Who owns the rights to a computer program developed and financed by your company? Does paying a programmer mean that you have become the owner of all rights to the computer program? Can a former employee use code they developed while working for you? What are you allowed to do with a computer program you have purchased?

These are just some of the questions that arise in practice when developing, purchasing and using computer programs.

For companies operating in the IT sector, as well as companies developing computer programs for their own needs, issues relating to copyright protection of such computer programs can have a direct impact on their business. A dispute over source code, an unclear agreement with an employee or freelancer, or an unchecked open-source licence may later make it more difficult to sell, license or further develop a software product.

It is therefore important to regulate the issue of rights in a computer program before a dispute arises.

What Does Copyright Protects in a Computer Program?

The Copyright and Related Rights Act (“the Act”) expressly classifies computer programs as written copyright works. Copyright of computer program arises upon the creation of the copyright work itself, without the need for any special registration procedure.

However, the fact that a computer program is protected by copyright does not mean that every idea, functionality or technical solution used by such a computer program is protected.

Copyright protection applies to the specific form of expression, i.e. the way in which the computer program is expressed. In practice, source code is particularly important, but depending on the circumstances, object code, accompanying technical and user documentation in whatever form they are expressed, as well as preparatory materials for the creation of the computer program, may also be relevant.

On the other hand, the idea on which a computer program is based, an algorithm, principle, method or function performed by the computer program does not become subject to the author’s monopoly.

Accordingly, two companies may develop computer programs that solve the same problem and have similar functionality without this constituting copyright infringement.

In other words, the key question is not what the computer program does, but whether the protected expression of one computer program has been unlawfully taken from it.

Does the Creation of a Similar Computer Program Mean That Copyright Infringement Has Occurred?

Not necessarily. The mere fact that two computer programs have the same or similar functionality, use the same input data or solve the same business problem is not sufficient to conclude that copyright infringement has occurred. A competing company may independently develop a computer program that performs the same function without unlawfully appropriating another party’s copyrighted work.

The situation is different where, without the permission of the rights holder, source code or another element of a computer program that constitutes protected expression has been copied. In such a case, the relevant issue is not merely that the two programs have a similar purpose, but how the similarities arose and what exactly was copied.

Therefore, in each individual case, in addition to the content and degree of similarity between the disputed parts of the programs, it may also be necessary to determine whether the person who developed the second computer program had access to the original computer program and whether the identified similarities can be explained by unauthorised copying or are instead the result of independent development.

Who Owns the Rights to a Computer Program Created in the Course of Employment?

This is one of the most important questions for companies with their own development teams.

The author of a copyright work is the natural person who created it. However, the Act provides a specific rule for computer programs created in the course of employment.

If an author creates a work during the term of employment while performing their employment duties, the Act expressly provides that the employer is the permanent holder of all exclusive economic rights in the work, unless otherwise provided by contract. The author is entitled to special remuneration if this is provided for by the contract.

Nevertheless, the fact that the Act determines who holds the economic rights to a computer program created in the course of employment does not mean that the relationship between the employer and the employee should be left without a clear contractual framework. On the contrary, the employment agreement, or another appropriate agreement concluded with the employee, should precisely regulate the manner in which the employee participates in the development of the computer program, the delivery of source code and accompanying documentation, the protection of confidential information, as well as the handling of the computer program and development resources after termination of employment.

Such arrangements are important not only for the organisation of work, but also for clearly demonstrating how the computer program was created and which rights the company holds, particularly if a dispute subsequently arises with the employee, as well as in situations where an employee leaves the company and the company must continue the development and maintenance of the software product.

What If the Computer Program Was Created by a Freelancer?

When an external contractor, i.e. a freelancer, is engaged, the situation may differ from the development of a computer program within an employment relationship.

In an agreement with a freelancer, what has been agreed is of key importance.

Where the development of a computer program is entrusted to a freelancer as the author, such a relationship may be regulated by an agreement for the commissioning of a copyright work. The Act provides a specific rule for this situation: if a computer program is created pursuant to an agreement for the commissioning of a copyright work, the client acquires all rights of exploitation of the computer program, unless otherwise provided by the agreement.

This is precisely why it is important for the agreement to clearly define what is being commissioned and which rights the client acquires. The agreement should regulate, among other things, the scope of the rights to use and further develop the computer program, the right to modify and improve it, the possibility of assigning or granting rights to use the computer program to third parties, as well as issues concerning source code, documentation and the use of third-party components.

It is particularly important to clearly regulate whether the freelancer may use the same or similar code in other projects, in order to avoid uncertainty as to what was developed exclusively for the client’s needs and what constitutes the freelancer’s pre-existing knowledge, code or other materials.

In other words, the fact that a company has paid for the development of a computer program is not, by itself, sufficient reason to leave the issue of rights in that computer program to assumptions. The agreement for the commissioning of a copyright work should clearly determine what is being commissioned, which rights the client acquires and under what conditions the client may further use and develop the computer program.

What May a Company Do With a Computer Program It Has Lawfully Acquired?

