Contracts are hard. Whether it’s for film, music, or to be a programmer … expect a lengthy contract. The contracts all have the same general goal in mind. They want to ensure that the company’s interests are protected and that the boundaries are well defined. But why should you care? And what do you need to look for?
Why do we need contracts?
In most industries, a contract carries with it the intention that a lawyer will review it and provide an opinion that protects both parties. Employment contracts are different. Most of them are “take it or leave it”, with no room for discussion or negotiation. Part of this stems from the fact that the contract may have been written quite a long time ago, with nobody reviewing or understanding it since then. It’s become a formality to be handled. In other cases, it’s because it’s a fair and balanced contract. Those are rare, but they do happen! On the other extreme, the contract is written to be deliberately unfair and unbalanced, designed to find anything profitable you might create and exploit it.
One section of these contracts that is often particularly misunderstood is the copyright clauses. Essentially, these clauses should make sure that it’s clear to both parties who will own any works you’ve created. Because code is a creative endeavor with authorship, this is important. Done correctly, it helps both sides understand the rules. Think about these circumstances and ask yourself who is the owner:
- If it’s created using a computer or software provided by the company
- You crete a graphic using your own computer
- It was developed completely on your personal time
These may seem simple, but they get complicated quickly:
- You update your resume on your work computer. Does the company now own the copyrights to that content and its presentation?
- The graphic was meant to be a placeholder but is now the product logo
- You saw a problem at work, invented a new software solution solve the problem, and built it in your spare time
In most cases, you and your company might have conflicting ideas about who owns what!
What can go wrong
It can definitely get worse. Some companies want to ensure that you create which could be profitable is theirs unless they say otherwise. For the business, this protects their value and ensures that they don’t compete against innovations that originate in-house. Some companies will take this too far, however. In many cases, they assume that employees will not read or question the contract. As an example from one I’ve seen:
Copyrights. During the course of your employment, you may solely or jointly be considered an author of copyrightable material such as writings, including but not limited to computer programs, software, technical data, and reports. With respect to such Works, you agree that the Works shall be:
- Disclosed promptly and fully to the Company;
- Considered “work made for hire” and the sole property of the Company, which will have exclusive rights to copyright throughout the world. You agree to assign all right, title, and interest to such Works to the Company or its nominee…
While it’s easy to assume this was meant to be harmless and focused on protecting what you create for the company, discussions with company lawyers confirmed the intention was to ensure ownership of anything created, inside or outside the company. To that end, I’ll highlight some things:
| Phrase | Meaning |
|---|---|
| During the course of your employment | During the time period when the company is employing you. Notice it is not during the hours of your employment or “in the scope of your work” |
| Copyrightable material | This means anything that is capable of having a copyright. That’s a lot of stuff! |
| Including but not limited to | It’s not just the code. It’s now broadened to include photos, songs, sketches, home movies, and anything else you might create. If you edit a photo, then you’re creating a “derivative work”, which can also get a copyright. This means works from before your employment are potentially at risk as well. They also own your personal emails and have the right to request those from you. This is a very broad scope, but it is made to appear to be more innocuous by giving examples related to work |
| Disclosed promptly | You must report anything you create, even if it’s on personal time. You know that email you sent after signing the contract? You may have just violated your agreement. |
| Sole property of the company | You give up all rights to anything you create |
| Agree to assign all right | And as a condition of your employment, you will give them the ownership of any copyright at no additional cost |
It’s very easy to dismiss these items or assume that it’s being taken too literally and too far. That said, if both sides agree that it is too broad, then there should be no problem limiting the scope to works created for the company. Remember this was created by lawyers at the company’s direction! In truth, those clauses aren’t necessary given that an employer automatically receives the rights to work you create for them on their time and using their resources.
It’s also very easy to dismiss the seriousness of what I’ve presented. Companies can and do pursue court cases for these claims. Quite a few home businesses and startups have been directly impacted by aggressive contracts. It’s not just the current employer you have to worry about, either. Anyone that acquires the company inherits the contracts and can choose to enforce them severely. In other words, make sure you know what you’re getting into before you sign! Lawyer’s are much less expensive when reviewing a contract (and much more expensive if when defend you from a contract you knowingly signed).
The ‘right stuff
The other approach is when a company recognizes that you create content for a living, and that content has value to you. They make it clear that they only own the items you create specifically for the company as part of your work.
By signing this Agreement as a condition of your employment, you agree to the following:
- The company owns any IP that you create as an employee in the scope of your employment, but only if it meets the following conditions: …
- These conditions apply regardless of whether the IP was created on your personal devices or using a Company-provided resource …
- Any IP created prior to working for the company remains your property …
Notice that this takes a more balanced approach. It makes it clear what each side owns, and it gives some benefit of the doubt to the employee. The company owns the work that they hired you to perform, and you own what you create outside of that. In this case, it also recognizes that you may use personal or work devices in both cases. Send a personal email on your work computer? No problem, it’s yours. Use your computer to create a video for the marketing team? The video was for the company during work hours, so they own it. It’s worth also noticing that in addition to narrowing it to being within the scope of employment, it further limits the conditions under which the company owns the works.
Instead of the company demanding all rights unless they tell you otherwise, these kind of contracts narrowly include a set of rights, clearly relinquishing the remainder to you. That’s the way it should be!
BEIPA
One of the first really impressive examples of a good contract that I saw was an open-source legal document from GitHub in 2017. GitHub was one of a handful of companies openly championing “Balanced Employee Intellectual Property Agreements” (BEIPA). In short, they open-sourced a fair IP contract to enable others to follow best practices. You can see the explanation and contract here. It’s a great read and explains in even more depth why these discussions should matter to you and what companies can do about this problem.
That repository shows you a complete IP contract that includes copyright clauses, but which tries to protect both sides and create a mutually beneficial working relationship. It’s worth reading just to see how lawyers can structure these contracts to make them clear, understandable, and cooperative. For new companies, consider this as a starting point. If you’re looking at your first contract in the industry, compare it to this one to understand the differences.
There’s more to know
The law is complex, especially in the US. Even within a single contract, there are multiple types of laws involved which are each a field of specialty within law practices. I lightly touched on IP and copyright law. Both of these are specialized areas of law, with additional specialties within them. In some cases, business lawyers will claim to understand all of the topics; to date I have yet to meet one that actually did. Think of it like working with doctors. While the general practitioner may be able to give you a lot of advice, the brain surgeon is far more specialized and detailed in that specific area. Neither of them are likely to offer much advice if you need a root canal.
If you’re new to the tech space, take the time to learn about the contracts you may have to sign. In addition, start to network withing the legal community to know who can help answer your questions and give you guidance. Even general advice can sometimes save you from making big mistakes.
Hope this gives you a bit of insight into what to look for … and what to run from.