Legal development

Your number one asset and number one risk: IP rights and personnel in the energy & resources sector


    What you need to know

    • Most of the valuable intellectual property (IP) your company holds will be created by your personnel, being employees or contractors embedded within your teams (eg, consultants, labour hires, secondees).
    • In this article, we address some of the common issues that arise in (a) proving ownership and chain of title in material IP and (b) protecting your IP rights when personnel depart.
    • These issues arise regularly in the energy & resources sector. We discuss some recent cases, and identify a range of best practice tips for managing these risks.

    What you need to do

    • Consider whether your company adopts each of the best practice tips in this article – at least in those parts of your business that may create valuable IP, or be exposed to material IP risk.


    In Australia, and many other countries, most types of intellectual property (IP) only protect creations of the human mind (recently confirmed for patents), and enforcement often requires that creation to be proven.  Retaining important rights in assets such as data/databases (without a human author) or algorithms (often not substantive enough to qualify for IP protection) may depend on your personnel keeping that information confidential.  Accordingly, proper management of employees and contractors is critical for any effective IP strategy.

    In the first article in this series on IP rights in the energy & resources sector we focused on external contractors.  In this article we focus on personnel – being employees and embedded contractors (eg, consultants, secondees or labour hire contractors).  This is particularly relevant to businesses in the energy & resources sector, who make significant use of embedded contractors (sometimes outnumbering full time employees in some teams).

    Ownership and chain of title

    Who actually created the IP?

    Ownership of IP generally must flow from the human creator.  To prove chain of title you need to be able to identify which human that was – remembering you may only be asked this question some years down the track.

    In the context of complex deliverables (eg, software source code), or projects delivered by teams following an agile methodology, there may be dozens or even hundreds of contributors and the record keeping may not always be clear.

    Best practice tips

    1. Document the authorship of key IP artefacts.

    2. Retain key documents for authors, including employment and engagement contracts, any separate assignments of IP rights signed by them, and basic identity details including name, address, job title and location of employment.

    3. Consider establishing an IP register for projects with material IP – this is usually best done on a project / key deliverable level where meaningful information can be captured and kept up to date.  

    Contractual terms

    Businesses depend on their employment contracts for the assignment of IP rights (and chain of title) from employees.  While there are some statutory provisions which automatically assign ownership, for example of copyright in works created by employees in the course of employment,  these often don't apply to contractors and certainly do not apply to all types of IP rights, nor to situations where an employee creates IP outside the scope of their usual duties.  Accordingly, getting the IP (and confidentiality) terms right in your contracts is critical (and worthy of its own separate article).

    The position is complicated for personnel who are embedded contractors because of the additional links in the contractual chain.  You must be able to satisfy yourself (and, one day, possibly a court or IP office) of the flow of rights from the creator > their employer > your company.  If any link in the chain is broken, you may not own the IP rights.  Often, this is only realised when you attempt to sell, assign or enforce those IP rights, at which point it may be too late to take an assignment of the rights you need.

    Best practice tips

    4. For embedded contractors, ensure your agreement with the party providing that contractor includes (a) an obligation to include appropriate IP clauses in the underlying employment contract; (b) a right for you to inspect that underlying employment contract (typically allowing sensitive information like salary to be redacted); and (c) an assignment of IP that may be acquired by that other party.

    5. On important projects, exercise the above inspection rights and keep records / copies of the relevant contracts as part of the project records / any IP register.  While this may be a time consuming exercise, it will be much harder to do years later. 

    IP rights, you may need the named inventor(s) to assist with paperwork in the future, possibly even some years in the future.  For example, when a PCT application enters the US national phase you may need signed inventor declarations.  While this issue can be dealt with in confirmatory assignment documents, you should also consider addressing this in your employment agreement and in the terms you require for embedded contractors.

    Best practice tips

    6. For personnel that may create important IP, consider a further assurances obligation requiring that person to assist with IP prosecution and enforcement in future (if appropriate, at the expense of the company). 

    Managing turnover

    The energy & resources sector experiences a significant movement of personnel between key firms and competitors.  For example:

    • In Austin Engineering Pty Ltd v Podulova [2023] FCA 419, a sales representative left employment at Austin Engineering to work for Schlam Engineering (a competitor in relation to haul truck parts) and is alleged to have breached confidentiality and infringed copyright by retaining an Austin computer, downloading a significant number of files (eg, technical drawings of parts, and pricing information), and misusing that information, including by uploading those files to Schlam's SharePoint.  It is not currently alleged that Schlam was knowingly involved, although Schlam was ordered to give an affidavit from a director of a comprehensive review of its own IT systems.  This was ordered for reasons including that Schlam was at least "mixed up" in the alleged wrongs.
    • In Directed Electronics OE Pty Ltd v OE Solutions Pty Ltd (No 8) [2022] FCA 1404, a former BD manager of Directed Electronics (producing AV and telematic systems, primarily supplied to OEMs who produce commercial trucks) was held to have downloaded confidential information and provided it to their subsequent employer, who was an overseas competitor.  The Court held that the employee breached confidentiality restrictions, breached the terms of their employment agreement, and infringed copyright.
    • In Leica Geosystems Pty Ltd v Koudstaal (No 3) [2014] FCA 1129, a Leica software engineer was held to have breached their employment contract and infringed copyright by downloading copies of software source code (including in Leica's fleet management systems) prior to leaving Leica and commencing employment at a direct competitor.

    There are a number of steps that can be taken to address these risks.

