Based on recurring enquiries from practice, we have prepared basic information on certain legal aspects associated with the development of computer programmes. The text is conceived from the perspective of the “investor”, that is, the entity which bears the economic costs associated with the implementation of a software project. The contribution contains information suitable for basic orientation in this issue. We do not address situations where an already existing computer programme is to be used, in particular Open Source software or free software.
As is well known, for the implementation of a software project it is possible to use one’s own employees (in an employment relationship) or to procure programming services through an external contractor (another natural or legal person). In the Czech Republic, programming services are often provided by natural persons doing business on the basis of a trade licence (OSVČ - osoba samostatně výdělečně činná). The reasons for this state of affairs are generally known, and we shall therefore not address them in greater detail in this article.
In cases where the development of a computer programme is procured on the basis of an employment relationship, there is less room for error from the perspective of the employer “investor”. An employment relationship means, in addition to an employment contract, also an agreement to perform work and an agreement on work activity. The variant of employing a programmer has a certain advantage from the copyright perspective, because the right to exercise proprietary copyright rights (thus a kind of equivalent of ownership) automatically passes to the employer pursuant to the provisions of Section 58(1) of the Copyright Act (Act No. 121/2000 Coll., as amended). Nevertheless, even in this case it is necessary to bear in mind that this legal regulation (Section 58(1) of the Copyright Act) is dispositive. This means that it is not entirely excluded that the employer might suffer prejudice through inappropriately conceived contractual documentation.
Given that in the case of employment relationships there should ideally not be so many problematic moments from the legal perspective, it is possible to focus on practical steps implemented within the framework of this relationship. In particular, therefore, on proper documentation of the actual development of the programme, including documentation of the assigned work and parts of the computer programme delivered to the employer. By this means it is possible to a certain extent to prevent disputes, not entirely exceptional in practice, concerning whether an employee created a computer programme (or part thereof) during working time for the employer or outside it.
Although the employer is entitled by law to certain rights, this does not automatically mean that it will always be capable of actually implementing them. Whilst an employer exercising proprietary copyright rights to a computer programme is entitled to make changes to such a programme (unless otherwise agreed), in certain cases in practice it is not capable of doing so for objective reasons (and not merely due to technical ignorance).
A disadvantage when procuring the development of a computer programme by one’s own employees is primarily the limitations given by employment law. Contractual freedom is significantly limited here, for example in the area of possible sanctions for reasons of non-fulfilment of obligations on the part of the employee or in the area of the possible agreement of a prohibition of competition and the like.
The legal situation need not be overly complicated for the customer even in cases where software development is procured through a natural person doing business (external contractor). Even in this case, the exercise of proprietary copyright rights passes to the customer (see Section 58(7) of the Copyright Act). We addressed this issue in greater detail previously in this contribution. Nevertheless, it is necessary to point out that whilst the provisions of Section 58(7) of the Copyright Act apply to computer programmes, they do not apply, for example, to graphic works. If, therefore, the graphic interface of a computer programme has the form of some more sophisticated design, it is appropriate to resolve copyright questions relating to such graphic works by explicit licensing provisions.
One-off cooperation with a natural person doing business is most frequently resolved by a contract for work, whilst regulation of longer-term cooperation usually takes the form of a framework contract for work. It may be recalled that if a contract is not concluded in written form, this changes nothing about the fact that it is a contract (albeit informal). Nevertheless, in such a case, naturally, questions may arise concerning the content of such a contract, including whether the exercise of proprietary copyright rights should indeed belong to the customer.
What most frequently forms the content of such a contract for work? In addition to essential requirements and standard provisions concerning the definition of the subject matter of the work, the time and manner of its creation, the due date of the price for the work or the protection of confidential information, questions specific to this area are also usually resolved. For example, relationships relating to commenting and access to source code, to the testing and delivery process for software, and further questions relating to the provision of a warranty, including regulation of the contractor’s reaction times. From the customer’s perspective, the contractor’s obligations concerning further development of the computer programme in the future may also be important. These relationships, together with other services, are also usually resolved by a separate service agreement.
