Using contractors? Lock down their work as your IP

(Editor’s note: Curtis Smolar is a partner at Ropers Majeski Kohn & Bentley. He submitted this column to VentureBeat.)

A reader asks:  I have employees that are creating intellectual property that is essential to my business.  How can I make sure that the company retains ownership of it?

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Answer:  In general, if you are dealing with employees, the answer is pretty straightforward — the IP will probably be owned by the company, not the employee.  However, there are some gray areas, since this area of the law incorporates both intellectual property and employment law principles.  So get a lawyer who understands the cross section of these areas involved to help you navigate these waters.

Typically, someone who creates work that is fixed in a tangible means of expression is considered the “author” of the copyrighted work.  United States copyright law, however, has created an exception in which the company, not the person who created the work, is deemed to be the author. When used, this means all rights vest with the company, not the individual.  There are numerous ways that someone can transfer the ownership of intellectual property to the company (generally through a written agreement).  But about the only way for the company to “author” the work is to have a work for hire.

At its core, this doctrine (officially called a “work made for hire”) states that an employee’s work is considered the property of the employer unless there is a written agreement to the contrary. Additionally, the work must be within the scope of the employee’s regular duties.

If the worker is an independent contractor, a work can only be considered a “work for hire” if it was “specially ordered” or “commissioned” by the company – and there should be a signed agreement saying that the end product will be considered a “work for hire” and should be in one of the nine following categories:

• a contribution to a collective work
• a part of a motion picture or other audiovisual work
• a translation
• a supplementary work
• a compilation
• an instructional text
• a test
• answer material for a test
• an atlas

(Keep in mind that in some states, the act of having an independent contractor sign a work for hire assignment of rights might create an employer-employee relationship – which could force you to comply with state requirements – such as worker’s compensation insurance).

Alternatively, the law often looks to the substance of the relationship more than the label put on it. The IRS, in fact, sometimes considers independent contractors as employees.  If you want the product of their work to belong to you—this, ironically, helps you.  Courts have looked to the degree of control the employer has over the independent contractor to determine who was the author of copyrighted works.

Bottom line: If a salaried employee will do the work –the intellectual property will belong to the company. If you’re dealing with independent contractors or others that are not clearly employees, however, be sure to have a skilled attorney review your agreements and employment issues.

Startup owners: Got a legal question about your business? Submit it in the comments below or email Curtis directly. It could end up in an upcoming “Ask the Attorney” column.

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Disclaimer: This “Ask the Attorney” post discusses general legal issues, but it does not constitute legal advice in any respect.  No reader should act or refrain from acting on the basis of any information presented herein without seeking the advice of counsel in the relevant jurisdiction.  VentureBeat, the author and the author’s firm expressly disclaim all liability in respect of any actions taken or not taken based on any contents of this post.