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Are University IP Policies Legally Binding?
It is often assumed that a university or research institute IP policy is legally binding. After all, it is an important policy document, and staff have agreed in their employment contracts to observe and comply with all the university’s or research institute’s (collectively “research organisations” or “ROs”) policies.
ROs often rely on their IP policy to be entitled to ownership of IP created by their staff and students.
However, a mistaken belief that an IP policy is legally binding may lead to a mistaken belief that the RO owns IP created by a staff member or
An expanded version of this issue of IP Bits was published in three parts: To What Extent are University IP Policies Legally Binding?
Part 1 - Staff les Nouvelles - Journal of the Licensing Executives Society, Volume LI No. 3, September 2016
Part 2 - Students les Nouvelles - Journal of the Licensing Executives Society, Volume LI No. 4, December 2016
Part 3 - Visiting Scientists les Nouvelles - Journal of the Licensing Executives Society, Volume LII No. 1, March 2017
or student. The RO may enter into a license (or other transaction) on the basis of that mistaken belief. Not in fact owning that IP results in the RO purporting to license something that it does not have the capacity or ability to license, putting it in breach. This exposes it to potential legal liabilities, which could be considerable.
An IP policy, being a unilateral document, not a consensual one, cannot of itself be contractually binding. Something more is needed if an IP policy is to be legally binding – it must either have legislative force, or form part of a legally binding contract.
Does the IP policy have legislative force?
In some countries, such as the United Kingdom, Australia, and the United States, an IP policy can be a law, if it is either a statute of a legislature, or subordinate legislation authorised by a statute of a legislature, such as a regulation, rule, or by-law. The IP policies of some (not all) universities in those countries are subordinate legislation in this way.
In these countries, and others whose legal systems are based on the UK’s or US’s legal systems, it is important to confirm, however, whether an IP policy that is a regulation, rule, or by-law is legally valid. A principle operates in some (if not all) these countries that a regulation, rule, or by-law cannot exceed the authority of the legislation that authorises it.
For example, legislation giving an RO power to make a regulation, rule or by-law in relation to the “use of facilities and equipment” has been held not to be a sufficient power to make a regulation that divests staff and students of the ownership of intellectual property created by them with the assistance of the RO’s facilities and equipment. The authority is confined to making regulations, rules and by-laws relating to the “use” of facilities and equipment, and does not extend to the compulsory acquisition of ownership of property (that is, IP) from someone else (University of Western Australia v Gray  FCA 498).
Is the IP policy part of a legally binding contract?
If the IP policy forms part of a legally binding contract, the IP policy will be enforceable on the contracting parties. As easy as that sounds, attempts to make an IP policy part of a binding contract have often failed.
An IP policy may be “incorporated by reference” in a contract. For example, an employment contract or student enrolment form may state: “Jane Smith will be bound by and comply with the university’s policies, the provisions of which are deemed to be incorporated by reference.”
Most countries have such an “incorporation by reference” law. To be legally effective it must comply with strict legal requirements.
These countries have consistently held that a clause such as our “Jane Smith” example, which does no more than call attention to the existence of the IP policy, by itself, is insufficient to comply with the “incorporation by reference” requirements, and that more is needed. That includes giving the staff member or student an opportunity to review the policy, understand it (which may require more than a single reading), ask any questions about it, or even to obtain advice about it, such as legal advice, or in the case of a student, the advice of a parent.
Not giving a staff member or student sufficient time to undertake that review and understanding, or to obtain advice, and doing no more than calling attention to the existence of policies broadly, or even an IP policy specifically, results in a very high risk that the “incorporation by reference” requirements have not been met. This results in the staff member or student not being bound by the IP policy.
As well, agreeing in an employment contract to comply with the terms of an RO’s policies would normally be understood as importing an obligation to comply with policies dealing with such matters as health and safety, security, academic rules, carrying out research, research ethics, etc. It would not normally be understood as indicating agreement to divest oneself of one’s property, such as the IP that one might create.
Similarly, agreeing in a student enrolment form to comply with the terms of a university’s policies would similarly be understood as referring to policies dealing with such matters as health and safety, etc, and would not normally be understood as indicating agreement to divest oneself of one’s property, such as the IP that one might create as a student.
Special issues in relation to staff
In some countries the law is that an employer owns the IP (including inventions) created by its employees “in the course of employment” or “during their usual duties”. This requires a careful consideration of what the employee’s employment duties actually are.
If the employment duties do not include the duty to create or invent IP, then any IP created or invented by a staff member may be owned by the staff member, not the RO.
