IP Issues in Your Contractor Agreements

Too many businesses make a potentially risky – and expensive – mistake when they fail to secure intellectual property (IP) rights via their contractor agreements.

A contractor can be anyone from a high-priced management consultant to someone writing a few blog posts. If the contractor is creating “works of authorship” (such as written materials) or potentially patentable inventions, the IP rights need to be secured for the client.

Some clients are unclear about the distinction between non-disclosure agreements (NDAs) and IP assignments.

An NDA only protects confidential information. For example, if you’re explaining an upcoming product launch to a contractor so that she can write marketing materials for it, you may not want her to reveal in advance details about the product.

However, an NDA won’t give you any rights to use the marketing materials she creates. Although most contractors won’t do something like this (because they want your repeat business), if you use something a contractor has written without the formal right to do so, the contractor could sue you for copyright infringement.

Generally, the initial owner of the copyright is the person who did the creative work – e.g., wrote the marketing materials, designed the logo, or created the software code.

If the work was created by an employee in the course of her employment, then the work may be a “work made for hire.” In that case, the employer is considered to own it from the time it’s created. The employee doesn’t need to transfer any IP rights to the employer, because the employee never had any IP rights to assign.

However, contractors are (by definition) not employees.

A creative work may also be a “work made for hire” under 17 U.S. Code § 101, even it was created by a contractor, if it is a work specially ordered or commissioned for use as:

• a contribution to a collective work,
• a part of a motion picture or other audiovisual work,
• a translation,
• a supplementary work,
• a compilation,
• an instructional text,
• a test,
• answer material for a test, or
• an atlas

Also, even if the work fits into one of these categories, the “work made for hire” doctrine doesn’t apply unless the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire.

Notice that marketing materials, blog posts, software, and most other things you might hire a contractor to create aren’t on this list.

Many independent contractor agreements use “work made for hire” language when it doesn’t really apply.

What’s really needed in a contractor agreement is an IP assignment clause that looks something like this:

You agree that all right, title, and interest in and to any and all Company Inventions and Intellectual Property, as defined herein, are the sole property of Company. “Company Inventions and Intellectual Property” or “CIIP” refers to all inventions, works of authorship, copyright-eligible works (such as materials, records, notes, drawings, and software), ideas, designs, developments, improvements, discoveries, and other intellectual property you develop, discover, or create (i) that relate to Company’s business, or to any actual or demonstrably anticipated research, future work, or projects of Company, whether or not conceived or developed alone or with others, or (ii) that result from any work you perform for Company, or perform using Company’s property, resources, or Confidential Information. You hereby assign to Company, without further consideration, your entire right, title, and interest (throughout the United States and in all foreign countries) free and clear of all liens and encumbrances in and to all such CIIP, which shall be the sole property of Company, whether or not patentable.

Be sure to check your standard contractor agreements to make sure they include something like this. If not, you could talk to an IP attorney about making the necessary changes.
Even if the contractor’s no longer working for you, you may still be able to protect your IP rights by obtaining an assignment.