Two weeks ago, Bombay High Court in the case of Darius
Rutton Kavasmaneck v. Gharda Chemicals Limited, Keki Hormusji Gharda & Ors. decided
on the issue of ownership of employer over inventions of employee. The Court
held that the test is whether there is any such clause in the employment
contract regarding transfer of ownership over invention devised by the employee
or whether the invention was devised in the course of employment. The Court
also discussed the use of employer’s funds in devising the invention. However,
it did not clarify what role of such "use of funds" would be in the
transfer of ownership.
Following are the submissions made by the plaintiff
(shareholder of Company) and the defendant (Managing Director of Company).
Plaintiff, here, is challenging the patents registered in the name of
defendants that they should have been registered in the name of the Company.
Plaintiff’s Arguments:
§
Defendant used the R&D facility, support and R&D team of
the Company and therefore the, any patent, obtained and/or applied for should
be in the name of the Company.
§
Arguendo, in view of the fiduciary duty, being the managing director, the
patents should be registered in the name of Company only.
§
Company incurred expenses regarding the impugned Patents.
§
Section 88 of Indian Trust Act requires the Defendant to hold for
the benefit of the company the advantage (interest in the patents) that he has
himself gained.
§
In the whole time employment of the Company, Defendant is
obligated and devoted his whole time exclusively for the benefit of the Company
alone.
§
Also, the fiduciary duty of the Defendant enjoins Defendant to
exclusively work for the Company and not to compete with or divert the business
or assets of the Company.
Defendant’s Arguments:
§ Defendant firstly
challenged the locus of plaintiff. The post is not concerned about these
arguments. The arguments are discussed here and here.
§ Patents are
individual creation of the defendant, hence should be registered in his name
only.
§ Though Defendant
owes a fiduciary duty, but this does not follow that patent devised by him in
his individual capacity should belong to the Company or that he should hold
them in trust for the Company.
§ The expenditure
on the impugned patents by the Company has not been for making or for granting
these patented process for products but only to fine tune how economically the
Defendant can use the patents.
§ There is no
provision in law which provides that the employee generated patent should
belong to the employer.
§ Defendant is
appointed as the Managing Director of the Company, he is only entrusted with
powers of management and he is not required to do any research and development
or make inventions.
§ If it is held
that the patent was wrongfully obtained by Defendant rather than in the name of
Company, then any person including the competitors of the Company may apply for
revocation/cancellation of the patent under Section 64(1)(b) of the Patents Act
and this can never be in the interest of company.
Determination by the Court:
§ The Court firstly
decided the maintainability of derivative action in favour of Defendant.
§ Fiduciary duty
violation: The test is whether Defendant, as Managing Director, had a duty to
invent. On perusal of Managing Director Contract, there is not even an iota of
indication either expressly or by implication that Defendant was also required
to devise inventions.
§ Defendant did not
create the inventions in the course of his employment. Also, he did not have a
duty to create the inventions. For these reasons, Section 88 of Indian Trust
Act is not applicable.
§ With respect to
R&D funds of Company, the Court accepted the submissions of the Defendant.
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