Are you sure that you own intellectual property rights in works created by your Slovenian employees?
Author: Nataša Pipan Nahtigal
Although the laws on employment-related intellectual property rights have remained unchanged for many years, in practice, we often see cases of employers neglecting this particular area. As a result, a problem may arise in instances when, for example, an employer wishes to transfer or license an IP right, sue a third party for infringement of an IP right or decides to sell a business. The problem with IP ownership is customarily identified during due diligence. In such circumstances, dealing with the legal issues with the authors or inventors is usually considerably more time-consuming, costly and uncertain, and it, therefore, makes sense to deal with them adequately in advance.
Employees most often create copyright works and inventions, which is why we are most often confronted with the need to regulate copyright and patent issues. Copyright arising out of the employment relationship is governed by specific provisions of the Copyright and Related Rights Act (CRRA), which also apply to copyright concerning works in respect of which the employer seeks to obtain protection by way of a trade mark or design. Inventions arising out of the employment relationship are governed by a separate law, i.e. the Employment-Related Inventions Act (ERIA). The ERIA applies only to inventions that qualify for patent protection or for protection by a short-term patent. Whether or not inventions fulfil these conditions can only be determined retroactively, after a patent or short-term patent is granted for the respective invention. It should be noted, however, that this grant in Slovenia happens without substantive examination of the fulfilment of patentability conditions. A written evidence on substantive fulfilment of patentability conditions does not need to be acquired for an invention to qualify as an invention under the ERIA.
In the case of other inventions or technical improvements which do not meet patentability conditions, the employee-employer relationship is left to contractual regulation, except in cases where provisions to this effect are contained in collective agreements or in the general acts of the employer.
Copyright and other rights arising from artistic, scientific, research and inventive activities are protected by Article 60 of the Slovenian Constitution. Accordingly, the law specifies that both copyright and invention rights belong originally to the employee, being the author or inventor. In the case of an author or inventor in an employment relationship, the employer may, therefore, acquire certain rights in respect of those rights only derivatively, by operation of law or pursuant to an agreement with the employee, whereby the scope of the transfer of rights should be interpreted narrowly.
If employees create copyright works in the course of their employment, e.g. articles, opinions, photographs, manuals or lectures, the material copyright in these works is exclusively transferred to the employer (automatically and by operation of law) for a period of 10 years from the completion of the work. After that period, the material copyright is again transferred (automatically and by operation of law) back to the employee, and the employer may request that the material copyright be exclusively transferred to the employer again, provided that such employer is prepared to pay appropriate compensation for such transfer. The CRRA allows for a different arrangement between the employee and the employer, both for the duration of the initial ten-year period and for the subsequent period after the expiry of the initial ten-year period.
The Slovenian Supreme Court explained that the provision governing copyright created during employment should be interpreted narrowly, so that it does not apply to all copyright works created by the employee, but only to copyright works created by the employee in the performance of his or her duties or on the instructions of the employer. Thus, the following factors are all relevant for the purposes of deciding whether a copyright work is created during employment: factual circumstances of the creation of a particular copyright work, the description of the employee’s duties and tasks in his or her employment contract and in the job description as contained in the systematisation act, the employer’s instructions, the employer’s means possibly used, whether copyright work was created within or outside working time, the employee’s duties in the particular case, etc.
The CRRA provides that the transfer of material copyright and other rights of the author to the employer is excusive for a period of 10 years. This means that neither third parties nor the employees themselves may use the copyright work, except in the context of their own collected works. After the expiry of the 10-year period, the employer also has the right to request another exclusive transfer of rights.
It should be noted that there is considerable doubt as to the extent of that “exclusivity”, and it is not advisable to assume that, by the law itself, a transfer which is exclusive in time, content and territory will occur in every case, whatever the circumstances.
In particular, concerns have been raised about the exploitation of copyright works in ways that were not foreseen by the employee and the employer when the employment contract was concluded and are, therefore, not reflected in the employee’s salary. The inclusion of the employee’s work in the employer’s automated system for generating new documents could constitute such an example. A similar concern may arise in relation to the exploitation of copyright work outside Slovenia, in particular in areas where the employer was not operating at the time the employment contract was concluded.
