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Who Owns The Rights?

[ 0 ] Aug. 4, 2014 | SBO Editor

who-owns-the-rightsWho owns the intellectual property rights created by an independent contractor?

By Alecia M. Schmuhl

Regardless of whether you are the person creating a work or paying for the creation of the work, the question of who owns works created by an independent contractor (or freelancer) is an important one.  The short, but always frustrating, answer is — It depends.

Traditionally under U.S. Copyright law, the general rule of ownership is “He who creates it, owns it.”  However, if you create a work as a “work made for hire,” you may not actually be the owner.

Under U.S. Copyright law, there are two specific circumstances when the creator of a work does not own the copyright in the work.  First, if a creative work is created by one of your employees within the scope of their employment, your company automatically owns the rights to the work.  Second, if your company hires an independent contractor, it is possible that your company does not own the rights to the contractor’s work; however, the line is not always clear cut.

The Department of Labor and Your Small Business

New and growing small businesses often need help identifying and understanding the specific U.S. Department of Labor (DOL) laws and regulations that apply to them. A variety of the Department’s compliance assistance resources can help in this regard, including FirstStep Employment Law Advisor and the Employment Law Guide, which describes 24 major laws enforced by DOL in plain, easy-to-understand language. These tools, and a variety of other compliance assistance materials, provide employers with the introductory information they need to develop wage, benefit, safety and health, and nondiscrimination policies for their business. For more labor tools visit www.dol.gov 

To determine whether your company owns an independent contractor’s creative work, you must ask yourself the following three questions:

1. Is your independent contractor creating one of the following: 

• A contribution to a collective work (such as a magazine, newspaper, book or song lyrics)?

• A part of a motion picture or other audio-visual -work?

• A translation?

• A supplementary work (such as a foreword, afterword, introduction or
editorial notes to a larger work)?

• A compilation?

• An instructional text (such as a
textbook or workbooks)?

• A test?

• Answer materials for a test?

• An atlas?

2. Did your company special-order or commission the work?

3. Is there a written agreement stating that this is a “work for hire?”

If you can answer yes to all three of the previous questions, then your company owns the contractor’s creative work.

What happens if a contractor’s creative work doesn’t fall neatly into one of the descriptions in question 1 above? Your company may still own the rights to the contractor’s work, but it takes additional contract language.

If your company has hired an independent contractor to create a work that does not exactly meet the definition of a “work for hire” above, such as a website, photographs, computer programs or other commissioned artistic works – your company should ensure that when the work is completed, the company owns what it paid for. Your company should also ensure that you can do whatever you please with the work in the future.

How can your company do this?  The language within the independent contractor agreement should state that if for any reason the work is not a work for hire under the U.S. Copyright Act, the contractor agrees to assign all of the rights to the company, and the contractor will execute any additional documents to convey those rights to the company.  Some contractors may be hesitant to agree to terms relinquishing all of their intellectual property rights in their creations.  However, these types of terms are quite standard and most contractors will agree without further discussion.  If a contractor pushes back, your company can sweeten the deal by allowing the contractor a perpetual unlimited free license to display the work as a part of the contractor’s portfolio – but only as an example of the work the contractor is capable of.

Whether you are the one creating the work or paying for the work, you should always …

1. Get the deal in writing. 

2. Read before you sign.  Make sure the document you are signing matches the deal you discussed.  This should go without saying, but more often than you’d think a client comes in saying “Oh, I didn’t read the contract. I just assumed that it was the deal we talked about.”

3. Consult with an attorney if you have any questions. Even if you only talk to an attorney for 30 minutes, the peace of mind you will gain from those 30 minutes will be worth every penny.

Having a good understanding of the basic rules of work made for hire can help you avoid any of the pitfalls or misunderstandings associated with intellectual property.  Adding an attorney to your roster of consultants can help any business owner feel more secure about hiring outside help for a project. Schedule a consultation and learn your rights.


Alecia M. Schmuhl is an attorney in Arlington, Virginia. She focuses her practice primarily in intellectual property, business transactions and government contracting.

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Category: Magazine, Small Business Opportunities, Small Business Opportunities Nov 2014