The value of the invisible: ownership of work-for-hire intellectual property.

• Author: Spendlove, Gretta
• Position: Techknowledge

Patrick Nagel was a freelance artist who produced some 285 paintings published in Playboy magazine. After Nagel's death in 1984, copyrights to the paintings were sold by his estate and copies of the paintings were then marketed, generating $25 million. Playboy sued, claiming it was the sole owner of copyrights in the Nagel paintings because they were "works for hire." The court ruled that some paintings were works for hire and others were not, depending on whether the wording on the checks paid to Nagel created a written work-for-hire contract, and whether the individuals who cashed the checks were authorized by Nagel to enter into that contract.

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Fights over ownership of intellectual property abound. The creator of Batboy sued the owner of Batman, and the alleged owners of Superboy and Superman fought for decades. Facebook creator Mark Zuckerberg has been sued repeatedly by people who claim they own his ideas and pieces of his company.

Fights over ownership of intellectual property are also complicated, often turning, as did the Playboy/Nagel suit, on such esoteric points as what promises are contained in a check legend.

Three areas of IP ownership that often generate controversy for businesspeople are work-for-hire agreements, ownership of patents and licensed rights.

Work for Hire Agreements

The general rule, under U.S. intellectual property (IP) laws, is that the creator of IP owns it. Thus painters, sculptors, graphic designers, advertisers, software engineers and architects continue to own their paintings, logos, jingles, source codes and building plans, unless exceptions to the general rule exist. The biggest exception to the rule involves works for hire. The presumption is that employers own IP that is created by their employees within "the scope of their employment."

If an independent contractor produces IP, the ownership rights remain with the contractor, unless a written work-for-hire agreement is signed. Even then, there are some additional requirements, such as that the work must be "specially ordered or commissioned." Thus, an ad agency can sell a similar logo to another client, or an architect can build the same "custom" house in another part of the city for someone else, unless they are prevented from doing so by a work-for-hire agreement.

Startup businesses often hire freelance Web designers and graphic artists to design the company's website and logo. But many forget to draft and file work-for-hire...