Recently in Trademark/Copyright/IP Category

Government and Tech Industry Move to Prevent Trade Secret Theft, Both by Employees and Outsiders

May 2, 2013

file0001149448379.jpgProtection of trade secrets is a critical component of business success, especially in the technology sector. Software and other tech companies have long known that they must guard their developing work against competitors, but a recent study has shown that they may face a greater risk from their own employees. The federal government launched a new strategy earlier this year geared towards protecting U.S. companies against trade secret theft. While the strategy primarily targets foreign governments and businesses, it offers useful guidance for California tech companies in preventing, and responding to, theft of trade secrets.

Theft of Trade Secrets

"Trade secret" refers to any proprietary or confidential information used by a company in the course of running its business. This includes client lists, designs or formulas for existing products, and designs or notes from products still under development. Information does not need to have copyright, trademark, or patent registration to be considered a trade secret, but individuals who have access to the information must be aware of its secret nature. Companies often require employees, contractors, and others to sign non-disclosure agreements, which identify trade secrets, prohibit unauthorized disclosure of the information, and define penalties for breach. Intentional theft of trade secret is a criminal offense under federal law, 18 U.S.C. § 1831 et seq., and California State Law, Cal. Civ. Code § 3426 et seq.

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EULAs May Prohibit Resale by Consumers of Software, Other Copyrighted Materials

April 25, 2013

1152647_39651290.jpgWhen a copyright owner sells a copy of their work, they retain the right to sell or distribute additional copies. A consumer who purchases copyrighted material, such as a book, a CD or DVD, or software, is limited to personal use of the material. A consumer may, however, resell the copy they purchased, such as the specific CD or DVD, provided they do not retain a copy. This is known as the "first sale doctrine." Copyright owners, particularly owners of software copyrights, may restrict first-sale doctrine rights through end-user license agreements (EULAs), which specify that the purchaser is merely licensing the work and does not "own" a copy. Google's recent restrictions on the use of its newest product, along with several recent court decisions, demonstrate how technology companies can protect their copyrights in this manner.

Restrictions on Google Glass

Google has begun a very limited release of the much-hyped Google Glass, allowing a select group of consumers to purchase the product for $1,500 apiece. The terms of service included with the device prohibit the user from selling or even loaning it to anyone else. As Wired reported, these restrictions gained publicity when a purchaser tried to list a Google Glass device for sale on the auction website eBay. The would-be reseller promptly cancelled the auction for fear of the consequences of violating Google's terms of service.

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Federal Circuit Court of Appeals Considers Whether Patent Law Applies to Software

April 15, 2013

Patent_513941.jpgThe Court of Appeals for the Federal Circuit, a specialized court in Washington, D.C. that hears patent cases affecting the entire country, recently held an en banc rehearing of a prior decision holding that software may be patentable. CLS Bank Int'l v. Alice Corp., No. 2011-1301, slip op. (Fed. Cir., Jul. 9, 2012). The outcome of the rehearing could have major implications for software developers around the country, particularly in Silicon Valley, as it might substantially redefine the standards for software's intellectual property protection.

Patent vs. Copyright

Patent law provides different protections and forms of relief from infringement, as compared to copyright law, which currently covers most software. Copyright law applies to creative works, such as books, songs, films, and software. "Ideas" are not eligible for copyright protection, meaning that a software application does not infringe on a copyright solely because it performs the same function as a copyrighted application. Patent law covers inventions, such as computer chips, but it can also apply to "processes." Federal statutes define "process," rather vaguely, as a "process, art, or method," which could include "new use[s] of a known process." 35 U.S.C. § 100(b). The U.S. Supreme Court has held that "abstract ideas" are not patentable, but that federal patent law may allow protection of "processes." Bilski v. Kappos, 130 S.Ct. 3218, 3231 (2010). This potentially gives patent protection wider coverage than copyright, as it would apply to a software application's method or process, rather than its code.

