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Using independent contractors? Protect your intellectual property rights

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If you use independent contractors to perform design work, make sure your contractor agreement transfers copyrights and other intellectual property rights to you.

Otherwise, if you terminate the arrangement and the worker claims ownership, you may find the independent contractor owns part of your intellectual property.

Recent case: Patrick wrote code for a company that makes computer games. The parties had a rather casual agreement that didn’t stipulate who owned the intellectual property rights and that didn’t set formal terms for payment.

The game Patrick designed made millions of dollars.

Then the company ended its arrangement with Patrick and redesigned the game.

Meanwhile, Patrick had registered the copyright, citing his work on the game and stating that he was its main creator.

He then sued, alleging two theories: 1) that he had been an employee with a contract for 60% of the profits and 2) unjust enrichment. The company argued he’d never been an employee and that it had never signed a formal contract divvying up profits.

The court agreed Patrick wasn’t an employee and that there was no contract for a specific ownership share or profit split. But it also said that Patrick hadn’t signed away his copyrights. It said his case could proceed.

For lack of clear contract language, the company is now at risk of losing the copyrights to its game. (Bubble Pony, et al., v. Facepunch Studios, et al., No. 15-601, DC MN, 2015)

Advice: Ensure that your contracts state that contractors’ output is your property as a work made for hire.

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