Creative agencies are increasingly shrinking the number of in-house or staff creatives and opting to rely on freelancers to perform a multitude of tasks from pitching ideas to sustaining an advertising campaign.
The sluggish economy has stressed many agencies causing those employers to suffer difficulties in covering the cost of maintaining staff employees.
It costs a lot these days to maintain a regular employee on staff (payroll taxes, healthcare, insurance, etc.).
Outsourcing of Freelance Work on the Rise
Some employers hoping to pinch a few nickels have turned to hiring freelancers and specifically designating them workers under agreement or “independent contractors” to function as part-time, intermittent and offsite workers that in truth provide the majority of the agency’s day to day creative needs.
Unfortunately, these employers wrongly conclude that simply claiming an employee is an independent contractor even if he is supplying regular, ongoing and predictable company tasks will relieve an employer of his responsibilities to State and federal taxation authorities.
It will not, and worse, this action could be considered intentional tax fraud.
If they could only see and hear the state and federal agency tax-collecting accountants slowly pursing their lemon-sucking lips into a shape that only slightly resembles a smile. “Penny wise and pound foolish,” they’d sneer in response, “Do these people think we were born yesterday on what? Audit that company.”
Copyright Ownership & Transfer, Employees and Independent Contractors
And if navigating the many potholes and ditches of payroll doesn’t provide enough points of interest for unwary management there is always the very dicey issue of copyright ownership and valid transfer of rights when the contributing creative is no longer considered a staff employee.
Selling a copyright to a client that is not one the seller company actually owns can place that company at significant risk for infringement litigation and related destruction of that company’s good will within the community resulting in the possibility of irreparable injury to the brand.
Fully understanding staff employee and freelancer copyright ownership rights and knowing the safest methods of transferring a copyright in a legally binding matter becomes critical.
Work-for-Hire Opportunities and Limitations
Ownership rights in a copyright vest in the employer of a creative contributor or in the person or business that commissioned a particular work under the legal principal of “work-for-hire.” Work-for-hire shifts the copyright from automatically vesting in the original author of the work to vesting in the employer or the commissioner of that work.
The Copyright Act of 1990 defines a work-for-hire as either:
(1) a work prepared by an employee with the scope of his or her employment, or
(2) as a work specially ordered or commissioned for use as:
(a) a contribution to a collective work
(b) a compilation
(c) a translation
(d) a part of a motion picture or audiovisual work
(e) a supplementary work
(f) instructional text
(g) a test or answer material for a test, or
(h) an atlas
Two parties may not enter into a legally binding work-for-hire agreement concerning work that is not included in one the enumerated categories.
For example, a work-for-hire agreement commissioning a fine art painting would result in an invalid and unenforceable transfer of copyright ownership rights to the commissioning party because fine artwork is not included in any listed category.
That means that if an advertising agency hired a freelance creative to “pitch ideas” which become set down in some sort of picture or writing for client review then copyright ownership in those ideas would fully vest in the creative.
“Pitching ideas” is not included in any of the listed categories and as such does not invoke work-for-hire copyright transfer to a party commissioning the work.
Ideas captured and set down in a graphic or written form are copyrightable.
If exclusive rights to those ideas were subsequently sold to an agency client for a fee without a valid transfer of the creative’s copyright ownership rights then the agency stands at significant risk for becoming a defendant in a copyright infringement lawsuit lodged against it by the creative.
Scope of Employment Limitations
One method of an employee obtaining a copyright is when a work is made within the employee’s scope of employment.
Remember, just because an individual is an employee does not mean that everything that person creates at work will be deemed work-for-hire.
For example if a man is hired as wait staff, and he creates a song while he is working the copyright to that song remains with the man and does not sift to the employer because lyric writing is outside the scope of his employment as a waiter.
Ad and marketing agencies would need to keep a close eye on the validity of copyright interests sold to clients that may have fallen outside the scope of a staff creative’s designated job description and duties in order to avoid the risk of transferring an invalid copyright in the work to a client.
Independent Contractor Copyright
Copyright ownership of creative work completed by an independent contractor will vest in the original author of the work or the independent contractor. There must be a valid transfer of that creative’s copyright interests to an agency before that agency may validly transfer any right in that creative product to a client.
In the absence of a written agreement with the contractor creative specifically transferring his interests in the copyrighted work to another it can be assumed and implied that the copyright remains vested in the creative and that he has merely licensed that use of his work to the agency for a limited time and for a limited purpose.
If the ad agency or the client of the agency begins or continues to using that work for the same or even for other purposes or ad campaigns then the aggrieved creative could successfully lodge claim infringement of his copyright in the work against the agency and the client.
How to Secure a Valid Copyright Transfer
A copyright transfer is an assignment, a mortgage, an exclusive license that can be reassigned by operation of a will, intestate succession or any other written document exchanging all or any of the ownership rights granted by a copyright.
The Copyright Act of 1976 requires that a transfer of a copyright be in writing in order to be valid.
Exceptions to this rule exist such as a transfer by will, intestate succession or in an involuntary transfer in such as a transfer made in connection with a bankruptcy. Generally, however, a valid copyright transfer requires written and signed documentation.
Kunvay simplifies the copyright transfer process for a busy ad and marketing agency and for content creatives by providing a readily-available, online platform for easily transferring copyright interests.
Because you want a better way to avoid copyright infringement and you care about navigating IP and copyright smartly, follow us on Twitter.
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.