Fairly often a contractor will create a customized version of something for a client based on a template: a customized version of a software program, a customized presentation or publication. In that situation, the contractor usually wants to be able to use the template again, but the client wants to feel like they own the work product.

A common way to address this situation is to define terms for the contractor’s previous work product, and for the customized work product. For the previous work product, the contractor grants a license but retains the copyright. For the customized work product, the contractor grants the copyright to the client. That means that the client can use the entire product delivered to them: the previous work product based on the license, and the customized work product based on its copyright ownership. The contractor can only use the previous work product for which it still holds copyright.

The client may feel that they should own the entire work that the are receiving: “Hey, I’m paying for it, don’t I get the copyright?”. But if it incorporates previous or template work of the contractor, that can be more than the contractor is willing to give up, because it will preclude them from re-using their template material — which as part of the whole deliverable work would also be assigned. Because that transfer would eliminate future work for the contractor based on the template, it usually carries a much higher price. Essentially the client would be paying for a higher degree of exclusivity, that no other client will use anything incorporated in the delivered product.

Figuring out how to draft the separation between previous work product and customized work product can sometimes be tricky. Often it is defined by when the part of the work is created: before the contract vs. during the contract. But if the contractor wants to keep part of the work done during the contract (usaully because it has general applicability to the contractor’s business) then it may need to be separated by subject matter, functionality, time and place, or some other manner. Keeping the distinction clear, simple, and understandable is important: terms of art, or vague terms, can sometimes turn out to be sources of dispute later down the road, and may be harder for a decisionmaker (judge or jury) to understand them easily.

* * Please note that nothing within our blog or website is meant to constitute legal advice or constitute advice pursuant to an attorney-client relationship.