Typical Ordering Scenarios Where Rights Troubles Occur
Cases where production orders proceed without clarifying rights ownership, resulting in serious troubles later, continue unabated.
Company A ordered a corporate website renewal from a freelance web designer. The contract only stated "Website production package: 500,000 yen" with no agreement on copyright. Six months after the site launch, it was discovered that the designer had provided a nearly identical design to a competitor. When Company A protested, the designer claimed "I own the copyright, so I'm free to use the design elsewhere." Ultimately, Company A had to pay an additional 300,000 yen for copyright transfer.
Company B ordered core system development from a small IT company, completing it for a total of 8 million yen. Two years after operation began, when trying to commission functional additions from another company, the original development company warned "We own the source code copyright. Modifications by other companies constitute copyright infringement." Company B was ultimately forced to choose between continuing to pay expensive maintenance fees or rebuilding the system from scratch.
What these cases share in common is failing to clarify copyright and intellectual property ownership during the rights design phase of ordering. The assumption among clients that "since we ordered the deliverable, naturally the rights belong to our company" creates expensive additional costs and legal risks.
Why Rights Issues Surface Later
The fundamental reason rights troubles surface after ordering is the gap between the basic principles of copyright law and client perceptions.
Copyright law follows the principle that "the creator is the copyright holder." In other words, the designer who created the design and the engineer who wrote the program hold copyright from the beginning. Even if the client pays compensation, that is "compensation for production services," not "compensation for copyright transfer." Without clear transfer agreements when ordering, rights remain with the contractor.
However, there is an exception called "work for hire." Works created by employees as part of their duties become company-owned copyrights under certain conditions. But this only applies when there is an employment relationship and does not apply to external outsourcing contracts. Orders to freelancers or external companies generally do not qualify as work for hire.
A major reason for not clarifying rights ownership before contracts is clients' "contract negligence." They treat production work as "simple service purchases" and neglect the handling of intellectual property as intangible assets. Additionally, contractors often fail to explain rights in detail, later using rights as "trump cards."
Furthermore, the value of rights fluctuates over time. Rights issues that seemed unimportant during initial production can suddenly become critical when the deliverable becomes central to the business or a differentiation factor against competitors. Rights issues surface at business turning points like system modifications, brand expansions, or business sales for this reason.
Rights Design at Ordering: Practical Procedures and Checkpoints
To prevent rights troubles, clients must conduct rights design before contract conclusion. Approach this systematically with the following procedures.
Step 1: Rights Design Policy Decision
First, clarify the strategic positioning of the deliverable. Is it an important asset that will differentiate your company, or a general business tool? For the former, seek complete copyright transfer; for the latter, usage licensing may suffice.
For example, brand logos and proprietary systems warrant complete transfer, while standard websites and brochures may only need usage licensing. However, since changing policies later dramatically increases costs, make decisions considering future business development.
Step 2: Rights Item Identification
Rights related to deliverables aren't limited to copyright. Comprehensively check the following items:
- Copyright (reproduction rights, performance rights, public transmission rights, etc.)
- Moral rights (right of publication, right of attribution, right of integrity)
- Trademark rights (logos and service names)
- Design rights (original designs)
- Portrait rights (human photographs and videos)
- Third-party material usage rights (fonts, stock photos, music, etc.)
Step 3: Reflecting Rights Clauses in Contracts
Record rights design results as specific contract clauses. Avoid ambiguous expressions and clearly state the following elements:
"Copyright for this deliverable (including rights under Articles 27 and 28 of the Copyright Act) shall be transferred to the client upon completion of inspection. However, moral rights shall not be transferred, and the contractor commits to not exercising such rights."
"The contractor shall not provide, publish, or create similar works for third parties regarding this deliverable without prior written consent from the client."
Step 4: Third-Party Rights Clearance
Rights processing when contractors use third-party materials is also important. Check usage conditions for paid fonts, premium stock photos, external libraries, etc., to ensure no interference with the client's intended use. When necessary, require material license acquisition under the client's name.
Step 5: Rights-Related Cost Clarification
Copyright transfer often involves additional costs. Get quotes separated like "Production cost 500,000 yen + Copyright transfer cost 100,000 yen" to understand total costs upfront. Requesting rights transfer after ordering at low prices risks expensive additional charges.
