Who Owns the IP Your Staff and Contractors Create?

A Malaysian founder about to sign a term sheet is asked for the IP assignments. There are none. The designer was a freelancer, the first version of the platform was written by a friend before the company existed, the logo came from an agency whose terms nobody read, and the trademark is registered in the founder’s personal name. Everyone assumed that paying for something meant owning it.

In Malaysia that assumption is, unusually, mostly correct — and that is exactly why nobody documents it, and why it falls apart at diligence.

The four statutes vest ownership four different ways

There is no single rule. Each Act has its own provision, and they do not line up.

Right	Employee work	Commissioned work	Provision
Copyright	Deemed transferred to the employer	Deemed transferred to the commissioner	Copyright Act 1987, s.26(2)
Patent / utility innovation	Rights accrue to the employer	Rights accrue to the person who commissioned the work	Patents Act 1983, s.20(1)
Industrial design	Employer is original owner	Commissioner is original owner, if commissioned for money or money’s worth	Industrial Designs Act 1996, s.10(2) and (3)
Trademark	No provision at all	No provision at all	Trademarks Act 2019

Every one of the first three is expressed to operate subject to any agreement to the contrary. They are defaults, not mandatory rules.

Copyright: Malaysia is not the UK

Section 26(1) vests copyright initially in the author. Section 26(2) then overrides that in two cases. Where a work is commissioned by a person who is not the author’s employer under a contract of service or apprenticeship, or where it is made in the course of the author’s employment, the copyright is deemed to be transferred to the commissioner or the employer, subject to any agreement between the parties excluding or limiting the transfer.

Most startup templates in circulation are drafted for jurisdictions where the opposite is true — where a contractor keeps copyright unless there is an express assignment. Malaysian law starts from the other end. Three qualifications kill the comfort:

It requires a commission. Buying an off-the-shelf product, or receiving work the author had already made, is not commissioning it. Section 26(2) attaches to work created pursuant to the commission.

The contract wins. Agency terms of business, dev-shop master agreements and freelance-platform terms very often say the supplier retains ownership and grants a licence. That is an agreement excluding the transfer, and it displaces s.26(2) entirely. This is the single most common finding at diligence.

It is a deemed transfer, not first ownership. The author still owns it at the moment of creation. Which means moral rights under s.25 — the right to be identified and to object to distortion, mutilation or modification prejudicial to honour or reputation — remain with the author regardless of who holds the copyright, and cannot be exercised against them without the author’s consent.

Note also that s.26(2) is expressed to apply notwithstanding s.27(6), the provision permitting assignments of future works. And s.27(3) bites separately: no assignment of copyright and no licence has effect unless in writing. A verbal side deal with a contractor conveys nothing.

Patents: the one term you cannot contract out of

Section 20(1) gives the rights to a patent for an invention made in the performance of a contract of employment, or in the execution of commissioned work, to the employer or the commissioner — in the absence of any provisions to the contrary.

Two provisos change the commercial picture, and almost no Malaysian employment contract addresses them:

• s.20(1) proviso: where the invention acquires an economic value much greater than the parties could reasonably have foreseen when the contract was concluded, the inventor is entitled to equitable remuneration, fixed by the Court if the parties do not agree.
• s.20(2): where an employee whose contract does not require inventive activity makes an invention in the employer’s field of activities using data or means placed at his disposal by the employer, the right accrues to the employer — but the employee is entitled to equitable remuneration, taking into account his emoluments, the economic value of the invention and the benefit derived by the employer.

Then s.20(3): the rights conferred on the inventor under subsections (1) and (2) shall not be restricted by contract. An assignment clause that purports to extinguish the inventor’s remuneration right does not work. Section 21 applies the same regime to Government employees, unless the organisation’s own rules provide otherwise.

Separately, s.19 lets a person from whom the essential elements of an invention were unlawfully derived apply to the Court to have the application or patent assigned to him — but not more than six years after grant.

