SWITZERLAND Trends and Developments Contributed by: Marco Toni and Lara Pafumi, Loyens & Loeff
key employees. It is essential to identify employee- generated IP or technology, including AI models or training data, and clarify ownership. Under Swiss law, inventions and designs produced by the employee in the course of the employee’s work for the employer, and during the performance of the employee’s con- tractual obligations, belong to the employer. Fur- thermore, the employer may acquire inventions and designs created by the employee in the course of the employee’s work for the employer – but not during the performance of the employee’s contractual obliga- tions – against reasonable compensation. However, if the employee creates works protected by copyright, different rules apply. It is necessary to distinguish between software and other copyright- ed works. For software created during professional duties and in fulfilling contractual obligations, the Swiss Copyright Act grants exclusive rights to the employer. For other copyrighted works, the so-called creator principle applies, and the rights are not auto- matically transferred to the employer. For more details on copyrights and information on how to deal with works protected by copyrights created by contractors or other third parties, including software, please refer to the subsection on IP protection. Finally, technology transactions frequently involve continued collaborating with the seller to retain key know-how and implement non-compete clauses. Typically, the seller remains in a management position. IP protection As discussed in the foregoing subsection on due dili- gence, IP rights are the primary reason for acquiring a technology company and thus require special atten- tion. Specifically, determining their scope and own- ership can be challenging. In addition, transferability must be ensured, especially when the target owns IP rights in multiple jurisdictions with differing rules. Identifying relevant IP requires understanding the types of rights and intangibles involved. Under Swiss law, a distinction is to be made between registered and non-registered IP rights. Trade marks, patents and designs are common registered IP rights in Swit- zerland. Registration entitles the owner to exclusive rights.
Unregistered IP rights, such as copyrights, are more challenging to identify. Copyrights are especially relevant for software. There is no register of copy- righted works in Switzerland. Instead, according to the so-called creator principle, the Swiss Copyright Act grants exclusive rights to the natural person who created the work. Unlike other jurisdictions, Switzer- land does not have a general work-for-hire doctrine applicable to third-party contractors and employees, whereby the client or employer obtains the copyrights resulting from the performance of the contract. An exception applies to software created by employees, as described in the foregoing subsection on due dili- gence. Swiss copyright law distinguishes between economic rights and moral rights. Economic rights determine who can commercially exploit a work – such as using, distributing or reproducing it – and these rights can be transferred. Moral rights, on the other hand, such as the right to be credited as the author and protecting the work’s integrity, cannot be transferred. Therefore, in the case of copyrighted works other than software created by an employee, copyright usually vests in the employee who has created the work. The employer may only obtain economic rights to exploit the work to the extent required by the purpose of the employment. To avoid uncertainty, employment agreements should set out the extent of the rights transferred. Particular attention must also be paid if external con- tractors or other third parties are involved in the crea- tion of work protected by copyright. It is essential to contractually clarify the scope of the rights the com- pany needs in the work – ideally, full copyright. To ensure the transfer and post-transaction use of key IP rights, and to protect the buyer from potential damages and liabilities, it is essential that the share or asset purchase agreement contains a detailed set of representations and warranties and indemnification mechanisms. Their precise content will be based on several factors, including due diligence findings. If uncertainty remains after the due diligence process as to the scope, ownership or transferability of certain IP rights, IP liability insurance may be another risk mitigation tool. It may cover litigation costs related to
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