Contractor ownership of IP

Agree on IP ownership in advance
Agree on IP ownership in advance

The ownership rules for copyrights, patents, and other IP vary depending on if the IP creator is an employee or an independent contractor.

In today’s world, the distinction between employee and independent contractor is often blurred, but legally, these two forms of working are very different.  As a result, whether you are working as an employee or independent contractor, or hiring employees or independent contractors, it is good to be aware of how these different types of work engagements impact IP ownership rights.

These laws can vary from state to state.  Consider California. Generally, work done by an employee for an employer, at the employer’ request, does belong to the employer. However the IP assignment process is not always automatic (patents, for example, generally need to be assigned to the employer in writing).

One of the reasons why California has a booming high-tech economy is that California labor code sections 2870-2872 mandate (with certain exceptions) that work that does not relate to an employer’s business (and is done with the California employee’s own time and materials) generally belongs to the employee. However, this section of California law may not protect independent contractors.  So if you are an independent contractor, you may want to negotiate this.

US copyright law (writing, art, software, etc.) also distinguishes between employees and contractors. For employees, copyright ownership for works made for the employer typically goes to the employer. However for independent contractors, absent a signed written agreement (such as a work made for hire agreement) that copyright ownership is being transferred, often ownership remains with the independent contractor.  So if you are hiring an independent contractor, absent a written agreement, just because you paid for something doesn’t automatically mean that you own it!

How to distinguish an employee from an independent contractor?  Generally, the difference is the amount of control.  For an independent contractor, whoever is paying can control the work result, but generally not how the work is done.  By contrast, even an employer who gives his employees freedom still has the legal right to specify how the work is done.

Regardless of work arrangement, it is always a good idea to work out the issues of who is going to own what in writing and in advance.  For employees, spell this out with a proprietary information and inventions agreement. For independent contractors, negotiate and sign an agreement on these issues before starting work.  This topic often comes up in due diligence.