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IN DETAIL: So who actually owns the IP?

Submariners at a chart table in the simulator onboard HMAS Stirling. Image: Defence

Intellectual Property, or IP, is an important part of Defence’s capability advantage. Last week’s AUKUS announcement about Australia’s way forward on nuclear-powered submarines, and forthcoming announcements about the Defence Strategic Review and joint R&D and acquisition of advanced capabilities in Pillar 2 of AUKUS, have made the issue of IP both a national and an international issue.

Ground up innovation from within the ranks of the ADF may be encouraged by a forward-leaning leadership, but can add a further layer of complication if not handled correctly.

Ethan Graham, Stephen von Muenster and Daniel Mendoza-Jones

IP plays an important role in delivering vital capabilities to Defence. The ADF recognises the value of IP and the crucial role it plays in underpinning a given technological advancement or application. However, it is important to recognise that IP is often far more valuable than in its first application as new technologies or new ways of using existing technologies often follow the first use or exploitation of IP.

Defence has an interest in fostering ‘ground up’ initiative and innovation from within the ranks of the Australian Defence Force (ADF) that often leads to the development of important and sometimes valuable IP by ADF members.

Therefore, in the ADF service context, it is important for members and former members who believe they have developed IP to understand its nature, how it comes into existence and, ultimately, who may own the IP in a given circumstance. This will avoid misunderstandings and potential disputes arising between Defence, a member’s chain of command, a member who has developed IP and potentially third parties that may have gained access to the IP and intend to, or are currently, exploiting it for commercial gain.

As this is a common question we are asked, in this article the team at Lawforce Alpha (LFA) will explore through an example a situation where an ADF member or former member has identified a unique capability gap or opportunity and developed IP whilst serving, but whilst off-duty, in their own time and using their own resources. The intention is to provide some clarity and approaches that can be taken to avoid future issues arising.

What is IP?

The expression ‘IP’ is used ubiquitously but its proper legal meaning is, in our opinion, not very well understood.  Intellectual Property, broadly speaking, refers to legal rights that protect original ideas that have been expressed or otherwise reduced to a material form in a tangible way in the industrial, scientific, literary and artistic fields. These rights include copyright (which arises automatically) and, if accepted for registration, also includes circuit layouts, designs, plant breeder’s rights and patents. Owners of IP (either a person or a company) have the right to decide who can use the IP and on what terms. Intellectual Property, however, is often confused with, but is not, a simple ’idea’, industrial know-how or commercially sensitive information that needs to be protected in other legal ways such as by contract or confidentiality deeds.

ADF members need to understand which of the above ‘buckets’ their material or property might fall into, as different legal treatments and commercial approaches may be necessary. It is advisable to seek professional advice if unsure.

Exemplar Situation

Our innovator is a current serving member of the ADF. Off duty, but at her own expense and using her own resources, as well as know-how developed from experience as an ADF member, she has developed a computer program for a discreet but important capability gap that she has identified in Defence.

Our innovator then shows her superior officer what she has done and it is of significant interest. Defence funds a trial and begins to integrate the computer program into their systems. Her chain of command congratulates her for her efforts, but tells her that Defence now owns the computer program because she is a Defence member.

There are a number of interesting questions that arise from this exemplar situation:

  • Is she considered to be an employee of the ADF, or is there another regime that applies to her service in the ADF?
  • In the circumstances, can she retain ownership of the IP subsisting in the computer program, or does this become the property of the ADF (the Commonwealth) by virtue of her service in the ADF?
  • What are her legal entitlements with respect to IP she created and what recourse does she have if the ADF uses and integrates her IP?
  • What is the best way to identify and protect her IP to avoid future misunderstandings?

Using the above example, we explore the legal framework in place with respect to the copyright that subsists in a computer program and the institutional structures within Defence that may pertain to the development and exploitation of such IP.


‘Computer Programs’ are considered to be a literary work under the Copyright Act 1968 (Cth) (Copyright Act).  There may also be separate forms of copyright that may subsist in the computer software (e.g. sound recordings, artistic works in user experience interfaces, etc) and related use documentation (e.g. literary and artistic works) however, the computer program refers to the literary work incorporated into, or associated with the computer program that is essential to its effective operation. Copyright is a form of IP and does not protect ideas, but rather the expression of ideas which in this case is a computer program expressed in literary form. There is no requirement of, or provision for, registration of copyright as there is for trademarks or patents, as copyright exists upon its creation.

Assuming that it is her work, and it is original, copyright would automatically subsist in the computer program as a literary work. This is an exclusive right to, among other things, enter into a commercial rental arrangement in respect of the computer program.

Ownership of Copyright

Whilst the Copyright Act itself does not expressly define who an ‘author’ is in the context of a literary work, generally it has been suggested that an author is the person who originates the particular form of the literary work. In other words our innovator is the author of the computer program, as she created it. Further, and by virtue of her authorship of the computer program, she is prima facie the owner of any copyright subsisting in the computer program and has the exclusive right to decide how the computer program is to be used and commercialised.

