IP Ownership in Hybrid Work: Employer vs Employee Rights

Introduction:

IP issues have been very important in the employer-employee relationship globally. The traditional concept of the workplace has now transformed from centralised offices to a hybrid work-from-home model. With evolving culture, innovation and technology, there is a big question that arises: Who owns the work done by the employees?
Nowadays, for companies that invest in creative and innovative works, it is very difficult to secure the ownership of the intellectual property created by their employees and preserve their investment of the company.

Concept of 'Course of Employment':

The concept of Course of Employment is a legal boundary that determines whether the invention or the creative work belongs to the employer or the employee. Section 17 of the Copyright Act states that generally the author is the first owner, but there are certain exceptions provided, notably for the employer under Section 17 (c) of the Copyright Act. It states that if the work done by the employee is during the course of employment under a service contract, then the employer is the first owner of the copyright work. Factors to determine if the work belongs to the employer are-

• There should be a proper job description that states that the IP work evolved by the employee in hybrid mode is within the same job description.

• The creation was only possible because of access to the resources of the company's private data.

• If the employer provides feedback, guidance and final approval for the work done by employees in hybrid mode, then it belongs to the company.

Statutory interpretation:

Intellectual property is defined as the work that legally protects Copyright, Trademark, patent, and Trade Secrets. Such IP developed by any employee while being employed is often owned by the employer, but there are certain issues arising in a hybrid environment, such as:
1- Was the work produced not during business hours?
2- What if the employee uses his own assets to create the work and not the company credentials?
3- Lack of a proper employment contract regarding the IP work.
4- Was it freelancing work done by the employee?

Copyright Act, 1957

The Control Test is an old traditional method used by courts to define an employment relationship. It states that there should be physical supervision of the employee, and lack of supervision does not provide rights on the work done by the employee. This test originates from the Supreme Court's reasoning in Dharangadhara Chemical Works Ltd. v. State of Saurashtra (1957), where the Court held that the essential feature of an employer-employee relationship is the employer's right to supervise and control not just what work is done, but the manner in which it is done. But this control-based approach lacked in the evolving hybrid work models; hence, the Integration Test (Modern Rule) came into light. Nowadays, courts mostly rely on the integrated test, which means if a person has company email, follows HR policies, uses company resources for IP work and is an integral part of the company, then the work done stays with the company itself and not with the employee.

Patents Act, 1970 :

Section 2(1 ) (g) and Section 6 of the Patents Act,1970 state that the 'True and First Inventor' is the only person who had the idea of inventing the IP work because the law assumes that the person doing the mental work is the patent owner. This principle was reinforced by the Mysore High Court in V.B. Mohammed Ibrahim v. Alfred Schafranek, AIR 1960 Mys 173, where the Court held that inventorship belongs to the natural person who genuinely contributes technical skill and knowledge to the invention, and that a financing partner or a corporation cannot itself be treated as the inventor. In hybrid models, this distinction matters: the employee remains the named inventor even where the company, as employer, is entitled to apply for and hold the patent through assignment. Companies may ensure that the employee has been assigned for all future inventions to claim ownership work by any agreement.

Doctrine of Shop Rights:

Shop right is an implied, royalty-free and non-transferable licence granted by the employee to the employer to use the invention created by him. If the employee creates an invention using the employer's resources, material, time and facilities, then the employee will be the true and first inventor. This doctrine is difficult to apply in hybrid models due to the lack of a physical office.

Key Judicial Precedents -

V.T. Thomas v. Malayala Manorama 1989 - This is a landmark case from the Kerala High Court which states the boundaries of the 'Course of Employment'. The court held that the drawing made by the employee is his own specific art and the characters belong to the artist only because they were created independently by the employee. So the employee possesses the exclusive right over his creation.

Sushilaben Indravadan Gandhi v. New India Assurance Co. Limited (2021) - This is a Supreme Court decision. The court was to decide if the doctor, Mr Gandhi, was an employee under a contract of service or he is an independent consultant. The court said that even if there is no supervision of the employee during the course of employment, he is still an integral part of the company.

