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 employment 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.
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:
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.
For all work that falls outside the work-for-hire domain, you’ll need to include an assignment clause in the employment agreement, in which the IC transfers some or all of their copyrights to the work to you. Without such a clause, the IC will retain all copyrights, 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 copyrights 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 us review all of 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.
We offer a complete spectrum of legal services for business owners and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer you a LIFT Your Life And Business Planning Session, which includes a review of all the legal, insurance, financial, and tax systems you need for your business. Schedule online today.