Cross-Border Catch-Up: IP Assignments Around the World

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Goli Rahimi: Hello and welcome to the Cross-Border Catch-Up, the podcast for global employers who want to stay in the know about cutting-edge employment issues worldwide. My name is Goli Rahimi and I’m here with my fantastic colleague, Lina Fernandez. We are both cross-border attorneys, and today’s topic is about whether it’s a good idea to have a global IP assignment policy for an international workforce.

Lina Fernandez: Hi, Goli. It’s a pleasure to be here with you discussing this interesting topic. We’re going to see that there are so many different requirements per country that it’s always better to analyze the IP assignment depending on where the workforce is located.

Goli Rahimi: Perfect. I think that makes sense because depending on your business, your intellectual property is probably one of your most critical assets. You want to make sure you’re protecting it properly, you’re not running afoul of the law, and you’re not risking losing or never even having ownership of it in the first place.

Lina Fernandez: Yeah, you’re right. What we’re going to discuss today, it’s applicable or is relevant mostly to a workforce that’s a critical IP creator that are not located in the U.S., but rather they are providing services around the world, whether on a short or long-term basis. So companies who engage international workforce and who are critical IP creators are going to benefit from listening to our approach here today.

Yeah, I think the first situation that we need to address is whether the U.S. agreement with your international workforce would be enforceable in other countries, and one of the main provisions that we need to take into consideration is the choice of law provision. So a U.S. choice of law will likely not be observed outside the U.S. because generally, IP legislation is territorial. So for example, if you have a workforce in Argentina, Chile, or Colombia and you have an IP dispute, regardless of whether your IP assignment is governed by U.S. law, these countries are going to apply their own legislation. There are a few countries in the world that would observe a U.S. law provision, and this is in very limited circumstances. So for example, in Canada and in Poland, judges could potentially observe the U.S. choice of law, but of course, this is going to depend on the specific circumstances. So our recommendation is not to rely on the possibility that a choice of law will be respected.

Goli Rahimi: That makes sense. So it’s not a foolproof method. It can be used maybe as a deterrent, but we should never rely on that specifically?

Lina Fernandez: Yeah, that’s right. And because IP legislation is territorial, then countries tend to have different requirements when it comes to properly assigning IP to an employer or a contracting party. And those requirements are particularly based on different categories. Goli, what type of categories have you seen come across frequently when you’re advising clients on this topic?

Goli Rahimi: That’s a really good question. So, just like when you’re preparing any sort of employment related or a service related document, you’re going to have to look at a number of different considerations to ensure that your agreement is enforceable. So we’ll cover some of those today. I’ll go over them at a high level, and then we’ll just dive right in. So first, you’re going to want to look at the type of IP that’s being assigned or created. In certain jurisdictions, there’s going to be a difference between how you protect copyrights versus how you protect patents, for example.
It’s also going to be key as to who is actually creating this intellectual property. Is it your employee? Is it an independent contractor, or is it some other party? Third, we’re going to look at specific compensation for intellectual property. Do you need to give the individual some extra money to secure your ownership rights, or can it just be part of the regular remuneration?

Next, we’re going to look at specific language in service of agreements and employment contracts to ensure that the IP is validly assigned. We’re also going to talk about what types of rights can and cannot be transferred. And then finally, we’ll talk about specific logistic considerations such as appointing someone an attorney in fact to ensure that the rights are properly transferred. With that, I guess we’ll just jump right in for our first category. So our first category is what types of IP? So, here’s an example. In some jurisdictions, the type of IP, whether it’s copyright, the trademark, or [inaudible 00:05:44], will actually influence how the employer or the service recipient, if you have a contractor relationship, can retain or obtain ownership over the IP. For example, under Canadian federal law, ownership rights to patents will automatically [inaudible 00:06:01] to the inventor. You could overcome this automatic rule by stating in the contract that the individual was specifically engaged to create this particular patent, and we’ll discuss that language a little bit later in the podcast.

