Philippines Philippines Philippinen. Report Q183. in the name of the Philippine Group. Employers rights to intellectual property

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1 Philippines Philippines Philippinen Report Q183 in the name of the Philippine Group Employers rights to intellectual property Questions 1. The State of positive Law 1.1 The Groups are invited to present the legal framework governing relations between employers and employees in the field of intellectual property rights. In particular, the Groups are invited to state whether these rules arise from provisions concerning labour law or whether these rules arise from provisions concerning intellectual property rights. In addition, the Groups are invited to state whether these rules may be considered as being public policy rules (i.e. mandatory rules) or whether, on the contrary, they may be modified by contractual relations between employees and employers. Under Philippine law, the legal framework governing relations between employers and employees in the field of intellectual property rights is primarily found in Republic Act No. 8293, otherwise known as the Intellectual Property Code of the Philippines (IP Code). However, a close perusal of the relevant provisions in the IP Code with regard to employer-employee relations reveals that they deal only with the issue of ownership of intellectual property created by the employee. Other issues involving employer-employee relations in the field of intellectual property rights are governed by the Labor Code of the Philippines (Labor Code) and in the absence of applicable provisions in the IP Code and Labor Code, certain provisions of the Civil Code of the Philippines on Contract of Labor shall apply suppletorily. Other special laws such as Republic Act No. 9168, otherwise known as the Philippine Plant Variety Protection Act of 2002 (Plant Variety Act) and its Implementing Rules and Regulations (DA Administrative Order No. 7-03), also contain a provision dealing with development of new plant variety during the existence of employer-employee relations. As to whether the foregoing provisions are of mandatory application or subject to the modification by the parties through the execution of contracts, a reading of the provisions in the IP Code implies that the IP Code merely provides default rules in the absence of contractual agreements, express or implied, between the employer and employee to the contrary, hence, subject to modification. 1.2 The Groups are invited to specify, for each of the intellectual property rights (patents, plant variety rights, copyright or authors rights, patterns and models, and software rights, it being recalled that trademarks and brand rights are expressly excluded from the scope of the study in question) what are the legal solutions concerning ownership of rights over intellectual creations: Do these rights originally belong to the employer or the employee? 1

2 If these rights belong to the employer from the outset, what are the conditions for this attribution? And if these rights originally belong to the employee, does the employer have the right to have them transferred to it and under what conditions? And the Groups are also invited to specify, as far as it concerns patents, if it is the employer who is the owner, from the outset, of the intellectual property rights over inventions made by employees in the context of their employment contract and in the performance of their tasks. The Groups are invited to give replies both with respect to moral rights and economic rights for each type of intellectual property rights. I) Patents a) Who is the original owner of the right to patent? It depends on whether the inventive activity is a part of the regular duties of the employee. Sec of the IP Code provides: In case the employee made the invention in the course of his employment contract, the patent shall belong to: i) the employee, if the inventive activity is not a part of his regular duties even if the employee uses the time, facilities and materials of the employer; ii) the employer, if the invention is the result of the performance of his regularly assigned duties, unless there is an agreement, express or implied, to the contrary. The foregoing provision is silent as to economic rights and moral rights. b) If the employer is the original owner, what are the conditions for this attribution? According to Section 30.2(ii), the employer is the original owner if the invention is the result of the employee s performance of his regularly assigned duties. The only condition for this attribution is that the employer and the employee has not entered into any agreement, express or implied, to the contrary. Stated otherwise, the employer will only be considered the owner of the invention if there is no existing agreement that makes the employee the original owner. Please note that the agreement need not be in written form. c) If the employee is the original owner, whether the employer has the right to have the right to patent transferred to him and under what conditions? Pursuant to Section 30.2(i), if the inventive activity is not a part of the regular duties of the employee, despite the utilization of the time, facilities and materials of the employer, the employee is considered the original owner of the invention. Such rule can be considered absolute, subject to no other qualification such as an existing agreement to the contrary, hence, the employer has no right to have the right to patent transferred to him as an employer per se. The parties cannot therefore validly agree in advance that even works created by the employee outside of the performance of his regularly assigned duties shall belong to the employer. The rationale for this appears to be that the parties in this situation are not on equal bargaining terms; the employee therefore needs to be protected against the imposition of the employer. In case a transfer will indeed take place, it should be considered as a transaction outside employer-employee relations. Contract law allows individuals to freely structure their transactions and employee relationships. An employee may thus freely consent by contract to assign all rights in inventive ideas to the employer. The rules on assignment or licensing of right to patent will then apply. Under Section 71.2 of the IP Code, patent owners shall have the right to assign or transfer by succession the patent, and to con- 2

