How to Protect Your Software

The importance of software (computer programmes) grows with the dynamic development of technology. One of the most important intangible assets, it needs to be correspondingly protected by individuals and companies. Due to its specific nature, this necessity is the stronger the easier it is to acquire it by unfair practices. Hence it is more difficult to protect compared to tangible assets. Typical situations where software might be abused and where the information might leak are staff exchanges in IT companies; particularly if the leaving employee decides to take with him not only the experience and knowledge he acquired while hired by the employer, but he tries also to take away valuable information of diverse nature (e.g. data, documentation, commands, instructions and source code files). The intangible assets (including know-how, technology, and trade secret) of the business might be jeopardised also where e.g. individual entities or their staff cooperate and work on a common project. Again, the risk of leakage and abuse relating to intangible assets or confidential data is rather high.

Employee’s Work

The evaluation of the business’s potential safeguards relies on the scope of its rights pertaining to the software or other intangible assets. Basically, these are rights of an undertaking pertaining to it as an employer of the respective IT experts, programmers and developers. Hence we might speak about software abuse and the necessity to protect it only where the undertaking — the employer — has any rights to the software.

The Copyright Act, of course, does not recognise the term software. The statutory term is computer programme which is a “set of commands and instructions used directly or indirectly in the computer. Commands and instructions might be written or expressed in the source or computer code. The documentation necessary for the development of the computer programme forms an integral part of the programme; if it meets the features of the work (Section 7(1) of the Copyright Act), it is protected just as the literary work”.

Hence if a computer programme is a result of the own creative activity of the author, one is dealing with an authorial work protected under the Copyright Act. As the Copyright Act operates with the mental activity of the author, a legal entity does not qualify for the author (i.e. most of the employers). This, however, does not mean that employers would have no rights pertaining to the software. On the contrary, the regulation relating to the so called employee’s piece of work is relatively favourable to the employers, as the property rights of the employer as one of the two parts of the authorial right can be exercised only by the employer, namely in his own name and on his own account.

It is the employer and not a particular employee (programmer, developer) who is entitled to determine its use, unless otherwise agreed by the parties. The employer’s rights pertaining to such a piece of work are unaffected even by the termination of the employment (or other relationship upon which the employee’s piece of work originated). Hence the author is obliged (even after ceasing the job performed for the employer) to refrain from exercising the property rights pertaining to such a piece of work.

Apart from the right to exercise the property rights to a piece of work in this connection, there is also an important legal presumption set forth by the Copyright Act. This provides that the author grants a permission to publish such a piece of work and release it under the employer’s name. With regard to the statutory extent of the property rights which include also the right to processing, translation and adaptation of the work, one might conclude that the employer thus enjoys a full set of rights necessary to use the work (including commercial use).

The employee’s idea that he has a “title” to the software he has created for the employer is a wrong one. Although the author of the work continues to be employed, his rights to the software are considerably limited — he is obliged to refrain from exercising them.

As the relationship between the IT developer and the company receiving the programme need not always be employment, the provision of the Copyright Act – under which the software is deemed an authorial work even in cases where it was wholly or partially created upon a contract for work done and materials supplied under Section 39 of the Copyright Act – becomes very important. Consequently, the entity for which the computer programme is being developed has a statutory status of an employer and is the administrator of the intellectual property rights pertaining to such a piece of work. This right to exercise the property rights terminates only upon a potential withdrawal from the contract for work. However, it shall be noted that this status is enjoyed by the client only if he has concluded the contract with the author of the computer programme as a natural person, i.e. not with another company.

WHAT IS PROTECTED UNDER THE COPYRIGHT ACT

From the viewpoint of the protection of the computer programme of the undertaking (within the meaning of the protection of the computer programme to which the employer has property rights) it is important to realise the scope of protection under the Copyright Act. Quite often, people by mistake think that everything is protected, i.e. also the principles and ideas on which the work (the computer programme) is founded. Here, again, we shall rely on the Copyright Act which states that the protection does not relate to “the idea, manner, system, method, concept, principle, discovery or information which was expressed, described, elaborated, demonstrated or included in the work,..” Hence the Copyright Act undoubtedly implies that claiming protection of algorithms, procedures and other ideas contained or otherwise expressed in a computer programme has no support in law and that these are values incapable of protection under the Copyright Act. Relying on the aforementioned definition of the computer programme, protection is enjoyed by commands and instructions regardless of the manner of their expression in the computer programme (i.e. in the source or computer code). Necessary for the development of the computer programme, the documentation which forms a part of the computer programme is also expressly protected.

Although this may be true, the attributes like ideas, procedures and principles expressed in the computer programme are also subject to a certain degree of legal protection, particularly the protection of trade secret in line with the Civil Code.