Here it is appropriate to pause for a moment at questions associated with prohibition of competition. These may be of substantial significance for the customer. Even in cases where the customer exercises proprietary copyright rights to the created computer programme, it may have an interest in the contractor not creating an identical or similar programme for another person for a certain period (the contractor in many cases has precisely the opposite interest). The contractor will, in fact, often be capable of replicating the result far more quickly than another person, even in cases where it does not use the original source code (which in effect could constitute infringement of the customer’s copyright). When specifying the content of a prohibition of competition, it is necessary to take into account the limitations given by Section 2975 of the Civil Code (Act No. 89/2012 Coll.), which newly sets relatively strict parameters in this area.
In cases where the development of a computer programme is to be procured through an external legal person, the situation is more complicated from the legal perspective. And, unfortunately, it is not entirely intuitive. There is more than enough scope for errors in the conception and in the formulation of contractual relationships, which experience from practice confirms. It is thus very difficult to do without specialist assistance.
It is necessary to bear in mind, amongst other things, that in the Czech Republic only a natural person may be the author of a computer programme and that copyright, including copyright to computer programmes, is in principle non-transferable. This in effect means that from the customer’s perspective it will also depend on how well the contractor has secured its legal relationships vis-à-vis programmers.
In cases where the development of a computer programme is ordered from a legal person, such a relationship is also most frequently resolved by a contract for work (which should be supplemented with licensing provisions). Here it is therefore possible to refer to a certain extent to the above information concerning the content of a contract for work concluded with a natural person, but it is necessary to remember the specifics relating to copyright regulation. Specifically, it is appropriate to devote increased attention primarily to the specification of the customer’s licensing rights and the possibilities of control of legal relationships between the contractor and its programmers. In relation to access to source code, it is possible to refer to our previous article.
In these relationships it generally applies that if a customer does not have certain rights expressly and validly agreed by contract, then in most cases they will not belong to it (if the customer does not wish to rely on the provisions, difficult to apply, regulating so-called collective works pursuant to Section 59 of the Copyright Act). At best, however, the scope of such rights from the customer’s perspective will be disputed. It will be derived primarily from the “purpose” of the contract, which is, however, in many cases unclear and perceived differently by the parties. One may encounter the layman’s notion that if the customer bears all the costs of developing a computer programme, all rights to such a programme also belong to it. Without the proper wording of contractual provisions, however, this notion is not correct.
In cases where the contractor is a legal person, it is possible to resolve the question of “ownership” of the programme being created also by means of so-called assignment of the right to exercise proprietary copyright rights (Section 58(1) of the Copyright Act). This assignment means that on the basis of contractual provisions between the contractor and the customer (with the consent of the authors - programmers), the customer becomes the person exercising proprietary copyright rights instead of the contractor. It is, however, necessary to recall that, particularly for reasons on the contractor’s side, it is often difficult in practice to implement this assignment.
Not infrequently it is possible in the business sphere to come across concepts of documents which have their origin in Anglo-American legal culture. These, however, may not be entirely suitable for the Czech legal environment. When drawing any inspiration from abroad, it is thus appropriate to be wary. Even today, individual nation states still have their own law, whilst the questions we mention are to a large extent not harmonised. Harmonisation in the area of copyright relates, in fact, particularly to the scope of copyright protection and not already to contractual relationships. If foreign persons participate in software development, the complexity of legal relationships thus increases further significantly.
In conclusion, it is appropriate to repeat that copyright, including copyright to computer programmes, is in the Czech Republic fundamentally non-transferable. This fact carries with it certain negative legal consequences, particularly in relation to contractual freedom in dealing with computer programmes (as opposed to the possibilities of dealing with tangible things).
article originally published on the LUPA server
This text was translated from Czech to English using an AI translator.