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Clifford Chance

Clifford Chance

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Acquisition of copyright in the Polish legal environment – some remarks on the challenges arising from the fields of exploitation

While the significance of new technologies and new forms of trading in works is increasing and they are becoming relevant to a growing number of business models, an important question from the Polish legal point of view is how to protect these new forms and how to effectively acquire the IP rights to them. This article sheds light especially on the fields of exploitation in this new legal environment (I), how the fields of exploitation impact the drafting of contracts (II), and will also touch upon a non-fungible token, which may cause confusion and uncertainty when it comes to trading of IP assets (III).

(I) Fields of exploitation in the Polish legal environment

The idea of Polish fields of exploitation is a quite original solution. The concept of fields of exploitation refers to a functional whole allowing for the exploitation of a work. Under the Polish Copyright and Neighbouring Rights Act (the "Polish Copyright Act", the "PCA"), "economic copyright", "fields of exploitation" and "modes of use" are not the same thing. These various rights are associated with the modes of use, i.e. the fields of exploitation. For example, the broadcasting of a work is a field of exploitation, but giving consent to broadcast is a sub-entitlement under a right, which entails the possibility of demanding remuneration. The distinction between them is crucial when drafting a contract transferring or authorising the use of a protected work.

A specific item is acquired when a sale is made, and the agreed price is paid. In the case of intangible assets (works), it is different. The structure of the fields of exploitation is supposed to specify the subject of performance. A field of exploitation means any manner of exploitation considered technically and economically independent in the trading practice. The technical difference in relation to the methods of distribution occurs when the quality of multiplication of the message improves and, at the same time, there is a wider reception of the work by new groups of recipients, i.e. when a new market for using the work is created. Only the indication of the work, together with the specific field(s) of exploitation, does constitute proper designation of the subject of performance. At the same time, the fields of exploitation mark, in a way, the limit of transfer of the right, as only the right to dispose of the work in the given field(s) of exploitation is transferred.

Hence, the need to list the fields of exploitation is extremely important when drafting contracts. Omitting a field of exploitation in an agreement deprives the acquirer (or the licensee) of the rights to exploit a field not listed in the agreement (i.e. to use the economic rights to distribute, sublicense the works, etc.). It is also worth noting that granting an exclusive licence for certain fields of exploitation does not exclude the possibility of granting an exclusive licence for the same right, but in other fields of exploitation (for the sake of clarity, granting an exclusive licence for the same fields of exploitation to two different entities would lead to claims against the licensor for non-performance of the agreement). The fields of exploitation make it possible to separate various forms of exploitation of the works and to seek remuneration for each specific form of exploitation. Thus, failure to specify the fields of exploitation in a contract opens the way to claims for remuneration for the use of each field of exploitation by a third party (e.g. a party to the contract which was improperly constructed by not specifying the fields of exploitation).

(II) Security of the exercise of rights and fluidity of new fields of exploitation – possible implications of specificity on contract drafting

The basic problem that arises during the drafting of copyright agreement is the issue of proper designation of the fields of exploitation. It is assumed that a creator may do anything with a work that is not expressly excluded from their power. Thus, under the PCA, it is not possible for an author to permanently transfer the entire copyright to another person, as under the agreement one can transfer the copyrights in the fields of exploitation known at the time of concluding the agreement.

Assigning a separate character to a field of exploitation should be allowed when the trading practice recognises such separate character. Where a practice – generally established by the stronger parties to the contract – does not recognise the distinctiveness of a field of exploitation, careful consideration should be given to whether the exploitation in question is capable of generating new sources of profit, usually by examining economic distinctiveness. Technological separateness, a different audience, a different distributor and territorial and linguistic coverage are prerequisites for recognising a new field of exploitation as an economically distinct field.

An economically distinct way of exploitation of a work manifests itself in the possibility of realising the earning power inherent in a given work, also indicating a new group of recipients, which comes down to the determination of the rates of remuneration for each use of the economic rights in a given field of exploitation. In fact, it comes down to the distinctiveness of making a profit.

