Negotiating contracts in the IT sector requires comprehensive regulation of copyright. Although copyright regulations are similar in European Union countries, specific legal systems often contain significant differences. From my article you will learn about the protection of your proprietary copyrights in the Polish legal system, the differences between proprietary and moral copyrights and how you should protect yourself.
Transferring of proprietary copyrights in an IT contract
Transferring of copyrights is always among the key provisions in IT contracts. On one hand, it is important for the ordering party to obtain the right to a given work to the fullest extent possible; on the other hand, it should be important for the contractor that the transfer is not unconditional.
In IT contracts you may encounter different models of intellectual property management. Transfer of copyrights is not the only available option. In addition, you will most often encounter licensing or a mixed model in which transfer of economic copyrights is combined with a license.
This article is part of a series on the Implementation Agreement. Below you will find links to the other entries. If an article is not yet linked, it means that a blog post about it will appear in the near future.
Why is proprietary copyrights transfer the most popular model?
The answer is very simple! By using this instrument, the client is given the broadest possible control over the work performed for them.
In this article, I will walk you through all issues related to the transfer of proprietary copyrights,
- I will show you what is actually protected by copyright and what are the differences between moral rights and proprietary copyrights,
- I will demonstrate to you the structure of a model transfer of economic copyrights clause,
- I will show you how to protect your business using the transfer of proprietary copyrights clause,
- I will show you the most common mistakes that software houses make when negotiating contracts with their clients in terms of copyrights,
- I will tell you what elements of transfer of economic copyrights clause pay attention to when negotiating agreements with your subcontractors,
- I will show you which provisions of law to look at.
What exactly are proprietary copyrights?
Browsing the Internet, including, for example, professional groups on Facebook, it is easy to find comments from people who explain what copyright is. However, more often than not, already at the stage of dividing copyright into the mythical moral rights and proprietary copyrights, it is apparent that this knowledge is not in accordance with at least the Act on Copyright and Related Rights (by the way, its current version is available here).
What does copyright law protect?
Copyright law protects everything that can be called a work. At this point, it is best to refer to the statutory definition of a work:
“The object of copyright is any manifestation of creative activity of an individual character, fixed in any form, regardless of value, purpose and manner of expression.” An example of this would be a literary, artistic, musical or photographic work.
Copyrights in a computer program
Are computer programs included in this definition? Yes, they are! Computer programs are protected in the same way as literary works (Article 74 of the Act). All forms of expression of such a program are protected, i.e., the source code or the resulting code. Documentation relating to a program may also be protected.
Is the very idea for a computer program protected by copyright law?
An important question that often comes up in the creative industry is whether the idea is also protected by the copyright law. Here, unfortunately, the answer is “no”.
Proprietary and moral copyrights
Another basic thing you need to be aware of is the division of copyrights to a work into proprietary copyrights and moral copyrights.
Moral copyrights protect the link between the author and their work. What exactly does it mean? A few key points can be mentioned on this occasion, such as:
- the right to authorship of the work,
- the right to label the work with your name or a pseudonym or to make it available anonymously,
- the right to the integrity of the content and form of the work and its fair use,
- the right to decide when a work is first made available to the public,
- the right to supervise the use of a work.
Moral copyrights are non-transferable. As such, they cannot be transferred to another person. However, it is common practice to pledge to refrain from exercising them.
Proprietary copyrights play a much more important role in IT contracts. These are the ones that are affected by copyright transfer clauses in all IT contracts, because only those rights can be transferred to another person or entity. These copyrights relate to the use and disposal of the work. In short, within their scope lies the commercial sphere associated with a work.
Transfer of proprietary copyrights
The most common practice in IT projects is transferring all proprietary copyrights to a program to the ordering party. Licensing remains to be a relatively less popular method of managing intellectual property. What rules do you need to abide by in order to transfer proprietary copyrights in a proper manner? Make sure that:
- you do it clearly through a separate clause in the contract or a separate agreement – such transfer must be made in writing under the pain of nullity, which means that you cannot agree to it by means of, say, an email,
- you identify the work to which copyrights are to be transferred,
- you indicate the fields of exploitation for which the transfer will be effective,
- you indicate the moment of transfer of rights (e.g., when the program is delivered or when the remuneration is paid),
- you indicate the standard software used by you also on projects for other clients that will be excluded from the scope of transfer,
- you indicate the fact of your using of, if any, open source software and exclude it from the scope of the transfer,
- you indicate whether the assignee will be able to make changes to the program and whether the transfer also includes derivative copyrights (e.g., development of the work, translation, adaptation),
- you indicate whether separate remuneration will be due for the transfer of proprietary copyrights.