3 clude licensing contracts for the same. Likewise, Section of the same Code reaffirms the above rule by providing that inventions and any right, title or interest in and to patents and inventions covered thereby, may be assigned or transmitted by inheritance or bequest or may be the subject of a license contract. An assignment may be of the entire right, title or interest in and to the patent and the invention covered thereby, or of an undivided share of the entire patent and invention, in which event the parties become joint owners thereof. An assignment may be limited to a specified territory. The assignment must be in writing, acknowledged before a notary public or other officer authorized to administer oaths or perform notarial acts, and certified under the hand and official seal of the notary or such other officer. (Sections , IP Code). As for voluntary licensing, parties can enter into technology transfer arrangements (TTA) that are subject to certain prohibited clauses as well as mandatory provisions. TTAs that contain the mandatory provisions without any of the prohibited clauses need not be registered with the Documentation, Information and Technology Transfer Bureau (DITTB). However, technology transfer arrangements which contain any of the prohibited clauses and do not include any of the mandatory provisions will automatically render the arrangement unenforceable, unless the arrangement is approved and registered with the DITTB in exceptional cases. (Sections 85, 92, IP Code) A TTA refers to contracts or agreements involving the transfer of systematic knowledge for the manufacture of a product, the application of a process, or rendering of a service including management contracts; and the transfer, assignment or licensing of all forms of intellectual property rights, including licensing of computer software except computer software developed for mass market. (Section 4.2, IP Code) The Rules and Regulations on Voluntary Licensing further provides that the licensing of copyright is considered a technology transfer arrangement only if it involves the transfer of systematic knowledge. (Rule 1[n]). II) Plant Variety Rights a) Who is the original owner of the right to patent plant varieties? Under Section 19 of Republic Act No. 9168, the law providing for sui generis protection for new plant varieties, in case an employee develops a plant variety in the course of his employment as a result of the performance of his regular duty, the plant variety protection shall belong to the employer, unless there is a written stipulation to the contrary. An employer is defined under the Implementing Rules and Regulations of the Philippine Plant Variety Protection Act of 2002 as including any person acting directly or indirectly in the interest of an employer in relation to an employee and shall include the Government, and all its branches, subdivisions and instrumentalities, all government-owned or controlled corporations and institutions, as well as non-profit private institutions or organizations. An employer will qualify as a breeder by being the employer of the natural person who bred, or discovered and developed a new plant variety, unless he has waived his right to the plant variety protection in accordance with Article 20 of the Implementing Rules and Regulations. Said article was lifted from Section 19 of Republic Act No The said law does not distinguish the right of ownership with respect to economic and moral rights. b) If the employer is the original owner, what are the conditions for this attribution? There are three (3) requirements or conditions before the employer can claim original ownership over the plant variety. The employee must have developed the plant variety (i) in the course of his employment; (ii) as a result of the performance of his regular duty; 3

4 and (iii) the absence of a written stipulation to the contrary (that notwithstanding the existence of conditions (i) and (ii), the employee owns the plant variety) embodied in a written contract. c) If the employee is the original owner, whether the employer has the right to have the plant variety transferred to him and under what conditions? According to Article 20 of the Implementing Rules and Regulations, if the employee developed the plant variety outside of his regular duties, the plant variety protection shall belong to the employee. Similar to the rules on patents, there is no qualification with respect to the situation when the employee is the original owner. In such case, Section 46 of the Plant Variety Act provides that the Certificate of Plant Variety Protection, which pertains to the document issued by the Board pursuant to the Plant Variety Act and these Rules for the protection of a new plant variety and serves as the prima facie evidence that the person to whom it is issued is the owner of the plant variety protection, shall be considered as a property right and the transmission thereof shall be governed by the law on Property. Article 65 of the Implementing Rules and Regulations further provides that the plant variety protection may be assigned or transmitted by inheritance or bequest or be the subject of a license agreement. Any transmission of rights, by assignment, inheritance, bequest or license, may pertain to the entire right, title or interest in and to the plant variety protection or application for plant variety protection, or of an undivided share in the plant variety protection or application for plant variety protection. Unless by inheritance, the transmission of plant variety protection or application for plant variety protection shall be in writing and acknowledged before a notary public or any officer authorized to administer oaths. (Article 65, IRR for the Plant Variety Act). III) Copyright / Rights Over Literary and Artistic Works a) Who is the original owner of the copyright? Both the employer and the employee can be the original owner of the copyright. Section of the IP Code provides that: In the case of work created by an author during and in the course of his employment, the copyright shall belong to: a) the employee, if the creation of the object of copyright is not a part of his regular duties even if the employee uses the time, facilities, and materials of the employer; b) the employer, if the work is the result of the performance of his regularly assigned duties, unless there is an agreement, express or implied, to the contrary. b) If the employer is the original owner, what are the conditions for this attribution? The conditions are essentially that (a) the literary or artistic work created is a result of the performance of the regularly assigned duties of the employee and (b) absence of an agreement, express or implied, which contains a stipulation vesting the copyright ownership on the employee instead. Again, please note that the agreement need not be in written form. c) If the employee is the original owner, whether the employer has the right to have the copyright transferred to him and under what conditions? Similar to the provisions on patents and new plant variety, if the employer is the original owner, the employer by the fact that he is such does not have the statutory right to have the copyright transferred to him. 4