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New Top-Level Internet Domains Are Coming - How California Businesses Can Protect Their Trademarks

April 5, 2013

1383212_88382956.jpgThe Internet Corporation for Assigned Names and Numbers (ICANN), the organization that manages the domain name system for much of the internet, began accepting applications for a massive expansion of generic top-level domains (gTLDs) last year. It has now announced that it will begin delegating new gTLDs in April 2013, meaning that familiar ones like ".com" and ".org" could soon have quite a bit of company. Aside from a cumbersome application process and prohibitively expensive fee, ICANN had few restrictions on who could apply for a gTLD during the application period. As a result, certain trademarks may be on the list of proposed new gTLDs without the knowledge or consent of the trademark owners. To assist trademark owners, ICANN launched the Trademark Clearinghouse (TMCH) in March 2013, which will allow trademark owners to file proof of their protected marks.

What Are gTLDs?

A gTLD is the two- to four-letter extension seen at the end of a domain name, such as ".com," ".info," or two-letter country domains like ".uk". ICANN allowed applications for new gTLDs during a four-month period in 2012, the first time it has accepted submission from the general public. New proposed gTLDs include ".accountant," ".email," and ".medical," but may also include trademarked words or terms.

Trademark Clearinghouse

The TMCH launched on March 26, 2013, giving trademark owners a central location to register their trademarks and streamline the process of enforcing trademark rights against new gTLD applicants. According to the TMCH's official guidelines, three types of trademarks are eligible for inclusion:

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End-User License Agreements and Copyright Law for California Software Developers

April 1, 2013

Thrall_statue,_Pekin_2006.jpgEnd-user license agreements (EULAs) provide notice to a software user, known as a licensee, of their obligations and the limitations on their use of the software. The terms of an EULA protect the licensor's intellectual property rights in the software, including the trademark in the name or brand associated with the software and the copyright in the code among other materials. Despite many EULAs' focus on intellectual property, contract law forms the basis of most enforcement actions. The applicability of copyright law to alleged EULA breaches by licensees is an interesting, albeit less-explored topic.

Enforcement of an EULA as a Contract

While enforcement of EULAs by licensors has been controversial, the trend appears to be towards treating software EULAs as "ordinary contracts accompanying the sale of products, and therefore as governed by the common law of contracts and the Uniform Commercial Code." ProCD v. Zeidenberg, 86 F.3d 1447, 1450 (7th. Cir. 1996). Breach of contract allows a licensor to assert claims for expenses, lost revenues, and other damages caused by a licensee's breach. In cases where the alleged breach threatens more than just immediate revenues and expenses, a licensor might want to consider other causes of action.

Enforcement of an EULA Under Copyright Law

Courts have generally held that copyright law should not apply to EULA breach claims. The ProCD court noted that contracts only apply to the specific parties to the contract, whereas "a copyright is a right against the world." ProCD, 86 F.3d at 1454. EULAs may prohibit certain uses of the software in a manner similar to a trade secrets agreement, rather than copyright law. Courts have generally found copyright claims for alleged EULA breaches to be beyond the scope of copyright law. MDY Industries, LLC v. Blizzard Entertainment, 629 F.3d 928, 941 (9th. Cir. 2010). Specifically, EULAs cannot apply copyright law to acts or materials that federal copyright law would not otherwise prohibit. However, it may be possible to apply copyright law if a licensee's EULA breach threatens to continuously violate copyright ownership rights. Id. at 941 n. 3. Copyright law may therefore be preferable to contract law in some cases, as it allows additional damages, injunctive relief, and attorney's fees. Id.

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Enforcement of End-User License Agreements for California Software Developers

March 23, 2013

file0001528816582.jpgSoftware license agreements range from boilerplate language to carefully-negotiated contractual terms between two or more businesses or individuals. License agreements between a software developer and the intended user are generally known as end-user license agreements (EULAs). In the event that a licensee violates one or more terms of an EULA, a licensor may wish to sue the licensee for breach of contract. Licensors generally have little trouble establishing the enforceability of an EULA negotiated between it and the licensee. However, court rulings on the enforceability of certain types of boilerplate EULAs against licensees vary among jurisdictions. Courts in California are likely to find most EULAs enforceable.

