Czech Republic République tchèque Tschechische Republik. Report Q183. in the name of the Czech Group. Employers rights to intellectual property

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1 Czech Republic République tchèque Tschechische Republik Report Q183 in the name of the Czech Group Employers rights to intellectual property Questions 1. The State of positive Law 1.1 The Groups are invited to present the legal framework governing relations between employers and employees in the field of intellectual property rights. In particular, the Groups are invited to state whether these rules arise from provisions concerning labour law or whether these rules arise from provisions concerning intellectual property rights. In addition, the Groups are invited to state whether these rules may be considered as being public policy rules (i.e. mandatory rules) or whether, on the contrary, they may be modified by contractual relations between employees and employers. Under Czech law, the relations between employers and employees in the field of intellectual property rights are governed exclusively by the respective specialized intellectual property laws: the Czech Copyright Act 1 the Czech Patent Act 2 the Czech Utility Model Act 3 the Czech Design Act 4 the Czech Plant Variety Act 5 The Czech Labour Code 6 does not contain any provision as to intellectual property rights. The statutory provisions are in case of all of the above Acts non-mandatory or optional and may be modified by contractual arrangements between employers and employees. (Section 58 (1) of the Czech Copyright Act, Section 9 (1) of the Czech Patent Act, Section 13 (1) of the Czech Design Act and Section 2 (c) of the Czech Plant Variety Act). Such modifying agreement has to be made before or at the time of origin of the intellectual property right, otherwise the statutory provisions automatically apply and a retroactive modifying agreement is not possible. 1 The Act No. 121/2000 Coll., on Authors' Rights and Neighbouring Rights (the Copyright Act). 2 The Act No. 527/1990 Coll., on Inventions and Improvement Proposals, as amended (hereinafter the Czech Patent Act ). 3 The Act No. 478/1992 Coll., on Utility Models as amended. 4 The Act No. 207/2000 Coll., on Protection of Industrial Designs. 5 The Act No. 408/2000 Coll., on Protection of Plant Varieties, (Plant Variety Act). 6 The Act No. 65/1965 Coll., the Labour Code, as amended. 1

2 1.2 The Groups are invited to specify, for each of the intellectual property rights (patents, plant variety rights, copyright or authors rights, patterns and models, and software rights, it being recalled that trademarks and brand rights are expressly excluded from the scope of the study in question) what are the legal solutions concerning ownership of rights over intellectual creations: Do these rights originally belong to the employer or the employee? If these rights belong to the employer from the outset, what are the conditions for this attribution? And if these rights originally belong to the employee, does the employer have the right to have them transferred to it and under what conditions? And the Groups are also invited to specify, as far as it concerns patents, if it is the employer who is the owner, from the outset, of the intellectual property rights over inventions made by employees in the context of their employment contract and in the performance of their tasks. The Groups are invited to give replies both with respect to moral rights and economic rights for each type of intellectual property rights. Copyright (including copyright relating to computer software) In case of copyright, both economic and moral rights formally remain with the employee - author. However, the employer is almost exclusively entitled to exercise them with very few limitations and rights pertaining to the employee. Economic Rights Section 58 of the Czech Copyright Act states that the employer exercises in his own name and at his expense the author s economic rights for a copyright work created to perform the employee s obligations arising from an employment or service relation with the employer or from an employment relationship between a cooperative and its member. Such copyright work is defined as an employee copyright work. The employer may assign the right of exercise of an employee copyright work only with consent of the author, unless it is done within a sale of business or a part thereof. The economic rights revert to the author in case of a death or dissolution of an employer with no legal successors. If the employer fails to exercise the economic rights to an employee copyright work at all or does so insufficiently, the author is entitled to request that the employer grants a licence to him under usual conditions, unless the employer has serious reasons to reject such licence. Moral Rights Section 58 expressly states that the author s moral rights are not affected. However, unless there is a modifying contractual arrangement, there is a statutory presumption that if the employer exercises the economic rights relating to an employee copyright work, the author granted consent with publication, modification, alteration including translation, connection with another copyright work, inclusion in a collective copyright work as well as to communicating the employee copyright work in public under the employer s name. Furthermore, unless there is an agreement to the contrary, there is a presumption that the author granted consent to the employer for completion of an incomplete employee copyright work in case he will be in delay with completion of the copyright work despite notice for additional performance or if the employee s obligation to complete the copyright work ceases to exist or for impossibility of performance. Patents and Utility Models In case of patents, if the invention has been made by the inventor to perform a task arising from an employment, membership or another other similar labour relation (hereinafter employment ) with the employer, the right for patent (i.e. the economic rights) is assigned by 2

