It is all-too-common for software development contracts with independent contractors to
improperly classify deliverables as works made for hire. The work for hire doctrine does not include literary works and is therefore inapplicable to computer software. A company which seeks to retain the copyrights to work product created by a software engineer acting as an independent contractor must include a valid IP assignment clause in the independent contractor agreement or classify the contractor as an employee.
Software Programs and Technical Documentation
The development of software and technical documentation is a standard occurrence for
San Francisco start-ups and Silicon Valley technology companies alike. Companies frequently enlist the services of an independent contractor to perform this work. Naturally, the company seeks exclusive ownership and right of use of the product(s) developed.
However, using the work for hire approach with independent contractors for software development agreements without an assignment clause fails to transfer copyright ownership to the hiring party. Payment for the work does not alter the independent contractor's rights of ownership of the software. See § 101 U.S. Copyright Act.
Work for Hire under the U.S. Copyright Act
As review, when hiring independent contractors, there are three elements which must be in place for deliverables to qualify as work made for hire:
First, all deliverables need to be original works, specifically created for the project.
Second, the contract must be in writing and must declare that the deliverables are work for hire.
Third, the deliverables must fall into one of nine limited categories of works outlined in the Copyright Act (17 U.S.C. § 101), as previously discussed in Work Made For Hire Agreements: Who Owns the Copyright? Part 1: Federal Law.
Because literary works are not included within the nine limited categories of works eligible for work made for hire status under the U.S. Copyright Act, companies must use other methods of obtaining ownership rights in the software created by contractors.
A Solution - Assignment of Copyright Clause
For most companies, the options include 1) classifying the software developer as an employee, because all works created by employees are owned by the hiring party, or 2) including an assignment of copyright clause in the written independent contractor agreement.
For employers who seek to retain the independent contractor status of software developers, obtaining an assignment of copyright in all works created under the agreement is essential. In this manner, the copyright to all works created for the company by the independent contractor are transferred to the company.
It is imperative that the language used in such an assignment clause be absolute and in the present tense. Unclear wording can result in the company receiving nothing more than a promise by the independent contractor to transfer the copyright at some future date. Should the independent contractor fail to assign the copyright, the company may have a valid breach of contract claim, leaving it with an award of monetary damages, but not the copyrights to the software.
To ensure the benefits and security of IP protection it is always advisable to consult with an experienced attorney.
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