A large number of entities have computer programmes created to order for the purposes of their business (particularly on the basis of a contract for work). Although these are often very demanding and costly projects, the question of the exercise of economic copyright in the computer programme being created is frequently overlooked. Subsequently, in practice we encounter disputes between the client and the contractor regarding further dealings with the computer programme, particularly regarding the granting of licences to other entities, regarding making changes and modifications to the programme, or even regarding the manner and scope of use of the computer programme by the client.

Decisive for the possibility of dealing with software created on the basis of a contract for work (by the term software is meant a computer programme and its documentation) is the question of who is the exerciser of the economic copyright in this software. Put simply, the exerciser of economic copyright is that person who may deal with the computer programme. Among the rights of the exerciser of economic copyright naturally belongs also the right to grant by contract to other persons authorisation to exercise the right to use the computer programme, i.e. to grant licences. It is therefore always necessary to distinguish strictly between the exercise of economic rights in a computer programme and the use of a computer programme on the basis of a licence agreement. In practice, the majority of computer programmes are used by end users on the basis of a licence granted by the exerciser of economic copyright or by the author of the programme himself.

For better clarification of the issue of the exercise of economic copyright in computer programmes created to order, it is necessary to mention beforehand briefly certain facts arising from Act No. 121/2000 Coll., on Copyright, on Rights Related to Copyright and on Amendment of Certain Acts (the Copyright Act). A computer programme is a copyright work if it satisfies the requirements laid down in Section 2(2) of the Copyright Act, i.e. if the computer programme is original in the sense that it is the author’s own intellectual creation (in practice this requirement is satisfied in the vast majority of cases). Copyright in a work arises at the moment when the work is expressed in any objectively perceptible form (Section 9(1) of the Copyright Act). The author of a computer programme (as with any other copyright work under the Czech Copyright Act) can be exclusively a natural person (or several natural persons), i.e. for example a programmer - see Section 5(1) of the Copyright Act: The author is the natural person who created the work. A natural person is the original subject of copyright; a legal person (for example a business company) lacks this capacity and can thus be only a derivative subject of copyright (for example an exerciser of economic copyright).

Given that the author of a computer programme can be exclusively a natural person, it was necessary to incorporate into the Copyright Act a mechanism for protecting the investment of software companies in the development of computer programmes. Software companies in most cases procure the creation of computer programmes through their employees, or through other natural persons doing business on the basis of a trade licence (it must be mentioned that in the second case frequently in breach of the provisions of the Employment Act). The Copyright Act contains regulation of the so-called employee work. In the case that a computer programme is created by an employee in fulfilment of obligations arising from an employment relationship, the employer is the exerciser of economic copyright in the computer programme. The provision of Section 58(1) of the Copyright Act specifically reads: unless otherwise agreed, the employer exercises in his own name and on his own account the author’s economic rights in a work which the author created in fulfilment of his obligations arising from an employment or service relationship to the employer… The employer is therefore not only entitled to use the computer programme in any manner for his own needs, but also to grant licences to this programme to third parties. Section 58(4) of the Copyright Act then states: The author’s moral rights in an employee work remain unaffected. Where the employer exercises economic rights in an employee work, it shall be deemed that the author has consented to publication, modifications, adaptations including translation, combination with another work, inclusion in a collective work, as well as to bringing the employee work to the public under his own name, unless otherwise agreed. Subsequent termination of the employment relationship has no effect on the above-mentioned entitlements of the employer.

With regard to computer programmes, the Copyright Act then contains an important special provision, namely in Section 58(7), which reads: Computer programmes and databases…shall be deemed to be employee works even where they have been created to order; the client shall in such case be deemed to be the employer. (Similar legal regulation is also found in the so-called collective work under Section 59 of the Copyright Act.). Despite the wording of the said Section 58(7) of the Copyright Act, for determining the exerciser of economic copyright in a computer programme created to order, decisive is the person of the contractor (i.e. what entity is the contractual party as contractor). If the contractual party (contractor) is directly the author of the computer programme, or its authors, the exerciser of economic copyright becomes the client - the contractual party which ordered the creation of the computer programme. However, in the case that the contractor is a legal person (for example a business company), the exerciser of economic copyright becomes this contractor - naturally on the condition that the computer programme was created by employees of this contractor (employee work under the above-mentioned Section 58(1) of the Copyright Act) or through other natural persons (authors) to order of this contractor (see the above-mentioned Section 58(7) of the Copyright Act).

