From Internet Law and Business Handbook
by J. Dianne Brinson and Mark F.
This chapter covers the Copyright Act's ownership rules, and, in less detail,
the ownership rules for patents, trademarks, and trade secrets. Ownership rules
discussed here apply only in the United States. Other countries have their own rules
of intellectual property ownership.
The intellectual property ownership rules discussed in this chapter are default
rules that apply if the parties—employer and employee, employer and independent
contractor, Web developer and client—do not reach their own agreement, in writing,
Ownership issues that arise in specific types of relationships are covered in chapters
5, 6, 8, 12, and 13.
You need to understand copyright's ownership rules if you acquire, use, or develop
Web content. Here's why:
The types of material used for Web site content—music; graphics; text; and video,
film, and television show clips—are protected by copyright, as are Web site designs
and software. If you want to use copyrighted material belonging to a third party
on your Web site, generally you need the permission of the copyright owner, as discussed
in chapters 9 and 10. Only the permission of the true owner will protect you from
an infringement suit. Getting permission from someone who mistakenly believes he
or she is the copyright owner will not protect you.
EXAMPLE / Web Marketing Director saw some photographs
she liked on Z Company's Web site. Director contacted Z Company's president and
got permission to use the photographs on the Web site owned by Director's company.
The photographs were created for Z Company by a freelance photographer. If the copyrights
in the photographs are owned by the photographer (likely) and Z Company does not
have the right to sublicense the use of the photographs, Z Company cannot authorize
Director to use the photographs. Only the photographer can. Getting permission to
use the photographs from Z Company will not protect Director if the photographer
sues Director for copyright infringement.
If you create Web content or commission freelancers (graphic designers, writers,
or photographers, for example) to create Web content, you should give careful consideration
to the question who will own the copyright in that content. The exclusive rights
of copyright discussed in chapter 1 belong to the copyright owner.
EXAMPLE / Web Entrepreneur commissioned Graphic
Designer to create graphics for a Web site. If Web Entrepreneur owns the copyright
in the graphics, then Entrepreneur has the exclusive right to reproduce and modify
the graphics for use on another Web site. If Graphic Designer owns the copyright,
Entrepreneur needs Graphic Designer's permission to reproduce and modify the graphics
for use on another Web site.
If you are involved in Web site development, either as a developer or a client,
you should give careful consideration to the question of who will own the copyright
in Web site designs and program code, for the reason just discussed.
EXAMPLE / Web Developer created a Web site for
Client. The Web site includes a shopping cart program. Whether Web Developer can
use the shopping cart program in projects for other clients depends on who owns
the copyright in the program.
Ownership of copyright initially belongs to the author or authors of the work. 17
USC § 201(a).
EXAMPLE / Sarah, a photographer, took a photograph
of the Lincoln Memorial. Sarah is the author of the photograph and the initial owner
of the copyright in the photograph.
The "author" is generally the individual who created the work, but there is an exception
for "works made for hire." This exception is discussed in the next section.
The Work Made For Hire Rule
The "author" of a work made for hire is the employer or hiring party for whom the
work was prepared. This default ownership rule is known as the work made for hire
rule. Unless the parties have agreed otherwise in a signed written document, the
employer or hiring party owns the copyright of a work made for hire. 17 USC § 201(b).
There are actually two branches to the work made for hire rule: one covering works
made by employees, and one covering specially commissioned works. 17 USC § 101.
We discuss these in this section.
Works Made by Employees
A work created by an employee within the scope of his or her employment is a work
made for hire. The employer for whom the work is made is the author of the work
for copyright purposes and is the owner of the work's copyright (unless the employee
and employer have agreed otherwise).
Example / As part of his job, John, an employee
of Big Company's training division, created original interactive training materials
on e-commerce for Big's marketing staff. Even though John created the training materials,
Big is the author for copyright purposes. Big owns the copyright in the training
materials (unless John and Big have agreed in a signed contract that John owns the
The work made for hire rule does not give employers ownership of works made by employees
outside the scope of their employment.
EXAMPLE / Darryl, an engineer at Productions,
Inc., does nature scene watercolors in his free time. The work made for hire rule
does not apply to Darryl's watercolors. If Productions wants ownership of the copyrights
in the watercolors, it must get an assignment (discussed in "Assignments," later
in this chapter) from Darryl.
Specially Commissioned Works
The second category of works made for hire is limited to nine types of specially
ordered or commissioned works. These are works commissioned for use as:
- A contribution to a collective work.