3 operation of law to the employer, unless an agreement sets forth otherwise. The right of authorship (i.e. the moral rights) are not affected. Economic Rights The procedure on statutory assignment of the right for patent for the employee invention is governed by Section 9 of the Czech Patent Act. The inventor who has made an invention within employment as defined above is obliged to immediately notify the employer in writing and hand over documents necessary for assessment of the invention. If the employer fails to exercise the right for patent against the employee in a period of three months from the notification, the right for patent reverts to the inventor. Within this period, the employer and the inventor are obliged not to disclose the invention to third parties. Moral Rights Despite the statutory assignment of the right for patent to the employer, under an express provision in Section 9 (1) of the Czech Patent Act, the inventor retains the authorship rights, i.e. the right to be mentioned in the patent as inventor under Article 4ter of the Paris Convention. Under Section 21 (2) of the Czech Utility Model Act, the Czech Patent Act shall apply per analogiam, inter alia, to the right for utility model. Designs The legal framework governing designs is very similar to the legal framework of patents. If a design has been created by an author to perform a task arising from an employment, membership or another other similar labour relation (hereinafter employment ) with an employer, the right for design (i.e. the economic rights) is assigned by operation of law to the employer, unless an agreement sets forth otherwise. The right of authorship (i.e. the moral rights) are not affected. Economic Rights The procedure on statutory assignment of the right for design for the employee design is governed by Section 13 of the Czech Design Act. The author who has created a design within his employment as defined above is obliged to immediately notify the employer in writing and hand over documents necessary for assessment of the design. If the employer fails to exercise the right for design against the employee in a period of three months from the notification, the right for design reverts to the author. Within this period, the employer and the author are obliged not to disclose the design to third parties. The employer is obliged not to disclose the design for an additional period of one month from the date of reverse assignment of the right for design to the author. Moral Rights Despite the statutory assignment of the right for patent to the employer, under an express provision in Section 9 (1) of the Czech Patent Act, the inventor retains the authorship rights, i.e. the right to be mentioned in the design as the author. Plant Varieties Under Section 2 (c) of the Czech Plant Variety Act, a plant breeder is either a natural person or legal entity who or which has cultivated, discovered or improved (hereinafter cultivated ) a plant variety or a natural person or legal entity for whom or which another person has cultivated the plant variety within performance of tasks arising from employment or another similar relation, unless a written agreement between the parties sets forth otherwise. A plant breeder shall also include the legal successor of a plant breeder. The Czech Plant Variety Act does not contain any provision relating to moral rights. 3

