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    Avoiding Intellectual Property Disputes

     

     
     
    © International Trade Centre, International Trade Forum - Issue 4/2002

    In most countries, if a freelance photographer produces a photograph, copyright on the photograph will not pass automatically to the commissioning party, but will remain with the photographer.

    by Lien Verbauwhede

    Businesses often rely on employees or independent consultants to develop their intellectual property assets and assume that they automatically own the intellectual property rights on the resulting creations. However, this is not always the case.

    National laws vary broadly, both as to who is the first owner and how ownership can pass to others. To prevent misunderstandings, it is best to clarify the issue of intellectual property ownership in any agreement with employees or independent contractors and, preferably, to get specialist advice.

    Intellectual property created by employees

    Many employees create intellectual property in the course of their employment. This may be a software programme, article, architect's plans, new logo, new product or product packaging, business plan, invention or many other types of creative work. But who owns the rights to these materials: the creator or the employer? The answer varies from one country to another and even within a given country, it may depend on the law and the employer/employee relationship.

    Inventions

    In many countries, the employer owns an invention made by an employee if it is related to the employer's business, unless the employment contract stipulates otherwise. Conversely, in some countries the rights to inventions belong to the inventor, unless otherwise agreed. In other countries, for example the United States, the employee may retain the right to exploit the invention, but the employer has non-exclusive rights to use the invention for internal purposes. This is known as "shop rights".

    Some countries grant employees the right to a reasonable compensation for inventions, whereas other countries do not grant any remuneration whatsoever, or only limited remuneration in exceptional cases.

    Copyright

    In most countries, if an employee produces a literary or artistic work, the employer automatically owns the copyright, unless otherwise agreed. But in some countries, the transfer of rights is not automatic. There are several circumstances under which an employee may own all or part of the rights. For example, if the employer is a publisher, the employee will, in most countries, own the copyright for some purposes, such as the publication of a book, and the employer owns the copyright for other purposes. In other countries, if an employee generates software in the course of employment, he or she owns the copyright, unless otherwise stated in the employment contract.

    The moral rights - i.e., the rights to claim authorship and to oppose changes to the work that could harm the creator's reputation - are not transferable. They remain with the author, even if he or she has transferred ownership of the economic rights to the employer. In some countries, such as the US and Canada, moral rights can be waived.

    Industrial designs

    Generally, design rights belong to the employer. In some countries, however, employees retain the right of ownership, unless otherwise agreed. In some cases, the employer has to pay the employee an equitable reward, which takes into account the economic value of the industrial design and any benefit the employer derives from using it. In other countries, the creator of an industrial design remains the proprietor unless he or she has received a reward for it.

    Intellectual property created by independent contractors

    Companies regularly engage consultants or independent contractors to create material for them. In this case, both the company and the independent contractor should take care to address the question of ownership of intellectual property assets. For example, they need to decide, if the contractor presents a number of designs or logos and the company accepts only one, who owns the intellectual property rights over the remaining options.

    Inventions

    In most countries, an independent contractor hired to develop a new product or process owns all rights to the invention, unless agreed otherwise. This means that, unless the contractor has a written agreement with the company giving ownership of the invention to that company, the company will have no ownership rights, even if it paid for the development process.

    Copyright

    In most countries, a freelance creator owns the copyright, unless he has signed a written agreement that this is "work for hire". If there is such a written agreement, the company owns the intellectual property, but the moral rights remain with the author. In the absence of such an agreement, the person who paid for the work is generally entitled to use the work only for the purpose for which it was created. Companies that have paid an independent contractor to create a web site for them may be unpleasantly surprised to find they do not own the creation. Different rules may apply for commissioned photographs, films and sound recordings.

    Industrial designs

    If a freelance designer produces a design, the intellectual property rights will not pass automatically to the commissioning party, but will remain with the freelance designer. In some countries, the commissioning party owns the rights to a design only if a reward has been paid for it.




    Practical guidelines for SMEs

    Below are a few "golden rules" to avoid disputes with employees or independent contractors:

    1. Obtain legal advice.
    As with most legal matters, it is essential to get skilled advice before entering into any agreement with employees or independent contractors.

    2. Conclude a written agreement.
    Agree on who owns the intellectual property rights to any material created by an employee or independent contractor, whether and when transfer of ownership will take place, who has the right to exploit it, who is to pay for it, whether improvements or modifications are allowed, etc. Make sure that the agreement is valid under the applicable intellectual property laws.

    3. Draw up a contract before work is started.
    Make sure that you deal with intellectual property ownership issues before collaboration starts, as even the earliest stages of work can give rise to intellectual property issues.

    4. Include confidentiality clauses in all contracts.
    Include "non-competition" clauses in contracts, as today's employees may be tomorrow's competitors.

    5. Adopt internal policies and regulations or guidelines on employee inventions.
    Such policies and regulations should contain provisions on matters including: the categories of inventions that fall within the field of the employer's business; the employee inventor's obligation to notify the employer of inventions; the employer's procedures for handling such notifications; confidentiality requirements and patent prosecution; and remuneration for the inventor. Such regulations should be in line with the applicable national intellectual property laws.

    6. Take special care when outsourcing research and development (R&D).
    Ensure that all persons involved sign an agreement whereby they give the company sufficient rights to the results of their work. Companies should ensure that all rights to the results of the project are transferred to them, including the right to re-transfer the rights and to make alterations, if the project produces materials eligible for copyright protection. R&D agreements should also contain provisions conferring the rights to know-how, copyright for research reports, and rights over physical material and background information, which is not within the public domain. All this should be kept strictly confidential.

    For more information contact Ms. Lien Verbauwhede in WIPO's SME Division at lien.verbauwhede@wipo.int

    The information above is adapted from an article in the November-December 2002 issue of WIPO Magazine.