APRIL / MAY 2004
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Work Made for Hire
Why You Do Not Own the Work You Commissioned?
by William S. Wyler
Schwartz, Manes & Ruby
Assume that ABC Company hires a software programmer to create a program for its business. The company's program manager gives the programmer specific specifications and requirements about the design of the program. After the programmer creates the first test version of the program, the company tells the programmer what should be changed. After several go-rounds of testing and asking for changes, the company is happy with the resulting program. The company gets a copy of the program, probably on CD or directly downloaded and pays the programmer the agreed price.
Nightmare number 1. The company is so happy with how the program works, they decide to treat it as a trade secret, so their competition can not have the benefit of using it. Then, a few weeks later they see that the programmer is marketing the program to the competition. They send a cease and desist letter to the programmer.
Nightmare number 2. The company is so happy with the performance of the program, they decide to market it and make it into a profit center. They begin to market the program and then, a few weeks later, the company receives a cease and desist letter from the programmer, insisting that the company immediately stop marketing the program.
Nightmare number 3. The company is so happy with the performance, it is decided to expand the use of the program into other divisions and subsidiaries of the company. Eventually, after programmer learns of the distribution, the company receives a cease and desist letter, insisting that the company immediately stop the internal distribution of the program.
What result? In each of the three nightmare scenarios, the company is going to lose to the programmer. In most everyday transactions, after a company buys something, it is the owner and may sell or not sell it as the company decides. However, when works that are subject to copyright protection, they do not exist in the everyday world. They exist in the strange and often confused world of the Copyright Act.
The reason the programmer owns the program is due to the Work Made for Hire doctrine, which is part of the United States Code. The doctrine has been affirmed by the U.S. Supreme Court. The Work Made for Hire section of the code assumes that the creator of a copyrightable work (whether a programmer, author, sculptor, movie director or composer) is the owner of the work, unless it is a Work Made for Hire. However, a work can only be a Work Made for Hire in two ways. First, any work made by an employee, in the course and scope of the employee's employment is considered a Work Made for Hire and belongs to the employer.
However, when the work is created by an independent contractor, the work is not considered a Work Made for Hire, unless the specific requirements of the statute are met. These include:
1) The hiring party and the creator of the work must have a written agreement which was signed before work has been started.
2) The agreement must use the magic words, that the work is a Work Made for Hire, as part of the agreement.
3) The work must fit into one of the nine categories of work entitled to Work Made for Hire status; among these, the most important from a technology perspective are that the work be an audio visual work, a contribution to a collective work (a number of independent works of different creators, collected in a single work, but maintaining individual existence), or a compilation work (a number of independent works of different creators, merged into a single work).
Unless the agreement meets all of the statutory requirements, the completed work will belong to that contractor, not to the company which hired the contractor.
So what rights does the hiring company receive when the work is turned over to it? The company receives a quasi-license, which permits it to use the program for the purposes the program created, but for no other purpose. If we go back to our nightmare scenarios, that means the company can not stop the programmer from marketing the program (it belongs to the programmer) and the company can not market the program or even distribute it internally to other departments, unless that was a specific part of the original the agreement with the contractor, when the contractor was hired.
Work Made for Hire is not as well known as it should be. Even programmers, who benefit from the doctrine, often do not know of it or misunderstand it. To avoid the nightmare scenarios requires either using only employees to create copyright protected work or some planning ahead. No custom or semi-custom programming should ever be started with an independent contractor, if the company intends to own the finished product, without first having a written agreement which includes the magic words, that it is a Work Made for Hire.
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