[2009] FCAFC 116
Federal Court of Australia
University of Western Australia v Gray





In a dispute between an Australian University and one of its Professors the question arose as to whether, in addition to the express terms of the employment contract requiring the Professor, among others, “[...] to undertake research, to organise research and generally to stimulate research among staff and students”, there was also – as argued by the University – a term implied by law to the effect that any inventions the Professor developed in the course of his employment would be owned by the University or whether – as argued by the Professor – there was no such implied term with the consequence that the University had no proprietary right on his inventions.

The Court decided in favour of the Professor. In his opinion Justice Finn, after recalling that under Australian law it was generally accepted that terms implied by law “[...] are not based upon the intention of the parties [nor] are they founded on the need to give efficacy to a contract” but are based “on necessity [that] is informed by more general considerations than mere business efficacy” and that in any event “implication of a term in law yields to the contrary intention of the parties as expressed in their contract”, expressed the opinion that “this is an area of law in which little direct assistance can be obtained from United States jurisprudence or from the provisions of transnational instruments” and in this respect expressly referred to § 204 of the Restatement of Contracts, Second, and to Articles 4.8 and 5.1.2 of the UNIDROIT Principles. However, at the same time the learned Judge pointed out that “there is apparent acceptance both in judicial decision and in legal scholarship in the United States that when terms are implied by law […] that implication can be for reasons of justice, fairness and policy […]”.




1 The appellant, The University of Western Australia (UWA), appeals from a judgment of the Court given on 17 April 2008: see University of Western Australia v Gray (No 20) (2008) 246 ALR 603; 76 IPR 222; [2008] FCA 498.

2 On 26 October 1984, the respondent, Bruce Nathaniel Gray (Dr Gray), accepted UWA’s offer of appointment as its Professor of Surgery with effect from 1 January 1985. [...]

3 As a full time employee, Dr Gray was required by the terms of his appointment, relevantly (a) to teach, to conduct examinations and to direct and supervise the work in his field; and (b) to undertake research, to organize research and generally to stimulate research among the staff and students.

4 The primary proceeding concerned certain inventions which were said to have been made wholly or in part by Dr Gray. The inventions involved the production and use of microparticles or "microspheres" for the targeted treatment of cancerous tumours in humans, notably in the liver. Dr Gray called his area of research "targeted microsphere technology". [...]

5 In substance UWA’s claim against Dr Gray was that by reason of his employment he had obligations to UWA in respect of the inventions, and that as a result UWA had proprietary rights in respect of them and of associated patent applications and patents, and that by reason of Dr Gray’s having dealt with the inventions as his own UWA was entitled to obtain certain remedies from him. The primary Judge dismissed UWA’s claim in its entirety.


Applicable legal principles

135 We will refer, first, to the general principles governing the implication of a term by law into a contract and, then, to the specific considerations applying to the implication of a term into an employment contract such as would entitle the employer to an invention made by the employee.

(a) Implication of a term in law

Terms implied in fact are individualised gap fillers, depending on the terms and circumstances of a particular contract. Terms implied in law are in reality incidents attached to standardised contractual relationships, or perhaps more illuminatingly, such terms can in modern US terminology be described as standardised default rules": Society of Lloyds v Clementson [1995] CLC 117 at 131.
See also Byrne at 447 ff; and generally, Furmston (ed), The Law of Contract (3rd ed, 2007), 3.21-3.25; Cheshire and Fifoot’s Law of Contract (9th Aust ed), 10.50-10.54; Carter, Peden and Tolhurst, Contract Law in Australia (5th ed, 2007), [11-12]-[11-16]; Peden, "Policy Concerns Behind Implication of Terms in Law" (2001) 117 LQR 459 where this subject is helpfully analysed.

136 We begin with what is well accepted. (i) Terms implied in law are "legal incidents of the particular class of contract" to which they respectively relate: Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337 at 345. They are to be found in many commonly occurring types of contract – sales, employment, landlord and tenant, doctor-patient, etc. (ii) They are not based upon the intention of the parties, actual or presumed, in a given instance, although the provenance of a particular term may well have been the commonplace use of such a term in earlier times in contracts of that type, so establishing what later would become the default rule: see Byrne at 449. (iii) Neither are they founded on the need to give efficacy to a contract: Codelfa Construction at 345; although, as has often been recognised, there can be a deal of overlap between terms implied in law and terms implied in fact in particular contractual settings: see eg Hughes Aircraft Systems International v Airservices Australia (1997) 76 FCR 151 (Hughes Aircraft Systems International) at 193. While implication in law is also said to be based on "necessity", that necessity, as will be seen, is informed by "more general considerations than mere business efficacy": Lister v Romford Ice and Cold Storage Co Pty Ltd [1956] UKHL 6; [1957] AC 555 (Lister) at 576. (iv) Implication of a term in law yields to the contrary intention of the parties as expressed in their contract or because of inconsistency with the terms that have been agreed: Castlemaine Tooheys Ltd v Carlton & United Breweries Ltd (1987) 10 NSWLR 468 (Castlemaine Tooheys) at 492B-C; Shell UK Ltd v Lostock Garage Ltd [1977] 1 All ER 481 (Shell UK) at 487.

137 The matters that need to be considered for present purposes are, first, the requirement that there be a recognised or commonly occurring class, type, or kind of contract: Breen v Williams [1996] HCA 57; (1996) 186 CLR 71 (Breen) at 103; Shell UK, at 487; and, secondly, the test to be satisfied if the implication is to be made.


