Rather than hiring full-time employees, you may choose to use independent contractors (IC) to handle the bulk of your creative tasks, such as art, logo design, photography, and content writing.
For sure, working with ICs can save your company quite a bit of money, because unlike with W-2 employees, you’re not required to pay your share of the IC’s Social Security and Medicare taxes or pay for their state unemployment compensation insurance and workers’ compensation insurance. That said, even though there are numerous benefits to working with ICs, they also come with a few unique risks, especially as it relates to one of your most valuable and often overlooked assets: intellectual property.
For example, you might think that because you paid an IC for a specific job that you automatically own the work he or she produces. Makes sense, right? Unfortunately, this is often not the case, and you can run into serious legal and financial issues if don’t take the right precautions.
Indeed, if you frequently commission ICs, it’s vital that you have the proper legal agreements in place to ensure that you actually own the work you’ve hired them to create—even if you’ve worked with a person for years using only an oral agreement. One of the best ways to be certain you own the work created by an IC for your company is to include a “work for hire” clause in your independent contractor agreement. And yes, you need every IC you work with to sign one of these.
Here, I’ll discuss the basics of how to protect your intellectual property (IP) using work for hire clauses, so you don’t end up without full ownership of the work you paid your ICs to do.
Unlike employees, with whom you generally own automatic copyrights to what they produce while working for you, ICs typically retain full copyrights to their work, unless their contract contains a work for hire clause. This is true of all works of authorship, such as written articles, music, graphic art, software, videos, photos, blueprints, designs, and others.
If you don’t include such a clause in the contract, your right as a business owner to use their work will be severely limited, even though you paid for it. What’s more, the list of works that are covered by work for hire clauses are quite limited, and many times, works that an owner assumes are covered are not.
Indeed, the only types of creative work that are qualified to be covered by work for hire clauses must fall into one of these categories:
- a contribution to a collective work, such as a magazine or literary anthology
- a part of an audiovisual work
- a translation
- a supplementary work, such as an appendix, bibliography, or chart
- a compilation
- an instructional text
- a test
- answer material for a test, and
- an atlas
Assignment of copyrights
If the work an IC did for you is not in one of the above nine categories, a work for hire clause won’t give you full ownership. Instead, for work that falls outside of this domain, you’ll need to include an “assignment clause” in the contract, in which the IC transfers some or all of their copyrights to the work to you.
Fortunately, such a contingency can be handled fairly easily. Business owners who seek to retain copyrights to such works simply need to add a clause that states that if the work is not deemed a work for hire, the IC assigns all of his or her copyrights to the work to the company.
Because the wording of your legal agreements is so important, it’s crucial that you consult with a reputable attorney. And if you need help creating new contracts, that attorney should also be able to help you write agreements that grant you the most complete and comprehensive ownership rights possible. Contact me today if you need help with this.
This article is a service of Beverly R. Davidek. I don’t just draft documents; I ensure that families and business owners make informed and empowered decisions about life and death, for themselves and the people they love. I also offer a LIFT Start-Up Session™ or a LIFT Audit for an ongoing business, which includes a review of all the legal, insurance, financial, and tax systems you need for your business.