The Pitfalls of Hackathons and Intellectual Property – and How to Avoid Them

The Pitfalls of Hackathons and Intellectual Property – and How to Avoid Them

When planning a hackathon, a fundamental question is bound to arise – who holds the intellectual property rights to the submitted projects? Will participants retain the rights to their ideas, or will they be required to transfer them to the organizing company? It can vary from hackathon to hackathon. But in any case, it’s essential to take a careful look at the conditions of participation.

Hackathons have experienced a boom in popularity in recent years. Almost all major companies organize them regularly, and they’ve resulted in a number of big-name startups (including Tinder and Lyft). But what is a hackathon?

It’s an innovation contest in which participants are tasked with addressing a specific issue. The term comes from the words ‘hack’ – a quick DIY solution to overcome a problem – and ‘marathon’ – the famous endurance event that puts participants’ stamina to the test. During a hackathon, developers, entrepreneurs and designers get together to innovate, code, and pitch their project to a jury. Some hackathons are held as physical events over 48 hours, while others (including Agorize’s) take place via an online platform. This type of hackathon lasts for several months, and culminates in an in-person grand final featuring a jury. Because they take place over a longer period of time, they result in projects that are better developed and more complete.

Why take part in a hackathon? Firstly, because it’s a stimulating and educational experience – team work, competition and working to solve a real-life issue are all essential parts of a hackathon. Secondly, because hackathons are golden opportunities for participants to get themselves noticed by companies – not to mention the chance to accelerate their project. If you’ve got the next BlaBlaCar or Facebook in mind, what could be better than presenting your project to a jury of potential mentors and investors who are willing to offer you premises, funding and a network of contacts?

A few legal considerations

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The competitive environment of a hackathon boosts participants’ creativity and inventiveness. In itself, this is a huge accelerator of innovation. But hackathons raise an essential question: who benefits from the intellectual property (IP) rights to the resulting projects? Participants are the inventors, designers and coders, so you might think that all the rights are theirs.

But hackathons’ conditions of participation may include alternative arrangements, such as exclusive rights, first-look rights, or shared IP rights. What’s more, the finalists and winners are generally given prizes or sums of money – essentially in exchange for the participants’ ideas.

The more revolutionary an idea is, the more coveted it will be – and the more care its creators will need to take when they reveal it to the public. As such, hackathon participants need to make sure that they properly read and understand what they’re signing up for before they agree to take part. Sometimes, only some projects will be given prizes, whereas the IP rights to all the other projects will be transferred to the organizing company with no prize in return.

What does IP law say about this?

1. Protection regimes and types of protection

Intellectual property rights are covered under a number of protection regimes, depending on what is to be protected. For example, literary works fall under copyright law, whereas the graphic identity associated with a company or a product would fall under trademark law. In France, most of the regulations governing IP can be found in the French Intellectual Property Code (CPI).

The main rights protections it includes are:

  • Copyright law
  • Patent law
  • Trademark law

Copyright applies to books, musical works, illustrations, fashion and software source code, among others. As hackathons are computer programming competitions, they are governed by copyright law. It’s conceivable that there could be a hackathon where a team proposes a product that is sufficiently sophisticated and tangible that it could be patented – but in this article, we’ll just look at copyright law.

Copyright doesn’t need to be registered to exist – it applies to an original work from the moment it is created. Copyright law gives beneficiaries two types of rights: patrimonial rights and moral rights. The first relates to marketing the work (royalties, licences, etc.):

“The right of exploitation belonging to the author shall comprise the right of performance and the right of reproduction.” (art. L122-1, CPI)

The second relates to the right to respect for the work (the context of use, the right to object to distortion of the work, and the right to be identified as the author of the work). The author of the work can transfer their patrimonial rights to someone else, but nonetheless retains the right to have their creative intention respected:

“An author shall enjoy the right to respect for his name, his authorship and his work.

This right shall attach to his person.

It shall be perpetual, inalienable and imprescriptible.” (art. L121-1, CPI)

Moral rights are what allow musicians to, for example, refuse permission for their songs to be used at a political event.

