Each day is new; nothing is normal. With offices shut, employees and contractors working remotely and others furloughed or laid off, we advise companies take immediate steps to protect their valuable data, inventions, content and intellectual property.
As a general rule, an individual owns any invention they create unless there is either a written agreement assigning invention rights, or they were specifically hired (even without a written agreement) for their inventing skills or to create the invention. Similarly, the author of a work is usually the owner of the copyright, unless the work was prepared by an employee in the scope of their employment. If so, then the work is a “work for hire” and the employer is the owner.
For inventions, one of the two exceptions – a written agreement or having been hired to “invent” – almost always applies. However, employers would be well advised in these volatile times to validate the existence of those agreements, have in hand specific signed assignments of any invention and, in the case of patent applications, have filed such signed assignments with the Patent Office.
For employees who may be furloughed and have been, or are in the process of, developing new potentially patentable subject matter, obtain a signed assignment and file a provisional patent application.
The situation for copyrights is more complex. Simply put, copyright is the legal protection afforded to the author of any literary, artistic or musical work. In the absence of written agreements or other circumstances, the author is the owner of the copyright.
If a company’s employees write software, develop content for the company’s website, produce advertising materials, photograph products for catalogues or other similar material, that “work” is subject to copyright protection. If the work is prepared by an employee in the scope of their employment, the work and corresponding legal protections of copyright are owned by the employer.
Surprisingly, many employment agreements and employee handbooks while specific about inventions are silent on copyrights. In the absence of an agreement, companies must rely on the “work made for hire” provisions of the Copyright Act. A “work made for hire” is “a work prepared by an employee within the scope of his or her employment.” With employees working remotely, the question of whether the work is within the “scope” of the employee’s work becomes complicated.
For an employee, a work is made within the scope of employment, and qualifies as a work for hire if it: (i) fits within the kind of work the employee is hired to create or is within their job description; (ii) is created within the employee’s work time and space; and (iii) is made, at least partially, for the purpose of serving the employer. If the created work fits this description, then it is a work for hire and the employer owns the copyright to the work as though the employer were the author.
But supposing the work is created by the employee working at home, using their personal computer, after regular business hours? In those cases, the work may not qualify as a “work for hire” and the copyright to the work may be owned by the employee.
If the company has engaged independent contractors to create the work, the situation is even more nuanced. In order for that work made to qualify as a work made for hire, it needs to have been created as a special order for the employer or on commission by the employer, and needs to fit within specific categories of specially ordered or commissioned works as:
- a contribution to a collective work
- part of a motion picture or other audiovisual work
- a translation
- a supplementary work
- a compilation
- an instructional text
- a test or answer material for a test
- an atlas
Most work will not be covered. And, noticeably absent from this list are “literary works” of which software is generally deemed a part. Thus, if the company has engaged an independent contractor to create software for the company, in the absence of a written agreement, the software is owned by the individual. Similarly, if the company has engaged outside developers for the design and content of its website, the website and content may not be owned by the company.
If, in response to the current crisis, the company is terminating these independent contractor relationships as part of an overall plan to conserve company assets, the company may find that it has no claim to copyright ownership and no protection if the independent contractor choses to license or sell the work to a competitor. In other words, if the parties do not have an agreement to treat the independent contractor’s work as a work made for hire, it’s not a work made for hire.
And, if management’s immediate reaction is to terminate all outside vendors, before it invokes the force majeure clause of its agreements, be certain to make sure that the company owns the contractor’s work-product. If not, have written assignments of all copyrights for all terminated outside vendors.
For both employees and third party vendors, maintaining the security of company data should be an immediate priority. Whether the employee is furloughed or the independent contractor relationship is terminated, make sure that the company’s IT department has procedures in place and implements consistent treatment for de-authorization of login credentials, mobile device access and conferencing software.
In cases where the furloughed employee has a primary contact relationship with the company’s customers or vendors, notify those key customers and vendors that there is a new contact.
Similarly, monitor download traffic from the company’s website and data bases to make sure that furloughed employees, or those likely to be concerned about being furloughed, are not taking company proprietary information. Even in normal times, departing employees may be tempted to abscond with material they incorrectly assume is theirs. This may include customer lists, vendor information, trade secrets and other valuable company intellectual property. With courts closed, obtaining any immediate legal relief may be difficult. Once this crisis is over, the loss of that data may imperil the company’s long-term recovery.
Protecting company data and intellectual property is as important as protecting its physical plant. For more information or to discuss further, please reach out to David Posteraro at firstname.lastname@example.org or 216.736.7218.