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Use of independent contractors for tasks traditionally performed by employees has become an increasingly popular business model. Many businesses use independent contractors to produce original works such as software code, marketing materials, websites, CAD drawings, blueprints and designs. Although a viable business strategy, using independent contractors to create these materials can result in disputes over ownership.
Many businesses assume that, since they paid for the work, they own it. The United States Copyright Act, however, provides a potentially counter-intuitive answer.
Authors Usually Own What They Produce
As a general proposition, the author of a creative work automatically owns the work without the need for any additional action. This is true for independent contractors. For example, if a business were to hire a contractor to produce a sequence of computer code for use in one of the business’s products, the contractor would own the code and be able to use it in any matter the contractor wishes, including selling it to competitors.
Independent Contractors and “Work Made for Hire”
The “work made for hire” doctrine contained in the Copyright Act provides an exception to this rule. If a creative work is a “work made for hire” the business commissioning the work, and not its creator, owns the work. In order for a contractor’s work to be considered a “work made for hire,” it must satisfy several conditions: (1) it must be “specially ordered or commissioned” by the business; (2) must fit into one of nine enumerated categories identified in the Copyright Law; and (3) must be produced pursuant to a written agreement that specifically identifies the material as a “work made for hire.”
The first and the third requirements are typically satisfied together. A well-drafted written agreement that “specifically orders or commissions” a work should also include language identifying the work as a “work made for hire.” This written agreement will often take the form of an “independent contract agreement” or an “agreement for services.” Indeed, businesses should already employ independent contractor agreements to cover important issues like compensation, quality of work, delivery schedule and indemnification.
Copyright law further restricts the scope of “works made for hire” to material used: (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. These categories limit the usefulness of the “work made for hire” doctrine for many businesses.
A well-drafted independent contractor agreement can typically overcome these limitations with language assigning ownership of a work from the independent contractor to the business that retained it. In the event that a work is deemed not to be a “work made for hire,” the agreement would automatically convey ownership of the work to the business.
Well-drafted independent contractor agreements can minimize the risk of ownership disputes over the creative works developed by independent contractors. Businesses should also consider adding “work made for hire” and assignment language to any form agreements they use with such contractors.
Alternatively, the Copyright Act is much more liberal for works created by employees in the scope of their employment. Such works are automatically considered “works made for hire” and are not limited to nine categories mentioned above. Depending on a business’s need for certain creative materials, using employees rather than independent contractors may make sense.