4 1.3 The Groups are also invited to provide information on procedures concerning potential disputes concerning the ownership of intellectual property rights over employees creations. Are these disputes within the jurisdiction of labour courts or, on the contrary, are they within the jurisdiction of the courts which are usually competent for intellectual property disputes? As mentioned above, the relations between employers and employees in the field of intellectual property are under Czech law a part of the law of intellectual property. In the Czech Republic, there is no special set of courts either for intellectual property matters or labour law matters. These disputes are therefore in the jurisdiction of general courts. Under Section 9 (2) and (3) of the Civil Procedure Code 7, copyright and industrial property disputes are in the first instance in jurisdiction of Regional Courts, i.e. the second set of courts in the fourstep court system in the Czech Republic, with appeals to second instance in High Courts, i.e. the third in the four-step court system. Is there a prior conciliation stage and if so, does it take place before the same court as the one having jurisdiction over disputes concerning the ownership or conditions for use of intellectual property rights over creations made by employees? There is no obligatory pre-conciliation stage. The parties may conclude a conciliatory settlement at any time during proceedings before the court under standard conditions as set forth by the Civil Procedure Code. Does the termination of the employment contract have an influence on the action which an employer can bring to obtain the attribution of rights over an employee s creation? Is there a limitation or statute-barring of the exercise of an action concerning the attribution of ownership rights over an invention or creation made by an employee in the context of an employment contract? All of the specialized laws except for the Czech Plant Variety Act contain an express provision stating that termination of the employment between the employer and the author does not affect the respective rights and obligations of the employer and the author (Section 58 (8) of the Czech Copyright Act, Section 10 of the Czech Patent Act, Section 14 of the Czech Design Act). The general statute-barring provisions under Section 100 of the Czech Civil Code 8 apply, i.e. three years from the day when a right could be exercised for the first time. Can the employee require the filing of a patent application in order to protect his invention or his other creations (registering patterns and models, etc.)? No, but as mentioned above, unless the employer exercises the right for patent/ utility model/ design against the author in a period of three months from notification from the author, the right for patent/ utility model/ design reverts to the author. Thereafter, the author can file an application in his/her own name. 1.4 The Groups are also invited to state whether there is a difference in status between employees in the private sector and researchers in universities or research institutes which receive public funding from the point of view of the employers rights. No, there is no difference in legal status between employees in the private sector and researchers in universities or research institutes which receive public funding from the point of view of employers rights 1.5 An important question in practice is whether compensation is due to employees in return for the rights of employers over the creations made by employees. 7 The Act No. 99/1963 Coll., the Civil Procedure Code, as amended. 8 The Act No. 40/1964 Coll., the Civil Code, as amended. 4

5 Moreover, it is in this field that the greatest disparities are currently observed in the world. The Groups are therefore invited to specify whether their domestic laws provide employees with a right to compensation (financial or in nature) in return for the transfer of rights over their creations to their employers. The specialized intellectual property laws provide for a legal framework for compensation for copyright, patents, utility models and designs. The Czech Plant Variety Act does not contain any provision on compensation for the author - employee. Copyright (including copyright to computer software) Section 58 (6) of the Czech Copyright Act provides that the author of an employee copyright work is entitled against the employer to adequate additional compensation, if the wages or other remuneration paid out to the author becomes clearly disproportionate to the profits generated from use the rights to the employee copyright work and importance of such work for generation of such profits. This statutory provision applies, unless the parties agree otherwise. The application of such statutory right for compensation is expressly excluded for computer programmes and databases, and cartographic works that are not collective works. Patents and Utility Models Under Section 9 (4) of the Czech Patent Act, the author who made an invention in employment for which the employer exercised right for patent is entitled to adequate compensation from the employer. The amount of such compensation is determined on basis of technical and economic importance of the invention and the benefits resulting by its possible use or other application, whereby the material contribution of the employer towards the invention is considered as well the scope of employment tasks of the employee. If the compensation that was already paid out becomes clearly disproportionate to the benefits arising from later use or other application of the invention, the inventor is entitled to an additional settlement. By virtue of Section 21 (2) of the Czech Utility Model Act, the same applies to utility models. Designs The provisions of Section 13 (4) of the Czech Design Act are almost identical to the analogous provision in the Czech Patent Act. The author who made a design in employment for which the employer exercised right for design is entitled to adequate compensation from the employer. The amount of such compensation is determined on basis of technical and economic importance of the design and the benefits resulting by its possible use or other application, whereby the material contribution of the employer towards the design is considered as well the scope of employment tasks of the employee. If the compensation that was already paid out becomes clearly disproportionate to the benefits arising from later use or other application of the design, the author is entitled to an additional settlement. While the legal regime of patents, utility models and designs is identical, the rules relating to copyright are somewhat different. While for patents, utility models and designs, the author is entitled to adequate compensation automatically in case that the employer exercises the right for patent, utility model or design, the additional compensation clause addresses the situation when such compensation post factum becomes clearly disproportionate. On the other hand, the author of an employee copyright work is not entitled to any compensation, unless the wages or other remuneration paid out are disproportionate to the employer s profits resulting from use of the copyright work, in which case the author is entitled to adequate additional compensation in addition to his/her regular wage or other remuneration. In addition, the right of additional compensation for employee copyright work is expressly excluded for computer software, databases and certain types of cartographic works. As a result, the rules for compensation for employee copyright work are more restrictive than for 5

