IP for Start-ups and Entrepreneurs. Part 1: The Importance of Copyrights

Copyright for Start-Ups

Start-up business owners and entrepreneurs must be aware of copyright law.  Of course, entertainment related businesses such as film production companies, authors, publishers, record labels, and artists themselves deal with copyrights regularly.  But all businesses must have a basic understanding of copyright law. Entrepreneurs and their attorneys must recognize copyright issues in the ordinary course of business in order to protect the company from being liable for infringement, while simultaneously safeguarding the company’s own copyrights.

Who owns that photo on your website?

Every time you use a photo, text, music, or image, it is imperative for you and your attorney to have conducted due diligence (research) to ascertain who owns the work. Before using a copyrighted work, you must obtain full ownership through assignment, or, at minimum, a license granting you permission to use work for certain purposes.

This situation frequently arises when using photos or text to build a website, post on a blog, or create marketing and advertising material.  Where did the photos on your website come from?  If you took them yourself, fantastic!  However, if you found them online, you must ensure that the pictures are public domain (read the fine print – sometimes even so-called public domain images have restrictions), or you obtain permission to use the images.  Stock photo sites, such as Getty Images or Shutterstock, may require a fee to use the pictures.  Relying on Google Images to build your website or blog, without determining the authors of the photos, means that you will be exposing yourself and your company to a copyright infringement claim.

If you hired a photographer or had a friend take the pictures, read on…

Independent Contractors and Works for Hire.  Who owns the copyright?  …Are you sure?

Start-up companies and established businesses alike also must exercise caution when hiring independent contractors. Almost always, the independent contractor owns the copyright for any artistic work he or she created while working for you.  The exception:  Works created by independent contractors for certain types of specially commissioned works — if also memorialized in writing as a “work made for hire.”

For example, if you hire a photographer to photograph your employees for their website biographies, the photographer will own the copyright to those pictures and has every right to sell them to third parties and use the photographs for other purposes, unless the photographer executes an assignment agreement transferring all ownership rights to you.

This is true even if you entered into “work for hire” agreement because photographs do not fall within one of the enumerated types of “works made for hire” included in the Copyright Act.

Make sure you consult with a lawyer experienced in copyright law who can prepare documents to transfer copyright ownership to the right party.

Copyright Issues for Tech-Startups

Tech-startups also need to know a few things about copyright law.

“Computer programs” are specifically protected under the Copyright Act, which is one basis for why companies continually struggle with software piracy issues. As with any other copyright, you cannot copy a computer program without the owner’s permission. If you hire developers to write code for your website, app or other computer program, be sure to obtain a copyright assignment assigning all copyrights to your company.  As with photographers, “work for hire” agreements will NOT transfer copyright to you.  If you don’t get an assignment, you don’t own the copyright and the developer could potentially sell the code to a competitor.

The Copyright Act’s “first-sale doctrine” provides that once a work is sold for the first time, the purchaser may then resell that lawfully obtained copy to a third party without permission from the owner. This can get tricky. Most software developers provide, in license agreements that are rarely read by consumers (you usually just click “Agree”), that the software sold to the consumer is licensed, not purchased, with significant restrictions on its use and transferability.

Courts have said that software users are licensees rather than owners when the copyright owner (1) specifies that the user is granted a license; (2) significantly restricts the user’s ability to transfer the software; and (3) imposes notable use restrictions.” See Vernor v. Autodesk Inc., 621 F.3d 1102 (9th Cir. 2010).

The first sale doctrine is now before the U.S. Supreme Court for it to determine whether buyers of foreign copyrighted works may resell them in the United States without the copyright holder’s permission.

Although there is plenty of controversy as to whether or not software should be freely transferable after a lawful first purchase, the license agreement is an effective method, at least in the Ninth Circuit, to restrict the resale of software.

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