New Case Protects Businesses’ Copyrights in Employee-Generated Content

Posted by Edward Sharkey on Mon, 11/26/2012 - 05:00

A lot of businesses create content that they want to protect by copyright. This includes designers, architects, software developers, consultants, retailers, and publishers. In a recent decision issued by the 9th Circuit Court of Appeals, the court was asked to rule on complicated questions regarding the ownership of copyrights to software created by a business's employee.

In an opinion favorable to business, the court held that, under the Copyright Act, “absent a written agreement to the contrary, the employer is the author of a work made for hire.”

In 2001, a computer programmer was hired by a fledgling auto parts website. He added a new feature to a software program he created prior to his employment. The new feature facilitated “drop-shipping,” which was instrumental in the website’s growth.

In 2006, a larger auto parts company purchased the site, including its intellectual property and software. After the sale, the computer programmer, along with most of the other employees of the original website, took a job at the new parent company, where he made more modifications to his software.

The programmer left the company in 2008, and later wrote a similar program for use by a new, competing site. The parent company sued, arguing that it owned the copyright to the modified software.

The 9th Circuit ruled that the modifications to the software belong to the parent company if they were made “within the scope of [the programmer’s] employment.” The 9th Circuit adopted a three-part test – already in place in the 4th Circuit, of which Maryland is a part – to make this determination. Under this test, work is made within the scope of employment if it:

• is of the kind the employee is employed to perform;
• occurs substantially within the authorized time and space limits; and
• is actuated, at least in part, by a purpose to serve the employer.

This case will be sent back to the trial court for more proceedings to determine whether the facts of the case satisfy this test.

Of course, businesses can protect themselves from this uncertainty by drafting employment contracts stating that they own the copyright to work created by their employees. This case serves as a reminder that businesses should do so, especially when the copyright is important to their success.

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