5 Nonetheless, the employer can enter into contractual arrangements with the employee to have the copyright transferred to the former but not anymore within the bounds of an employer-employee relationship. One should take note, however, that there is a difference between economic and moral rights with respect to assignment or licensing of copyright. With respect to economic rights, Section and of the IP Code provides that the copyright may be assigned in whole or in part and within the scope of the assignment, the assignee is entitled to all the rights and remedies which the assignor had with respect to the copyright. The copyright is not deemed assigned inter vivos in whole or in part, unless there is a written indication of such intention. Further, the copyright is distinct from the property in the material object subject to it. Consequently, the transfer or assignment of the copyright shall not itself constitute a transfer of the material object. Nor shall a transfer or assignment of the sole copy or of one or several copies of the work imply transfer or assignment of the copyright. (Section 181, IP Code). As for moral rights, such rights of an author shall last during the lifetime of the author and for fifty (50) years after his death and shall not be assignable or subject to license. The distinction between economic and moral rights are understandable since economic rights are rights which allow the owner of rights to derive financial reward from the use of his works by others and these are, namely, the (a) right of reproduction; (b) right of performance; and (c) right of translation and adoption. Moral rights, on the other hand, allow the author to take certain actions to preserve the personal link between himself and the work and these are namely the (a) right of paternity; (b) right of privacy; (c) right against false attribution; and (d) right of integrity. Moral rights are distinct from economic rights and remain with the author even after he has transferred or assigned rights of copyright to others. IV) Patterns / Models (Under Philippine law, they are more commonly known as Utility Models or Petty Patents, Topographies [Layout Design] of Integrated Circuits and Industrial Designs) a) Who is the original owner of the right to patent involving patterns and models? The same rules applicable to patents are also the governing rules for utility models, layout designs of integrated circuits and industrial designs. Section of the IP Code expressly provides that the provisions governing patents shall apply, mutatis mutandis, to the registration of utility models, subject to certain exceptions. With respect to industrial designs and layout design of integrated circuits, the same rule also applies since as provided in Republic Act No. 9150, An Act Providing for the Protection of Layout Designs (Topographies) of Integrated Circuits, Amending for the Purpose Certain Sections of Republic Act No. 8293, otherwise known as the Intellectual Property Code of the Philippines and for Other Purposes, Section 119 of the IP Code is amended to read as follows: Sec Application of Other Sections and Chapters ) The following provisions relating to patents shall apply mutatis mutandis to an industrial design registration: Section Inventions Created Pursuant to a Commission ) The following provisions relating to patents shall apply mutatis mutandis to a layout design of integrated circuits registration: Section Inventions Created Pursuant to a Commission. 5

