22 October, 2010

EdSonic Pty Ltd v Cassidy [2010] FCA 1008

EdSonic Pty Ltd v Cassidy [2010] FCA 1008

A recent Federal Court decision illustrates the importance of not only clearly identifying the nature and scope of an employment relationship, but also carefully considering the status of any pre-existing works which may potentially be further developed or completed during the period of the relationship, and expressly referring to any intellectual property rights which may attach to those works in the contract of employment.

Justice Moore of the Federal Court recently handed down a decision concerning ownership of copyright in the context of section 35(6) of the Copyright Act 1968, which provides that copyright in work produced by an employee "in pursuance of the terms of his or her employment" is owned by the employer.

The proceedings involved a dispute as to the ownership of copyright in a number of works created by Ms Cassidy, who had extensive expertise in the area of vocational and educational training and was engaged by EdSonic to assist with the development of vocational and educational training (VET) materials in consideration for the issue of shares in Edsonic and the payment of royalties.

Ms Cassidy subsequently worked as a contractor for a third party (unrelated to EdSonic) but arranged for Edsonic to enter into the contract with that third party (whereby EdSonic paid Ms Cassidy a wage, superannuation, and withheld income tax as well as a percentage for itself) so that Ms Cassidy was not required to obtain an ABN and lodge quarterly BAS statements and the like.  The work performed by Ms Cassidy for the third party was different to the work she undertook for EdSonic (namely, the development of VET materials the subject of the dispute as to the ownership of copyright).

In the absence of previous authorities which directly address the scope of the expression "in pursuance of the terms of his or her employment" under section 35(6), the Court considered authorities concerning intellectual property rights in material created by a person during employment and noted the following principles:

  • the mere existence of the employer/employee relationship will not give the employer ownership of inventions made by the employee during the term of the relationship (per the decision of the Supreme Court of Victoria in Victoria University v Wilson[2004] VSC 33; (2004) 60 IPR 392 which concerned the intellectual property rights to a patentable invention and two related computer programs);
  • unless the contract of employment expressly so provides, or an invention is the product of work which the employee was paid to perform, it is unlikely that any invention made by the employee will be held to belong to the employer (per the recent decision of the Full Federal Court in University of Western Australia v Gray[2009] FCAFC 116; (2009) 259 ALF 224.

Moore J was of the view that the question for consideration was not simply whether Ms Cassidy was employed under a contract of service at the time the work was made, but whether the relevant work was made in furtherance of the contract of employment with EdSonic.  That is, did Ms Cassidy make the work because the contract of employment expressly or impliedly required or at least authorised the work to be made?

The Court found that if Ms Cassidy was an employee of EdSonic, she was only an employee for the purposes of the work she carried out for the third party unrelated to EdSonic (rather than for the purposes of the development of the VET materials).  Importantly, the Court accepted Ms Cassidy's contention that the subject works were started and substantially completed by her prior to any association with EdSonic and ultimately found that even if Ms Cassidy was an employee of EdSonic and the subject works were made by her during the period she was employed, the works were not made by Ms Cassidy "in pursuance of the terms of her employment".  EdSonic's claim to the copyright in those works therefore failed.

For more information on University of Western Australia v Gray [2009] FCAFC 116; (2009) 259 ALF 224 please see here.

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