Sunday, October 10, 2010

Work-for-Hire: what’s the big deal about it?

A lot has been said and written about why businesses need to have work-for-hire agreements with their freelancers. Yet I find that some of my clients and business owners I meet at networking receptions have no idea what I am talking about and why anyone would need this additional piece of paperwork. I agree, the reason for having work-for-hire agreements is somewhat counterintuitive and it has to do with copyright law. The U.S. Constitution grants the initial copyright in a work to its creator. As usual, there is an exception that applies to work made for hire: (1) if an employee creates the work as part of his or her job, then the copyright vests in the employer, and (2) if the parties expressly agree that the work is work made for hire and it falls within one of nine categories, then the copyright vests in the person/entity that commissioned the work.

So, let’s imagine a scenario where a business owner hires an independent contractor to create website content for his business and pays him for this one-time project. It would be natural to assume that the business owner owns the copyright to the end result since he paid for it. However, this is not automatically the case because the independent contractor has a constitutionally protected copyright to the content that he has created. He is also not an employee, so the first exception does not apply. The only thing that would protect the business owner is a work-for-hire agreement that he has (hopefully) entered into with the independent contractor, in which the independent contractor (the original creator) transferred his intellectual property rights to the business owner. I hope now you see the importance of these agreements.

The U.S. Copyright Act of 1976 defines work made for hire as “(1) a work prepared by an employee within the scope of his or her employment; or (2) a work specially ordered or commissioned . . . . . , if the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire.”

One further limitation: a work for hire must come within one of the nine categories listed below: (1) a contribution to a collective work, (2) a part of a motion picture or other audiovisual work, (3) a translation, (4) a supplementary work, (5) a compilation, (6) an instructional text, (7) a test, (8) an answer material for a test, or (9) an atlas.

In all other circumstances, there needs to be an additional assignment or licensing provision to make the assignment effective. There is room for negotiation, of course, as licenses can be made exclusive or nonexclusive, worldwide or limited to a certain geographic location, granted in perpetuity or limited to a certain amount of time, royalty-free or otherwise...

An additional question may arise as to whether the person who created the work was in fact an employee or an independent contractor. But this is a topic for another blog.

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