An important aspect that yacht design agreements should cover relates to intellectual property rights in the concept and in the designs.
Is yacht interior design protected by IP laws?
Yes.
Architectural works (as referred to under Law 633/1941, the Italian Copyright Act) are protectable where they are endowed (among other requirements) with creative character. However, there is no unanimity of views as to what “creativity” or “creative character” means.
Italian courts highlight the existence of two different approaches to the protectability of architectural works, particularly with regard to pieces of furniture and interior design:
- a more restrictive theory, inclined to recognise protection for the designer’s work only where it displays a marked creative component characterised by novelty, originality, recognisability, and distinctiveness due to strong personalisation;
- a broader theory, embraced by the more recent case law of the Court of Cassation, according to which intellectual property protection arises even in the presence of a minimal creative act. Specifically, according to this view, the legal concept of “creativity” does not coincide with creation, originality, and absolute novelty; rather, it refers to the mere existence of a creative act, even minimal. Indeed, an architectural work does not need to display absolute originality or novelty to be protectable; even when exploring familiar design solutions, it must constitute a personal contribution of the author, a particular expression of the author’s creativity, even with respect to known and commonly used elements.
Does IP protection extend to interior furniture?
Yes. Protection of architectural works may extend to interior furniture, especially where these result from a design process carried out by the author. In this sector, what matters is not the creation of individual furnishings considered in isolation, but the design and interpretation of known elements according to the author’s personal style.
How are IP rights structured?
The designer, if the author of a work covered by IP protection (see above), holds two main rights:
- Moral right, i.e., the right to be recognised as the author of the creation (for example: “Yacht X, Interior Design by A”).This right is absolute and cannot be transferred, licensed, or sold because it is personal, inalienable and non-waivable, which protect the authorship and the integrity of the work.
- Economic rights, i.e., the rights to commercially exploit the work (for example, the designer’s right to license to a shipyard the designs to build one or more yachts). This right can be freely licensed or transferred under various modalities.
What happens if the design contract does not contain any IP rights clause?
According to an Italian consolidated case-law orientation, if a design agreement does not contain any IP rights clause, then the work is presumed to be carried out for the client, and therefore the rights to commercially exploit the works delivered by the interior designer are automatically transferred to, and vested in, the client (the owner or the shipyard, as the case may be), while the moral rights always remain vested in the interior designer.
What types of IP rights clause can be inserted in a yacht design contract?
The parties may freely decide, through an ad hoc contractual clause, who, when, and how becomes the owner of the economic IP rights (moral rights cannot be transferred). This very much depends on the specific case.
The highest form of protection for the interior designer is when the designer’s deliverables are not assigned but are instead licensed to the client on a limited basis, solely for the purpose of building one yacht, subject to payment of the agreed fees.
There are, however, many possible alternative clauses that can be agreed depending on the specific situation, the agreed fees, and the parties’ needs. Indeed, the parties may agree that the client obtains full rights to use the deliverables for the construction of an unlimited number of yachts and/or that transfer of IP ownership occurs immediately upon creation (and not upon payment of the fees), and/or that the client may use, in whole or in part, the deliverables for the construction of other yacht models, etc.
When are royalties typically used?
Royalties are typically included in yacht design agreements between designers and shipyards in the context of model series — that is, when the shipyard intends to build multiple yachts of the same model using the concept and deliverables of the designer. In such cases, a royalty is generally agreed, usually in the form of a percentage of the sale price of any future yacht built using the designer’s deliverables.
This solution may be profitable for the designer if the design is successful and the yacht is subsequently sold in many units, while it may result in economic loss if the model is not successful on the market or if the shipyard decides to discontinue production.
Other issues may arise when the yachts built are not identical to those designed by the designer — for example, when the buyer appoints another designer who introduces modifications to the original design while retaining parts of it, or when the shipyard itself decides to make modifications.
In these cases, disputes may arise both regarding the right to be paid the royalty and regarding authorship/co-authorship of the design. For these reasons, royalty clauses should be carefully drafted and evaluated, as they may lead to conflicts.
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Intellectual property is one of the key issues in yacht design contracts. In light of the possible effects arising out of the content of the parties’ agreement, the relevant clauses should be carefully drafted in order to limit possible future disputes.
For further information, feel free to contact
Avv. Lucilla Margherita — margherita@pglegal.it