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Ownership of Outsourced Work and Why You Should Have a Work For Hire Agreement

In today's world, outsourcing is a common practice many entrepreneurs and businesses are doing. However, when a person or company outsources, many legal issues are involved. Specifically, these issues arise from the ownership of outsourced work and the intellectual property that is created in outsourcing the work. To protect your interests, often many businesses will use a work for hire agreement to ensure that they own the work they outsource. Contact Cordero Law to ensure your work for hire agreement is correct and accurately protects your interests. 

In today's world, as outsourcing is a common practice many entrepreneurs and businesses are doing, you may have been confronted with a work for hire agreement. And while that appears rather standard at first glance, it is one of the many legalities that are involved in outsourcing work to others. 

When a person or company outsources, many legal issues are involved. Specifically, these issues arise from the ownership of the intellectual property that is created in outsourcing the work. For example, if you hire a writer to create a brochure for your company - do you own the rights to the material or does the creator? Additionally, would it change things if the writer is your employee? 

This is just one of the many issues of legal confusion, while important, are often left unconsidered by entrepreneurs and business owners alike.  

Copyright Law in General

Under US Copyright Law, a copyright vests the moment a creation is put into tangible form. In plain English, when "something" is created, whoever created that "something" gets a copyright, and all rights associated with it, upon its creation. That "something" has to be in a tangible form, meaning it can't simply be an idea - it has to be something that you can see, touch, etc. 

For instance, the original copyright to that brochure we mentioned earlier belongs to the writer as soon as he or she creates the design and adds a combination of words to a physical sheet of paper. 

Work Made For Hire

A major exception to the rule above with regards to copyright being vested to the creator is the "work made for hire" doctrine. Under this exception, if a work is considered to be work made for hire, the person that commissioned the work will be given the copyright instead of the creator. 

What is considered Work For Hire? 

Section 101 of the US Copyright Act defines a work for hire as either:

Work prepared by an employee within the scope of his or her employment; or 

Work specifically ordered or commissioned, providing the parties expressly agree in writing that the work created to be considered a work made for hire, for use as either a: 

  • Contribution to a collective work; 
  • Part of a motion picture or other audiovisual work; 
  • Translation; 
  • Supplementary work; 
  • Compilation; 
  • Instructional text; 
  • Test; 
  • Answer material for a test; 
  • Atlas

Copyright Ownership of Employees 

By default, as you can see above, if an employee is performing work for the employer during the regular course of his or her employment, the employer owns the copyright to the work of the employee. 

While this sounds great and may leave you feeling protected, defining what actually is "during the regular course of employment" is more complex than it sounds because you need to be able to define what is an "employee" and what is considered the "regular course of employment" for copyright purposes. 

Who Classifies as an Employee

In order to determine if someone is an employee, the Supreme Court has determined that there are several factors that must be looked at in order to figure out if the employee is actually able to be classified as an employee. These factors, while not all the factors are ones the court considered important enough to site. 

Control by the Employer Over the Work: The employer determines how the work is done, has the work done at his or her location, and provides the equipment and/or means to create the work. 
Control by the Employer Over the Employee: The employer controls the employee's schedule, has the right to have the employee perform other assignments, determines the method of payment, and has the right to hire the employee's assistants. 
Status and Conduct of the Employer: The employer is in the business of producing such work, provides the employee with certain benefits, and withholds taxes from the employee's payment. 

Regular Course of Employment

A regular course of employment can be interpreted in a variety of different ways and the truth is figuring out an exact definition has not "really" been done yet. For now, the best way to understand if something is in the regular course of employment - it is best to ask if an ordinary person acting as an employee of the employer would perform the specific task being analyzed in order to determine if it is being done during the regular course of employment. 

If the writer is an employee, he or she should sign an employment contract that includes a work-for-hire clause, stating that any creative works (writing, design, computer programs, etc.) belong to the company and not the individual creator; they are works made for hire.

How to Fight Confusion

Whether you want to be assigned the work of the employees or not, it is important to make such distinction in the employees contract. Having a proper employment agreement drafted that either has the employee assigning or retaining his or her work is generally a good practice. Doing so can help avoid the many points of confusion that exist in terms of whether an employee owns the intellectual property he or she creates.

Copyright Ownership of Independent Contractors (or Freelancers)

If you hire a freelancer (or independent contractor), you should have a signed contract that includes all the terms of the purchase, including a work-for-hire clause. While it can be interpreted that the act of hiring a freelancer by itself would cause the presumption that the work being done was intended to classify as work for hire, it is not set in stone.

Common Language of Assignment 

In many independent contractor agreements, a careful lawyer will include a provision that states a few major points: 

The work being done is work for hire; and
If the work is determined not to be work for hire, the independent contractor expressly assigns all intellectual property rights to the work that's being created to the person or company that hired the independent contractor. 

Conclusion

The interpretation of these general rules can be complex and difficult for the layperson to understand, and in many cases, certain lawyers as well. In particular, the classification of whether someone is an employee or independent contractor has been, and will continue to be, subject to lengthy government review, interpretation, etc., and is a thorny issue that affects the ownership of copyright (among other problems).

It's important that you protect your business's intellectual property, just as you insure against physical losses. Consult with a business attorney that is familiar with intellectual property before you desire to outsource your next body of work. At Cordero Law, we can help you design an approach to copyright ownership that will work best for you. Contact us today!

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Julian Cordero is an Attorney, Music Producer, and Entrepreneur.  Oh and he blogs too!  Julian is licensed to practice law in New York and is the Managing Member of Cordero Law LLC, a New York City based law firm focusing on Business Law, Entertainment Law, and Intellectual Property.