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Learn how to navigate copyright and intellectual property ownership smartly so you own your work, and own your future.


3 Common Copyright & IP Lawsuits Just Waiting to Happen to You & Your Business

Photo Credit: Large copyright sign made of jigsaw puzzle pieces by Horia Varlan used under CC BY 2.0.

Photo Credit: Large copyright sign made of jigsaw puzzle pieces by Horia Varlan used under CC BY 2.0.

The three most common Intellectual Property (IP) themed lawsuits are likely those that center on independent contractor/employee issues, copyright ownership issues and the hijacking of a unique and moneymaking idea.

The issues that create these types of lawsuits tend to crop up again and again for the simple reason that the law protecting the rights of the players is not always intuitive for most people with the result that costly and inadvertent mistakes can easily be made.

The first important legal mine field to know more about is the one that pits the rights of a creative or freelancer against those of an employer.

Part I. Independent Contractor IP Rights v. Employee

Just for a moment pretend that you created this really innovative business and you hired your neighbor’s kid do the programming work for your website. Now that your business has really taken off you are wondering if the kid actually owns the copyright to the code and if he can demand additional payments from you if you continue to use the code. Can he claim he transferred to you only an implied and limited license to use the code? Well, the answer is kind of complicated. Let’s take a look.

Works Made For Hire

For the purposes of copyright ownership an author’s rights may land with the employer of the person creating the work or the person who commissioned the work if a “work for hire” relationship existed between them. The legal doctrine known as “work made-for-hire” shifts copyright ownership rights from the creator of a certain work to his or her employer. Courts will review whether or not the work at issue was made within the scope of the employment situation of the original creator to determine the rights of the parties. This is an example of the mechanism that requires many brilliant scientists employed by huge corporations to turn over any and all rights to their discoveries to their employer.

It is important to note that a work-for-hire relationship can also arise by a contractual agreement made between the parties, but this is true only for works falling into very specific categories. Work for hire agreements concerning all other work that does not fall into a listed category, such as a commissioned work of fine or graphic art, will not similarly be recognized as a work made for hire even if there is a written agreement between the parties.

Copyright Ownership Rights of an Independent Contractor

Copyright ownership vests in the original author of a copyrightable work. In the case of a creative, a freelancer, or an independent contractor, the copyright is owned by him or her unless and until those ownership rights and interests are transferred to another either in whole or in part. A freelancer can transfer full copyright ownership rights to another or he can transfer only a limited license to use the work specifying a limited term of use and limited rights of use.

Thinking back to the earlier scenario where a new business hired the neighbor’s kid to create code for a website and recognizing now that the kid was not a formal business employee but was acting only as an independent contractor we can see that the kid would be considered the original author of the code and as such the owner of the copyright to the code. The rights of the business owner to freely use the code would tend to turn on whether or not the kid validly transferred his copyright interests in the code in full or in part to the business owner. This is where the copyright transfer services offered at Kunvay can really work to protect a business or an individual interest from being hauled into court as the result of copyright infringement lawsuit with a freelancer claiming damages based on a transfer of only an implied and limited license to a use his copyrighted work.

Part II. Full Copyright Ownership v. Limited License to Use

Do you remember that I was telling you in my earlier Kunvay blog entitled, “Copyright 101 for eBook Self-Publishers – What You Need to Know about Copyright & IP Before You Self Publish,” that a copyright ownership is a sort of “bundle of rights”? The means that the author of a copyrightable work, the creator of a work, whether he is an individual, a freelancer or independent contractor, is vested under copyright law with several rights and interests as owner of the copyright to a work.

The “bundle of rights” as provided by federal copyright law gives the creator of a work an exclusive right to control the reproduction, adaptation, publication, performance and display of his work. Authors often transfer all or a specific part of their “bundle of rights” to a publisher, an individual user or an employer under a written contract. A transfer by an author of less than his full bundle of rights is known as a “license” transfer allowing another to use the copyrighted work for a specific purpose and for a limited period of time.