- Part of a motion picture or other audiovisual work.
- A translation.
- A supplementary work.
- A compilation.
- An instructional text.
- A test or answer material for a test.
- An atlas.
- A sound recording.
For these types of works, if the hiring party and independent contractor creating
the work agree in writing, before the contractor begins the project, to designate
the work as a work made for hire, the work is a work made for hire. If the parties
do not have an agreement to treat the independent contractor's work as a work made
for hire, it's not a work made for hire.
EXAMPLE / Game Company hired Don, a software
developer, to design the software for Game Company's new online game (an audiovisual
work). Game Company and Don did not agree in writing to consider the software a
work made for hire, so the software is not a work made for hire. Don owns the copyright
in the software.
Even if the hiring party and independent contractor agree in writing to consider
the independent contractor's work a work made for hire, the work is not a work made
for hire unless it falls into one of the nine special categories listed in the first
paragraph of this subsection.
EXAMPLE / Sarah commissioned John, a freelance
painter, to do an oil painting of Sarah's home. Although Sarah and John agreed in
writing that the painting would be considered a work made for hire, the written
agreement does not make the painting a work made for hire because the painting is
not in one of the nine categories of works that can be specially commissioned works
made for hire. If Sarah wants to own the copyright, she needs an assignment (discussed
in "Assignments," later in this chapter) from John.
The rules governing ownership of copyrights in works created before January 1, 1978
(the effective date of the Copyright Act of 1976), were different from the rules
described in this chapter. The 1909 Copyright Act did not distinguish between employees
and independent contractors (works created by both independent contractors and employees
were automatically owned by the employer or hiring party unless the parties agreed
otherwise). In the case Community for Creative Nonviolence v. Reid, 490 US
730 (1989), the U.S. Supreme Court made it clear that the current Copyright Act
does distinguish between employees and independent contractors.
The issue in Reid was who owned the copyright in a sculpture created by the
artist Reid for the Community for Creative Nonviolence (CCNV). The court concluded
that the work made for hire rule did not apply for two reasons: Reid was not an
employee of CCNV, and the sculpture was not one of the types of works that could
be designated a work made for hire by written agreement of the parties.
Foreign Copyright Law
The work made for hire rule discussed in this chapter and in other chapters of this
book applies to copyrights in the United States. Other countries have different
rules on copyright ownership. Although many countries have rules similar to the
first branch of the Copyright Act's rule (works made by employees), the second branch
(specially commissioned works) of the U.S. rule does not exist in most countries.
To obtain international copyright ownership for works that fall within the second
branch of the Copyright Act's work made for hire rule, parties that commission works
should obtain assignments of copyrights (see "Assignments," later in this chapter)
from independent contractors. Ownership of independent contractors' works is discussed
in "Copyright Ownership," chapter 6.
Joint Authorship and Ownership
According to the Copyright Act, the authors of a joint work jointly own the copyright
in the work they create. 17 USC § 201(a). A joint work is defined in Section 101
of the Copyright Act as "a work prepared by two or more authors with the intention
that their contributions be merged into inseparable or interdependent parts of a
EXAMPLE / Ann and Bruce worked together to create
an e-commerce site, with Ann developing the software and user interface and Bruce
developing the content. The work is a joint work, and Ann and Bruce jointly own
Of course, if Ann and Bruce worked as employees of an employer rather than as individuals,
their employer would be the copyright owner, as discussed in "The Work Made for
Hire Rule," earlier in this chapter.
You do not become the author of a joint work merely by contributing ideas or supervision
to a work. You do so by contributing material that meets the standards for copyright
protection (see "Standards," chapter 1).
EXAMPLE / Susan suggested that John write a
book on how to beat the stock market, and John did so. Susan is not a joint author
of John's book.
Joint Authorship or Not?
Corky Ballas, a competitive dancer, asked a music producer to create a compact
disk of music appropriate for dance competitions. Ballas made suggestions about
concepts and suggested songs for the recording. When Ballas and the producer parted
company, Ballas claimed to be a joint author of the completed CD. The court held
that the producer was the sole author, because Ballas had contributed only uncopyrightable
ideas and concepts to the project. Ballas v. Tedesco and Ballroom Blitz Music Inc.,
41 FSupp2d 531 (DNJ 1999).
When the copyright in a work is jointly owned, according to U.S. law, each joint
owner can use or license the work (authorize others to use it) without the consent
of the other owner, provided that the use does not destroy the value of the work
and the parties do not have an agreement requiring the consent of each owner for
use or licensing. A joint owner who licenses a work must share any royalties he
or she receives with the other owners.