It is also questionable whether an employer may transfer material copyright and other rights of the author to third parties without a separate employee’s consent. The answer to this question could be in the negative, as the CRRA provides that the holder to whom a material copyright or other right of the author has been assigned may not, without the author’s permission, assign that right to third parties, unless otherwise provided for by contract. On the other hand, it should be borne in mind that, at least in certain cases, the work duties of certain employees involve the creation of copyright works for the employer’s clients, which would make the transfer of material copyright to the employer meaningless if it were not coupled with the right to transfer it to third parties.
The CRRA contains additional or different provisions for certain types of copyright works. Of particular relevance to employers in the IT sector are the provisions according to which the employee’s material copyrights in computer programs are exclusively transferred to the employer without any time limit, unless otherwise agreed with the employee. The law also contains specific provisions for compilations, collective works and databases, as well as for the performance of copyright works.
If the employer wishes to have different arrangements for the transfer of material copyrights than those set out in the CRRA, either for the first 10-year period or for a subsequent period, this must be agreed with each employee individually. In the light of the above, it is advisable to consider carefully what copyright works are expected to be created by which employees, how and where the employer expects to use them, whether or not the employer intends to transfer them to third parties, etc. Only on the basis of such consideration can it be determined whether the copyright regime under the CRRA is appropriate for the employees’ copyright works, or whether it would be appropriate to enter into additional arrangements with the employees, either in the context of employment contracts or in the form of separate contracts. It may be useful to include copyright provisions in the employment contract, but they should be as specific as possible and tailored to the copyright works that the employee is expected to create.
Irrespective of the contractual regime, the employee-author is in any case entitled to moral copyrights, which are inalienable and cannot be transferred to third parties. These include, inter alia, the right to decide whether, when and how the work is to be published for the first time, the right to decide whether and with what attribution the work is to be published, and the right to resist the destruction of their work. According to case law, based on moral copyrights, the employee also retains the right to cite a particular copyright work among his or her references.
If employees are likely to create inventions in any field of technology in the course of their work, it is even more important for the employer to prepare in advance the legal framework for dealing with such inventions than in the case of copyright.
The ERIA generally divides inventions created by persons in an employment relationship into direct employment inventions, indirect employment inventions and free inventions. A direct employment invention is an invention created in the performance of an employment contract, at the express request of the employer or pursuant to a specific contract between the employer and the employee. An indirect employment invention is an invention created in the course of an occupation if the invention is due essentially to experience acquired by the employee in the workplace or to resources made available to him by his employer. Other inventions created by the employee during the term of his employment are considered to be free inventions.
It is important to remember that, under the Slovenian system, all inventions, including direct employment inventions, and irrespective of the field of technology, belong originally to the employee as the inventor. The employer has the right to take over certain inventions on a limited or full basis, subject to the procedure laid down in the ERIA.
If the employer takes over the employment invention in full, it acquires all the rights in the invention, whereas, with a limited takeover, it acquires a non-exclusive licence in the invention. Limited takeover is, however, not always permissible. If the limited takeover of the employment invention clearly hinders the exploitation of the employment invention, the employee may request the employer to take over the invention in full or to make it freely available to the employee. This could be the case, for example, where the employer has a dominant position in the market and the employee cannot sell his invention to anyone else if it is used by the employer.
In case of takeover on a limited or full basis, the employer is obliged to pay a certain award to the employee in accordance with provisions of ERIA, which award is obviously higher in case of a full takeover. In the event of a full takeover of an employee’s invention, as a rule, the employer must apply for a patent or a short-term patent in Slovenia or abroad.
The entire regime under the ERIA is based on the employee’s obligation to promptly notify the employer in writing of the created invention. The ERIA does not provide that the notification of the invention should constitute a separate document, but only sets out its mandatory content. Therefore, attention should be paid to reports and other communications from employees (e.g. periodical work reports, experimental results, lab diaries, etc.) that could, under certain circumstances, constitute a notice of invention.
