Does Your Employee Own Your Intellectual Property
If you have employees on your team, you might be wondering, do you own the intellectual property that they create? Under the United States Copyright Law, the creator of a copyrightable work is deemed to be the author and owner of the work’s copyright, with the sole exception if the work qualifies as a “work made for hire.” In this case, the party that hired the creator as an employee is deemed to be the author and owner.
In this blog, we’ll focus on work made for hire as it applies to your employee.
Work Made for Hire and Your Employee
When an employee creates a copyrightable work during the course of their job or employment, it might qualify as work made for hire under the Copyright Act. But first, you’ll need to prove that an employee’s created work is, in fact, a work made for hire.
How can I prove that my employee created the copyrightable work?
You need to prove that an employee’s created work is work made for hire. This is to ensure that the intellectual property is owned by you (the employer).
To do so, the employer must meet these two requirements:
Requirement #1: Determining the Employee’s Status
An employee must create work for the hiring party (or you as the employer) to own it as a work made for hire under the Copyright Act definition.
REMINDER: If the creator is an independent contractor and not an employee, the work can only be work made for hire if it qualifies as specially commissioned work.
The Copyright Act doesn’t define the “employee” for the work made for hire analysis, but rather has several points or identifiers relevant to the right to control the manner and means of the work created. These points are identified in the 12 non-exhaustive and non-dispositive factors, including whether:
Requirement #2: Determining the Scope of Employment
Work created by an employee is only considered work made for hire if the employee created it “within the scope of their employment.” The common issue is when the creation of the work isn’t within the employee’s job description, yet the hiring party benefits from the work in some way.
So, it’s important to have a clear job description for all of your employees, which can begin with a well drafted Offer Letter to determine whether a work was created within the scope of employment. To determine whether a work was created within the scope of employment, the following three conditions must be met:
For a work to be within the scope of employment, the creation of the work must be the type of task that the employee was hired to perform. Courts will often look at the job description when assessing this element. However, the task of creating the work doesn’t have to be expressly stated in the employee’s job description.
While you may list specific deliverables in an independent contractor agreement, an employee’s job description wouldn’t be a detailed list of every type of task that they may complete or be responsible for completing. An act incidental to the employee’s authorized act may also be within the scope of employment if the act is subordinate or pertinent to their role within the employer’s ultimate objectives and one that isn’t unlikely for the employee to perform within their role.
The circumstances that may weigh in favor of finding that the employee created the work outside of the scope of employment include (1) the employer’s lack of knowledge or control over the creation of the work, (2) the employer’s active discouragement of the employee’s creation of the work, or (3) the employee relied solely on knowledge gained outside of their job. If you’re seeing the particular intellectual property created by your employee seems to have these three in common, it’s, in fact, weighing in favor of finding that the employee created the work outside of their employment. Therefore, the work wouldn’t qualify as work made for hire.
When assessing whether a work was created within the scope of employment, the courts will assess when the employee created the work, meaning that if the employee created the work in the employer’s workplace, this supports the finding that the work was within the scope of employment.
Now, you might be thinking that it’s more complicated in a digital work-from-home culture. If your employees work from home, you’ll instead consider if the work was completed with company equipment. So, if your employees are completing the work with the computer, tools, and other resources you provided to them, this leans in the favor of finding that the work was done within the scope of their employment.
If the employee created the work outside of the workplace (or without company equipment) and work hours, it may support the finding that the employee prepared the work outside of their scope of employment. However, if work was created at home, it may still be within the scope of their employment, especially if the nature of the job commonly involves completing work at home at these hours.
Rest assured, the mere fact that the work is prepared outside of the office is generally insufficient. These two factors will have to rely on one another: just because the work is outside of work hours and just because it may be done at home doesn’t mean it won’t qualify as work made for hire. What you need to weigh it against is what’s common within their role–if they’re commonly working from home and working more fluid hours doing this type of work. All of these factors together will lean in the direction of work made for hire, meaning that you as the employer will own the intellectual property.
This element considers what the employee’s actual motivation was for preparing the work. Employees claiming creations outside of the scope of employment typically argue that they were self-motivated and created the work for their own benefit or to benefit another entity or industry. Generally, this might be their claim of a side hustle.
What courts will generally consider as relevant facts include whether the employer has provided specifications for the work, the work was tailored to the employers or the employer’s particular demands or needs, and the employer benefited from the work. In most cases, the employer will benefit in some way, and this benefit is at least a partial motivation for the work’s creation. But keep in mind that a mere ancillary benefit to the employer will likely be found insufficient to satisfy this element.
So, ask yourself, what was the reason the employee primarily created the work?
For an employee’s work to be considered “work made for hire” under the Copyright Act, you need to first determine the employee’s employment status. Then, determine if the work was completed within their scope of employment. Together, these two factors and the sub-elements we’ve discussed above will help you weigh the determination of whether the intellectual property is owned by you as an employer.
Always keep in mind the things that you can benefit from your employees and set clear expectations ─ starting from the Offer Letter and continuing through the course of employment. Also, ensure that their job description is up to date and they have a clear understanding of the ownership of intellectual property, their confidentiality responsibilities, and what happens when they leave.
Most importantly, make sure that the employee understands that the work they’ve created during the course of their employment is owned by the company. Though the employee can put the job on their resume, they can’t include the intellectual property they created in the course of their employment in their portfolio. Set this expectation early and often–from their Offer Letter and in continue conversations, so that everybody is on the same page
I hope this blog has empowered you to own your intellectual property created by your team. Having employees is an incredible investment, but it only flourishes with great care and clear expectations that align to the overall business vision.