Many foreign countries (Germany and France, for example) require that all joint
owners consent to the grant of a license. Generally, joint ownership is not recommended
because of the complications it adds to licensing worldwide rights. In addition,
it is unclear what effect the filing of bankruptcy by one joint owner would have
In nine states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas,
Washington, and Wisconsin), any property acquired during a marriage is jointly owned
by the husband and wife. Whether a copyright in a work created by one spouse during
marriage is community property is unclear. In Marriage of Worth, a California
state court held that the copyrights in several books created by a man during his
marriage were jointly owned by the man and his wife. 195 Ca3d 768 (1987). The court's
reasoning—that the copyrights were community property because they were the result
of one spouse's expenditure of time, effort, and skill during the marriage —could
apply to patents, trademarks, and trade secrets as well. However, a federal court
in Louisiana recently held that copyrights created by one spouse during a marriage
are not community property because treating copyrights as community property would
risk damaging the Copyright Act's goals of predictability and certainty as to copyright
ownership and national uniformity. Rodrigue v. Rodrigue, 55 FSupp2d 534 (ED
A transfer of the ownership of a copyright is known as an assignment. When a copyright
is assigned, the assignee (individual or company to whom it is assigned) becomes
the owner of the exclusive rights of copyright in the protected work. (These rights
are discussed in "The Exclusive Rights," chapter 1.)
EXAMPLE / Tom, an individual working on his
own, created Web development tool software and then assigned the copyright in the
software to Software Publisher. After the assignment, Software Publisher has the
exclusive right to reproduce and publicly distribute the software. If Tom starts
selling the software, he will be infringing the Software Publisher's rights as copyright
The ownership of copyright may be transferred in whole or in part. 17 USC § 201(d).
Examples of partial transfers are an assignment of the copyright for a term of ten
years (time limitation) and an assignment limited to California (geographic limitation).
In addition, the individual exclusive rights (reproduction, modification, and so
forth) can be transferred.
Assignments are common in many industries—for example, music composers often assign
copyrights in their compositions to music publishers.
An assignment is not valid unless it is in writing and is signed by the owner of
the rights conveyed or the owner's authorized agent. 17 USC § 204(a).
Is an Email a Signed Writing?
So far, only one court has ruled on the question of whether an email satisfies
the Copyright Act's "signed writing" requirement. That court held that the email
at issue in that case was not "signed." Ballas v. Tedesco and Ballroom Blitz Music
Inc., 41 FSupp2d 531 (DNJ 1999). Until this issue is clarified—either through
amendment to the Copyright Act or through a general federal electronic records law—don't
rely on emails to satisfy the "signed writing" requirement. (A federal electronic
records law is likely to be passed by late 2000.)
An assignment can be recorded in the Copyright Office to give others "constructive
notice" of the assignment. Constructive notice is a legal term that means you are
presumed to know a fact (because it is a matter of public record) even if you have
no actual knowledge of the fact. (Constructive notice is discussed in more detail
in "Obtaining a License," chapter 10.)
Recording an assignment in the Copyright Office to give constructive notice protects
the assignee from future conflicting transfers. An assignment that is recorded properly
within one month after its signing prevails over a later assignment. If the assignment
is signed outside the U.S., the assignee has two months to record it. 17 USC § 205(d).
(The mechanics of recording are discussed in "Obtaining a License," chapter 10.)
EXAMPLE / Songwriter assigned the copyright
in her song to Music Publishing Company in Boston on August 1, 1993. On August 15,
1993, Songwriter assigned the copyright in the same song to World Enterprises. So
long as Music Publishing recorded its assignment properly in the Copyright Office
by September 1, Music Publishing owns the copyright because its assignment prevails
over Songwriter's later assignment to World Enterprises.
A properly recorded assignment even prevails over an earlier assignment that was
not recorded if the later assignment meets two criteria:
- The later assignment was taken in good faith and without notice of the earlier
- The assignee paid money or something of value for the assignment or made a promise
to pay royalties.
EXAMPLE / Author assigned the copyright in his
novel to Publishing, Inc. on November 1, 1993. Publishing, Inc. did not record the
assignment. On January 15, 1994, Author assigned the copyright in the same novel
to Media, Inc. for $10,000. Media, Inc. recorded its assignment in the Copyright
Office. So long as Media, Inc. acted in good faith and did not know or have reason
to know about Author's 1993 assignment to Publishing, Inc., Media, Inc. owns the
copyright. The assignment to Media, Inc. prevails over Author's earlier assignment
to Publishing, Inc.