Notwithstanding the prima facie position, generally an employer will be the owner of the copyright in the computer program if it is made ‘by the author in pursuance of the terms of his or her employment by another person under a contract of service or apprenticeship’. This situation may be modified by a written agreement expressing a contrary intention. In contrast to this, it is not uncommon for employees of a business to produce new IP using their own experiences and know-how gained from their workplace outside the workplace for their own personal benefit and through their own initiative, and not in pursuance of the terms of their employment and stated duties. In this case, the employee would retain ownership of the IP.

Employee v Servant of the Crown

Whilst the above position generally applies to employees who provide services to civilian businesses, case law suggests that ADF members are not considered an “employee” of the ADF or the Commonwealth, nor is there a contractual relationship between ADF members and the Crown of civil employment or that directly addresses the question of IP created during ADF service.

The Federal Court of Australia in the case of C v Commonwealth of Australia [2015] FCAFC 113 set out the common law position developed over a number of centuries as to the status of ADF members from which we derive the following relevant points:

  1. at least since the reign of Charles II, the government and command of the military forces had been vested in the Crown by prerogative right at common law and by statute”.
  2. It follows from point 1 above that: “[a service officer] cannot as between himself and the Crown take proceedings in the courts of law in respect of anything which has happened between him and the Crown in consequence of his being a soldier. The courts of law have nothing whatever to do with such a matter”.;
  3. Soldiers served at the pleasure of the Crown and could have their services terminated with or without cause”.
  4. Neither commission nor enlistment in the services does not or can amount to a contract with the Crown.

In this context, the legal status of ADF members is distinct and unique from other individuals employed in the civilian workforce.

ADF members are not employees of the Crown with a contractual relationship or benefits under the national workplace relations system; they serve at the pleasure of the Crown. Therefore, it is arguable that this may influence the ownership of IP created by Defence members and suggests that a broad interpretation can be taken to their service in the ADF. In other words, it could be interpreted that ADF members serve “at the pleasure of the Crown”, everything they do could be in service to the Crown, and that ownership of IP created by them, regardless of the circumstances, resides with the Crown. It is generally understood that Defence members and other servants of the Crown (e.g. police officers) are ‘always on duty’.

However, as discussed below, this broad interpretation of service in the ADF must be considered in light of the applicable provisions of the Copyright Act. Thus, ownership of IP created by the Defence member in the example we’re considering must therefore have regard to their specific duties in the ADF in order to properly determine with whom copyright should reside.

Does ownership of copyright transfer to the Crown?

Part VII of the Copyright Act contains unique provisions applying to the Crown that take a completely different approach to the general commercial context. The Commonwealth, states and territories own copyright in literary works that were ‘made by them or under their direction or control’.

The term ‘under the direction or control of’ is not defined in the Copyright Act, however it has been held that this test requires that the Commonwealth has brought about the making of the work, and it appears that courts are reluctant to give this broad interpretation.

Therefore, it is clear that this term includes works created by ADF members in the course of their duties. Whether our innovator was under the direction or control of the Crown at the time of creating the computer program is a matter to be determined by reference to her duties in the ADF at the relevant time. As a broad interpretation is unlikely to apply, ownership of IP created beyond the scope of the specific duties of an ADF member would reside with that Defence member, particularly if the ADF member created the IP in their own time using their own resources, including equipment and funding. In the example of our innovator, we would suggest that she owns the IP in the computer program. This would arguably be the case even if Defence agreed to some sort of test and evaluation of the IP to assess its capability merits and expended its own resources in so doing.

Can Defence otherwise use her IP?

As we have now established that our innovator is likely to own the IP rights in the computer program, it must be asked if Defence can use the IP she has shown them regardless. An important protection that the Crown enjoys under the Copyright Act is that unlike commercial entities, the Crown can never be liable for Copyright infringement.

Where the use of a copyright material is for the services of the Commonwealth or State, it will not infringe copyright in that material. However, Defence must inform the copyright owner of the use and as the owner reasonably requires ‘from time to time’. Therefore, even if copyright in the computer system subsists in her, the Crown has a right to use the material under this section 183 of the Copyright Act if it is being used “for the services of the Commonwealth or State”. However, this does not come without a cost.

If Defence has used her computer program under the aforementioned provision of the Copyright Act, the terms of use need to be agreed upon between the Commonwealth and her, the owner of the copyright. In other words, the Commonwealth should approach her to agree the terms of a licence under which they will use the computer program, and to agree any royalties or remuneration structures payable to her in return for this licence. Alternatively, our innovator and Defence may strike a deal for the sale to the Commonwealth for an agreed cost.

What recourse do I have if the Commonwealth is using my IP without an agreement in place?