How to safeguard the contractor’s interests?
Remember that your client, as the one ordering the computer program from you, will want to negotiate the transferring of copyrights to their benefit. This is not surprising since it is one of several key business issues. A client frequently needs to transfer the rights to a program ordered from you to their client. They must therefore ensure that all rights are effectively transferred to them in order to be able to effectively dispose of them on their own.
However, as a contractor (software house), you need to pay attention to some important issues.
The moment of transferring of copyrights
How do I correctly identify when copyrights are transferred?
The most commonly used solutions are:
- transfer at the moment of delivering the work (program), or part thereof, to the ordering party,
- transfer at the time of final or partial acceptance,
- transfer when the work is established,
- transfer upon payment of the remuneration by the ordering party.
For you, as a contractor, the last option is the best. In theory, it prevents the ordering party from using the program until the agreed remuneration is paid.
What are the fields of exploitation of a work (program)?
Fields of exploitation are the way a work is used. Examples of such fields are indicated in the Copyright and Related Rights Act. In the case of computer programs, these are:
- the right to permanently and temporarily multiply a computer program in whole or in part by any means and in any form;
- the right to translate, adapt, modify the layout or change a computer program in any other way;
- the right to distribute, including lending or rental, a computer program or a copy thereof.
Remember that transfer of copyrights to a program always applies to a clearly indicated scope of fields of exploitation. In practice, this means that you should precisely specify these fields in the clause concerning the transfer of economic copyrights.
Contractor’s standard software, i.e. working on own solutions
When implementing IT projects, contractors, in most cases, use the software (code) developed by them, which is then used to perform works for various clients. It is therefore in the contractor’s interest to exclude that part of the software which they have already used in cooperation with other ordering parties. This part of software is usually licensed.
Transfer of proprietary copyrights vs. territory
In the case of implementation contracts for the development of a computer program, it is also important to indicate the territory for which the transfer of economic copyrights is valid. If the effects are limited to one or several countries or a specific continent, a software house allows itself to sell a similar solution based on the developed code also to other clients.
The most common mistakes made when transferring copyrights
When negotiating a transfer of proprietary copyrights with ordering parties, owners of software houses often repeat the same mistakes. Among the most frequent ones, the following are worth mentioning:
- not determining the moment of transfer of proprietary copyrights,
- not excluding the use of standard software,
- not regulating matters related to derivative copyrights,
- not indicating fields of use.
Copyrights in particular forms of employment
An important role in the subject of copyrights and their transfer to clients is played by people with whom the contractor for an IT project cooperates. The approach to proprietary copyrights will vary depending on the form of cooperation (a B2B contract, contract of mandate, specific work contract, contract of employment) .
Remember! In order to effectively transfer proprietary copyrights to a client, you must first effectively obtain them from your subcontractors or employees. The exception here, of course, is when you do everything with your own hands. What does this look like in practice?
Transferring proprietary copyrights under a contract of employment
Let’s start with a contract of employment. It is relatively easy in the case of this kind of contract. Works, including computer programs, made by an employee (for the purpose of this article an employee shall mean only a person employed under a contract of employment), automatically pass on to the employer.
Consider this provision of the Copyright and Related Rights Act:
Unless otherwise stipulated by law or the contract of employment, the employer whose employee has created a work as a result of the performance of duties under the employment relationship shall, upon acceptance of the work, acquire the proprietary copyrights within the limits arising from the purpose of the employment contract and the consensual intention of the parties.
Transfer of proprietary copyrights under a contract of mandate, specific work contract, a B2B cooperation contract
In the case of all other contracts (a contract of mandate, specific work contract, contract of cooperation – B2B) the transfer of proprietary copyrights is not automatic. This means that if you do not ensure that your subcontractor transfers proprietary copyrights to you (your software house), then according to the law it is assumed that you are only granted a license. So, make sure that the transfer from a subcontractor or employee to you is at least as extensive as from you to your client.
Provisions on copyright and related rights
A list of selected provisions of the Copyright and Related Rights Act which are worth pointing out in the context of IT contracts:
- article 1 – definition of work,
- article 16 – moral copyrights,
- article 17 – proprietary copyrights,
- article 41– transfer of proprietary copyrights,
- article 50 – examples of fields of exploitation relating to all works,
- articles 65-68 – license,
- art. 74 – computer program,
- article 79 – protection of proprietary copyrights,