For many companies, especially startups operating in technology, innovation or creative services, intellectual property is one of the most valuable elements of their business. Software, technological solutions, product or user interface design, databases, methodologies and marketing concepts often form the foundation of a company’s competitive advantage and long-term business value.

However, in practice, situations still arise where only during investor due diligence or negotiations for the sale of a business it becomes clear that the company’s most important asset, its intellectual property, does not legally belong to it. This usually happens when employment contracts do not address intellectual property rights at all or contain only general provisions stating that all rights are transferred to the employer. In such cases, statutory rules apply, and these rules do not always align with the company’s interests.

It is important to understand that intellectual property rights in employment relationships do not automatically transfer to the employer in full. The fact that an employee created a work or a solution does not automatically mean that the rights belong to the employer. What matters most is whether the specific result was created while performing the employee’s job duties and what the parties have agreed regarding intellectual property rights. It also depends on what exactly was created, whether it is a computer program, another copyright protected work, a design or an invention.

Therefore, before considering intellectual property protection, licensing or commercialization, companies should first answer a fundamental question: does the company actually hold the rights to the intellectual property created by its employees?

Copyright in Employment Relationships: Not Only Relevant for Creative Industries

Copyright is often associated with literature, music or other artistic works. However, copyright protected works are created far beyond the creative industries. Copyright may also protect drawings, training or presentation materials, website structure or design, user interface solutions and other solutions created within companies, provided they constitute an original result of an employee’s creative activity.

Who Owns the Economic Copyright to an Employee’s Work?

The general rule is that if an employee creates a copyright protected work while performing their job duties, the economic copyright to that work transfers to the employer for five years, unless the employment contract provides otherwise.

There is one important exception. Computer programs are treated differently. If an employee creates a computer program while performing their job duties, the economic copyright transfers to the employer for an unlimited period, unless the parties agree otherwise.

This means that if the employment contract does not clearly establish a longer transfer period, the economic rights return to the employee after five years. As a result, without an agreement on a longer transfer period, a company may lose the right to use employee created work that may by then have become an essential part of its business.

It is also important to note that under the law, economic copyright transfers to the employer only for works created as part of the employee’s job duties. If creating such work is not part of the employee’s responsibilities, the rights do not automatically transfer to the employer and the employee remains the rights holder unless the parties agree otherwise.

For example, if a software developer creates a computer program while performing their job duties, the rights will belong to the employer. However, if the same program were created by a company administrator, it would likely fall outside their job responsibilities. In that case the rights would not automatically transfer to the employer and a separate agreement would be required.

For this reason, it is crucial in practice to clearly regulate intellectual property ownership in employment contracts and to precisely define employees’ job responsibilities. This often determines whether the rights to created solutions will belong to the company.

When Does a Design Created by an Employee Belong to the Employer?

The rights to a design created by an employee usually belong to the employer if the design was created while performing job duties or using the employer’s experience, technology or equipment.

If the employer registers the design in their own name, the employee must be paid remuneration unless the creation of designs is already part of the employee’s job responsibilities under the employment contract.

Therefore, as with copyright protected works, the key factor is how the employee’s duties are defined in the employment contract. If the contract clearly states that the employee is responsible for creating designs, additional remuneration usually does not arise. However, if such responsibility is not specified, the employee may claim remuneration for the design or challenge the employer’s rights to it.

Who Owns an Invention Created by an Employee?

If an invention is created while performing job duties, following a specific assignment from the employer, during design, engineering or research activities, or using the employer’s technologies and expertise, the invention is considered a service invention. In such cases the patent application is usually filed in the employer’s name.

Unlike copyright protected works or designs, employees must receive additional remuneration for inventions when the employer obtains a patent for a service invention or begins using it.

The law generally allows this in two ways. The employee may receive an increased salary for inventive activity if the employment contract includes responsibilities related to creating inventions. Alternatively, the parties may agree on inventor remuneration for a specific invention when it is patented or used.

If this is not properly addressed, the employee may apply to court and request recognition as the owner of the service invention patent.

Therefore, companies involved in innovation should not only clearly define employees’ job responsibilities and regulate intellectual property rights, but should also assess in advance which model is more appropriate. One option is paying higher remuneration for inventive activity. Another option is agreeing on inventor compensation only when a specific invention is patented or used.

What Companies Should Review in Employment Contracts

To ensure that poorly drafted or outdated employment contracts do not become an obstacle when attracting investment, selling a business or commercializing technologies, companies should periodically review them and confirm that intellectual property created by employees legally belongs to the company.

In practice, several key aspects should be assessed:

• whether employee duties are clearly defined in employment contracts and reflect the actual work performed
• whether contracts include provisions on the transfer of intellectual property rights to the employer
• whether the scope and duration of intellectual property rights transfer are clearly established
• whether additional agreements may be required in certain cases, such as remuneration for employee created inventions that are patented

Timely reviewed and clearly drafted contracts help prevent disputes, ensure clarity regarding rights to employee created results and allow companies to safely use and commercialize what is often their most valuable asset: innovations, technologies and solutions created by their employees.