A license is a copyright owner's grant of permission to use a copyrighted work in
a way that would otherwise be copyright infringement. A copyright owner who grants
a license is known as a licensor. A party receiving a license is known as a licensee.
Implied in every license is a promise by the licensor to refrain from suing the
licensee for infringement based on activities within the scope of the license.
A copyright license can be exclusive or nonexclusive. An exclusive license is a
license that cannot overlap another grant of rights.
EXAMPLE / Author granted Publisher the exclusive
right to sell Author's novel in the United States. She granted Movie Developer the
exclusive right to create and distribute a movie version of the novel. Both Publisher
and Developer have exclusive licenses. There is no overlap between the two licenses.
Under copyright law, an exclusive license is considered a "transfer of copyright
ownership." 17 USC § 101. An exclusive license, like an assignment, is not valid
unless it is in writing and signed by the owner of the rights conveyed. A nonexclusive
license is valid even if it is not in writing.
No Writing, No Case
During the Cannes Film Festival, New World Entertainment orally agreed to grant
Television Espanola the exclusive right to broadcast the television show Spiderman
in Spain. Written documents were to be prepared by Television Espanola later.
When Television Espanola delivered the documents to New World for signing, New World
refused to sign, because by then it had granted the broadcast rights for Spain to
another party. Television Espanola sued New World for breach of contract. Television
Espanola lost the case because oral exclusive copyright licenses are unenforceable.
Radio Television Espanola S.A. v. New World Entertainment, Ltd., 183 F3d
922 (9th Cir 1999).
An exclusive license, like an assignment, can be recorded in the Copyright Office
to give constructive notice. Recording the exclusive license protects the license
against unrecorded earlier transfers of copyright ownership and against later transfers.
(See "Assignments," earlier in this chapter.)
Licensing is discussed in detail in chapter 10.
The author of a work other than a work made for hire has the right to terminate
any license or assignment granted on or after January 1, 1978 during a five-year
period that starts thirty-five years after the grant was made. If the grant involves
the right to distribute the work to the public, the termination period begins thirty-five
years after distribution begins or forty years after the grant was made, whichever
is earlier. 17 USC § 203.
For works published before January 1, 1978, a different rule applies to pre-1978
licenses and assignments: The five-year termination period begins fifty-six years
after the work was published. 17 USC § 304(c). For older works in their renewal
term in 1998 for which the termination right had expired before 1998, there is an
additional five-year termination period beginning at the end of seventy-five years
from the date the copyright was originally secured. 17 USC § 304(d). Renewal of
copyright, applicable only to pre-1978 works, is discussed in "Public Domain Works,"
The termination right cannot be waived in advance. If the author dies before the
termination period begins, the termination right can be exercised by the author's
widow or widower, children, and grandchildren. If none of these people are alive
at the time the termination right can be exercised, the right can be exercised by
the author's executor, administrator, personal representative, or trustee.
Owning a Copy of a Work
Copyright law distinguishes the ownership of a copy of a protected work (a print
of a photograph, a compact disc, a book, a diskette) from ownership of the intangible
copyright rights. The transfer of a copy of a work does not transfer any rights
in the copyright. Thus, purchasing a book (a copy of a literary work, in copyright
terminology) does not give you permission to make copies of the book and sell those
There are several exceptions to the principle that the transfer of a copy of a work
does not transfer copyright rights. We'll discuss the most important ones in the
rest of this section.
Displaying a Copy
The owner of a lawfully made copy of a work has the right to display the copy publicly,
"either directly or by the projection of no more than one image at a time, to viewers
present at the place where the copy is located." 17 USC § 109(c).
Making a Backup Copy
It is not infringement for the owner of a copy of a computer program to make another
copy of the program if doing so is necessary to use the program or for archival
purposes. 17 USC § 117(a).
No infringement action may be brought against consumers for noncommercial use of
digital or analog audio recording devices to make copies of records, tapes, or CDs.
17 USC § 1008.
"First Sale" Doctrine
The owner of a lawfully made copy of a work has the right to resell or otherwise
dispose of possession of that copy. This exception to the distribution right is
known as the "first sale doctrine." 17 USC § 109(a).
EXAMPLE / Don bought a copy of Publisher's new
book on Web design. Don can resell his copy of the book. The first sale doctrine
gives him that right.
Sale or License?
