Code Ownership: Employee Use in Company Software
In today’s rapidly evolving technological landscape, issues surrounding code ownership have become increasingly relevant. One such situation arises when an employee utilizes their own code within a company’s software. This scenario can give rise to uncertainties and legal complexities regarding who owns the code. In this article, we will explore the factors that come into play when determining code ownership in such circumstances.
Understanding Intellectual Property Rights
Before delving into the specifics of code ownership, it is essential to grasp the concept of intellectual property rights. Intellectual property (IP) refers to intangible creations of the mind, which can include inventions, designs, artistic works, and computer code. IP rights provide legal protection to individuals or entities that create these intangible assets, granting them exclusive rights to use and exploit their creations.
Work for Hire Doctrine
In the context of employment, the concept of “work for hire” plays a crucial role in determining code ownership. The work for hire doctrine states that if an employee creates intellectual property within the scope of their employment, the employer is typically considered the rightful owner of that property. This doctrine is often incorporated into employment contracts, outlining the ownership of intellectual property created by employees during their tenure.
Determining Scope of Employment
To determine whether code created by an employee falls within the scope of their employment, several factors must be considered. These factors may include:
- Employment agreement or contract: The terms and conditions of the employment agreement or contract may specify the ownership of intellectual property created by the employee during their employment.
- Job description and responsibilities: If the employee’s job description explicitly includes software development or coding tasks, the code they create in relation to their role may be considered within the scope of employment.
- Use of company resources: If the employee utilized company resources, such as workstations, software licenses, or proprietary libraries, to develop the code, it strengthens the argument that the code is owned by the employer.
- Confidentiality and noncompete agreements: The existence of confidentiality and noncompete agreements can impact the ownership of code. If the employee has signed agreements that restrict the use or disclosure of the code, it may influence ownership rights.
- Industry norms and practices: The prevailing norms and practices within the industry can also shape the determination of code ownership. Some industries may have established conventions that favor either the employer or the employee in ownership disputes.
Collaborative and Derived Work
In cases where an employee utilizes their own code within a company’s software, there might be complexities related to collaboration and derived work. If the employee’s code forms an integral part of the company’s software and cannot be easily separated or distinguished, it may be challenging to assert ownership over that specific portion of the code.
Resolution and Best Practices
When faced with a situation where an employee has used their own code within company software, it is advisable to take the following steps:
- Review employment agreements: Carefully examine the employment agreement or contract to determine whether it addresses the ownership of intellectual property created by employees.
- Seek legal counsel: Consult with legal professionals experienced in intellectual property and employment law. They can help analyze the specific circumstances and provide guidance on the applicable laws and legal precedents.
- Negotiate and clarify ownership: If the ownership of the code remains ambiguous, it may be necessary to engage in negotiations with the employee to reach a mutually agreeable resolution. This could involve revisiting the terms of the employment agreement or entering into a separate agreement to clarify ownership rights.
- Implement clear policies: To prevent future disputes, it is recommended to establish clear policies and guidelines regarding code ownership, intellectual property, and the use of personal code within company software. These policies should be communicated to all employees and incorporated into employment contracts.
Conclusion
Determining ownership when an employee uses their code in company software can be a complex matter. The specifics of each situation, including employment agreements, job responsibilities, and use of company resources, play a vital role in determining the rightful owner. Seeking legal advice and establishing clear policies can help mitigate potential conflicts and ensure a transparent and fair resolution. By proactively addressing code ownership issues, companies can protect their intellectual property and maintain a harmonious relationship with their employees.
Video Transcript
My Employee Used His Software Code in Our Company. Who Owns the Code Now?
This has become an issue. A number of companies have had employees use their own code in some company software. And what I mean by the employee’s own code is it may have been written by the employee prior to coming into the company. So who owns the code now? Did the employee freely give it to the company, and now the company owns it? Or does the employee still own it? And can the employee tell the company you have to stop using my code if the employee is no longer at the company?
Here is how this works. By the way, it is a copyright analysis. So this is all under copyright law. When the employee first wrote the code, the employee acquired copyright ownership in the code, so the employee has intellectual property rights, the right of ownership of the code. Unless the employee transfers that ownership, the employee keeps it. So let’s say the employee uses the code in the company’s software. That use is called a license. So the employee is allowing the company to use the code. That is called a copyright license. License just means permission to use. So now, the company has a right to use it, but it doesn’t mean the company owns the code.
Let’s say the employee gets fired, and now the employee says, “Hey, by the way, you have to stop using my code, which is somewhere in the company software.” Does the company have to? Well, first off, the company doesn’t own the code. The employee owned it because the employee created that code before joining the company. So the copyright is owned by the employee, but the employee allowed the company to use it. It is what is called an implied license. By putting the code in the company’s software, the employee was performing acts that imply the employee was authorizing use of the code.
How Long Can the Company Use the Code if They Have a License?
So the company has a license to use it, but for how long? That is now a difficult issue because the employee is going to say the company only has a right to use the code as long as the employee is working in the company. The company is going to say, “We have a right to perpetually use this code because the employee was hired to make the software work.” We didn’t even know the employee used this code, or maybe they did, but either way, the employee was fulfilling job responsibilities by making the code work. It would be sabotage to allow the employee to pull that code out now, leaving the company software disabled. Ultimately, I think the company would be likely to prevail if this went to court. In other words, I think a judge would be likely to say the employee does not have a right to withdraw the license for the copyright just because the employee got fired.
It would be a different story if the employee had in writing that the company can use the code as long as the employee is working there. That is a different scenario. But if it was never discussed, I believe a court is likely to conclude that the employee authorized ongoing use of the code by putting it in the company software, and the employee does not have a right to stop the company from using that code now that the employee is terminated.
As you can see, this is messy. And all parties would be better off if they had something in writing. And so whenever an employee is using their own code or phone or computer or laptop or creative work or data, anything that the employee is using that is personal, it makes sense to sit and think about whether should we have an agreement in place about what happens when the employee is no longer here? For example, if the employee is using her phone and she leaves, what happens to the company’s code, email, or data on that phone?
Conclusion
If you found this video helpful and you would like more educational videos like this, feel free to subscribe to this channel. If you have other questions, put them in the comments below. I am Aaron Hall, an attorney for business owners and entrepreneurial companies. You can learn more about me at aaronhall.com. And if you would like to sign up for our free resources go to aaronhall.com/free. It was great to be with you here today.