The ownership rules for copyrights, patents, and other IP vary depending on if the IP creator is an employee or an independent contractor.
The distinction between employee and independent contractor confuses almost everyone. Legally, however, 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.
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.
Some other states have similar provisions. For example, see New York Labor Law Section 203-f. Other states that may be more employee rights friendly include Delaware, Illinois, Kansas, Minnesota, North Carolina, and Washington.
Copyright law is particularly tricky
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. If you hire an independent contractor, you can control the work result, but not how they do their work. By contrast, your employer has the legal right to specify how you do your work. An employer may not exercise, this right, but they have it. Sound strange? Remember that attorneys are usually independent contractors!
Regardless of work arrangement, you need to work out the issues of who is going to own what. Do this 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.