Owning and transferring intellectual property

For this reason, an unwitting company may find unexpectedly that it does not actually own the assets that it uses in its day-to-day business or that a transaction that it has entered in good faith is void and unenforceable.

Generally, the person who invents or authors a work that is subject to intellectual property rights, such as an invention, design or copyright work, is the owner of the intellectual property embodied in that work. The actual inventor, designer, author or creator of the work will be a natural person or team of persons. However, ownership may vest in an employer by operation of law, or, by agreement, in another person.

IP created by an employee

It is well established in our common law that intellectual property created by an employee in the course and scope of his employment belongs to the employer. The Copyright Act has codified this position and provides that where a work is made in the course of the author's employment under contract of service or apprenticeship, the employer shall be the owner of any copyright in the work (there are a few exceptions to this rule).

It is, however, prudent to include in any employment contract a provision as the ownership of intellectual property developed in whole or in part by an employee in the course and scope of his employment. Of course, the question that sometimes arises is what precisely is the scope of an employee's employment? And what of intellectual property that is within the scope of employment but is created outside the course of employment, for example shortly after leaving the employer?

The Patents Act has provisions limiting the rights of an employer in the above circumstances: Any condition in a contract of employment that requires an employee to assign to his employer an invention made by him otherwise than in the course and scope of his employment is null and void, as is any condition that restricts the right of an employee in an invention made by him more than a year after termination of his contract of employment. Similar provisions are found in the Designs Act, but are not found in the other intellectual property statutes.

Thus, contracts of employment are both essential and should be carefully drafted to avoid pitfalls and to ensure the proper protection of the employer's interests.

Consulting and services situations

Similar difficulties are found in consulting and services situations. Unless there is a contractual provision that clearly provides that the intellectual property arising out of the services of the consultant or service provider shall belong to the client, the client may find that although he owns the deliverables, he does not own the underlying intellectual property. So, if you appoint a software developer to write a software program for your business, you may find that you are entitled to use the program, but not to modify or maintain it unless you appoint the original software developer to do so. Similarly, if you appoint an advertising agency to produce an advertising campaign, you may be entitled to execute the campaign as originally envisaged, but not to re-use or modify the campaign for future use.

Transferring ownership

There are more pitfalls in the transferring of ownership in intellectual property. Intellectual property cannot be physically handed-over and the transfer of intellectual property is by way of assignment. The Copyright, Trademarks and Designs Acts all require that this assignment be in writing. The Patents Act is unclear as to whether a written assignment is necessary, but, in any event, it is highly advisable to reduce such an assignment to writing. In addition, it is advisable that such an assignment is recorded on the respective register of patents, trademarks or designs. If this is not done, the assignment may be effective only between the parties thereto and may not be asserted against third parties.

Since some of the intellectual property statutes require an assignment to be in writing, a purported assignment that is not in writing or a written agreement that does not clearly and unambiguously identify the intellectual property in question and the intention to transfer ownership, is ineffective. Further, it is probable that the failure to reduce the assignment to writing cannot be corrected or ratified at a later date: The assignment may be effected anew, but cannot be backdated.

IP assigned to foreign entity

Further complications in the assigning of intellectual property arise if the intellectual property is assigned to a foreign entity. In such an event, the prior authorisation of the South African exchange control authorities is required for the transaction. The failure to obtain the authorisation of the exchange control authorities is an offence.

In addition, although there is a legal dispute as to the effect of failing to obtain authorisation, there is at least one judgement in which it has been held that the failure renders the entire transaction null and void. In this case, the omission cannot be corrected subsequently without unwinding the transaction and, as the original transaction may have taken place many years in the past, this may be impractical or even impossible. In some cases, one of the parties to such a transaction has used failure to obtain authorisation to renege on its obligations in terms of the original agreement pursuant to which that assignment was made.

You may think that you own the intellectual property that you use on a daily basis in the running of your business, but do you?