"Work Made for Hire: When Is There Contractual Abuse?

It is a form of clause that I suspect many readers of this blog have encountered. The circumstances are as follows: You represent a non-U.S. entity in an employment or development agreement in which copyright may be created by your client. Your client will perform the agreement outside of the U.S. on behalf of a U.S. entity, and your client is asked to execute a form of assignment, either as part of the agreement. The agreement is governed under the law of one of the U.S. states.

The clause typically goes something like this:

The Employee acknowledges that any original works of authorship that are created by the Employee (solely or jointly with others), within the scope of and during the period of the Employee's relationship with the Company, are deemed a "work made for hire", as that term is defined in the United States Copyright Act, and are protected in accordance therewith. To the extent that any such work is not, by operation of law, a work made for hire as aforesaid, the Employee does hereby transfer and assign to the Company, on a world-wide basis, all her right, title and interest therein, including copyright.

To round out the clause, permit me to set out Section 101 of the U.S. copyright law, which defines a “work made for hire” as

"1. a work prepared by an employee within the scope of his or her employment or

2. a work specially ordered or commissioned for use as a contribution to a collective work, as a part of a motion picture or other audiovisual work, as a translation, as a supplementary work, as a compilation, as an instrucitonal text, as a text, as answer material for a test, or as an atlas, if the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire."

I must confess: I simply don't understand such a clause in the context that I have described. Let me ennumerate various reasons for my bewilderment:

1. "A work made for hire clause" under U.S. copyright law deals with authorship, not copyright "protectability"(whatever that term means). The issue of authorship is determined by the national copyright law in which the issue arises (at the most, if appropriate, exercise of choice of law provisions will determine which national copyright law shall apply).

2. Stated otherwise, the governing law (being the law of one of the U.S. states) applies to the construction and performance of the agreement. However, the governing law provision cannot provide which substantive copyright law will apply to the issue of authorship. 

3. The parties cannot ex ante provide in the agreement whether a work will, or will not, constitute "a work made for hire". That determination is made in accordance with the statutory provisions of the U.S. copyright law as construed an applied by the courts. More particularly: 

a. If the work is created by an employee, then the first part of the definition will apply (namely--"a work prepared by an employee within the scope of his or her employment"), as construed by U.S. courts. 

b. If the work is created by a contractor, then the second part of the definition, being a narrow list of ennumerated exceptions, will apply. It is noted that here, unlike in (a), the parties need to execute a written agreement acknowledging the "work made for hire" status. That said, such a requirement only applies when the parties are in a contractor relationship (which is at its core a contractual arrangement) and not an employer-employee relationship, which is governed first and foremost by a combination of fiduciary duty law and statute, and only secondarily by contract law. All of this, of course, is subject to U.S. case law on the subject. 

4. In either case, as a matter of contract, the parties cannot directly override these statutory provisions ex ante. That renders all reference to the statutory meaning of "work made for hire" irelevant as a contractual matter between the parties. One cannot apply U.S. copyright law to the issue of ownership, unless U.S. copyright law other applies to the question of authorship. 

5. At the most, the parties can ex post provide for an assignment of copyright ownership, whereby the party deemed to be the initial author may transfer ownership to another party.

If the foregoing analysis is correct, the question is then asked: why does this type

of clause persist? I have several possible explanations:

1. Analytical error--The employer/contracting party fails to understand the distinction between rights fixed ex ante pursuant to national copyright law and the contractual arrangements reached consensually by the parties with respect to ownership. As a result, it conflates these two different issues within the framework of the clause, resulting in a distorted form of contractual belt and braces. 

2. Inertia--The U.S. party replicates the clause used for an agreement where both parties are American (whether or not the clause is even appropriate here is still an open question--see above) to a situation where the work is created outside of America, without giving sufficient thought to the difference between these two circumstances. 

3. Mea culpa--My analysis above is incorrect, and in fact the clause is appropriate as a matter of both contract law as well as the application of U.S. copyright law to the circumstances.

Thoughts anyone?