Enforceability of "Shrinkwrap" End-User License Agreements

The enforceability of an EULA may depend on whether it was negotiated directly between the licensor and the user, or whether the license was a "shrinkwrap" or "clickwrap" license, which users accept by opening the software packaging, or by downloading or installing the software. Some courts have found these to be unenforceable contracts of adhesion, while others have ruled them to be valid and enforceable. The trend appears to be in favor of enforcement. The Ninth Circuit, which includes California, has ruled in favor of enforceability.

The seminal case finding a "shrinkwrap" EULA enforceable is ProCD, Inc. v. Zeidenberg, 86 F.3d 1447, 1449 (7th Cir. 1996), which held a shrinkwrap license to the same standard of enforceability as general contract law. The act of opening a software package, with the understanding that doing so signals agreement to an EULA, makes it an enforceable contract, according to the Ninth Circuit in Arizona Cartridge v. Lexmark Intern., Inc., 421 F.3d 981, 987 (9th Cir. 2005).

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How California Businesses Can Protect Their Intellectual Property through End-User License Agreements

March 15, 2013

1041269_55322245.jpgBusinesses that develop and sell software must protect their intellectual property rights in order to stay in business. Copyright law provides protections and remedies for developers and retailers, but it generally only applies once an infringement has occurred. In order to make a purchaser of software aware of the limitations on its use, developers and retailers, known as licensors, include a license agreement in the packaging of the software. For software downloaded from the internet, the license agreement is often included as a separate file or on a screen that appears during the installation process. Because these agreements typically only allow a purchaser to use the software for personal or business use, the purchaser is referred to as the "end user," and the license is called an "end-user license agreement" (EULA).

What is an End-User License Agreement?

An EULA defines the permissible uses of the software by the purchaser, usually limited to personal use or use in the ordinary course of the purchaser's business. The EULA may prohibit the sale of copies of the software, and may even prohibit resale of the original software media. The "first-sale doctrine" usually allows a purchaser to sell the original product, provided the purchaser did not keep any copies. U.S. copyright law also allows a purchaser to make one or more copies of computer programs for the specific purpose of creating backups or performing maintenance. Nearly any other use may be subject to restrictions in an EULA.

EULAs have been controversial because of the manner in which purchasers must agree to their terms. EULAs that accompany software sold in physical media, like CD-ROM discs, are often called "shrinkwrap agreements," because purchasers agree to the terms of the EULA by opening the packaging. Downloadable software may have "clickable" licenses, which require a purchaser to check a box on the screen during software installation. Purchasers are not obligated to agree to the EULA's terms, but they are not authorized to use the software unless they do. Despite the controversy, courts have generally held these agreements to be enforceable.

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5 Key Points Licensees Should Know When Negotiating a California Software License

March 8, 2013

file0001761923906.jpgEvery business relies on software to some extent, whether they produce software products, use software extensively in a company network, or simply use email. Silicon Valley is one of the world's centers for software and tech development, and businesses in the San Francisco area are ideally placed to take advantage of new products and technologies.

Licensing Software for Business or Consumer Use

Companies may wish to license software for use by employees within the business, or they may wish to acquire "white label" software that they can use as part of their own products or services. A carefully-written license agreement is crucial to ensuring that a business can make full use of a software product, while avoiding any liabilities that the software's developer or owner may incur. Here are five tips that a business, known as a licensee, seeking to acquire the right to use a software product from a licensor, should consider:

1. The Scope of Use Provisions Should Be Broad Enough to Allow All of Your Intended Uses for the Software, Including the Flexibility to Expand or Adapt the Use

A license agreement will usually contain a "Scope of Use" clause identifying the permitted uses of the software. This may include the actual application of the software; the physical location where the software is to be installed, such as on a central server or individual workstations; and prohibitions on use of the software by anyone not expressly authorized. A prospective licensee should develop a plan for how they intend to use the software, and should insist on a Scope of Use clause that allows not only the intended uses, but also foreseeable future uses based on the growth of the business.

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5 Things Licensors Should Know When Negotiating a California Software License

March 1, 2013

file0001556041700.jpgThe principal business of Silicon Valley tech companies is the development of new software and the integration and improvement of existing applications. Businesses rely to an ever-increasing degree on software applications for daily functions. Companies that have an application to sell to other businesses, organizations, or the public must protect their intellectual property rights, particularly when providing software to other businesses to use in their operations.

