Recently, the world has been changing very dynamically, new areas of business development, new conditions and jurisdictions are emerging. IT companies are very attentive to trends, and their mobility and ability to organize workflows without being tied to a specific country cause many of them to open new offices around the world. Georgia has become one of the popular destinations for relocation and opening of IT companies. Over the past few months, a large number of IT specialists have gone to this country, and many large international companies have opened their offices here.
However, as practice shows, only a few companies have managed to study the features of registration and protection of intellectual property, although for an IT company IP is one of its most important assets, so it should not be forgotten.
In this piece, our lawyer Vasilisa Dashkouskaya, Associate REVERA law group explains how Georgian legislation works in IP sphere, why it is important for product and outsourcing companies to take care of it, and gives advice on how best to do so.
In this article we will look at IP as a right to the result of intellectual activity, such results are called intellectual property objects. A work made for hire is an intellectual property object created by an employee in the course of his or her employment. To put it in a nutshell, an IT company’s software development activity results in the creation of an intellectual property asset (the software itself) which consists of the works made for the hire of its employees. The rights to such software constitute the company’s intellectual property.
When launching a new business, it is important to get things ‘right’ at the start, especially in the relationship with your employees. This applies equally to product teams and outsourcing teams.
As a rule, the company is made up of staff who work together to create and develop the software that is subsequently monetized by the company. In this type of company, the future of the company depends directly on how the relationship with its employees is handled.
Let’s imagine a situation: a developer was working on software and added some new functionality to the application. As a result of some internal conflict, the employee decides to leave the company and wants to take with him the piece of code that he created during countless days and nights. If the conflict cannot be settled by negotiations, the likely option is to go to court, and in court you need documents to prove that the disputed piece of code was actually developed in the course of his employment. The absence of an employment contract signed by both parties, or only a framework contract containing only the salary amount, can make it very difficult to prove.
The second reason is so-called due diligence, which is carried out in the process of concluding a deal with an investor. This is a situation where an investor gets interested in the project and, before giving any money for project development, wants to make sure that everything is OK with the company, in particular, that the rights to the main asset belong to the company and there will be no problems regarding this issue in the future. The correctness of the documents, including those signed with employees, may influence the investor’s decision or the costs that will have to be incurred in order to correct the deficiencies that have been identified.
Outsourcing companies that work with an eye towards western markets may face the requirement from the customer to provide documents confirming that the rights to the software they have ordered will be transferred to them without any problems.
It is also important that companies often provide various guarantees in their contracts with these customers, including the ones concerning handling the formalities of employees and IP. Failure to comply with such guarantees, depending on the terms of the contract, may lead to adverse consequences (such as termination of the contract, fines, etc.).
According to my observation, the regulation of works made for hire in Georgia is rather framework. In general, it boils down to Article 16 of the Law on Copyright and Related Rights. The definition of a work made for hire can also be derived from this article. A work made for hire in Georgia is a work created by an employee or recipient of an order in connection with the performance of official duties or an order. It should be noted that according to Georgian legislation, a computer program is recognized as an object of intellectual property.
As a general rule, property rights to the created work made for hire belong to the employer (client), unless otherwise provided by the contract. The contract may also provide for the payment of remuneration for the use of the work made for hire.
However, the Law of Georgia On Copyright and Related Rights and the Labour Code of Georgia do not define “official duties”, i.e. it is not normatively established what refers to actions in connection with the performance of which a work made for hire may be created. There is also no such term as “job description” (“duty regulation”) or “employer’s assignment”. In this case, the question arises: how to distinguish what is created in the performance of work duties and, consequently, what is transferred to the employer and what remains the property of the employee.
Based on the analysis of the Labour Code, it can be deduced that work duties include the following types of work:
In general, Georgian law recognises the transfer of rights from the employee to the employer, but there is some uncertainty about the distinction between ‘personal’ and ‘performed while working’. It should also be kept in mind that the parties can further agree on many aspects of cooperation in a contract. The Georgian statutory and regulatory enactments do not regulate most of the issues, thus giving a special value to the agreements of the parties.
To summarize, Georgian legislation in this area is quite framework and the practice of formalizing software is still evolving. The main document regulating relations between the employee and the employer, including the work made for hire, is in fact the employment contract.
Considering such peculiarities, we, at the company, recommend to ensure more detailed formalisation of works made for hire in the Georgian employment contract.
As I have already mentioned, Georgian legislation gives quite a lot of freedom to the parties, so a number of conditions can be fixed in the contract. For this reason, the first step I recommend to take at the start is to prepare a competent form of employment contract, with sufficient detail on intellectual property issues, which will be signed with all the employees. In such a form, it makes sense to reflect the following points:
Among other things, the employment contract can be supplemented with confidentiality clauses. In addition, Article 60 of the Labour Code of Georgia contains the opportunity to add a non-competition clause to the employment contract: in other words, you can fix the employee’s obligation not to use the knowledge and qualifications acquired in the performance of the conditions of the employment contract for the benefit of a competitor of his employer. This restriction can be applied for a period of 6 months after the termination of the employment relationship, provided that during the period of this restriction, the employer pays the employee at least the amount available at the time of termination of the employment relationship. However, I recommend assessing the appropriateness of including such a clause in the contract, as it imposes additional obligations on the company to pay compensation when the employee will no longer be employed.
In Georgia, the employment contract is the main document regulating the relationship between the employee and the employer, so I recommend drafting it in sufficient detail. This may help to avoid many problems in the future. In addition, although Georgian legislation does not require the preparation of orders, job descriptions, technical tasks, reports, signing NDA, in my opinion it is still worth having such documents, because in case of conflict, written confirmations will help justify your position and protect your rights.
