Does Your Business Own its Copyrights?
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For those of you who run your own business, whether you are aware of it or not, copyrights are a primary mechanism to protect your intellectual property. For example, whether you are writing a blog post, designing a logo, writing the source code of a computer program, or creating a piece of music, all these works are subject to a copyright.
A copyright does not need to be registered in South Africa, but arises automatically upon its creation, preventing others from copying the contents of what you’ve created.
Copyrights can provide a very useful means to ensure that others don’t unlawfully compete with you, and can also be licensed for royalties. With the plethora of technological developments of the past decade or more, copyright legislation is fundamentally in need of an update.
The 2017 Copyright Amendment Bill recently published by the Department of Trade and Industry for comment, has been widely criticised.
We’ve set out some of the proposed amendments that we believe to be unfair, lacking common logic, or that may affect your business if the 2017 bill becomes law.
Copyrights funded by the State
One of the most contentious introductions is the advent of state-funded copyrights. The bill stipulates that the state will own all copyrights it has funded, but does not define what it terms as ‘funded’. Accordingly, this may include grants, subsidies, loans, tax incentives, equity investments and the like.
Further, the bill does not set any minimum threshold to constitute state funded. This could mean that if the state provided 0,5% of the capital required to develop software, or certain educational course content, it would own copyrights flowing from the works.
Further, the state is not permitted, by way of contract, to transfer back the copyright to the person who obtained the funding from the state. Contracts are the primary mechanism by which copyrights are transferred under the current Act.
With the Department of Trade and Industry introducing some great funding initiatives for start-ups, the risk is obvious in that any start-up that is part funded by the Department of Trade and Industry would not own the copyright to anything created as a result of that funding.
Should private investors be looking to provide a company with any later stage funding, a simple due diligence would reveal that the company simply does not own any of its ‘own’ copyrights. This would discourage most investors, which could curtail private funding for businesses that were initially state funded. These businesses are primarily owned and run by previously disadvantaged individuals, and hence, may have the effect of further curtailing transformation in our fragile economy.
The 25-year assignment
In a previous article, we touched on the fact that independent contractors tend to own the copyright to works they create on behalf of businesses (think outsourced web development and logo creation). Under the current law, independent contractors may permanently transfer a copyright, by written agreement, back to the company that instructed them to perform the work.
The 2017 bill proposes a 25-year limit on this transfer. Unless you are the independent contractor creating copyrighted works on behalf of others, this provision is severely prejudicial to most businesses that tend to outsource a number of their works. An independent contractor may assign the copyright back to the business that outsourced the work, however, the copyright will automatically revert to the independent contractor after 25 years.
If you’re looking to sell your business, or raise funding, for example, the value of your business is inextricably linked to the intellectual property owned by it, such as copyrights, trademarks, and the like. With your business lacking the ability to retain a copyright that was assigned to it beyond 25 years, this could detrimentally impact the valuation of your business.
Unenforceable contractual provisions
As mentioned above, copyright assignment agreements are currently used to ensure that copyrights have been validly assigned from an independent contractor — for example, back to the company that outsourced the work. The 2017 bill provides that any contract that purports to take away a right, prevent or restrict any act in terms of the bill will be invalid and unenforceable. This means that, for example, a copyright assignment agreement, as mentioned above, would be void.
While the bill is not law yet, there could be far-reaching and detrimental impacts to your business should it become law. One can only hope, for the sake of our entrepreneurial community, that the concerns we raise are heeded, and the bill amended.