Software License Agreements

Software license agreements, sometimes known as end-user license agreements (EULAs), are part of the sale of software from a licensor to a licensee. They define what software a licensee may use and the manner in which they may use it. Software sold to the public often includes non-negotiable EULAs. The consumer agrees to the EULA merely by opening the physical packaging or commencing a download. Among businesses, the specific terms of software licenses may be subject to negotiation. The following tips may help licensors negotiate an agreement:

1. Provisions defining the scope of the license should clearly identify the permitted uses of the software.

The license agreement should identify the licensee, who may be an individual, business, or organization. It should also specifically identify the software, including its trade name and any other information that distinguishes it. The specific uses permitted by the agreement, such as exclusive use by the licensee or its agents, the operating system or hardware on which it may be installed, or its use solely for business purposes, should be clearly stated.

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What are the Risks of Cloud Computing and Other New Technologies for Small Businesses and Medical/Dental Practices?

October 25, 2012

Cloud_Computing.jpgCloud computing, the process of using remote computer servers via the internet for various computing functions, is a new but fast-growing model of business computing. It allows individuals and businesses to share resources online through third-party computing services, thus freeing up local computing resources and storage space. By reducing a business' infrastructure needs and sharing the cost of certain computer resources among multiple users, cloud computing can mean significant cost savings.

Extensive use of the internet in business, however, also means greater risk, including service interruptions, data loss, and security breaches. Small businesses should review their computing needs when researching cloud computing options. Medical and dental practices, with their heightened standards for patient privacy and records retention, should carefully consider how use of remote data storage and other services could affect patients' legal rights.

Cloud Computing Defined

The National Institute of Standards and Technology (NIST), part of the U.S. Department of Commerce, developed a set of definitions of cloud computing in late 2011. It identified five key characteristics of cloud computing services. The most important of those are a user's ability to access data or services on-demand and the broad availability of the data or services across the internet. Cloud services range in complexity from simple storage of files on remote servers to use of complex virtual computer network, often via a web browser. The "cloud" refers to the remote servers that allow remote computing or storage.

Risks for Small Business

Most businesses face the risks of loss of data and interruptions in service from computer problems. While cloud storage might assist businesses in managing the risk of losing data stored locally, the off-site nature of the cloud puts a business at risk of service interruptions. Internet outages can occur at nearly any point between the cloud server and the user, and a loss of access to necessary cloud services could translate to serious losses for a small business.

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Louboutin v. Yves Saint Laurent: Second Circuit Landmark Decision Says Louboutin Deserves Trademark Protection for Red Color on Soles of High-Heeled Shoes

October 19, 2012

722px-Louboutin_altadama140.jpgA dispute between two of the world's most famous fashion designers over women's red-soled high-heeled shoes was decided September 5 by a federal appeals court for the Second Circuit. The appellate court granted a limited preliminary injunction against Yves Saint Laurent America, Inc. (YSL), in favor of Christian Louboutin. The court, in its important decision, held that Louboutin had a valid and enforceable trademark for red outsoles, only when the rest of the shoe was a contrasting color. Louboutin had appealed the district court's ruling and continued to seek enforcement of its trademark for red soled women's high heeled shoes, alleging that the color red in certain shoe designs by YSL was likely to cause consumer confusion. The district court denied Louboutin's request for a preliminary injunction on YSL's sales of its red soled women's high heeled shoes in a ruling last year, which the Second Circuit partially reversed in its recent decision. The limited injunction will not pertain to the monochrome red shoes directly addressed by Louboutin's lawsuit, but does provide Louboutin with trademark protection for its red soled shoes when the rest of the shoe has a contrasting color,

Background/Louboutin's Motion for a Preliminary Injunction

Louboutin began designing shoes with red soles in 1992, and since then the fashion world has come to associate red-outsoled shoes with Louboutin's brand. The designer obtained a federal trademark, which was officially registered in 2008, for "lacquered red sole[s] on footwear."

