Intellectual property: yours or your employer’s?

Intellectual property: yours or your employer’s?

David V. Radack

A golf club manufacturer surely would fire an employee who walks out of the plant at the end of the day with a club under his coat. Although the employee may have made the club on the assembly line, it belongs to the company because the company paid the employee to make it.

But what happens to an employee who walks out of an office at the end of the day with a computer program tucked in his brief case? The employee may have written the program, but it still belongs to the company because it paid the employee to write the program.

The products created by many companies in the information age are intellectual property. Computer programmers, technical writers, paralegals, designers, researchers, and other knowledge workers all create intellectual property in the course of their day-today work. Companies that pay employees to produce such intellectual property need to protect their ownership of that property.

Who Owns What?

The rights to any work automatically belongs to the “author” of the work. The author usually is the person who creates the work. Under the U.S. copyright law’s work-made-for-hire doctrine, however, the author may be the company contracting for the work or employing the person who created the work.

If, for example, a person is hired by a company to write a computer program, who owns the rights to the program? The answer to that question depends on whether the programmer is an employee of the company or an independent contractor.

If the programmer is an employee and created the work as part of his or her job, then the employer – not the employee – is the author of the work under the work-made-for-hire doctrine. The rights to any work created by an employee for an employer are owned automatically by the employer.

The situation is different, however, if the programmer is an independent contractor. Unless there is a written contract transferring the copyright from the independent contractor to the company, the rights to the program belong to the programmer. The programmer may sell or lease the program to others even though the company paid for his services.

Employee or Independent Contractor?

In 1989, the U.S. Supreme Court identified several criteria for deciding if a hired person is an independent contractor or an employee. While no single criterion is definitive, taken together these criteria indicate the employment status of a hired person:

* Degree of control the hiring party has over the hired party. Employees are controlled to a greater degree than independent contractors.

* Where the work is performed. Employees are likely to be required to perform their work at the site of the employer.

* Method of payment of the hired party. Employees are paid periodically – every week, two weeks, or month. Independent contractors are usually paid upon completion of the job.

* Source of the hired party’s tools and office space. An employee will have his or her tools and office space provided by the employer. An independent contractor supplies his or her own tools.

* Whether non-cash benefits, such as health insurance and pensions, are extended to the hired party. Benefits are given only to employees.

* Tax treatment of the hired party. An employee’s income is reported to the IRS on a Forum W-4, while the income of an independent contractor is reported on a Form 1099. Many employers, however, misclassify their employees and use a 1099 when a W-4 is required.

Intellectual Property and Telecommuting

Telecommuting – working from home using Computer networks, fax machines, and telephones to stay in touch with supervisors and coworkers – presents new threats to intellectual property by blurring the distinction between employees and independent contractors.

Because telecommuting gives the employer greater independence and reduces the employer’s supervision of the telecommuter, there is a risk that the telecommuter may come to think of himself or herself as an independent contractor and insist upon the intellectual property rights to the work done for the company. Because the employment status of any hired person is open to challenge and interpretation by the court, a telecommuter who you take to be an employee might successfully challenge that status and walk off with the intellectual property you paid to have made.

Protecting Intellectual Properly

While the work-made-for-hire doctrine grants a company the copyright in all works created by its employee within the scope of his or her employment, a company should consider preemptively laying claim to those rights so they are less likely to be challenged down the road. When the distinction between employee and independent contractor is open to question, this preemptive claim may short circuit claims by the hired person. Here’s what to do to make sure your company owns the work it has paid for:

* Require all new employees to sign an agreement giving intellectual property rights to your company.

* Require current employees to sign the agreement. Please note, however, that current employees cannot be required to sign an agreement unless given “extra consideration” in the form of a raise or promotion.

* Require all new independent contractors to sign the agreement before any work is done.

* Require current independent contractors to sign the agreement. They can be required to sign an agreement without any “extra consideration.”

The bottom line: Intellectual property is the stock-in-trade of many companies today. This property needs to be protected as carefully as a manufacturer would protect the products it produces.

David V. Radack is a member of the intellectual property department at Eckert Seamans Cherin & Mellott, LLC, a national law firm headquartered in Pittsburgh.

COPYRIGHT 1997 American Management Association

COPYRIGHT 2004 Gale Group