6 patents, utility models and designs and therefore, employee copyright works are less likely to qualify for such compensation. How is this compensation calculated? The statutory provisions described above give guidelines how to establish the amount of such compensation. For copyright, the right of adequate additional compensation originates only if the wages or other remuneration is clearly disproportionate to the employer s profits from use of the rights to the employee copyright work and importance of such work for generation of such profits. Therefore, there should be a reasonable proportion between the employer s profits and the employee s compensation. For patents, utility models and designs, the decisive factor for the amount of compensation is the technical and economic importance of the respective intellectual property right and the benefits resulting by its possible use or other application. However, these criteria are subject to the corrective of the material contribution of the employer towards the respective intellectual property right and well the scope of the employment tasks of the employee, which should be also considered. Therefore, for example, even if the technical and economic importance of a patent and the benefits for the employer from its exploitation are very high, the employee s compensation does not have to be so high if the employer invested much financial resources into the invention and the employee has been hired as a researcher for such particular invention. There is a protective clause for employees stating that if the compensation that was already paid out becomes clearly disproportionate to the benefits arising from later use or other application of the design, the inventor is entitled to an additional settlement. Courts have discretionary in establishing the employer s profits, technical and economic importance and benefits from use. The standard practice in Czech courts is to appoint an expert to assess the value of the relevant intellectual property right. The expert would use one of the standard methods, i.e. the market approach, the revenue approach or the costs approach. Using a licence analogy, i.e. assessment how much would the employer have to pay in licence fees for use a similar intellectual property right, is very common. What is the time limit for prescription or statute-barring of a claim for payment of this compensation? In all of the above cases, the general statute-barring period of three years applies as mentioned above. 1.6 Finally, the Groups are invited to state whether there is a significant level of dispute in their countries concerning the ownership and use of rights over intellectual creations made by employees, and to give a general opinion on the effectiveness and/or efficiency of the national system. Until 1989, disputes between employers - state organizations and employees for compensation for use of patents have been perhaps the most frequent type of patent litigation and the courts have developed a significant volume of case-law in this area. Since 1989, however, there has been decrease in this type of litigation under the new market economy conditions. In addition, a new Czech Patent Act has been passed and pre-1989 case-law is likely not to be applicable. Firstly, the problems in the national system are the general flaws of Czech judiciary, i.e. excessive length of court proceedings and tendencies to formalistic approach of judges. Secondly and more specifically relating to intellectual property, the problems arise from non-existence of specialised intellectual property courts as intellectual property cases are heard by 6

