The peculiarities of Bulgarian Law
There are a number of forms of intellectual property rights to protect software depending on its specifics. Subject to this article will be the protection by copyright in computer programs, which is most commonly applied under Bulgarian Law. The owner of copyright in software has various exclusive rights, including to use, reproduce (or “copy”) and distribute it, and to allow or prohibit these acts to third parties. The rule seems simple, as long as we can establish whether there is a copyrightable subject matter, who is the author pursuant to the law and in which cases another person holds the exclusive rights. These questions are often at issue in court battles about intellectual property. In Oracle v. Google the U.S. court had to rule whether the Java APIs (Application Programming Interfaces) are subject to copyright. What is the position in the U.S., however, would not matter in case that Bulgarian Law is applicable, as copyright is governed by the principle of territoriality. Despite that the rules regarding computer programs are harmonized to a large extent in the EUi, the Bulgarian legislation and case law has its own peculiarities.
A computer program is protected when it is “original” and recorded in material form. In respect of the first requirement no qualitative or aesthetic characteristics are assessed. The criterion is the program to be the author’s own intellectual creation. Only the expression of the program which allows its reproduction is protected, while its underlying ideas and principles, functions, as well as algorithms and programming languages are not subject to copyright. According to this principle CJEU found that the source code, object code and also the preparatory design work which may result in the creation of a program at a later stage are protected by copyright, but not the graphic user interfaceii (the latter may be protected as another work, if it is original). In another case CJEU concluded that a company which purchased a licence for the software of a competitor and developed a rival program, did not infringe the copyright of the owner, insofar as it only observed and tested the software and did not have access to its source codeiii .
Copyright arises automatically upon the creation of the work (in our case the computer program), without being necessary to perform any registration or other formality. However, to ascertain since when the copyright has arisen and who owns it, it is important to be able to prove these circumstances with the proper documents.
Author of the software is the person who has written it and according to the general rule he will also be the holder of the copyright. It is possible, however, that the person has made the program as part of his employment duties or has been commissioned to develop it. In these cases special rules apply regarding the ownership of copyright. Pursuant to Bulgarian Law it will vest in the employer if the computer program has been created in the course of the employment, in the absence of an agreement to the contraryiv. A question arises what “in the course of employment” means and a guideline can be found in the European directive which says that the program has to be created by the employee in the execution of his duties or following the instructions given by his employerv. Generally, to prove his ownership the employer has to establish that the software has been written by his employee, whose employment characteristic include duties of development of software, and that there is not an agreement that the copyright remains with the employee. It is possible, however, that the employee has made its own software after work or at weekends and that the employer pretends ownership in it, because the person is his employee and has used company’s equipment. In this case it would be decisive whether the employer has ordered the creation and delivery of this type of software to his employee – if not, then the copyright could be with the developer, although he has been in employment relationship at that time. In the opposite scenario, even if the employee has written the software outside his working hours and at his own equipment, in case that his employment duties include the development of similar programs, then the copyright will probably vest in the employer. It is, therefore, advisable to define clearly the duties of the employee and to provide expressly in his employment contract clauses governing the copyright in the results from his work.
Things look different when the software has been commissioned, for example a company has ordered this to an external developer or to a software company. In this case according to Bulgarian Law the copyright is held by the author (i.e. the developer) unless in the contract for commissioning the parties have agreed that the client will be the rightholdervi. Even if copyright remains with the author, however, the Law introduces a presumption that the commissioning party is entitled to use the work without the permission of the author for the purpose, for which it has been ordered, unless otherwise is agreedvii. It happens that the contract does not have terms regarding copyright, i.e. there is no “otherwise agreed” by the parties, in which case the general rule applies. The latter used to raise a number of questions to academics and courts, and namely whether the commissioning party has an exclusive or non-exclusive right to use the works, whether this right is limited by term and territory and whether the “otherwise agreed” has to be a provision in the contract for commissioning or could be set out in another contract. The answers to these questions are of particular importance, because the difference between exclusive and non-exclusive right of use is that if the first is granted only the client will be entitled to exploit the product, while the non-exclusive right entitles the author to use it together with him, as well as to grant rights to third parties. Moreover, only the owner and the exclusive user may claim damages for infringement of their copyright before the court. In previous legal cases Bulgarian courts and arbitral tribunals held that in the absence of “otherwise agreed” the commissioning party who assigned the development of computer program had the non-exclusive right to use it for a period of 3 years. Judgment of the Supreme Cassation Court of May 13, 2016 reverses such case-law and gives answers to the controversial questions, which are mandatory for the first instance and the appeal courts. The Supreme Cassation Court (SCC) ruled that if there is nothing agreed in the contract for commissioning, the client has an exclusive right to use the material result without permission of the author for the purpose for which it has been ordered. It also follows from the Judgment of SCC that this right is not limited by term. The parties, however, may agree on other terms and conditions in the contract, such as non-exclusive right of use, a limited period or territory, or other restrictions for the commissioning party. According to SCC the “otherwise agreed” could be a clause in the contract for commissioning or provided in another contract, which re-arranges the relationship of the parties. Last but not least, SCC confirms that the use of the work under the contract for commissioning should be against consideration, even if such has not been agreed in the contract.
In our view SCC has been quite categorical and ultimate in its position which could hardly be grounded under the effective Bulgarian legislation. We find a good example in the English case law, where in the absence of express provision in the contract, the court may rule that there are implied terms of either assignment or licence of the copyright in favour of the commissioning partyviii. The test is what is the necessity of the client in relation to the exploitation of the copyrighted work in the circumstances – whether he will be satisfied only with the right to use it, or he has to be the owner in order to be eligible to benefit from the commissioned work. Relevant factors would be the price paid under the contract and the impact on the contractor, and namely whether the intention of the parties was the contractor to exploit the work. Certainly, we should not forget that the Bulgarian courts do not have freedom to create the rule of law, as it is in common law systems, however, they can make an interpretation of legal provisions which becomes mandatory. Ultimately, authors of software and their clients are advised to define expressly their rights in the contract.
McGregor & Partners
The article has been published in Bulgarian, in Capital Daily: www.capital.bg
i Directive2009/24/EC of the European Parliament and of the Council of 23 April 2009 on the legal protection of computer programs
iiBezpečnostní softwarová asociace – Svaz softwarové ochrany v Ministerstvo kultury, Case C-393/09 Judgment 2010 (CJEU)
iiiSAS Institute Inc. v World Programming Ltd., Case C-406/10 Judgment 2012 (CJEU)
ivArticle 14 of the Law on Copyright and Related Rights
vArticle 2, point 3 of Directive 2009/24/ЕО
viArticle 42 (1) of the Law on Copyright and Related Rights
viiArticle 42 (2) of the Law on Copyright and Related Rights
viiiRobin Ray v Classic FM  FSR 622