Protecting and cultivating innovation in a remote working environment – a legal analysis

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Darren Olivier | Partner | mail me |
Lita Miti-Qamata | Partner | mail me |
Thandeka Mhlongo | Associate | mail me |
Aslam Patel | Associate | mail me |
| Adams & Adams |

88% of the respondents in the Savile Row Workplace survey published in October 2020 would prefer to either work from home or a combination of both.

A few days ago, Microsoft a permanent work from home option with its staff. Despite this, 67% of the respondents in the survey have not changed work policies or agreements and of those that did only 7% made any change to their intellectual property management regime. 41% of respondents in the survey do not see remote working as a major concern or no different to a traditional working environment.

If one accepts that innovation is crucial to business sustainability especially in the disruption era in which we live, there appears to be a need to better explain the purpose of intellectual property and how these rights together with workplace policies on performance can assist businesses adapt and compete.



Companies are advised to review their employee contracts as well as those with collaborators, consultants, and remote workers to ensure that they can enhance business value and reduce significant risks.

Relationship between innovation and intellectual property

Conceptually, innovation and intellectual property are comfortable bedfellows. Intellectual property rights are designed to encourage innovation and protect and promote creativity. They do this by creating areas and periods of exclusivity or a monopoly right as an incentive to innovate and to share the innovation.

For example, the principle of sharing the innovation as publicly available drawings in a design and embodiments or claims in a patent both wards off others from infringement as well as stimulate further innovation. The automatic protection provided by copyright protects the creators (music, artistic works and the like) and the trade mark’s ability to protect sustainable brands can be linked to incentivising innovation by that brand.

Furthermore, the state of innovation of companies and countries is regularly measured by their level of intellectual property registrations relative to others.

Relationship between business value, intangibles, and intellectual property

Over the past five decades company valuation experts have consistently reflected that the value intangibles on a company balance sheet significantly and increasingly outweigh the tangible value of that company.

Tangible value is attributed to buildings, factories, stock and the like whereas intangible value encompasses everything that cannot be physically seen, such as goodwill and includes the value of human capital, expertise, culture, and brand reputation.



The legal basis for protecting and enhancing intangible value is, most directly, through intellectual property rights created by statute and common law. Thus, from a business value perspective the ownership and control of intellectual property rights is crucial.

Relationship between governance and intellectual property

If one accepts that stakeholder value in company is protected by intellectual property it stands to reason that proper  becomes important.

For example, the negligent lapsing of a crucial intellectual property right can significantly devalue a company as would the badly researched selection of a trade mark to act as legal title to reputation and goodwill, or the sharing of trade secrets and abuse of confidential information obligations.

Corruption scandals such as Theranos in the United States and Steinhoff locally are also linked to the lack of legitimate intellectual property governance and transparency.

Stakeholders and investors are crucial to business growth. Proper intellectual property governance should therefore follow as business imperative.

Employment contracts, intellectual property, performance, and the function of a place of work

Traditional work contracts stipulate a ‘place of work’. This is normally the traditional office. The employer has obligations toward that place of work and the employee obligations to be at that place of work and performance obligations toward it. The employment contract regulated by legislation and practice reflects the social contract between employer and employee.



A business seeking to encourage work output and protect innovation will be astute in ensuring that clauses within their employment contacts, policies and even ad hoc agreements with staff create a basis for that to occur.

Examples include, clauses governing confidential information, incentive clauses or policies for innovation, patent development or performance generally, restraints of trade, intellectual property ownership and cession clauses as well as penalty clauses.

The move to a more agile or remote working environment challenges the traditional social contract, in a legal sense, existing between employee and employer in several ways:

  • Difficulties adhering to the requirements of particulars of employment in terms of the Basic Conditions of Employment Act 1997, requires consideration specifically relating to:
    • The ‘place of work’, and, where the employee is required or permitted to work at various places, an indication of this in the contract.
    • The concept of ‘ordinary hours of work’ and the regulation of overtime for employee earning below the threshold and employees who are contractually entitled to overtime.
    • Benefits that allow the employee to perform work from the workplace, for example canteen allowance or parking.
    • Consents to any changes in terms and conditions of employment and possible options available if either party is not willing to accept these changes. This could bring into play retrenchments or redundancy based on the employer’s operational requirements.
  • Challenges in how companies manage, maintain, and measure employees work standard while working from home or remotely. This includes upskilling of employees and the employer’s obligation to provide its employees with the tools and equipment to perform their functions and from home.
  • The possible need to amend and/or introduce new policies to regulate employees who are working remotely. This includes how employees must deal with confidential and privileged company information when working remotely and the wellbeing of employees (including alcohol and substance abuse), dress code and potential amendments to the disciplinary code and procedure and the restructuring of benefits policies.
  • The interplay and potential significance of the employer’s corporate social responsibility initiatives in the context of the creating employment equity which could lead to greater corporate involvement in community development, especially if it could directly increase performance of staff.
  • A proper understanding of the process that an employer must follow when the employee is performance below the required performance standard, including the code of good practice on incapacity in a remote working situation.
  • The retrenchment processes the company can follow where the employees do not agree to the changes in the terms and conditions of employment to allow for remote work. A retrenchment must be based on the operational requirements of the employer.

The clauses dealing with intellectual property

To understand changes that need to be made one needs to have some idea of how intellectual property rights are created and who owns those rights, and what effect remote working may have on those rights.

