Copyright Ownership of Your Business Documents

At some point in the life cycle of your business, you have or will request that an employee or third party create something for use by your business, such as a brochure, a logo, artwork, a policy manual, or even a website. If your business is like most businesses, you likely either did not consider who actually owns the work that was created for your business or you assumed that the business was the owner of the work created. You may be surprised to find out that without a proper agreement to the contrary, the creator of the work, and not the business, may very well be the legal owner of the work that was created.

Many business owners learn about copyright ownership the hard way. In a common scenario, a business hires or engages an individual to prepare a document, a design, a logo, or a website for that business. Perhaps the parties actually enter into a written agreement setting forth what is to be created, when it will be completed and what is to be paid for the work. However, if ownership of the work and the copyright to that work is not addressed in the agreement or discussed by the parties, two copyright issues may arise:

The artist or author of the work disputes some aspect of the work or payment and will not allow the business to further use the work that was created; or
The artist or author sells the work created to another business or allows another business to use the same or similar work.

As unfair as these results may seem, copyright law generally protects the artist or author in these cases. The U.S. Copyright Act gives the owner of a copyright the exclusive right to reproduce the work, prepare derivative works based on the work, distribute copies of the work to the public, and display the work publicly. Only the owner of the copyright to the work has these rights. The individual or company that paid for the work can keep the tangible document or picture, but cannot legally do anything else with the work. The issue that every business should consider when entering into this kind of transaction is how to become the owner of the work that will be created and paid for by that business.

The general rule is that the actual creator of an “original work of authorship” is the owner of the copyright to that work. However, the copyright law makes exceptions for what are called “works made for hire” and works that are expressly assigned to another party by agreement. Copyright law defines “work made for hire” as: (1) the work prepared by an employee within the scope of his or her employment; or (2) the works specially ordered or commissioned to be used as a contribution to a collective work, as a part of a motion picture or other audio visual work, as a translation, as a supplementary work, as a compilation, as an instructional text, as a test, as answer material for a test, or as an atlas, if the parties expressly agree in writing that the work is work made for hire.

In many cases, the first definition of “work made for hire” provides that protection. Under that definition, if an employee of the business creates a work for the business as part of his or her employment duties, then the business is the owner of the copyright to the work. Nothing more needs to be done to ensure ownership of the work (Registration of the work with the copyright Office is advisable, although if does not control ownership). The employer has all of the rights to the copyrighted work discussed above.

If the work is created by a non-employee, such as a vendor or independent contractor, and doesn’t fall within one of the identified uses in the second portion of the definition of “works made for hire,” then the creator of the work is the owner of the copyright unless the creator expressly assigns ownership to another in a written agreement. Such an assignment should be obtained at the engagement of the author or artist. It is at that point that payment and other terms are negotiated, and ownership of the copyright to the work should also be a negotiated term.

Many people mistakenly believe that the “Fair Use Doctrine” allows use of copyrighted work by businesses or individuals who are not the creator of the work. The Fair Use Doctrine applies only in limited circumstances, and rarely, if ever, in a commercial transaction. You should be careful not to rely upon this limited exception without discussing it with an expert in copyright law.

As you can see, failure to consider ownership of copyright and works that are created for your business can have frustrating and often costly consequences. If you would like to further discuss these issues or if you need assistance in correctly documenting these types of business relationships, please contact our office.