Employers own the rights to innovative products, not the individual staff who develop them, the Court of Appeal ruled today in a case involving Euronext-Liffe and an electronic trading system invented by a former employee.

Two senior judges upheld an earlier High Court decision which said that the derivatives exchange was entitled to the intellectual property rights to four products developed by Pavel Pinkava, a manager in Euronext-Liffe’s interest rates division until July 2005.

Euronext-Liffe successfully sued Dr Pinkava in the High Court after he attempted to patent the inventions in the US.

In what lawyers are calling an employer-friendly ruling, the Court of Appeal reinforced that decision today and said that Euronext-Liffe owned the rights to Dr Pinkava’s invention because he devised it during the course of his “normal duties”.

The ruling goes further than the original High Court decision, which said that the inventions were not part of Mr Pinkava’s normal duties but still belonged to Euronext-Liffe because they were devised during a special assignment.

But today the judges adopted a much broader view of what constituted an employee’s “normal duties” and said that they evolved over time and were not limited to the strict scope of a written employment contract.

Jason Rix, an intellectual property lawyer at Allen & Overy, said that companies could "breathe a sigh of relief” after today’s ruling, but he warned that financial institutions “need to be aware of their patent rights in order to protect their investments in new products”.

Lawyers predicted that because Dr Pinkava had lost his fight to claim the patent rights to his inventions, he may now turn his attention to claiming compensation from Euronext-Liffe.

Jeremy Morton, an intellectual property partner at Simmons & Simmons, said: “As Euronext-Liffe acknowledged, the door is now open for Dr Pinkava to claim statutory compensation.

“Traditionally, claims for compensation by UK employee inventors have tended to fail, but the law has changed in recent years in a way that may favour the employee.”

Dr Pinkava attempted to patent his creations in the US, where it is possible to claim intellectual property rights to so-called business services, such as electronic trading systems.

It is much harder to patent similar products in the UK.

Robin Fry, an intellectual property partner at Beachcroft, said: “New financial instruments and trading systems have worldwide value even if, at present, they can only be patented in the US and a handful of other countries.

“Britain needs to follow the lead of Nasdaq and the major US investment banks in seeking patent protection.”

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