The most common of these rights are:

  • Copyrights

These rights evolve automatically through the creation of works such as literary, artistic, musical, sound recordings, broadcasts, or computer programs. Identifying the author of these works is critical to determining ownership for it is only in a limited number of circumstances that the first owner of the work will not be the author. Two of these exceptions are works created in the course of employment of another or where a contract regulates ownership, the provisions of that contract.

Consequently, where remote working does not entail any change to employment, copyrights will likely continue to be owned by the employer. However, if as predicted, employees will increasingly become liberated from their organisations, it becomes necessary for any contracts of work and policies to contain specific clauses on copyright ownership.

Remote working is also expected to accelerate the adoption of technology solutions. These solutions are underpinned by software innovation through generation of computer programs protected by copyrights. Software developers tend to be very mobile and since ownership will vest in the person who has ‘control over the making of the computer program’ – a vague concept – their contract becomes critical not only to control the intellectual property creation but to access it as well. These computer programs also often reflect trade secrets in the way that they operate, so protection on confidentiality related to them is critical to avoid loss of both rights.



It is recommended that specific legal advice is obtained. Copyright arises through statute and strict compliance with the legislation is required for it be effective. For example, the exceptions referred to above are themselves subject to limited further exceptions relating to photographs, works for magazines and moral rights. Further, the validity of the contract or enforceability of related policies and the way in which they are agreed, adopted, or executed is very important.

  • Patents

A patentee is the person whose name is entered in the register as the name of the grantee or proprietor of a patent. An application for a patent in respect of an invention may be made by the inventor or by any other person acquiring from him the right to apply or by both such inventor and such other person.

Any condition in a contract of employment which requires an employee to assign to his employer an invention made by him otherwise than within the course and scope of his employment, or restricts the right of an employee in an invention made by him more than one year after the termination of the contract of employment is null and void.

It will be evident, that clauses in employment contracts and related policies require close attention to ensure that the right to apply for a patent between inventor and employer organisation or between the inventor and the organisation that funded the invention requires careful construction. If the organisation funding the invention is publicly funded (which may include a financial contribution to the place of work) then special legislation governs the commercialisation and ownership of such intellectual property, especially patent rights. Remote working could affect both the relationship between inventor and organisation and the funding of the place of work.

  • Designs

Under South African design law a proprietor is the author of the design; or where the author of the design executes the work for another person, the other person for whom the work is so executed; or where a person, or his employee acting in the course of his employment, makes a design for another person in terms of an agreement, such other person; where the ownership in the design has passed to any other person, such other person.

Any condition in a contract of employment which requires an employee to assign to his employer a design made by him otherwise than within the course and scope of his employment, or restricts the right of an employee in a design made by him more than one year after the termination of the contract of employment is null and void.

There is a difference in the initial ownership provisions relation to designs compared with patents, copyright and trade marks because any design for another person (e.g. in a remote working environment whether governed by an employment agreement or not) is owned by that person. This would appear to place less emphasis on design ownership than the other intellectual property rights. However, the meaning of ‘work for another person’ is open to interpretation and consequently should be regulated by written contract and/or enforceable policies.

As with patents, the unlawfulness of certain contractual terms mean that additional care should be taken when drafting these terms.

  • Trade Marks

Rights in trade marks occur both through registration and through reputation or goodwill of a company symbolised by the trade mark under which that trade mark or goodwill is created.

In simple terms, there are both registered and unregistered trade marks. Ownership of these independent rights may be by separate persons, although that is not advisable because it will dilute the value of the trade mark. The applicant for a registered trade mark right needs to be the proprietor. This is regarded as the person who adopted the trade mark or has the intention of using that trade mark, if the trade mark is not in use by them. Ownership of unregistered trade mark rights is a question of fact related to the public understanding of who is in control of that trade mark.

The regulation of ownership of a trade mark is relatively complex. Remote working linked with changes from employment to independent contracting could give rises to questions on proprietorship and may results in user and registered trade marks rights vesting in different persons, if uncontrolled, reducing the strength of the trade mark and devaluing it. As a result there is a need to regulate this very carefully through contractual terms and enforceable policies.

  • Knowhow, confidential information, and trade secrets

These rights arise and relation to information that is both secret (in the sense of not being known outside of the organisation) and that which gives that organisation a competitive advantage.



To be capable of being enforced, the rights needs to be capable of being identified, accessed, and retained. The only way to do this is to have proper agreements in place with employees and contractors that deal with identification, access, and restrictions.

In a remote working environment, there will also be practical considerations that may risk the publication or exposure of that information to the public domain. A stolen laptop or a casual conversation with a spouse all potentially risk protection of trade secrets. This, in addition to common law principles of fairness when it comes to restraint of trade provisions, penalty clauses, jurisdiction and urgency, all mean that care in drafting, managing  and enforcing contractual terms and policies dealing with this type of protection are important.

Other remarks

As remote working practices accelerate opportunities to employ and be employed across national boundaries increase. Approaches to the contract of employment, policies and laws relating to intellectual property differ from one country to the next and cannot be ignored.

Furthermore, South Africa’s strong protectionist regime and exchange control policies relating to intellectual property rights and assets are likely to require further assessment should the country wish its fiscus to take advantages of global opportunities from local taxpayers working in outsourcing environments.


 

 



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