It is not uncommon for companies to look externally when in need of services outside of the expertise of its organization. Companies frequently look externally for marketing, design and programming services. Contracting for such services can assist in accomplishing important organizational goals without taking on the cost, potential liabilities or administrative burden that might come with hiring an employee with only a limited scope of work. Companies might also be able to contract with entities with particular expertise that could be time-consuming, difficult or impossible to locate in the job market.
It is important to be aware of the protections of the Copyright Act when contracting for services related to the design or creation of works that might fall under its purview, the breadth of which might be surprising. For example, copyright can subsist in artistic works (including paintings, drawings, sculptures and even maps), movies, books, sound recordings, broadcasts and beyond. Copyright can even subsist in software code, among other things.
The Canadian Copyright Act provides that copyright belongs to an employer with respect to works created by its employees during the course of their employment. However, unlike employees, independent contractors retain copyright in creative works authored by them. This divide is critical, as a copyright owner has a great deal of power pursuant to the Copyright Act: they can prevent the use, copying or disclosure of their work, and can obtain damages on a variety of measures for breach.
It can be very difficult to establish ownership of copyright as an “employer” where a company has previously structured its relationship with the author of the work as one of independent contractor and contractee. For example, in one case1, a company was unable to establish that a programmer hired to develop software for an online poker game was an “employee” given that he worked exclusively from home, had been paid without payroll deductions and was not supervised or limited in respect of his schedule or ability to work for other entities. The programmer ceased working with the company when it refused to purchase a development he had created for its poker game. Instead, the programmer absconded with that development, pretended to leave the country, and set up operations in direct competition. Given that he had never been an employee, and had not assigned or licensed his copyright to the company, in the words of the Court:
"…he kept his copyright, he could quite legally improve his product, commercialize it, and reap the benefits."
As this case illustrates, when contracting for the creation or design of something falling under the scope of the Copyright Act’s protections, a company needs to be very careful of the structure of its relationships. Had this company properly implemented an employment relationship with the programmer he would likely have lost his advantageous competitive position altogether. He may even have had to pay damages.
There is no bar to arranging affairs with a contractor such their copyright is assigned to the contracting entity. Accordingly, it is always advisable be proactive in contracting for intellectual property rights to the work product of contractors (and even employees). In fact, the Copyright Act demands that certain steps and formalities are taken for such an assignment to be valid. These steps are all too often overlooked or forgotten, particularly where a business is just embarking on its road to success.
As an example, the Québec Superior Court recently ruled on a case involving two one-time friends involved in the design of the popular ‘app’ game “Extreme Road Trip”.2 After a friendly brainstorming session prior to the game’s creation, the designer of the game received some artwork from a personal friend that he used in the first several iterations of the game. The friend consistently refused payment for the artwork he had provided. That is, the friend refused until the game rocketed to the top of the rankings on the App Store at which point he sought a large portion of the profits. After four years of court proceedings, and in spite of the friend’s multiple refusals of offers of payment and even equity, the Court found that the friend’s copyright had been violated as the right to the use of his artwork had never been formally sold or assigned.
The importance of the formalities of the Copyright Act cannot be understated. There are very few circumstances where a court will uphold an assignment of those rights without a written and signed agreement. Even in the event a court finds an implied license for use of certain works, the author may be able to revoke that assignment at any time. This could provide the author with incredible leverage against a company dependent on their copyright in its operations.
As is often the case, in protecting your company’s copyright, an ounce of prevention is worth a pound of cure.
Cameron Wardell is a lawyer at the Vancouver office of Mathews, Dinsdale & Clark LLP, Canada’s only labour and employment law firm with offices coast-to-coast. Cameron’s practice extends to most aspects of labour and employment law, with a focus on the litigation and resolution of workplace disputes. In addition to his expertise in labour and employment, Cameron studied intellectual property at St. Peter’s College in Oxford.
This article was originally posted by HRVoice.org on May 10, 2017. HRVoice is CPHR BC & Yukon's online industry information center. Founded in 1942, CPHR BC & YK has grown to include more than 5,700 members encompassing CEOs, VPs, directors of HR, HR generalists, HR advisors, consultants, educators, students and small-business owners in BC and the Yukon. CPHR BC & YK propels the HR profession forward by supporting its members with education and advocacy. Find out more at: www.cphrbc.ca.
1 Amusements Wiltron Inc. v. Mainville,  R.J.Q. 1930 (S.C.).
2 Seggie v. Roofdog Games Inc.,  Q.J. No. 16404 (S.C.).