Copyright on Work Made for Hire Under Employment

01
July 2019

Works for hire made by employees are important to all employers whose employees can create original works of authorship. Who owns that work for hire, what rights does the employer have and what are the rights of employees and what is the validity on copyrights, are just some of the questions clients ask us daily. It is important for all employers and employees to have a good understanding of copyright to protect their interests on time. When it comes to the IT sector and software copyrights, particular attention should be paid to the specificities in terms of which this branch of economy differs from others.

Given the reasons above, we wanted to explain the rules that apply in the field of copyright in general, as well as to specifically address the copyright of software developed during employment.

What is an Original Work of Authorship?

For a work of authorship to exist, only two conditions need to be met:

1. That it represents an original intellectual work of authorship,

2. That it is expressed in a certain form (especially in case of literary, dramatic, music or works of art).

Saying that, originality does not require innovation in the sense that the work must introduce novelties in that respective area, which is for instance, an essential feature of patents. Unlike innovation, which is measured by objective criteria, originality is primarily measured subjectively, as to what feelings does it evoke in those to whom it is directed (for example, readers, viewers, etc.). Originality is required primarily to protect other authors and works of authorship so that plagiarism does not become the subject of copyright protection, and its creator the holder of the copyright. For this reason, originality is always considered in every specific case and represents a factual question.

What is specifically implied by the criterion of “originality” is determined through the case law of each state by applying appropriate legal tests. Thus, for example, according to the originality test established by the European Court of Justice in Infopaq International A/S v Danske Dagblades Forening, a work of authorship must satisfy the criterion of being “the author intellectual creation”.

The work of authorship must be expressed in some form. This criterion makes a key distinction between one’s original idea (which remained only at the level of an idea and not expressed in some way) and the work of authorship. For some sorts of work of authorship (for example, films, works of architecture, sculptural works, etc.) it is not possible to create a work without expressing it in material form. However, some dramatic or musical works can exist without being expressed in material form. For them to be protected by copyright, they must be in a form that allows expression of that work of authorship. For example, a choreography is a work of authorship, and its expressive form is human movement.

Work of authorship exists regardless of its artistic, scientific or some other value, its purpose, size, contents and way of manifestation, as well as the permissibility of public communication of its contents.

However, the protection of copyright shall not apply to general ideas, procedures and methods of operations or mathematical concepts as such, as well as concepts, principles and instructions included in a work of authorship.

What Can be Considered an Original Work of Authorship?

Written works (e.g. books, brochures, articles, translations, computer programs), spoken works (lectures, speeches, orations, etc.), dramatic works, works of music, films, fine artworks, works of architecture, applied art, etc.

Law on Copyright and Related Rights explicitly states that computer software can be protected by copyright.

The proposed amendments to the Law on Copyright and Related Rights, which is in the parliamentary procedure at the time of writing this blog, foresees that the database will also be considered as original works. If these changes get adopted, the database will be defined as a collection of separate data, works of authorship or other materials arranged systematically or methodically, individually accessible by electronic or other means. However, not every database will enjoy protection as a work of authorship, but only the one that meets the basic criterion – originality.

When Is an Original Work of Authorship Created?

Any author shall acquire copyrights to their work of authorship as of the moment it is created. Even unfinished works of authorship, parts of original work, as well as the title of original work, shall be deemed as original work of authorship.

Accordingly, for the author to enjoy copyright, it is not necessary to fulfil any formal conditions such as the registration of a work, its publication or public communication in any other way.

By the very act of the creation of the work of authorship, the author enjoys all the rights that accrue to them, and these are the pecuniary and moral rights of the author. Pecuniary rights last for the life of the author and 70 years after his death, whereas moral rights of an author last even after the expiration of pecuniary rights, more precisely, these rights cannot become obsolete.

The author’s moral rights include the author’s right to be recognized as the author of their work, that their name, pseudonym or mark can be put on each copy of their work or be quoted at each public communication of that work, the exclusive right to disclose their work and set the way in which it is to be disclosed, as well as the exclusive right to protect the integrity of their work.

Pecuniary rights allow the author to commercially exploit their work, which means that they can, among other things, reproduce the work, place in circulation copies of the work, rent copies of work, broadcast the work, etc.

Moral and pecuniary rights could be transferred by inheritance, except for the author’s moral rights to publish an undisclosed work, if the author has prohibited it, and the right to modify the work. Unlike pecuniary rights, the author’s moral rights cannot be transferred by contract.

Depositing Works of Authorship Before the Intellectual Property Office

Although your work is protected by copyright from the very beginning (without any obligation to register a work of authorship), a voluntary system of recording and depositing works of authorship and subject-matters of related rights has been established before the Intellectual Property Office. Depositing is one of the proofs of authorship of some work. However, it is important to understand that the Intellectual Property Office does not examine the content of the work of authorship, nor its originality, and the deposit does not confirm that the subject matter is a work of authorship.

Author v. Copyright Holder

Bearing in mind that the work of authorship represents the author’s intellectual creativity, only a natural person can be the author of the work, and not a company that hires workers. The idea of works of authorship is that the author leaves their mark on the work they created.

However, the author does not have to be the holder of all copyrights on that work. Transferable copyrights may be transferred by

If an author has created a work as an employee in the performance of his duties, some of the copyrights on that work belongs to the employer according to the law itself, unless otherwise provided by a general regulation or employment contract.

What is a Work Made for Hire?

For the employer to hold the copyright on the work of authorship, the work must be created within employment.

In the event of a dispute, when concerning if an employee was performing their duties, the courts consider whether the work of authorship was created using the funds of the employer or the employee’s resources. The courts also analyze whether a work of authorship was created at home or in the workplace.

