Who owns the intellectual property rights ("IPR") when an employee comes up with an innovative idea or product? Does the answer differ if the work is carried during working hours or during the employee's own time, outside of work?

We have summarised below some possible measures to take in order to avoid disputes such as that in the High Court decision in Prosyscor Ltd v Netsweeper Inc & Ors [2019] EWHC 1302 (IPEC):

Bradley Kite was employed by Netsweeper as a Senior Systems Engineer, and stayed on afterwards as a contractor. Mr Kite's responsibilities included writing software to "create product capabilities for Netsweeper", and he was obliged under contract to disclose his ideas to his management team. For Mr Kite, part of the attraction of the job at Netsweeper was the chance to be involved in software development.

Mr Kite had developed, in his own time and using his personal computer, a system that could authenticate a user's access to online content without relying on a computer's Internet Protocol ("IP") address. This allowed different access restrictions for different users working on computers with the same IP address; eg students in a school and their teachers, or ensuring that only paying subscribers were accessing certain websites.

Mr Kite had discussed his idea with a work colleague, who suggested amendments to the system which Mr Kite then implemented. Mr Kite was also posting updates on Netsweeper's intranet as his ideas developed. Netsweeper was otherwise fairly unenthusiastic about the system, and it was not until later discussions with a client (after Mr Kite had left Netsweeper's employment) that Netsweeper began work on a system using Mr Kite's concept.

Mr Kite realised there was a way to commercialise his system through Netsweeper, and he entered into a confidentiality agreement with Netsweeper so that the parties might exchange information in the development of each party's iteration of the system. Netsweeper continued to work on the system after the exchange of information, and eventually filed a patent application for its version (named "Authenticate Override"). On becoming aware of this patent application, Mr Kite assigned all of his IPR in his own system (named "Authent") to a company he had previously founded (Prosyscor) in order to market Authent. Prosyscor subsequently issued proceedings against Netsweeper, claiming ownership of the IPR, and that Netsweeper had breached the confidentiality agreement by using the information shared by Mr Kite in order to progress its system.

Who owns the IPR?

The Court found in favour of Netsweeper:

  • Netsweeper had web-filtering software as part of its product offering (of which Mr Kite was aware even before he was employed there), and Mr Kite had been employed to "create product capabilities" for the company. It followed that Mr Kite was therefore employed to create concepts such as the one in dispute;
  • the above finding was regardless of whether Mr Kite was specifically employed to innovate, or what area his innovation duties were intended to cover. Mr Kite was employed to write software, which would (almost) inevitably give rise to patentable material, and which by his own admission was an element which had attracted him to the job. Furthermore, web-filtering was part of Netsweeper's core business. An analogy was made (quoting Jacob LJ in LIFFE Administration and Management v Pavel Pinkava [2007]) to the research scientist happening upon a cure for arthritis, when they were employed to cure cancer – the IPR to such a cure would still vest in the research scientist's employer;
  • supporting the conclusion that the creation of this concept fell within Mr Kite's normal duties as an employee was the fact that Mr Kite had posted the inventive concept on the Netsweeper intranet and discussed the concept with another colleague; and
  • the claim that Netsweeper had used confidential information gained from Mr Kite in breach of their confidentiality agreement to progress its system was not successful. It could not be established what exactly this confidential information was, and in any case the mere fact that Netsweeper had continued with the development of its system did not prove that any such confidential information had been used.