Commissioned designs: an oral contract is not worth the paper it is not written on
The European Court of Justice (ECJ) recently issued a preliminary ruling concerning the interpretation of Articles 14(1) and 14(3) of the EU Community Designs Regulation (6/2002) following a reference by the Juzgado de lo Mercantil No 1 de Alicante y No 1 de Marca Comunitaria. The case involved the company Cul de Sac Espacio Creativo SL, which designed a series of wall clocks, manufactured as part of a design project by the Fundación Española para la Innovación de la Artesanìa (FEIA).
By means of an oral agreement, Cul de Sac was responsible for creating a cuckoo clock design and received €1,800 plus value added tax as payment for its services.
Cul de Sac and Acierta Product & Position SA later commercialised identical cuckoo clocks as part of their collection, and FEIA brought an action against them for infringement of an unregistered Community design and for unfair competition.
The relevant provisions of the Community Design Regulation state as follows:
Article 14(1): 1. The right to the Community design shall vest in the designer or his successor in title...
Article 14(3): 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 Juzgado de lo Mercantil No 1 de Alicante y No 1 de Marca Comunitaria stayed the proceedings and referred the following questions to the ECJ for a preliminary ruling:
- Whether Article 14(3) applies to Community designs produced as a result of a commission, and therefore outside an employment relationship.
- Whether Article 14(1) must be interpreted as meaning that the right to a Community design vests in the designer unless it has been assigned by way of contract to its successor in title.
On the first issue, the ECJ pointed out that the terms “employer” and “employee” in Article 14(3) could not be interpreted broadly in order to apply the exception provided to commissioned designs. In fact, Article 14(1) sets down the general rule that a Community design vests in the designer or in its successor in title, whereas Article 14(3) provides a special system for Community designs developed in the context of an employment relationship.
The drafting history and the procedure by which the Community Design Regulation was adopted confirm this strict interpretation that “employer” and “employee” cannot be interpreted broadly to mean “principal” and “agent”. The ECJ concluded that Article 14(3) defines a special system for employment relationships which cannot be applied to other contractual relationships, such as in the case of a Community design produced as a result of a commission.
Following this literal interpretation, the ECJ answered the second point, affirming that Article 14(1) establishes that the right to the Community design vests in the designer, unless it has been assigned by way of contract.
Provided that the case at issue relates to unregistered Community designs produced as a result of a commissioned work, and that such design is not developed in the context of an employment relationship, the ECJ deduced the possibility of assigning, by way of contract, the right to the Community design from the designer to its successor in title, in line with both the wording of Article 14(1) and the aims of the regulation.
In light of all these considerations, the general rule of Article 14(1) applies to all designs developed outside an employment relationship and even in the case of commissioned designs. The right to the design can be assigned only by way of contract and the national courts must ascertain the content of the assignment by applying the national laws on contracts.
Since these indications clearly addressed the interpretation of Articles 14(1) and 14(3), the ECJ did not answer the remaining questions regarding the possibility of applying national laws governing designs, which can place on an equal footing designs produced within an employment relationship and designs resulting from a commission.
The principle clarified by the ECJ’s decision should be borne in mind by any party commissioning designs, as the ECJ made clear that within this framework, an oral contract is not even worth the paper it is not written on.
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