YSL introduced four monochromatic shoe designs in its 2011 collection, each of which included solid red shoes with red outsoles. Louboutin requested that YSL remove the red versions of the four shoe designs from the market. When YSL declined, Louboutin filed suit in a New York federal court in 2011 for trademark violations.

The district court denied Louboutin's motion for a preliminary injunction, finding that Louboutin would be unlikely to prevail on the merits in a claim for trademark infringement for the red outsoles. The court's opinion characterized the purpose of the red soles on Louboutin's shoes as primarily aesthetic, and held that the soles lacked the required "secondary meaning" required for a color to have trademark protection.

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3 More Key Issues When Buying a California Business

September 5, 2012

1377701_97082023.jpgBuying a business is a substantial investment, first of money, then of time and energy. Any prospective buyer has a seemingly endless list of factors and issues to consider, both when exploring the general idea of buying a business and making an offer on a specific one. We previously listed three key issues when buying a business. We mentioned negotiating a fair price, assuming the office lease, and choosing the correct business structure. Here are three more key issues, relating to the assets of the business and what you should look for when considering a purchase.

Trademarks and Other Intellectual Property

Trademarks are the names, logos, or slogans that identify a business, product, or service. Every business has one or more marks that identify it to consumers, and business owners must protect those marks to preserve their value. Businesses may also own copyrighted materials, such as formulas, or designs; or patents on inventions used in the course of business. Certain aspects of the business may be subject to trade secret protection.

A prospective buyer should identify the intellectual property that is critical to business success, and assess the business's efforts to protect it. Trademarks, copyrights, and patents may be registered with the federal government. California also allows state registration of trademarks. The assets of the business transferred in a sale should explicitly include this intellectual property, and the seller should assist in transferring the rights to any registered marks, copyrights, or patents to the buyer.

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What Do I Need to Know About Trademarks for My California Medical or Dental Practice?

June 27, 2012

Trademark-symbool.pngAn important way to protect your medical or dental practice in California is to trademark your practice name or logo. A familiar name or logo helps distinguish your practice among the many others in the San Francisco area. By registering these assets with the United States Patent and Trademark Office (USPTO), you can preserve the goodwill you accumulate and prevent others from appropriating your trademark and siphoning away patients. If you already have a name or logo, or are in the process of creating one or both, you should consult with a San Francisco business lawyer who can help you navigate the registration procedures at the USPTO.

Trademarks: A Brief Overview

Physicians and dentists build a unique relationship with their patients. Patients' health, well-being, and lives, are entrusted in the physician's hands. Your reputation in this respect is crucial to building your practice. Your practice's trademark reflects your reputation, which is why protecting it is so important.

The registration process begins with an application to the USPTO. The trademark must be distinctive, and must have been used in the stream of commerce with the purpose of selling goods and services. Distinctiveness can be either inherent or acquired. An inherently distinctive trademark is unique in some way, and does not merely describe the product being offered. A practice bearing the name of the dentist or physician is considered distinctive. However, a San Francisco dental practice named "San Francisco Dentist" is not unique, as the name merely describes the service being provided. While a generic or descriptive trademark is not inherently distinctive, it can acquire distinctiveness over time by becoming associated with a particular practice.

Protecting Your Trademark and Reputation

Your practice's trademark may be infringed by another practice using one that is identical or confusingly similar to yours. The danger if this occurs is that the infringing practice may lead patients away from your practice. To make matters worse, the infringing practice might also provide services that are inferior to yours, which tarnishes your trademark and reputation in the mind of the patient who may be unaware that your practice is not associated with the infringing one.

Enforcing Your Rights

It is important that once you have registered your trademark, you are vigilant in preventing others from infringing. If you do not vigorously protect your trademark through the courts, you may lose your trademark protection by "sitting" on your rights. While it may be necessary to bring a suit in a court of law, sometimes sending a cease and desist letter to an infringing party is sufficient to stop an infringing practice from using your trademark. Additionally, a trademark applicant or holder can oppose the application of an infringing trademark in the USPTO. If an infringing trademark has already been approved by the USPTO, then the trademark holder can file a petition to cancel the infringing trademark.

