Determining authorship and ownership of any Intellectual Property Right (IPR) is vital for the just and appropriate exploitation of the work. Therefore, where an individual inventor or creator is involved, such determination may not involve much deliberation, unlike where multiple parties acting in different capacities are witnessed. Hence, it is imperative to analyze the ‘Work for Hire’ principle in the present times that are garnered by technical evolution and business expansion projects disrupting the geographical limitations of how work was traditionally delegated. Today, independent contractors and employees are a much-observed trend since it saves cost and enhances convenience.
What is the ‘Work for Hire’ Doctrine?
The ‘work for hire’ clause regulates the wide range of activities wherein the work is created by an employee acting in his official capacity while in the course of employment. It stands true for employees as well as independent contractors governed by such a contract. Although such works are the creation of an individual or employee, due to the operation of law, that individual or employee is deemed as being authored by the employer enforcing such a contract; for instance, where some software is prepared by an engineer employed by a company or where a painter paints a portrait of his employer on demand. In all such instances, the work is considered to be made ‘for hire’ and cannot be adversely claimed by another person as his own. The incorporation of such a principle enables the addition of different flavors and elements in a corporate entity without changing its essential nature as an employer.
In an employer-employee relationship, it is mostly implied that the work created belongs to the employer. The employer only has to establish that there exists such a relationship and that such a work of intellect was created within the scope of employment. However, when it comes to independent contractors, the burden of proof is more stringent. The employer hiring such an independent contractor has to prove some elements. Firstly, it is to be proven that the created work was ordered or commissioned by the employer to the independent contractor; secondly, it needs to be proven that the work created by the independent contractor falls within one of the nine ‘work for hire’ categories, which include:
- A contribution to a collective work;
- A part of a motion picture or other audio-visual work;
- A translation;
- A supplementary work;
- A compilation;
- An instructional text;
- A test;
- Answer material for a test; or
- An atlas.
The court will make a subjective analysis to comprehend whether the conditions mentioned above are met or not before arriving at a conclusion corresponding to whether a work is governed under the ‘work for hire’ doctrine where it is not explicitly so mentioned in the contract of employment.
A major issue lies in the fact that ‘software’ does not fall within either of these categories, which is why there has to be a property assignment agreement in place to establish that software is copyright belonging to the employer where such a delegation is made to the independent contractor. There have been many judgments recently where courts have agreed that works of independent contractors belong to the employer by virtue of there being an implied employer-employee relationship. For example, in IXL, Inc. v. AdOutlet.Com, Inc., the United States District Court established that the source code of the hiring business’ (employer) website qualified as a contribution to a collective work under the ‘work for hire’ doctrine since each portion of the website was construed as an independent work constituting the entire collective work when holistically viewed together. Later in Stanacard, LLC v. Rubard, LLC, the Court held that the company’s new software system accounted as a compilation under the said doctrine because different components of the computer program were created and assimilated to create the whole copyrightable work.
The ‘Work for Hire’ Agreement
The ‘work for hire’ agreement should incorporate a provision covering the following aspects in brief:
- It should clearly and in unambiguous terms identify the parties to the contract. It should elaborate on the nature of their relationship as well.
- It should include an explicit declaration of both the parties to willingly constitute the agreement, keeping in mind the distinct goals each party may have from such a transaction.
- There should be an explanation included as to the payments to be made.
- It should also clarify the nature and extent of use of each party concerning the object of the contract after the termination of the employer-employee relationship.
- It should also provide details on the course of action to be taken in case of default of either of the parties hindering the conclusion of the contract.
Furthermore, where the Intellectual Property (IP) is owned by the employer but needs some modifications or alterations to be made upon the original form, it is advisable to seek a customization agreement before beginning the process. This kind of contract defines the scope of the work to be done and also clarifies that under such modifications, the authorship of the modified work does not change. It instead operates in the form of a licensing right where the employer permits the employee to modify an already existing IP asset like a book, software, invention, etc.
In addition to the previously mentioned points, the contract may also throw light on the following aspects to provide better safety and security to the IP asset originating from such a transaction:
- The employer should consider adding a provision of ‘work for hire’ in the employment agreement governing independent contractors and employees.
- The contract can explicitly mention a clause enabling the transfer of the work created during such a course of employment along with the rights of proprietorship that are complementary to such works.
- Where a work created by an employee or independent contractor is such that it has substantial economic value, it can also be protected in the form of a trade secret by incorporating a provision related to the same in the contract.
- There can be an expressed clause governing the confidentiality of the knowledge exchanged between the employee and the employer in the course of employment.
- It is also advisable to include within the contract a non-compete clause to restrain the use of the work created by the employee or independent contractor concerning third parties or even competitors. It helps to maintain the nature of rights and enforce the same in case of any adversaries.
The stipulation of this doctrine is crucial not only for entrepreneurs and business houses but also for employees and freelancers. As observed above, the employer should be sure of demarcating what IPRs belong to the business entity and what can be rightfully claimed by it, even though it is a resultant of another’s hardship. Similarly, an employee should also be aware of his rights and the scope of his job description. From an employee’s point of view, it may be beneficial to negotiate the terms of a contract that expressly states that the work is for hire. It is a standard boilerplate, and one should consider negotiating an agreement where IP is owned by the employee but may be licensed to the one for whom it is prepared (employer) in a certain manner and for a stipulated period. Therefore, it is critical to understand the terms of the contract and whether it refers to ‘work of hire’ or ‘work for hire’ when dealing with valuable intangible property.