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So, you're a software developer, or you own a software development company and have others develop it for you? Well then you need to know who owns the intellectual property, and specifically the copyrights to computer software programs being developed. Who gets all the protections of the U.S. Copyright Act to keep others from wrongly copying those programs? Who gets to to reap the financial benefits for licensing those programs (read: payday)? With the thousands of copyright lawsuits filed and tried and appealed for the last 200 years, the answer should be clear by now, but it’s not.  The answer can be particularly complex when the work’s creator is creating the work at someone else’s direction. Here's an explanation of what you should know.

Background--The Copyright Act Protects the Author’s Rights to Literary Works Such as Computer Software:

 The Copyright Act protects a copyright owner’s right to her or his “works.”  Those works include “literary works.”  See 17 USC § 101. Federal courts have almost universally concluded that computer software programs constitute “literary works.”  In other words, software programs are generally protectable by the Copyright Act so long as the programs are “fixed in a tangible medium of expression” (versus an idea) and are “original.”

Not surprisingly, the Copyright Act’s general rule is that the person who puts down (or “fixes”) the program/material for the first time has first rights to the work.  Or, in the words of the Copyright Act, copyright work that can be protected by the Act “vests initially in the author or authors of the work.”  See 17 USC § 201(a). But that’s just the general rule. And in the law, there’s (almost) always an exception.

“Works Made for Hire”—A Major Twist on Copyright Ownership:

 When an author creates a work at someone else’s direction, the work may qualify as a “work made for hire,” a carve out from the general rule, which may leave the original author without any copyright rights in the work at all.  Specifically, in the case of a “work made for hire,” the Copyright Act declares that “the employer or other person for whom the work was prepared”—not the original author—“is considered the author.”

In other words, under the Copyright Act, the “work made for hire” provision flips authorship of the work from the original author to someone else (usually the original author’s employer). So, what is a “work made for hire”?  The Copyright Act defines this term differently, depending on whether the original author was an employee or not.

If the original author was an employee, then the employee’s work is “work made for hire” if it was “prepared by [the] employee within the scope of his or her employment.”  This definition seems pretty straightforward, but know that "employee" is not defined by the IRS's standards, but rather the laws of agency. So, if the original author is on the payroll of the employer, and creates the work as part of the employee’s job duties, then the work qualifies as “work made for hire,” unless there's something in writing to the contrary.  In short, the employee produced the work as part of the employee’s efforts for the employer, so the employer owns the copyright. (Notably, the Copyright Act also permits employers and employees to opt out of this definition.  That is, if the employee and employer “expressly” agree in writing (and sign the writing), then the copyright can stay with the employee/original author.  See 17 USC § 201(b).)

If the original author was not an employee, then the non-employee’s work is “work made for hire” if three conditions are met. First, the non-employee must sign a written agreement expressly stating that the work is a “work made for hire.”  Thus, if the non-employee does not sign such an agreement, then the work should not be considered “work made for hire.” Second, the non-employee must have been “ordered or commissioned” to do the work.  Thus, if the non-employee simply does the work spontaneously, then work should not be considered “work made for hire.” Third, the non-employee’s work must qualify within one of nine (9) specific categories of “works”:

(1)   as a contribution to a collective work,

(2)   as a part of a motion picture or other audiovisual work,

(3)   as a translation,

(4)   as a supplementary work,

(5)   as a compilation,

(6)   as an instructional text,

(7)   as a test,

(8)   as answer material for a test, or

(9)   as an atlas

See 17 USC § 101.  Thus, if the non-employee creates a “work” that does not fall within one of those nine categories, then the work should not be considered a “work made for hire.”

So what is missing from the nine categories?  Literary works (i.e. computer programs!).  This means that software programs created by non-employees may never qualify as “work made for hire” under the Copyright Act—leaving all copyright protections and rights with the original author.

Conclusion—Smart IP Players Need Solid Advice:

With the every-increasing value of software programs and other intellectual property, savvy employees, employers, independent contractors, and computer programmers need competent legal counsel to navigate through the complexities and subtleties of the Copyright Act and the “work made for hire” principles.  (This brief post only touches on some of the potential issues.)

If you’d like more information on how we can help you with your IP ownership, computer software, or copyright issue, please call or email us: In Colorado, contact Christina Saunders at 303-396-0270 or [email protected]; in Texas, contact Will Denham at 713-401-2924 or [email protected]. We'd love to hear from you.

Friendly disclaimer: This blog post is for educational purposes only. None of this information constitutes legal advice, and no attorney-client relationship is established until a written agreement is signed between you and Sparkman + Foote LLP.