Related Blog Posts

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United States Patent and Trademark Office

Starting a Medical Practice: Name It Right the First Time!, CareerMedicine.com

Continue reading "What Do I Need to Know About Trademarks for My California Medical or Dental Practice?" »

Work Made For Hire Agreements: Who Owns the Copyright? Part 3: Software Development and Technology

May 4, 2012

1282930_untitled.jpgIt 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.

Related Blog Posts

Work Made For Hire Agreements: Who Owns the Copyright? Part 2: California Law

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Sources

U.S. Copyright Office-Circular 9 Works Made for Hire Under the 1976 Copyright Act

U.S. Copyright Office

17 U.S.C. § 101: Definitions

Continue reading "Work Made For Hire Agreements: Who Owns the Copyright? Part 3: Software Development and Technology" »

Work Made For Hire Agreements: Who Owns the Copyright? Part 2: California Law

April 29, 2012

FEP2D00Z.jpgIn my previous entry, Work Made For Hire Agreements: Who Owns the Copyright? Part 1: Federal Law, we reviewed the federal copyright law governing work for hire agreements. This entry will examine the California state law implications of work for hire agreements for both employers and independent contractors.

Work Made For Hire Doctrine Under US Copyright Act

To begin, let's revisit the United States Copyright Act of 1976. Under this Act the copyright immediately becomes the property of the author who created the work, subject to two limited exceptions, as follows: 1) if the work is created by an employee within the scope of his or her employment, then the copyright ownership vests in the employer; and 2) if the work is a "work made for hire", copyright ownership vests in the hiring party.

As discussed in my previous post, the work made for hire doctrine permits businesses hiring freelancers to acquire the rights to the creative work if two conditions are satisfied: (1) the work must be within one of the nine categories of works listed in the Act, and (2) there must be a written agreement signed by both parties stipulating that the work is a work made for hire.

In California, state law changes the independent contractor's status to that of an employee for purposes of workers compensation and unemployment benefits.

Statutory Employee Status

In California, an individual engaged to produce work on a work made for hire basis is regarded as a "statutory employee." When this is the case, the hiring party is responsible for payment of state disability insurance and unemployment insurance. California Labor Code § 3351.5 (c) defines "Employee" in relevant part as:

"Any person while engaged by contract for the creation of a specially ordered or commissioned work of authorship in which the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire, as defined in Section 101 of Title 17 of the United States Code, and the ordering or commissioning party obtains ownership of all the rights comprised in the copyright in the work."

Additionally, the hiring party's failure to acquire workers' compensation insurance once a work made for hire agreement is entered is subject to criminal penalties under California law. See California Labor Code § 3700.5 There may be serious consequences for the misapplication of California's "statutory employee" laws which must be considered when entering a work for hire agreement in California.

How Can California Employers Best Navigate Work For Hire Complexities?

One option is to simply handle independent contractors like employees regarding unemployment insurance and workers' compensation.

A second option is to leave the "work for hire" wording out of independent contractor agreements completely. Choosing this route requires adding an assignment provision to the agreement; whereby, the independent contractor agrees to assign all intellectual property created by the contractor to the hiring party.

Finally, an employer may request the independent contractor to form an LLC that is treated as a corporation for federal income tax purposes. If the independent contractor agrees to this, the employer could validly enter a "work for hire" agreement with the LLC without incurring the insurance obligations under California's statutory employee law since LLCs cannot be employees. See California Unemployment Insurance Code § 621(d)

In summary, both California employers and individuals must carefully evaluate the implications of work for hire agreements before entering such arrangements.

Related Blog Posts

California Independent Contractor or Employee Classification Part 1: California Test

California Independent Contractor or Employee Classification Part 2: Federal Test

Sources

California Unemployment Insurance Code § 686

California Labor Code § 3351.5(c)

California Labor Code § 3700.5

17 U.S.C. § 101: Definitions

U.S. Copyright Office-Circular 9 Works Made for Hire Under the 1976 Copyright Act

U.S. Copyright Office

Continue reading "Work Made For Hire Agreements: Who Owns the Copyright? Part 2: California Law" »