Who owns the internet?

Internet Law: Who owns web development code?

• A non-profit organization has hired a company to design and develop a website. As the leaders of the two groups were friends, a verbal/informal email agreement was reached as to pay rate, but no contract was signed. Over the course of their working relationship, the company has developed a number of small web-based applications for the non-profit organizations. Both the organization and the web company are investigating the possibilties of selling the code to other organizations, but, as no contract was written up or signed, it is not clear who actually owns the rights to the code. At this time, the code is in a form tailored specifically to the organization's website -- it is NOT viable as a standalone product. The primary question is: Who has legal ownership of this code? If no contractual terms are set, does the code by default belong to the one who developed it or to the one who commissioned it? Or to both? Does the answer differ depending on the situations described below? 1a) The organization pays the web company to develop the code into a standalone, marketable form. 1b) The web company does so on its own time, without billing the organization (although the core of the code was developed on the organization's dime). 2) The web company does not develop a standalone product, but instead takes the code from the current organization and establishes contracts with other organizations wherein it will adapt the code for their websites. By the way, the code was developed in Pennsylvania in 2002, although it could, in the future, be sold in any of the 50 states. A good answer will include reference to legal statutes and/or previous court cases. Extra credit for addressing the moral side of this question, i.e. "If the side that ends up owning the code does sell it, does it have a moral (and/or legal) obligation to return some of the profits to the other side? If so, what is a fair amount?" Obviously, this depends to a great extent on personal opinion (or are there industry standards?). One final item -- clearly it behooves both sides to establish a contract. We are in the process of doing so. We would just like to know if there is a legal precedent for this. (Note: this post represents both sides) Thanks in advance for inquiries/answers!

• Answer:

  Hi, NKR-31 ~ Copyrights and Intellectual Property Rights to material developed and used by others can be a hazy area, easily misunderstood by everyone. I'll try to address your questions here so you can get a better idea of who owns what and why. PLEASE NOTE: I am not an attorney licensed to practice law in Pennsyvania or any other state. However, I am self-employed, and my livelihood relies on being cognizant of copyright and intellectual property rights. Likewise, the information offered here is not my interpretation of the law, but is from other learned minds who have already done so and given us their interpretations. ***** You asked: "Who has legal ownership of this code? If no contractual terms are set, does the code by default belong to the one who developed it or to the one who commissioned it? Or to both?" The short answer is that YOU own the rights and copyrights to the program. As the creator of the software, whether or not it can stand alone, and whether or not you created it for that particular client, you are the owner of the software. ***** EXCEPTION TO THE ABOVE: There are two exceptions to the above: 1. If you developed the software as a matter of being an employee of the non-profit organization (NPO), then it becomes work product, and the NPO would own the intellectual property rights to the software; and 2. If you assigned those rights to another person or entity ... IN WRITING ... then they are the owners. ***** EMPLOYEE AND EMPLOYMENT LAW - There are distinct determinants as to whether you are an independent contractor or an 'employee' of an organization. Pennsylvania law generally follows the US Department of Labor's Fair Fair Labor Standards Act. Determining whether or not you are an 'employee' under both laws has to meet provisions provisions for minimum wages and maximum work hours. You are considered to be an 'employee' if you: 1. Work a definite set of hours as prescribed by the employer; 2. The employer directs and supervises your works and provides you the equipment with which to perform your duties. (See: Commonwealth of Pennsylvania - Department of Labor & Industry Wage Payment & Collection Law - http://www.dli.state.pa.us/landi/cwp/view.asp?a=196&Q=65894&landiRNav=| ) (See also: US Department of Labor - Fair Labor Standards Act - Compliance Fact Sheet http://www.dol.gov/dol/compliance/comp-flsa.htm ) Since you do not meet the determinant criteria of being an employee, the copyrights and intellectual property rights belong to you. ***** COPYRIGHT AND INTELLECTUAL PROPERTY RIGHTS A. Copyrights: A copyright is the set of exclusive legal rights authors have over their works for a limited period of time. US Copyrights are principally defined by the federal Copyright Statute. These rights include: - copying the works (including parts of the works), - making derivative works, - distributing the works, and - performing the works (this means showing a movie or playing an audio recording, as well as performing a dramatic work). The author's rights begin when a work is created and do not have to bear a copyright notice. (Works published since March 1, 1989 need not bear a copyright notice to be protected under the federal statute.) Works Governed by Copyright Law Works governed by the copyright law include not only more traditional works of authorship (such as books, photographs, video and sculpture), but also works such as software and databases. Copyrighted works are protected regardless of the medium in which they are created or reproduced; thus, copyright extends to digital works and works transformed into a digital format. (See: Stanford University Libraries - Copyright & Fair Use - http://fairuse.stanford.edu/library/faq.html Electronic Frontier Foundation's Patent, Trademark, and Copyright Archive - http://www.eff.org/IP/ The United States Copyright Law - in all its glory - http://www.loc.gov/copyright/title17/ ) ***** You also asked if the answer would change if the following would apply: "1a) The organization pays the web company to develop the code into a standalone, marketable form. 1b) The web company does so on its own time, without billing the organization (although the core of the code was developed on the organization's dime). 2) The web company does not develop a standalone product, but instead takes the code from the current organization and establishes contracts with other organizations wherein it will adapt the code for their websites." Again, ABSENT the two EXCEPTIONS listed above, you would retain ownership of the copyright and intellectual property rights. The fact that you developed the software for that NPO allows them the license to use it under your agreements, whether verbal or written. If, however, you did not transfer your copyright or your intellectual property rights, you are the owner of the software. ***** You said you were working on an agreement with the NPO for who owns what - while you are hammering out the terms of the agreement, you will definitely want to decide the copyright and intellectual property rights and any transfer of those rights, if any. ***** OTHER INFORMATION SOURCES TO CONSIDER: Having said this and given you the information above, other helpful information and discussions of this complex matter are listed below: 1. Employment Law Information Network - Pennsylvania Wage & Hour http://www.elinfonet.com/stindex/39 2. Final Report from the Working Group on Intellectual Property and the National Information Infrastructure The Clinton Aministration "White Paper" on Intellectual Property http://www.uspto.gov/web/offices/com/doc/ipnii/ 3. Papers by Pamela Samuelson A number of papers on copyright and intellectual property rights by one of the leaders in the field. http://www.sims.berkeley.edu/~pam/papers.html ***** Search Terms Used: Employment Law Copyright Law Intellectual Property Law Pennsylvania Employment Law Pennsylvania Copyright Law Pennsylvania Intellectual Property Law US Employment Law US Copyright Intellectual Property Law ***** I hope this helps answer your questions for now. Prior to entering into an agreement, even if everyone has hammered out what you want to happen ... I highly suggest you consult with an attorney who specializes in copyright and intellectual property law in order to make sure that what you actually put down in writing is what you *really* want to happen. An ounce of prevention now can help avoid a whole lot of "cure" costs later! Good luck in your enterprises, Serenata