The second scenario is unfortunately a little bit less concrete, but what a court would do if there was a dispute over ownership, is they would look at the totality of the circumstances. They would look to see was there ever an intention in the first place for the worker to own the patent? This is usually an [inaudible 00:06:36] that would occur if the contract is silent. Now, copyright is a little bit different. In Canada, the employer is deemed to own the work created by the employee, but this is not the situation of the independent contractor. The independent contractor is deemed to own the work they created themselves. This is another reason why it’s so important to have that robust services agreement or employment contract.

Lina Fernandez: And in that line, Goli, we can start talking about who creates the IP. So generally, when the IP is created by an employee, it will automatically transfer to the employer. Whereas if the IP is created by an independent contractor, that transfer generally requires a written agreement. So, we can take a look at a few examples. So in Australia and India, employers have automatic IP rights towards made-for-hire by their employees. However, if the work is developed by an independent contractor, the independent contractor is the one who is going to owe the copyright or the patent right unless the services agreement specifically transfer the IP to the contracting party.

In Moldova, on the other hand, regardless of whether the creation was made by an employee or an independent contractor, it will belong to either the employer or the contracting party. In Vietnam, for example, any IP created by employee of service provider are going to be vested on the employer or the contracting party as long as the inventions were created as part of the services provided by the employee or the contractor. That’s why who creates the IP is relevant when drafting an IP assignment agreement.

On this note, and this is important, a lot of our U.S. clients may not have legal entities in the countries where the workforce is located. So sometimes, they engage employee of records or staffing agencies. In this situation, the recommendation is that the IP is assigned to either the employee of record or the staffing agency rather than to the U.S. entity directly. And this is because it will first reduce the risk of a co-employment relationship between the U.S. entity and the employer of record or the staffing agency, because the IP rights are being transferred from the contingent worker to the employer.

And the second recommendation to do it this way is because in the event of an IP litigation, the employer of record will have the obligation to aid the customer, in this case, the U.S. client, to enforce the IP rights in the location where the contingent worker is located. So this means that the client will not have to litigate an IP right in a foreign country with unfamiliar rules. So, it’s important when you are handling international workforce hire or engaged through an employee of record, that the master services agreement clearly transfers any IP created by the contingent worker to the client.

Goli Rahimi: I think this is so interesting because I’ve been covering topics, you’ve been covering other topics, and we’re just seeing how you have to restore these agreements to specific circumstances. Our next topic is compensation. Another key is whether additional compensation is required to ensure that the employee or the independent contractor is validly assigning intellectual property to the company. For example, in Italy, unlike other countries, the employer must specifically compensate the employee for such an invention. And I know there’s people probably listening, shouting at right now, “How much compensation? What am I supposed to give them? A dollar, a hundred thousand dollars? What’s correct?”

Unfortunately, I don’t have a straight line for you. This is more of an art than a science. It’s similar to the United States where we ask how much consideration is sufficient to create a legally enforceable contract. In Italy, this compensation is sometimes referred to as a quote, “fair reward.” There’s a lot of case law on what constitutes a fair reward, but in essence, it has to be a reasonable amount based on the value that this IP is going to bring to the company. So the more valuable the IP to the company, for example, if an employee is developing one of the company’s key products, versus designing marketing material, which is a one-time event, the greater a court will require that reward to be.

By contrast, there are countries where the salary or the compensation paid to the employee or the independent contractor is enough. You don’t have to give them anything extra for them to validly give up their rights to the intellectual property. One example of this is in Colombia where IP laws are a little bit more employer-friendly than in other jurisdictions. In Colombia, inventions belong to the employer if the employee was hired to create the work or if they used information obtained from their employment to create that work. In that country, the employee is not legally entitled to something extra to secure their transfer of IP rights. So this is another reason you’re going to want to have to look at every country specifically. Do you need to give them some additional consideration? Can you earmark part of the salary and call it sufficient for purposes of IP enforcement?