People usually end up in a courtroom with a judge determining the rights of the parties because there is a disagreement as to whether there was a full transfer of copyright, a limited transfer a copyright or no valid transfer of copyright at all based on verbal agreements, written agreements, if any, and the general intentions and understandings of the parties. It is an issue that can become complicated and expensive to defend and to litigate. Kunvay offers a method of transferring copyright interests that seeks to protect people from being pulled into courtroom based on copyright infringement and licensing issues. It seems like a good option to take to protect your project from ending up as an unintended rainmaker for another.

Part III. Protecting Exclusive Ownership Rights in Ideas

Courts are of full of cases where someone is claiming that someone else stole their highly lucrative idea and made millions of dollars with it. There are many cases where an aggrieved individual claims to be the originator, the creator, the author of a unique idea seeking to be awarded a portion of the dollars earned by another through the use of his brilliant flash of genius by an alleged idea hijacker.

How can you protect yourself or your employer from this type of exploitation? Take a look at my Kunvay blog entitled, “What the Winklevoss Twins Can Teach You About Copyright & Intellectual Property Law” for on point information about how to effectively protect your original ideas. I guess we all know that ideas are not copyrightable. However, there are methods that can be used to fully protect important and innovative ideas such as the plot of a television show pilot, a novel way to access undersea treasure and antiquities, a map to reach the treasure, and zillions of other amazing ideas.

The process of protecting an idea is simpler than you may think. It involves buying or drafting a few legally recognizable documents and getting them signed by those people or entities that you choose to share your idea with. The centrally necessary document to protect an idea is called a “non-disclosure agreement,” and another document needed may be an “evaluation agreement.” You may also decide to add an “agreement not to compete” depending in the rule of law in your State. And last, but never least, is taking the option to patent your idea.

An idea is patentable if it is a useful, novel and “not obvious” design or invention that falls into one of four patentable classes, one, a useful process, two, a type of machine, three, a manufacture process, and four, a composition of matter. In addition, any idea presenting a new and useful improvement to an existing useful process, machine, manufacture or composition of matter is similarly patentable.

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About the Author: Christine Varad is the principal writer and editor for Varacolors. She earned her JD in law from New England Law and holds a BFA from Massachusetts College of Art and Design. As an artist and a lawyer she has a long standing interest in Intellectual Property law and protecting the rights and interests of the writers and visual and performing artists the law was designed to protect.

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  • TheInternetGuy

    Sir, you were not ‘forgotten’ out of $1,000, they never intended to pay you in the first place. Think about it, you never knew who the winner was (or if there was one) but you were offered a measly $1,000 on a take-it-or-leave-it basis (who does that?), giving you no further options. That’s incredibly unusual, especially given a 72-hour period to decide?

    When you decided to hand over the IP they probably collected the large sum from whatever company launched the challenge and their job was finished, leaving no reason to actually pay out the fees since you had signed a contract transferring the IP. The hiring company probably has no clue of what happened and this should not reflect negatively on them.

    Sadly, that’s how some businesses are run.

    • Reggie Solomon

      It’s true. I never did find out who the actual grand prize winner was; I wish there had been more transparency around that. It would definitely have improved my confidence in the process.

      The actual IP however was never formally transferred to them because they never followed through with the actual prize award rendering the transfer incomplete. That’s actually, one of the saving graces of the whole experience reflected in point #2 of lessons learned.

      Thanks for chiming in and sharing your thoughts. Much appreciated.

  • Juan Mario Inca

    Really interesting Kunvay, thanks ​!

    Given your interest, I think you’ll be very much interested in this list of emerging Open Innovation research: http://www.openinnovation.eu/07-05-2013/768/

    And in this new research too:

    - The Contours of Crowd Capability
    http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2324637

    Powerful stuff!

  • Will Tennant

    Registering the copyright is required prior to bringing an infringement lawsuit.

    • airtonix

      um no?

      Perhaps you are thinking of trademark or patent.

      Copyright is given the instant you create the work.

      • Will Tennant

        True, But See Copyright Statute Title 17 Section 411 requiring registration prior to bringing lawsuit.

        • John Feminella

          If you’re the author, you don’t need to register beforehand. Otherwise, registration is required. The law is very clear on this — it’s the very first part of the relevant section. See §411:

          **Except for an action brought for a violation of the rights of the author under section 106A (a)** [...] no civil action for infringement of the copyright in any United States work shall be instituted until preregistration or registration of the copyright claim has been made in accordance with this title.

