Innovation At Work And At Home: Clarifying Employer And Employee IP Rights Under Maltese Law (Part 2)

This article is the second part of a three-part series examining employer and employee IP rights under Maltese law. Part 1 can be accessed here.

5. Employee-Created IP Outside Working Hours: The Grey Zone

Although the legal position is relatively straightforward when IP is created during working hours and within the employee’s assigned duties, matters become less clear where creations are developed outside working hours and using personal equipment.

A common question is whether an employee who develops software, designs a product, writes technical documentation or creates other intellectual works at home automatically owns those rights simply because the work was produced during personal time. The answer is often more complex than a simple distinction between work hours and private hours.

In assessing ownership, several factors may become relevant. One important consideration is whether the creation falls within the employee’s contractual duties or closely relates to the role for which the employee was engaged. An engineer employed to develop innovative technical solutions, for example, may find it more difficult to argue that a closely related invention developed at home is entirely independent from his or her employment than an employee working in a completely unrelated field.

The resources used to create the work may also be relevant. Works developed entirely on personal devices and using privately acquired software generally strengthen an employee’s claim to ownership. Conversely, where employer-owned equipment, development environments, research facilities or proprietary databases are used, an employer may have stronger grounds to assert rights over the resulting IP.

The relationship between the work created and the employer’s business activities may also be considered. If the creation operates within the same market, addresses similar research and development objectives or was inspired by projects being pursued by the employer, ownership questions may become more contentious.

While Maltese legislation does not expressly regulate every scenario involving employee-created works outside working hours, a number of factors may be relevant when assessing whether a creation is sufficiently connected to the employment relationship.

Factors that may be relevant include:

1. whether the work was created in the course of employment or in the execution of the employee’s duties;
2. the degree of connection between the creation and the employee’s contractual duties or role;
3. whether employer resources, know-how, confidential information or trade secrets contributed to its development; and
4. whether the employee acted consistently with the duties of loyalty and good faith owed to the employer.

Accordingly, ownership disputes involving off-duty creations are often dealt with on a case by case basis and therefore dependent on a careful assessment of the surrounding facts and circumstances.

6. Confidential Information and Trade Secrets

Even where an employee successfully demonstrates that a work was created outside working hours and falls outside the scope of employment, the analysis does not necessarily end there.

Employers may still have recourse where confidential information, trade secrets or proprietary know-how have been used in the creation, development or commercialisation of that work.

The protection of confidential business information extends beyond the ownership of intellectual property rights. Under Directive (EU) 2016/943 of the European Parliament and of the Council of 8 June 2016 on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure, as implemented in Malta through the Trade Secrets Act, Chapter 589 of the Laws of Malta, information qualifies for protection as a trade secret where it is secret, has commercial value because it is secret, and has been subject to reasonable measures to preserve its confidentiality. As a result, employees cannot assume that work created outside working hours is free from legal constraints where its development incorporates or relies upon an employer’s confidential information, trade secrets or proprietary know-how.

The distinction is important because ownership of IP and protection of confidential information are separate legal concepts. An employee may own copyright in a work created independently at home, yet still be prohibited from using confidential information obtained through employment in the development of that work.

For example, a software developer who creates a personal application during evenings and weekends may own the copyright in the source code. However, problems may arise if the application incorporates confidential algorithms, architectural designs or proprietary business processes learned through employment.

Similarly, an engineer may develop an innovative product in personal time, but difficulties may emerge if the design relies on confidential technical specifications, research data or development methodologies belonging to an employer.

The same principles apply beyond technical roles. Designers, marketing professionals and sales personnel may all have access to commercially valuable information which remains protected irrespective of when subsequent work is created.

For this reason, employers should ensure that confidentiality provisions are clearly documented in employment agreements and internal policies, while employees should remain conscious that independent ownership of a work does not necessarily permit unrestricted use of confidential business information.

7. Moral Rights and their Limitations

While employment contracts often focus on the ownership and assignment of economic rights, employers and employees should also be aware of the separate concept of moral rights.

In addition to economic rights, the Copyright Act, Chapter 415 of the Laws of Malta, grants authors certain moral rights in respect of their works. These rights are personal to the author and protect the connection between the author and the work, independently of the ownership of copyright.

Under Article 12 of the Copyright Act, authors enjoy, among other things, the right to claim authorship of their works and the right to object to the mutilation, modification, distortion or other derogatory treatment of a work where this would prejudice the author’s honour or reputation. These protections may remain relevant even where the economic rights in the work have been assigned to an employer.

By way of example, a graphic designer engaged by an employer may create branding materials, illustrations or marketing content as part of his or her employment. While the economic rights in those works may be assigned to, or owned by, the employer, the author may still benefit from the moral rights recognised under Article 12 of the Copyright Act. This distinction highlights the difference between ownership of copyright and the author’s continuing personal connection with the work.

Unlike economic rights, moral rights are personal to the author and, during the author’s lifetime, may not be transmitted to another person. As a result, the assignment of copyright does not necessarily extinguish all of the author’s rights in relation to the work.

This distinction may be particularly relevant where employers commission, acquire or commercialise creative works that are subsequently modified, adapted or incorporated into broader commercial projects. Employers should therefore ensure that IP assignment clauses and related contractual provisions are drafted carefully and consistently with the protections afforded under Maltese copyright law.