cost-effective intellectual property tips for business: employment agreements

Dear Ladies and Gents:

Last time we talked about ownership of intellectual property which independent vendors and service providers create for your business. To obtain ownership of this intellectual property the business owner must require that the vendor sign a work for hire agreement before commencing the project. For continuing business relationships the vendor should sign such an agreement on a per project basis. Finally, the written agreement must be signed by the person with authority, or who apparently has authority, to obligate the independent vendor to transfer ownership and authorship.

Now, what about employees? For works which are protected by copyright there is good news for the business owner: The employer is automatically the owner and author of any works which an employee creates within the scope of his or her employment! Consequently no additional fees, contracts or agreements are necessary under these circumstances. However, there are two potential pitfalls:

First, the work must be eligible for United States copyright registration. This category includes visual arts, music composition and performances, literary works, architectural drawings, choreographic works, and software and computer programs. If you have any doubts, then place a quick call to your experienced intellectual property attorney. At least you will know that there is an issue on whether additional agreements are necessary.

Secondly, you must recognize whether a particular individual qualifies as an employee. For the definition of ‘employee’ one should refer to the United States tax code, although copyright law generally tracks the tax code definition. If you are not sure whether someone qualifies as an employee then to ask your intellectual property attorney. Otherwise you may later discover that an individual is a non-employee and required a work for hire agreement. If in doubt and with a need to act quickly, ask that individual to sign a work for hire agreement on behalf of himself or herself individually and/or as the principle of the service provider.

For other projects, such as inventions and trade secrets, provisions for transfer of ownership must appear in the initial employment contract and signed prior to commencing employment. The appropriate non–compete provisions should be in the employment agreement. In states such as Illinois, there must also be transfer of ownership for non-copyright projects employees create that are related to the business. If these provisions are not in the initial written agreement, then subsequent enforcement may require additional compensation to the employee as a bonus, promotion or raise.

In our next chapter in this series, we will discuss why United States copyright registrations are preferable, and more cost/effective in numerous situations, to patent protection.

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