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French Employers: Are you sure to own your employees' works and creations?... A bit of recent case law

published on 14 September 2023 | reading time approx. 12 minutes

In light of recent jurisprudential developments, how does a company ensure that it owns the creations and inventions of its employees, or even of its non-employee managers? The legal rules are very strict and generally protect authors, i.e. natural persons, leaving it up to companies to organize the necessary transfers. However, a number of recent, but still isolated, rulings offer a touch of pragmatism and simplification in this area, even if it means shocking the legal expert, who continue to call for caution and rigor, often neglected in the drafting of the necessary deeds of transfer of rights.

Employer ownership of employee creations and inventions is a redundant subject in French law. It also extends to company’s non-employee managers, whose agreements and shareholders’ agreements with the company sometimes provide for the simplified transfer of intellectual property rights to them.

Many SMEs still believe that the company automatically, or at least quite easily, becomes the owner of the intellectual productions of their employees or directors, produced in the course of their duties, without the need for a written agreement or additional remuneration. This is of course not the case, but the legislation (the Intellectual Property Code) is not always very clear on this subject, and at the very least is not well known.

In addition, companies often cling, in good faith, to the negotiated and anticipated provisions of collective agreements, particularly as regards remuneration for the transfer of inventions and creations. Caution is advised, however, as some of these provisions are sometimes too generalized, or more often not up to date, or even sometimes contrary to legal rules.

In view of the very French complexity of the legal rules applicable to this question of ownership, but above all in view of recent surprising court decisions, it is useful for companies to take stock of the measures and precautions to be taken to ensure that these rights are passed on to the legal entity.

Two situations need to be distinguished. The first concerns creations (materialized intellectual works) protected primarily by copyright (texts, graphics, works, software, etc.). This situation, which is poorly regulated, is the main focus of current case law. The second concerns inventions (innovative industrial achievements that can be protected by secrecy or patent).

Let us first briefly recall the rules applicable to inventions, which have not been overturned by the recent decisions examined in this article.

Inventions »
Creations protected by copyright »
It's not all that simple... »

Inventions

It should be remembered that an invention, a technical creation with the potential to be industrialized, is not initially protected by patent law, but only by legal rules or contractual clauses relating to its necessary confidentiality, secrecy, security, or even its protection by copyright. Where employee inventions are concerned, the French Intellectual Property Code (IP Code) imposes a number of obligations of secrecy and information on employees towards their employer, precisely in order to secure the period of analysis of the invention, its ownership and its possible patentability. Only if the invention proves patentable and a patent application is subsequently filed will its protection be further governed by patent law.

Whether it involves employees or third parties under contract, it is therefore in the obvious interest of the company (and more generally of any company commissioning researchers) to organize this protection properly, well in advance of any patent application, by means of precise procedures and agreements.

Ownership of inventions, but above all the ‘right’ to apply for a patent on an invention, is governed mainly by the French IP Code itself, and quite precisely, unlike ownership of creations.

Without going into detail, the principle is as follows:

If the invention results from work entrusted by the employer to an employee (employment contract or letter of assignment, for example), the invention and the right to the patent belong to the employer, who then owes the employee an additional salary;
If this is not the case, but the invention would not have been possible without the use by the employee of the means made available by the company or the knowledge acquired within the company, the employer only has a priority right to the invention, to be negotiated with the employee against a “fair price”, more favorable to the employer than a more freely negotiable market price;
In other cases, the employer has no particular right and is free to offer or not to offer to buy the invention and the patent rights from the employee at a freely negotiable price.

Creations protected by copyright

This, for example, concern: software, logos, slogan, video games, audiovisual productions, drawings, videos, texts, articles, books, brochures, shows, scenarios, spare parts, packaging, database, bottle shapes, etc.

The principle is clear: copyright may be attached to the author, who is a natural person. In particular, the rights to the creations of employees therefore remain the property of the latter, unless the employer scrupulously arranges, in writing and by contract, for the transfer of the copyright to him, together with appropriate remuneration, separate from the salary.

However, there are numerous exceptions to this principle, which grant this ownership, directly or almost directly, to the employer:

Software produced by employees: software developments produced by the employee(s) in the course of their duties belong to the employer, without additional remuneration. This greatly simplifies the issue for companies in the IT and digital sectors.
Collective works: when the employer takes the initiative of entrusting several people (employees or not) with a creative project, which it then edits, publishes and distributes under its name, and when the various intellectual contributions of these people are combined in a single result, without it being possible to attribute to each individual a specific right or merit within this resulting creation, the copyright in this joint work automatically reverts to the employer. As an exception to this principle, the employer is even considered to be the author of the work.

In view of this complex combination of criteria, it is not always easy to classify a work created by several people as a collective work. Examples include newspapers, advertising slogans created by an agency, tourist guides and even some software, although the latter is more usually considered to be a “collaborative work”, since each contributor generally has a distinct role (coder, graphic designer, scriptwriter, etc.). More generally, however, when a company or employer entrusts a team of creative people with a joint project of this kind, it should consider expressly qualifying the project as a collective work in advance in the contract or assignment letter, provided the above criteria are met.

