“Quack,
Quack!” But It Ain’t a Duck: Misconceptions about “Work
Made for Hire”
By: Daniel A. Batterman, Esq.
DISCLAIMER: This article is intended for informational purposes only and does not constitute legal advice. You should not rely or act upon any information contained in this article without seeking the advice of qualified legal counsel.
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In technology, ownership of intellectual property is critical. Any contract
between hiring and creative parties needs to clearly define this. In many
instances, the hiring party who’s paying to have something created
will insist upon ownership. In this case, the contract will often contain
the ubiquitous “work made for hire” clause, which allows the
hiring party to be the owner (and author). Without it, ownership would
automatically vest with the creative party.
This provision typically reads as follows
“The parties agree that
the [content] shall be deemed a ‘work made for hire’ pursuant
to federal copyright law and shall be the property of [the hiring party].”
This
hopefully isn’t the only language which addresses ownership, but
I’ve seen many contracts which include nothing more. This is a
critical mistake, and—if you’re the hiring party—can
cost you a great deal of money and aggravation down the road, especially
if valuable content is created.
It’s also particularly relevant in the technology field, where many
people classify themselves as “independent contractors.” As
explained below, simply calling yourself an independent contractor and
receiving a 1099 doesn’t make you one. In fact, such thinking can
be disastrous here. If a company isn’t careful, it will end up losing
ownership after paying to have something created. If a contractor isn’t
careful, she will be deemed to be an employee and forced to give up ownership.
There are risks on both sides.
Copyright Envy
First, this doctrine only applies to copyrightable subject matter. A copyright
protects creative “expression” and can take any number of forms,
including literary works, musical compositions, motion pictures, and others.
Neither patent nor trademark law have similar doctrines. Under patent law,
if someone’s hired to invent something and there’s no formal
agreement as to ownership, the hiring party will not be the owner or inventor.
Work made for hire is unique to copyright, which is federal law.
The definition is found in Section 101 of Title 17 of the United States
Code. A work made for hire is defined as:
(1) a work prepared by an employee within the scope of his or her employment;
or
(2) a work specially ordered or commissioned for use as a contribution
to a collective work, as a part of a motion picture or other audiovisual
work, as a translation, as a supplementary work, as a compilation,
as an instructional text, as a test, as answer material for a test,
or as an atlas, if the parties expressly agree in a written instrument
signed by them that the work shall be considered a work made for hire. . . .
“You’re not the boss of me!”
The language in subsection (1) is deceptively simple and potentially misleading.
When most people think of being an “employee,” they think in
traditional terms of having a salary, boss, office, and schedule. While
these are part of the equation, there’s much more to it than that
under the work made for hire doctrine.
The Supreme Court has defined an “employee” by focusing upon
the hiring party’s right to control the manner and means of the work’s
creation. These factors include:
- who provides the tools and materials used to create the work;
- the work’s
location;
- the duration of the parties’ relationship;
- whether the hiring
party could assign additional projects to the
- creative party;
- the payment method;
- who had discretion over the creative party’s
schedule;
- the creative party’s role in hiring and paying assistants;
- whether
the work consists of the hiring party’s regular business;
- whether
the hiring party is in business;
- whether employee benefits are given
to the creative party; and
- the tax treatment of the creative party.
While this test looks easy
to apply, don’t be fooled. It can
be quite complicated. No one factor alone determines who’s an “employee,” and
this list isn’t exhaustive. Other elements can be considered.
Even if the hiring party retains control or supervises, this still
isn’t
controlling. While these factors provide some guidance, how a court
will actually weigh them could yield surprising results. Let’s
look at a scenario:
Assume you’re an employer who runs a travel agency. You hire a receptionist
who develops a travel website in her spare time at home, without your input,
and which ends up generating money for your company. Do you own the site?
She is “your employee” after all, isn’t she? Using the
factors above, a court may find that she’s not an employee under
copyright law (or that it wasn’t within the “scope” of
her employment). If so, she owns the site.
The Lucky 9
Subsection (2) addresses independent contractors, but only in certain
situations. First, the work must be “specially ordered or commissioned.” This
means that the hiring party must specifically ask the artist to create
the work. This also prohibits the hiring party from acquiring ownership
in any pre-existing work that was created before the relationship began.
It then lists 9 specific categories into which the work must fall: “a
contribution to a collective work, as a part of a motion picture or other
audiovisual work, as a translation, as a supplementary work, as a compilation,
as an instructional text, as a test, as answer material for a test, or
as an atlas.” Why does the law include these special categories?
At the risk of sounding cynical, this was probably due to the lobbying
efforts by these industries. No doubt they wanted to stack the deck in
their favor to ensure that any content produced for them fell within this
provision, regardless of whether there is an employee relationship.
Yet these categories can be broad in the technology field. Video games,
for example, are audiovisual works and can be works made for hire. A multimedia
website could also be an audiovisual work. In addition, a “collective
work” is a “work . . . in which a number
of contributions, constituting separate and independent works in themselves,
are assembled into a collective whole.” Software modules developed as part of a
larger IT project can be contributions to a collective work and thus works
made for hire. So the simple question: “Is it work made for hire?” may
not always be so simple to answer.
It’s Not a Widget
The key point about subsection (2) is this: If a person isn’t an
employee but an independent contractor—and the work falls outside
of these 9 categories—it’s not work made for hire. This means
that the hiring party doesn’t own what it just paid a lot of money
to have created. It doesn’t matter what the contract says and whether
the parties call it “work made for hire.” It’s not. Period.
While parties are often free to define their contractual terms as they
see fit, this definition is dictated entirely by statute and cannot be
changed or modified. Many lawyers still don’t understand this point.
I’ve had attorneys in large, expensive law firms condescendingly
lecture me that their client owns my client’s software simply because
he signed a work made for hire provision—even though he didn’t
qualify as an employee and the 9 categories didn’t apply. This misunderstanding
is common.
Put It in Writing
For independent contractors, a “written instrument” must also
be signed by both parties. While this doesn’t have to be a contract
per se, signing one at the outset is the most prudent thing to do. Signing
something later can be problematic, although in one case a court allowed
it because it confirmed a prior oral agreement between the parties before
the work was created. Nevertheless, it’s always wise to execute a
contract before beginning any work.
The contract must also state that the parties intended to create a work
made for hire relationship. While the exact term, “work made for
hire” doesn’t have to be used, there’s simply no reason
not to use it. While creative lawyering may be necessary in some contexts,
this isn’t one of them. Using these 4 simple words is best.
A Simple Fix
As mentioned earlier, I’ve seen many contracts over the years that
only contain a basic work made for hire provision and nothing else. This
is easy to correct. If you’re the hiring party and intend to own
whatever is created, you may want to include a valid “assignment
clause” to remove any ambiguity. So in addition to the work made
for hire provision, I typically include some variation of the following
language:
To the extent that ownership of the [content] does not automatically
vest in [the hiring party] and the [content] is not deemed to be a ‘work
made for hire,’ [the creative party] irrevocably transfers and assigns
all right, title, and interest in the [content] to [the hiring party].
It’s a single sentence, but an important one. And given the obvious
benefits of ownership, don’t take any chances—there may be
a great deal at stake. After all, why pay to mine the gold if you don’t
own it?
© 2008 Daniel A. Batterman. All rights reserved.
DISCLAIMER: This article is intended for informational purposes only and does not constitute legal advice. You should not rely or act upon any information contained in this article without seeking the advice of qualified legal counsel.
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