The "Work for Hire" Trap

by Lee Gesmer on September 15, 2006

Copyright. Sometimes it just seems like the law is full of traps. Miss a filing deadline, fail to make the proper objection or motion in court, leave the many forms of “magic language” out of an agreement – any of these, and countless more, can result in disaster.

Our firm has recently seen two clients pay over $500,000 to buy their way out of what I call the “work for hire” trap. Both clients are software companies. In the first case, the client hired an independent contractor to develop its product, and failed to get a written assignment of ownership from him. After leaving under adversarial circumstances, the contractor claimed that he, not the company, owned the product. The second case involved similar facts, but the independent contractor/programmer worked for a small agency, and after several years the agency asserted ownership of the programmer’s work. Again, no written assignment, and again, a multi-hundred thousand dollar settlement to avoid litigation and get what the company should have owned outright.

In both cases the companies could have argued that they had an “implied license” to use and sell the software (since in neither case did the contractor warn the company of his ownership claim while the work was being done), but the implied license doctrine is messy, to say the least. What investor or purchaser wants to be told that the company it is investing in or buying doesn’t own its software, and that it has an “implied license” from a hostile former programmer?�  ‘Nuff said.

Here are “the rules” of work for hire under the Copyright Act:

First, the easy case: if the developer is truly an “employee” (works full time, at direction of employer, employer withholds taxes), and the work is within the scope of her employment, the employer owns the programmers work. In this context the disputes that usually arise are over the “scope of employment” question – when the employee works at home evenings or weekends, was the invention within the “scope”? Any ambiguities in this situation are usually resolved be a well written employment agreement that draws this line contractually.

Second, if the developer is an independent contractor (working for you directly or through an agency), you must get a written assignment. The assignment can be complicated and wordy, but it can also be as simple as one sentence: “I, John Doe, for good consideration, receipt of which is acknowledged, do hereby assign to Corporation all title and interest in the intellectual property I have created for Corporation.”

Leave out any mention of “work for hire” unless you are sure that the work falls into one of the nine narrow work for hire categories set forth in the Copyright Act (for example, a translation or an atlas). If the contractor is working on one of these items, then the contractor can agree in writing, before work is commenced, that his work is a work for hire. Note that a computer program developed by a contractor can never be a work for hire, because computer programs are not one of the nine categories.

Because of the legal technicalities associated with the work for hire doctrine as applied to independent contractors, any reference to a work for hire is both unnecessary and possibly dangerous. What if the contractor agrees that the computer program she is writing is a work for hire? Does this technically deficient agreement (since computer programs don’t fall under work for hire) undermine the “employer’s” ownership? Who needs to worry about these technicalities? The solution, plain and simple, is to get a blanket assignment. An assignment covers all bases: whether the developer is an employee or an independent contractor, and whether her work falls within the nine work for hire categories or not, the assignment transfers ownership.

Avoid the work for hire trap: get an assignment.

Previous post:

Next post: