Stop Press

02 Oct 2008

All Change – Commissioning Copyright Works

New Zealand's Parliament is poised to make a radical change to the rules about copyright ownership. This move will turn current expectations and understandings on their head for a wide and diverse range of industries which contract for the creation of copyright works.

A Bill to amend the Copyright Act 1994, which would abolish the so-called "commissioning rule", has recently been introduced to Parliament. The commissioning rule provides that those who commission and agree to pay for the creation of computer programs, designs and other artistic works, photographs, films and sound recordings, are the first owners of any copyright in the works created. The rule applies subject to agreement to the contrary.

Why Have a Commissioning Rule?

Although the commissioning rule is not universally understood and has thrown up some problems (discussed below), it is an important back drop to day-to-day business for those involved with the software industry, architecture, photography, visual arts, publishing, engineers, others in the construction industry, advertising and other marketing, film and television, music, and a range of other activities.

The commissioning rule recognises the economic nature of copyright, and provides that those who invest in the creation of works with business application would in some circumstances own the rights. In the case of a commissioned work, the payment for the commission provides the author with an incentive to create the new work, and the person who commissions the work is granted copyright as an incentive to fund the creation of the new work. This recognises that, in many instances, the commissioner will often have directed or influenced the nature of the work created, and as such is "akin to an author".

The commissioning rule goes further and helps protect the privacy of those who commission domestic works, such as portraits and wedding photographs, by giving the commissioner the ability, through ownership of the copyright, to control publication and other use of the works.

In each case, there is an opportunity to set out alternative copyright ownership rules by contract. This has meant, for example, that the standard terms of professional photographers always reverse the commissioning rule. More sophisticated contracting parties will usually also address ownership of copyright and other intellectual property in their contract.

Why Change the Commissioning Rule?

The commissioning rule is thought by some to be no longer necessary to protect investment. Similar jurisdictions, such as the United Kingdom and Australia, have repealed or narrowed the application of the commissioning rule in the last two decades. Australia's copyright legislation contains limited commissioning provisions applicable to a narrow range of works. The commissioning rule is, in general, consistent with the United States "work made for hire" doctrine, albeit that the doctrine only applies to limited types of works.

Some confusion and uncertainty has arisen as a result of the somewhat arbitrary application of the commissioning rule to some works and not others. For example, a software program and the related software manual may end up with different copyright owners if they are separately commissioned in contracts which are otherwise silent about copyright ownership.

Similarly, different copyright ownership rules apply to commissioned multi-media works (as compilations) and commissioned software. Copyright in the illustrations and story for a commissioned book could also be in different hands. In comparison, the rule regarding works created in the course of employment applies to all works.

Government also believes that privacy associated with photographs and portraits will be adequately protected elsewhere in the Copyright Act by the prohibition on publication, without the consent of the commissioner, of photographs and portraits created for private and domestic purposes but for which the commissioner does not own copyright.

The Reform Process

The process for possible reform began with a discussion paper entitled "The Commissioning Rule, Contracts and the Copyright Act 1994" (Discussion Paper) from the Ministry of Economic Development in March 2006 (covered in our May 2006 issue of On Your Marks). The Discussion Paper focused primarily on the position of photographers, and observed that the Ministry did not know much about any issues with the commissioning rule faced by other industries. The software industry, for one, would have believed that it was easy for the Ministry to find out about its issues - a review of recent cases about rights in software would have readily revealed some concerns.

Given the focus of the paper, it was natural that a significant proportion of the submissions received related to photographs. However, after only an initial and very general "feeling out" for issues faced by other industries, the July 2007 follow up paper, entitled "The Commissioning Rule and the Copyright Act 1994" (Second Paper), covering issues in a more holistic way, was only sent to a few organisations, primarily those who had provided submissions on the discussion paper. The Second Paper, its submissions and the resulting Cabinet paper were released to the public on the Ministry website on 29 September 2008, ten days after the Bill was introduced into Parliament.

Consequently, the Ministry missed the opportunity to have informed submissions and debate about the economic role of the commissioning rule for different industries and the associated legal implications, before the amending Bill was introduced to Parliament. This lack of transparency and public consultation is particularly troubling in light of the finely balanced split of the (only) 17 submissions received in response to the Second Paper - nine supporting repeal, eight supporting either expansion or retention of the status quo.

The Resulting Bill

Examining the stated purpose of the new Bill, it is far from clear that the issues have been discussed in sufficient depth to warrant the radical legislative overhaul that has been proposed. The Explanatory Note to the Bill states that the Bill aims to:

1. provide consistency in the default rules for copyright ownership of commissioned works;
2. facilitate clarity about the rules for both the creator and the commissioner; and
3. assist creators in retaining copyright in their works so as to expand their ability to create future works, while maintaining the same number of works commissioned.

It is difficult to see how repealing such a well-known and important back drop to day-to-day business can "facilitate clarity", particularly in light of the distinctly opaque consultation process which has led up to the proposed amendments.

Finally, and most fundamentally, there is the issue of whether abolishing the rule would in fact change much. Abolishing the rule will not eliminate the perceived inequality of bargaining power between commissioner and author (as this inequality is of economic, not legal origins). As such it is reasonable to assume that authors - particularly of works for which multiple alternative suppliers exist - will continue to readily assign copyright ownership when confronted with a contract drafted to achieve this, either through necessity or through a lack of knowledge regarding the significance of copyright ownership.

In summary, while it is possible that reform of the commissioning rule is appropriate, the Bill to repeal the rule has been introduced with insufficiently broad consultation to be confident that this change is justified across the broad range of industries it affects.

Parliament has now risen with the General Election to take place on 8 November 2008. The Bill will, therefore, not receive substantive consideration by Parliament before 2009. Please contact us if you would like to explore possibilities to lobby on this issue.

Authors

Earl Gray

Partner - Intellectual Property

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John Shackleton

Partner - Dispute Resolution

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Tracey Walker

Partner - Dispute Resolution

DDI: +64 9 977 5088

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Richard Watts

Partner - Intellectual Property

DDI: +64 9 977 5182

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Claire Foggo

Senior Associate - Intellectual Property

DDI: +64 9 977 5314

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Sonya Hill

Senior Associate - Corporate & Commercial

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