A collective work simplifies the employer’s management of the creation of value, as it does not have to worry about transferring rights in writing to the members of the team.
Articles by journalists
Creations by civil servants (without additional remuneration)

Thus, apart from these exceptions, if the employer wishes to ensure ownership of the copyright in the important creations of one or more employees, it cannot simply state in an employment contract or any other document that it is the owner of the rights, but must arrange, in writing, for the transfer of the rights from the employee to the company.

It’s not all that simple...

Complexity and practice

It is in anticipating, organizing and drafting the necessary transfer of rights that things can get complicated.

First of all, we are only talking here about transfers between an individual, who is the primary author of the creation, and a company (here the employer), and not about subsequent transfers that may take place from assignee to assignee, where the author is no longer involved.

In accordance with articles L.131-2 and L.131-3 of the CPI :

The assignment deed or clause must be in writing;
The assignment clause requires a demanding formalism, clearly defining the scope of the assignment, whether full or partial (types of authorized uses, duration, geographical scope of the assignment, etc.);
The transfer must be remunerated, including between employees and employers, such remuneration being in principle, and therefore barring exceptions, proportional to the exploitation of the transferred creation.
It should be noted that, historically, the first paragraph of Article L.131-2 seems to make a special case of four types of contracts with a typically creative vocation, but is subject to a very restrictive interpretation to the benefit of formalism: “Performance, publishing and audiovisual production contracts as defined in this Title must be evidenced in writing. The same applies to free performance authorizations”.

Already, these formal requirements are not always respected in practice, leading to a number of disputes.

Another legal principle (article L.131-1 CPI) also raises a number of difficulties: the prohibition on providing, in advance and in a general manner, for the global transfer of all the creations that a person (for example, an employee) may make during the term of his contract (for example, an employment contract). Ownership can only be transferred of identified or identifiable (in this case intangible) property. Thus, a simple clause in an employment contract stating “Mr. X assigns to company Y all his copyright in any work he creates during the course of his duties, for the entire world” is not sufficient and is not valid.

Although this principle is fairly well known, many employment contracts still contain clauses that assign all rights in advance, which are therefore null and void, and are therefore generally annulled by the courts.

This neglect of the various above-mentioned rules, which are nonetheless imperative, can also be found, within a company, in agreements between non-employee directors (partners, corporate officers, founders, shareholders, etc.) on the one hand, and the company on the other, with such agreements often providing for automatic ownership of any creations or inventions, or at the very least a tersely worded assignment, contrary to the provisions of the CPI.

Admittedly, the rules of presumption of ownership in favor of the actual public operator of the creation can generally benefit the company (in this case the employer), but this is a palliative solution which presents certain weaknesses, especially when the author claims rights on the grounds that no regular assignment has taken place.

In practice, given this level of formal requirement in the French IP Code, but also the evolving wording of the aforementioned articles, a certain vagueness has developed over time as to the level of writing and above all the formalism required for any transfer of copyright between an author (in particular an employee or a self-employed manager) and his company.

In employment contracts, several pragmatic solutions have emerged in practice to offset the nullity of anticipated global assignment clauses:

qualifying works produced by groups of employees as “collective” works as far as possible (subject to challenge), in order to ensure that the employer has immediate and automatic ownership of the copyright. But this does not always stand up to analysis of the precise criteria for collective works;
supplement the employment contract with subsequent confirmatory agreements, such as a deed of assignment clearly identifying the creation to be assigned, or a letter of assignment identifying the creation to be possibly produced at the end of a given project. It should also be remembered that, as with any deed of transfer of ownership, provision must also be made (where this point is not conveniently forgotten...) for specific remuneration, uncoupled from the salary or price of the service commissioned.
add to the overall assignment clause in the employment contract formulas which are sometimes tolerated, such as “the employee assigns his copyright to company X as and when he creates”, in order to give a semblance of identification to creations which have not yet materialized. However, case law eventually condemned this pragmatic but unprincipled practice.

In addition, a debate arose - to summarize - on the need for detailed formalism in the assignment clause. Some authors and courts argued, in view of the somewhat vague wording of articles L.131-2 and L.131-3 of the French IP Code, that this formalism only applied to the four very specific types of special contracts listed exhaustively in the first article.

A new vagueness created by recent case law

A number of interesting court decisions have further blurred the applicable rules, particularly for non-employee directors.

1. Decision of the Montpellier Court of Appeal, 18 October 2022

The facts concern a start-up whose business consists of developing software for architects and construction professionals (i.e. software creation and other intellectual creations protected by copyright).