          Then §106A says:

          the author of a work of visual art [...] (1) shall have the right [...] (A) to claim authorship of that work, and [...] (B) to prevent the use of his or her name as the author of any work of visual art which he or she did not create;

          So, in this case, since Mark’s client is ripping off the work and presenting it as his own, registration would not be required since the original author is bringing the suit.

          However, even if you don’t need to register, you may want to do so anyway. That’s because the law requires courts to presume that a plaintiff who has a registered copyright is the holder of that copyright. So a defendant would have to prove that the registration certificate is in error, fraudulent, or otherwise not accurate.

          • Will Tennant

            This is true if you’re claiming a 106A right of attribution or integrity. The famous artist Anish Kapoor, for example, would not appreciate someone taking credit for his work, or suggesting he authored the work of another. However, my comment was with respect to copyright infringement. If Mark’s client is ripping him off by copying or reproducing the work, which is Mark’s exclusive right, then 106 applies. Most of my clients are in the former category and whether it’s a picture or web-design, etc., they’re just looking to get paid for the work they do.

          • Richard_M

            Registration within 90 days of first publication grants the copyright holder the right to recover attorney and court costs. This is what puts teeth into copyright laws. It is true that copyright is given the moment a writer expresses their work. It is also true that not registering within 90 of first publication is not a good business practice.

  • Heather Cuthill

    This is a classic example of why artists should always insist upon a written contract from every client: you’ll get paid, you’ll protect your rights in your own work, and you’ll save yourself the hassle and the costs of trying to get paid through the courts – which may end up losing you money even if you’re successful. Here’s a contract template that is comprehensive and easy to customize for each of your graphic design projects: http://www.megadox.com/d/22.

    • Mo Kane

      Having a written contract is meaningless. Have you heard of breach of contract? If the client is not going to pay because they never intended to, having a piece of paper will not obligate them to do so. If the design work was done for a pitch and the client didn’t get the project, the client may not have the money to pay subcontractors like the designer. Not his fault. See my other post as to what to do next (TL:DR:Nothing).

      • Heather Cuthill

        You can always ask for money up front – either a deposit of 50% of the contract price payable at the time the contract is signed, or the full contract price to be placed in escrow or trust until completion. Clients who intend to honor the contract should not have a problem with that.

        • Mo Kane

          A 50% deposit is an excellent idea. But if the client is going to rip you off, all you are going to get is the 50%. Placing the money in trust requires a cooperating attorney that both sides agree upon and adds cost. The trust department of a bank won’t do this; they would need a trust instrument, etc. I am unaware of any commercial escrow services though this is a good idea as well, can you suggest any?

          • Heather Cuthill

            There are a number of online escrow services, such as Escrow.com. Their fees are typically based on the dollar value of the transaction. It’s the most cost-effective way I know of – a lot cheaper than a lawyer.

  • I’ve been a prayin.

    Why on earth would you do $1000 worth of work without a contract? Of course it’s heinous on the part of the contractee to not pay, but you should do what you can to prevent being taken for a ride.

  • Will Tennant

    (a) Except for an action brought for a violation of the rights of the author under section 106A(a), and subject to the provisions of subsection (b), no civil action for infringement of the copyright in any United States work shall be instituted until preregistration or registration of the copyright claim has been made in accordance with this title. In any case, however, where the deposit, application, and fee required for registration have been delivered to the Copyright Office in proper form and registration has been refused, the applicant is entitled to institute a civil action for infringement if notice thereof, with a copy of the complaint, is served on the Register of Copyrights. The Register may, at his or her option, become a party to the action with respect to the issue of registrability of the copyright claim by entering an appearance within sixty days after such service, but the Register’s failure to become a party shall not deprive the court of jurisdiction to determine that issue.

