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Intellectual Property and Engaging Independent Contractors: Who Owns What?

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Working with Independent Contractors can be an advantageous option for many businesses striving to remain financially prosperous and relevant in the fast-paced and talent-driven culture that dominates both the national and international business scene. The rapid growth of contingent worker engagements over traditional “employment” and its popularity among both independent contractors and managers alike, has given rise to various employment law issues, as well as worker misclassification concerns. Appropriate classification, though, is not the only risk that buyers face. Intellectual property concerns should also be addressed any time a business engages with an Independent Contractor to create, develop, or deliver a product, idea, or service for their business.

Intellectual property rights are intangible rights protecting the products of human intelligence and creation. Intellectual property rights include copyright, patents, and trademarks. These rights allow an inventor or creator the right to exclude others from making, using, or selling an invention or creation for limited period of time, or allow the creator the exclusive right to the creation invention.

Intellectual property concerns arise often when utilizing flexible workers, including Independent Contractors, to get work done. Typically, Independent Contractors are in business for themselves and have a specialized skill, invention, or creation that is needed by a client company. Independent Contractors often want to ensure that they retain their intellectual property rights that they have developed prior to engaging with a business for a specific project, so that they can continue to use that intellectual property in other engagements with other clients. Businesses often have a competing interest in ensuring that certain intellectual property remains with the business and will not be used to aid a competitor.

A common misconception exists regarding the ownership of intellectual property upon payment for services or deliverables. If you are a business owner and you hire an Independent Contractor to develop some work for your company, you may reason that upon payment for the Independent Contractor’s services/deliverables, the work belongs to your business. You may be wrong, and such a misunderstanding can cost your business financially, or cause serious brand damage. In fact, if you did not obtain a written assignment of copyright ownership, the work that you just paid for, is not exactly your own.

As a best practice, any time a business hires an Independent Contractor to perform work of any kind, the business should require a written assignment of the ownership to the business. This written assignment can be a brief clause located within the Independent Contractor Agreement. Without this assignment, the work that the Independent Contractor develops will belong to the Independent Contractor, regardless of whether the Independent Contractor was compensated for that work/product/deliverable.

Depending on the type of service/deliverable, it may be an industry standard for the certain Independent Contractors to retain the right to use the work they develop. For example, most freelance writers, photographers, and designers create digital portfolios, blog posts, websites, and social media accounts, through which they market their services utilizing their work product. This could possibly contain your company name, logo, website design, etc. It is best practice to always outline in writing the limits that you as a business owner wish to set regarding the use of the work for which you commissioned an Independent Contractor. Although you as a business owner may not be alarmed if a freelance designer uses the logo they designed for your company on their own website, you may be significantly upset if a software coder uses the code he developed for your specific software to develop software for a competitor. In the case of the software coder, overlooking the importance of a licensing or assignment clause may cause irreparable harm to a business.

Often, Independent Contractors will request to retain certain intellectual property before signing an Agreement. Sometimes, this request is granted by our clients. For example, if an Independent Contractor has developed a method by which he will perform the work that he does not wish to become the Intellectual Property of the business when the assignment is complete, the Independent Contractor will request that the while the finished work will be the property of the business, the method will remain the intellectual property of the Independent Contractor. This can be considered and the intellectual property the Independent Contractor wishes to retain can be called out in writing as an addendum to the Agreement. It is always best practice for all of the parties to have mutual understanding of who owns what, and the most efficient and effective way in which to accomplish that is to put everything in writing.

The importance of the Independent Contractor Agreement is paramount when it comes to intellectual property concerns. It advisable that an Agreement is put in place before before any work has begun, regardless of the urgency of the assignment. If, for example, the Independent Contractor you have engaged has already started working without an agreement in place, all of the Intellectual Property rights in the work that the Independent Contractor had accomplished prior to the execution of the Agreement will belong to the Independent Contractor. This could be a fatal mistake for your business.

Engaging with flexible workers can give rise to more concerns than just worker misclassification. Having a robust understanding of these issues is particularly important when dealing with sophisticated businesspeople and legal departments which have the best interest of their own business in mind. At Synergy Services, our business is focused on engaging independent consultants on behalf of the clients who refer them to us. Striking a balance between protecting our clients and remaining solutions-oriented for each individual Independent Contractor is of the utmost importance to us. The extensive knowledge of Independent Contractor engagements and dedicated customer service that TalentWave offers to each Independent Contractor engaging with our client can create long-lasting and productive relationships with the most creative and sought-after talent in a particular business field.

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