This is an equally important question for nonprofits and for-profits but we have noticed nonprofits are particularly prone to failing to secure their ownership over copyrights in commissioned works. The ownership of commissioned works is determined under the Copyright Act and the Work Made for Hire Doctrine.
The “Work Made for Hire Doctrine” maintains that an employer will own all exclusive rights to the work made by employees. However, when commissioning works from independent contractors, additional steps need to be taken to ensure the employer obtains full rights to the work.
The “Work Made for Hire Doctrine” started in the courts and was later codified by the Copyright Act. The Copyright Act defined the word “author” as including “an employer in the case of works made for hire.” Under the Copyright Act, an employer may claim to be the “author” of a work under one of two situations as follows:
- the work is prepared by an employee within the scope of the employee’s employment; or
- an independent contractor and employer agree in writing that the work created by the independent contractor shall be considered a “work made for hire”.
If the creator of the work is not an employee, three additional requirements must be satisfied in order for the hiring party to own the original work. An original must comply with these three requirements; otherwise a “work made for hire” provision in an agreement does not always result in a work becoming “for hire.” The requirements are:
- prior to the commencement of the work, the parties must agree in writing that the work shall be considered a “work for hire”;
- the work must have been “specially ordered” or “commissioned” by the employer; and
- the work must fall within at least one of nine statutorily mandated categories of commissioned works listed in the Copyright Act. The nine categories include:
- using the work as a contribution to a collective work,
- as a part of a motion picture or other audiovisual work,
- as a translation,
- as a supplementary work,
- as a compilation,
- as an instructional text,
- as a test,
- as answer material for a test, or
- as an atlas.
Therefore, to determine who owns a commissioned work, an employer must first determine whether the creator of the work is an employee or an independent contractor. Generally, if the creator of the work is an employee, there is a presumption that the employer owns the copyright. If the creator of the work is an independent contractor, the presumption is that the independent contractor owns the copyright unless there is a work made for hire agreement and the work falls into one of the nine categories of commissioned works.
The key case on this issue is a 1989 U.S. Supreme Court case involving a nonprofit employer that commissioned a sculpture. Community for Creative Non-Violence v. Reid, 490 U.S. 730 (1989 ) (hereafter, “CCNV”). There, the Court held that the sculptor was an independent contractor and not an employee. Since no written agreement between the parties existed and the sculptural works did not fall within one of the nine specific categories of “commissioned” works listed in the Copyright Act, the sculptor was determined to own the copyright.
In making the determination that the sculptor was an independent contractor, the Court examined the common law agency principles, which include:
- the hiring party’s right to control the manner and means of creation
- who provided the materials and tools
- the skill required by the hired person
- the location of the work
- the length of the relationship between the parties
- how the hired party was paid
- who hired and paid assistants
- whether the work is part of the regular business of the hired party
- the tax treatment of the hired party
Based upon the holding in CCNV, independent contractors hired to produce work do not necessarily give up their copyrights in the work. Therefore, nonprofits hiring artists, authors, technical writers, designers, website developers, programmers, and others need to ensure they take steps to secure the copyright in the work if that is their intention. Alternatively, by permitting the creator of the work to retain the copyright, nonprofits may be able to negotiate a lower price for the work.
Where a nonprofit commissions work for which it intends to retain the copyright, it should enter into a Work Made for Hire Agreement with the independent contractor. The agreement should state that the work created by the independent contractor is considered a “work made for hire.” The agreement should also include a fall back clause that if the work does not qualify as a “work made for hire,” the nonprofit may obtain the exclusive rights to the work created through an assignment.
Ellis Carter is a nonprofit lawyer licensed to practice in Washington and Arizona. Ellis advises tax-exempt clients on federal tax matters nationwide.