Example: 1) ABCD, s.r.o. company enters into a contract for work with entrepreneur Karel Novák (a programmer) regarding Karel Novák creating a computer programme. The exerciser of economic copyright in the computer programme after its creation is ABCD, s.r.o. company. ABCD, s.r.o. company enters into a contract for work with XYZ, s.r.o. company regarding creation of a computer programme. The company creates the computer programme through its 5 employees - programmers. The exerciser of economic copyright in the computer programme after its creation is XYZ, s.r.o. company (regarding the rights of ABCD, s.r.o. company arising from the contract for work see below).

This at first sight absurd legal regulation, where the question of the exercise of economic copyright depends on the legal form of the entity which is the contractor, however has its internal logic with regard to the principles of the Copyright Act. For there to be able to occur a “transfer” of the exercise of economic copyright to a third party, it is always necessary that there exists a legal relationship between the author of the work and the acquirer of these rights. In the case of employee work, this is the employment relationship between the employer and the programmer; in the case of the above-mentioned legal construction under Section 58(7) of the Copyright Act, this is a contract for work. However, at the moment when the contractual party on the contractor’s side is “merely” the employer of the author of the computer programme (and not the author himself), there cannot occur, without the consent of the author, that the exerciser of economic copyright becomes a third party - for example the client. Conversely, with the consent of the author (or authors), the employer of the author (authors) may assign the exercise of economic copyright in the computer programme to a third party - thus also to the client under the contract for work. The consent of the author is not required only in the case that there occurs a transfer of the enterprise or its part - see the second sentence of Section 58(1) of the Copyright Act: The employer may assign the right of exercise… to a third party only with the consent of the author, unless this occurs in the sale of the enterprise or its part. The contractual parties to a contract for work regarding creation of a computer programme therefore cannot, without the consent of the author, agree that the exerciser of economic copyright is the client.

In the case that the contractor of the computer programme is a legal person, a strange situation arises where the client, whilst paying the contractor remuneration for creating the computer programme, does not become the exerciser of economic copyright. For this case, in our opinion it is necessary to apply the provision of Section 61 of the Copyright Act. (A different legal opinion is contained in the commentary to the Copyright Act, which states that the provision of Section 61 of the Copyright Act cannot be applied to contracts where the contractual party is not the author.). The provision of Section 61(1) of the Copyright Act states: The client may use a work created on the basis of a contract for work (work created to order) only for the purpose arising from the contract. To use the work beyond the scope of such purpose, the client is entitled only on the basis of a licence agreement… The client therefore acquires “only” the right to use the computer programme. The legal position of such a client is naturally incomparably weaker than the position of the above-mentioned client who is the exerciser of economic copyright. A client who is not the exerciser of economic copyright may use the computer programme only for the purpose arising from the contract for work. Moreover, situations arise where the purpose of the contract may not be entirely clearly expressed in the contract itself, or each of the contractual parties interprets the purpose of the contract differently (in practice there also occur situations where there is no written contract at all). The position of this client may be further weakened by the provision of Section 61(2) of the Copyright Act: Unless otherwise agreed, the author may use a work created to order and grant a licence to another, if this is not in conflict with the legitimate interests of the client.

With regard to the outlined legal regulation, it can only be recommended that the question of the exercise of economic copyright in a computer programme created to order (or the manners and scope of use of the computer programme) be regulated in advance and expressly in the contract for work. By this, potential later disputes of the contractual parties regarding these matters can be avoided. In this connection it must be mentioned that a number of software companies operating in the Czech Republic are, with regard to dealing with computer programmes, markedly inspired by Anglo-American legal culture (for example by licence agreements of large foreign companies). However, given the different conception of the Czech Copyright Act and given that the Copyright Act contains a large number of mandatory (coercive) provisions from which it is not possible to deviate by contract, these Anglo-American “incentives” may often result in invalidity of contractual arrangements.

This text was translated from Czech to English using an AI translator.