Many business owners don’t realize this but the classification of your workers is very important. It will impact your tax obligations, who owns their work product, and more.
This is Part 3 (Intellectual Property Issues) of a four part series on hiring employees and contractors. You can learn more in Part 1 (The Differences), Part 2 (Tax Responsibilities), and Part 4 (Other Considerations).
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If you hire someone to create something for you, you probably want to own the intellectual property rights to the creations. If so, then you need to pay special attention to this section.
Generally speaking, your company will own the intellectual property to anything that your employee invents or creates if the work is within their scope of employment, is created on your time, and with your equipment.
Even though that is the default rule, it is always a good idea to have something in writing with your employees to clarify that your company will own their inventions and creations.
Things get a bit more complicated when you hire independent contractors.
Generally speaking, the contractor will own the intellectual property rights to anything they invent or create, even if you pay them.
That’s why it is critical to get an assignment in writing.
For certain creative works, you can designate the works as “works made for hire” in the written agreement to ensure copyright ownership vests in your company. But for all other works (and as a backup measure for works made for hire), you should use an explicit assignment of intellectual property rights in your written contractor agreement.
*This article is very general in nature and does not constitute legal advice.