SI Review: September 2013

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Benefit of Counsel: Whose Property Is It, Anyway?

Ownership of intellectual property created by ICs has its own set of rules

By Jessica Jacob

When it comes to independent contractors (ICs), most staffing companies and their clients worry about making sure they are classified properly — that is, making sure that those workers paid on a 1099 or “corp-to-corp” basis are bona fide ICs.

Most companies forget, though, that ICs are quite different from employees in other respects too, among them, the subject of intellectual property. For the most part, companies enjoy automatic ownership of work created by their W-2 employees during work hours and on work premises. The same isn’t true for ICs, however.

Check the Contract

Ownership by your company (and in turn, your clients) of any work completed by or intellectual property created by an IC needs to be documented and formalized in contract(s) between your company and the IC (or the IC’s legal entity, if applicable). Work-for-hire language is often not enough, particularly if the IC is working on anything that has, will or could be patented. That’s because work-for-hire language is specifically applicable to the copyright context. So in the context of patentable work, a proprietary inventions and assignment clause or separate agreement would be needed to ensure ownership.

There are other unique issues when ICs become involved with patents, such as participating in the United States Patent and Trademark Office process.

Proper contracts with the IC are only one part of the process for staffing firms. Your client likely has very specific requirements in its staffing agency contracts regarding ownership and assignment of the work product created by staffing agency workers, regardless of whether that worker is paid on a 1099 or a W-2. This may require the collection of client-specific documents regarding intellectual property, which may be agreements between the staffing agency and the worker or between the worker and the client company directly.

When evaluating your current contracts, consider the following:

  • Does your current independent contractor agreement (and/or employment agreement) contain language requiring the worker to assign the rights to all work created by them during the length of their assignment to you and/or your client company?
  • Do you have a proprietary inventions and assignments clause or separate agreement that requires the worker to detail his or her prior inventions, agree to assign all inventions created to you and/ or your client company and assist in the future assignment of inventions, including cooperation with the Patent and Trademark Office?
  • Do your client contracts contain specific requirements for agreements with independent contractors and/or W-2 workers? Are you complying with these requirements?

Processes Matter

Keep in mind that proper contracts are often not enough. The onboarding and offboarding processes for ICs should take into account the sensitivity of your company’s (and your client’s) intellectual property. You may want to conduct background checks on ICs working on especially sensitive projects. You may also want to limit equipment, physical site and systems access.

Pay close attention to your onboarding and offboarding procedures to ensure your and your client’s intellectual property is protected. When terminating an IC, make sure you have a process in place to ensure all access to the client’s systems and premises is terminated and any equipment assigned to them is returned as well. This step in the offboarding process may be the staffing agency’s legal responsibility under its agreement with the client company, so failing to create a process with each client to ensure that these steps are completed properly may result in costly legal liability for the staffing agency.

Jessica Jacob is vice president and corporate counsel for Secure Talent. She can be reached at jjacob@securetalent.com

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