IT Products as Employee's Piece of Work

Computer Programs as the Object of Legal Relations. The eligibility of computer programs to be the object of legal (and economic) relations is established by the Civil Code which stipulates in Section 118 that the object of civil relations are things, and if their nature admits, rights or any other proprietary values. With regard to the relevant provisions of the Copyright Act we can say that a computer program is intangible property (proprietary value) to which special rights enabling the bearer to economically evaluate the computer program are connected. These rights (in their pure nature) guarantee an author an exclusive position in which the author is entitled to dispose of a computer program without restraint and use it in a manner which its nature enables. At the same time the Copyright Act stipulates the duty for all other entities to refrain from any action that would be in conflict with the author’s rights.

Significance of Employee's Work

Despite the fact that when giving the reasons which led the legislator to provide protection to the subjects of intellectual property various opinion exist, in the case of computer programs we consider it indisputable that the purpose of protecting them is in particular the endeavour to protect the author’s investment in the form of time and intellectual effort made with respect to the creation of a work. Evidently, it would not be just if the benefits from an author’s work were adopted by a third person who did not participate in creating the work. This conclusion helps understand the significance of the special regulation of the so-called employee work under Section 58 of the Copyright Act. In practice it is common for an author’s personal input in the creation of a computer program to be only a part of the total cost associated with creating the work. Today, the creation of commercial software is in most cases organisationally and materially ensured by entities which cannot be considered authors, but despite this they have an essential influence on the creation of these computer programs (for simplification we can call them employers). The employers’ activity aims to create conditions in which authors are motivated (mostly in cooperation with other authors) to create computer programs which would hardly be created without the organisational and financial backing. This simultaneously applies, to a certain extent, to the individual parts of such software whose independent existence would have no utilisation or which the author would be unable to utilise. However, an employee work may be any work other than a computer program. Another typical example is work contained in the periodical press. A big part of editors’ articles fulfill the elements of a literary work under Section 2(1) of the Copyright Act. The economic utilisation of such works (which is reflected in the author’s income) would not, however, be possible without the editor of a peridocial ensuring the printing of an edition and its distribution. Consequently, we can say that a symbiosis exists between the author and their employer within which both jointly participate in the creation of a work and obtain and share the benefit that would not be created without such cooperation. The legislator reacts to this fact by creating a special institute of employee work.

Regulation of Employee Work in Copyright Act

Employee work is a legal concept defined in Section 58(1) of the Copyright Act as a work the author created in connection with fulfilling their obligations arising from an employment or service relationship with an employer or from an employment relationship between a cooperative and its member. The author, such as a programmer, may only be the natural person who created the work. Each author of a work, not only a work with a special legal regime, which an employee work undoubtedly is, becomes the holder of the proprietary and personal rights as defined in Section 10 et seq of the Copyright Act .

An employee work generally represents the protection of the employer. The substance of the employee work lies in the fact that the employer who provides an employee, for an author`s creation, with the necessary support and, if developing a computer program, with no small financial means which require protection and generation of profit on the investment made, unless agreed otherwise, by law assumes and exercises in its name and on its account the economic responsibility for the use of the results of the author’s/employee’s creative activity or it becomes the person exercising the proprietary rights to this work while the employee has only the proprietary rights without the possibility to use them in any manner (compensation for this limitation of the author’s rights is part of their wage or any other remuneration and if this wage or other remuneration is in evident disproportion to the profit from the use of the right to the employee work, the author is entitled to additional remuneration ). The author’s personal rights to the employee work remain unaffected if the employer does not exercise the author`s proprietary author’s rights. The employer’s right to exercise the author’s rights is transferable (assignable) to third persons unlike the author’s rights which are framed as non-transferable in the Czech legal order.