Nippon Steel Corporation v. Controller of Patents (2025) - This is a significant judgement given by the Delhi High Court, decided on 24 December 2025, addressing the 'Proof of Right' under Section 7(2) of the Patents Act, 1970. The case arose after the Patent Office refused Nippon Steel's patent application on the ground that a general employment agreement, lacking a specific IP-transfer clause, could not serve as valid proof of right, particularly because one of the named inventors had died before filing. The Delhi High Court disagreed, holding that Section 7(2) only requires the applicant to establish a prima facie right to apply, not the conclusive title needed at the grant stage and that this prima facie right can be shown through an employment agreement read together with the company's internal IP policy and supporting declarations. The Court clarified that the Patent Office had wrongly equated the "proof of right" requirement under Section 7(2) with the stricter documentary requirements for post-grant assignments under Section 68. Importantly, this ruling does not mean an employment agreement alone is sufficient in every case; it turns on the specific facts, including that similar declarations from the same inventors had previously been accepted by the Patent Office in other applications by the company. Employers relying on this precedent should still ensure their employment agreements and IP policies clearly address invention assignment, rather than treating a general employment contract as an automatic substitute for a dedicated deed.

Conclusion:

The shift from the traditional concept of workplace to the hybrid model has created major conflicts in the ownership of the IP works. As we can see, the Copyright Act,1957 provides flexibility through its Section 17(c), but the Patents Act,1970 remains strict and rigid towards the protection of the first and true invention of the individual. We can see that the creation of the IP work irrespective of the place and time of work, creates an issue in hybrid work model, and a significant statutory gap remains. Ultimately, to resolve the IP ownership conflict to preserve the balance between employees' individual creation and the company's investment, we can mention a clear IP clause or NDA in an agreement or contract to prevent conflicts over ownership.

Key Takeaways

• Under Section 17(c) of the Copyright Act, 1957, the employer is the first owner of copyright created by an employee during the course of employment under a service contract but this depends on facts like job description, resource use, and employer oversight.

• The old "Control Test" (physical supervision) has largely given way to the "Integration Test" courts now look at whether the employee is functionally integrated into the company (email, HR policies, resource access), which is more workable for hybrid/remote setups.

• Patent law treats inventorship and ownership as separate questions. The employee is still the inventor; the employer's right to hold the patent comes from assignment, not automatically from employment.

• The "Shop Right" doctrine an implied, royalty-free licence to the employer is hard to apply in hybrid work because it assumes use of the employer's physical space and resources, which hybrid work often doesn't involve.

• The Nippon Steel (2025) ruling clarifies that an employment agreement plus internal IP policy can meet the prima facie "proof of right" bar under Section 7(2) this is a filing-stage threshold, not proof of final ownership, and it doesn't replace the need for clear IP assignment clauses in employment contracts.

• No single statute directly addresses hybrid or remote-work IP ownership in India the current position is built from applying older tests (control, integration, course of employment) to new work arrangements.

• The most reliable way to avoid disputes is a clear, specific IP assignment clause or NDA in the employment contract general employment terms alone create ambiguity, as Nippon Steel itself shows.

FAQs

1. Who owns IP created by an employee working from home?
Generally, the employer  if the work falls within the employee's job description, uses company resources, and is done under a service contract (Section 17(c), Copyright Act). Ownership becomes less clear if the employee used personal equipment or worked outside these conditions.

2. What is the "Integration Test" and why does it matter for hybrid work?
It asks whether the employee is functionally part of the company using company email, following HR policy, accessing company systems  rather than whether they were physically supervised. It's more suited to hybrid/remote work than the older Control Test.

3. Does an employee remain the "inventor" even if the company owns the patent?
Yes. Indian law treats inventorship (a natural person's technical contribution) separately from ownership (who has the legal right to hold the patent). A company can hold ownership through assignment while the employee remains the named inventor.

4. What did the Nippon Steel v. Controller of Patents (2025) case decide?
It held that an employment agreement combined with internal IP policy can satisfy the "proof of right" requirement under Section 7(2) of the Patents Act at the filing stage. It did not rule that employment agreements are always sufficient the case turned on specific facts, including a deceased inventor and prior accepted declarations.

5. What is "Shop Right" and does it apply to remote employees?
It's an implied, royalty-free licence letting the employer use an invention the employee made using company resources, time, and facilities. It's harder to establish in hybrid work because it depends on physical workplace use, which remote arrangements often lack.

6. How can companies protect IP ownership in hybrid work arrangements?
By including a specific, clearly worded IP assignment clause or NDA in the employment contract  rather than relying on general employment terms, job descriptions, or implied doctrines, which is where most disputes arise.

7. Is there a specific Indian law for IP ownership in hybrid/remote work?
No. There's no dedicated statute for this. Courts currently apply existing frameworks  the Copyright Act's Section 17(c), Patents Act provisions on inventorship and assignment, and judge-made tests like Integration and Shop Right to hybrid-work fact patterns.

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