What Is The Status Of Works Made For Hire In Georgia? - Contract of Employment

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.

Brief background

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.

Why is it so important to take charge of intellectual property at the start?

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.

Product companies

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

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.).

What is the situation of employees' intellectual property in Georgia?

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:

the type or description of which is set forth in the employment contract (Article 14 of the Georgian Labour Code): the type and description of the work to be performed is a material condition of the employment contract, i.e. the description of the work function must be reflected in the employment contract drawn;
performed during working hours on the employer's terms and conditions (Article 24 of the Georgian Labour Code);
performed on the assignment of the employer: Article 45 of the Labour Code uses the term 'employer's assignment', therefore it may be assumed that performance of work on the instructions of the employer may also be considered as performance of official duties.

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.

How can you protect yourself?

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:

Job function. Since it is not customary to draft job description (duty regulation) in Georgia and, according to the Labour Code, the job description should be contained in the employment contract, it makes sense to record the main job duties in it, especially those resulting in the creation of intellectual property.
The procedure for assigning work tasks. If your workflow uses collaboration systems such as Jira, Trello, etc., I recommend that it be recorded that it is the employee's job responsibility to complete the tasks set in such systems. The same applies to email, messengers, etc.
Reporting system. If the organization of the work process makes it possible, it is a good idea to record the obligation to submit reports on the work done. Such reports will provide evidence that the employees understood that the task in question was within the scope of their job responsibilities.
Determining the software as the property of the employer. Software is a set of different elements including but not limited to source and object code, text, fonts, pictures, sounds, animations, etc. It makes sense to stipulate that all these are regarded as integral elements of the software, which in turn is the intellectual property of the employer. It could also be explicitly stated that any intellectual property created by an employee in connection with the software is recognized by the parties as a work made for hire.
Transfer of rights to intellectual property objects created in the course of labour activity. Here, it is important to designate not only the very fact of transfer of rights in full and for the whole term of copyright (as noted above, this will be by virtue of the legal provisions), but also the moment of transfer of rights: the moment of creation of any such intellectual property object.
The right of the employer to use the work made for hire. It makes sense to specify the unlimited right of the employer to use the software (or elements of it) as the company sees fit, in any form or manner, and to allow third parties to use it, while noting that there is no territorial limitation on this right. In other words, an employee must not have the right to restrain his or her employer from using the software wherever and however employer wants, including the ability to transfer the right to use the software to someone else. If it is a product company, the employer must be able to allow the software to be used by end users; if it is an outsourcing company, the employer will use the software until it is transferred to the customer.
Additional remuneration for the employee. As I mentioned earlier, additional remuneration may be agreed upon in the contract for the use of the work made fore hire. In order to avoid disputes, it is better to state explicitly whether or not the employee can claim such remuneration for the use of the intellectual property objects created by him or her. If it is agreed with the employee that additional remuneration may take place, I recommend that the amount of such remuneration and the period of time during which the employee may claim it be specified very carefully.
The employee's permissions in relation to personal non-proprietary rights. These include the permission to use the work without employee's name, as well as to modify and make the work public. The right of revocation can also be mentioned, stipulating that the employee will not prevent the disclosure of the intellectual property objects he or she has created by the employer or third parties.

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.

Summary

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.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Georgia: What Is The Status Of Works Made For Hire In Georgia?