Case Study

Scenario:

Client Co. outsourced the development of software for its internal operations to Vendor Co., under a contract governed by Japanese law. The software development contract included the following clause regarding ownership of the software’s copyright:

“Copyrights in the software shall be deemed to be assigned to Client Co. upon the payment of all development service fees.”

After completing payment, Client Co. updated the software on its own. Vendor Co. objected, claiming that Client Co. does not have the right to modify the software independently and must outsource updates to Vendor Co.

Question:

Is Vendor Co.’s assertion correct?

Analysis

Perhaps surprisingly, under Japanese copyright law, Vendor Co.’s claim may have legal merit. While the contract explicitly transfers ownership of the copyright to Client Co., the right to modify the software—considered part of the bundle of rights associated with copyright—may not have been included in the assignment unless explicitly stated.

Key Legal Considerations

1. Copyright Assignment and Modification Rights

Articles 27 and 28 of the Japanese Copyright Act cover the right to modify and right of creator of original works on the derivative works.
If the contract does not explicitly assign these rights, they may remain with Vendor Co., even though Client Co. owns the copyright (Article 61, Paragraph 2 of Copyright Act of Japan).

Contractual Best Practice:
To ensure that the right to modify the software is included in the copyright assignment, the following wording should be added to the contract:

“Copyrights in the software, including the rights under Articles 27 and 28 of the Japanese Copyright Law, shall be deemed to be assigned to Client Co. upon the payment of all development service fees.”

2. Moral Rights of the Author

Under Japanese law, the creator of copyrighted material retains moral rights, including the right to prevent unauthorized alteration, and such rights cannot be assigned to a third party.
However, to avoid potential disputes, it is common practice to include a clause in the contract stating that the creator (Vendor Co.) will not exercise their moral rights.

Disclaimer: This column intends to provide a high-level summary of the subject matter, and it does not aim to provide exhaustive information. Also, this column is for informational purposes only and does not constitute legal advice. For specific issues, we recommend consulting an expert. If you have any query, please contact us via inquiry form in this homepage.