When a company hires a consultant to develop software for its business, who owns the copyright to that work, the company or the consultant? The answer depends on whether (1) the consultant is considered an employee of the company or an independent contractor, and (2) the terms of their contract.
As a general rule, an “author” of a copyright is a person who actually creates the work, or translates an idea into a tangible form which is entitled to copyright protection. An exception to the rule is a work made for hire. In the case of a “work for hire,” the employer or other person for whom the work was prepared is considered the author, and, unless the parties have otherwise agreed in writing, the employer owns the right to the copyright.
The reason why the independent contractor/employee distinction is relevant is because if the creator of the work is considered an “employee,” then the work created by him within the scope of his employment will be deemed a work for hire, and thus, owned by his employer. On the other hand, if the creator is considered an “independent contractor,” the copyright belongs to him. To obtain rights to the copyright prior to its creation, the company could enter into a written contract with the creator, specifically including the terms dictated by the Copyright Act.
Whether the creator is an employee or independent contractor is not as obvious as it may seem. One who appears to be an independent contractor could still be deemed an employee under the work for hire doctrine. For example, if the company hiring the consultant exercises complete control over the manner and means by which the work is produced, has the right to assign further projects to him, provides the instrumentalities to perform the work, and requires that the work be performed at the company’s location, such consultant may be an “employee” of the company for these purposes.
There are numerous factors relevant to whether the creator of a work is an employee, including:
- the skill required to create the work;
- the source of the instrumentalities and tools;
- the duration of the relationship between the parties;
- the extent of the hiring party’s discretion and control over when and how long to work;
- the provision of employee benefits; and
- the tax treatment of the hired party.
Not only is it imperative to know the employment status of the creator, but also to understand the terms of the agreement between the creator and the company. Some time ago, I came across a contract containing the requisite “work for hire” language which an independent contractor signed (without consulting his attorney!). As a result, the contractor unintentionally lost his copyright in the work.
The importance of having an attorney review the terms of a contract prior to execution cannot be stressed enough. Seemingly harmless language in an agreement can have very specific meaning under the law. An agreement failing to use the correct terminology may result in the loss of valuable rights.
— Denise Ciampitti