I hired a developer and they now claim they have a copyright on the code, how did this happen?

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Chris Barsness represents businesses and startups throughout California. Mr. Barsness has worked as general counsel and chief financial officer for several publicly traded companies which has given him a unique insight into the real world needs of businesses. Visit his firm’s website to learn more.

In this day of a new app being developed every day, how does the company owner or management know who owns the code developed and when they could lose control over it?

Most issues of ownership for software code fall into areas of copyright (a form of intellectual property or IP), since they are usually “written works of authorship” and primarily covered by US copyright law.  Copyright protection provides the author with protection from reproduction by others.  There are times when works can be reproduced without violating a copyright under things such as the “fair-use doctrine,” such as when sample pages from a book are reprinted in a blog with commentary by the blog author about their thoughts or criticisms about what is being said in the book.  The rights for copyright protection are generally given to the original author of the work for long periods of time (anywhere from 70 years to over 120 years depending upon all the facts).  After that amount of time has passed, the work is considered in the public domain and others can copy it without worrying about infringement.

When an existing tech company or startup hires someone as a developer to work for them, they need to be cautious regarding who will own the code the developer is writing.  One of the first questions to be answered is whether the developer was hired as an independent contractor or employee.  Many people think that just because you call them an independent contractor, even in a written contract, or “1099″ them by paying compensation hourly without deducting payroll taxes, the person is, in fact, an independent contractor.  That is not the case for several reasons.  The IRS has its main test for determining what classifies as an independent contractor and they don’t simply look at how you pay them or what you call them.  Their are a number of factors involved such as who determines when they work, where they work, and how they work.  Generally, the more control the company has over them, the more likely they will be an employee under the IRS test.  There are other tests as well, such as in California, employees must be provided workers compensation insurance coverage by their employer.  California tends to go beyond what the IRS requires to impose the added costs and obligation of getting workers comp coverage for what many would consider a contractor.

To continue reading visit Chris’s blog Corporate Attorney Finance Blog.

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