Software Contracting and Legal Matters

The big problem with work for hire as a contractor is that most projects include substantial amounts of code that belongs to frameworks and libraries which the contractor has developed for whatever specialty he typically writes for. When the client insists on copyright transfer (rather than licensing) of all code that is delivered, it means that the code will have to be rewritten from scratch at great time and money cost, or that the contractor will have to lose all his preexisting IP, often developed over decades, which is plainly unacceptable unless he is retiring or cashing out and selling his whole company to someone else.

Most clients understand this. What they really need is a license to the software, which can come with things like the code, a license to modify the code, a license to sell or transfer the code license, etc, but none which deprives the contractor of his cumulative work. Clueless and overreaching lawyers though will often give advice like "only a complete sale of copyright is acceptable", which basically means you're going to be employing clueless inexperienced contractors, dishonest ones who will "sell" you open source stuff they've found on the net, or will be weighed down by the enormous time and money cost of reimplementing everything from scratch. Clauses such as "including but not limited to [work done] during the duration of the Project", we see a contract written not by a lawyer who is simply clueless about development realities, we instead see a bad faith contract that specifically intends to grab ownership of preexisting frameworks and libraries.

I'm a bit concerned about the form of the copyright clause. It says it is creating a "work for hire", but then goes on to clearly describe something that is NOT a "work for hire".

If a work is a "work for hire", the employer IS THE AUTHOR as far as copyright law is concerned. As soon as the work is fixed in a tangible medium of expression (i.e., as soon as the programmer types the code in his editor) the copyright springs into existence, and the owner of that copyright is the employer. See 17 USC 201(b).

The clause in the article talks about the copyright being transferred to the employer after the contractor is paid, and says that before that the copyright is owned by the contractor. In other words, it is NOT a work for hire.

From the discussion in the article, the purpose for this clause is so that if the employer does not pay, the contractor can use copyright law against them. Thus it is clear that the contractor in fact does not wish to create a work for hire situation.

So why use the "work for hire" language? You are just asking for trouble--in a dispute the employer will argue that you intended to create a work for hire situation and that the other language about transferring rights should be tossed out (contract ambiguities generally are interpreted against the drafter).

I don't think they would succeed in this, but why the heck would you want to even give them it as an issue?

You are correct, but there are some gotchas, too.

1. Hopefully you incorporated in your state and actually have the protection, not as a Delaware LLC, which might not help you. Hopefully you paid the yearly fees and did the registration requirements, too.

2. Declaring bankruptcy doesn't just let you walk away. The opponent will get your assets. Did you claim your computer as a deduction? Other side could get that. They can get any corporate assets up to the judgement amount. If you have regular income from licensing agreements they can also get that. And so on.

3. Declaring bankruptcy isn't without its consequences. Senior officers of companies that declare bankruptcy can be prohibited from serving as a senior officer or founder of other/new companies. In some instances it will show up on your personal credit report.

4. Hopefully you don't have a business line of credit that you made a personal guarantee on. Or friends and family loans.

And so on.