IP Clauses In Employment Contracts And Assignments

Written by Saad Khan | March 30, 2022

IP Contracts

If you have a contract of employment, there’s a good chance it includes a section that deals with intellectual property (IP) rights. The IP clause will likely state that all IP created by the employee in the course of their employment is owned by the employer. As IP encompasses a broad range of rights, such as trade marks, designs, copyright, database rights and patents, it’s important to read this clause carefully before signing your employment contract.

This blog will focus only on the IP clause in the context of copyright. Copyright protects works such as books, music, software code and film (amongst other things), and arises automatically – so there is no requirement to register the right. The owner of copyright has many exclusive rights in relation to the work in question. For example, an author of a book has exclusivity to copy the book, issue copies to the public, and make adaptations. As such, the owner of copyright work holds the cards when exploiting the IP’s potential. Whether you’re an employer or employee, pre or post-contract, it’s extremely useful to know your rights in relation to IP clauses.

The general rule of copyright

The general rule is that the author (defined as the person who creates the copyright work) is the first owner. However, if a literary, dramatic, musical or artistic work is made by an employee in the course of their employment the employer is the first owner, subject to any agreement to the contrary. As mentioned earlier, employers will reinforce this by including an IP clause in the employment contract, along with the other rights.

Firstly, you need to know whether you are in an employee-employer relationship, as opposed to a worker or self-employed. The contract document isn’t determinative, so it’s necessary to look at the practical reality and nature of the relationship between both parties.

Secondly, the work needs to be made during the course of an employee’s employment. Below are some factors that will help determine this:

  • a) The terms of the contract of employment
  • b) Where the work was created
  • c) Whether the work was created during normal office hours
  • d) Who provided the materials for the work to be created
  • e) The level of direction provided to the author
  • f) Whether the author can refuse to create the work/s
  • g) Whether the work is ‘integral’ to the business


To illustrate, in a recent case, the High Court dealt with the interpretation of an employment contract. The employee (Mr P) created virtual forensic computing (VFC) software prior to his employment at a company called MD5. MD5 employed him on the premise that he would develop that VFC software for the company’s product, which would be sold to their customers. Mr P argued he worked on the VFC software at home on his own computer and during his time off. Similarly, Mr P worked at home on a user guide to assist the end-users of MD5’s product.

The Judge stated that it did not matter that Mr P developed the software using his own computer at home as he was paid to do this, and it was part of his employment duties. Similarly, the guide was also integral to the software and also formed part of his duties. Therefore, MD5, the employer, was held to be the first owner of the copyright to the VFC software and user guide.

As this case shows, doing work at home on a personal computer was deemed to be in the course of employment, but this was based on Mr P having been hired to develop the software for MD5. Had Mr P worked on a different software unrelated to his MD5 duties, he would have a stronger argument. It’s also important to note that the factors listed above are not a checklist exercise when determining ‘in the course of employment’. The court will look at those factors which are relevant to the facts of each case.

Assignment of copyright

Another key thing to consider is commissioning someone to create work for you. If you hire someone such as a freelancer/creative agency to produce a copyright protectable work, such as a logo, they will be the first owner of the copyright in the artistic work. These individuals or companies will not be your employees, meaning you do not automatically become the first owner of their copyright works. Such a situation can be overlooked and, before you know it, the copyright has been assigned to some other party.

Accordingly, you will want them to assign the IP rights in the work to you as soon as possible. An assignment means they transfer the ownership of the IP rights in question to you.

An assignment must be in writing, signed by or on behalf of the assignor. It is wise to have this document prepared before commissioning any work.


The IP clause in an employment contract will of course be relevant to some employees more than others. Certain roles may require employees to create pieces of work eligible for IP protection over the course of their employment. Equally, an employee may take some initiative outside of work to create something innovative and unique that is closely related to their employment.

From an employee’s perspective, check whether any work you create is protected by copyright. Then, make sure you are in fact an employee. And finally, consider whether you are creating the work in the course of your employment. Before creating work while employed, ask yourself if the copyright work is something you would create in the course of your employment. It’s also worth checking the clauses in the contract as some can be quite wide and potentially try and take ownership of all IP you create.

From the employer’s side, ensuring there is an employer-employee relationship in the first place would be wise to start with. Then, include an IP clause and ensure it covers all IP rights, regardless of whether it may or may not be relevant to you and your business. Sound recordings and broadcasts don’t fall under the general rule so if these are important, consider getting these assigned to you.

If you require assistance with IP clauses in contracts or drafting an assignment, no matter how small or complex, then please get in touch with one of our specialist lawyers.

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