Transfer of Copyright in the Author’s Work and Computer Program (“Software”) in the Employment Relationship

Today, perhaps more than ever, the commercial use of software is of great value and many software developers design and develop software intended to be licensed or sold to end users, or for business in a constantly growing market.

A computer program is a sequence or set of instructions in a programming language that a computer must execute. It represents a component of software, including documentation and other intangible components. On the other hand, software is a collection of programs that allow hardware to perform a specific task. Therefore, a technical difference exists between the two, which means that software represents a collection of computer programs, but for these purposes, computer program, accompanying components and software will be collectively referred to as ”Software”.

This substantial scope of commercial use of the Software has been duly recognized by the Law on copyright and related rights (”Right”). The law, in general, regulates the rights of authors of literary, scientific, professional and artistic works (“copyright”), the rights of performers, the right of publishing, the rights of producers of phonograms, videograms, broadcasts, databases and the right of publishers of printed editions as neighboring rights to copyright (“neighboring rights”), as well as how to exercise copyright and neighboring rights and the protection jurisdiction of these rights.

The law defines a work of the mind (“copyright”) as an original creation of the author, expressed in a certain form, regardless of its artistic, scientific or other value, of its object, of its size, of its content and its mode of expression, as well as the legality of the public communication of its content. The law requires that written works (e.g. books, pamphlets, articles, translations, computer programs in any form, including preparatory design materials therefor and others) are, in particular, considered as works of the mind. An author is a natural person who has created an intellectual work and is presumed to be the holder of the rights to the work enjoying the moral and economic rights over his intellectual work from the moment of its creation, in accordance with Article 8 of the law. However, in addition to the author alone, the rights holder may be one or more other persons or entities (who are not the author), if they have acquired the rights to this work in accordance with the law.

The general rule provided for in Article 98 of the law states that, if an author has created an intellectual work as an employee in the exercise of his functions, the employer is authorized to disclose this work and to hold exclusive pecuniary rights to its operation as part of the employer’s registered business for a period of 5 (five) years from the completion of such work, unless otherwise provided in the general act or contract of employment of the employer. The author is entitled to special remuneration, depending on the proceeds from the exploitation of the work. At the end of the period of 5 (five) years referred to in Article 98 of the law, the author acquires the exclusive economic rights to the work. This means that the employer has the exploitation rights to the protected work within the first 5 (five) years from its completion, while the author becomes the exclusive holder of the exploitation rights after the expiration of this delay.

On the other hand, when the work of the mind is a computer program (”Software”), according to article 98, paragraph 4, of the law, the permanent holder of all the exclusive pecuniary rights on this work is the employer, except contrary provision of the employment contract. However, the author is entitled to special remuneration and is the exclusive owner of the pecuniary rights to the work only if this is stipulated in the employment contract. This means that the basic rule of the Act regarding the mechanism for acquiring rights in Software is different from obtaining the rights in the protected work in general, since the employer becomes the owner of the exclusive pecuniary right in Software without any limitation in time, unlike other works protected by copyright for which the duration of 5 years is imposed by law.

The legal presumption provided by law for the acquisition of rights by the employer in the protected work is limited in time and ceases after the expiration of 5 (five) years from the completion of the work. Conversely, when the employer acquires the copyright on the Software, the legal presumption is established without time limit. The law provides for the possibility of regulating differently the transfer of rights within the framework of the employment contract. This emphasizes the possibility both for the employer to acquire economic rights to the protected work without time constraints and for the employee-author of the Software to retain his rights over it, without transferring them to the employer.

It should be mentioned that the “purpose of transfer” doctrine, according to which, in general, if third parties (e.g. the underlying agreements should be assessed for the rights to be obtained by the employer. Without such agreements with third parties, there is a risk that the rights obtained by the employer will be limited by the “purpose of the transfer”. The doctrine, in essence, claims that the author of the copyrighted work in general grants rights to this work only to the extent necessary to achieve the “purpose” of the transfer at the time of transfer. The subject doctrine is practically irrelevant in Serbian law, since the law explicitly regulates how to transfer these rights.

On the other hand, the customer of the Software, which is produced on the basis of the agreement having the legal nature of “agreement on the production of the work protected by copyright”, prescribes by law under article 95, acquires the exclusive rights to exploit the software, while the remaining rights are retained by the hired author, if not regulated differently under the agreement . For example, freelance contracts have the same legal nature and, with regard to Software, the same applies if they were born of the said contract or, if the rights were acquired by the employer, in application of the rule general of the law. The two provisions of Article 95, paragraph 3, of the law, regulating the agreement on the production of the commissioned copyrighted work with the exclusive right to acquire operating powers over the software , and article 98, paragraph 4, of the law, regulating the general rule of the right of the employer to acquire the software, obtain a similar legal and commercial result. The law provides the same transfer mechanism with respect to pecuniary rights to the software, whether obtained either on the basis of employment or under the agreement on the production of the copyrighted work commissioned. However, in order to exclude any possible misunderstanding and/or dispute, even if it falls within the competence of the employer to exploit the developed Software, it is more advantageous to regulate more clearly and more precisely the mechanism of transfer by agreement or employment contract.

With regard to the general rule provided by law, it is clear that the transfer of intellectual property rights may be regulated differently under the employment contract, which represents an exception to the general rule, i.e. – say if the employment contract explicitly provides that the employee must retain the copyright, the application of the general rule is excluded. However, when drafting the employment contract, an explicit provision of the contract should state that intellectual property rights, including but not limited to software, source code, all project documentation, etc are transferred to the employer permanently and exclusively, without any subject, territory, time and scope restrictions. These provisions must be included in the employment contract in order to exclude the application of the general rule under the law. In addition, clear provisions within the framework of the employment contract govern the legal basis for the employer to acquire the intellectual property rights of the employee, to provide the employment relationship and to prevent possible disputes, which may arise through the result, affecting the business outcome for both employer and employee. It is of great commercial and legal importance to regulate the relationship between the employee, as the author, and the employer, as the potential owner of the rights, in view of the vague general stipulation provided by law and the great potential value of the software on a case-by-case basis. – case by case.

In conclusion, the transfer of pecuniary rights to the Software is explicitly regulated by law. However, the transfer of any other intellectual property right and its exploitation is not directly provided for by law, therefore, the best commercial and legal assessment is detailed regulation under the Employment Act.

contract, with intellectual property rights clause, where the transfer would be extensively regulated, with respect to subject matter, scope, time, territory and/or whether the employer or employee would have a limitation of exploitation. Due to the general provisions on the remuneration which the employee may receive under Article 98(1) of the Act, it should be specifically determined within the framework of the employment contract whether this remuneration is consumed together with the salary/ regular salary or whether the employee is entitled to additional remuneration. as provided by law, regardless of the salary determined. The employment contract must be specific when regulating the transfer, in order to avoid any dispute or possible interpretation due to the general rule under the law, but also to guarantee a more solid and lasting employment relationship as a environment for subsequent creation of software and other original creations.

Gordon K. Morehouse