Seedcamp has teamed up with JAG Shaw Baker (a technology focused law firm based in London) to produce a series of short articles highlighting some of the key intellectual property (IP) issues that affect startups. By underlining some of the common issues and providing practical advice, this Understanding Intellectual Property series will touch upon the protection of IP, ownership, data protection and privacy, infringement and web / domain name issues.
In this article we continue our overview of key IP rights, this time focusing on copyright. In the UK, copyright is probably the most far-reaching IP right and can protect everything from computer software to photographs, films to buildings and many other works in between. In particular, three primary features distinguish copyright from other IP rights:
a) copyright protection arises automatically, as soon as a work is created. In other words, there is no registration requirement. This is particularly useful for startups as no expenditure is needed to obtain protection;
b) the duration of copyright continues for a very significant period of time and often well beyond the commercial value of the work; and
c) copyright protection covers a broad range of subject matter.
As copyright arises automatically, businesses frequently overlook the importance of its protection. In fact, one of the biggest challenges is understanding and appreciating that copyright will subsist in all manner of works and is particularly useful to stop counterfeiters and copycats encroaching on your commercial patch. Indeed, every business will, to some extent, benefit from copyright protection (although businesses in the creative and software industries will invariably benefit most). Copyright protection is, therefore, an incredibly useful means of protection for startups.
The following points provide a brief overview of copyright and will assist startups to recognise and appreciate the significance of copyright:
1. Subsistence of Copyright
What does copyright protect? Any work that falls into one of the following categories will automatically be protected by copyright in the UK:
a) original literary works. Examples include written documents, software programs, marketing plans, reports, etc.;
b) original dramatic works. Examples include performances, stage shows, etc.;
c) original musical works. Examples include jingles, music, sound effects, etc.;
d) original artistic works. Examples include technical drawings, logos, paintings, sculptures, photographs, architectural plans, etc.;
e) sound recordings, films or broadcasts; and
f) the typographical arrangements of published editions.
Often a product or creation will fall into more than one of these categories. Where this happens more than one copyright will exist. For example, a song will often benefit from five or six copyrights: literary copyright in the lyrics; musical copyright in the musical composition; copyright in the sound recording; film copyright in the music video; artistic copyright on the album cover, etc. Businesses too will benefit from several important copyrights – for example: literary copyright in its proprietary software programs; artistic copyright in its distinctive logo; literary copyright in its marketing plans; film copyright in marketing videos; etc.
Does a work need to be original? It is a requirement that literary, dramatic, musical and artistic works be original in order to qualify for copyright protection. A work is ‘original’ if it is an intellectual creation of the author (or is created through his own skill, judgment and effort. Note that the law is uncertain in this area) and is not copied from another source. Originality is not concerned with the work being new or novel and it does not matter if the work has no or little artistic merit. Sound recordings, films and broadcasts do not need to be original (otherwise a film based on a book would not qualify for copyright protection, for example).
Does the work need to be written down? Under UK law, yes. Copyright does not subsist in literary, dramatic or musical works unless and until the work is recorded in some way (whether in writing, by computer program or otherwise). Sound recordings, films and broadcasts will, of course, be recorded by their very nature.
2. Copyright Ownership
Who is the owner of copyright? Generally speaking, the author of the work (i.e. the person(s) who created it) will be the first owner. There are some exceptions to this. Notably, copyright works created by employees during the course of their employment will be owned by the employer, not the employee. For further information on ownership, please see our ownership article.
Joint authorship: Where more than one person has created a work, the work may be classed as a work of joint authorship if the contribution of each author is not distinct from that of the other authors. Subject to certain exceptions (including works made in the course of employment), joint authors will own the copyright in the work jointly.
As has already been mentioned, copyright arises automatically. In the UK and Europe there is no copyright registration system at all. In the US, however, the position is slightly different. Although copyright arises automatically, it is beneficial to record copyright ownership at the US Copyright Office. Benefits include additional remedies in the event of infringement (statutory damages and attorney’s fees) and simplicity in pursuing infringers. China also operates a similar copyright recordal system. Businesses – and in particular, early stage, high-growth businesses where the US / China is a key market – would be well advised to register key copyright works in the US / China as soon as possible.
4. Copyright Duration
How long does copyright protection last? The answer depends on the nature of the work:
– For literary, dramatic, musical and artistic works – copyright expires 70 years following the end of the calendar year in which the author died. For works of joint authorship, copyright will expire 70 years from the end of the calendar year in which the last known author dies.
– For computer generated literary, dramatic, musical or artistic works (i.e. when there is no human author) – copyright expires 50 years from end of the calendar year in which the work was made.
– Sound recordings – copyright expires 50 years from the end of the calendar year in which the recording is made.
– Films – copyright expires 70 years from the end of the calendar year in which the death of the last to die of certain specified persons occurs.