The trade secret and the right to its protection is one of the rights attached to business (hence also IT) corporations. The trade secret of a business comprises matters meeting the following criteria:
 commercial, production or technical nature relating to the business;
 real or potential in/tangible nature;
 not normally available in the respective business circles;
 will of the undertaking to protect them;
 the undertaking correspondingly ensuring their protection.

Basically, one is dealing with the protection of know-how of the undertaking; provided it meets all the aforementioned definitions of the trade secret, it qualifies for a fact the undertaking is exclusively entitled to dispose of; it may particularly grant permission for its use und determine the conditions of such a use. With regard to the potential protection of ideas and principles expressed in the computer programme, out of the characteristic features of a trade secret, we shall underline particularly the fact that the matters cannot be normally available in the respective business circles, i.e. particularly professional and informed public with which one might assume a high awareness of such facts. Further, the undertaking shall correspondingly secure its concealment. Provided the undertaking meets all the said requirements, it shall be entitled to protection where the trade secret is jeopardised or not maintained.
Pursuant to the Commercial Code, the undertaking might seek:
 that the violator refrains from the violation or jeopardy;
 that the defective condition be removed;
 reasonable satisfaction (even pecuniary);
 damages;
 that the profit acquired by unjust enrichment be returned.

There is a rather wide range of remedial measures. Most importantly, the undertaking seeking protection must prove that the trade secret of the particular case meets all the abovementioned criteria and that this exclusive right of his has been violated. This, however, with regard to the intangible nature of matters the protection of which is sought, need not be always easy.

WHAT TO ACCOMODATE IN AN EMPLOYMENT CONTRACT

Although the regulation of individual aspects of performing work with the employee is desirable, it is considerably limited in employments. The Labour Code reads: “In labour relationships, employment conditions might be set more favourable to the employee than this law or other employment regulation sets forth unless expressly prohibited by this law or other employment regulation and unless the nature of these provisions implies that one might not deviate from them.”

Therefore, any contractual provision imposing duties on the employee beyond the framework of the duties set forth in the Labour Code that would otherwise impair his status is inadmissible.

The Labour Code, particularly Section 81, sets forth the employee’s duties in relation to the employer. The employee is particularly obliged to refrain from acting contrary to the employer’s justified interests and also maintain secrecy about matters which he learned while performing the job and which cannot be published to third parties in the interests of the employer. Failing to meet these duties by the employee might lead to the termination of employment and the employer claiming damages due to the breach of employment duties through the fault of the employee while performing the assigned tasks or in relation to them. However, the burden of proof is borne by the employer, i.e. he must prove that the employee has breached his employment duties. Where only a fault through neglect instead of wilful fault is proved, the employee’s liability for damage has a statutory cap.

As already stated, as to the employee’s rights in relation to the computer programme created for the employer, the Copyright Act favours rather the employer which practically means that — save for the cases where the employer would need authorisation to use the employee’s work beyond the property rights of the author (e.g. permission to modify the work etc.) — it is not necessary to specially regulate the rights of both parties in relation to the employee’s piece of work.

WHAT TO SEEK IN CASE OF KNOW-HOW ABUSE

Where the employer’s rights are infringed, his action against the violating employee (or a former employee) depends on the character of the legal asset abused. An unlawful use of software to which the property right is exercised by the employer qualifies for an authorised use of an authorial work. The employer might seek remedies set forth by the Copyright Act to which the right to seek an injunction preventing further jeopardising or interference might be sought as well as the right to request information on the origin of the potentially illegal copy of the software; removal of the effects of the interference with such a right, namely by destroying the illegal copy itself or the tools and devices used at the unauthorised interference. Private claims (especially damages and return of profits acquired by unjust enrichment) of the employer as the administrator of the intellectual property rights are applicable, too. Where the rights pertaining to know-how (or trade secret) or the employee’s duties set forth by the Labour Code are violated, we shall rely on the potential claim of the aforesaid legal titles.

OTHER POTENTIAL PROTECTION

In case of any breach of the protected rights, we shall realise that the burden of proof is always borne by the aggrieved party which must prove the rights have been jeopardised or violated (e.g. rights pertaining to the intangible assets) and define the extent. All the material and documentation depicting individual steps leading to the development of the computer programme might later make it easier for the employer to furnish proofs. Hence careful keeping of records can only be recommended. A certain form of eligible records might be represented by placing the source code or documentation to the computer programme in escrow which could strengthen the employer’s evidence position in relation to the potential violator of his software rights.

Similarly, we might recommend defining in writing the trade secret (know-how) and matters which the employee learned about in connection with performing the employment duties and which the employer wishes to protect and requires to be maintained in secrecy by the employee.

Following this, various technical protection devices come into question besides the remedies. Often, these might have a preventative character and hence might help prevent the violation of the protected rights as such.

Tomáš Nielsen
Branislav Ujvári
Martin Flaškár

ROWAN LEGAL