Copyrights to work made for hire under Norwegian law

Intellectual property rights are of increasing importance, and for some companies, their most valuable assets. In fact, among S&P 500 companies, the proportion of the company value attributable to intellectual capital (of which intellectual property rights (IPR) are often the most important) is as high as 87%. Although the importance of intangible assets relative to tangible assets may vary, a thorough understanding of the importance of an efficient intellectual property management policy is valuable for all companies. A central part of any intellectual property policy is the relationship between the company and the persons (actual or legal) who generate the IPR – typically being the company’s employees/consultants and contractors.

In this article, we will focus on the category of IPR dealing with creative works (including software code), namely copyright. Specifically, we will shed a light on how companies should regulate copyright to works made for hire.

A first aspect to be aware of in order to understand Norwegian copyright regulation is that, like the UK, Norway does not have a register of copyrighted works. Protection can be provided by the courts as a part of an infringement case, but this protection ultimately rests on the company having actively acquired the copyright from the person creating the work (who becomes the copyright holder automatically upon creation of the work).

In this respect, the strategy for the company resembles the need to acquire other intellectual property rights that are being created by personnel, even in cases of registerable rights, due to the somewhat limited effect of registration.

So how is the copyright situation between a company and its employees regulated under Norwegian law? Contrary to certain common law states, Norway does not (with one key exception regarding software, discussed below) have any statutory provision recognising that ownership, or any limited rights, to work made for hire is to be held by the employing company. This lack of a statutory work for hire-rules also applies to the relationship between a company and individual contractors, although there might be some minor differences in these cases.

Certainly, the copyright can be transferred from the creator in whole or in part, and there is no formal requirement of putting the transfer in writing. However, the key question of whether such transfer has taken place, will depend on an overall assessment of all relevant facts, in order to determine the existence of an (oral or implied) agreement about copyright transfer. Consequently, there should always be a transfer of copyright clause in all contracts, despite the less formal Norwegian contractual tradition. The company shouldn’t risk key assets slipping through its fingers due to difficulties in proving the existence of unwritten agreements.

A further point to note is that any subsequent transfer from the company to a third party would normally require the creator’s – eg the employee’s – approval. The same applies to the right to amend the work. There is an important exception from this approval requirement in cases where the copyright is transferred as a part of a merger, acquisition or buyout. However, as there is no good faith acquisition rule or the like related to copyrights, what is subsequently transferred from the company, can never be more than what is covered by the agreement between the company and its employee (or any original creator for that matter). Thus, the contract should also contain express wording stating that the right to assign further and make amendments to the work is included in the copyright transfer.

Even though the copyright to work made for hire originally vests in the employee, there is a general default principle for employment contracts called the Knoph Maxim. Under this maxim, the rights to the work that are considered ‘necessary and reasonable’ to fulfil the purpose of the employment, will automatically be transferred to the employer. This default rule ensures the company the rights needed to exploit the work within the scope of its activities. Even though the maxim should not be relied on, as it does not always ensure the company the ownership of the copyright or the right to amend or assign the copyrights to third parties – or to exploit the work in completely new manners, relying on this maxim could be sufficient for many companies in situations where the damage is done, in order to fix previous contractual mistakes.

As mentioned, there is one key exception when it comes to a codified rule, namely the copyrights to software code. Under Article 2(3) of the Computer Programs Directive (2009/24/EC), the copyright to a computer program created as a work for hire is automatically assigned to the company in cases where the employee creates a computer program in the execution of their duties, cf the Norwegian Copyrights Act, s71. The main rule is also that the right to amend and further assign the work is included in this automatic assignment.

From the above-mentioned, it follows that for companies where one of the main assets is its copyrights, it is highly advised to regulate the transfer from the employee to the company more thoroughly, rather than relying on the discretionary soft rules. If done right, this will ensure that the company has the necessary rights if the company later seeks to exploit the works in question in new manners. Management of the company’s intellectual property is also likely to be an element of importance in a due diligence process.

When formulating the provision regulating the full or partial transfer of copyright from the employee to the company, it is however important to be aware of another Norwegian copyright principle, being the so-called speciality principle. This principle is set out in the Norwegian Copyrights Act s67(2) and provides an interpretation standard for copyright transfer agreements. Under this speciality principle, the copyright holder shall not be considered as having transferred a more comprehensive right than what can clearly be interpreted from the contract. Hence, if the employer is only granted certain exploitation rights, and no further rights can be implied from the parties’ correspondence or other circumstances, it follows from the speciality principle that the residual copyrights will remain with the employee – providing the employee a strong protection. The contract should thus be carefully worded and reviewed by legal counsel.

In addition, as already mentioned, there are no laws or regulations providing that a good faith buyer of a copyright will prevail in a case against the actual copyright holder, if the latter can prove that no assignment has been made. It should still be noted that there could be cases where the actual copyright holder’s mere silence or inactivity during a long time span potentially could cause for their rights to be extinguished due to rules set out in Norwegian case law, but these rules are considered to be strict exceptions. And due to their highly arbitrary and discretional character, they should be viewed only as a last resort.

We add that when it comes to work for hire by independent contractors, the Knoph Maxim is not applicable per se. In these relations it is imperative to regulate issues concerning copyright explicitly. Especially if you as a customer want to keep the copyright of the material produced for you.

To summarise, the most important action to take in order to ensure transfer of the necessary copyrights, is to draft contracts with sufficiently clear copyright transfer provisions. This especially applies to the contracts in which creation of works protected by copyright is most practical, such as employment contracts, consultancy agreements, agreements with contractors contributing to the company’s development work, etc. If, for instance, a company wishes to distribute the works of an employee, but the contract only provides that the company has the ‘right to adapt and transfer’ this work, the company could be in a difficult position. In most cases, the safest way forward would probably be for the provision to state that all intellectual property rights generated by the employee for the company automatically shall be transferred to the company as it is generated by the employee. In any case, a well-planned copyright policy, taking the Knoph Maxim, the speciality principle and the company’s needs into consideration, is fundamental.