Ownership of employee inventions: is the test for inventive step relevant?
The Royal Children’s Hospital v Robert Alexander  APO 94 (10 November 2011)
In a recent decision, the Australian Patent Office considered whether inventions made by an employee were made in the course of the employee’s employment, and were therefore owned by the employer.
In deciding whether the inventions were made in the course of employment, the Patent Office adopted elements of the test for “inventive step”—a statutory test defined in the Patents Act 1990 as a pre-requisite to an invention’s patentability. The decision, if followed in subsequent Patent Office cases, may have implications for employers in relation to determining who owns inventions made by an employee, particularly where the employee’s job description relates to the provision of improvements to technology as opposed to pure research.
The patents in question
The decision arose as a result of a claim by The Royal Children’s Hospital (RCH) that it was entitled to two patent applications by Dr Robert Alexander, as the employer of Dr Alexander. The RCH sought a direction from the Commissioner of Patents that both applications are to proceed in its name only.
Both applications relate to improvements in viral diagnostic methods and kits which may be used with a viral detection technique known as Rapid Enhanced Tissue Culture Immunofluoresence (RETCIF) the subject of an earlier innovation patent of which Dr Alexander was a co-inventor:
- Application no. 2006206051 relates to a virus recovery medium which can be used in any viral detection method where viruses are grown in culture before being assayed (the “recovery medium patent”). The medium comprises a cell culture medium supplemented with at least one hormone and at least one enzyme.
- Application no. 2006222481 relates to a single flat-bed well suitable for use in a viral diagnostic method (the “diagnostic well patent”). The invention broadly relates to an improvement to the single well design in a microtitre tray the inventive concept lying in the provision of a well which has a smaller well located within it.
Key issues for determination
The Hearing Officer identified a number of key issues for determination, including:
- what Dr Alexander’s position was at The Royal Children’s Hospital;
- whether Dr Alexander had a duty to invent
- whether the inventions were created in the course of Dr Alexander’s employment;
- the effect that the Royal Children’s Hospital’s IP policy had on ownership; and
- whether the case was analogous to University of Western Australia v. Gray.
What was Dr Alexander’s position at The Royal Children’s Hospital?
At the time the inventions described in both applications were made Dr Alexander was employed by the RCH as the Head of Virology. Dr Alexander’s primary role was to maintain the Virology/Tissue Culture and Molecular Diagnostics service, and was responsible for both the quality and efficiency of the viral diagnostic work undertaken.
The Hearing Officer found that Dr Alexander’s position in the management chain of the RCH was not “…a position which might attract an additional ‘duty of fidelity’ to forward the interests of his employer even if the position itself did not contain a duty to invent.” As a result, the key question was whether Dr Alexander’s position at the RCH contained either an express or implied duty to invent, and in addition whether the inventions were created in the course of Dr Alexander’s employment.
Did Dr Alexander have a duty to invent?
The Hearing Officer noted that one of Dr Alexander’s specific job requirements was to identify “potential areas for improvement in the diagnostic service”. It was however also noted that RCH generally did not pursue substantial improvements to the RETCIF technique unless there was a clear motivation to do so. With these considerations in mind the Hearing Officer held that Dr Alexander had a duty to invent only “when there was a clear motivation which arose in the course of his employment”.
The Hearing Officer then considered two broad circumstances where Dr Alexander would have been motivated to identify an improvement in the course of his employment:
- Where there was a recognised problem which he would have been reasonably expected to resolve
- Where he was otherwise motivated to pursue a particular avenue of research in the reasonable expectation of identifying potential improvements
Was each invention created in the course of Dr Alexander’s employment?
- Recovery medium patent
The Hearing Officer opined that a skilled worker would recognise that media supplementation was a potential avenue of research where further improvements could be made, and that given Dr Alexander’s expertise, was an avenue of research that he would be expected to further investigate with a reasonable expectation of identifying potential improvements.
The expectation of Dr Alexander to further investigate media supplementation with a reasonable expectation of identifying potential improvements was viewed by the Hearing Officer as providing “clear motivation to making the claimed improvement in the course of Dr Alexander’s employment”. It was therefore held that the invention claimed in the application was made in the course of Dr Alexander’s employment, and was therefore owned by RCH.
- Diagnostic well patent
The Hearing Officer had regard to evidence before her which suggested that the existing single well design was effective, and that “a substantial improvement was neither likely nor needed”. The Hearing Officer therefore held that the invention claimed was not made in the course of Dr Alexander’s employment, because there was “no clear motivation for Dr Alexander to pursue this avenue of research in the reasonable expectation of identifying improvements”.
What effect did The Royal Children’s Hospital’s IP policy have on ownership?
The RCH initially argued that its IP policy, which stated that IP generated by employees during the course of their employment is the property of RCH, was imported into Dr Alexander’s contract. On this basis RCH contended that Dr Alexander’s contract contained an explicit provision for transferring rights in any invention from Dr Alexander to the RCH. However it was later conceded by both parties that the provision adds nothing to the common law position as it relates to ownership of employee inventions because the contract refers only to IP generated by employees in the course of their employment. As such, the existence of the IP policy was immaterial to the decision.
Was this case analogous to University of Western Australia v. Gray?
The Hearing Officer also considered whether the present case was analogous to the circumstances of the high profile case of University of Western Australia v. Gray.1 In finding that the circumstances were not analogous, the Hearing Officer relied on differences between the “primary purpose” of Dr Alexander’s research and Dr Gray’s research. Dr Gray’s inventions were unrelated to the primary purpose of the University, and there was no requirement that he advance any commercial purpose of the University.
In contrast, the Hearing Officer noted that Dr Alexander’s research on improving viral diagnostic techniques in use at the RCH would enable the RCH to better diagnose viral diseases, and on this basis is related to the primary purpose of the RCH and directly benefits the RCH and advances its interests.
Implications of the decision
Given the specific role and responsibilities of Dr Alexander, including the particular requirements set out in his job description to identify potential areas of improvement in diagnostic services, it is likely that this decision will be confined to its own facts.
However, based on the approach taken by the Hearing Officer, the question of whether an invention is owned by an employer or an employee may, in circumstances similar to this case, depend on whether the employee, as a notional skilled addressee, would be motivated to pursue an avenue of research having regard to the prior art with a reasonable expectation of achieving an improved result.
This approach imports subjective concepts related to inventive step, such as motivation and a reasonable expectation of success, into issues of ownership and as a result complicates the task of determining who owns an invention made by an employee. In this regard, ownership of an invention may, in particular circumstances (for example, where an employee has a specific responsibility to identify potential areas of improvement in areas related to his or her role) depend primarily on whether an employee, at the outset of commencing a line of research, had an expectation of achieving a useful or improved result. In our opinion, steps taken by a skilled person and the likelihood of success should be independent of whether an invention was made in the course of employment.
Having regard to the facts of this case, one can envisage a situation arising where an employer is placed in a difficult situation when looking to assert ownership of an invention, whilst at the same time establishing that the invention involves an inventive step. On the one hand, in following this decision the employer would need to argue that the employee would have been motivated to pursue the line of research with a reasonable expectation of achieving an improved result (to establish ownership of the invention), whilst also arguing that a skilled addressee would not have been led as a matter of course to try the invention claimed with an expectation of success.
Dr Alexander lodged an appeal in the Federal Court from the Hearing Officer’s decision on 1 December, 2011.
- University of Western Australia v Gray  FCAFC 116