147 There are two final comments to be made. The first is that it is not appropriate in this appeal for us to venture a view upon whether the necessity test ought be discarded. That is for the High Court. What we have had to say of its presently permitted latitude is sufficient for present purposes. Secondly, we note that this is an area of law in which little direct assistance can be obtained from United States jurisprudence or from the provisions of transnational instruments: cf Restatements of Contracts, Second, SS 204; Farnsworth, "Disputes over Omission in Contracts", (1968) 68 Colum L Rev 860; and see eg UNIDROIT Principles of International Commercial Contracts, Arts 4.8 and 5.1.2. What can be said, though, is that there is apparent acceptance both in judicial decision and in legal scholarship in the United States that when terms are implied by law (a description which includes what in our jurisprudence are implications in fact: Farnsworth on Contracts, SS 7.16 (3rd ed, 2004)), that implication can be for reasons of justice, fairness and policy: see eg NEA-Coffeyville v Unified School District No 445 996 P. 2d 821 at 830-832 (Kan 2000); Farnsworth on Contracts, SS 7.16 at 351.



206 His Honour’s conclusion that UWA failed at the threshold is correct and for a variety of reasons. Justice French was well aware that the circumstances of Dr Gray’s employment were a long way removed from the situations that gave rise to the common law implication of employer ownership of employee inventions that were developed in the course of, and as a product of, what the employee was employed actually to do. Dr Gray’s employer was a university; he was a member and an employee of it. In determining whether such an employment was nonetheless one which attracted the common law implication, French J was obliged to have regard to what Viscount Simonds in Sterling Engineering described as "more general considerations" and he did have regard to them. As we have indicated, these include both considerations of policy and consequentialist considerations. Importantly, regard can be had to considerations of these kinds, not only in support of making the implication into a class, but also to negative the implication. In this matter, and again rightly in our view, his Honour relied upon them to negative the implication. His Honour also relied, as we have indicated, upon four specific and differentiating aspects of Dr Gray’s employment and research environment. One of these alone – that Dr Gray had no duty to invent – could well of itself have justified the dismissal of UWA’s claim. What we wish to highlight, because it was a central pillar in his Honour’s reasons and is in our own, is the distinctiveness of a university such as UWA and of academic employment in it as considerations relevant to the determination of the "threshold question".

207 The employee invention implied term is a particularly blunt instrument to settle the ownership of employee inventions. UWA recognised as much in the provision it made in the Patents Regulations, and then the IP Regulations, in relation to the apportionment of the benefits derived from patents and other intellectual property, as between UWA and the inventor/originator. Equally importantly, as we have indicated, in employment contracts to which it applies, the implied term presupposes the common law duty of fidelity and the equitable duty of confidence to protect for the employer’s benefit confidential (and other) information generated during the course of the employment, which is not, or is not yet, patentable. As this case highlights, it is important to appreciate what the implication itself presupposes about how the employment relationship is already regulated when considering the threshold question. It is this which explains and justifies French J’s concern with Dr Gray’s employment circumstances and his conclusions that Dr Gray’s freedom to publish research results and the need to collaborate with external institutions told against the implication.

208 His Honour obviously considered freedom to publish as an important value in the setting of a university given its nature and public purposes. And we would note in passing that, in other contexts involving education (eg charitable trusts for the advancement of education), the law has placed a particular value upon the dissemination of the results of research: see Taylor per Griffith CJ at 231. Justice French obviously attributed a like significance to the academic researcher’s freedom to choose the subject and manner of research without being subject to a duty to invent. As is quite clear from [160] of his Honour’s reasons, these two features plus the fact that the contract of employment was with a university serving public purposes, were significant characteristics of the general class or type of contract that was under consideration for the purposes of the threshold question. Dr Gray’s contract, as his Honour later found, had those characteristics: see [1359]-[1363].

209 In appraising that contract, the primary Judge necessarily had regard both to the nature and public purposes of universities and to the distinctiveness of academic employment in universities, focusing in particular on the two "freedoms". None of these matters, though, were ones upon which significant evidence was adduced. This explains why his Honour’s focus was on such material as there was relating to UWA in its statutory setting and to the terms and circumstances of Dr Gray’s employment. Nonetheless, it was not only proper but also necessary for his Honour to have regard to the more general issues of policy suggested by that material (especially as they related to the two freedoms) which would arise if the implication was, or was not, to be made. In that regard his reference to the work of Monotti and Ricketson and to "academic freedom" was entirely appropriate. After all, what was being made was a judgment as to the "necessity" of implying a term into a particular class or type of contract. There was ample reason for not making the implication sought given the class or type of contract in question.


211 We would also add that, while our conclusion recognises a distinction between the ownership of employee inventions in universities and in private sector business entities, we should not be taken as suggesting that the solution reached by use of the implied term in law is necessarily a desirable one in either case. What we do emphasise is that there are clear reasons for not implying such a term as to inventions in a case such as this. If a less crude and more fair and reasonable result is to be achieved which balances the respective interests of a university and its academic staff members, this will need to be done by or under legislation or, if it could be devised, by an express contractual régime appropriate to the circumstances of the individual case.

212 We would not sustain grounds 1 to 5 and 8 of the appeal.



380 For the above reasons UWA’s appeal should be dismissed with costs. Accordingly, it is not necessary that we consider Dr Gray’s notice of contention.}}