Information Technology Concept - Homo connectusAfter many years of practicing law, it never ceases to amaze me how many companies mistakenly believe that they own certain works just because they have paid for them. Whether it is an employee who has created marketing materials for your company website, or an independent contractor who has developed a software package based upon your company’s specifications, the fact that your company is paying the employee’s salary (or the contractor’s fees) alone does not mean that you own the works created. Referred to as the “work for hire doctrine” under copyright law, these misconceptions are understandable – this is an area of copyright law that many legal practitioners (and clients) take for granted –but if misconstrued, the repercussions can be substantial and painful to a company’s bottom line. Having a better understanding of such “works made for hire” (or “WFH”) will help you avoid such difficult lessons. The following are the three biggest misconceptions I have found in my experience:

 

  1. “An employee created the work, so the company owns it.”

 

Not necessarily. A WFH is defined under Section 101 of the Copyright Act (17 U.S.C. Section 101). The WFH doctrine provides in part that where the work is created by an employee “within the scope of his or her employment”, then the employer is deemed the author and owner of the work. The first question to ask, therefore, is whether the individual that created the work really and “employee”. The answer may not be as evident as you think. Freelance artists and writers, as well as independent contractors, do not meet the stringent test laid out by the US Supreme Court in Community for Creative Non-Violence v. Reid, 490 U.S. 730 (1989) that sets forth criteria to evaluate the employer-employee relationship vis-à-vis the WFH doctrine. The factors set forth in Community can be reduced to 3 general categories: (i) the level of control the employer exercises over the work, (ii) the level of control the employer exercises over the employee, and (iii) the status of the employer and how the employer conducts its business. Although not exhaustive, the gist is that a copyrightable work created within a “regular, salaried employment relationship” is required for a WFH to apply.

 

If such an employment relationship exists, however, whether the work was, in fact, created within the scope of such employee’s duties is important. For example, software created by a computer programmer employed by the company to create such works would clearly be within the scope of such duties. That said, an employee who creates an original work on their own time, using their own materials and outside of the their enumerated job responsibilities would not be considered to have created the work within the “scope” of their employment. Unfortunately, the realities of the employer-employee relationship normally do not lend themselves to such clear-cut determinations. What about a marketing plan created by a human resources employee on their own initiative after hours on a laptop owned by the company but using graphics loaded onto the laptop by the employee? As you can see, the realities of the employer-employee relationship may not be conducive to a simple determination.

 

  1. “We paid the contractor for the services rendered, so the company owns it.”

 

Nothing in my experience has caused more grief to companies hiring contractors to create copyrightable works than this blanket assumption. As a general rule, Section 201 of the Copyright Act defaults ownership in the “author” of the original work.  A contractor who creates an original work of authorship that is fixed in a tangible medium of expression, therefore,  is the “author” of the work by default. Moreover, a WFH under the Copyright Act refers to “a work specially ordered or commissioned for use” under 9 specific enumerated criteria ANDif the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire.” As a practical matter, the lack of a written agreement (specifically stating that the works created by the contractor shall be considered a WFH) is itself fatal – without a written agreement to the contrary, the contractor owns the work.

 

  1. “The consulting agreement with the contractor says it’s a WFH anyway, so the company owns it.”

 

Not so fast. As stated above, a written agreement that is signed by the contractor and the company designating the work as a “work for hire” is only part of the equation – there are 9 specific categories of works that must be specially ordered or commissioned to qualify: (1) as a contribution to a collective work; (2) as a part of a motion picture or other audiovisual work; (3) as a translation; (4) as a supplementary work; (5) as a compilation, (6) as an instructional text; (7) as a test; (8) as answer material for a test; or (9) as an atlas. If the specially ordered or commissioned work is does not fit into any of these enumerated types, is cannot be deemed a WFH under copyright law and the company will not own the work by default. For example, the work of a freelance writer specifically commissioned by a magazine under a written agreement to create an article for that publication would likely qualify as a WFH; however, a claims processing mobile app developed by a software developer engaged by a company to do so would not qualify, even with a written agreement deeming the work as a WFH. A written agreement alone is not enough – if the commissioned work doesn’t fit with any of these 9 statutory categories, the work simply cannot qualify as a WFH.

 

As you can see, the assumptions listed above can create significant problems for companies that have works created by employees, and especially those created by independent contractors. Understanding how the WFH doctrine works is essential to properly vesting copyrights into your company and protecting your company’s copyright assets. Of course, there are ways to overcome these assumptions with proper counsel to ensure that all the rights available under copyright law properly vest in your company.  Remember: if you don’t do so, you may not get what you pay for….and end up paying a far higher price in the long run to do so.

 

Tom Kulik is a sought-after technology lawyer who uses his award-winning industry experience to creatively help his clients navigate the complexities of law and technology in their business.  He is an an intellectual property & technology partner at Scheef & Stone, L.L.P., a full-service commercial law firm based in Texas representing businesses of all sizes throughout the United States and, through its Mackrell International network, around the world.

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