Monday, March 14, 2011

Who Owns the Copyright in Work Created While Employed? (cont'd)

Employers and employees can prevent a lot of problems by clarifying their rights to intellectual property in writing at the beginning. In the first post on this subject, I listed several things to keep in mind when creating an agreement that covers copyrights (and most other intellectual property rights) between employer and employee or when hiring contract services.

1. Who owns what?
2. How will the employer “pay” for the creator’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 that post, I covered the first four. Now, I will address the rest.

What about work product the employer sells to others?
When one person sells the work of another who is the author of some or all of the work, the author is generally still entitled to compensation unless the author has given up that right. Not so for “works made for hire.” Because the copyright is automatically given to the employer, the author can not revoke or claim an interest in the rights without an express conveyance from the employer or a written agreement with the employer at the time the work was created (17 USC 203(a)).

A clearly-worded written agreement at the outset can allocate any rights that will not be exclusive to the employer (exceptions) and any rights reserved by the employee.

How will each address exceptions?
Some agreements attempt to cover everything the author creates during the employment term, whether or not related to the employer’s business. Those are likely not enforceable beyond what is reasonably tied to the employer’s business or created using the employer’s tools, equipment or proprietary processes, without special "consideration" to pay for works created outside the scope of employment. Others are less clear about work authored at home after work hours, for example, or in concert with others who are not employees of the same employer.

Better to be clear. Describe the works that are deemed included and then list the exceptions. Are some rights world-wide, for example, while others only have a limited geographical license? Are they exclusive rights, meaning no one else can have them at the same time? Are there rights reserved to the author for certain limited uses?

It is difficult to anticipate every possible future event, so provide a mechanism for each party to notify the other that a particular work is included in or excluded from the agreement’s scope.

When does the IP rights agreement start and end?
Unless the work is "prepared by an employee within the scope of his or her employment; or
". . . “the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire” (17 USC 101) (1)), or the author transfers the copyright 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,” (17 USC 204(a)) (2)), the author retains full rights. Parties can agree to buy or sell their respective rights in intellectual property at any time, whether the works already exist at the time of the agreement or are created in the future. Designate the specific starting date and describe when it terminates.
Address the rights that will survive termination of the agreement and those that expire with it so that both sides know their obligations even after they part ways. For any that continue after they separate, be clear on the term, geographical scope and relative priority of the rights.

How will disputes be handled?
If one party disagrees with the other’s interpretation or application of some part of the agreement, what is the preferred method of documenting the concern and the resolution? Are specific people or documents required? Will the procedures produce a result for future reference if needed?

Most agreements address litigation restrictions, but many fail to outline informal dispute resolution procedures or emphasize that they are preferred or even required before either party may begin legal action. You don’t have to go as far as a binding arbitration clause, but you can still guide disputes through a pre-litigation attempt to resolve them.

What happens if the parties can’t resolve a dispute themselves?
As with pre-nuptial agreements, where the pre-wedding couple dislikes thinking about divorce at the beginning of their marriage, employers and new employees dislike thinking about litigation when they are about to enter their “honeymoon phase.” Even so, it is important to nail down the laws that will apply to the agreement, the place where any legal action must be filed and any other variables that may change the terms of the agreement down the road as circumstances change. You need predictability and confidence that a provision in the agreement will not be turned on its head should one party relocate to another jurisdiction with different laws and legal procedures.

Here is where you can insert the arbitration clause, if desired. Also address venue, applicable rules of procedure and law and how costs of litigation will be divided if one party prevails over the other in the litigation.

Other Issues
This post does not address the issues that come up when an author conditionally grants a license to another who then breaches the license terms or fails to warn a subsequent purchaser of the original license terms. I discussed some of these risks in an earlier post, but there are many more to cover at another time.

With a well-written agreement that both parties understand, many disputes can be prevented and those that do arise can be managed. Think through the situation from both sides, use plain language whenever you can, and get solid legal advice before you sign. With those and some luck, you should be able to avoid problems down the road.

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