November 24, 2020

Work Made for Hire … or Notone source of complexity in intellectual property terms

Why do agreements about intellectual property run on so damn long? There are many reasons, some valid, some bunk. Let’s take a look at one: ownership of copyrights. We can learn a lot from it.

The general rule under United States copyright law is that the author of a work owns the copyright in it. If you sit down at home and scrawl out the next great epic poem, you probably own the copyright in it. If someone else wants to publish your masterpiece, they’ll have do to a deal with you first. You can charge them for the privilege, which is, at least officially, the point of copyright law. Creator gets paid.

This is not what companies want when they hire people to do creative work. Companies want to own what they pay for. In fact, they’re so unanimous on the matter that United States copyright law makes “company owns it” the default.

Copyright in works that count as “work made for hire” belong to the one that hired the author, usually a company, rather than the individual author themself. Or, if you prefer, the law treats the company as the author, rather than the employee.

The magic happens in title 17, section 101 of the United States Code, usually written “17 U.S.C. §101”. It’s in the definition of “work made for hire”:

A “work made for hire” is—

(1) a work prepared by an employee within the scope of his or her employment…

But what about contractors? Independent contractors aren’t employees. That is pretty much what “independent contractor” means. So what about copyrights in work contractors do on clients’ time and dime? The definition of “work made for hire” covers that, too. Maybe:

A “work made for hire” is—

(1) a work prepared by an employee within the scope of his or her employment; or

(2) a work specially ordered or commissioned for use as a contribution to a collective work, as a part of a motion picture or other audiovisual work, as a translation, as a supplementary work, as a compilation, as an instructional text, as a test, as answer material for a test, or as an atlas, if the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire. [Long clarification on what “supplementary work” follows.]

If you didn’t read all that, I don’t blame you. It’s long and complicated. Which is the point. But to start, let’s try to break it down.

If the person doing the work isn’t an employee, their work can still count as “work made for hire”. The copyright can belong to the client, rather than the author. But only if creator and client tick a few boxes:

the work is “specially ordered or commissioned”
the work is ordered or commissioned “for use as a contribution to a collective work” or a number of other kinds of works that are either commonly made up of contributions from lots of different individuals, like a movie or magazine, or strongly related to some other, preexisting work, like translations or supplements
the author and the client specifically call it work made for hire in writing, and sign that writing, which is usually a contract

I’m paraphrasing here. Which is dangerous in law. What do all these requirements really mean?

At best? It’s complicated. More honestly? We don’t know. Or rather, sometimes we just don’t know, but most of the time we’re not going to drag a lawyer in to find out. Even lawyers have given up pretending that clients will pay for that. They’re going to pay for forms to use with employees and contractors. But they’re going to hire these people and then have them do all kinds of work. Some of which will meet the requirements, some of which probably won’t.

So we can write a form contract that says, basically, that if there’s copyrights in any of the work contractor does on the job, that’s work made for hire and belongs to the client. That checks box number three. But that work might turn out not to be “specially ordered or commissioned”. And it might turn out not to be for use in a compilation or one of the other special categories that “work made for hire” can apply to. So we better have a backup plan. And we better write that plan out in the contract.

The plan goes like this:

If the contractor makes it on the job, the copyright’s covered by the contract.
If it can be work made for hire, it is.
But if it can’t be work made for hire, the law won’t do the contractor-to-client transfer for us. So we do it ourselves, by having the contractor “assign” (transfer) any copyrights in their work to the client under the contract. They are the author, and therefore the owner, but they sell what they get as author-owner to the client.

Copyright assignment is slightly worse for the company than being considered the author from the get-go, under some other rules. Search “Funkytown 35 years” for more on that. But it’s the best copyright can do in the circumstances.

After all, the point is that the client ends up owning the work. The client gets the work. The contractor gets paid. Work for money. That’s the deal.

We’d like to just write that out in the contract and be done with it. Short and sweet. But the law will try to understand in its own terms, which, as we’ve seen, aren’t short or sweet. So you’ll probably find both “work made for hire” and “assign”, verbatim, like “open sesame”, in the next set of contracting terms you see. All the magic words to get the job done.

Got it? Feeling good?

You know what’s coming, right?

Under California law, there’s a catch. Special provisions of the labor and insurance codes basically say that if you sign a work made for hire contract, the contractor isn’t a contractor. For the purposes of state law, they’re an employee.

Treating employees as contractors can be a crime. People have gone to jail for it. California lock-up has been so stuffed, primarily with folks whose crimes don’t involve putting the wrong words to paper, that the Supreme Court ruled it unconstitutional. So that’s rather a bigger concern than who-owns-what.

Companies want to own the copyrights in work they pay for. The best way to do that under the law is to make it work made for hire. But companies hiring contractors as contractors do not want those folks treated as employees. California law says you can’t have both. Other states have followed suit.

As a client, best case, you get work made for hire. Second best, when you can’t get work made for hire, you get an assignment. But work made for hire is a land mine in states like California, because it turns your contractor into an employee. In part because so many companies wanted to hire people and own their work, but not fork over benefits, employment insurance, and so on. States stepped in to keep them getting screwed.

Someone asks a company lawyer to draft a form for independent contractors. It needs to make sure the company owns the copyrights in the work. Here we go:

If you do it on the job, the copyright’s covered by the contract.
If the contact comes under California law, or the law of any other state where work made for hire gets contractors treated like employees, the contractor assigns their copyrights, rather than calling them “work made for hire”.
Otherwise, if it can be “work made for hire”, it is.
Otherwise, the contractor assigns copyright to the client.

A shocking number of lawyers and law firms still toss around forms that don’t deal with California-style work made for hire rules. Even so, their forms run on for quite a while about intellectual property rights. Sometimes the whole solution gets mushed into one, long, run-on section. Sometimes drafters put work made for hire and backup assignment in different sections. Either way, they ramble on. To an extent, they have to. It’s complicated.

Work made for hire is hardly the only complication. Not even when it comes to copyright law.

For the sake of argument: What about work people crib work they don’t own, like templates, stock photos, B-roll, production music, and software libraries? The worker can’t assign rights in those works. They can’t give away what they don’t own to begin with: copyright in the works. But hopefully they’re able to sublicense the right to use it, because they had a license to use it in the first place, and their license allows passing permission on.

We should probably have them promise that they’ll only use other people’s work if they have permission to do so. In law speak, that’s a “warranty”, and lives in another section of the form. In real English, it’s promise not to plagiarize. Back in law land, we also want an indemnity. Which works like an insurance policy, to cover the fallout if they plagiarize and the client gets sued about it. Indemnities live in yet another section.

None of this is to dissuade anyone from diving in and picking apart terms they’ve been presented, or even just seen online. Take a breath and dive in.

None of the pieces here are particularly intricate. They’re if-then kinds of rules, and it’s often fairly clear where one side or the other wants to end up when the rule is done. None of this requires super smarts or clairvoyance of the legal shadow realm. Just a sense of humility, and a willingness to grind away at understanding, cataloging, and internalizing the rules of the game, no matter how many there are. No matter how happenstance, conflict, and time have mangled and disfigured them.

Such is law.

Your thoughts and feedback are always welcome by e-mail.