When Copyright Law and the California Labor Laws Conflict 

When hiring an independent contractor to develop content, a specific agreement needs to be in place to ensure the ownership of the Copyright for the work belongs to the employer. In California, the usual rules do not always apply.

The Copyright Law, 17 U.S.C. § 101 et seq., defines a “work made for hire” at https://www.law.cornell.edu/uscode/text/17/101, which is a codification of the U.S. Supreme Court case Community for Creative Non-Violence v. Reid, 490 U.S. 730 (1989).  The Copyright Law (and case law) distinguishes between (a) an employee (in which case a “work made for hire” agreement is NOT required for the employer to own the Copyright) and (b) an independent contractor, in which case a “work made for hire” agreement IS usually required for the employer to own the Copyright.

Another requirement to be a “work made for hire” is that the Content be: “specially commissioned or ordered, meaning it is made at the hiring party’s request for a specific purpose or project and not something the creator made previously.”  

Certainly, a written transfer agreement, signed by both parties, is expressly required.  The written agreement normally must use the magic words “work made for hire” or “work for hire.”  This seems to be confirmed by the United States Copyright Office in its Circular 9 and Circular 30, which were most recently updated in March 2021. On Page 5 of that updated Circular 30, there is a flowchart to assist in the determination of whether a work is a “work made for hire” or not.  Question No. 6 is the critical one:

Did the parties expressly agree that the work shall be considered a “work made for hire”? Yes? Proceed to Question 7. No? The work is not a work made for hire.

Accordingly, if the agreement does not use the magic words “work made for hire” or “work for hire,” then it is not one, and, normally, the independent contractor would retain the rights to the work.

Unfortunately, California Unemployment Insurance Code §686 is designed to turn the otherwise “independent contractor” into a “statutory employee” who is eligible for the normal protections and rights of an “employee” “when the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire, as defined in Section 101 of Title 17 of the United States Code.” 

To be sure, there have been numerous commentators who have warned about the implications of California’s Assembly Bill (AB5), a codification of the California Supreme Court’s unanimous opinion applying the strict “ABC” test for classification of whether one is an “employee” or an “independent contractor.” Dynamex Operations West, Inc. v. Superior Court of Los Angeles, 4 Cal. 5th 903 (2018). AB5 broadens the application of the California Supreme Court’s holding in Dynamex and applies it to the California Unemployment Insurance Code §686 for companies who have “work made for hire” agreements such that the application ends up converting those companies’ otherwise “independent contractors” into “statutory employees” eligible for all sorts of employment benefits because that is the public policy of the State of California. 

Hankin Patent Law, APC routinely drafts Intellectual Property Assignment Agreements and IP Assignment clauses of Employee and/or Independent Contractor Agreements, and HPL also reviews existing Agreements or portions of Agreements that relate solely to the ownership and/or transfer of ownership of newly created Intellectual Property. We provide our clients with the proper information regarding patents, trademark, and copyright ownership issues in relation to employment, contractor, and licensing agreements to clarify who owns what, under what situations.

Now, with this new wrinkle caused by California’s enactment of the Dynamex decision at AB5, it is essential for all companies and content creators to review their existing Employment Agreements and Independent Contractor Agreements to ensure that the language clarifying a transfer of Intellectual Property rights does not inadvertently make the “independent contractor” into a “statutory employee.”

If you need someone to review your contract, or draft a contact Hankin Patent Law, APC today to speak with an experienced copyright lawyer.

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