7 regular courts. As a result, there are problems with inadequate technical qualification and experience of judges with intellectual property matters resulting in constant appointments of experts. 2. Suggestions with respect to International Harmonisation 2.1 Do the Groups think that such harmonisation is desirable on the international level for each of the types of intellectual property rights? Virtually every patent office around the world today encounters issues relating to whether an employer may file a patent application and, if yes in what period, whether a declaration on assignment of the right to file the patent application is required, etc. If the applicant is a foreign company, which is the case in a significant share of all patent applications, then the receiving patent office has to rely on information provided by the applicant, because these issues are governed by the national laws of the state of domicile of the applicant and the patent office has little or no possibility to verify such information. Harmonisation of laws in the field of employers rights to intellectual property would simplify the situation for patent offices around the world. The Czech National Group of AIPPI is of the opinion that harmonisation in the field of employers rights to intellectual property is desirable, particularly in case of patents. Do the Groups wish such harmonisation to be undertaken through labour law rules or through rules of intellectual property law? The issues of who has the right to file a patent or registered design application and, if yes, in what period, amount of remuneration of the author etc. are issues primarily falling within the field of intellectual property law. The role of labour law, in the opinion of the Czech National Group of AIPPI, plays an ancillary role limited to perhaps the question of existence of employment and whether the intellectual property right has been generated within performance of employment tasks. Therefore, the Czech National Group of AIPPI is of the opinion that harmonisation in the field of employers rights to intellectual property should be undertaken through intellectual property law. 2.2 The Groups are requested to state whether as a general rule it is the employer who is to be the owner, from the outset, of the intellectual property rights over creations made by employees in the context of their employment contract and in the performance of their tasks, or whether, on the contrary, it is the employee who must conserve his rights, but with the possibility for the employer to have them attributed to it under certain conditions. The creation of intellectual property rights, in particular inventions and computer programs, etc., in the modern world is characterized by two factors: significant financial investments of employers into technological resources and extensive use of teamwork of specialised experts hired particularly for the purpose of generating certain creation - intellectual property right. These two factors justify, in the opinion of the Czech National Group of AIPPI, that these should be automatically assigned to the employers who have made these significant investments into technological and human resources necessary for origin of the intellectual property right provided that these creations were made by in the context of their employment contract and in the performance of their tasks. On the other hand, the Czech National Group of AIPPI considers it to be fair that employees are entitled to adequate compensation and, if the employer does not wish to exercise and use these intellectual property rights, these rights revert to the employee. 2.3 If the employer was to be considered as owner from the outset of the intellectual property rights over creations made by employees, do the Groups think that the employee should re- 7

8 ceive a particular reward, in addition to his salary, for these creations, or do they think that such a reward is not justified? In the opinion of the Czech National Group of AIPPI, the question of additional remuneration for intellectual property rights devised by employees should be assessed on case-by-case basis provided that difference should be made with respect to the technical and economic benefits of the employer and the employee s regular employment tasks. The patent for a best-selling pharmaceutical representing a significant portion of the employer s profits should be more likely to result in additional remuneration for the employee than a patent for a somewhat incremental, although patentable, improvement of technology with little technical and economic impact on the employer s business. If, on the contrary, the employer is not vested from the outset in the intellectual property rights over creations made by employees, what would be the conditions for the attribution of these rights and, in particular, what could the remuneration be, corresponding with the possibility of having the intellectual property rights in question attributed to the employer? Do the Groups consider that the adoption in principle of a reward could have an influence over the general system of intellectual property rights and if so, what would that influence be? As stated above, reward should conditional on the economic and technical importance of the patent. 2.4 The Groups are also invited to present their opinions on the organisation of disputes concerning the attribution of intellectual property rights over employees creations and concerning their use by employers. Are the Groups of the opinion that such disputes should be governed by the courts which have jurisdiction in labour law matters, or are they more of the opinion that these disputes should be subject to those courts which judge intellectual property disputes? It should be recalled that the disputes may concern various aspects of relations between employers and employees: attribution of ownership of such rights; decisions concerning the means of protection and, finally, any compensation as may be due. The Czech National Group of AIPPI considers the issues relating to employer s rights to fall primarily within the field of intellectual property law rather than labour law. Therefore, these disputes should handled by the courts that have jurisdiction in intellectual property matters. 2.5 The Groups are also invited to give their opinion on the existence of differences, if any, between the status of private sector employees and researchers in universities and in research institutes which are financed by public funds. Are there any grounds for providing for a difference in treatment in the hypothesis of international harmonisation or, on the contrary, should all employees and researchers be treated in the same way? The Czech National Group of AIPPI is not aware of any particular reasons why there should be a specific legal regime discriminating between private sector employees and researchers in universities. Summary Under Czech law, the relations between employers and employees in the field of intellectual property rights are governed exclusively by the respective specialized intellectual property laws. The legal regime is quite similar for copyright, patents, utility models, designs and plant varieties. 8

9 If made within performance of employment tasks, the relevant right is automatically assigned to the employer, or the employer automatically has exclusive right to exercise it in case of copyright. In the Czech Republic, there is no special set of courts either for intellectual property matters. These disputes are therefore in the jurisdiction of general courts. The employee authors are entitled to adequate compensation for employee intellectual. 9