In default of agreement, or if her computer program is used by Defence without her knowledge or consent, the conditions of any licence including any compensation or remuneration may be fixed by the Copyright Tribunal.

The Copyright Tribunal is an independent body established under the Copyright Act and is administered by the Federal Court of Australia. The Copyright Tribunal has jurisdiction to determine a variety of applications and references for the grant of copyright licences and the determination of royalties and remuneration. This provides a mechanism for securing compensation for the copyright owner in the event IP is used by Defence. However, a copyright owner will need to establish their ownership of the copyright as well as the value of the IP to determine the remuneration they should receive.

In addition to, or alternatively from the Copyright Tribunal, there are internal complaints and disputes mechanisms available to ADF members if their IP is taken or used without their knowledge or consent including the following courses of action:

  • Defence has a variety of internal dispute resolution mechanisms available to ADF members starting with the member’s usual chain of command and it is always preferrable that concerns and disputes are resolved at the lowest possible level
  • A ‘Redress of Grievance’: ADF members may complain about a decision, act or omission relating to their service under this scheme which is supervised by the Inspector-General of the Australian Defence Force
  • An alternative or subsequent option is to make a formal complaint to the Defence Force Ombudsman

These mechanisms are noteworthy to ADF members considering that they are excluded from the protections of the national workplace relations system and the usual rights of copyright owners under the Copyright Act.

Defence Approach to Innovation and IP

Defence has recognized that it is important to foster the development of “ground up” innovative technologies to enhance the capabilities of the ADF and its members. An example of this has been the genesis of Diggerworks, a joint initiative between different Defence organisations which has been established to identify and deliver technology quickly to better equip Defence members. It utilizes the experience of Defence members to identify capability gaps and to develop new technologies to assist frontline soldiers and tactical units.

Defence also recognizes that IP rights are integral in encouraging long term innovation. This is driven by respecting the investment of individuals and industry in developing innovative technologies that have a Defence application, and providing a means of obtaining commercial returns to support the viability and sustainability of innovative businesses.

Achieving an optimal balance between the interests of Defence and industry is a central concern to foster development of innovative technologies, and this has been seen in the development of the Defence Innovation Hub. If you are an Australian or New Zealand business, you can submit innovative ideas (such as the computer program) that could have a Defence application and can be awarded a contract and grants via the Defence Innovation Hub.

The position that has recently been put forward by both the Defence Innovation Hub (and the ADF generally) is that in many instances, they will no longer seek to take sole ownership of IP. Rather, it may take joint ownership or get a licence to use the IP and will need to consider the nature of the licence that it requires (e.g. does it need to sub-licence, cost, whether it will be perpetual, will it be restricted to industry sectors, etc). Again, this is to encourage collaboration between Defence and industry, particularly in circumstances where innovative technologies may have dual uses with other industries. The creation and maintenance of trust and transparency are key enablers to effective Defence and industry sovereign capability development.

Conclusion and key takeaways

If you are a serving or former ADF member, there may be a standing order or instructions pertaining to you regarding IP that you created on or off duty. This may need to be taken into consideration and may bear upon the example above. However, in our experience, standing orders and duty statements often do not address the specific question of IP development.

Nevertheless, if you are a current or former ADF member or are a commander, superior officer or individual who has developed a “ground up” innovative idea or IP, here are some key takeaways to consider:

  • Consider if the IP was developed off duty, and whether or not it may fall within the scope of the ADF Member’s duties: If it was created whilst on duty at the direction or control of the Crown, then arguably it belongs to the Commonwealth. Otherwise, if it was conceived, developed and funded by the individual in their own time using their own resources, it will be owned by the ADF member
  • If Defence considers the innovation to be necessary for capability enhancement, then the appropriate course is for Defence and the individual to agree to a licence or transfer of ownership for any agreed sum and terms. It may also have dual applications in industry
  • It is critical for individuals like our innovator to properly identify the nature of the IP or proprietary information that they have created and arrange for the protection of this material created off duty. Only once this has been achieved should a member share their idea with their chain of command or other commercial stakeholders. An individual may consider going through the formal channels in Defence such as Diggerworks or the Defence Innovation Hub in order to be awarded grants or a contract to further develop any IP

It is always advisable to obtain appropriate legal, taxation and commercial advice upfront so that confusion and misunderstandings do not arise in the future. In our experience, many future issues can be avoided by simply setting things out in writing in an appropriate manner before disclosures are made.

If you have any questions regarding IP in Defence, please feel free to contact the Lawforce Alpha team and visit

Mr Ethan Graham is a Senior Solicitor and Mr Stephen von Muenster and Mr Daniel Mendoza-Jones are partners and co-founders of Law Force Alpha and are serving ADF reserve officers.

Lawforce Alpha is an Australian veteran-owned specialist legal and commercial advisory service that is focused on serving and supporting the capability needs to Australian Small and Medium Enterprises (SME) operating in the defence, aerospace and security services sectors.

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