Austria: The (new) provisions on unknown exploitation forms and the right of second exploitation in copyright contract law

The amendment to the Austrian Copyright Act introduces a whole range of new provisions on copyright contract law, strengthening the position of authors and performers¹. In our first Legal Insight ("Austria: The (new) Copyright Contract Law") we provided some background information and an overview. In our second and third Legal Insights, we introduced the new remuneration provisions ("Austria: The (new) copyright remuneration rules for authors and performers") and the transparency obligation ("Austria: The (new) copyright transparency obligation"), which are based on the DSM Directive. We continued with provisions additionally adopted from the German Copyright Act, starting with the transfer of rights by the purpose of the contract ("Austria: The (new) transfer of rights by purpose in copyright contract law"). Now it's time for the fifth and final Legal Insight of this series about unknown exploitation forms (Section 24c para 2 and 3 Austrian Copyright Act; Section 31a German Copyright Act) and the right of second exploitation (Section 31a Austrian Copyright Act; Section 40d German Copyright Act):

New provision on unknown exploitation forms (Section 24c para 2 and 3 Austrian Copyright Act)

To protect the author, the provision limits the possibilities of granting rights for as yet unknown forms of exploitation (since the author cannot foresee the economic relevance at the time such rights are granted). As a reminder, a form of exploitation describes the scope and "field of use" of exploitation rights. Accordingly, a contract granting right to unknown exploitation forms must be in writing and the author has a right of revocation that cannot be waived in advance.

What is unknown?

Whether a type of exploitation is known is not only determined by the fact that the technical possibilities for it exist, but also by the economic relevance. New forms of exploitation usually come along together with technical revolutions and ground-breaking inventions that would happen frequently, but not every day. Therefore, unknown forms of exploitation are those that may be assumed by technical experts but are not known to the average author or the general public.

Written form requirement

Written form is required for the granting of rights to unknown forms of exploitation. This means that, in principle, a handwritten signature or qualified electronic signature is required from both parties.

Revocation right

In addition, the author has a right to revoke the grant of rights at any time insofar as it relates to unknown forms of exploitation. Such a right cannot be waived in advance. This is intended to give the author the opportunity to reconsider their earlier decision as soon as the new form of exploitation has become known.

Naturally, the addressee of this revocation will initially be the author's contractual partner. If the contractual partner has permissibly transferred the rights, the author may revoke the agreement with the acquirer. Alternatively, they may continue to adhere to their contractual partner, because authors are not obliged to follow a chain of rights transfers. The revocation leads to an ex nunc loss of the rights granted in relation to the new forms of exploitation.

However, the author's right of revocation will expire three months after the contractual partner has sent a notification of the intended commencement of a new form of exploitation to the author (at the last known address). Thus, the contractual partner may force the author to decide whether to revoke or not.

In the absence of notification, the right of revocation remains in force and there is a risk for the licensee that at some point the author may revoke the rights.

However, there are several exceptions where there is no right of revocation:

• cinematographic works or works used for the production of a cinematographic work (e.g. screenplay, film music);
• subordinate contributions;
• works created within the scope of an employment relationship;
• if separate additional reasonable remuneration for the new form of exploitation has been agreed upon;
• computer programs.²

Applicability

The provision is only applicable to contracts concluded after 31 December 2021 and only in an author/rightsholder relation (thus not between rightsholders).

Right of second exploitation (Section 31a Austrian Copyright Act)

The provision stipulates that exclusive rights will be "converted" into non-exclusive rights after 15 years, if the exclusive rights were granted for a lump sum payment. This should give the author the chance to exploit the work again after 15 years.

Lump sum payment

A lump sum payment is a payment that is not linked to the duration of use, the intensity of use or the hoped-for or subsequently achieved success of use. It is irrelevant whether such lump sum remuneration is paid in one lump sum or in instalments.

Conversion and deviating agreement

The secondary exploitation right arises automatically after 15 years if the conditions are met. After 15 years, the exclusive licence is converted automatically into a non-exclusive licence. Sublicences should remain in force, but must consequently be converted into non-exclusive sublicences if they had been exclusive.

At the earliest five years after the beginning of the 15-year period, the contracting parties can extend the exclusivity to the entire duration of the granting of the right of use. However, this must be done in writing.

Applicability

The secondary exploitation right is only available to the author and their heirs (not to other right holders) and is only to be applied to contracts concluded after 31 December 2021. It can be assumed that the right can be waived, although the intention of the legislator in this respect cannot be clearly interpreted from the provision.

Irrespective of this, the secondary exploitation right does not apply in the following cases:  

• subordinate contributions;
• works created within the scope of an employment relationship;
• works created to be used as trademarks, design and other sign (e.g. company names), whether registered or not;
• works that are not to be published or disclosed to third parties (e.g. internal expert opinions);
• computer programs³;
• commercially produced cinematographic works⁴ and performances for cinematographic works.⁵

Practical advice for licensees

In the era of the metaverse, AI and NFTs, new ways to exploit copyright works are appearing more and more frequently. It is therefore advisable to state in the licence agreement that rights to yet unknown forms of exploitation are granted as well. In addition, it should be borne in mind that such contracts are signed by both parties. The right of revocation remains as a risk unless one of the exceptions applies.

With regard to the right of second exploitation, it is advisable – if the work to be licensed does not already fall under the above-mentioned exceptions – to consider whether the conversion of the right is indeed desired by the parties. If this is not the case, the applicability of the provision should be excluded in the contract. If the right is not waived or if it turns out that it cannot be waived, the licensee should keep an eye on the five-year period and may afterwards try to obtain written confirmation from the author that the exclusivity is extended to the entire duration of the contract.

¹ The provisions apply equally to authors and performers. For better readability, however, the article only refers to authors.
² According to Section 37g Austrian Copyright Act.
³ According to Section 37g Austrian Copyright Act.
⁴ According to Section 40 para 3 Austrian Copyright Act.
⁵ According to Section 69 para 2 Austrian Copyright Act.

authors: Dominik Hofmarcher, Roland Vesenmayer