Lina Fernandez: In that line, Goli, for example, in Argentina, if the creation or the invention exceeds the normal scope of the employee’s work, even if you call it out in the contract, the employer may be entitled to that creation if it provides additional compensation to the employee. So even if you don’t address specifically whether the employee is being compensated or not for the IP, because in this situation the IP is outside the scope of the employee’s work, some countries would allow you to buy that IP after the fact. So, that’s also something to take into account when you are in a situation in which you probably maybe didn’t have the best agreement in place, but now you’re interested in acquiring the IP that has been created.

Goli Rahimi: That’s a good point.

Lina Fernandez: And in this topic as well, we have been talking about language and whether we need to include specific language to assign IP to the employer or the contracting party. In Argentina, as I said, you should include in the employment contract or in the services agreement that the employee was hired specifically for the purpose of generating IP. If you do not include this provision, then the presumption is that the employee was not hired for the purpose of creating IP and therefore the employee owes the IP.

Similarly, in Brazil, inventions and software is created by employees belong to the employer if the employee was hired for the purpose of creating these inventions. So it’s important that your IP assignment agreement contains the specific language, whether the employee was hired to create this IP, what type of IP the employee is creating, and what are the expectations in terms of IP creation for that particular employee?

Goli Rahimi: That makes total sense. And it’s actually a really interesting segue, Lina, into our penultimate category, which is what type of rights can be transferred? This is really key because we’ve been discussing assigning ownership rights throughout this podcast, which generally means the right to receive some sort of financial benefit from that intellectual property. But we’re going to talk about a different set of rights. These are called moral rights. So moral rights are in almost every jurisdiction, inalienable. So what does this mean? This means that a moral right is a right that somebody has to be recognized as the true author and creator of the IP. It’s not an economic right, which means you keep your moral rights to something. You’re not entitled to compensation for that intellectual property, but you are entitled to be recognized and have your name displayed essentially as the person who made it.

Now, many countries, including the U.S., don’t permit you to transfer moral rights. These are inalienable, they remain with the creator of the IP. But there is some exceptions. Canada is one of them. In Canada, an IP creator can essentially contract away or waive their moral rights in an agreement with the company. So what’s the importance of this [inaudible 00:16:18] why do we care? It makes it even more important, actually, in that an employer or a service recipient has a valid written agreement with its workforce to ensure that any IP created by an individual is duly transferred under the agreement.

For instance, let’s go to Colombia where moral rights are not transferred to the employer. That means that in Colombia, the employee or the independent contractor will always have a right to be recognized as the creator of that invention or the author of a work. This means that they might [inaudible 00:16:51] authorship rights over the work or even object if the work itself is going to be modified in any way. But if you have a valid IP assignment agreement, the employee would not be able to claim ownership or any sort of economic benefit over the IP. So it is to the company’s benefit.

Lina Fernandez: That’s so interesting, how to address moral rights validly in an IP assignment agreement, just to also assess expectations from employers and to avoid surprises later on when an employee who has executed an IP assignment agreement comes and say, “Wait a minute, I need my name to be displayed on this work of art,” for example. And one last topic that I would like to address is based on the enforceability of the IP assignment and whether the standard clause that we always see in a U.S. IP assignment about the employee appointing the company or any of the company as their attorney in fact, in order to materialize the IP assignment. So this provision also could potentially be enforceable or not depending on the country.

So for example, in New Zealand, in order for this provision to be enforceable, the agreement must be executed as a deed. It is not enough for the parties to sign a DocuSign of the IP assignment agreement. They have to follow the requirements to execute the agreement as a deed. So this is something that also needs to be taken into consideration, the formalities as to how to execute the agreement for some of the provisions or for the entire agreement to be enforceable.

Goli Rahimi: Well, thank you, Lena. I think this was really helpful. So with that, Lena and I would love to thank you so much for joining us today on this Cross-Border Catch-Up. Please do follow us to stay in the know about cutting edge employment issues worldwide, and we will see you again soon.

Lina Fernandez: Thank you everyone, and thank you, Goli.

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