Managing your valuable copyright to avoid common pitfalls

A lack of competent management of copyright in businesses seems to be a persistent problem. 

By Eugene Honey

Too often, due to a lack of understanding and knowledge, the management of copyright as a valuable asset is neglected. This places the franchisor at risk by severely hindering their options when it becomes necessary to enforce its rights against errant franchisees engaging in unauthorized use of key components of the business system.

The valuable assets in a typical franchise system which enjoy copyright protection and which are licensed to the franchisees, include the:

·               Operations manual;

·               Intranets;

·               Corporate materials, reports and documentation;

·               Promotional materials, advertisements and signage;

·               Packaging;

·               Menus and recipe books;

·               Software and programs;

·               Presentations;

·               Photographs (including photographs of new outlets);

·               Drawings, including architectural and design drawings of outlets;

·               Databases (including the client database).

Unlike most other forms of intellectual property, copyright exists automatically and does not have to be registered. In fact, other than in the case of films, no registration procedure is available in South Africa or in many other countries.

The requirements for copyright to exist include that the work must be (i) original, (ii) in a material form, (iii) produced in South Africa or by a South African (or in compliance with the Berne Convention) and (iv) of a certain morally acceptable nature.

With regard to originality, this means that the work must have been the product of the creator or the author’s original skill and effort and was not copied from another work. It does not matter whether or not the idea or the concept behind the work was the creator’s own idea. Originality basically requires that the work was the result of the creator’s own effort and does not mean novelty or inventiveness, as is required in the case of patents.

The work must be reduced to a material or tangible form such as a document or other optically, mechanically or electronically readable form. Copyright does not exist in a simple idea.

The creator or author must be a citizen, resident or domiciled in South Africa, a legal body incorporated in South Africa or must have been first published, broadcast or disseminated in South Africa. In terms of the Berne Convention, reciprocal rights also exist between signatory countries, in terms of which copyright existing in any of these countries is recognized in the others. Most of South Africa’s primary trading partners are signatories to the Berne Convention.

The general rule regarding ownership is that the creator or author of the work is the owner. Important exceptions to this general rule include the following:

·                A person who commissions the taking of a photograph, the painting or drawing of a portrait, the making of a cinematographic film or sound recording and pays or agrees to pay for it, is generally the owner of any copyright subsisting in the work.

·                Where a work is made in the course of the creator or the author’s employment by another person under a contract of employment, the work will be owned by the employer. A sub-contractor or consultant, however, would retain ownership unless there is a written agreement transferring the copyright.

·                In the case of a computer program, the author and owner of the copyright is the person who exercises control over the making of the computer program, which may not always be clear (again it is advisable to have a written agreement providing for the transfer to the intended proprietor).

·                If the work is made under the direction or control of the state, or an international organization prescribed under the Copyright Act, the state or that international organization will be the owner of the copyright subsisting in the work.

·                If the creator or author assigns the copyright to another person in writing, ownership is transferred to the person acquiring the copyright.

The duration of copyright protection depends on the type of work. The main types include the following:

o      Literary and artistic works: fifty years from the end of the year in which the author dies;

o      Computer programs: fifty years from the year in which the legitimate copies were first made available to the public;

o      Published cinematographic films, photographs and sound recordings: fifty years from the end of the year in which the work was first published or broadcast.    

In order for the franchisor to enforce its rights regarding unauthorized use of any of its copyright, the franchisor must be the proprietor thereof. A problem often encountered is that the franchisor has outsourced the development of its software, website, intranet, operations manual, promotional material, logos, store designs and the like and when unauthorized use occurs, it becomes apparent that no Copyright Assignment Agreements granting the franchisor ownership of its ‘own’ copyright were ever entered into. The franchisor then finds they are unable to enforce their rights against an errant franchisee engaging in unauthorised use of their copyright, whether it be aspects of the know-how as set out in the operations manual, their client database, similar corporate or promotional materials, premises with a similar design or generally copying the franchisor’s business system.

To effectively manage copyright in the franchise system, the franchisor should prepare and maintain a master list of all works of copyright. The primary concern being to ensure that the franchisor owns the copyright in each of the aforesaid valuable works which form or make up part of the business system. In each instance where a work is outsourced, a Copyright Assignment Agreement, in terms of which the relevant work should be competently identified and transferred or assigned to the franchisor in writing, should be entered into. This will ensure the franchisor’s ownership of the copyright and enable them to enforce their rights which include civil and criminal law remedies as well as damages and punitive damages, depending upon the nature and extent of the copying or unauthorized use.

In addition, so as to place the franchisor in a position where it is able to prove ownership, it needs to be able to furnish details and proof of the development of the relevant work. A file or details should therefore be kept regarding the acquisition or creation and development of each and every work.

As mentioned, in the writer’s experience, it often occurs that the franchisor does not own a substantial amount of the copyright which they believe is theirs and which is licensed into the franchise system.

We recommend that steps be immediately taken to secure the franchisor’s ownership of its copyright assets and Intellectual Property licensed to its franchisees.

 

Adams & Adams

www.adamsadams.co.za

eugene.honey@adamsadams.co.za

+27 12 432 6000