Copyright Laws when using Consultants

You are the Director of IT for a mid-sized company; you hire a consultant to write some code to handle a process, creates some dashboards, and you ask them to write a manual to document the processes.  Your firm doesn’t have a legal department, so you grabbed a contract from the internet that states the basics.  Unfortunately, it does not have a clause that clarifies that the company owns the work product.  In this case, the consultant will own the code, the dashboard design and the manual!  Hmmm…not the results you were expecting?

What a lot of technology people don’t realize is that if you are not careful, your contractors may own the rights to the work they produce.  Under the U.S. copyright laws, the rights belong to the original author unless the contract specifically designates a “works-made-for-hire clause”.

Copyright laws provide the creator of an original work exclusive rights to its use and distribution, usually for a limited time, with the intention of enabling the creator of intellectual property (i.e. the author, the artist, code developer) to receive compensation for their work and be able to financially support themselves. Typically, the duration of copyright is the whole life of the creator plus fifty to a hundred years from the creator's death, or a finite period for anonymous or corporate creations. Some jurisdictions have required formalities for establishing copyright, but most recognize copyright in any completed work, without formal registration.

So when your consultants wrote the code and wrote the manual, they were the creators.  One can also argue that, in designing the dashboard design, it was artistic in nature and, therefore, also their creation.

When you engage consultants, you want to include language in the contract that clarifies you, as the client, own the work.  For example:

Contractor agrees for itself and its personnel, that all documents, deliverables, software, systems designs, disks, tapes and any other materials (collectively, “materials”) created in whole or in part by contractor in the course of or related to providing services to the XYZ company shall be treated as a “work for hire” for the XYZ Company…

What about employees?  Do you need to have them sign an agreement assigning rights to the organization?  The law presumes that such works created by an employee in the course and scope of his or her employment relationship are the employer’s property.  (U.S. Supreme Court has told us so in Bleistein v. Donaldson Lithography Co., 188 U.S. 239 (1903).)  But you may want to consider still including a works-for-hire clause in your employment agreements, to put the employee on notice that such works are the property of the employer. This could serve as a little reminder to the employees.

NOTE: Inventions are NOT covered under copyright law.  So if your employee develops any invention, secret formula or process or anything else, it might be classified as a trade secret and may be governed by patent law. Discussion of patent assignment will be covered in a separate blog ( Part 2 – Do You Own the Inventions of Your Consultants and Employees?  (Patent Laws)

As always, I recommend you check with corporate counsel to obtain language that will meet your state laws and requirements.

This blog is not legal advice and does not create an attorney-client relationship!