The first sale doctrine is only triggered by a sale of a copy of a work, not by
a license. Software and database products, whether delivered online or in tangible
form, are generally licensed rather than sold. Licenses allow software suppliers
to tailor products to specific markets. A multiuser site license, for example, provides
different use rights and carries a different price from a single-user license. Software
and database suppliers also use licenses to obtain protection for factual information
and prohibit reverse engineering. Whether such provisions are binding, given that
copyright law does not protect facts and permits reverse engineering, is discussed
in "When You Don't Need a License,"
Sale or License Transaction?
Sometimes the documents used in a transaction use "sale" terminology and "license"
terminology, making it unclear whether the transaction is a sale triggering the
first sale doctrine or not. In Adobe Systems Inc. v. One Stop Micro Inc.,
84 FSupp2d 1086 (ND Cal 2000), Adobe sued a company that had acquired copies of
"education versions" (stripped-down, less expensive versions) of Adobe products,
removed the "education version" labels, and sold the products to consumers. The
defendant claimed that it had a right to distribute the software because it had
purchased the copies from educational resellers who had purchased the copies. The
reseller agreement used the word "purchase." Other language in the reseller agreement
indicated that Adobe was only granting licenses to educational resellers. The court
found that the reseller agreement was a license, so the first sale doctrine was
not triggered between Adobe and the educational resellers. The court held that the
defendant infringed Adobe's copyrights by distributing the products without a license.
For mass-marketed software and databases delivered in tangible form (diskette or
CD-ROM), licenses generally take the form of "shrink wrap" agreements contained
on or in the product packaging. Some people maintain that shrink wrap agreements
do not create binding contracts because they are "contracts of adhesion" (contracts
based on "offers" that give the consumer no meaningful choice). They believe that
the typical transaction wherein a consumer acquires a copy of mass-market software
or database material is a sale, triggering the first sale doctrine.
Some courts agree with this analysis. The Court of Appeals for the Fifth Circuit
held that an end-user software license prohibiting reverse engineering was a contract
of adhesion. Vault Corp. v. Quaid Software Ltd., 847 F2d 255 (5th Cir 1988).
The Court of Appeals for the Third Circuit also held shrink wrap licenses invalid.
Step-Saver Data Systems, Inc. v. Wyse Technology, 939 F2d 91 (3d Cir 1991).
However, more recently, the Seventh Circuit Court of Appeals held that shrink wrap
licenses are enforceable unless their terms are objectionable on grounds applicable
to contracts in general. ProCD, Inc. v. Zeidenberg, 86 F3d 1447 (7th Cir
1996). The court noted that even though the consumer in this case could not review
the license terms before concluding the transaction, ProCD's license gave the consumer
the right to reject the product if the consumer found the license terms unsatisfactory.
Other aspects of the ProCD case are discussed in "When You Don't Need a License,"
Patents, Trademarks, and Trade Secrets
Patent law does not have a work made for hire rule. Patentable inventions created
by employees within the scope of their employment are owned by the employee. However,
the employee may have a legal obligation to transfer ownership to the employer under
the patent law's "hired to invent" doctrine. This doctrine provides that when an
employee is hired to perform research or solve a specific problem, the employer
is entitled to get an assignment of a patent received by the employee on the results
of the research.
Generally, as a condition of employment, employers require employees to agree to
assign their interests in patentable inventions to the employer. The Patent Act
implicitly recognizes the validity of such agreements, providing that a patent may
be granted to the assignee of the inventor. The Employee Nondisclosure and Assignment
Agreement in appendix B (Form 6 ) includes an assignment clause.
A trademark is owned by the first party to use it in connection with goods or services
or the first to apply to federally register it. A trademark can be owned by an individual,
company, or any other legal entity. Acquisition of trademark rights is discussed
extensively in chapter 16.
An employer or hiring party generally owns trade secrets developed by employees
and by independent contractors who are hired to invent.
Ownership of patents, trade secrets, and trademarks, like the ownership of copyrights,
can be assigned. As with copyrights, owners of these types of intellectual property
frequently grant licenses authorizing others to do things that would otherwise violate
the owner's exclusive rights.
This article is an excerpt from the book Internet Legal Forms for
Business by J. Dianne Brinson and Mark F. Radcliffe (Copyright 2000 by
Brinson and Radcliffe). The article is used on this site with the authors' permission.
You may copy the article for personal or educational use, as long as all copies
include the author and title source information at the beginning and this License
Notice at the end. The article may not be modified or displayed on other Web sites
or intranets without the written permission of the authors.