    Post-employment restrictions

    As the above examples demonstrate, the IP risks associated with outgoing personnel are typically focused on confidential information and copyright.  To strengthen potential avenues of enforcement against departing personnel, you may insert clauses into your employment contract (and the IP clauses required in the contracts of embedded contractors) restricting the use of certain information even after the engagement ends.

    Restricting the use of confidential information after the conclusion of an engagement is a complex area of law.  It depends on the jurisprudence on both equitable breach of confidence and when a post-employment restriction amounts to an unenforceable restraint of trade.  However, in general:

    • personnel cannot be prevented from using their know-how in subsequent roles, even where that know-how was developed in the course of the prior role; and
    • personnel can be prevented from disclosing sensitive confidential information or trade secrets, even once their engagement ends.

    "Trade secret" is an imprecise label.  In a number of decisions the court relies on a list of relevant factors to determine whether or not something is a trade secret.  One of the most cited lists is provided in Del Casale v Artedomus (Aust) Pty Ltd (2007) 73 IPR 326 at [40], and includes the following factors:

    • the extent to which the information is known by employees and others involved in the business;
    • the extent of measures taken to guard the secrecy of the information; and
    • whether it was plainly made known to employees that the material was regarded by the employer as confidential.

    These factors may each be significantly shaped by your IP policies and procedures.  In particular, you should consider:

    1. practical protections such as monitoring file transfers from your business' IT environments, logging the attendance of contractors and other visitors to site, maintaining registers recording access to any key IP, and storing key data or algorithms on secure servers that are only accessed by relevant personnel.
    2. document labelling and storage policies, which help personnel understand which information is confidential.  A number of companies now include automatic document labelling systems requiring each document to be marked, for example, "sensitive" or "internal".

    Practical measures that actually bring matters to the attention of personnel are critical.  For example, in New Aim Pty Ltd v Leung [2022] FCA 722, Justice McElwaine considered that the outgoing employee in question was not aware of the company's "Confidentiality/Intellectual Property Policy", even though they had received general onboarding materials referring to company policies available online.  In particular, Justice McElwaine noted that there was no evidence that they had actually read the policy, or that it had been brought to their attention.  This decision was overturned on appeal, although not in relation to the above finding.

    In addition to improving your prospects of characterising material IP as a trade secret, practical measures can reduce the likelihood of issues arising in the first place.  Most personnel want to do the right thing, and may genuinely not know that certain information is sensitive.  Offboarding and exit interviews are a key opportunity to remind outgoing personnel about their obligations and help them understand what is confidential and cannot be reused in their new role.

    Best practice tips

    7. Set up your IP policies and procedures to ensure material IP will be considered a "trade secret", or identifies the category of confidential information that may be enforced following the conclusion of a personnel's engagement.

    8. Build a culture of good practice and an awareness of IP and confidentiality.  For example, implement practical measures such as document labelling policies to help personnel understand what is confidential.

    9. Limit access to key information.  This is particularly important for algorithms and data, which are unlikely to be protected by any other IP rights.

    10. Ensure incoming personnel who may access sensitive material are put on notice of company IP policies and procedures.  This should ideally be documented, for example, as a checklist that incoming personnel (to a role or to a project) must complete and sign.

    11. Ensure outgoing personnel address IP and confidentiality as part of any off-boarding processes.  If appropriate, request outgoing personnel to complete a checklist confirming they have returned confidential material and cut off any continuing access (eg, to cloud based file storage).

    What can do you if there is a suspected misuse of IP

    If departed personnel misuse or threaten to misuse your IP there are a number of options.

    First, you could simply write to the person, identifying the material you claim to be your IP and putting them on notice that you are concerned.  You may also demand the return of any particular materials.

    Second, you could write to the first tier of recipients of your IP, for example the person's new employer.  This can be a sensitive option, as you don't want to unfairly jeopardise the relationship of the person with their new employer without good cause.

    Third, if necessary, you can commence legal action for breach of confidence or infringement of IP rights.  This is where you will be tested on whether your contractual arrangements and policies and procedures are sufficient.  As the Austin Engineering example demonstrates, you may also be able to seek orders for the production of documents or information from the subsequent employer.

    Introducing infringement risk

    Your personnel are also a key source of third party IP risk for your company infringing the rights of others.  For example, if your personnel integrate IP from a previous employer into your business' materials, you may find yourself in breach of the previous employer's IP rights.  In the above Austin Engineering example, Schlam has found itself at least "mixed up" in the wrongdoing caused by its employee bringing information from their previous role, and is now a named respondent in the action.

    The awareness of IP and confidentiality you build to protect your own IP will also help your personnel respect the IP rights of others, and avoid introducing infringement risk.

    Next steps

    IP rights are just one of many risks and opportunities facing businesses in the energy & resources sectors.  While IP can be complex, the risks can largely be minimised, and the opportunities can largely be maximised, by relatively straightforward policies and procedures – such as ensuring your employment contract terms are well drafted, and your on- and off- boarding policies address IP (including confidentiality).

    You should consider whether your company is exposed to IP risk and, if so, adopt each of the best practice tips in this article – at least in those parts of your business that may create valuable IP, or be exposed to material IP risk.

    Authors: Kellech Smith, Partner; and Tim Rankin, Senior Associate.
    Thank you also to Jasmine Xu, Graduate, for her research assistance.

    The information provided is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to.
    Readers should take legal advice before applying it to specific issues or transactions.


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