When it comes to copyrightable subject matter, ownership of original works of authorship may not be as clear cut as you may think. Many companies mistakenly believe that they own certain copyrightable 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 your company automatically own the works created. Referred to as “work(s) made for hire” (“WFH”) 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 the “work for hire” doctrine will help you avoid such difficult lessons. The following three points illustrate the 3 biggest misconceptions about WFH:
- “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 who created the work is really an “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 U.S. 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 three 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 WFH to apply.
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If such an employment relationship exists, then it is vitally important to determine whether the work was created within the scope of such employee’s duties. For example, software created by a computer programmer employed by your company to create such works would clearly rest 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 do not always 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 separately created by the employee and loaded onto the laptop by them? As you can see, the realities of the employer-employee relationship may not be conducive to a simple determination.
- “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 develop 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 nine specific enumerated criteria and “if the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire.” 17 U.S.C. Section 201(b) (emphasis added). 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.
- “The consulting agreement with the contractor says it’s a WFH anyway, so the company owns it.”
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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 nine 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. 17 U.S.C. Section 101. As you can see, literary works are not enumerated — this would include computer software (as it is considered a literary work for copyright purposes). For example, the work of a freelance writer specifically commissioned by a magazine under a written agreement to translate an article written by one of the magazine’s staff editors for that publication and that deems such translation a WFH would likely qualify; however, a new claims-processing mobile application developed by a software developer engaged by an insurance 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 nine statutory categories, the work simply cannot qualify as a WFH and the company will not own the work by default. In such cases, the work needs to be expressly assigned.
As you can see, the assumptions listed above can create significant problems for companies that have works created by employees, and especially for those works created by independent contractors. Understanding how the WFH doctrine operates is essential to properly vesting copyrights into your company and protecting your company’s intellectual property assets. Remember: if you don’t do so, you may not get what you pay for… and end up paying far more for much less than you bargained for in the process.
Tom Kulik is an Intellectual Property & Information Technology Partner at the Dallas-based law firm of Scheef & Stone, LLP. In private practice for over 20 years, Tom is a sought-after technology lawyer who uses his industry experience as a former computer systems engineer to creatively counsel and help his clients navigate the complexities of law and technology in their business. News outlets reach out to Tom for his insight, and he has been quoted by national media organizations. Get in touch with Tom on Twitter (@LegalIntangibls) or Facebook (www.facebook.com/technologylawyer), or contact him directly at [email protected].