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Austria: The (New) Transfer of Rights by Purpose in Copyright Contract Law

Austria: The (New) Transfer of Rights by Purpose in Copyright Contract Law

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The amendment to the Austrian Copyright Act introduces a whole range of new provisions on copyright contract law, strengthening the position of authors and performers. In our first Legal Insight ("Austria: The (new) Copyright Contract Law") we provided some background information and an overview. In our second and third Legal Insights, we introduced the new remuneration provisions ("Austria: The (new) copyright remuneration rules for authors and performers") and the transparency obligation ("Austria: The (new) copyright transparency obligation"), which are based on the DSM Directive.

Now we want to have a look at the provisions adopted from the German Copyright Act, in this edition the transfer of rights by the purpose of the contract (Sec 31 para 5 German Copyright Act; Sec 24c para 1 Austrian Copyright Act).

Introduction
Interpreting copyright contracts based on their purpose is not new in Austria. After all, this teleological interpretation is an essential part of every contract analysis and the theory of transfer by purpose developed in Germany has always been an integral part of Austrian jurisprudence. Accordingly, the extent of rights granted does not, in case of doubt, go beyond what is necessary for the practical purpose of the intended use of the work.

Moreover, the person commissioning a work is in any case implicitly granted the rights to use the work for the purpose for which the work was commissioned. If the commission to use the work would only make sense if the commissioner alone is entitled to use the work, the rights granted are exclusive.

While the provision merely codifies existing case law in this respect, the new law goes beyond this previous case law.

Content of the provision

  • Specification obligation (Sec 24c para 1 first sentence)

For all contracts on the granting of rights of use, the provision provides for a kind of obligation on the part of the acquirer of the rights to expressly and individually designate the forms of exploitation covered by the licence. If such forms of exploitation are not expressly and individually designated, the purpose of the contract as understood by both parties will determine which forms of exploitation it covers. This is not a rule of doubt. Even if it is clear that the parties wanted to cover all forms of exploitation, the scope of the licence is restricted according to the purpose of the contract, if the forms of exploitation are not expressly and individually designated.

However, this does not relate to a specification of exploitation rights like the right of reproduction, distribution right, communication to the public, etc.), but the forms of exploitation. A form of exploitation describes the scope and "field of use" of exploitation rights.

There is no formal requirement for the specification; the forms of exploitation can therefore also be individually and expressly designated orally.

  • General rule of doubt (Sec 24c para 1 second sentence)

In addition, the law stipulates that (in case of doubt) it should be determined on the basis of the purpose of the contract whether exclusive or non-exclusive rights have been granted, how far the rights granted extend and what restrictions they are subject to. This is what Austrian courts have previously done anyway.

According to the legislator, the adoption of the provision is justified by the guiding principle of the author's participation in the economic exploitation of his or her work to the greatest possible extent. The provision is intended to protect the author as the generally weaker party to the contract and to prevent an excessive granting of exploitation rights through comprehensive grants of rights to the exploiter (copyright buyout). This is to ensure that the acquirer is not granted more rights than necessary without a clearly recognisable intention on the part of the parties.

The purpose of the contract
If the forms of exploitation are not expressly designated, the purpose of the contract will determine the forms of exploitation to which the grant of rights extends. Furthermore, in case of doubt, it should be determined based on the purpose of the contract whether exclusive or non-exclusive rights have been granted, how far the rights granted extend and what restrictions they are subject to.

It is therefore generally advisable to state the purpose of the contract explicitly and clearly in the contract.

When determining the purpose of the contract, the industry practice might also be considered, but also preliminary negotiations, accompanying circumstances, similar contractual relationships, usual activity, business structure and the usual course of business of the parties involved, insofar as they allow conclusions to be drawn about the purpose of the contract.

In order to achieve a comprehensive granting or transfer of rights – which is often desired or even required in practice, especially in relation to works made for hire and commissioned works – giving the acquirer of the rights a position similar to that of an owner, it is advisable to clarify that this is precisely the purpose of the contract.

Who is subject to this provision?
The provision applies not only to contracts between authors and first exploiters but to all contracts on the granting of rights of use. It is only applicable to contracts concluded after the amendment came into force, i.e. on 1 January 2022.

Furthermore, the following are excluded from the provision:

  • Works created within the scope of an employment relationship

The law leaves open what constitutes an employment relationship. In the absence of European law requirements, this will be determined by Austrian labour law. However, the purpose – although it is an exception – argues against an overly restrictive interpretation, so that persons similar to employees and freelancers may also be covered.

  • Subordinated contributions

These are works that represent a not significant contribution in relation to the overall work. However, it depends on the individual case, taking into account copyright and economic aspects.

  • Computer programs
  • Cinematographic works

For cinematographic works a different rule of doubt applies, i.e. authors who undertake to participate in the production of a film thereby grant the producer the exclusive right to use the cinematographic work as well as translations and other cinematographic adaptations or transformations of the work for all forms of exploitation.

In case of such exceptions, blanket grants of rights without listing the forms of exploitation are permissible and implied grants of rights beyond the purpose of the contract are possible.

The purpose transfer principle is not mandatory and can therefore be waived. Also in case of such a waiver a comprehensive grant of rights is possible without listing the forms of exploitation.

Practical advice
Generally, it is advisable to state the purpose of the contract, for example in a preamble of the contract. Furthermore, the forms of exploitation should be explicitly stated where possible (and in particular in case they go beyond the purpose of the contract). If comprehensive rights to a work are granted in order to create an "owner-like" position for the acquirer, this should be stated as the purpose of the contract. It is also advisable to explicitly list all exploitation rights that should be covered by a grant of rights.

By Dominik Hofmarcher, Partner, Roland Vesenmayer, Associate,  Schoenherr

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