2. The status of ‘author’

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Who receives protection under copyright law? In theory, the author of the work (as you might expect). However, some works that are created in collaboration with others will have more than one author: ““Work of collaboration” shall mean a work in the creation of which more than one natural person has participated” (art. L113-2, CPI). In this case, the work will be the joint property of its co-authors, who will all be copyright holders. They must exercise their rights by mutual agreement. However, if the co-authors contributed to distinct and identifiable portions of the work, each co-author can exercise their right of exploitation for their personal contribution as long as this does not prevent the other co-authors from exercising their rights to the shared work.

What should we take from all this? Essentially, that copyright can be shared between several people who took part in creating the work. In the context of a hackathon, this means that the various people in a team who helped to code a piece of software or an app will all hold the copyright to the software. It should also be noted that copyright doesn’t protect the ideas themselves, but the expression of these ideas in a given medium. As such, gaining the status of ‘co-author’ means being involved in transposing the idea to the medium. People can’t claim copyright over an idea that they had ‘in their head’ without ever expressing it in any way (that would be too easy).

3. The Creative Commons Licence 3.0

Creative Commons licences are a way for an author to allow the general public to “copy, distribute, and make certain uses of their work”. There are a range of different Creative Commons licences, each of which grants varying levels of rights. For example, some allow the work to be used for commercial purposes, whereas others don’t. Some simply require the author’s name to be mentioned when using the work.

4. Specific provisions relating to software authors

The French Intellectual Property Code (CPI) sets out a number of rules specifically relating to software copyright. For example, in article L122-6, the CPI sets out what the exploitation right to a software programme covers: the right to authorize and carry out the permanent or temporary reproduction of software (in part or in whole), the right to alter the software (including translating and adapting it) and the right to place it on the market (for payment or free of charge). The moral rights of the software’s author are limited by article L121-7 – they only cover actions that could prejudice the author’s honour or reputation.

The rights of performance and of reproduction of a software programme may be transferred by its author. The methods by which this transfer takes place are set out in the transfer contract – which can be included in the regulations or conditions governing participation in the hackathon. As such, a hackathon may include provisions for the transfer of performance and reproduction rights to the code created during the hackathon.

However, the transfer must comply with the formalities of article L131-3: “(…) each of the assigned rights [must be] separately mentioned in the instrument of assignment and the field of exploitation of the assigned rights [must be] defined as to its scope and purpose, as to place and as to duration.” This is why exhaustive hackathon regulations are so essential! There is one final consideration: unlike for most copyright law, remuneration for software authors may take the form of a lump sum (art. L131-4 (5)).

Some hackathons have been criticized all over the world for conditions of participation that go too far. In August 2015, Capital One was strongly condemned for a clause in its hackathon’s terms and conditions, which gave the company an irrevocable and worldwide right to grant licences to use the applications created during the event without remuneration. It was later revealed that the clause had been included in the terms erroneously.

Telstra is another example of a company that got a slap on the wrist. For its IoT Challenge, the company required participants to sign a contract assigning them exclusive rights over any new creation developed by participants in the 18 months following the hackathon. The benefits the company would receive included first-look rights, giving Telstra a privileged position over any other potential investors. The first-look rights weren’t a big issue in themselves, because they didn’t prevent participants from approaching other parties if no arrangement was made with Telstra. But the wording of the clause implied that Telstra would have exclusive rights to anything created by the participants, not just anything created during the hackathon – something that would quickly become intrusive!

Our advice: be as transparent as possible and share copyright equally.Click To Tweet

No-one will want to take part in a hackathon that’s too restrictive when it comes to IP – participants will feel like you’re trying to take advantage of them. Both the organizing company and the participants should benefit from the arrangement.

Hackathons and employment contracts

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We’ve all heard about ‘20% time’ – the amount of time that Google allows its employees to spend on personal projects. At first glance, it might seem like generosity from the Californian giant, but above all, it’s a way of implementing a culture of innovation that can pay off in a big way! Google News, Gmail and AdSense all came from personal projects created during ‘20% time’. In their 2004 IPO letter, the Google co-founders argued that the 20% policy allows employees to become more creative and innovative. “Many of our significant advances have happened in this manner,” they explained.

