While hiring independent contractors (ICs) offers a range of valuable benefits in terms of cost savings and convenience, it also opens your business up to some unique legal and financial complications. This is particularly true when it comes to your company’s intellectual property (IP).
Unlike employees, with whom you generally own automatic copyrights to everything they produce while working for you, ICs typically retain full copyrights to their work—unless they’ve signed a written agreement stating otherwise.
Indeed, if you don’t have properly drafted agreements in place, you may not own the very work you paid ICs to produce for you. And this is true of all works of authorship including graphic design, written content, software, computer code, photos, videos, among other materials.
Given the potential legal and financial nightmare that can arise from failing to secure full ownership of your IP, it’s critical that you have the proper legal agreements in place with every IC you hire. And this means every single one, even those with whom you’ve worked with for years without issue.
Work-for-Hire Agreements
Depending on the type of work that’s being produced, there are a couple different ways you can use legal agreements to secure ownership of an IC’s work. One way is to include a work-for-hire clause in their independent contractor agreement.
A work-for-hire clause states that you, not the contractor, own all copyrights to the deliverables he or she produces for you under the agreement. Such a clause effectively makes it as if you created the work yourself, and as such, it allows you to use the work in any way you wish.
Make sure you have the IC sign the agreement before he or she starts working. If not, it may be too late to acquire full ownership. What’s more, the type of materials that can be covered by work-for-hire clauses is fairly limited and must fall into one of the following categories:
- a contribution to a collective work, such as a magazine or anthology
- a part of an audiovisual work or motion picture
- a translation
- a supplementary work, such as a forward, editorial notes, appendix, bibliography, or chart
- a compilation created by selecting and/or arranging preexisting works
- an instructional text
- a test
- answer material for a test
- an atlas
As you can see, a large number of materials that you might hire ICs to create are not covered by these categories, and therefore a work-for-hire clause would not give you full ownership. Many business owners aren’t aware of these limited categories and falsely assume the work-for-hire clauses are all they need, leaving them with a false sense of security.
Assignment of Copyrights, Trademarks, and Patents
For all work that falls outside the work-for-hire domain, you’ll need to include an assignment clause in the agreement, in which the IC transfers some or all of their IP rights to the work to you – this includes rights to trademarks, service marks, copyrights, and patents. Without such a clause, the IC will retain all the rights, even if the agreement contained a work-for-hire clause.
Adding an assignment clause to an IC contract isn’t complicated, and it can be used in conjunction with a work-for-hire provision. In the agreement, you’d simply add a brief clause stating that if the work is not deemed a work for hire, the IC assigns all IP rights to your company.
For maximum protection, you should include both a work-for-hire clause and assignment clause in all of your IC agreements. Because the wording of these agreements needs to be precise, you should have an attorney review all your IC contracts, even those created by another lawyer. And if you need help drafting new IC agreements, we can ensure your contracts grant you the most comprehensive ownership rights possible.
Failure to Sign Agreements
If you fail to have ICs sign agreements assigning and transferring IP to your business, they may be able to demand royalty payments of profits in the future. Also, if you ever want to sell your business, the buyer is going to want to know you own all IP rights. If you can’t show them any agreements, it could kill the deal. Keep in mind if you ever want to register the IP in the future, you will likely have to obtain written consent from the IC that produced the IP.
Dahl Law Group
