Whose idea is it when you're at work?
1. Introduction
When an employee writes software code, draws a logo, or prepares an analytical article during working hours, the question naturally arises as to who owns the created result: the one who created it or the one who paid for this labor. The same question is even more acute in the case of an independent contractor, or freelancer, who is not in an employment relationship with a company and only fulfills a specific order. It should be said from the outset that the question posed in the title is not precisely formulated, because according to Georgian law, copyright does not apply to ideas, methods, concepts, and principles at all, even if they are expressed in a work. Therefore, the subject of the dispute is never the idea itself; the dispute always concerns its specific expression, that is, text, drawing, code, or design.
This issue is of practical importance, as the Georgian legislator has changed its answer to it three times in eleven years: in 1999, copyright belonged to the author,[1] in 2005, property rights still remained with the author, although they were transferred to the employer for computer programs,[2] and since 2010, property rights, as a rule, belong to the employer or customer.[3] In addition, you will often hear that the American approach is the opposite of the Georgian one. It will be shown below that this opinion is only partially correct: American law is even more favorable to the employer in relation to the employee than Georgian law, while in relation to the independent contractor it actually chooses the opposite path. The report consistently discusses the current Georgian rule, its history, the American model and the practice of the US Supreme Court, and then presents a comparative analysis and recommendations.
2. How is Georgia today?
2.1. Basic rule: Article 16, paragraph 1
The first paragraph of Article 16 of the current law reads as follows: “Property rights to a work created by an employee or a recipient of an order, which is related to the performance of official duties or an order (service work), belong to the employer or the customer, respectively, unless otherwise provided for by the contract.” Three elements are distinguished in this norm. The first element concerns the status of the creator: the norm equally covers both the employee and the recipient of the order. The second element is the criterion of connection: the work must be “related” to the performance of official duties or an order. The third element is the result: property rights belong to the employer or the customer, but only if the parties have not agreed otherwise by contract. Thus, the norm is dispositive: it establishes a rule that is in effect until the parties agree otherwise.
At the same time, what the norm does not say is important. According to the law, the author is a natural person whose intellectual and creative activity resulted in the creation of a work. Article 16 does not make the employer an author; it only grants him property rights. Accordingly, the employer is included in the number of persons whom the law calls “other copyright holders,”[3] while the author remains the person who created the work. It is this difference, as we will see below, that creates the main boundary between the Georgian and American models.
2.2. What does the employer receive?
Article 16 does not contain a list of rights and only refers in general terms to “property rights”. Since this concept is not limited in any way in the norm, and all property rights provided for in Article 18 are transferred to the employer. According to the first paragraph of Article 18, the author or other copyright holder has the exclusive right to use the work in any form, and the second paragraph explains that this is the right to “carry out, authorize or prohibit” the following acts: reproduction, distribution, translation, import, public display, public performance, public communication, adaptation, rental and other exploitation.
The employer has two special powers directly derived from Article 16. First, he has the right to indicate his name (title) or to request such indication when using a work of service in any form. Second, the law establishes that the amount of royalties and the method of payment for the use of a work of service “may be determined” by an agreement between the author and the employer. The word “may” is crucial here: the law does not grant an employed author the right to additional remuneration in addition to his salary and leaves this issue entirely to the agreement of the parties.
2.3. What remains for the author
Despite the transfer of property rights, the author retains personal non-property rights, which Article 17 of the Law lists as follows:
• The right of authorship, the right to be recognized as the author of a work and to request that one's name be indicated on each copy of the work and in any form of use;
• The right to a name, the right to indicate a pseudonym instead of a name or to refuse to indicate a name at all;
• The right to decide when, where and in what form the fact of the creation of the work is made known;
• The right to the inviolability of a work, the right to allow others to make changes to the work, its title and the name of the author, and to oppose changes being made without his consent;
• The right to respect for reputation, the right to protect a work from distortion or infringement that may be prejudicial to the author's honor, dignity or business reputation;
• The right to allow others to add to the work the work of other authors, for example, an illustration, a preface, or a commentary;
• The right to withdraw a work, which, by direct reference to the law, does not apply to official works.
The legal nature of these rights is clearly defined in the law. Personal non-property rights belong to the author independently of property rights and are retained even if they are surrendered.
2.4. How long does the employer's right last?
Copyright arises upon the creation of a work and is valid during the life of the author and for 70 years after his death, and the term begins on January 1 of the year following the year in which the relevant legal fact occurred. Article 32 of the law establishes special terms for pseudonymous and anonymous, co-authored and audiovisual works, but does not provide for a separate term for work-related works. The result is interesting: although the property rights belong to the company, their duration is tied to the life of the person who created the work. This is a logical continuation of the Georgian model, in which the author always remains a natural person.
Accordingly, in the Georgian model, it is clear that only property rights (rights that allow financial benefits to be obtained from the work) can be transferred. The author will always be the person who directly created the work. In this case, the employee. The United States of America has a different system, where the employer is also considered the author.
The US approach
3.1. Law: The employer himself is considered the author
The U.S. Copyright Act of 1976 defines “work made for hire” in two ways. The first applies to an employee: a work that the employee produced in the course of his or her employment is considered a work.[1] The second applies to works made for hire, but it only applies to nine categories: a part of a collective work, a part of a motion picture or other audiovisual work, a translation, a companion work, a collection, an educational text, a test, a test answer sheet, and an atlas.[2] Even in these categories, a work made for hire is considered a work made for hire only if the parties have expressly agreed in a written document signed by both parties that the work is to be considered a work.[3]
The result of this definition is fundamentally different from the Georgian one. As a general rule, copyright originally belongs to the author or authors of the work, but in the case of a work created for hire, according to the law, “the employer or other person for whom the work was prepared shall be deemed to be the author for the purposes of this law and, unless the parties expressly agree otherwise in a signed written document, shall own all the rights constituting the copyright.” Therefore, the American employer is not only the owner of the rights, but is also the legal author himself. The parties can change by agreement who owns the rights, but the text of the law does not provide for the possibility of changing who is considered the author.
Reed Case (1989): Who is employed?
The most important decision is the 1989 case of Nonviolent Creative Society v. Reed, which the court decided unanimously in a decision written by Justice Marshall. The facts of the case were simple. The organization commissioned a sculptor, Reed, to make a statue, and the agreement stipulated that the cost of the project would not exceed $15,000, excluding Reed's services, which he offered to provide free of charge. The dispute arose over the copyright in the statue, and the main question was whether Reed was an "employee" within the meaning of the law. The court took as its starting point the fact that the law nowhere defines the terms "employee" and "the scope of employment."
It therefore concluded that Congress intended the ordinary relationship of “master and servant” as understood in common law doctrine. At the same time, the Court rejected two alternative tests used by lower courts: one based on the employer’s right to control the product, the other on actual control. Furthermore, the Court did not share the approach that only formally employed, salaried employees are considered employees. The Court also emphasized that the parties concerned and Congress have always considered works by employees and works created by independent contractors to be separate. In addition, it was crucial that the employer had the means to control and supervise the employee.