Surprise! You Don't Own Your Intellectual Property!

Some of humanity’s finest efforts have been dedicated towards causing our fellow humans to experience surprise.  Amongst our species’ greatest technological achievements is the classic “snake in a can” prank—where a hungry (but gullible) victim opens a can of purported mixed nuts, only to find a spring-loaded imitation snake.  The results are reliably hilarious. Unfortunately, the genius of a well-timed surprise is generally under-appreciated, particularly by those who “benefit” from the surprise.
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It is with some hesitation then that I share the surprising fact that the default position under Canadian law is that an individual inventor (not their employer) owns an invention, even if it was created in while on the job.  As an example, a labourer who develops an innovative widget used in the application of asphalt while working for a paving company will have a presumptive claim to ownership of that widget.

Over the years, a few exceptions to this default position have been created by courts and legislators.  Contract provisions have also been used by employers to assert ownership of inventions. In this post, I’ll lay out the details of theses exceptions and conclude with some take-aways for employers. 

Exceptions created by the courts
Courts have historically recognized three situations in which an employer will be found to be the rightful owner of an invention:

1. The employee is hired specifically to invent. In cases where an employee is hired for the express purpose of developing a particular invention, the invention has been found to belong to the employer.[1] This can extend to existing employees who are given a new specific task that involves innovating.[2]
2. The invention relates to the nature of the employment.[3] For example, engineers or technical personnel are under a duty to apply their inventive ingenuity to problems assigned by management. The case law suggests that the invention needs to be created while discharging these duties.
3. The individual is in a managerial capacity; in these cases, courts have found that managers ought to apply all their talents to the welfare of the company.
   
   

Statutory exceptions
Law makers have created three important exceptions to the default rule that an inventor-employee owns the rights to their work:

1. The Copyright Act,[4] which provides ownership rights to employers for software code written by employees;
2. The Integrated Circuit Topography Act,[5] which deals with the design of microchips; and
3. The Industrial Design Act,[6] which deals with the finished appearance of a product.

The traditional rules for ownership are reversed under these statutes; the employer is deemed to be the owner of creations that qualify under these regimes if they were produced in the course of employment. The employee may own the innovation provided it was produced outside the workplace, on the employee’s own time, or simply not within the true course of employment.[7]

Contractual law exceptions
It can be difficult and time consuming to prove that an employee’s invention falls within one of the common law or statutory exceptions listed above.  Supposedly, this is one of the reasons why a new employee is asked to sign an intellectual property (IP) assignment agreement alongside their employment contract.[8] In these matters, a court would look to the precise wording of the contract to determine if an employee has assigned their rights to their employer.

Choose your contractual terms carefully!
But this is where a problem arises.  IP assignment agreements commonly purport to assign IP developed in the “course of employment” or in the “discharge of duties”. Troublingly, these terms are usually left undefined.
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Whatever the language used, it’s important for plaintiff employers (and their lawyers) to realize that they may someday be called to prove that an invention was invented in the course of employment or discharge of duties. Is the paving company’s labourer acting in the “discharge of his duties” when he invents a widget that makes his job easier? 

Failing to show the court that a product was created in the “course of employment” can be fatal to a plaintiff’s cause. For instance, the employer in Secure Energy[9] argued that it was the owner of an invention because the inventor's employment agreement required him to assign inventions developed “in the discharge of his employment duties”. The Federal Court did not agree, ruling that Secure Energy did not prove that the invention was in fact made while discharging the employee’s “employment duties”. Although other factors were considered by the Federal Court when making its decision, the specific wording of the employment agreement was important to the Federal Court.[10] So it’s clear that IP assignment contracts should be drafted in a way that anticipates the legal burden that an employer may later be called upon to meet.

Conclusion
There are a number of ways for an employer to protect its IP.  One strategy has been to include IP assignment agreements as a condition of employment.  However, employers must carefully consider the terms used in the assignment clause.  Will an employer be able to prove that an invention arose during the “course of employment” or “discharge of duties”?  If not, an employer may be in line for an unwelcome surprise, ready to spring from a can of mixed nuts.

[1] Eleni Kassaris, Executive Employment Law, (Toronto: LexisNexis Canada Inc, 1993) (loose-leaf revision 135) at s 10.132.

[2] David Vaver, Intellectual Property Law, (Toronto: Irwin Books, 2011) at 369 but see also Spiroll Corp Ltd v Putti et al, [1975] BCJ No 992.[3] CED 4th, Patents, "Master and Servant" at s 109.
[4] Copyright Act, RSC 1985, c C-42.

[5] Integrated Circuit Topography Act, SC 1990, c 37.

[6] Industrial Design Act, RSC 1985, c I-9.

[7] Bryce C Tingle, Start-up and Growth Companies in Canada, 3rd ed (Toronto: LexisNexis Canada, 2018) at 137.

[8] Ibid; Richard Brait and Bruce Pollock, “Confidentiality, Intellectual Property and Competitive Risk in the Employment Relationship” (2004) 83 Can Bar Rev 585.

[9] Mud Engineering Inc v Secure Energy (Drilling Services) Inc, 2022 FC 943.

[10] Nina Lindop, et al, “Patent Litigation in the Energy Sector: Insights and Strategies from the Last Decade” (2025) 62:2 Alta L Rev 280 at para 38.

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