Intellectual Property

Small Business and Copyright Ownership

Everyday, you come across materials that are protected by a copyright: the stories in the morning newspaper, the magazine you read at lunch and the television show or baseball game that you watch in the evening. The protection given by a copyright lies in limiting how and for how long other people can use the protected material without paying you, the copyright owner, for the use.

Usually, who actually "owns" a copyright is straightforward and clear: the person who created it. But, a special ownership problem is created by works that have been "made for hire." If you're a small business owner, or if you work for such a business, you need to know some things about copyright ownership.

What Exactly is a Copyright?

Copyrights protect the tangible expression of ideas, that is, the expression of an idea in a form that you can see or feel. Common uses include protecting the contents of published and unpublished books, movie plots, paintings, and sound recordings.

Under the federal copyright law, protection attaches when the creator or author puts pen to paper and creates a tangible expression of the idea. This basic protection can be registered by filing an application for federal copyright registration with the U.S. Copyright Office, which requires a simple form, a fee and a copy of the work you want to protect.

Generally, the owner of a copyright has the exclusive right to do various things, such as:

  • Reproduce the copyrighted work
  • Prepare derivative works, that is, a work that is based on one or more pre-existing works, such as translating to English a novel originally written in Spanish
  • Distribute copies or phonorecords of the copyrighted work

The copyright protects the form of expression, not the subject matter of the writing. For example, a description of a machine could be copyrighted, but this would only prevent others from copying the description; it would not prevent others from writing a description of their own or from making and using the machine.

Federal copyrights for works created and registered after 1978 generally last for the author's life, plus 70 years after his or her death. If someone infringes your federally registered copyright, you might be able to recover substantial damages as well as attorney's fees.

Works "Made for Hire"

Under federal law, the ownership of a copyright vests initially in the author of a particular work at the time of the work's creation. But, a work prepared under certain employment arrangements may be deemed a work "made for hire" and, in such case, the copyright rests with the employer (hiring party) who purchased or paid for the author's services, rather than in the employee/author.

An exception to this rule is when the employee/author and the employer have a signed, written agreement or contract that clearly states that the employee/author owns the materials.

There are two kinds of works "made for hire:"

  • Employee works, which are materials prepared by an employee within the scope of his or her employment, and
  • Specially commissioned works, which are materials specially ordered or commissioned for use as, among other things, a part of a motion picture or other audiovisual work, a translation, an instructional text, or a test (or answer material for a test) if the employer and the employee have a signed, written agreement stating that the works are "made for hire"

In order to determine if in fact a work is "made for hire," you have to first determine if the author/creator of the work is an employee or an independent contractor. If the author is an employee, then the work in question will be considered "made for hire," and the employer will own the copyright.

There is no uniform rule or definition of either "employee" or "independent contractor." Rather, when the issue comes up, courts will look at several factors to determine the nature of the parties' relationship, such as:

  • Control by the employer over the work being done, that is, does employer tell the worker how the work has to be done, is it done at the employer's location and does the employer provide equipment or tools to help the worker create the protected material?
  • Does the employer control the worker, such as by setting the worker's schedule, having him or her do other tasks in addition to creating the copyrighted work, and does the employer determine how and when the worker will be paid?
  • Does the worker receive benefits from the employer, such as health insurance or pension benefits, and does the employer withhold state and federal payroll taxes from the worker's paychecks?

Generally, the more "control" the employer has over a worker the more likely it is that an employer-employee relationship exists. Nonetheless, because there are no clear-cut, uniform definitions, it might be best to seek advice from an experienced business law attorney or an attorney who specializes in copyright law if you're uncertain as to whether protected works are "made for hire."

Questions for Your Attorney

  • Do I have to register my copyright?
  • Is my registered copyright good in other countries?
  • How long will it take to register my copyright?
  • Can I sell my copyright to another employer or another party? How do I do that?
  • Related Resources on Lawyers.comsm

    - Find a Copyright Law Attorney in your area
    - Find a Business Law Lawyer in your area
    - Visit our Business Organizations Message Board for more help

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