As a general rule, all software created under an employment contract belongs to the employer. Article L113-9 of the CPI is fairly clear on this:

“Unless otherwise provided by statutory provision or stipulation, the economic rights in the software and its documentation created by one or more employees in the execution of their duties or following the instructions given by their employer shall be the property of the employer and he exclusively shall be entitled to exercise them.”

As such, when employees take part in a hackathon during work time, the company is the holder of the intellectual property rights relating to the projects that are created. The projects can then become part of the company’s business activities for good, even when the employees who created them leave.

Although Google’s 20% policy has been called into question several times over the last decade (alongside their 20% for personal projects, employees don’t spend 80% of the time working on company projects, but another 100% – and it means investing in too many projects that aren’t properly compatible with each other), it remains an excellent example of a culture of open innovation. These projects become ways for the employees who work on them to unleash their creative side – not to mention that they ultimately bring considerable added value to the company’s business activities.

Participants’ liability

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It isn’t just the company that makes promises to participants during the hackathon – participants themselves also have to agree not to use material that is subject to intellectual protection in their projects. Otherwise, when the organizing company markets their ideas, it would be violating another party’s copyright, and would potentially be liable.

The organizing company has to ensure that the technology submitted by participants actually belongs to them, and wasn’t developed at another company or by someone else. To avoid disputes of this kind, in most cases, the rules of participation include a clause exempting the organizing company from any such liability, which makes participants responsible for the integrity of the projects they submit. As such, it’s up to them to make sure that the projects they submit actually belong to them – or at least that they’re copyright-free.

Situation 1: using open-source code

When an author creates a work based on another’s work, the result is known as a ‘composite work’:

““Composite work” shall mean a new work in which a preexisting work is incorporated without the collaboration of the author of the latter work.” (art. L113-2, para. 2, CPI)

Article L113-4 specifies who benefits from the rights to a composite work:

“A composite work shall be the property of the author who has produced it, subject to the rights of the author of the preexisting work.”

When a programmer uses open-source code to build their software or app, they’ve created a composite work. In a composite work, the authors retain ownership of their respective contributions. As a result, attributing copyright to the authors of pre-existing works becomes increasingly complicated as the code is used and re-used. If there is a requirement to identify the authors of the code (depending on the licence being used), hackathon participants must comply.

Situation 2: using protected code

When reproduction of source code is not permitted by the copyright holder, hackathon participants cannot include it in their project unless they have been granted a licence to do so. Otherwise, they would be liable to civil action.

The importance of foresight

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Ultimately, the question of intellectual property during hackathons is slightly more complex than it might seem at first glance. It’s an issue can also lead to its fair share of concerns – participants worry about their ideas being stolen from them, and organizing companies want to ensure that their valuable investment bears fruit. And to top it all off, conflicts between participants themselves can suddenly arise, given that often, hackathons lay the foundations for future startups! It’s easy to imagine a situation where a team of challengers disbands after a hackathon – only for one of the members to want to carry on. If that member decides to set up their own company, how can their former team-mates (and their new team-mates too) be sure of getting their fair share?

The solution is simple: cover everything in the conditions of participation! Almost all legal issues come from contracts that are vague or not comprehensive enough. Make sure you set out all of your company’s rights and obligations and those of the participants in your hackathon’s conditions of participation.

You should also remember to implement general rules of conduct to make sure your hackathon goes smoothly (the right attitude, respect, fair play, etc.). Don’t leave anything to chance, and be transparent – the more comprehensible and accessible your terms and conditions are, the more interested participants will be in taking part and making their ideas into reality by building a business partnership with you. Set out the legal foundations for mutually satisfactory cooperation so everyone’s a winner.

 

Disclaimer: this article is a brief and non-exhaustive overview of French intellectual property law as it applies to software. It does not constitute a legal opinion of any kind. To learn more about the rights and obligations that are created when taking part in and organizing a hackathon, contact Agorize.

 

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