Mine, Yours, the boss’ !

Mine, Yours, the boss’ !

Adi Marcus, Adv.
June 26, 2021

The value of a technology company is measured by two key elements: its intellectual property and its employees. One of the fundamental issues facing employers today, especially in the technological world in which we live, is how to ensure that employees' inventions or developments are recognized as the employer's property and form part of the company's intellectual property.

Allegedly, Israeli Copyright Law grants ownership of a work created by an employee for the purpose of his work and during it, to his employer. However, the issue of intellectual property ownership in an employee-employer relationship is also governed by labor law and the gap between such and the copyright legislation means that many employers, who choose to rely on copyright law only, find themselves, in the moment of truth, facing a situation where they need to purchase form their employees inventions or developments which the employer assumed to belong to it in the first place.

While copyright law theoretically automatically grants ownership of the work to the employer, it first requires that it be determined that there is an employer-employee relationship using labor law tests, which often do not fit intellectual property issues. Labor law is intended to prevent the weak employee being exploited by the employer, while copyright law has chosen to grant ownership of the work to the "strong" employer in order to encourage R&D, assuming that the employer is able to bear the economic risk involved in developing new works and incentivizing employees for their work.

Thus, today, in order to examine whether a work created by an employee belongs to the employer, the Court examines the nature of the relationship between the parties, determines whether there is an employer-employee relationship (or alternatively a contractor relationship or a joint venture), and whether the employee used tools of the employer, created the work during working hours, or received separate remuneration for the work. Thus, for example, in the case where the employee received a one-time payment for the R&D project, the assumption will be that it is a contractor-client relationship and the work might actually belong to the employee. Similarly, if the employee worked for the employer only part-time, the assumption may be that he is allowed for the remainder of his time to work and create independently.

However, as mentioned, these tests often do not fit the reality of the Internet age and startups. If, in the past, it was clear to everyone that everything an employee does during work hours or in the workplace belongs to his employer, today the segregation between private and professional life is no longer so clear. How do you distinguish between a work product and a private product when the employee is a programmer who works from home? How do you distinguish between a work that belongs to the employer and a work that belongs to the employee when it was written on a computer that is used by the employee both during working hours and for private uses? The distinction becomes even more blurred in high-tech companies where there is a practice of paying employees for the development of the company's intellectual property through bonuses or options when the company makes an "exit".

Another issues lies in the fact that copyright law deals with non-registered intellectual property assets as patents, designs or trademarks and are classified into four categories: literary, artistic, dramatic and musical. What then is the case with works that do not fall into these categories? How do you make the distinction when the product is, for example, a company's landing page on a social network that is built and operated by one of the employees and may even be registered on his private Gmail address?

The solution is, of course, to make a clear and orderly transfer of the employee's intellectual property rights to the employer by a written agreement drafted by a lawyer specializing in the field and which specifically states that any invention, development or creation belongs to the employer. This is regardless of the definition of the employment relationship and while setting an agreed payment, included in the salary. It is also important to make sure that the agreement refers to the employee's previous works and therefore using a standard template without a legal advisor examining each agreement may ultimately prove what is known to all: immediate savings often lead to tenfold expenses in the future.