6 b) If the employer is the original owner, what are the conditions for this attribution? The employer is the original owner if the utility model, layout design of integrated circuits and industrial design is the result of the employee s performance of his regularly assigned duties. The only condition for this attribution is when the employer and the employee did not enter into any agreement, express or implied, to the contrary. Stated otherwise, the employer will only be considered the owner of the utility model, layout design of integrated circuits and industrial design if there is no existing agreement that makes the employee the original owner. Please note that the agreement need not be in written form. c) If the employee is the original owner, whether the employer has the right to have the right to patent transferred to him and under what conditions? If the creation of the utility model, layout design of integrated circuits and industrial design is not a part of the regular duties of the employee, despite the utilization of the time, facilities and materials of the employer, the employee is considered the original owner of the model or design. Such rule can be considered absolute, subject to no other qualification such as an existing agreement to the contrary, hence, the employer has no right to have the right to patent transferred to him as an employer per se. In case a transfer nevertheless takes place, it should be considered as a transaction outside employer-employee relations. The rules on assignment or licensing of right to patent will apply by analogy to utility models, layout designs of integrated circuits and industrial designs. (Section 108.1, Sections and 119.3, IP Code). The provisions for compulsory and voluntary licensing are applicable to utility models. Nevertheless, the provisions for compulsory licensing as well as voluntary licensing are not applicable to industrial designs since they were not adopted by the amendatory law, R.A. No As for layout designs, only the provisions for compulsory licensing were adopted by R.A. No V) Software Rights (Computer Software and Programs) a) Who is the original owner of the intellectual property rights involving computer software? A computer software or program is defined under the IP Code as a set of instructions expressed in words, codes, schemes or in any other form, which is capable when incorporated in a medium that the computer can read, of causing the computer to perform or achieve a particular task or result. (Section 171.4). What can be protected under copyright is that which is so fixed in computer-readable form that enables the computer to operate in a planned manner. The instructions alone are ideas or procedures, and as such are not protected as copyrightable work. In fact, the Philippines is a signatory to the Agreement on Trade-Related Aspects of Intellectual Property Rights of GATT 1994, which contains a provision expressly protecting computer programs as literary works under the Berne Convention. Because the IP Code was drafted to be TRIPS-compliant, Section (n) of the IP Code also includes computer programs as literary and artistic works. However, copyright protection does not preclude patent protection. Patent not only protects products but also processes. Depending on the nature of the software developed, the developer can actually avail of copyright and patent protection for his creation. If the developer is an employee and he seeks copyright protection, then Section of the IP Code (supra) will govern. In case the developer seeks patent protection, then the rules of patent govern, specifically Section 30.2 of the same Code. (supra) All these were previously discussed in the foregoing subsections. Likewise, the rules governing 6

7 copyright and patent with regard to ownership in case of employer-employee relations are essentially similar with each other. b) If the employer is the original owner, what are the conditions for this attribution? For the employer to be considered as the original owner, the employee must have created the software as a result of his performance of regularly-assigned duties and that there is no agreement, express or implied, which vest ownership on the employee. c) If the employee is the original owner, whether the employer has the right to have the intellectual property rights transferred to him and under what conditions? Based on the foregoing discussions, the employer has no right to have the intellectual property rights, whether copyright or patent, transferred to it by the mere fact that it is an employer of the developer/creator. As discussed in the foregoing, however, the employer can acquire the ownership of the intellectual property rights not as an employer but as an assignee or licensee. With respect to computer software being the subject of a TTA or voluntary licensing, it bears reiterating that computer software developed for the mass market are not proper subjects for a TTA. A computer software developed for the mass market is defined as computer software that (i) is produced, made and marketed for a broad range of purposes and users including end-users and commercial users; (ii) is sold over the counter or via standard delivery mechanisms; (iii) involves payments that are not based on royalty; (iv) generally provides for an indefinite term for the use of the software; and (v) does not need any customization by the supplier or distributor. (Rule 1 [c], Rules and Regulations on Voluntary Licensing). Moreover, the licensing of copyright, including computer software not developed for the mass market, is considered a technology transfer arrangement only if it involves the transfer of systematic knowledge. (Rule 1 [n], Rules and Regulations on Voluntary Licensing). 1.3 The Groups are also invited to provide information on procedures concerning potential disputes concerning the ownership of intellectual property rights over employees creations. Are these disputes within the jurisdiction of labour courts or, on the contrary, are they within the jurisdiction of the courts which are usually competent for intellectual property disputes? The Philippines does not have a judicial court dealing exclusively with labor cases. Instead, it is the National Labor Relations Commission (NLRC) which is the principal government agency that hears and decides labor-management disputes. Although NLRC functions as a court, the Labor Code wants NLRC to be more expeditious and less tied to technical rules than the regular courts. The cases that the NLRC and its arbiters can hear and decide should be employment-related. One unifying element runs through all the cases and disputes enumerated in the Labor Code which the NLRC can hear and decide. The essential element is employment connection. As regards money claims, the law applicable to grant the relief sought should likewise be considered. If the principal relief sought will be resolved by applying the Labor Code or other labor relations statute or a collective bargaining agreement, then the case belongs to the NLRC and its arbiters. But if the applicable law is the general civil law or other special laws such as the IP Code, the jurisdiction over the dispute belongs to the regular courts, such as the regional trial court or other administrative agencies. It is worth mentioning at this point that pursuant to Administrative Matter No , Intellectual Property Courts were consolidated with Commercial Courts, which are now referred to as Special Commercial Courts. Special Commercial Courts are regular courts specially designated to handle intellectual property cases. The purpose of the consolidation is 7