Industrial designs: the consideration requirement

Section 10(1) makes the author the original owner. Section 10(2) transfers that to the person commissioning the design, but only where the design is created in pursuance of a commission for money or money’s worth. An unpaid collaboration, an intern arrangement with no consideration, or a design supplied speculatively does not engage it. Section 10(3) covers employee designs created in the course of employment. Both are subject to contrary agreement. Section 10(6) deals with computer-generated designs with no human author, treating the person who made the arrangements necessary for creation as the author.

Trademarks: no rule at all

The Trademarks Act 2019 contains nothing equivalent. Section 17(1) simply allows any person claiming to be the bona fide proprietor of a trademark to apply. The register records whoever applied.

That is how an agency ends up owning your mark, or a founder holds it personally while the operating company trades under it, or a mark ends up in a dormant holding entity nobody remembers. Fixing it is an assignment under s.64 plus a recordal under s.65 at RM300 — cheap, but only once someone notices.

What an assignment actually needs

In writing, signed. Copyright s.27(3); Patents s.39(3)(b), signed by or on behalf of the contracting parties; Industrial Designs s.29(3); Trademarks s.64(3), signed by or on behalf of assignor and assignee or a personal representative.

Precise about what is assigned. Identify the works, inventions, designs and marks. Partial assignments are allowed — Trademarks s.64(2) permits an assignment limited to some of the goods or services, and Copyright s.27(2) permits limits by act, period or territory. Silence about scope is a dispute in waiting.

Forward-looking. Copyright s.27(6) expressly allows an assignment or licence of a future work, or an existing work in which copyright does not yet subsist. That is the clause that makes an employment or contractor agreement work prospectively rather than requiring a fresh assignment per deliverable.

Explicit about moral rights. Section 25 rights sit with the author. An assignment that does not deal with the author’s consent leaves you unable to modify or re-present the work without argument.

Recorded. This is the step that gets skipped, and it has teeth:

• Patents s.39(4): no assignment, transmission or security interest has effect against third parties unless recorded in the Register.
• Trademarks s.65(2): until an application to record is made and approved, the transaction is ineffective against a person acquiring a conflicting interest in ignorance of it. And s.65(3) denies the new proprietor damages or an account of profits for any infringement occurring between the transaction date and the date of the application to record. Delay is not neutral; it costs you remedies.
• Industrial Designs s.30: a person entitled by assignment or transmission applies to have it recorded.
• Copyright: there is no register of title, but a notification of assignment on Form CR-11 costs RM50 and feeds into the Register of Copyright, whose certified extracts are prima facie evidence under s.26B(5).

Common mistakes

Relying on the statutory default without reading the supplier’s terms. The default is displaced by any contrary agreement, and most professional suppliers have one.

Treating a purchase order as a commission. Section 26(2)(a) needs the work to be commissioned; s.10(2) of the Industrial Designs Act needs money or money’s worth. Buying finished goods is neither.

Forgetting pre-incorporation work. Anything a founder built before the company existed was commissioned by nobody and created in the course of nobody’s employment. It needs an actual assignment, executed after incorporation.

Assuming an employment contract covers contractors. A contract of service and a contract for services engage different limbs of s.26(2), and the industrial design and patent provisions treat them differently again.

Assigning but not recording. Patents s.39(4) and Trademarks s.65(2) and (3) make an unrecorded assignment weak against third parties and expensive in lost remedies.

Ignoring the inventor’s remuneration right. Section 20(3) makes it non-excludable. A clause purporting to waive it is unenforceable, and the Court sets the figure if the parties cannot agree.

What’s next

Build the chain of title backwards from every material asset: who made it, under what contract, and is there a signed document. Where the statutory default does the work, say so in a file note. Where it does not — supplier terms, pre-formation work, a mark in the wrong name — execute an assignment now and record it, because Trademarks s.65(3) charges you for waiting.