You have paid a designer to develop the new design you intend to market. You have surely bought the design rights – haven’t you? The answer may well be no, according to the European Court of Justice in Case C-32/08 FEIA, their first ruling under the Community Design Regulation – it all depends on who, where, and what was involved in the agreement you made.
The designs in question (of cuckoo clocks) were part of a project started by FEIA (Fundación Española para la Innovación de la Artesanía, or Spanish Foundation for the Innovation of Craftsmanship) and organised by AC&G SA, who then made an oral contract with Cul de Sac Espacio Creativo SL, the employers of the designers. Cul de Sac later produced a series of cuckoo clocks under the range name “Timeless” which, in FEIA’s views, infringed the unregistered Community design right in those designed for the project.
Spanish national design law, like that of the UK, vests rights in the commissioner rather than the designer. However, the Community Design Regulation confers rights of employed designers to the employer but is silent on commissioneddesigns. FEIA, having paid, claimed ownership of the Community design rights in the Spanish courts.
They won at first instance, but on appeal the Court referred the issue to the European Court of Justice.
These are the questions referred by the court (the Juzgado de lo Mercantil Número Uno de Alicante):
1. Must Article 14(3) of Council Regulation (EC) No 6/2002 of 12 December 2001 on Community designs be interpreted as referring only to Community designs developed in the context of an employment relationship where the designer is bound by a contract governed by employment law whose provisions are such that the designer works under the direction and in the employ of another? Or
2. Must the terms ‘employee’ and ‘employer’ in Article 14(3) of Regulation No 6/2002 be interpreted broadly so as to include situations other than employment relationships, such as a relationship where, in accordance with a civil/commercial contract (and therefore one which does not provide that an individual habitually works under the direction and in the employ of another), an individual (designer) undertakes to execute a design for another individual for a settled price and, as a result, it is understood that the design belongs to the person who commissioned it, unless the contract stipulates otherwise?
3. In the event that the answer to the second question is in the negative, on the ground that the production of designs within an employment relationship and the production of designs within a non-employment relationship constitute different factual situations,
(a) is it necessary to apply the general rule in Article 14(1) of Regulation No 6/2002 and, consequently, must the designs be construed as belonging to the designer, unless the parties stipulate otherwise in the contract? Or
(b) must the Community design court rely on national law governing designs in accordance with Article 88(2) of Regulation No 6/2002?
4. In the event that national law is to be relied on, is it possible to apply national law where it places on an equal footing (as Spanish law does) designs produced in the context of an employment relationship (the designs belong to the employer, unless it has been agreed otherwise) and designs produced as a result of a commission (the designs belong to the party who commissioned them, unless it has been agreed otherwise)?
5. In the event that the answer to the fourth question is in the affirmative, would such a solution (the designs belong to the party who commissioned them, unless it has been agreed otherwise) conflict with the negative answer to the second question?
The relevant parts of Article 14 are as follows:
1. The right to the Community design shall vest in the designer or his successor in title.
3. However, where a design is developed by an employee in the execution of his duties or following the instructions given by his employer, the right to the Community design shall vest in the employer, unless otherwise agreed or specified under national law.
The Court’s response to the headline issue couldn't be clearer: "the arguments of the FEIA and the United Kingdom Government that the terms ‘employer’ and ‘employee’, in particular, in Article 14(3) must be interpreted broadly in order to apply also to commissioned designs, must be rejected."
The meanings of “designer” and “successor in title” are questions of European, not national, law: "it follows from the need for uniform application of Community law and from the principle of equality that the terms of a provision of Community law which makes no express reference to the law of the Member States for the purpose of determining its meaning and scope must normally be given an autonomous and uniform interpretation throughout the Community, having regard to the context of the provision and the objective pursued by the legislation in question.... That is the case for the terms ‘designer’ and ‘successor in title’ in Article 14 of the regulation."
A designer can contractually assign title, making the assignee the successor in title. It is up to the applicable national law (which will depend on factors including the nationalities of the assignor and assignee) to decide whether a contract does in fact have that effect. Accordingly, “the regulation must be interpreted as meaning that the right to the Community design vests in the designer, unless it has been assigned by way of contract to his successor in title.” The court thus answered the first question (yes), the second question (no), and part (a) of the third question (yes), and found it unnecessary to answer part (b) thereof or the fourth or fifth questions.
The judgment itself is clear enough, but it highlights the need to ensure that outsourced designs are clearly and expressly covered by contract – merely paying for a design is no guarantee that you own it.
The helpful default ownership provisions of UK or Spanish national law cannot be relied on for Community rights. In the absence of clear written terms, the default rules concerning ownership will vary from country to country, and determining the applicable law is itself a complex task. Without a clear contract, Community design right in a given work may well end up in different hands to copyright and national registered or unregistered design right in the very same work – a commercial nightmare for the commissioner.