Copyright gives the rights holder control over various forms of exploitation of a computer program, but the law provides certain rights to lawful users.

Unless otherwise provided by contract, a person who has lawfully acquired a copy of a computer program has the right, without the author’s specific permission and without paying a copyright fee, to:

• permanently or temporarily reproduce the computer program or parts thereof, by any means and in any form, where this is necessary for the use of the computer program in accordance with its intended purpose;
• correct errors in the computer program, taking into account its intended purpose;
• load, display, run, transmit or store the computer program in the memory of a computer where this is necessary for the reproduction of the computer program;
• translate, adapt, arrange and otherwise modify the computer program, as well as reproduce the results of such actions.

With regard to computer programs, it is particularly important that loading and running a computer program on a computer is considered reproduction.

The Act also permits the making of a backup copy of a computer program on a permanent tangible medium where this is necessary for its use. Such a right may not be prohibited by contract.

In addition, a person entitled to use a copy of a computer program may, without the permission of the rights holder, observe, study or test the functioning of the computer program in order to determine the ideas and principles underlying any element of the computer program, provided that this is done while performing acts of loading, displaying, running, transmitting or storing the program which that person is authorised to perform.

In other words, a lawful user of a program may, within the scope of the acts of use they are authorised to perform, study how the program functions and determine the ideas and principles on which it is based, but this does not give them the right to copy its protected code or other protected elements.

These provisions, however, do not mean that the purchaser, client or user of a computer program acquires an unlimited right to copy, distribute or transfer the computer program to third parties.

Interoperability of Computer Programs: When is it Permitted?

The Act provides specific rules for situations where it is necessary to connect an independently developed computer program with another computer program.

Interoperability means the ability of two independently developed computer programs to communicate with each other and exchange data so that they can function properly together.

Under certain conditions, the Act permits the reproduction of source code and translation of its form where this is necessary to achieve interoperability between an independently created program and other programs. This is possible under the following conditions:

• the acts are performed by a licence holder or another person who has the right to use a copy of the program, or by a person authorised by such persons to perform these acts;
• the information necessary to achieve interoperability has not otherwise been made available to those persons;
• the acts are limited to those parts of the original program which are necessary to achieve interoperability.

The information obtained in this way may be used only for the purpose of achieving interoperability of the independently created computer program.

Such information may not be disclosed to others, except where this is necessary to achieve interoperability of the independently created computer program, nor may it be used for the development, production or marketing of a computer program that is substantially similar in its expression to the computer program being decompiled, or for any other act that infringes copyright in that program.

Any contractual provisions contrary to these statutory rules are null and void.

What does Open Source mean for a Company Developing a Computer Program?

One common misconception is that open-source software is not subject to copyright protection and may therefore be freely used without any restrictions.

However, open-source software is also protected by copyright, but the rights holder grants users certain permissions subject to the terms of the applicable licence.

This means that a company may use, modify or distribute a particular open-source component, but only in accordance with the licence under which that component is made available.

Different licences may impose different obligations regarding the distribution of the computer program, modifications, availability of source code, copyright notices and the licensing of derivative works.

For a company developing commercial software, it is therefore not enough to know that a particular component is open source. It is necessary to determine under which licence it has been released and what obligations arise from that licence.

Failure to comply with the terms of open-source licences may create legal and business risks, particularly when distributing a product or potentially selling the company.

How can a Company Protect itself Before a Dispute Arises?

The most expensive time to resolve copyright issues is often after a dispute has already arisen.

If a company only then tries to determine who developed a particular part of the code, who holds the rights to it, what was agreed with an employee or freelancer, or under what conditions a particular component was incorporated into the computer program, proving the relevant facts may be significantly more difficult.

It is therefore important to address copyright issues before work on the computer program begins. A company should have clear agreements with employees and external contractors, properly regulate rights in the source code and accompanying documentation, and maintain records of who participated in the development of the computer program and under what terms. It is equally important to keep track of third-party components and open-source software incorporated into the computer program, so that the applicable conditions of use are known in advance.

Such documentation is not intended only for potential court proceedings. It enables the company to know, throughout the development process, which rights it holds and to subsequently use, modify, license or further develop its software product without unnecessary legal uncertainty.

Regulating Rights as the Foundation of Legal Certainty

With computer programs, it is not enough to know that they are protected by copyright. For a company, it is much more important to know who holds the rights, what those rights cover and what the company may do with the particular computer program.

Particular attention should be paid to distinguishing ideas and functionality from protected expression, relationships with employees and external contractors, the content of agreements for the development of computer programs, the rights of lawful users, the rules on interoperability, and open-source components.

Well-structured contractual and copyright arrangements enable a company to develop, use, license and further improve its computer program with greater legal certainty.

If your company develops software, engages external contractors or uses computer programs belonging to third parties, a timely review of copyright ownership and contractual documentation can help prevent disputes and protect the investment made in the software product.

This article is for informational purposes only and does not constitute legal advice. If you require any additional information, please feel free to contact us.

This article is to be considered as exclusively informative, with no intention to provide legal advice. If you should need additional information, please contact us directly.