8 to streamline the court structure and to promote expediency and efficiency in handling intellectual property cases. In case there are any disputes concerning the ownership of intellectual property rights over employees creations, both the Intellectual Property Office and the Special Commercial Courts have concurrent jurisdiction to hear and decide cases involving such disputes. The primary consideration will be the type of relief the complainant seeks to secure and the type of intellectual property involved. Take for example, when the intellectual creation involves copyright, no registration is required before ownership is vested. If there is any dispute regarding ownership over intellectual creations, it is the Special Commercial Courts which will hear and decide since the IPO s jurisdiction over copyright matters is limited to infringement. The issue on ownership will merely be incidental. When it comes to patents, a petition to cancel or oppose the registration will have to be filed with the IPO but a declaration as to who is the real and true inventor of the invention, model or pattern, without any prior registration proceedings before the IPO, is a matter belonging to the jurisdiction of the Special Commercial Courts. Is there a prior conciliation stage and if so, does it take place before the same court as the one having jurisdiction over disputes concerning the ownership or conditions for use of intellectual property rights over creations made by employees? With respect to IPO, the dispute settlement mechanism is only applicable to two areas in Intellectual Property: (a) settlement of dispute on royalties under Technology Transfer Payments and (b) settlement of dispute relating to the terms of a license involving the author s right to public performance or other communication of his work. As for regular courts, civil cases now undergo a pretrial stage which is mandated by Rule 18 of the 1997 Revised Rules on Civil Procedure. Aside from the aforesaid Rules, Philippine Congress recently passed into law Republic Act No. 9285, otherwise known as the Alternative Dispute Resolution Act of The Alternative Dispute Resolution System means any process or procedure used to resolve a dispute or controversy, other than by adjudication of a presiding judge of a court or an officer of a government agency, in which a neutral third party participates to assist in the resolution of issues, which includes arbitration, mediation, conciliation, early neutral evaluation, mini-trial, or any combination thereof. Intellectual property cases are covered by the new law, since it is not among the exceptions to the application of the law. Does the termination of the employment contract have an influence on the action which an employer can bring to obtain the attribution of rights over an employee s creation? Termination of the employment contract does not mean that the contracting parties can no longer enforce the provisions found in the contract. The issue of ownership arose as a result of the perfection of the contract. The respective rights and obligations of employer and employee, touching an invention conceived by the latter, spring from the contract of employment. Even if the contract had been terminated, the issue of ownership is still intertwined with the fact of employment and the pre-existing contractual relation that the parties once had before the termination of the employment contract. Is there a limitation or statute-barring of the exercise of an action concerning the attribution of ownership rights over an invention or creation made by an employee in the context of an employment contract? In the context of an employment contract, the applicable prescriptive period or statute of limitations is ten (10) years, as provided in Article 1144 of the Civil Code. Actions arising upon a written contract must be brought within ten years from the time the right of action accrues. The right of action accrues when there is a breach or violation of a right or duty with consequential injury or damage to the plaintiff, for which he may maintain an action for appropriate relief. 8