(III) The new face of trading in works in the digital reality

The dynamic development of new techniques of exploitation of works does not seem to be harmonised with the statutory constructions, in particular with regard to the prohibition of contractual coverage of unknown fields of exploitation. Cyberspace itself has been recognised for years as a separate field of exploitation. This is supported by the different way of reaching the public. However, over the last few years, it has become apparent that various areas within the cyberspace itself have become distinct, which, in line with the above attempts to define the fields of exploitation, would be an argument for a legitimate definition of multiple fields of exploitation within the cyberspace: not only the hyperlinked system, which is considered to be a separate field of exploitation from placing a work on a website, but also the emergence of issues related to blockchains and the whole world of the newest technologies is a potential separate field of exploitation.

One such example is non-fungible token, created ("minted") based on blockchain technology, which support smart contracts (the "NFT"), a solution that makes it possible to create a certificate of authenticity that cannot be forged or hacked. It is a system that makes it possible to pay online for unique, non-counterfeit, virtually created objects that may be protected by the PCA due to their individual nature. NFT may contain a link to where the work that represents the NFT can be found (the components that should be found with the NFT are the token ID, generated when the NFT is "minted", and the smart contract address, i.e. the address in the blockchain where the NFT is stored). All transactions stored in the blockchain are public and visible to everyone (e.g. via the "Etherscan" browser). As access to the this is publicly available and the file to which the NFT transaction relates is stored on a properly hosted website, referencing the token could theoretically be another way of communicating about the work, although hyperlinked referencing has been commonplace for years. Judging this on the basis of the above-mentioned economic rationale, the sale of items produced virtually by NFTs may represent a new earning potential. The NFT as a digital certificate of authenticity and ownership of some digital item that can be protected under PCA is in practice available to a certain circle of recipients who are able to trade objects through the NFTs. The NFT is a kind of digital signature of the creator or a digital proof of purchase of the creator's work. Therefore, recording the ownership of a work in an NFT may constitute the exercise of an economic right in a new and separate field of exploitation if the NFT contains at least the data making it possible to establish unequivocally that the NFT in question is linked to a real work.

The attribution of the character of a distinct field of exploitation should be allowed when the practice of trading recognises such distinctness. It is advisable to consider whether a particular mode of exploitation has the capacity to generate new sources of profit. Economic distinctiveness implies that if the benefits of a potentially separate field of exploitation are independent of those from other established fields of exploitation, it constitutes a field of exploitation separate from them. Consequently, in the absence of any indication in the contract, it makes it possible for the creator (or the right holder) to seek remuneration for the exercise of the economic rights in this new field of exploitation. At the same time, the fields of exploitation indicated in the agreement, in which the economic copyrights are to be exercised, may be only those that are known at the time of concluding the agreement. For the sake of completeness, it is believed that this "knowledge" should be related to a particular environment in terms of subjective and territorial aspects, demonstrating the existence of a given manner of "communication" of a work.

(IV) Summary

In view of the limitation consisting in indicating only the known fields of exploitation, it is advisable to include appropriate contractual clauses to transfer the rights to any new fields of exploitation, e.g. by granting the acquirer priority to acquire the exploitation rights to the work in any newly-created field. These are simple examples of ways to both protect against the failure of a key field of exploitation of a acquired or licensed work, and against unexpected future exploitation not known at the time of contracting. These clauses can be individually tailored, though bearing in mind the requirements imposed by PCA as described above.

The world is constantly changing yet the rules remain the same. It is only a matter of knowing how to adapt them to the new, unforeseen, reality.

Key issues

  • Fields of exploitation may have implications, depending on the jurisdiction, and improper regulation can lead to the unlawful use of works, which may entail a renumeration claim
  • New forms of use of protected under IP law work may necessitate renegotiation of contracts transferring or authorising the use of the work