Ownership as the Result of a Work Made For Hire
Copyright law seems deceptively simple compared to patent and trademark law. Where copyright law can get particularly complicated for the unwary, however, is in the area of copyright ownership. Under U.S. law, the creator or author of the work is the owner of the copyright. But what happens if the work was created by and employee in the scope of his/her employment or by an independent contractor who was hired or commissioned to create the work?
Regarding an employer-employee relationship, the work is generally treated as a work made for hire wherein the employer (and not the employee) is deemed the author and owner of the work. The forms for federal registration of a copyrightable work include a section addressing ownership secured on the basis of a work made for hire.
Regarding an independent contractor relationship, the work may qualify as a work made for hire providing two conditions are met pursuant to the Copyright Act (Act). First, the work must fall into one of the nine enumerated types of works specified in the Act. Second, the independent contractor and the hiring party must have both signed an agreement agreeing that the work to be created is a work made for hire. If these two requirements are met, the hiring party is deemed as the owner of the work created by the independent contractor. 17 U.S.C. § 101, et. seq.
Note the difference between works made for hire by an employee versus those made by an independent contractor. In the latter case, the type of works qualifying as work made for hire are limited by statute and a written agreement is required.
Why the Distinction Between and Employee and an Independent Contractor Is Important
Take the scenario of software developers who are often hired as independent contractors by startup companies. Software can be copyrighted, but software is not one of the enumerated types of works qualifying as a work made for hire work by Independent Contractors. Therefore, even with a written agreement stating that the software is to be designated as a work made for hire, the hiring company will not actually own the copyright to the developed software under the work made for hire doctrine even though the software developer (Independent Contractor) was paid to create the software. That is, the software developer may well still be the owner of the software despite the work made for hire agreement. On the other hand software development companies such as Microsoft Corporation that have employees dedicated to developing software are the owners/authors of any copyright-related rights in the software under the work made for hire doctrine. See the U.S. Copyright Office Records for Microsoft Corporation’s registered copyrights where Microsoft is listed as the author of the work as the result of an employer work made for hire.
Copyright ownership issues as they relate to Independent Contractors may remain hidden and only arise when: 1) a business is being sold and the sale involves intellectual property (IP) assets such as copyrights; or 2) in a copyright infringement lawsuit. The buyer of IP assets will want assurance that the IP assets are indeed owned by the seller so that they may be effectively assigned to the buyer by a written instrument signed by the seller and the buyer. A deal could fall through if the seller cannot prove to the buyer’s satisfaction that it – the seller – is the owner of the copyrights and therefore has the right to transfer ownership to the buyer.
A defendant in a copyright infringement lawsuit may be able to use “lack of ownership” as a defense if the work was created by an independent contractor and the work does not qualify as a work made for hire under the Copyright Act. That is, ownership remains invested in the Independent Contractor and plaintiff does not own the copyright it claims is being infringed.
Ensuring the Legally Sufficient Transfer of a Copyright by an Independent Contractor
What steps can be taken to ensure the proper transfer of copyright-related rights from an Independent Contractor? Where the work(s) to be created clearly fall into one of the nine (9) enumerated classifications specified within the copyright statute, the Independent Contractor and the hiring party need to sign an agreement wherein the work(s) to be created is designated as a work made for hire with all associated copyright-related rights belonging to the hiring party.
Copyright ownership can also be transferred by an assignment of rights and by operation of law (e.g., as the result of a probate proceeding). For my clients, I include an assignment of rights provision within all work made for hire agreements with Independent Contractors as a precaution to cover the situation where the created work may be found to not qualify as a work made for hire. Thus if for whatever reason the work should not qualify as a work made for hire because, e.g., it does not fall into one of the nine enumerated categories, the hiring party would still own the copyright as the result of the creator’s assignment of rights to the hiring party. 17 U.S.C. § 101; 17 U.S.C. § 201(d)(1). Any such assignment needs to be clear as to the rights being conveyed and the nature of the underlying works. For a good discussion of how important an assignment of rights provision may be where the work made for hire conveyance to an Independent Contractor fails, see Capital Concepts, Inc. v. Mountain Technology Corp., et al., WL 6761880 (W.D. Va. 2012).
THE ABOVE IS FOR INFORMATION ONLY AND DOES NOT CONSTITUTE LEGAL ADVICE.
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