Imagine discovering that you do not own the copyrights to your proprietary software or your Web site.
Many companies which have hired nonemployees to develop these vital tools are discovering that their purchase price did not buy the copyrights to the underlying work and they are, therefore, limited in their ability to exploit or even protect the work.
Companies fail to recognize that under the sometimes counterintuitive default principles of copyright law, copyrights in the works for which they paid stayed with the contractor, even though the work itself was paid for and transferred. As a result, these companies may be left scrambling to acquire those rights, sometimes at great cost and potential risk.
So how can you avoid this scenario?
The key is to understand two principles of copyright law. First, copyright ownership flows from authorship. Second, the person who fixes a work into a tangible medium, like paper, film or computer code — not the person who paid for the work — is generally deemed the author.
Thus, when you hire an outside contractor to develop your software program or Web site, by default, the contractor is the author, even though you may have paid thousands of dollars for the project and even though it was implicitly understood that the contractor would turn the final product over to you.
By the same token, if your contractor hires a subcontractor, the subcontractor may be the author and owner of the copyrights and you’ll be left searching to figure out who has the copyrights.
There are two important exceptions. First, an employer is generally deemed the author over any works created by its employees who are acting within the scope of their employment. Thus, the scenario above relies on the fact that an outside contractor was hired to perform work.
Second, the Copyright Act specifies that copyrights in “works made for hire” belong to the commissioning party (rather than the commissioned contractor) if the parties agree in a signed writing that the work is a “work made for hire.”
Unfortunately, the Copyright Act specifies only nine categories of works that constitute works made for hire, and in many cases, the work being developed by your contractor may not fit into one of those.
So what can you do if you must use the services of an outside contractor? The brief answer is to make sure that you have a written agreement signed by you and your contractor and entered into, prior to the commencement of the work, that identifies the work specifically as being a work made for hire.
The agreement should contain a provision requiring the contractor to assign all copyrights in the work to you in the event that the work is found not to fall within one of the statutory categories of works made for hire. Lastly, include a provision obligating the contractor to obtain similar agreements from all subcontractors used on the project.
Where there is doubt on the need to obtain such an agreement from anyone, resolve it in favor of getting an agreement. By taking this preventive measure at the start, you may avoid a larger, more costly pain in the future.
