Medical APP development on commission: transferring source and executive files

Medical devices (MD) are increasingly software, either stand-alone or incorporated into other products or devices.

Software development is frequently entrusted by the MD manufacturer to a third party, a service provider; the relationship is governed by a contract that in many cases only regulates the economic aspects of the relationship without taking into account the regulation of the intellectual or industrial property of the software. Often, authorship and property rights are not fully regulated; on the other hand, it may not be easy because the software can be:

• protected under copyright law and therefore as intellectual property, or
• the subject of a patent application if it has the characteristics of novelty, and originality is suitable for industrial application and offers a solution to a technical problem.

Frequently, contracts do not distinguish between the two types of files, and, as a consequence, the developer of the commissioned software refuses to deliver the source files, considering only the executive files as due.

In the area of Medical Devices, the non-delivery of the source files may cause considerable problems for the manufacturer, who may find himself in the difficult position of not being able to make changes or improvements to the software, and thus to the MD, without the collaboration of the person who developed the software.

Recently, the Italian Court of Cassation, with Order No. 19335 of 15 June 2022, ruled precisely on the issue of the protection of intellectual works made on commission by self-employed authors, with particular regard to the discipline of executive files and source files.

The Case Study

The judgment originates from the assignment by a pharmaceutical company to a communication and marketing agency for the production of executive graphic files, relating to images of the packaging, package leaflets, and advertising material concerning imported and marketed drugs.

At the end of the relationship between the parties, which lasted from 2006 to 2012, the pharmaceutical company decided to take legal action in order to obtain the delivery by the graphic agency not only of the executive files produced on commission but also of the source files.

In the first instance, the Court of Milan sentenced the graphic agency to return the source files, holding the pharmaceutical company to be the exclusive owner of all rights over them.

The first-degree sentence was appealed before the Court of Appeal of Milan, which, considering the existence of a creative contribution by the graphic agency, also established the relative attribution of the rights on the source files, subject to the payment of an equitable consideration.

The pharmaceutical company, therefore, decided to appeal to the Italian Court of Cassation, on the basis of the alleged absence of the prerequisites of creativity and autonomy of the author of the work.

The Court of Cassation, following the logical-legal reasoning of the Court of Appeal of Milan, focused on the concepts of creativity and autonomy of the author under Article 1 of the Italian copyright law (Law No. 633/1941), holding that even works characterised by a " low degree of creativity" are worthy of protection.

The Court also affirmed the important distinction between:

• the executive file (Corpus mechanicum) commissioned, processed, and delivered to the pharmaceutical company,
• the source file (Corpus mysticum) open and modifiable, but not delivered to the client,
• Software: subject to a licence used by the graphic agency and conceptually distinct, in the present case, from the executive file, as it did not represent the result of the agency's work.

In particular, the Court affirmed the recognition of a component of originality in the graphic agency's processing of the source files, protected by copyright law, and examined its consequent ownership.

Specifically, the Italian Court of Cassation, citing a previous judgment (Section I. Judgment No. 8433 of 30/04/2020), pointed out the general principle according to which: the principal is the exclusive owner of the rights of economic exploitation of intellectual works commissioned by the self-employed worker, and at the latter, as the author, is entitled only to moral rights.

In the present case, however, the Court held that in the absence of express contractual clauses and adequate evidentiary allegations, the processing of "an intellectual work", consisting of the source file, was in no way configurable.

Consequently, the Italian Court of Cassation rejected the appeal, identifying as the sole object of the contractual performance the delivery of the executive files, already correctly transmitted by the graphic agency to the pharmaceutical company.

In conclusion, we draw attention to the emphasis placed by the Italian Court of Cassation on the absence of specific contractual clauses and consequently on the importance of regulating in contracts for the commission of works such as software the aspects relating to intellectual or industrial property as well as the fate of the source files.