Who Owns Copyright in Freelancer Work?

Photo by Tianyi Ma on Unsplash

Businesses often assume that if they paid for something, they own it. It’s usually true for furniture and office supplies but is not necessarily the case for creative works by freelancers.

This issue comes up regularly as businesses increasingly rely on independent contractors. A company hires a freelance developer to write code, a photographer to take photos for a website, or a graphic artist to develop marketing materials. The company pays the invoice, receives the deliverables, and starts using them. No one gives much thought to ownership until later when the business wants to change vendors, raise capital, register a copyright, or prevent a third party from using the work. Read on to learn the important steps needed to ensure your business has more than just the right to use a work and actually owns copyright in it.

Ownership Basics

Under U.S. law, copyright generally belongs to the person who created the work. The key exception is the work made for hire doctrine. If a work qualifies as a work made for hire, the hiring party is treated as the author and owns the copyright from the outset. 17 U.S.C. § 101.

That rule is straightforward when the creator is an employee acting within the scope of employment. It is more complex when the creator is an independent contractor.

Many people assume that calling a contractor’s work “work for hire” in an agreement solves the problem. However, for a contractor-created work to qualify as a work made for hire, the work must also fall into one of the statutory categories for specially ordered or commissioned works. 17 U.S.C. § 101. Some categories are fairly broad, like compilations and contributions to collective works, while others are quite narrow, such as test questions and answers.

The problem is that many deliverables do not fit neatly into that statutory list. Source code, logos, photographs, website designs, packaging, and advertising copy may be central to the business, but they are not automatically works made for hire merely because the company paid for them, and calling them a work made for hire in the contract may not be sufficient.

Control Is Not Enough

When a business is deeply involved in the creative process, reviewing drafts, requesting revisions, and approving final versions, it may assume such control means that the business owns it. From a copyright perspective, however, control is generally not enough.

The Supreme Court made this clear in Community for Creative Non-Violence v. Reid. The Court held that a commissioned work does not become a work made for hire simply because the hiring party controlled, or had the right to control, the finished product. Instead, courts look to common-law agency factors to determine whether the creator was really an employee or an independent contractor. Those factors include the skill required, who supplied the tools, where the work was done, the duration of the relationship, the method of payment, benefits, tax treatment, and similar circumstances. Community for Creative Non-Violence v. Reid, 490 U.S. 730 (1989).

Practical Implications

These issues frequently arise in software development cases where businesses may be surprised to learn they don’t own software they conceived, paid for and implemented. For example, in Aymes v. Bonelli, the court held that a program was not a work made for hire because the developer was an independent contractor, not an employee. Aymes v. Bonelli, 980 F.2d 857 (2d Cir. 1992).  In contrast, in JustMed, Inc. v. Byce the court held the programmer was an employee, so the employer owned the copyright. JustMed, Inc. v. Byce, 600 F.3d 1118 (9th Cir. 2010).

Similar issues can arise in marketing and design work, where agencies and freelancers create copy, photographs, video, graphics, email campaigns, social media posts, logos, website layouts, and brand materials. If the work product is not a work for hire, the use rights may be narrower than anticipated. The company may have permission to use it in the initial intended campaign, but may lack the right to modify it, use it for other campaigns, use it with a new vendor, or stop someone else from exploiting it. For example, in Effects Associates, Inc. v. Cohen, the court found an implied license to use special-effects footage in a film, but no transfer of copyright ownership. Effects Associates, Inc. v. Cohen, 908 F.2d 555 (9th Cir. 1990).

The Key Drafting Approach

Because not all works will fall within the enumerated categories, it is important that agreements not rely solely on “work for hire” language. The better practice is to use an alternative drafting approach that states that the work will be treated as a work made for hire to the fullest extent permitted by law, and also includes a present assignment of all right, title, and interest in the work to the client. The alternative assignment language is essential because copyright transfers must be in writing and signed by the owner of the rights conveyed. 17 U.S.C. § 204.

Takeaway

When a business intends to own contractor-created copyright, it should make that clear in a signed written agreement before the work begins. It is much easier to address ownership at the front end than to address it later, when the work may have become even more valuable than originally anticipated.

Feel free to contact us for help with intellectual property issues in independent contractor agreements.