19 July 2010

Court Pours (Stored) Water on Employer's Claim to Ownership of Employee Designs

Courier Pete Pty Ltd v Metroll Queensland Pty Ltd [2010] FCA 735 (15 July 2010)

This is a case relating to a registered design, rather than a patent. However, Patentology claims interest on this occasion because it addresses an issue in common with patent rights, namely the circumstances in which an employer will (or, in this case, will not) have a claim to ownership of employee inventions.

The take-home message from this case, as in similar cases in the past, is that an employer is not entitled to assume ownership of the products of their employees’ efforts, including patentable inventions and registrable designs, unless they have actually been produced pursuant to the employees’ paid duties.

BACKGROUND

Metroll Queensland Pty Ltd ("Metroll") is a manufacturer and supplier of metal building products, including rainwater tanks.

Mark Collymore is the author of three registered designs, nos. 310528, 312217 and 312218, for rainwater tanks.  At all relevant times, Mr Collymore was employed by Metroll.  He had "risen up through the ranks" of the company, and had reached the position of factory foreman.

Courier Pete Pty Ltd ("Pete") is a company established by Mr Collymore, and the registered owner of design nos. 312217 and 312218 by assignment. 

Inspired by a horse on his own property (see paragraph [30] of the case), Mr Collymore came up with an idea for a new modular rainwater tank.  He refined the idea, on his own time at home, over a period of 10 days or so, and filed a design application on 21 September 2006.  A representation from that application is shown (right).

From this point, the evidence of Mr Collymore and that of Metroll diverges. Collymore's version of events is that he approached his employer to discuss developing and manufacturing modular rainwater tanks based upon his design, subject to his retaining ownership of the designs. The result of this was a tank based on the same design principles, but constructed in corrugated metal. The design of the new products was subsequently registered as design nos. 312217 and 312218 (“the second and third designs”), example representations from which are shown (left).

In Metroll’s version of events, no agreement regarding Collymore retaining ownership was reached, and Metroll considered the design to be owned by the company by virtue of a written contract of employment with Collymore.

Metroll sought revocation of the design registrations, on grounds of lack of entitlement, before the Designs Office, and a hearing was held on 14 October 2008. In a decision published on 1 December 2008 ([2008] ADO 9) Hearing Office Dave Herald found that Collymore was entitled to registration of the first design, but that Metroll, and not Pete, was an entitled party in relation to the second and third designs, and that these two registrations should therefore be revoked.

Both parties appealed.

ENTITLEMENT ON APPEAL

The appeal was heard before Justice Spender in the Federal Court of Australia on 2-4 March 2010.

The judge found, as did the hearing office, that the parties’ evidence was contradictory, and that there was a lack of substantive corroboration. In relation to the absence of evidence from other members of the tank-making team at Metroll, Spender J commented (at [34]) that “[t]heir absence is unexplained, and I infer that none of those witnesses would have provided evidence helpful to Metroll.”

As regards entitlement, Spender J referred to prior case law in relation to patents, namely Spencer Industries Pty Ltd v Collins [2003] FCA 542 and Patchett v Sterling Engineering Co Ltd (1955) 72 RPC 50.

The general principle established in these prior cases is that “any product of the work which the servant [employee] is paid to do belongs to the master [employee]. I can find neither principle nor authority for holding that this rule ceases to apply if a product of that work happens to be a patentable invention.” (Patchett at 58, emphasis added.)

The issue therefore arose as to whether the creative work of authoring new designs fell with the scope of work for which Mr Collymore was paid by Metroll:
28. … in relation to the first design, the issues are whether, (a) Mr Collymore was solely responsible for creating the design; and (b) the first design was created in the course of Mr Collymore’s employment, in that it was created pursuant to either a general expectation of creativity as part of Mr Collymore’s employment, or a specific direction from Metroll.
29. …in relation to the second and third designs, the applicant does not accept that the designs were created pursuant to a specific direction from Metroll and … in the course of Mr Collymore’s employment. …what occurred was a negotiation between Metroll and Mr Collymore about the basis upon which Mr Collymore would make his design available to Metroll. However, even if it were to be found that the prototype tanks were manufactured pursuant to a specific direction, the applicant maintains that there was an agreement between Metroll and Mr Collymore, either express or to be inferred from Metroll’s conduct, that Mr Collymore would retain ownership of the designs….
The court found in favour of Mr Collymore on all points:

At [42]:
I am satisfied Mr Collymore was never employed to design tanks for Metroll, and did not, in fact, design tanks during the course of his employment at Metroll.
At [44]:
I am quite satisfied that the first design was not created pursuant to any direction by Mr Morrison [production manager/assistant manager of Metroll Toowoomba].
At [48]:
I am satisfied that the design of the modular tanks with corrugated sides, which became designs 312217 and 312218, were authored by Mr Collymore. Those designs were not produced as a result of a direction or instruction by either Mr Morrison or Mr Harland [manager of Metroll Toowoomba], whether that direction or instruction was to come up with a design for modular tanks with corrugated sides, or otherwise.
And at [53]:
I am not satisfied that there was an express agreement between Metroll and Mr Collymore at the meeting between Mr Harland, Mr Morrison and Mr Collymore before the sample modular tanks were constructed, that Mr Collymore would remain the owner of the modular designs. I am satisfied, however, that in all the circumstances of the case, an agreement between Mr Collymore and Metroll that Mr Collymore would remain the owner of the designs should be inferred from Metroll’s conduct.
As a result, the revocation of design nos. 312217 and 312218 was reversed, and reinstatement of the registrations ordered by the court.

CONCLUSION

On the evidence, as interpreted by the court, this appears to be a case in which the employer Metroll has attempted to renege on an express (though verbal) agreement with the employee Mr Collymore, perhaps not realizing initially that Mr Collymore would obtain registered design rights and seek to extract royalties for use of his tank designs.

More generally, however, the case serves as a reminder of good practice for both employers and employees who may find themselves in similar situations:
  1. maintain written employment contracts, including formal position descriptions setting out the duties and responsibilities of each employee, and to keep these up-to-date as those duties change; and
  2. any variations to an employment contract, or express agreement outside the terms of a contract of employment, should be put in writing.

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