(A version of this article previously appeared in the Valley Business Front.)
The CEO’s voice was controlled, but I could sense the panic underneath. He was about to crack. It sounded almost like he might even start crying.
“We have paid a total of more than one hundred thousand dollars for that web site over the years!” he said, his voice quavering with anger. “And now the developers won’t even give us a copy of it. I want you to sue them tomorrow. I want justice!” he said.
“Whoa, whoa, OK, yes, justice, of course,” I said, “but before we start a lawsuit, let’s figure out what they’re thinking, from a legal perspective. Do you have a written contract with this web site company?”
He did have a written contract. He sent it to me. It was about four pages long and mostly detailed all the various types of work that the developers were supposed to do on the web site.
They had done the work very well. The web site that they hosted for our client was brilliantly designed, and it sat at the core of our client’s business. Loaded with product information and boasting a flawless fulfillment engine powered by up-to-the-second inventory information, it was the conduit for ninety-five percent of our client’s orders. And now they were threatening to shut it down.
See, it seems that our client had decided to try to save money on web hosts. Just before the contract was due to expire, the CEO had gone shopping around for better deals on bandwidth and storage. Then, based on some bargain-basement offers he’d received, he made a lowball renewal offer. Dickering led to bickering led to bad blood, and the CEO was damned if he was going to do business with that company any more. He let the contract run out and demanded a copy of the web site.
They wouldn’t give him a copy of his company’s own web site.
“They say they own it! Can you believe it?” he laughed. “After we paid them all that money to build it!”
“Well, I’ve looked over your contract, and actually, they do own it,” I said.
“Er . . . .”
“The thing is,” I said, “this is all copyrighted work. Whenever someone makes a creative work that’s recorded in a physical medium—like the illustrations, text and computer code on your web site—it’s copyrighted, and the author owns the copyright.”
“I know that,” he said. “But I paid them. So I should own it!”
“Well, copyright only can be transferred in writing,” I said. “There’s nothing in this contract that transfers the copyright in the web site to you. So the web development company still own the copyright.”
“But I paid them!” he said. “So . . . wait! If I paid them, then that makes it a ‘work-for-hire.’ Right?”
“Ah. Well, when someone creates something for you as a work-made-for-hire, it’s actually kind of a special situation,” I said. “It means that you actually are the author, not the person who creates the work. Usually this happens because the person is your employee and creates the work as part of his or her job.”
“Got it. So when I pay them, I’m the author,” he said.
“Hold on,” I said. “It doesn’t automatically become a work-made-for-hire just because you pay the person who creates it. That only happens if the person is your employee. Like, if you give the person a W-2.”
“Otherwise, it’s only a work-made-for-hire if (1) it’s something you specially order, (2) you agree in writing with the creator that it’s a work-made-for-hire, and (3) it falls within a very narrow list of certain types of works, like atlases, translations, tests and textbooks, that can be a work-made-for-hire,” I said. “If it’s not on the list, it can’t be a work-made-for-hire.”
“What about web sites?” he said.
“A commercial web site isn’t on the list,” I said. “A whole bunch of things aren’t on the list. Software isn’t on the list. Photos and illustrations aren’t on the list. Architectural plans aren’t on the list. None of these things will be a work-made-for-hire unless it falls into one of the categories that actually is on the list. Take your company logo for example. Who created it?”
“Our logo?” he said. “Well, I asked my cousin to design it for us. We didn’t have a written agreement.”
“OK, then, you don’t own that either,” I said. “No written agreement, no transfer of copyright. Your cousin owns the logo. You need to have him sign a document transferring the logo to your company. Here, let me prepare one for you. . . .”
In the end, the CEO managed to purchase the copyright to his company’s website from the web development company—in exchange for an extortionate “processing fee” of about $30,000. On the plus side, we made sure that going forward all of the company’s contracts with outsiders—graphic designers, freelance writers, photographers, software developers, web designers, and anyone else that the company hired to do creative work—contained a simple little paragraph stating that (1) the creative work was a “work-made-for-hire” where possible under the law, and (2) the artist or author handed over the copyright in the creative work whenever it could not be a “work-made-for-hire.”
Of course, sometimes the artist wants to keep some rights in the creative work—like the right to put the creative work in an online portfolio, for exam
ple—and it’s easy to change the contract so that the company grants a license back to the artist for whatever he or she needs. Sometimes the artist positively refuses to sign over the copyright (that’s how creative types are, sometimes) but that’s not a problem either, because we can change the contract so that instead of owning the copyright, the company just gets an exclusive and permanent license to use the creative work for whatever it needs.
So if you hire someone to create something for you, you might not actually own that thing unless you have the right contract language. Even though you paid for that thing.
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