The employer may take over the employment invention, on a limited or full basis, if it notifies the employee within three months of receiving notice of the invention, or, if no notice of the invention has been received, within three months of becoming aware of the employment invention. If the employer does not take the invention over within that period, the employee shall be free to dispose of the invention. Of course, the employee and the employer may also agree on the transfer of rights at a later date, but this shall only be possible if both parties agree on the terms of such transfer. This would be a purely contractual transfer, in the same way as if the employee had transferred the rights to a third party.
The employee is also obliged to inform the employer of any free invention, i.e. an invention made in their spare time, unless such invention is clearly outside the scope of the employer’s business. The notice of a free invention must contain only the information necessary to enable the employer to assess whether it is in fact a free invention. The employee must also offer in writing to the employer to purchase the right to use the free invention before starting to use such free invention.
In the case of an invention that the employee has indicated is a free invention, the employer has the right to object to the free invention before the Settlement Board of the Intellectual Property Office within two months of receipt of the notification. Otherwise, the employer loses the right to take over the invention in question as an employment invention. According to case law, in the event of a dispute as to whether an invention is an employment invention or a free invention, it is necessary to refrain from the use or marketing of the invention until agreeing on the award due to the employee (or, in the case of a free invention, on whether the employer will buy such invention from the employee).
Considering the relatively complex procedure envisaged by the ERIA, it makes sense for employers to regulate the treatment of employee inventions in more detail in an internal act that takes into account the specific circumstances of each employer and the types of inventions envisaged to be created. For example, it may be useful to prescribe the form to be used by employees to notify the employer of an employment invention or a free invention, and where and how it should be submitted, so that there is no doubt as to what kind of notification is required and to whom. It is also advisable to warn employees of the possible consequences under employment law of a failure to notify the invention. The ERIA does not specifically regulate the consequences of a failure to give notice of invention, while the case law has merely taken the view that an employee who fails to give notice of invention to the employer is not entitled to an invention award, irrespective of other circumstances.
Provisions of the ERIA contain a general reciprocal obligation of employers and employees to protect the secrecy of the invention. Disclosure of an invention to the public may prevent its successful patent protection, since an invention disclosed to third parties before filing a patent application will, generally, not satisfy the novelty requirement for patent protection. It is, therefore, highly advisable to inform the employees of the detailed rules for the protection of the secrecy of inventions. Such rules should also be aligned with the Trade Secrets Act.
The adoption of an internal act is particularly useful if it regulates, in more detail, the issue of awards, i.e. the compensation due to employees in the event that the employer takes over their invention, on a limited or full basis. The main factors in determining the award are the economic utility of the invention, the employee’s duties to the employer, the employer’s share in the creation of the invention and whether the invention is taken over in full or partially. In addition to the ERIA, the issue of awards is regulated by a separate Regulation on Awards for Inventions Arising out of the Employment Relationship. However, the provisions of both pieces of legislation are very abstract and difficult to apply directly in practice as they assume, for example, that the employee and the employer will be able to assess the economic utility of the invention at the time of deciding on the award (a fact which is usually only evident at a much later time) and, among other things, quantify the value of the employee’s tasks for the employer and the employer’s contribution. A more realistic option is to set the award in a lump sum, in respect of which the Regulation provides for a minimum of two net salaries of the employee for a direct employment invention, and a minimum of five net salaries of the employee for an indirect employment invention, which, in both cases, are replaced by the average monthly net salary in the economy of the Republic of Slovenia, if this is more favourable for the employee.
The amount and the type of the award are, ultimately, left to the employee and the employer to regulate contractually. The contract must be concluded within three months of the invention being taken over by the employer. In the absence of such a contract, the employer must, by a written reasoned decision, determine and pay the award no later than three months from the grant of the patent or short-term patent (for the fully taken-over invention) or from the start of use (for the limited taken-over invention). The employee may, within one month, appeal against the employer’s decision to the Settlement Board of the Intellectual Property Office; otherwise, the award shall be deemed to have been determined by mutual agreement. The chances of requiring a third party intervention into determining of awards are significantly reduced if the employer transparently determines, in advance, the manner of calculation of employee invention awards.