Intellectual Property in Commercial Settings

Copyright: Exceptions to the general rules

There are certain exceptions to the general rules for copyright ownership and patent ownership. This is largely because the law has tried to respond and adapt to common commercial situations and arrangements.

For your purposes, the following are the most important and relevant exceptions to the general rules.

Ownership of copyright and patents made in the course of employment

Copyright

Australian copyright law states that if an employee creates copyrightable material in the course of their employment, then the copyright in the material is automatically owned by the employer.

For this rule to apply, the creative material

must be created by an employee; and
must fall within the scope of duties of that person’s employment.

This rule would not apply if

there is a written contract to the contrary; or
the creator is an independent contractor or freelancer; or
the material created falls outside the employee’s contractual duties or scope of work.

How can you tell the difference between an ‘employee’ and an ‘independent contractor’?

It is not always easy to tell whether or not someone is an ‘employee’, especially in this time of increased casual labour.

The first place to look is the contract between a person and their employer or contractor. Often, the written document will specify whether or not the person is an employee.

Where the document is not clear, a court will look at the whole of a person’s situation to determine whether or not they are an employee. Some common indications include:

	Employee	Independent contractor
Payment and entitlements	An employee will normally be paid on a regular basis, such as weekly, fortnightly or monthly. An employee will be entitled to paid leave for illness and holidays.	An independent contractor will often be paid in lump sums, when the job is completed or when instalments of the work are completed. An independent contractor does not have entitlements to paid sick leave and holiday leave.
Tools and equipment	When a person is an employee, their workspace and work tools and equipment will usually be supplied by their employer.	An independent contractor will often supply their own tools and equipment, and may work off-site.
Independence and control	An employee will usually be required to work a set number of hours, and must complete tasks as required by their employer. They may have limited control over how, when and where those tasks are completed.	An independent contractor will usually have more control over their project than an employee, and more independence as to the hours and place of work, and how the work is performed.
Tax and other responsibilities	An employer will make tax and superannuation payments on behalf on an employee. They will also take responsibility for the employee’s safety while at work.	An independent contractor will manage their own tax payments. They will also assume the risk for their own safety while completing tasks.
Exclusivity	An employee will usually work exclusively for the one employer.	An independent contractor may have several contracts in place at the same time, to perform services for different people.

This video explains the difference between contractors and employees (4:06). Transcript

Josh: Hi my name is Josh Wilkinson and I’m a freelance sound designer and I’m doing a project, which involves some copyright but I know nothing about copyright. So I’m going to ring up my friend Ray, cause she knows the details.

Rachel: Hey Josh… What’s up?

Josh: Yeah look, I need your advice. I’m writing this computer program for the Edge at the State Library to be presented at the Powerhouse. Yeah I just don’t know at the end of it all, who has copyright over the program? Do you reckon you can help me out with that?

Rachel: Sure. Can I ask, do you have a contract already with the Edge?

Josh: No, it hasn’t come through yet. I guess I just want to know if there’s anything I should know for when it does. But they do keep saying they’re contracting out to me.

Rachel: Okay well using the term ‘contracting’ doesn’t necessarily mean that you are a contractor. So we need to see whether you’re an employee or a contractor in relation to the Edge by looking at some factors that will then determine who owns the copyright in the program. One of these factors is degree of control. So who has control over how you perform?

Josh: Well I guess, I do. I decide when I work, there’s no set hours or anything.

Rachel: And you have freedom of the way you actually carry out your work?

Josh: Yeah.

Rachel: How about payment? Are you getting regularly paid or is it just a lump sum amount?

Josh: Just a lump sum.

Rachel: So you get paid at the end after you finish the work?

Josh: That’s right.

Rachel: Cool, so you’re not working exclusively for the Edge, are you? Can you work for other people at the same and do other projects?

Josh: Yeah I can, I’m doing other freelance work right now.

Rachel: Great. And what about tools and equipment? Do you provide your own?

Josh: Yeah well I provide my laptop and the programs I use to write but they’re also giving us the space to test things and other support.

Rachel: That’s really good to know. What about risks? – So something goes wrong – if what you’ve created happens to be faulty, who is responsible for that?

Josh: I’m responsible.

Rachel: Okay so it sounds as if, you know, when you look at all these factors for you and the entirety, that you’re really a contractor and not an employee. Also you’ve raised that you have access to the Edge’s resources but this doesn’t haven’t any significance in regards to copyright.

Josh: Okay cool, so what’s the difference between a contractor and an employee in terms of copyright?

Rachel: Well when you’re an employee – generally – the copyright that you got in the work that you’ve done will go automatically to your employer. This is simply because you’re required to create an ______ and that’s just within the job description – that’s your role. But as you can imagine – you may experience some problems which you may have already when you split your time working at home and at the office. And it seems that you could be working on your own stuff or their stuff or say you’re working on something that is somehow related to but not actually directly connected to what they've asked you to do. It creates a grey area in terms of who owns the copyright in the work – that’s why it helps to make it clear in writing.

Josh: And what about a contractor like me?

Rachel: So as a contractor, the copyright is all yours – generally – rather than belonging to the Edge, the people who commissioned you to do the job. Again you can probably imagine that this could create problems for the Edge later on if they want to pull off a similar project using the same program you created but they don’t know if you’ll be happy with that and you actually might not be because that’s not what you wanted or expected it to be used for.

Josh: Yeah and I imagine the Edge wouldn’t be that happy if I just went out and used the program even though it was their idea to begin with.

Rachel: That’s right. So that’s why it’s really important to have a written contract between you and the Edge that clearly outlines who owns the copyright in the program you'll create and anticipates what you and the Edge can do with that program in future.

Josh: Okay so I guess it’s just important that we have a really tight contract. Thanks Ray, you’ve been such a help.

_{Please note: this video was not developed by, and is not the property of the ATN and is hosted on an external website.}

How can you tell when something is ‘within the scope of employment’?

The main question is ask is whether the activity is the type of thing that you have been employed to do.

Easy indications that something is within the scope of employment include that the task is completed during normal work hours, at the place of employment, and using company resources.

However, an activity may still be within the scope of employment if it is undertaken outside of work hours or off-site. If the activity is the type of thing that you are generally employed to do, then it may still be considered to fall within the scope of employment for the purposes of copyright law.