9 Can the employee require the filing of a patent application in order to protect his invention or his other creations (registering patterns and models, etc.)? There is no legal or statutory obligation on the part of the employer to file a patent application in order to protect the invention or the other creations of its employee. Registration is entirely optional on the part of the applicant-inventor. If there will be any obligation on the part of the employer to file a patent application on behalf of the employee, most likely, such obligation will arise pursuant to an employment contract, hence, contractual in nature. However, in the absence of an express contract or failure to stipulate with respect to patent protection, payment by the employer of the fees related to patent protection is considered a factor in determining whether the employer was intended to be the original owner of the intellectual creation. 1.4 The Groups are also invited to state whether there is a difference in status between employees in the private sector and researchers in universities or research institutes which receive public funding from the point of view of the employers rights. There is no difference. Since the IP Code discusses inventions, models, patterns, and literary or other artistic works created pursuant to an employer-employee relationship generally, without making a distinction between employees employed in the private sector and researchers in universities or research institutes which receive public funding, then no distinction should be made. This is in accordance with the legal maxim ubi lex non distinguit, nec nos distinguere debemus. 1.5 An important question in practice is whether compensation is due to employees in return for the rights of employers over the creations made by employees. Moreover, it is in this field that the greatest disparities are currently observed in the world. The Groups are therefore invited to specify whether their domestic laws provide employees with a right to compensation (financial or in nature) in return for the transfer of rights over their creations to their employers. How is this compensation calculated? What is the time limit for prescription or statute-barring of a claim for payment of this compensation? The IP Code is silent as to whether employees have a right to compensation in return for the transfer of rights over their creations to their employers. This is especially the case when the employer is deemed the original owner of the creations. To reiterate the rule, an employer owns the intellectual creation if the invention is the result of the performance of his regularly assigned duties, unless there is an agreement, express or implied, to the contrary. Stated otherwise, the employer may claim ownership of the invention if the employer hires a person for the specific purpose of making the invention. When the purpose of employment thus focuses on invention, the employee has received full compensation for his or her inventive work. Since the employer is the original owner, the employee cannot demand a separate financial compensation apart from his salary since he is not the owner to begin with. Nevertheless, an employee may be entitled to a separate financial compensation if it is expressly granted in the employment contract. Thus, the availment of the right to financial compensation depends on the stipulations of the subject contract. However, if the employee is the original owner of the intellectual creation, such as the work was created not pursuant to his regularly assigned duties, transfer to the employer of the rights over the intellectual creations through contracts of assignment, licensing or technology transfer arrangements may be made by contract. In such contracts, technology transfer or royalty payments will most likely be stipulated and serve as the consideration for the contract. 9

10 There is no statutory computation for compensation or the amount of royalty payments. The only standard provided by the IP Code is that the royalty payments must be appropriate for technology transfer arrangements. In case compensation is due, the prescriptive period or statute of limitations will depend on whether there is an express, probably written, contractual agreement or an implied, probably oral, agreement governing the ownership over the intellectual creation. If there is a written contract, the prescriptive period is ten (10) years from the time the right of action accrues. As for oral contracts, the prescriptive period is six (6) years from the time the right of action accrues. 1.6 Finally, the Groups are invited to state whether there is a significant level of dispute in their countries concerning the ownership and use of rights over intellectual creations made by employees, and to give a general opinion on the effectiveness and/or efficiency of the national system. As explained earlier, the ownership of creations, inventions or works of employees during the tenure of their employment are usually dealt with in an employment contract. Since the ownership and use of rights over intellectual creations made by employees are subject to the stipulations found in their respective contracts, and therefore voluntarily agreed to by the parties, it is safe to say that there is no significant level of dispute in the Philippines corresponding to this matter. By the obligatory force of contracts, it constitutes the law as between the parties. An inquiry with the Intellectual Property Office (IPO), Bureau of Legal Affairs reveal that there is only one pending case being handled presently by their office involving such dispute. Hence, although the jurisdiction of the IPO and the Special Commercial Courts are concurrent, it can be inferred that majority of the cases involving such disputes are filed with the Special Commercial Courts rather than the IPO. It can be opined that the IP Code seems effective in dealing with issues related to intellectual creations created during the tenure of employer-employee relations since the IP Code merely provides for the default rules which allow the parties to enjoy a significant degree of freedom in entering into a contract, express or implied, and stipulate upon the terms and conditions suitable to their respective purposes. Unnecessary disputes are thus prevented. 2. Suggestions with respect to International Harmonisation 2.1 Do the Groups think that such harmonisation is desirable on the international level for each of the types of intellectual property rights? Do the Groups wish such harmonisation to be undertaken through labour law rules or through rules of intellectual property law? Yes, it is our belief that harmonization is desirable on the international level. A treaty dealing specifically with the rights of the employers as well as the employees with respect to the creation of intellectual property during employment is quite necessary in order to promote consistency, specially since there is a growing number of cross-border employment. Harmonization should be undertaken through an amendment of the relevant intellectual property laws and not through labor laws. 2.2 The Groups are requested to state whether as a general rule it is the employer who is to be the owner, from the outset, of the intellectual property rights over creations made by employees in the context of their employment contract and in the performance of their tasks, or whether, on the contrary, it is the employee who must conserve his rights, but with the possibility for the employer to have them attributed to it under certain conditions. 10

