Who owns your intellectual property?

Independent contractors often hold the copyright on works they’ve created, like logos and software code

In today’s technology and online business environment, the key assets of a business are often its intangible assets — its intellectual property, whether patents, trade secrets, copyrights or trademarks. Frequently, businesses have others create works for them, including written content, artwork, logos and graphics. If the work is created by an employee, under U.S. copyright law, the employer is deemed to be owner of the copyrights in the work.

On the other hand, the general rule is that the copyrights on works created by an independent contractor are owned by the independent contractor. There are two exceptions to this rule: there is an enforceable written work-made-for-hire agreement between the parties or there is a written assignment agreement between the parties.

And even if there is a work-made-for-hire agreement, it applies only to certain types of works, namely one 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.

Therefore, if you hire someone to create software code or a website or a trademark logo, in most cases the ownership in the copyrights in the works will remain with the author, unless you have a written assignment of the copyrights from the contractor.

So what does that mean for you in the real world?

Potentially the independent contractor could prevent you from using the work, and possibly even sue you for copyright infringement. That’s a serious predicament to be in, especially if you are sublicensing the code to your customers, using the website for interactive business or using the logo as your trademark.

So what can you do?

If the intent always was that you would own the copyright in the work, you might be able to convince the contractor to provide you with a written assignment — after all, you did pay good money for the work product (presumably). Hopefully, the resolution would be that simple
(although it might require some additional payment).

But, what if your relationship with the contractor has broken down and you are at odds? Can you force the contractor to transfer the copyright to you?

Generally, copyright assignments must be in writing to be enforceable. If it was understood between you and the contractor that you would own the copyrights in the work there is a possibility you might be able to convince a court under principles of equity to order the contractor to execute an assignment to you.

But what if the two of you never really discussed ownership per se? Under such circumstances, a court (assuming it even has a right to do so) might be unwilling to force the contractor to execute an assignment. However, given that the whole purpose of the engagement was to pay the contractor to make something according to your requirements for you to use, and the contractor (presumably) was paid to do so, then a court might find that there was an implied license from the contractor to you to use the work for the purposes for which the work was commissioned.

But what are those purposes? How broad or limited will your rights be as construed by the court?

To complicate matters more, what if you want to register a copyright but are not the owner of the work? What if you want to register the trademark logo but are not the owner of the work? These could be some serious hurdles to try to overcome. And even though trademark rights are acquired through use of a mark, if you don’t also own the copyright in the drawing of a logo used as a trademark, the copyright owner conceivably could stop your use of it.

The old adage “an ounce of prevention is worth a pound of cure” applies here fully.

The moral of the story is this — make sure you have a written work-made-for-hire agreement in place that also contains an assignment clause for all non-employees who create any works of authorship before they commence the work. Period. End of story.

Attorney Douglas Verge, a former chair of Sheehan Phinney’s Intellectual Property Practice Group, now chairs the firm’s Franchise and Distribution Law Practice Group. He can be reached at 603-627-8119 or dverge@sheehan.com.