Last year the European Court of Justice (the “ECJ”) issued an important decision relating to the often encountered problem of who owns the rights to work which a third party has been commissioned to create.

The case involved a project, ‘D’Artes’, established by FEIA, a Spanish foundation for artisans. The idea behind the project was that craft objects would be designed and made by local artisans, then placed on the market for sale. Although FEIA was the main funder and the sponsor of the project, the project was organised for it by Company A. Company A was responsible for picking out the designers who would work with the artisans and entering into agreements with them for the design of the objects. One of the agreements which Company A entered into was with Company C. The agreement required Company C to develop designs for cuckoo clocks and to provide help to the craftswoman who would manufacture the clocks. Company C duly produced a series of designs for the cuckoo clocks which the craftswoman then manufactured.

Perhaps not surprisingly, when the FEIA subsequently found out that Company C was working with another company and selling cuckoo clocks which appeared to be based on the clock designs which FIEA had commissioned, it was none too pleased. FEIA brought proceedings against Company C, arguing that it owned the unregistered design rights to the clocks on the basis that it was the sponsor and main funder of the D’Artes project.

The ECJ disagreed and held that the design rights remained with Company C as these had not been transferred to the FEIA. The ECJ noted that, under the relevant Spanish provisions, unless the right to the design had been expressly transferred to the commissioning party it remained with the designer.

Design rights in Guernsey

So what is a ‘design right’? When does it arise and how is it protected under Guernsey law? What do Guernsey businesses need to do to ensure they get all the rights to a work commissioned by them?

Let’s look first of all at what constitutes a design right. In simple terms, design rights are original and out-of-the ordinary designs for the shape or configuration of products. An example of a design right is the distinctive shape of the Coca Cola® bottle. Design rights can be registered or unregistered.

Registered design rights

Registered design rights give the greatest protection, both as to what is covered and how long the protection lasts. To obtain a registered design right, it will not surprise you that you need first to register the design right.

The relevant legislation in Guernsey is The Registered Designs (Bailiwick of Guernsey) Ordinance, 2005, which came into force in Guernsey on 1 March 2006. The legislation allows registration of a design right which relates to the appearance of products, whether that appearance results from the lines, contours, colours, shape, texture or materials of the product or its ornamentation.

As we have said, in order to obtain protection you need to register the design. At the moment, Guernsey is what is termed a jurisdiction of ‘secondary registration’. This means that you need to obtain a registered design right in an overseas jurisdiction before you can extend protection under that right to Guernsey. Once extended, the right will be protected in Guernsey for as long as the overseas registration is maintained, up to a maximum of 25 years.

Unregistered design rights

As was the case in the cuckoo clocks litigation, not all designs are registered. Does the law protect unregistered designs? It does, by way of ‘unregistered design rights’. (We hope someone didn’t have to spend too long dreaming up that title!)

In Guernsey, the relevant legislation is the Unregistered Design Rights (Bailiwick of Guernsey) Ordinance, 2005 which came into force on 1 January 2006. Under this legislation, the protection available for unregistered design rights in Guernsey is wider than in the UK. This is because the Guernsey legislation adopts the EC definition of unregistered design rights, namely: “the appearance of the whole or a part of a product resulting from the features of, in particular, the lines, contours, colours, shape, texture or materials of the product or its ornamentation”. A qualifying design is protected to the extent that it is “original” and has “individual character”. The right does not arise until the design has been recorded in a design document or a product is made to the design.

The owner of an unregistered design right can, depending on the circumstances, take certain steps to prevent unauthorised use of the unregistered design, including stopping third parties from making, selling, importing, using or stocking any product which has been made by copying the protected design. Protection can extend up to 15 years, although will be limited to 5 years if the design is commercially exploited.

The positive news for Guernsey businesses is that the question of who owns commissioned works is answered in the opposite way in Guernsey to the answer under the Spanish provisions. Thus, if the FEIA had been operating under Guernsey law, it would not have lost out on the unregistered design rights for those cuckoo clocks. Under the Guernsey legislation (section 4), the designer owns the design rights unless the design is created either (a) in the course of employment or (b) in pursuance of a commission, in which case the employer and commissioning party respectively will own the design rights.

Copyright

The other area of intellectual property where businesses often get their fingers burnt is in relation to obtaining ownership of copyright works, so we’ve summarised the key points which Guernsey businesses need to think about below.

Where an employee creates a copyright work in the course of his/her employment, the employer will be the first owner of any copyright in that work. However, unless specifically agreed otherwise, the employee may retain certain ‘moral’ rights, including the right to be identified as the author and the right to object to derogatory treatment of the work. For that reason, in order to avoid any disputes at a later stage, we recommend that all your employment contracts contain an acknowledgment from the employee that the employer will acquire all intellectual property arising in any work product and that the employee waives any moral rights to such products. This is particularly relevant when you are looking to acquire another company whose IP rights are valuable – without such a provision in the employee’s contracts, there is a real risk that you will be acquiring a company whose real value may be owned by some other party.

What about when you commission a work from a third party? In contrast to the unregistered design right, if you commission copyright work from a third party, the third party will be the owner of the copyright and not you. If you want to obtain ownership of the copyright, you will have to negotiate with the third party for this to be transferred to you. Additionally, even if you get agreement to transfer copyright to you (usually by way of an assignment) this agreement should be expressly recorded in writing.

Remember too that copyright applies across many areas of literary, artistic and musical works. For example, computer programs are usually protected by copyright, so if your business relies on a particular bit of software it can be absolutely critical to know the copyright position. Once again, the message is clear- be sure to negotiate copyright in relation to any works carried out for you by sub- and independent contractors. This issue is again important in the context of acquiring a business, as you will want to ensure that you acquire full ownership of all the business systems.

Tick tock, tick tock…

Have you got your IP rights properly protected? Is there a ticking time-bomb of problems for you, waiting to explode? Don’t take the risk: if you are commissioning someone to supply you with a deliverable (whether that deliverable be a document, website copy, technical specifications, software or designs), get yourself protected by entering into an express written agreement giving you all intellectual property rights in that deliverable