Intellectual Property Works Made for Hire: Who Owns What?
I’m sure you’re going to see with this with many (truthfully, if not all) of my legal guides – but disappointingly, the short answer is “it depends". Depending on your industry, the owner of your Intellectual Properties could be any of the following: you, your employer, or the business entities, universities or grant organizations that may be underwriting your research. For those of you who like to skip to the bottom, here’s the gist – if you can satisfy the criteria necessary to consider yourself an “independent contractor", then you probably own the work. If you don’t, then you’re an “employee" and your employer owns your work. Now, let’s backtrack for a minute on the presumption that you’re savvy enough to have something in writing…
As the first (and surely, the most obvious) step of your analysis, you’ll have to consider the terms of your employment agreement and/or any other ancillary agreements to which you may be subject. These may include those agreements between your employer and the businesses, universities or grant organizations for which your employer has agreed to produce research and/or develop a product.
To illustrate what you’re likely to see, let’s consider a couple of brief provisions from a video game publishing agreement with ownership falling to either side as indicated by the brackets:
[Option 1. Work Made for Hire for Publisher]
1.1. Work for Hire; Publisher’s Rights
1.1.1. Developer acknowledges and agrees that the Intellectual Property Rights in the Game created under this Agreement will be the sole and exclusive property of Publisher except that the Developer makes no representations with respect to the assets provided by Publisher and commercially available third party development tools and libraries. The parties agree that the Game created pursuant to this Agreement was specifically commissioned by Publisher as work made for hire, as such term is used in the U.S. Copyright Act.
1.1.2. If the Game or any portion thereof is determined not to be a work made for hire, Developer hereby irrevocably assigns to Publisher in perpetuity throughout the universe, all right, title and interest of Developer in and to the Game, including without limitation, all Intellectual Property Rights embodied in or pertaining to the Game created under this Agreement, and the complete right to exploit or otherwise use the Game (including the right to sublicense the Intellectual Property Rights through multiple tiers of sublicensees, in any form of medium, expression or technology now known or hereafter devised.)
[Option 2. Ownership by Developer]
1.1. Developer’s Ownership Rights. Publisher acknowledges and agrees that the Intellectual Property Rights in the Game will be the sole and exclusive property of Developer. Publisher’s sole rights to the Game will be those licenses granted elsewhere in this Agreement.
In my experience, absent a reversion interest in the intellectual property rights (say, in the case that the publisher decides not to release the work), Work for Hire clauses are generally straight-forward, and rarely negotiable.
With all that said, it’s typically clear as to who owns what where you have a well-crafted Work for Hire clause in your written agreement – but what about the cases in which you don’t or the agreement you have is unclear? Well, as I’m sure youve already guessed – it depends.
The copyright case on point in this area is Community for Creative Non-Violence v. Reid, 490 U.S. 730 (1989), but this is one of the rare cases you’ll find in IP law in which you can (generally) apply the Court’s analysis to other IP rights (in this case, patents). Now, let me take a moment to caution you that this isn’t going to be the best analog to the kind of works you see produced in the Tech Industry (not to mention the freshest case on-point in your particular Federal Circuit), but it gives a fair idea of the kind of factors courts will consider when evaluating the ownership of Works For Hire.
I managed to dig deep and come up with my brief of CCNV v. Reid from way back in law school, so for those of you who have since pushed it from your mind, allow me to offer a short refresher:
PROCEDURAL POSTURE: Petitioners, a non-profit organization that hired respondent artist to create a sculpture, appealed a judgment from the United States Court of Appeals for the District of Columbia Circuit, which held that the sculpture was not a work made for hire under the provisions of the Copyright Act of 1976, 17 U.S.C.S. § 101.
OVERVIEW: The U.S. Supreme Court affirmed a judgment which held that a sculpture created by an artist hired by an organization was not a “work made for hire" under provisions of the Copyright Act of 1976, 17 U.S.C.S. § 101. Petitioners, a non-profit organization, hired respondent artist to create a sculpture of homeless individuals for a Christmas contest. The Court held that under § 101, a work was a work for hire when either the work was prepared by an employee within the scope of his or her employment or it was included in the list of nine categories of works enumerated in § 101. The Court rejected petitioners’ arguments that the hiring party’s right to control or actual control tests should determine whether the work was for hire. The Court stated that because the statute did not define the terms “employer" or “employee," they had to rely on the conventional master-servant relationship understood by the common law of Agency. Respondent was not an employee given the facts that he was hired only for one specific task for a limited time, worked in his own studio with his materials, and was a skilled sculptor. Finding that respondent was an independent contractor; the Court affirmed the judgment.
OUTCOME: The Court affirmed the judgment and held that respondent artist was not an employee in the traditional common law sense because he was hired for a specific project for a limited time, used his own studio and materials, and was a skilled craftsman; thus, the sculpture was not a work made for hire
So, if the court is able to determine that the producer of the work is an independent contractor rather than an employee, then the producer is deemed to be the Author/Inventor of the work and accedes to all the rights of ownership they may wish to exert.
Defining the Independent Contractor
Since CCNV v. Reid, we’ve seen some significant expansion to these factors, but as yet, no consistent, uniform definition distinguishes an employee from an independent contractor. Some statutes contain their own definitions. The U.S. Supreme Court has held that when a statute contains the term employee but fails to define it adequately, there is a presumption that traditional agency-law criteria for identifying master-servant relationships apply (National Mutual Insurance Co. v. Darden, 503 U.S. 318, 112 S. Ct. 1344, 111 L. Ed. 2d 581 ).
One comprehensive test that takes into account agency-law criteria and numerous other factors courts have created to define independent contractor status was developed by the IRS. Known collectively as the 20-factor test, the enumerated criteria generally fall within three categories: control (whether the employer or the worker has control over the work performed), organization (whether the worker is integrated into the business), and economic realities (whether the worker directly benefits from his or her labor). The 20 factors serve only as a guideline. Each factor’s degree of importance varies depending on the occupation and the facts involved in a particular case.
The IRS 20-Factor Test can be found here.
So, for all these reasons, it depends. If the best and worst cases are simultaneously realized and your product or research has significant value to your industry, it’s easy to imagine that you may wind up the unfortunate subject of an IP ownership cautionary tale. Just remember – a little well-thought planning will end up saving you a lot of trouble and money down the line. Know your rights and protect your interests!