However, the final answer to the question of whether a work of authorship belongs to an employer or an employee will depend on the particular situation. This can be seen from the case-law of far more progressive legal systems in the field of intellectual property, as is the case with Great Britain.

Namely, in the Software v. Magee[1], before English courts, the question arose whether software that was created by an employee outside work time and on their equipment was created during labor relation or not. A company that sued their employee claimed that the employee was the holder of the right on software, even though the employee was free to create software, having in mind that this software belonged to the same type of software that he was hired for during his employment relationship. The court adopted the company’s arguments and ruled that the employer is the copyright holder of the software.

What Rights do Employers Have as Copyright Holders?

If an author i.e. an employee has created a work within employment, the employer shall be authorized to disclose such work and to hold exclusive pecuniary rights on its exploitation within the scope of the employer’s registered business. This employer’s right shall be valid for five years from completion of that work unless provided otherwise by a general regulation or employment contract.

However, upon the expiration of a period of 5 years or the period provided by a general regulation or employment contract, the author shall acquire the exclusive pecuniary rights on the work.

Hence, if you are an employer and want to reserve exclusive pecuniary rights to a work of authorship, you need to correctly provide this in the general regulation or employment contract.

The law creates an opportunity for the employer to enter a clause while regulating labor relations with their employee, by which the pecuniary rights of the employee as an author of the work created in the labor relations will be regulated differently than the manner prescribed by the law. In this way, the employee can transfer permanently all the pecuniary rights exclusive to them by the law to their employer. Thus, the employer removes the possibility that their employee, after five years from the commencement of the work, enjoys all copyrights instead of them and thus suffers economic losses, which could happen, if such a clause did not exist.

Furthermore, depending on the outcomes of the work’s exploitation, the employee as the author of the work is entitled to a special remuneration, which is determined by a general regulation or employment contract. However, there is a possibility that the employer prescribes that this kind of compensation will not be paid to their employee by the indicated acts (general regulation or work contract).

However, it should be considered that, unlike pecuniary rights, an employer cannot be the holder of moral rights, nor can these rights be transferred to the employer. In such a case, exclusively an employee as the author of the work can be the holder of moral rights.

When using a work created by an employee, the employer should quote the author’s name, pseudonym or mark.

These rules refer to works of authorship that have been created within the scope of the employer’s registered business, while in other cases the holder of both pecuniary and moral rights becomes an employee. However, an employer may hire a person based on a service contract, specifically based on a copyright contract for jobs outside their registered business. By the contract of commissioning a work of authorship, as the type of copyright contract, the author undertakes to produce a work of authorship and to hand it over to for the commissioning party, and the commissioning party to receive that work and pay him the agreed compensation. In this way, the employer can acquire all pecuniary rights even to a work that is not the result of his registered business.

Computer Program as a Work of Authorship

The exception to rule that employees acquire exclusive pecuniary rights after the expiration of a period of five years, are the computer programs created by an employee who has performed their work duties with the employer or by the person engaged by the company as an independent contractor (e.g. an entrepreneur who has created a computer program based on a contract of commissioning a work of authorship).

Namely, in this case, the employer is a permanent holder of all pecuniary rights on a computer program, unless provided otherwise by a general regulation or employment contract.

Thus, if an employee wants to negotiate different conditions, it is necessary to enter a clause into an employment contract or a general regulation that regulates this issue differently. Otherwise, a legal provision will apply which fully benefits the employer, in contrast to other business activities.

However, it should be noted, that the exception provided for by the law only applies to the scope and duration of pecuniary rights. Accordingly, for the IT sector, the same legal regime applies regarding the effects of the exploitation of the work of authorship, according to which the employee as the author of the work is entitled to a special remuneration, which is determined by a general regulation or employment contract, and this provision of the law applies to employers from the IT sector too.

For this reason, it is necessary for IT companies to define whether they will pay this compensation to their employees as the author of the work in their acts and to decide what will be the amount, if they opt for such compensation.

Does the Employer Have the Right to Continue to Exploit the Computer Program Without Limitations?

The law prescribes that the licensing of pecuniary rights may be either exclusive or non-exclusive.

In the case of exclusive licensing of pecuniary rights, only the licensee can be authorized to exploit the work of authorship in the way stipulated by the contract, as well as to license such rights to somebody else, with the author’s or their successor’s special permission. The right a licensee transfers to others is not a non-exclusive right unless otherwise is provided by the contract.

In the case of non-exclusive licensing of pecuniary rights, the licensee shall be authorized neither to prohibit somebody else from exercising the copyright nor to license their right to somebody else. If the contract does not state whether exclusive or non-exclusive licensing is implicated, concerned licensing of pecuniary rights shall be deemed to be non-exclusive. This means that the person who acquired the pecuniary right from the author, and in this particular case, the employer from their employee, may transfer this right in its entirety to another person, i.e. economically exploit it only with the permission of the author, and in this case the employee. For this reason, the employer shall pay particular attention when deciding on mutual rights and obligations between them and the employee and in the employment contract or general regulation necessarily enter a clause that acquires the exclusive pecuniary right on the computer program.

How to Use the Obtained Computer Program?

The person who has legitimately obtained a copy of that computer program for their own usual use, may store the program in the computer memory and run the program, eliminate errors in the program, as well as make any other necessary changes in it, in accordance with its purpose, unless otherwise provided by the contract, make a one back-up copy of the program on a lasting tangible carrier, decompile the program exclusively for the purpose of obtaining the data necessary for making that program inter-operational with some other independently developed program or some hardware, on condition that such data were not accessible in some other way and that decompilation is limited only to those parts of the program necessary to achieve interoperability.

[1] (1989) FSR 361.

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