This special, non-mandatory limitation of the exclusive proprietary author’s rights can be considered a quasi-licence limitation since it differs from the statutory licences in particular in the fact that it is not primarily established in the public interest but it is led by the employer’s/investor’s private interest. The fact that no strict public interest from which it is not possible to deviate (as with the statutory licences) is concerned can be deduced also from the author`s statutory possibility to require that the employer grant him a licence under usual conditions in case the employer does not exercise the proprietary rights to the employee work or exercises them insufficiently. However, in this respect it needs to be pointed out that the sufficiency or insufficiency of the exercise of rights is not limited by law. This issue is thus the subject of an uncertainty and regulating it, for example in the employment contract, is recommended, since it is in the interest of both parties (however, primarily in the interest of the employer). The author may also obtain a licence in the case of death or the employer’s dissolution with no legal successor.

Another aspect of the regulation of employee work, in our case work lying in the development of various, generally financially very demanding, IT products, is the strenghtening of the legal position of the investor, that is, the employer, towards its employees (programmers). The Copyright Act stipulates a framework in which it is possible to specify, by a clear and definite written employment contract, the rights and obligations of a particular employee/programmer in the issues relating, for example, to the corresponding specification of a work position, the employee’s duty to inform the creation of software, the issue of the handover and disposal of source codes and program documentation, the confidentiality obligation and last, but not least, the prohibition of competitive action. However, it is no longer necessary to grant a licence to the employer for the output from a programmer’s activity. Because the employer is the person exercising the proprietary rights to a software by law (and who is implicitly granted the author`s consent falling within the sphere of the exercise of an author’s personal rights), its position is stronger than the position of a mere user of the computer program based on the licence granted.

Special Nature of Computer Programs and Databases

Computer programs and databases constitute, within employee works, a certain specific group. They qualify, under other criteria stipulated by law, as author’s works under the Copyright Act . Their special position is reflected in a special provision of Section 58(7) of the Copyright Act which considers computer programs, databases and cartographic works to be an employee work even if they were created by the author based on an order (provided that a collective work under Section 59 of the Copyright Act was not concerned). In relation to these works the Act then expressly excludes the application of the provision of Section 61 of the Copyright Act on works created based on an order. The consequence of this regulation is that although no employment or any other similar relation exists between the author and the orderer of the work and the author creates a computer program, database or cartographic work based on the orderer’s order (that is, de facto under Section 61 of the Copyright Act), the orderer has, by reason of the statutory fiction, the position of an employer and is the person exercising the author’s proprietary rights to these works (including the presumed consent to intervene in the author’s personal rights).

The fundamental difference between the result of the regulation pursuant to Section 58(7) and Section 61 of the Copyright Act thus lies in the legal position of the orderer who is, under Section 58(7) of the Copyright Act, in a much stronger position than they would be based on an order in the case of any other author’s work or disposes of the authorisation to exercise the author’s exclusive proprietary rights on behalf of the orderer and on their account as described above. This difference can be demonstrated by the example of the articles mentioned above which may also be created by authors based on an orderer’s order. In such a case the statutory fiction of an employee work will not apply (the works mentioned in Section 58(7) of the Copyright Act are not concerned) and the orderer is only a licensee under Section 61(1) of the Copyright Act. Their position is thus weaker than the position of the orderer of a computer program.

Another difference in the regulation of IT products, compared to any other author’s work, is the exclusion of the right of the author of an employee work to reasonable additional remuneration from the employer if the wage or any other remuneration paid to the author by the employer becomes evidently disproportionate to the profit from the use of the rights to the employee work and the significance of the work to make such profit. Such regulation stems from the different nature of IT products as author’s works, which can be seen in the fact that the Act, as regards computer programs and databases, partially limits the criteria for author’s works (as already mentioned, the Act does not require uniqueness, so creation is easier). At the same time, with these works, only exceptionally are literary works or other artworks or scientific works concerned (compare the first sentence of Section 2(1) of the Copyright Act ) and these works are regularly created as products within a certain segment of industry. Here, the Act gives priority to the employer and enables it, upon payment of a wage or any agreed remuneration, to retain as its own income the remaining part of the added value which is contained in the IT product. However, this regulation does not conflict with the author’s interests since the competitiveness of the person exercising their proprietary rights ensures a proprietary benefit also for the author. Thus, again we are emphasising the mutual profitableness of the institute of employee work both for authors and employers.

