Imagine you own a company and you want to create an app to better market and sell your products. Most likely, none of your employees will know how to make apps so you’ll need to hire an independent software engineer to create one for you. However, whenever a copyrightable work is created, it’s always important to determine who will actually own the finished work. At first glance, it seems like a simple “work for hire” agreement will be enough, but that may not be the case.
Under U.S. copyright law, a “work for hire” is defined as (1) a work prepared by an employee within the scope of his or her employment; or (2) a work specially ordered or commissioned for use as a contribution to a collective work, as part of a motion picture or other audiovisual work, as a translation, as a supplementary work, as a compilation, as an instructional text, as a test, as an answer material for a test, or as an atlas, if the parties agree in a written instrument signed by them that the work shall be considered a work made for hire.
In our scenario, the software engineer probably wouldn’t qualify as an “employee” of your company since you don’t regularly employ or supervise him, so the other option would be to try and argue that the app is a “work specifically ordered or commissioned…” But, notice that the law lists a specific set of works that can qualify as “works for hire” and there is no category for software. So, in our case, if you use a simple work for hire agreement, it may not be sufficient to grant full ownership to your company.
What should you do in this situation? Fortunately, the law allows copyright owners to transfer a copyright through an “assignment.” To be valid, a copyright assignment must be in writing and signed by the owner making the transfer. In our scenario, it would be smart to include an “assignment clause” in the software engineer’s work for hire agreement. This clause would say that if the app doesn’t qualify as a “work for hire” then the engineer assigns all rights to your company. Including this language will provide an added layer of protection if there’s an ownership dispute later.
What happens if there isn’t assignment language in your contract and the app doesn’t qualify as a “work for hire”? Well, then your company and the software engineer will most likely be considered 50/50 owners. If that happens, you may be on the hook to pay him for continued use of the app and that can get pricey.
Bottom line: when hiring people outside your company to create copyrightable material, be sure your agreements contain the necessary language. Taking precautions in the beginning could save you big bucks in the long run.
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