An RO should therefore consider including in its staff employment contracts provisions stating that the staff member’s duties extend to the creation or invention of IP in the staff member’s scientific field, which must be promptly disclosed to the RO; and that such IP is owned by the RO.
By doing so, reliance for the RO’s ownership of IP created by its staff is placed on the express terms of the legally binding employment contract, instead of on the sometimes unreliable “incorporation by reference” principle.
Special issues in relation to students
Most countries have laws that protect a party to a contract from unfair terms as well as from unconscionable conduct by the other party.
An IP policy which mandates that a student must assign the student’s IP to the RO, or which asserts or declares that the RO, by force of the policy alone, owns the IP created by a student, is highly likely to be void in those countries that have laws dealing with unfair contractual terms or unconscionability.
A standard operating procedure under which all students (or category of students) must sign an IP assignment, because it is a standard operating procedure, without a student having the opportunity to review, understand, and obtain advice about the IP assignment document, is highly likely to be considered unconscionable, with the document considered to be unfair, in its legal sense.
Similarly, a provision in a student enrolment form that incorporates by reference the university’s policies generally, or even its IP policy specifically, is also likely to be unfair or unconscionable.
To address these issues, many ROs do not seek an assignment from all students. Instead, an assignment is sought on an “as needed” basis, with students being given the opportunity to review, understand, and obtain advice about the assignment, as well as the freedom to choose not to assign, in which case the student is excluded from the project which necessitates an assignment and participates in a project of equal merit where no assignment is necessary.
Special issues in relation to visiting scientists
A visiting scientist is a person employed by one RO, who visits and carries out research at another RO, called a host RO.
A host RO’s IP policy often states that it will own the IP created by a visiting scientist.
However, if the visiting scientist at the host RO continues research on a project that originates from the visiting scientist’s employer RO, the employer RO will not want the IP from its project to be owned by the host RO. This causes the ownership of IP to be fragmented, which may impede its commercialisation.
Similarly, if the visiting scientist at the host RO undertakes research on a project that originates from the host RO, the host RO will not want IP from its project being owned by the employer RO.
An employer RO is not bound by the IP policy of the host RO, as it is not a party to any contract that incorporates it by reference.
An employer RO that is located in another state or country is not bound by the laws operating in the host RO’s state or country, and is therefore not bound by any legislative based IP policy that the host RO may have.
A visiting scientist may be asked by the host RO to sign a document that incorporates the host RO’s IP policy by reference, or a document that assigns any IP which is created while a visiting scientist.
However, both such documents are unlikely to result in the host RO owning the IP created by the visiting scientist.
This is because the employment contract between the visiting scientist and the employer RO usually provides that the employer RO owns all the IP created by the visiting scientist, who is its employee. The visiting scientist therefore does not own the IP created at the host RO, and not owning it means that the visiting scientist does not have the power or capacity to assign it to the host RO. Any assignment signed by the visiting scientist is therefore ineffective.
An IP Policy is not a legal document – it relies on legal documents for implementation
For these reasons, it is very difficult to ensure that an RO’s IP policy is legally binding in relation to all its staff members, students, and visiting scientists. It may bind some of them. But, it is hard to conceive that it will bind all of them.
A mistaken belief that it is binding could lead to a mistaken belief that an RO owns IP. Acting on that mistaken belief by entering into a license or other agreement could expose the RO to considerable liabilities. To avoid the potential liabilities, an IP policy should be regarded as just that – a policy - which of itself does not have legal effect, but which relies on legal documents being put in place for the policy’s implementation.
That implementation is then a separate matter, to be achieved by legally binding documents:
in relation to staff: the required terms in the employment contract;
in relation to students: on a “as needed” basis, the required terms in an assignment document, which is signed by the student employing a process that ensures that there is no unfairness or unconscionability; and
in relation to visiting scientists: on a “as needed” basis, an agreement between the RO that employs the visiting scientist, and RO that hosts the visiting scientist, recording their agreement on the ownership of IP created by the visiting scientist while at the host RO.
A caution about best practice when considering the policies of other ROs
When preparing an IP policy it is prudent to consider the IP policies of other ROs. Doing so, and being informed about how other ROs deal with particular issues in their own IP policies can inform, and assist ascertaining best practice.
But there is a need to be cautious. If another RO’s IP policy assumes that its IP policy is legally effective, and that by force of the policy itself the RO owns IP, which in fact it may not, that RO could be exposed to legal liabilities. Being guided by such a policy in formulating one’s own policy might not be duplicating best practice, but in fact might be duplicating worst practice.