Does this sound familiar - you pay a developer a good chunk of money to design your website. You agree on price and pay her in full. You don't have a written contract because since you don't pay her until she's completed the site, you believe a contract is not necessary.

Now let's say that your site becomes huge and all of the sudden the developer you last spoke with two years ago (before you had even posted the site) now sues you for copyright infringement. Depending on all of the circumstances, you may not own the copyright to your own site.

Under copyright law, the general rule is that the person who creates the work is the author of that work. However, if a work is "made for hire," the employer, not the employee, is considered the author.

If the person who created the work is an employee, the business owns the work. If the person who created the work is an independent contractor, that person may own the work unless the parties have executed a written agreement stating that the work performed is "made for hire."

Courts look at several factors to determine whether or not someone is an employee:

1. Control by the employer over the work (e.g., the employer may determine how the work is done, has the work done at the employer's location, and provides equipment or other means to create the work).
   
   
2. Control by employer of the employee (e.g., the employer controls the employee's schedule in creating the work, has the right to have the employee perform other assignments, etc.)
   
   
3. Status and conduct of the employer (e.g., the employer is in business to produce such works, provides the employee with benefits, and/or withholds tax from the employee's payment.)

Remember - these factors are not exhaustive, but demonstrate a regular, salaried employment relationship and it is clear that the work is created within the scope of the employment.

The case of Kirk v. Halter, 188 F.3d 1005, (8th Cir. 1999) demonstrates what happens when the line is not so clear.

Iowa Pedigree, a partnership owned by Ron and Judy Kirk, is in the business of assisting dog breeders and brokers to comply with American Kennel Club (AKC) and United States Department of Agriculture (USDA) licensing and registration requirements. Iowa Pedigree sought to develop computer software that would aid its customers in conforming to these regulations and asked Halter to develop a computer program for Iowa Pedigree to assist dog brokers with AKC and USDA regulations.

Halter agreed and for the next six years worked on a variety of projects for Iowa Pedigree. He developed several computer programs, maintained the computers at Iowa Pedigree, and serviced the software of Iowa Pedigree's clients. In 1996, several customers terminated their relationship with Iowa Pedigree and began receiving services directly from Halter. Iowa Pedigree then sued Halter for copyright infringement (and other causes of action).

The central issue in the case was whether Iowa Pedigree was the sole owner of the copyright to the computer programs. The court determined that Halter was in fact an independent contractor and not an employee and therefore that he was the owner of the computer program and thus not liable for copyright infringement. Here are the factors that the court used to determine that Halter was not an employee:

1. Throughout Halter's relationship with Iowa Pedigree, his pay was reported to the Internal Revenue Service by Iowa Pedigree on form 1099 as payment to an independent contractor.
   
   
2. Halter reported the pay as self-employed income. Iowa Pedigree did not withhold any portion of Halter's pay for income taxes, nor did it withhold social security taxes.
   
   
3. Halter received no medical, retirement, or vacation benefits while working for Iowa Pedigree. Iowa Pedigree's failure to provide employment benefits or withhold any payroll taxes was probative evidence of Halter's status as an independent contractor.
   
   
4. Moreover, Halter received payments on an irregular basis. For example, in August of 1991, he was paid on the 12th, 17th, and 19th, whereas he did not receive any payment from December 19, 1989, to July 11, 1990. Halter did not use a time clock or submit the number of hours he worked to Iowa Pedigree, except in the form of an invoice. This absence of regular, periodic payments is an indicia of independent contractor status.
   
   
5. Throughout his six-year relationship with Iowa Pedigree, Halter continued to engage in computer consulting with other companies, a factor suggesting that he was an independent contractor.
   
   
6. In 1992, Halter hired a second programmer, Dennis Blazek, to work on a particular project. Halter's 1992 tax return shows that payments made to Blazek were reported as subcontractor expenses, a fact indicative of Halter's status as an independent contractor.

Want to avoid this mess? It is very simple - for each independent contractor with whom you have a relationship insist on a written agreement with "work made for hire" clause into it. See an attorney or contact me. Even for employees, especially those who are creating websites, software, art work, etc. for you, you should have a written agreement indicating that such work is a work made for hire pursuant to the Copyright Act. Remember, consult a lawyer. If you attempt to do it yourself, you'll get what you pay for.

Do You Own The Copyright To Your Web Site?