If you are a creative who produces works based “on commission”, you could be forgiven for thinking that you own the copyright in the works produced and have some degree of control over how it is used and commercialised. However, the legal position is often more nuanced, and the rights in commissioned works may rest with someone other than the creator.
The “Commissioning Rule”
One of the most important parts of the Copyright Act 1994 for artists, software developers, designers and other creators of original works is the “Commissioning Rule”. The Commissioning Rule (contained in section 21(3) of the Copyright Act 1994) provides that, where an original work is created on a client’s instructions for a fee (or other reward), then the client (not the creator) owns the copyright in the work. Where there is no agreement to the contrary, the Commissioning Rule will apply by default.
The Commissioning Rule applies to a broad range of works including photographs, software, paintings, drawings, maps, charts, plans, engravings, models, sculptures, films, and sound recordings. It does not apply to literary works such as novels or magazine articles.
However, the Commissioning Rule can be contracted out of if there is an agreement between the creator and the client before any works are created. Therefore, we recommend that creators that are regularly commissioned for works have terms and conditions in place that cover copyright ownership. Lane Neave can assist with preparing appropriate terms and conditions suitable for your business.
Having ownership in your works, creates opportunities for commercialising your intellectual property. We cover commercialising your intellectual property in more detail here.
When is work ‘commissioned’?
Two requirements must be satisfied for a “commission” to be a valid commission under the Copyright Act:
1) There must be an obligation on the commissioning party/the client to pay for the work created in pursuance of the commission.
A client’s failure to make payment for a commissioned work does not displace the Commissioning Rule, nor does the Rule require agreement about the precise amount to be paid. Indirect rewards, or the possibility of a later reward (such as the potential for future business or future engagements), may be sufficient for the Courts to deem the work as created in pursuance of a commission. The supply of initial works free-of-charge will not automatically prevent a finding that there has been a commission, where the initial works were created to secure a future paid engagement.
2) The commission (i.e. the order or request for work) must predate the creation of the work. Otherwise, the work cannot be said to have been created “in pursuance of that commission”.
New Zealand Courts have found that a “commission” does not need to be expressly recorded in a contract. The existence of a commission can be inferred from the circumstances or from the conduct of the parties, even if there is a written contract that omits specific mention of a “commission”.
Timing is important
The timing of the commission is critical. Copyright vests in a work the moment that (original) work is created.
The Commissioning Rule applies to complete as well as incomplete works made in pursuance of a commission, from the time that the work is created.
If the creator of the work wishes to retain copyright (even if only to secure payment), it is strongly recommended that the parties contract out of the Commissioning Rule before creating the work, usually by a written agreement with their client recording copyright ownership and usage rights for the commissioned work. If no agreement is made before a commissioned work is created and supplied to the client, then the client owns the copyright, even if the work was a preliminary draft (e.g. concept drawing or beta version of software).
If a creator intends to contract out of the default position in the Commissioning Rule, it is important they bring their supply terms to the attention of the client and ensure they are accepted.
Types of work covered by the Commissioning Rule
As noted earlier, the Commissioning Rule vests copyright ownership in the commissioning party for specific categories of work.
The Commissioning Rule does not apply to literary works. Copyright ownership for this type of work will depend on the context in which the work was created (e.g. in the context of employment) and/or the details of any corresponding agreement.
The exclusion of some types of works from the Commissioning Rule can cause unusual situations. For example, a customer who commissions computer software with an accompanying user manual would, if the Commissioning Rule applied, own copyright in the software but not the manual, as the latter falls into the category of literary works not subject to the Commissioning Rule. This highlights the importance of reaching a clear agreement on copyright ownership prior to commencing any commissioned work.
Avoiding disputes
The Copyright Act allows parties to contract out of statutory presumptions of copyright ownership, such as the Commissioning Rule. To avoid situations which lead to unclear or unintended copyright ownership, an agreement at the outset between creator(s) and client(s) is essential. That agreement could cover:
- Copyright in pre-existing works supplied by each party (if any);
- Copyright in new works created under the commission;
- Use of third-party copyright or open-source components in the work;
- Copyright in materials/ancillary works used or supplied in the course of creating the commissioned works;
- Usage rights, including sublicensing, territory, duration etc.; and
- Moral rights, including attribution rights and requirements.
Creators who often create works for clients should adopt sound contracting procedures and terms and conditions regarding copyright ownership. Reach out to our experienced team for advice.
Disclaimer
This article by its nature cannot be comprehensive and cannot be relied on by any client as advice – its purpose is to help clients identify legal issues on which they should seek legal advice. Please consult the professional staff of Lane Neave for advice specific to your situation.
