In today’s world, the global exploitation of copyright is part of daily business, and of great importance, for many companies. But the legal system has difficulties keeping pace with the increasing global connection of markets. Taking a closer look at the international harmonization of copyright laws, it is surprising to see how many issues around harmonization remain unresolved. This may have a huge impact not only on the business of global players but virtually every company that is active internationally. Squire Patton Boggs lawyer Jens Petry published an article in Entertainment Law Review, issue 6/2014, p. 205, which focuses on one of these issues: the applicable law in cross-border copyright litigation.
The key message is: The foreign owner of a derived copyright cannot enforce the copyright in Germany without the consent of the initial author. Similar difficulties arise in countries where copyright cannot be assigned.
What is the background?
Sec. 34 German Copyright Act (“Urheberrechtsgesetz”) provides that “an exploitation right may only be transferred with the author’s consent”. Under German law, the author can only be a natural person. A company which exploits the works created by its employees or external providers can never be an “author”. The company commonly acquires the entirety of copyright related rights, i.e. not the copyright itself, in the moment of creation of the work based on contracts with its employees or its external providers, but will not be considered as initial owner of these rights.
Consequently, if the company intends to transfer its rights to a second company, which is a common practice especially in multi-national corporations, the validity of this transfer depends on the consent of the employees or external providers, as initial authors of the work. Although it is, in principle, possible to assume “implied consent”, the “purpose of transfer” rule (in German: “Zweckübertragungslehre”) also applies here, according to which the rights remain with the author in cases of doubt. Then, the acquiring company could not become owner of the (derived) copyright exploitation rights.
A company, for which the US or UK “work for hire” doctrine is part of daily business, may find this peculiar. However, the “work for hire” doctrine is simply not accepted in the German legal system.
Do the rules on conflict of laws assist?
The relevant international treaties, with the Revised Berne Convention (“RBC”) leading the way, do not provide any specific rules on the question of which law is applicable to determine the emergence of a copyright in case of copyright infringement in a foreign country. Basically, two opposing positions can be found: first, the principle of ‘country of origin’, which provides that the law of the country in which the work was created determines the question of authorship and first ownership and second, the principle of ‘lex protectionis’ according to which the law of the country shall apply in which protection is sought, in other words: where the infringement happened.
Both opinions have their pros and cons. Copyright owners from the United States should be aware that US courts – like the French courts– at least consider the ‘country of origin’ principle and may apply foreign copyright law in certain situations. But they must not be surprised that the prevailing opinion in Germany refers to the ‘lex protectionis’ principle. German courts exclusively apply German copyright law, not only with regard to the scope of protection, but also concerning the emergence of the copyright and first ownership.
As a consequence, when it comes to enforcement of copyrights in Germany, international companies must be aware of the traps laid by German copyright law.
What is the solution?
Companies must ensure that, in circumstances where German law applies, they not only obtain all exploitation rights from their employees and designers at the time of creation, but also the consent of the original author when the companies assign these exploitation rights to a new owner, no matter whether this is an intra-group assignment or by way of an asset deal.
The above highlights how important it is for international corporations and SMEs alike to obtain legal advice before transferring copyrights. Otherwise, they risk not being able to successfully exploit their rights in countries, like Germany, where the original authorship vests with the employee or external service providers.