Typical mistakes in the transfer of intellectual property rights in IT

Neglecting to agree on the transfer of rights

If an IT specialist works under an employment contract and has created a computer program, all rights to the newly created object belong to the employer unless otherwise stipulated by the warranty. These norms are defined in Part 4 of Art. 181 of the Association Agreement with the EU and Part 2 of Article 14 of the Law on Copyright and Related Rights. At the same time, by Part 2 of Art. 429 of the Civil Code, the rights to the object belong to the employer and the employee jointly unless otherwise established by the Code or the contract. Similarly, the legislation regulates transferring rights to objects created to order (service contract, contract, etc.).

As for the list of objects, it is partial. If guided by Art. 433 of the Civil Code, concerning the IT sphere, it can be computer programs and data compilations, music, videos, articles, photos, etc. That is, by default, an IT specialist, after creating an IT product, will not have the right to independently reproduce, process, or distribute copies of the computer program, etc. If it is an international project, the regulations of another country may apply, creating additional uncertainties.

To avoid a situation where the developer cannot use his IT product, it is recommended to conclude a separate agreement on the transfer of rights before creating the object rather than relying only on an employment contract or a subcontract.

Exclusively “automatic” transfer of rights

To avoid conflicts, it is recommended to conclude written agreements on cooperation (employment, services, contract, etc.) and describe the procedure for transferring rights. This will regulate the relationship between project participants and make the process understandable for international participants.

The transfer of rights can be automatic with the possibility of signing acts of acceptance and transfer to finally record the creation of the development and the transfer of exclusive property rights to it. In our experience, it is possible to avoid the permanent signing of acts, but it is recommended to do it from time to time (end of the project, a specific period such as once a quarter, when the participant leaves the project, etc.)

Unregulated project deposit and storage process

One of the ways of fixing IP rights to an object is escrow. This is the digital storing and providing access to it through cloud platforms. The purpose of this fixation method is reliable preservation and orderly organization of access to a particular object, where anyone can obtain information about the author and the person who owns the IP rights to the thing. Depositing provides the authors’ needs for an evidence base in case of a need for rights protection.

In Ukraine, the escrow process has yet to be developed, but IT professionals can store their developments on such international platforms as Blue Ocean. To save an object on similar media, it is enough to create an account, upload the thing and describe it, pay for the service, and receive a certificate. Transferring software or code through cloud storage platforms is not recommended, as a court will need to provide access to the software to prove that the object has been transferred.

Therefore, it is essential in the contract to indicate the software’s transfer method, for example, transfer via physical media or electronic mail. The transfer of the object by these methods will be easier to prove in court.

Lack of detailing of the terms of the contract on the transfer of rights

In the agreement on the transfer of rights, it is necessary to specify the object, the rights to which it is transferred, the methods of using the thing, the term for which the request is assigned, the territory in which the right can be exercised, the amount and duration of payment to the specialist. According to the legislation of Ukraine, the list of methods of using objects is incomplete. For example, it is publishing a computer program on the website, reproducing, distributing copies, and changing the object’s source code.

It is also worth paying attention to the property rights that are transferred. This is the right to reproduce, rent, distribute the object, etc. All rights that are transferred must be specified in the contract with the identification of the rights themselves, depending on the work performed by the team members. Those rights that are not set in the copyright agreement as alienable are considered to be non-transferable. Therefore, detailing the contract terms is one of the best ways to protect the interests of both the developer and the customer.

In the USA, this issue is regulated a little differently. When transferring rights to computer programs, it does not matter whether the developer is an employee or works for the company as an independent contractor (by analogy with Ukrainian FOPs).

In the USA, there is a “work for hire” regime, according to which all rights to the work will belong to the company. US legal regulations do not contain special restrictions on the transfer of ownership to not yet created objects, do not require specifying the exact list of rights to be transferred, and do not limit the developer’s ability to transfer non-property rights to the company. In the contract, it is essential to specify a clear technical task that the developer will perform. The task should select the desired result of the work, the materials that will be used to develop the object, and how the specialist will perform his work.

In addition, in the USA, personal correspondence and negotiations between the company and the developer are considered evidence of the technical task.

Refusal of copyright registration

Copyright for a work arises from its creation, but it is recommended to register a copyright for a computer program. Because it will simplify the protection of rights in court in case of a dispute regarding the object. In addition, the registration of ownership provides the owner with complete safety and partially guarantees against the misuse of his rights by others.

Establishing the agreement on the transfer of IP rights remuneration in the form of royalties

A typical mistake is determining the remuneration for the transfer of IP rights to a computer program in the form of royalties – regular payments for using the object. If the computer program is provided only for use based on a license agreement without the right to dispose of the object, then the user pays the remuneration in the form of royalties. In that case, if the IP property rights to the thing are transferred in full, the payment is not considered a royalty under tax law. It is necessary to provide a one-time remuneration in the contract or establish an hourly pay for the developer.

Insufficient attention to the verification of open software licenses

In the field of IT, the use of open-source software is becoming increasingly popular. Developers can use and modify open components to create innovative products through this practice.

However, it would help to be careful about the license terms associated with these open sources. Failure to comply with these terms may violate license agreements and create legal problems for the project.

In particular, incompatibilities between different open licenses can lead to conflicts that complicate the transfer of IP rights. In addition, illegal use of open source or copyright infringement may lead to legal disputes and claims for damages.

Checking the open-source codes and licenses used in the development will help avoid legal problems and ensure the legal use of the software.

Conclusion

Intellectual property is the most valuable asset in the IT industry. Reliable protection of developers’ rights to computer programs or codes contributes to successful operations and ensures a competitive advantage in the market. However, the following errors may occur during the registration of the transfer of rights:

🔹 to focus only on the norms of the law and not to enter into contracts or acts of transfer;

🔹 not to specify separate conditions in the contract, which may lead to the transfer of an incomplete amount of rights or cause the lack of fixation of the object to which the rights are transferred;

🔹 refusal to register a copyright on an object;

🔹 incorrect fixation of terms of payment

🔹 lack of verification of open licenses.

Published by DOU

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