– Broadcasts – copyright expires 50 years from the end of the calendar year in which the broadcast was made.
– Typographical arrangement of published editions – copyright expires 25 years from the end of the calendar year in which the edition was first published.
Special rules apply where the author or director is unknown.
5. Economic Right
At the heart of copyright are the economic rights (also known as the exclusive rights). These economic rights grant copyright owners the right to exploit the work for the duration of copyright protection and are intended to encourage innovation and creativity. The economic rights include, amongst others, the right to copy, lend, perform, adapt, distribute and communicate the work to the public.
What does copyright protection allow me to do? A copyright owner can exploit copyright in two main ways (in addition to exploiting the work himself): (i) he can ‘assign’ it (that is, sell all, or any part, of the economic rights to a third party); or (ii) he can license it (that is, grant permission for third parties to make use of one or more of the economic rights). For example, a business may want to license its software platform by charging customers for access. Alternatively, copyright can be used protectively to prevent third parties from disclosing commercially sensitive documents.
Considerable thought and attention should be paid to the exploitation of economic rights. With careful thought and strategy, it is possible to reap significant rewards from copyright ownership for a substantial period of time. When it comes to contractual negotiation, the devil is certainly in the detail!
6. Moral Rights
In addition to (and separately from) the economic rights, authors of a copyright work are granted certain ‘moral rights’. Moral rights protect the author’s interest in the work and grant certain rights over the work, even after ownership of the economic rights have been transferred to a third party. In particular, moral rights allow authors to:
a) insist on being named as the author of the work; and
b) object to certain derogatory treatment of the work, where such treatment amounts to a distortion or mutilation, if it harms the authors reputation.
In the UK, moral rights cannot be assigned to a third party. Authors can, however, agree not to exercise their moral rights (by way of waiver). Startups would, therefore, be well advised to ensure that they obtain irrevocable and unconditional waivers of moral rights from all creators of copyright works (including employees, consultants and third party contractors). If you operate in markets such as France and Germany, the law in connection with moral rights is very different and specialist advice should be sought.
7. Copyright Infringement
As the name suggests, copyright protects against copying. In other words, if a third party performs one of the economic rights (see section 5 above) in relation to all or a substantial part of the work without the copyright owner’s permission (or without a legal defence), he will infringe copyright. Entirely independent creation without reference to the copyright work will not, therefore, infringe.
As you may expect, there are a number of exceptions, defences and limitations to infringement. If you suspect that your business infringes a third party’s copyright or you suspect that a third party is infringing your copyright, it is advised that you seek immediate legal advice.
What if somebody has stolen my ‘idea’? It is a common misconception that copyright protects ideas. In fact, copyright protects the form of expression of ideas (i.e. the recorded expression of that idea) not the ideas themselves. Although confidential information might protect an idea, copyright will not.
8. Exceptions to Copyright
In the UK (and elsewhere in Europe), there are a number of very narrow exceptions to copyright infringement. For example, the two most important exceptions allow third parties to: (i) use a literary, dramatic, musical or artistic work for non-commercial research purposes provided that it is accompanied by a sufficient acknowledgement; or (ii) use any copyrighted work for the purpose of criticism or review provided that it is accompanied by a sufficient acknowledgement.
In the US, copyright exceptions are much broader. Generally speaking, an otherwise infringing activity is allowed if it can be shown to be ‘fair use’. This is very different to the law in the UK and, in practice, means that US copyright law has been better at enabling innovative products (such as data aggregation businesses) than UK law.
To properly understand the level and extent of copyright protection, it is advisable that startups:
– review the key documents and works that might benefit from copyright protection;
– keep a written record of who created the copyright work and the date on which it was created;
– ensure that your business has full and unfettered ownership of all copyright;
– ensure that irrevocable waivers of moral rights have been obtained from all employees, consultants and other content creators;
– consider recordal of copyright of key works in the US / China / other key jurisdictions which operate a registration system; and
– check whether: (i) your business’s copyright is being infringed; and (ii) whether your business is infringing the copyright of a third party.
JAG Shaw Baker is a firm dedicated to advising entrepreneurs, companies, and investors in high-growth industries. The firm advises on all aspects of venture and growth capital, as well as other corporate finance transactions, corporate structuring, intellectual property and growth and exit strategies. It also acts as general counsel for high-growth companies.
Seedcamp is Europe’s leading Acceleration Fund, and provides its startups with an ongoing Learning programme, known as Seedcamp Academy. Sessions are provided on a variety of topics; from marketing, to product development, to fundraising, to legal. Ambitious startups with disruptive products/services and global aspirations are invited to apply.
This article contains general information only. It does not constitute legal advice. You should consult a suitably qualified lawyer on any specific legal matter or issue.