11 The general rule should be divided into the two aforementioned situations, such as the present provisions found in the IP Code. It is quite impractical and highly contentious to insist on one general rule only. Neither the employer nor the employee should be considered, from the outset, the original owner regardless of the factual setting. The exception is always when there is an agreement, express or implied, to the contrary. If there is no applicable provision of law, close determination of the situation and the prevailing circumstances should be undertaken before either of the parties is considered as the original owner. 2.3 If the employer was to be considered as owner from the outset of the intellectual property rights over creations made by employees, do the Groups think that the employee should receive a particular reward, in addition to his salary, for these creations, or do they think that such a reward is not justified? American jurisprudence has ruled on the matter, providing that if the employee is employed to devise or invent, the patents obtained therefore should belong to the employer, since in making such inventions the employee is merely doing what he was hired to do. When the purpose for employment thus focuses on invention, the employee has received full compensation for his or her inventive work through his or her salary. No separate reward is necessary. The reason is that he has only produced that which he was employed to invent. His invention is the precise subject of the contract of employment. Again, this does not prevent the employer from granting a reward, as an incentive, out of generosity. If, on the contrary, the employer is not vested from the outset in the intellectual property rights over creations made by employees, what would be the conditions for the attribution of these rights and, in particular, what could the remuneration be, corresponding with the possibility of having the intellectual property rights in question attributed to the employer? An express assignment or licensing of the rights is possible. In such situations, payment of an appropriate amount of royalty to the inventor - employee is reasonable. Do the Groups consider that the adoption in principle of a reward could have an influence over the general system of intellectual property rights and if so, what would that influence be? A reward can serve as an incentive for the employees to invent. But at the same time, it can also degrade intellectual creations to profit-making or money-making tools, which does not necessarily imply that the intellectual creations are indeed innovative and for the betterment of mankind. Also, the motivation to invent may depend on the size of the reward. 2.4 The Groups are also invited to present their opinions on the organisation of disputes concerning the attribution of intellectual property rights over employees creations and concerning their use by employers. Are the Groups of the opinion that such disputes should be governed by the courts which have jurisdiction in labour law matters, or are they more of the opinion that these disputes should be subject to those courts which judge intellectual property disputes? It should be recalled that the disputes may concern various aspects of relations between employers and employees: attribution of ownership of such rights; decisions concerning the means of protection and, finally, any compensation as may be due. Obviously, disputes arising from ownership over intellectual creations are best adjudicated by courts and administrative agencies which are specially trained in intellectual property laws. The issue of compensation is incidental. The concept of administrative agencies and special courts are that such entities become specialized in the particular fields assigned to them and which other non-specialized entities are considered not suited to administer properly and efficiently. Specifically on administrative agencies, it is a well-known rule that in proceedings before administrative bodies, technical rules of procedure and evidence are not 11

12 binding. They are not bound by the rigid requirements of the Rules of Court. This is to expedite the resolution of the disputes and contribute to the unclogging of the court dockets. 2.5 The Groups are also invited to give their opinion on the existence of differences, if any, between the status of private sector employees and researchers in universities and in research institutes which are financed by public funds. There is no existing difference in the treatment of employees belonging to the private sector and researchers in universities and research institutes which are financed by public funds. Are there any grounds for providing for a difference in treatment in the hypothesis of international harmonisation or, on the contrary, should all employees and researchers be treated in the same way? A general rule applicable to all types of employees is recommended. It bears stressing that the primary object in this discussion is not really on employees rights in terms of labor law, but the creation of intellectual property and the determination of the rightful, true and actual inventor or creator. The issue with respect to employer and employee relations are merely incidental and should not be the focus of the discussion. Whether the employer belongs to the private sector or the public sector should not make any difference in the treatment of the intellectual creations made during the course of employment. Finally, the Groups are invited to make any and all further suggestions concerning a possible international harmonisation of the status of employers rights over employees intellectual creations. We believe that the provisions of our IP Code on attribution of the invention to the employer or to the employee in the factual settings described in said provisions are quite fair and may be the starting point in discussions on possible international harmonization. 12

Latvia Lettonie Lettland. Report Q183. in the name of the Latvian Group by Armins PETERSONS and Gatis MERZVINSKIS

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