This is a question that we encounter fairly frequently, usually when a consultant (artist, business consultant, software engineer) is contracting with a company to provide deliverables (a design, business plans, software).
Often both sides will feel that they should “own” the intellectual property in the work product. The company doesn’t want the consultant to take the work product and sell it to a competitor, and wants to make sure that it can use the work product however the company deems fit. The consultant may often feel personally invested in the work product since they are the ones creating it, and may want to re-use the product — or at least some portion of it — for other projects.
What’s the right solution here? Of course, it depends. Three common factors it depends on are: (1) how critical the IP is to the company; (2) how custom-tailored it is to their business; and (3) whether the consultant feels they are being paid enough for what they are giving up. Let’s take each of those in turn. In a later post, I discuss licensing alternatives that may, in some cases, allow for the parties to come to a compromise between outright ownership by one or the other.
(1) How critical is the IP to the company? When a consultant is creating something that is the absolute secret sauce of the company, it is more likely that the company will absolutely demand IP ownership. For example, with creation of customized software that a business runs on, the company may be willing to pay a greater price to the consultant to make sure that the consultant doesn’t turn around and license it to another competitor. If it is an analysis of the business’s internal functioning, then that’s the sort of thing that the corporation wouldn’t want shared or used anywhere else (and should have protected by trade secret law as well as copyright).
On the other hand, there are circumstances where the consultant will be gathering or creating content that isn’t so specific to the company: a software library that is general in purpose and could be resold to others without endangering the company’s business; general information about an industry; or materials that are incidental to a service that the contractor is providing. In those circumstances, the company and contractor may agree that the contractor can keep the copyright, or at least a license, to the materials.
(2) How custom-tailored is the work to the business? This is somewhat a follow-on to the preceding point, but more from the consultant’s point of view. If a software engineer is writing code that is so specific to the way the company operates (or has written its code in the past), then there really isn’t any point in the software engineer retaining rights in it. For design work that can’t be used anywhere except in the company, then it’s not really worth the contractor demanding rights in it. In these cases, the contractor is more approaching the work as a way to make money for services it is providing, and not looking to build a separate products-based business at the same time.
(3) Does the consultant feel they are being paid enough for what they are giving up? In my last year of college I was putting up a display of photography in a local café, and I asked the photography professor his thoughts on pricing. He replied, “Of course you should look at what other people charge and what seems reasonable, but really the main decision is asking yourself: ‘at what price would I feel after the sale that it is OK, that I will have no regrets letting it go?'”. The converse is if you set the price too high, you may end up regretting that you didn’t sell any of it. I sold a couple of prints, but not all of them. To this day — fifteen year later — I still have another six of those framed prints in my basement that I didn’t sell and wouldn’t have minded selling so I don’t have to lug them around when I move, or push them out of the way when I need to get something else in storage.
Again, this can depend on the business model of the consultant. In general, if there is re-usable content that the consultant is giving up all rights to, that often corresponds to a higher price. Some consultants may simply view what they do as services, with no expectation of re-use. Others may have a mixed services/product model where they want to start out providing services, but eventually shift to a product-based revenue model where they are re-licensing their work product, with little or no additional time investment. This latter kind of consultant may want to resist handing over the copyright to their work, or charge more for it to make up for the loss of potential re-licensing revenue.
* * Please note that nothing within our blog or website is meant to constitute legal advice or constitute advice pursuant to an attorney-client relationship.