  • Mo Kane

    So much for the law, what about the reality of the situation? What happens, say, if there was a contract and the client simply refused to pay? What should the artist/designer do? Assume further that the contract was for $1000. You will not get an attorney to represent you in small claims court for less than $250. And that doesn’t include filing fees and subpoena fees. Figure on at least one continuance. And then your attorney will ask for more money for the second hearing. Assume you win. Now you have a judgment. Do you know where the client’s bank account is? Do you have the client’s bank account number? No? Then you have to pay someone to find it. That is not necessarily cheap, either. Can you garnish your client’s bank account? Sure, if you know where it is. But you have to file a separate proceeding. Your attorney will charge extra for that. At an absolute minimum, you’re at $750 in attorneys fees, not including the costs of filing the new case, the costs of service on the bank, etc. And don’t think that even if you get all the numbers right that the bank is going to simply mail you a check. No, they may very well answer and wait for yet another court hearing. Or your client, who may well be a small business like you are, simply lives paycheck to paycheck and there’s not much money in the bank either. Now what? Seize the client’s car? It’s probably a lease. You mean you didn’t get a full financial statement from the client when you started working on the new project? How much time have you spent on this collection effort? And in the meantime, you have opportunity costs because time spent on the lawsuit(s), just like time spent on the original project, is unrecoverable. You could be working on something else. My advice: if the amount of your bill is less than $5000, chalk it up to experience. In the future, insist on a down payment. That’s one way to cover your loss. Tell the client that you will not hesitate to truthfully inform anyone who asks that he has not paid you. This is a somewhat obscure reference, but when relatively small amounts of money are involved, trying to collect on a debt in the United States is like Captain Kirk’s comment on the Kobayashi Maru: the only way you can win is not to play the game.

  • Mo Kane

    For some reasons everyone’s comments seem to be repeated under separate posts. My comments about whether the law protects those who have been swindled for small amounts obviously does not apply to situations such as Winklevoss v. Zukerberg.

    • http://www.kunvay.com/ Kunvay

      Sorry about that Mo. There seems to be a Disqus bug. We’ll get fixed this week. Thanks for the note.

  • mr.t

    What if you worked for a large company as an artist and began working with one of there biggest clients producing original artwork for them wich was being printed on tshirts. Wich was and still is being produced and making lots of profit. You only worked on the clock hourly and left the company after some time. You never signed anything at all stating anything about royalties or copywrites. You have the proof that these are your works. Are you entitled to any royalties or rights about these works of art in the fact these have generated thousands of dollars and you are left pennyless and kicked to the curb?

  • Oliver Gerasimov

    I think that’s the most freelancer risk because most of them worked in a client without written contract. But thanks for sharing this post at least they will know that they have the right to claim their work.

  • Paul Thomas

    As a photographer, I needed exclusive ownership of my work. After some extensive research I found out about this firm called Levy, Levy & Sosa in Miami. I decided to set up a consultation to meet with their attorney and I’m sure glad I did. They assisted me with applying for copyright registration, the process was so simple and they guided me along the way, explaining in ways that were easy to understand. I encourage you to contact them on 1-800-464-5554 or visit their website http://www.trademarklaw101.com/practice-areas/copyright/ to secure your work!

  • Tony

    Can someone tell me the legality of creating a shirt (not for resale) that says something like “Pepsi is Shit”. Would that be illegal if I am not selling it? Thanks in advance.

    • http://www.kunvay.com/ Kunvay

      Hi Tony – Good question. If you created a t-shirt that said “Pepsi is Shit” that would constitute an expression of opinion and would be protected speech. Pepsi wouldn’t like it, but you could sell a shirt with that message. Just be sure not to use the Pepsi logo; that’s where you could get into murky waters.

  • Gerrie7407

    If I decide to print 20 t-shirts for a concert, am I allowed to print the artist logo on it ?
    Example a Justin Bieber logo with a face ? what the legal implications

    • http://www.kunvay.com/ Kunvay

      Gerrie7407 – If you print someone else’s logo on a t-shirt for sale, you would unfortunately be violating the logo owner’s copyright. The legal implications are if the logo owner saw the shirt and was able to trace it back to you or your company, you could be liable for damages. You could take the risk that the logo owner wouldn’t find out given how large the Bieber brand is and the unlikelihood that they’d find you, but you’d be taking a risk.

      Below is an article with a 4-part test to determine “fair use” vs. “copyright theft. http://blog.kunvay.com/copyright-theft-vs-fair-use-how-to-determine-if-your-work-has-been-stolen-or-adopted-for-fair-use-with-a-4-factor-test/