Rights Design Pitfalls That Clients Often Fall Into
Even experienced clients can fall into the following rights design pitfalls.
Pitfall 1: "Blanket Transfer" Assumptions
A clause stating only "transfer copyright" is insufficient. Copyright includes multiple component rights like reproduction rights, performance rights, and adaptation rights. Additionally, derivative work usage rights under Articles 27 and 28 of the Copyright Act are not transferred unless explicitly stated. You must specify "all copyrights (including rights under Articles 27 and 28)."
Pitfall 2: Overlooking Moral Rights
While moral rights cannot be transferred, commitments to "not exercise" them are possible. Without such commitments, contractors may later claim integrity rights, asserting "unauthorized modifications were made." This is particularly important for websites and systems that undergo frequent modifications.
Pitfall 3: Rights Mixing in Partial Outsourcing
In large production projects with multiple contractors handling different parts, rights relationships become complex. When Company A handles design, Company B handles coding, and Company C handles systems, each company's rights scope overlaps and intermingles. Create a rights allocation table in advance and reach agreement with each contractor.
Pitfall 4: Rights Processing During Existing System Modifications
Adding features or modifying existing systems may require consent from the original system's copyright holder. This creates high copyright infringement risks, especially when commissioning modifications from companies different from the original developer. Before modifications, organize existing system rights relationships and obtain rights transfers or usage licenses as needed.
Pitfall 5: Territorial Nature of Rights in Global Expansion
Since copyrights are managed country by country, deliverables intended for overseas expansion may require rights acquisition or registration in each country. Trademark rights particularly operate on country-by-country registration, so services and brands expanding globally should conduct trademark research and applications in major markets.
Pitfall 6: Insufficient Consideration of Rights Duration
Copyright protection lasts 70 years after the creator's death (or 70 years after publication for corporate works). In contrast, utility model rights last 10 years and design rights last up to 25 years. Select appropriate rights protection strategies based on the deliverable's nature.
Client Actions to Ensure Rights Design
To prevent rights troubles and streamline ordering operations, clients should implement the following actions.
Action 1: Create Rights Design Checklist
Create a checklist covering the following items for each order and operate it as a mandatory pre-contract process:
□ Clarify strategic positioning of deliverable □ Decide policy: rights transfer vs usage licensing □ Record copyright transfer clauses in contract □ Obtain commitment to not exercise moral rights □ Confirm third-party material rights clearance □ Obtain rights-related cost estimates □ Confirm rights transfer procedures at delivery
Action 2: Establish Standard Contract Templates
Create standard contract templates incorporating rights clauses and share them across ordering departments. Prepare multiple templates by industry and deliverable type, selectable according to projects. Creating templates in collaboration with legal departments or external attorneys minimizes legal risks.
Action 3: Improve Rights Literacy Among Ordering Staff
Educate staff involved in ordering about basic copyright knowledge and rights design importance. Particularly emphasize the copyright law principle that "rights belong to creators" and that "ordering ≠ rights acquisition."
Action 4: Inventory Existing Deliverable Rights Relationships
Conduct inventory of rights relationships for previously ordered deliverables. For deliverables with unclear rights ownership, proceed with additional rights transfer agreements or usage licensing clarification according to priority. Prioritize websites, systems, and brand assets central to business operations.
Action 5: Implement Rights Management System
Introduce systems for centralized management of deliverables and rights relationships. Create databases of project names, contractors, deliverable content, rights ownership, contract deadlines, etc., to visualize rights relationships. Automatic alert functions for renewal dates prevent contract renewal oversights.
Action 6: Establish Rights Discussion Habits with Contractors
Discuss rights from the quotation request stage and confirm contractors' attitudes toward rights. Contractors who dislike rights transfer or avoid rights explanations may cause future troubles. Prioritize selecting contractors who can engage in constructive rights discussions.
Most importantly for clients is positioning rights design not as "contract ancillary matters" but as "core ordering process." Managing rights relationships at the same level as deliverable quality builds foundations for avoiding long-term business risks and strategically utilizing intellectual property.