Ownership rights in 'improvements'

Written on the 1st of December 2009 by Dr Joanne Redburn and Kerrin Anderson

As a general rule, an organisation entering into a collaborative agreement will always assert and maintain ownership of its background IP (‘Background IP’) that it brings to the collaboration. It is also becoming common that the organisation asserts ownership of any improvement in the Background IP that arises out of the results of the collaboration. So the question arises: what differentiates an improvement in Background IP from the other intellectual property created for the purposes of the collaboration?

In patent law some guidance can be ascertained from the IP Australia guidelines and judicial interpretation of the term in relation to patents of addition.

To determine if an application for a patent of addition is an improvement in the main invention, a comparison between the novel contribution of the main invention and the specification made to that novel contribution under the application is made. If the application involves a minor variation, whether by addition, omission or alteration, to secure a better performance, whilst retaining the essential characteristic of the original invention then there is an improvement of the main invention and thus suitable for a patent of addition.

The Supreme Court of New South Wales in Fermiscan v James [2009] NSWSC 546 was required to consider whether a patented process using x-ray diffraction of samples of human nail and skin was an improvement of the earlier patented process using x-ray diffraction of human hair samples to screen for breast cancer. Justice McDougall considered that the latter patent, x-ray diffraction of human nail and skin, could only be something designed to improve the performance, or broaden the applicability of, the earlier patent, if the earlier patent could be construed as extending from human hair to all biological material, and thus human nail and skin. It was reasoned that as a matter of construction, the subject matter of the invention of the earlier patent was limited to human hair and did not extend to all biological material.

In interpreting the term ‘improvement’, guidance was gleaned from the definition of ‘enhancement’ in the Australian Oxford Dictionary which means: ‘a heightening or intensification or improvement of something already in existence.’ Justice McDougall concluded that it was difficult to see how a wholly new process could be an enhancement of the subject matter (that is, the human hair) of the earlier invention, unless that subject matter was defined in extremely wide terms. In effect, the subject matter of the earlier invention would have to be defined as the detection of breast cancer not just by the x-ray diffraction of hair, or biological material generally, but by any means whatsoever.

Outside of patent law, there is little or no guidance as to what constitutes an improvement for other types of IP. This can be a particular issue, for instance, in relation to improvements in software. If you keep developing updates or increasing functionality of software at what point does the software cease to be an improved version of the original software and become a new version?

Leaving uncertainty around what constitutes an ‘improvement’ increases the potential for disputes. Further, if you are unable to ascertain what is an improvement and what is new IP it can result in none of the developed IP being used by any party. Defining as precisely as possible what constitutes an ‘improvement’ with the definition tailored to the specific type of IP the subject matter of the contract is therefore critical.