Work Made For Hire

Many companies don't own the work they paid consultants to create, even when the contract calls it "work made for hire."

Say a company pays an outside sales consultant for nearly two years to build its sales process, including the playbook, the pricing model, and the call scripts the team uses every day. When the engagement ends, the consultant sends a polite note explaining that all of it is his, and that continuing to use it requires a license.

The agreement says the consultant's work is "work made for hire" and belongs to the company. It would be entirely reasonable for the owner to assume that settles the matter. But it probably doesn't, for reasons that apply to almost every outside contractor, from developers and designers to marketing and strategy consultants.

The phrase falls short in two ways. First, for copyrightable material, a contractor's work counts as "work made for hire" only if it meets two separate requirements. It must fall within one of nine narrow categories listed in the Copyright Act, such as a magazine article, part of a film, a compilation or an instructional text. And both sides must sign a written agreement saying it is a work made for hire. Custom software, logos and strategy reports generally fall outside those categories, so the contract language alone doesn't help. Some materials, such as slide decks and training content, arguably fit.

Second, for everything else, including inventions, trade secrets, methods and know-how, the concept doesn't exist at all.

Absent a written assignment, the contractor owns the copyright as its author and generally owns any invention as its inventor. The law on trade secrets and know-how is less settled, but at least one federal appeals court has treated a contractor as presumptively owning them.

Often the company has only an implied license to keep using what it paid for. Its scope and length depend on what a court decides the parties intended. Under New York law, an arrangement with no stated end date can generally be ended on reasonable notice, a rule that a federal appeals court has applied to a copyright license. The Ninth Circuit, by contrast, has held that a paid-for implied license to custom software could not be revoked.

What to put in place before the work starts:

→ A present assignment ("hereby assigns") of all work product, defined to cover copyrightable material, inventions, methods, know-how, and confidential information.

 → Where the contractor brings existing materials or their own methodology, a written license to those materials that is perpetual and irrevocable.

→ For agencies and firms, confirmation that they hold assignments from their own people and subcontractors.

In California, "work made for hire" language can make an individual contractor an employee for workers' compensation and unemployment insurance purposes. A straightforward assignment avoids that problem.

 Attorney Advertising. The scenario above is hypothetical. None of this is legal advice.

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Disclaimer: This article constitutes attorney advertising. Prior results do not guarantee a similar outcome. MGLS publishes this article for information purposes only. Nothing within is intended as legal advice.