Thursday, March 3, 2011

Who Owns the Copyright in Work Created While Employed?

The Copyright Act of 1976 (17 USC Section 101-810) (1) gives ownership rights of music, text, artwork, computer code and other such "original works of authorship" (17 USC Section 102(a)) to their authors by default with a few exceptions. (2) No registration by the original author is necessary. One of the exceptions is the so-called “works for hire” exception (more accurately called “works made for hire”) defined in 17 USC Section 101), that gives at least co-ownership of the authored work to the author and the one who paid to have it created.

You can see how someone who hires a sculptor, for example, to create a specific work of art would expect to have some ownership in the creation he paid for. In the technology sector, this issue comes up most often with respect to software code written by employees (3), contract employees and others who perform work that is accumulated into the final software product. Copyright protection extends to copyrightable expression within a computer program, but not to ideas, program logic, algorithms, systems, methods, concepts or layouts (17 USC Section 102(b)) which typically fall under the U.S. patent law (see 35 USC Sections 100 and 101 , e.g.).

Ownership of a copyright can generally be transferred only with "an instrument of conveyance, or a note or memorandum of the transfer, is in writing and signed by the owner of the rights conveyed or such owner's duly authorized agent" or by operation of law. (17 USC Section 204(a)). While many employers have new hires sign an agreement at the start that clearly states the employer will own everything the employee creates while working there, some still do not take this simple, pro-active step. And non-traditional workers pose special challenges.

On top of those, add the challenges that come when the employer sells the work product of the author. Government procurement regulations often require vendors to release some or all of their rights to any intellectual property (“IP”) included in the deliverables. (See standard Federal Acquisition Regulation clauses 52.227-14 through 52-227-20, for example or Policy Notification 49 in Canada, which many state, provincial and local governments pattern their own rules after.) Commercial purchase agreements generally have similar provisions.

And finally, there is more often these days than in the past a challenge that comes when the employee modifies or incorporates work authored by others who may not be employed by the same employer. The ease with which a programmer can find and incorporate “open source” software components exposes the employer to potential claims of people the employer never intended to involve in a project. The employee is also potentially at risk.

Preventing Disputes
Employers and employees can prevent a lot of problems by clarifying their rights in writing at the beginning. Here are some things to keep in mind when creating an agreement that covers copyrights (and most other intellectual property rights) between employer and employee or to define contract services.

1. Who owns what?
2. How will the employer “pay” for the author’s rights?
3. What is covered by the agreement?
4. What duties does each party owe to the other?
5. What about work product the employer sells to others?
6. How will each address exceptions?
7. When does the IP rights agreement start and end?
8. How will disputes be handled?
9. What happens if the parties can’t resolve a dispute themselves?

In this post, I will cover the first four. The rest will be in a later post.

1. Who Owns What?
Most of the time, the parties come together with rights in work product created before they associate. Employers need to know what the employee already owns and the employee needs to list in detail the pre-existing work before work begins so there is no question about the date of creation or the applicability of the employment agreement’s terms. It is important that the employee list any liens or other claims against any of her work and to show that those claims will not apply to work created for the employer.

Describe the parties, indicating who is employer and who is employee, and that the future works subject to the agreement will be made within the scope of the employee's duties. Be sure to address the potential claims of third parties to any of the pre-existing work, especially if any of them work or have worked for the hiring employer or if the new employee may have potential claims by a previous employer to any work she claims. Then describe what rights the employee will surrender to the employer and the exact date and time, including time zone, the employer’s rights will begin. Be specific. Each of these can be a source of disagreement later.

2. How will the employer “pay” for the author’s rights?
An essential element of a valid contract is the “consideration.” One party must give something of value to the other for the second party’s deliverable. Consideration does not have to be in cash, however. Depending on the circumstances, consideration may be the extension of a job offer, or giving up a valuable right or an obligation to do or refrain from doing something in the near future, for example. State clearly what the consideration is and that the parties agree it is sufficient consideration for the future IP rights surrendered by the employee as well as the employer's right to re-sell the work authored by the employee without further compensation.

3. What is covered by the agreement?
This seems intuitive until you dig into the possible scenarios. What about work done after hours though on the employer’s equipment? Or at home after hours on the employee’s own equipment? Can the employee perform the same type of work for others? Can she add to pre-existing works that do not relate to the employer’s business? Address as many scenarios as you can but also include guidelines for the parties to raise and address unforeseen situations in a pro-active manner. It may be wise to include a provision where everything is deemed surrendered unless excepted by separate written agreement prior to creation.

4. What duties does each party owe to the other?
Initially, there are duties of disclosure. Is the employee bound by any nondisclosure or non-competion agreement? Does the employee know of any potential claims by others to his work? Does the employee hold rights in IP used or also owned by potential competitors?

Next, there are duties during the employment or contract term. Has the employee used the work of others in his work? If so, there should be an itemized list of the source, all applicable license terms, where you can get a copy of the license and how the license was acquired. The employee should be required to get permission before incorporating any works of others and should be on notice of potential consequences for violating that clause.

In the second post on this topic, I will cover the remaining five points.
1 Though this discussion focuses on the Copyright Act of 1976 in the United States, as amended through 2009, the guidelines are generally applicable to other intellectual property issues such as patents, trademarks, and service marks. Those types of IP rights have other concerns, however, that are not addressed here.

2 It is important to note that this post discusses ONLY the United States Copyright Act and works created solely within the United States. Other laws may apply to works from other countries and the U.S. has signed treaties and international commitments related to the protection of intellectual property rights around the world.

3 The question of when a person is an “employee” for the purposes of the “works for hire” exception will be the subject of a later post, since it is complicated and deserves discussion.

No comments: