You Can't Always Get
What You Want
(But Get What You Need)

E. Scott Johnson
410-347-7388
johnson@ober.com

A wise attorney once asked: "Would you really rather beg for forgiveness than ask for permission?" That should be the touchstone for all those who use photographs, artwork, textual works, computer software, data, or an actual person's name or image in a website, publication, product, or in advertising. Unauthorized use of such third party materials poses the risk of infringing intellectual property rights. Even when such materials are created by employees or vendors, intellectual property ownership and scope of use license issues can arise. The prevalent misunderstanding of "fair use" as an affirmative right, rather than what it really is: a defense to an infringement claim (a "right" that can be very expensive to vindicate in litigation), can lead to serious legal problems.

Intellectual property or "IP" is the term used to describe products of human intellect that are accorded property-like legal status. The term has long referred to copyrightable works of authorship, inventions, trademarks and trade secrets, but is more expansively used today to include industrial designs, trade dress, integrated circuit mask works, domain names, rights of privacy and publicity, biological materials, databases, "moral rights" — and the list keeps growing.

"Rights clearance" is the discipline of securing rights, permissions and licenses to incorporate intellectual property owned by others in new works. To use the photograph of an identifiable person in a print advertisement or on a website, one must first secure a license from the photograph's copyright owner, usually the photographer or the photographer's stock photo house, agent or publisher. One must also secure a model release from the photograph's subject, or risk infringing that person's rights of privacy and publicity.

Rights clearance is both art and science. "Rate cards" are not always available, and licensors charge what the market will bear. License fees negotiated after use has commenced are generally higher than fees quoted for prospective uses, but not every use must be cleared. New productions should be evaluated early so that rights, permissions and licenses can be secured before production costs are incurred. Developing a clearance process is important to insurers offering Errors and Omission or Media Perils coverage, insurance needed by companies that produce or distribute creative works.

Not all pre-existing materials must be cleared. For example, public domain works can be used without license. However, adaptations of public domain works (e.g., Disney's animated film adaptation of Victor Hugo's "Hunchback of Notre Dame") are often protected under a separate copyright that covers the material added to the public domain work. Unauthorized use of the later-added material would infringe the copyright in the adaptation.

Those involved in running nonprofits, especially tax-exempt charitable or educational organizations, often believe they are entitled to an extensive "fair use" copyright exemption. That is mostly incorrect. A few specific exemptions for nonprofits are provided in the U.S. Copyright Act, but non-profits generally must adhere to the same copyright laws as for-profits when using copyrighted works.

When intellectual property is created by employees, vendors, or even volunteers, the organization that expects to own or exclusively exploit the work product must ensure that intellectual property ownership and use issues are appropriately addressed in contracts. For example, an organization engaging a researcher to write a manual likely expects to own the copyright or at least the exclusive right to publish the manual. But unless copyright is expressly assigned or exclusively licensed in writing, the consultant is generally free to adapt, publish and re-license the manual.

An even more surprising example is the company that engages a consultant to develop a computer program, pursuant to a contract that provides detailed specifications for the computer program deliverable but is silent on source code copyright. In that case, the developer owns the copyright and may be able to license the software to its other customers, including competitors of the business that paid for development of the software. The default rules under the Copyright Act, which apply when no written agreement expressly addresses copyright ownership or exclusive license rights, give specific and often unanticipated rights to the creators of commissioned works.

In most instances, the copyright owner is the actual creator or "author" of the work. The person who writes computer source code owns the copyright in the code unless it is created by (a) an employee within the scope of his or her employment, or (b) an independent contractor pursuant to a written contract that specifically assigns copyright to the commissioning party. If an employee is hired to write computer code, the employer automatically owns the computer code as a work-made-for-hire and is considered the "author" of those works under U.S. copyright law. If a contractor writes the code, the copyright must be expressly assigned in writing, or the most that is conveyed is an implied license, the scope of which may be subject to debate.

When copyrightable work is created outside the scope of employment, such as when an employee who is hired to write marketing copy writes a novel on weekends, the work is not work-made-for-hire for the employer. Sometimes determining what is "within the scope of employment" is trickier. Take the bookkeeper who develops accounting software at home. If technically not a work-made-for-hire, the employer can acquire copyright ownership only by written assignment.

Attention to the legal requirements for acquisition of copyright is especially important when dealing with independent contractors. Frequently misunderstood is the term of art, "work-made-for-hire." Under U.S. Copyright law, except for nine specific categories of works (a contribution to a collective work; part of an audiovisual work; a translation; a supplementary work; a compilation; an instructional text; a test; answer material for a test, or an atlas), works prepared by independent contractors are not works-made-for-hire. Unless expressly assigned in writing, the copyright for a commissioned work that is not in one of the nine statutory categories remains with the creator.

For works falling within the nine statutory categories, copyright can be acquired by assignment or as work-made-for-hire, but express words of assignment (or words designating the commissioned work as a work-made-for-hire), must appear in a signed writing. This aspect of the U.S. Copyright Act, which denies automatic acquisition of copyright in commissioned works and requires express words of assignment, or work-made-for-hire designation for certain categories of works, can lead to significant problems.

When intellectual property is created by employees, vendors, or volunteers, the organization that expects to own or exclusively exploit the work product must ensure that intellectual property ownership and use issues are appropriately addressed in contracts. Even though U.S. copyright law provides that works created by employees within the scope of employment are automatically owned by the employer as works-made-for-hire, intellectual property provisions in employment contracts can be important in avoiding debates over "scope of employment." The rules are different under U.S. patent law, so if patentable inventions are anticipated, it is even more important to include intellectual property assignment provisions in employment agreements.

To avoid infringement, the best practice is to evaluate rights clearance issues early, before production costs are incurred. Securing rights, permissions and licenses before production commences is almost always less costly than the alternative of responding to an infringement claim or negotiating a license from the position of infringer.