Under the terms of a shareholders’ agreement concerning the Managing Director, it was briefly stated, in summary, that all inventions and creations made by the aforementioned shareholder were the property of the company. As the said shareholder was not an employee, the automatic attribution of copyright in source codes to the employer did not apply. Consequently, (i) because the required legal formalities had not been used and (ii) because this was a global assignment of future works, the assignment was a priori null and void on two counts. The Director claimed that he never transferred to the company his IP rights on his creations.

However, the Court of Appeal, reverting to long-standing and generally abandoned case law, held that the formalities required by article L.131-3 of the IP Code only applied to the four specific types of contract expressly cited by article L.131-2. Consequently, the assignment was valid even in the absence of the usual formalities.

Here, the Court rekindles a tense debate about author/licensee assignments: is the detailed formalism, which generally requires these lengthy clauses to be drafted by specialist lawyers, of general application or limited to these typically creative contracts? Yet it was fairly unanimously agreed that, precisely for the protection of the author, the assignment should comply with this formalism, so that the parties indicate very clearly the extent of the rights that the author intends to assign or license (what uses, where, for how long, correlated financial consideration, etc.) and those that he intends to reserve for himself.

But even more surprisingly, the Court seems to apply the same reasoning to article L.131-1 of the French IP Code, namely the prohibition on the global assignment of future works. In fact, the Court does not seem to be bothered by this agreement providing for such an assignment, and therefore validates it, in particular on the grounds that, once again, the nullity of anticipated global assignments would only apply to the four specific types of contracts referred to in the following article.

2. Paris Court of Appeal, 25 January 2023

In this case, a fashion designer had co-created a haute couture company to offer collections.

The designer was also employed, first as a stylist and then as executive director. Her employment contract contained a simple, non-detailed clause assigning to the company the rights to all her future creations during the term of her contract, without the additional remuneration usually required in addition to salary. The clause merely specified that the transfer would take place “as and when they are created”, thus using this pragmatic formula that is frequently used and tolerated.

The designer ended up claiming compensation in addition to her salary, on the grounds that the anticipated global assignment contained in her contract was classically null and void and that she therefore remained the owner of the copyright in her creations.

Surprisingly, the Court ruled that this type of situation, involving an employee whose job was essentially creative, did not fall within the prohibition on anticipated global assignments, since the expected works were therefore at least determinable, “as and when” they were produced.

The phrase “as and when they are created”, expressly added to the clause in the contract, seems to have played an important role in convincing the Court not to bring this type of contract with a designer within the prohibition.

We are therefore particularly surprised by this decision, which introduces unprecedented nuances, not to say criticisms, to the principle of prohibiting anticipated global assignments.

Secondly, with regard to additional remuneration, the Court held, just as surprisingly, that the lump-sum salary paid to the employee-creator could be considered as constituting in part the specific remuneration for the assignment of rights, given the very creative essence of the employee’s function. This solution is also surprising, not to say shocking, given the principles of distinction between remuneration for the service (or work) and remuneration for the transfer of rights.

There is a slightly cynical phrase that is sometimes used in France by researchers and designers when dealing with this type of issue: “In France, you are paid to search, not to find”... So if the researcher or creative artist finds something, he or she should be paid something more, separate from the remuneration paid for the work.

Even if they are tinged with economic efficiency and pragmatism, these recent decisions therefore upset the pragmatic consensus reached in recent years, under the terms of converging case law which had established a certain balance between the protection of the rights of employees and other company players and that of the company’s rights and economic efficiency.

They reflect the debate that exists between, on the one hand, a fairly conservative defense of the interests of authors, which requires fairly general formalism and clear agreements on the scope of an assignment, and a more liberal defense, which tends to limit the requirement for formalism and to be satisfied with a more concise writing, at least in the most obvious cases.

Admittedly, the formalism required by the French IP Code often seems a little cumbersome for certain transfers of rights from an author, salaried individual, corporate officer or other, to the company for which he works, in particular when common sense dictates a logical attribution of the fruits of this work to the company, notably for people with creative functions or corporate officers supposed to favor the interests of the latter.

But simplification, in the interests of balancing the interests of both parties, cannot be achieved through a biased interpretation of the clear texts of the French IP Code, but rather through legislative change. It is to be hoped that the Cour de Cassation will have the opportunity to clarify this situation once again, pending clarification of the texts, which has already been attempted.

In conclusion, let us be practical and very cautious with regard to these latest, rather isolated, court decisions, which should not set a precedent without legislative or Supreme Court intervention. We as all the doctrine therefore recommend that companies continue to take great care in organizing the transfer of the rights of their employees or corporate officers to the company. Firstly, by providing for a clear written agreement (which is all too often omitted), but above all by complying with the precise and detailed formalities required for this type of transfer clause. And finally, by being extremely cautious with early transfer clauses in employment contracts, and therefore continuing to formalize real written transfers as and when works of value are completed.

Too many disputes arise, particularly between employees and employers, seeking to call into question the company’s ownership of a particular work (a book, a drawing, a logo, a slogan, a design, a prototype, a video, etc.) on the grounds that things were not properly anticipated by the employer beforehand.