Copyright is a type of intellectual property right, and one of the most common among the various intellectual property rights. Copyright can exist in musical works, literary works, films, sound recordings, artistic works, derivative works, broadcasts and even software code.
Copyright protection is provided under the Copyright Act 1987. Unlike trademarks, designs and patents, there is no specific system of registration for copyright in Malaysia. To put simply, it gives the right to control what is done to a work. Thus, the copyright owner is the only one who can prohibit or allow certain acts (e.g., reproducing, distributing, licensing, or recording) being done to a work.
It is commonly thought that the author of a work is always the copyright owner. But this is not true. Authorship and ownership of copyright are two different – but closely linked – concepts.
Section 26(1) of the Copyright Act 1987 says that ownership of the copyright will initially be given to the author. But the copyright may then be transferred or assigned to someone else. Therefore, the author and the owner of a copyright work are not necessarily the same person.
With that said, ownership of copyright is far more important in economic terms than authorship. The owner can sell/assign/transfer the copyright (and all its associated rights). So, parties must take care to ensure that they address who obtains or retains ownership of the copyright in their works when entering into agreements. Typical scenarios where ownership of the copyright is compromised are:
- Commissioned works; and
- Co-ownership.
Commissioned works
Section 26(2) says that if a work is commissioned by someone who is not the author’s employer, the ownership of the copyright will be transferred from the author (where the copyright is initially vested) to the person who commissioned the work.
Aktif Perunding Sdn Bhd v ZNVA & Associates Sdn Bhd [2018] 7 MLJ 692 explains the meaning of ‘commission’. Essentially, it means to order/request for something, while connoting an obligation to pay.
The court also states that there are certain requirements. The most important requirement is that the commissioning must be antecedent to the work. In other words, the commissioning or instruction must come before the work is made.
But importantly, section 26(2) goes on to say that this transfer of ownership in the copyright work can be excluded by agreement.
Co-ownership
Section 27(5) says that if a joint interest in a copyrighted work is shared by multiple parties, those parties will be deemed to be co-owners.
Under section 27(4), a co-owner can assign the copyright or grant a license to do an act controlled by copyright, even without the consent and/or knowledge of the other co-owner(s). Parties would usually want to avoid a scenario of co-ownership in a copyrighted work if possible as it gives rise to inherent challenges. This issue of co-ownership commonly arises when parties collaborate on a work.
Where multiple parties collaborate on a work, the resulting work may be deemed to be a ‘work of joint authorship’.
Section 3 defines ‘work of joint authorship’. This definition has 2 elements:
- The work is produced by the collaboration of 2 (or more) authors; and
- The contribution of each author is not separable from that of the other author(s).
An example of ‘separable contribution’ is where a book compiles essays written by different people. Because the author of each individual essay can be identified, it is separable.
In situations involving collaborative work (e.g., joint ventures), it is important to ensure the individual contributions of the parties are separable. If a work is deemed inseparable, this would result in the collaborators being joint authors (and therefore co-owners) of the final work.
Key Takeaways
- Parties entering into collaborative arrangements resulting in the creation of copyright works (including Software Code) should be careful with the terms and wordings used in the agreement.
- It is important to have an agreement so that ‘ownership/interest’ in the resulting work can be addressed upfront before the work is made, and to avoid that the parties unintentionally being deemed as co-owners.
- When producing or developing commissioned works for others, parties should consider whether it is appropriate to include express exclusion clauses to prevent the transfer of ownership under section 26(2). For example, certain third party works or original works created by the service provider being their ‘inventory’ can be excluded.
- When collaborating on a work, parties should try to ensure that each parties’ contributions are separable. This can be done by specifically setting out the contributions of each party in the agreement.
- By failing to do the above, parties could put themselves in a dangerous position where they could lose their exclusive copyright. Their work can then be mass reproduced and distributed by the unintended co-owner, causing the original work to have a much lower value, if any at all.
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This article was written by Jie Hang (Intern) and edited by Shawn Ho (Partner). Shawn leads the corporate practice group of Donovan & Ho, and has been recognised as a Notable Practitioner, whilst the firm has been recognised as a Notable Firm for Corporate and M&A by Asialaw Profiles 2020 and 2021. We are also ranked as a Recommended Firm by IFLR1000 2020 and 2021.
Our corporate practice group advises on corporate acquisitions, restructuring exercises, joint venture arrangements, shareholder agreements, employee share options and franchise businesses, Malaysia start-up founders and can assist with venture capital funds in Seed, Series A & B funding rounds. Feel free to contact us if you have any queries.
