Taking ownership of intellectual property (IP) is of critical importance for businesses in circumstances where that business wants to ensure that it alone has the right to use that IP, and that the value of that IP sits on its balance sheet, as an asset of the business. However, the law does not always automatically transfer IP to a business, even if it is created for and paid for by that business.

In this bulletin, we explain what steps you should take to ensure that you take ownership of IP, in circumstances when you intend to own the IP outright rather than obtain a licence of the IP.

What is IP?

Intellectual property is the term used to describe intangible property which is a "creation of the mind", and includes designs, inventions, trademarks, know-how, and copyright works. In a business context this can include some really important intangible assets that have been created for you, such as your brand name, logos, product names, key methodologies and ways of working, and the creation of inventions and designs within any R&D programme.

IP created by employees

The general rule is that IP created by an employee during the "course of their employment" is, in the absence of a contrary agreement, owned by the employer.

There are some very clear case examples, for example, a chief product designer, who is employed in that role, and develops a new product for that business, will have created that product in the "course of their employment". However, if that same employee composes music as part of a band at the weekend, he will own the copyright in the music, as this was not within the course of his employment as a product designer.

However, in practice things are often less clear cut. What about a software developer who creates software in his own time which, although not within the current product-range of his employer, could be of commercial benefit to that business? In this case it is important that there is a clear understanding of the job description of the individual and the time and attention they are required to give to the job in question (including their working hours). Business should be very careful and specific in defining job descriptions and roles, particularly where the nature of that role is likely to lead to IP creation.

In addition, although the employer will own most IP rights created by an employee automatically, IP clauses are still needed to offer protection not only around the role and work to be undertaken, but also around use of company equipment and non-compete provisions. For example, if company equipment was not to be taken from the premises or used for non-business purposes then the employer may be able to initiate disciplinary proceedings. Similar restrictions may also offer the ability to deal with the matter as a disciplinary.

IP clauses in employment contracts often also deal with a waiver of moral rights, which are personal to the employee and potentially allow the employee to be credited as author of the copyright works and to object to "derogatory treatment of the work".

How to protect IP created by an employee?

  • Always draft bespoke IP terms in a contract of employment to ensure that both the employer and employee are clear on what IP may arise from the role, and who will own the IP.
  • Carefully and clearly define the scope of the employee's engagement and the terms of their employment in their contract to avoid any potential dispute concerning whether work was created during the course of the employment.

IP created by contractors

In general, all IP created by third party contractors will be owned by them and not the company engaging them, unless there is a contrary agreement in place. So, the default rule is the opposite where IP is created by anyone other than your employees.

This rule would apply to all contractors and suppliers and also anyone who provides services to your business outside of the traditional employment relationship (such as consultants). For example, if you engage a branding consultancy to develop a logo, a website developer for a new website or a consultant to work on the development of some in-house software. In each case, if the commercial contract is silent about the ownership of IP, then the legal title remains with the creator who is free to use, sell and distribute it to other companies, including any potential competitors.

How to protect IP created by a third party?

  • The terms of the relevant contract must be checked carefully. Particularly where you are dealing with the third party contractor's standard terms and conditions, they are unlikely to include any assignment of IP. 
  • If you intend on owning the IP created by a third party consultant this must be documented in writing, ideally in the commercial agreement, before work is started.
  • Consider a "waiver of moral rights" clause. Without such a clause, you are potentially allowing the consultant to be credited as author of the copyright works and object to "derogatory treatment" of the work.

What about licensing of IP?

IP created may not always need to be transferred to your business. In such cases, your business will still require IP provisions which enable you to have a sufficient and adequate license to use the IP, if and when you are required to use it.

How we can help?

IP is an important and valuable asset for any business and, in order to be clear on the ownership position your business, requires solid contractual documentation and a careful review of contract terms before third party contractors are engaged.

Through our strategic partnership with Ward Hadaway law firm, Ward Hadaway have a team of Intellectual Property/IT legal experts who have in-depth knowledge and experience of advising on the exploitation and protection of intellectual property. They can help you understand your current intellectual property regime and provide advice on securing ownership of your IP. 

For further information, please contact us and we will ensure we put you in contact with a specialist from Ward Hadaway immediately. Call us on 0333 006 2929 or email info@esphr.co.uk.


This article has been drafted on esphr’s behalf by Ward Hadaway Law Firm. Ward Hadaway Law Firm are one of esphr’s strategic legal advisory partners and provide certain services to our customers through a range of different Legal and HR support services offered by ourselves to the Corporate market. The content of this article does not constitute legal advice and it should not be relied upon. Specific legal advice may be required to address your specific circumstance.