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So You Think You Own that Work Product You Paid Someone to Produce for You?

Sep 28

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9/28/2013 12:20 PM  RssIcon


If you pay an independent contractor to design a website or write website content for you, you will automatically own the product, right?

If you pay an independent contractor to write computer code for you, you will automatically own that code, right?

If any employee invents something that relates to your business while working for you on your time, while using your facilities, you will automatically own that invention, right?

As you have probably figured out by now, I am going to inform you that the answer to each one of these questions is NO.

Under federal copyright law, in the absence of a properly written and signed agreement to the contrary, the copyright in any creative work (such as a website or computer code) is held by the author immediately upon creation of the work.  That means the person you hired to work on your website or code for you will have the exclusive right to copy, modify and update your website or code, and to register the work with the U.S. Copyright Office.  That also means you will have no right to modify or update the website or code (or to pay someone else to do so), but the person you paid to produce it is perfectly free to copy, modify, or update it for his or her next client.

Under federal patent law, in the absence of a properly written agreement to the contrary, the employer of an employee or independent contractor will only own an invention if (i) the employee accepts payment for his or her work and (ii) is hired specifically to invent or is directed by the business to make an invention.  In the case described above of an employee who comes up with an invention that: (i) related to the business and (ii) was invented using the employer’s resources or on the employer’s time, the employer will in most situations have a license to use the invention, but the employee owns the invention and may commercialize it independently of the employer – such as by selling rights to the employer’s competitor!

If you don’t believe all of this could possibly be correct, spend some time researching these issues yourself!

What can you do about it?  All of these issues are easily addressed with properly worded written agreements with the independent contractor or employee.  Note the reference to “properly worded”, because it is important that the agreement is worded in a technically correct way.  But that’s the key – you have to get a properly worded written agreement in place, or you may find that the person you paid to produce something for you actually owns the work product.

One final note.  Even though you might be willing to live with this issue, you should be aware that potential acquirers of (or investors in) a business routinely inquire as to the execution of relevant intellectual property ownership agreements by employees and independent contractors.  Gaps in the maintenance of such agreements might result in disruption and even abandonment of an otherwise desirable transaction.

Many thanks to Dan Kent of Kent Law, P.C. for looking over the copyright-related content, and to Dan McClure of McClure, Qualey & Rodack, LLP for looking over the patent-related content.  Dan Kent’s practice is focused on intellectual property litigation, particularly in the areas of patents, trademarks, and copyrights.  Dan McClure’s practice is focused on the preparation and prosecution of patent applications and related client counseling.

Two more miscellaneous notes:

·         You may recall that a couple of months ago I blogged about changes occurring in the laws relating to raising capital, and that I reported that the rules permitting general solicitation and general advertising in Rule 506 sales to accredited investors (under certain conditions) would be effective 60 days after publication in the Federal Register.  Those rules became effective this past week, in September 23.

·         This coming Tuesday, October 1st, is the deadline for companies to issue notices to their employees explaining their options under the new healthcare laws.  This is not within the scope of my personal practice, but if you wish more information or assistance in this area I would be pleased to connect you with people who can help you.

What would any written material coming from a lawyer be without a disclaimer?  Here it comes: This advisory contains general information only.  It is not intended to be and should not be relied upon as legal advice for any specific situation.  Your mileage may vary.  Offer void where prohibited.

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