At the end of this part we would like to refer to one more aspect of a work created based on an order under Section 61 of the Copyright Act. In practice it is often ignored that it arises from the wording of the provision of Section 61(1) of the Copyright Act that a work created based on an order is only a work the author created under a contract for work. If the author’s employer concluded a contract for work with an orderer for the performance of which it uses an author`s intellectual activity, the work so created is not considered a work made based on an order irrespective of the fact that the employer is the person exercising the author’s proprietary rights to the work. The reason is that this work was not created by the author under a contract for work but under an employment contract. The orderer’s right to use the work so created must be granted under a licence agreement or it is possible, if a business-legal relation is concerned, to apply Section 558 of the Commercial Code. If a work created based on an order is to be created under Section 61 of the Copyright Act, the contract for work must be concluded directly between the orderer and the author. Only in this case will it be possible to apply Section 58(7) to the computer programs, databases or cartographic works so created and consider them as employee work.

School Work

The topic of an employee work is also connected with the issue of a school work, that is, work created by a pupil or student to fulfill school or study obligations arising from their legal relationship with a school or educational facility. The basic idea lies in the fact that to create a school work the school (or educational facility, further referred to as the “school”) must have incurred certain costs similarly to those of an employer in an employee work. It is a unique world regulation and the reason for it is not completely clear, for example, with respect to schools where students pay tuition (in principle the same relates to schools funded from the state budget, since school funds are not concerned in this case either).

For the use of a shool work during lectures or for the school’s own internal needs, a statutory licence is stipulated in Section 35(3) of the Copyright Act. However, this cannot occur for the purpose of the direct or indirect economic or business benefit of the school. Here, we must only agree with the conclusion on the systematically incorrect placement of this statutory licencse between the limitations of the copyright law in the public interest (a school’s interest is not the public interest).

Moreover, Section 60(1) of the Copyright Act prohibits an author from lying in a contract obligation to conclude a licencse agreement with the school on the use of a shool work; the author may refuse to conclude such an agreement for serious reasons only. Under Section 60(2) an author is limited in the exercise of their proprietary rights to provide, use their work or provide a lincese to another person if this contradicts with the legitimate interests of the school. Section 60(3) imposes a duty on the author to contribute to the school from the revenues received by using a school work or from the provision of a licence to reimburse the school for the costs the school incurred on the creation of the work.

Irrespective of the exceptions mentioned above this regulation needs to be taken into account in particular regarding IT products, since they are often created at academic or school level. However, we must state that some of the important provisions relating to a shool work admit different manners of interpretation and it will, for example, be a question what the amount of the costs by which the school participated in the creation of a work is, what the legitimate interests of the school are or whether the previous granting of an exclusive licence to another person can be considered a serious reason for the refusal to conclude a licence agreement.

Conclusion

To conclude, it can be said that the issue of employee works in the IT sphere, as briefly described above, is not a frequent topic in professional society. Many entities, on both the employers’ and authors’ sides, underestimate the contractual issues in the IT sphere, which, in cases of insufficient specification and definiteness of the regulation of the mutual rights and obligations of the parties, may cause legal uncertainty, damage and losses not only from the financial perspective. These are the essential issues where the possibility of producers to increase the value of their own IT products (developed through their employees) may be limited by the fact that the employer limited the regulation of the author’s rights to the statutory regulation without any deeper specification, for example, in an employment contract (an example may be the author’s possibility to refuse to grant consent to the assignment of the employer’s right to exercise the author’s proprietary rights to an employee work if the consent was not granted in a contract).

For this reason we advise paying sufficient attention to these issues when creating an employment relationship, and with regard to the complexity of this issue and to the importance copyright law has in the sphere of IT products, it can only be recommended to use a professional consultancy of specialists in this area.

Martin Maisner
Martin Šimka
Hana Konopásková

ROWAN LEGAL