When people go to work for a company, anything they invent or create as part of their job is usually owned by their employer, who has the right to copyright, patent, or trademark it because it’s their intellectual property. Whether it’s a software program, a piece of equipment, a new doll, or a recipe, an employee doesn’t typically have the right to sell a creation (or even use it outside a work context) without their employer’s permission.
Where things can get complicated is when someone who’s not an employee creates or invents something outside of an employer-employee relationship and without a contract specifying who owns the rights to their “work made for hire.”
This is why any business that uses independent contractors needs to have a clear “work made for hire” clause in their contracts. Unfortunately, employers and workers don’t always have the same understanding of what constitutes an employee vs. an independent contractor. For a number of reasons, it’s crucial to be clear when a person must be classified as an employee under California law.
Contractual agreements are consequential
Most businesses that regularly use independent contractors have contracts that include necessary provisions to protect their right to profit from and use work made for them as they see fit. Of course, it’s always smart to make sure that standard contracts are reviewed regularly.
Where legal disputes over work made for hire most often occur is when there’s a less formal relationship. For example, a small business owner might pay an artistic friend or relative to design a logo or mascot to represent a business. It might not occur to them to put a contract in place. However, if the person decides to sell their design, let someone else use it, or even copyright it, that could blur the business’s branding.
The work doesn’t necessarily have to be something “creative.” It can be a piece of equipment, or anything unique but potentially valuable – or potentially damaging to the business if someone else uses it. Either way, a business needs to protect its rights to it.
It’s typically better to have a professionally drafted contract and not need it than not to have one when work made for hire is an issue. In addition to preventing unnecessary and costly legal battles, well-executed contracts codify expectations for both parties and (ideally) protect each party’s rights as well.