Businesses commonly require their employees and independent contractors to sign agreements assigning ownership of all work product and related intellectual property rights to the business. A 2011 B.C. Supreme Court decision holds that those agreements do not assign legal ownership of copyright in future-created works (works created after the agreement is signed), and that copyright in a work can only be assigned by an agreement that is signed after the work is created. Businesses should consider implementing practices to address this issue and ensure that they acquire appropriate rights in their workers' work product.
The Century 21 Case
Century 21 Canada Ltd. Partnership v. Rogers Communications Inc. involved a dispute over the unauthorized copying of property descriptions and photos from Century 21's website for use on a real estate listings website operated by Rogers' subsidiary Zoocasa. Century 21 and its co-plaintiffs (a brokerage business and two real estate brokers who created some of the copied property descriptions and photos) asserted various claims against Rogers and Zoocasa, including infringement of copyright in the property descriptions and photos. Century 21 claimed a right to sue for copyright infringement based upon license and assignment agreements signed by the co-plaintiffs before the property descriptions and photos were created. The Court ruled that Century 21 could not maintain the copyright infringement claims, because the license and assignment agreements did not give Century 21 ownership of copyright in the property descriptions and photos or an exclusive license to use them. In coming to its decision, the Court followed a 1924 decision of the English House of Lords, which applied basic property law principles to rule that an agreement cannot effectively assign legal ownership of copyright in a nonexistent (future-created) work. Instead, a purported assignment of copyright in a future-created work gives the assignee only an equitable interest in the copyright when the work is created and a right to require the copyright owner to execute a proper assignment of copyright after the work is created, which might be difficult to do in many circumstances. Applying those principles, the Court held that Century 21's co-plaintiffs retained legal ownership of copyright and could sue for infringement, but Century 21 could not do so.
Analysis and Recommendations
The ruling in the Century 21 case has potentially broad implications. The fundamental underlying principle – the common law does not recognize as valid an assignment of property that does not exist when the assignment is signed – could apply to all kinds of intellectual property rights and thereby limit the effectiveness of work product ownership agreements signed when a worker is first engaged. It is important to note that the Canadian Copyright Act provides that in most situations copyright in a work created by an employee in the course of employment is owned by the employer without the need for any formal assignment agreement, but there are no similar statutory provisions for other kinds of intellectual property rights (such as patentable inventions) created by employees or for any intellectual property rights (including copyright) created by independent contractors.
To address these risks, businesses should ensure that when employees or independent contractors are first engaged, they are required to sign an agreement that includes appropriate assignments and exclusive licenses of work product and related intellectual property rights and that obligates the worker to execute further agreements to confirm the business' ownership of future-created work product and related rights. For workers who are already engaged, businesses should consider requiring them to sign a supplemental agreement (supported by valid consideration) to address these issues. In addition, businesses should consider implementing a practice of requiring that each worker sign a confirmatory work product ownership agreement on a routine basis (for example, when annual bonuses are distributed) and upon termination or disengagement (including as part of a severance agreement).
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