Your employees make all kinds of creations for your business while performing their jobs. Who owns these creations? The answer depends on what kinds of subject matter are involved, and what kinds of agreements are in place, and may be very important to you if employees are leaving for other jobs, especially with competitors.
As you will see, if you want your business to own your employees’ creations, you may need to take some proactive steps.
For literary, artistic, and other creative works, such as articles, advertising copy, databases, photographs, software, artwork, sculptures, architectural works, music, or videos, the answer depends on copyright law, which is governed purely by federal law and is, therefore, the same throughout the entire United States.
If an employee is a formal salaried W-2 employee, and a work was created in the course of employment, then the employer automatically owns the copyright rights as a “work made for hire.”
However, if the work was created by an employee, but not in the course of employment, then it would not qualify as a “work made for hire.” For example, a company bookkeeper who took a photograph at a company publicity event probably was not acting within the scope of employment, because taking photographs was not in his/her job description, so the photograph probably does NOT belong to the company.
Moreover, if a work was created by an independent contractor, then the independent contractor probably owns the copyright rights. This is because the U.S. Supreme Court ruled in 1989 that independent contractors do NOT qualify as employees for purposes of the test for “works made for hire.” Merely paying the independent contractor for the work is NOT sufficient to transfer ownership of the copyright rights to your business.
In order for an independent contractor to qualify as an employee, the Supreme Court said that the independent contractor must meet the common law agency test for qualifying as an employee. Under the common law agency test, if the principal (the hiring party) controls the contractor sufficiently closely, the contractor becomes an agent of the hiring party. This means that the hiring party, as principal, would then be liable for the contractor’s acts or omissions, as agent. Most parties who hire independent contractors do not control the contractor sufficiently to be held liable for the contractor’s acts and omissions (when the contractor is performing work for the hiring party), so most contractors would not qualify as employees under the common law agency test.
Many employers mistakenly think that they can write into a contract that a work will be a “work made for hire” that is owned by the hiring party so that the hiring party can then automatically become the owner of the copyright rights. However, this is almost certainly wrong.
Under U.S. copyright law, there are only two ways for a work to be a “work made for hire” – be created by an employee acting within the scope of employment or be one of nine special categories of works that are specially ordered or commissioned, if there is a signed written agreement stating that the work shall be considered to be a “work made for hire.” The nine special categories are very narrow: (1) a contribution to a collective work; (2) part of a motion picture or other audiovisual work; (3) a translation; (4) a supplementary work; (5) a compilation; (6) an instructional text; (7) a test; (8) answer material for a test; or (9) an atlas. A supplementary work is a work prepared for publication as a secondary adjunct to another work by another author, such as forewords, afterwords, pictorial illustrations, maps, charts, tables, editorial notes, musical arrangements, answer material for tests, bibliographies, appendixes, and indexes.
If a work does not fall within one of these nine special categories, it is not eligible to be converted into a “work made for hire” by a contract.
Congress was serious in its intent that only these nine categories can be converted into a “work made for hire” by a contract: in 1999, a technical correction was made that inexplicably added “phonorecords” to the list of nine categories, and when this was pointed out, Congress then passed a special act to delete “phonorecords” in 2000.
If an employer wants to own the copyright rights to works that its employees create, the employer must either (a) for formal salaried W-2 employees, be sure that the works are within the scope of the employees’ employment; or (b) for independent contractors, after the work has been created, have the independent contractor sign a written assignment (transfer) of copyright rights.
The copyright law specifies that initial ownership of copyright rights vests in the author, and that copyright rights can only be assigned (transferred) in writing. Thus, for an independent contractor, the copyright rights vest initially in the independent contractor, and can only be assigned (transferred) in writing. Except for one of the nine special categories of work, you probably cannot put in the contract beforehand that the hiring party will own the copyright rights, because the copyright law specifies that the copyright vests initially in the author. Contracts are governed by State law, but copyright law is governed by federal law, which overrules State law.
If your business does not own the copyright rights to works created by an employee (because the works were not within the scope of employment) or independent contractor (because the written assignment of copyright was not obtained), then your business cannot take legal action against someone else who copies, adapts, displays, or transmits those works, such as your former employee’s new employer, or another client of the independent contractor. Employers should consider these issues and act accordingly to protect their business interests.