United States: Copyright Strategies For Start-Up Companies

Last Updated: October 2 2015
Article by Julia Huston

As a leader of a start-up company, you are probably aware of the importance of protecting your company's innovative products, services and technologies through patent filings.  If you are savvy, you are also aware of the importance of having a trademark and branding strategy as well (see our guide entitled " Trademark Strategies for Start-Up Companies").  Most start-up companies overlook copyright issues, however, and this can create problems down the road.  In this article, we identify the most common traps that we see start-up companies fall into, and provide recommendations for how to avoid them.

Trap for the Unwary #1: Paying Someone to Create Content Does Not Mean That You Own It

One of the most common mistakes companies make in the early stages is to fail to shore up — in writing — ownership rights to content created for the company.  Many companies think that, by hiring someone to write content such as website text, software programs, or training manuals, the company automatically owns that content.  Not true!

The term "work for hire" is one of the most misunderstood terms in copyright law, and it seldom covers anyone but a true employee (i.e., someone who gets a W2 tax form from the employer, as opposed to an independent contractor).

As a general matter, an individual who creates content, by putting an original work of authorship into a tangible medium of expression, owns the copyright in that content at the moment of its creation unless (1) the individual is an employee who creates the work in the scope of his or her employment; or (2) the individual previously signed a written contract acknowledging that the work is a "work for hire" and the work is one of a few categories narrowly defined in the Copyright Act under the definition of "work for hire" (i.e., "a work specially ordered or commissioned for use as a contribution to a collective work, as a part of a motion picture or other audiovisual work, as a translation, as a supplementary work, as a compilation, as an instructional text, as a test, as answer material for a test, or as an atlas").

Thus, very few non-employees will fall into the "work for hire" category.  It is therefore crucially important that such individuals execute written assignments so that the copyrights are transferred to the company.  To the extent that a non-employee content creator is working for the company pursuant to a written contract, that contract can impose upon the independent contractor the obligation to execute copyright assignments, and even give the company the power of attorney to execute such assignments on his or her behalf.

As copyrights can only be transferred in writing, it is important for start-up companies to obtain the necessary written assignments before its independent contractors move on or disappear.

Trap for the Unwary #2: Using Someone Else's Content With Attribution is Not a Defense to Infringement

Although it may be a common practice to use content owned by third parties and attribute it to them, particularly with respect to website images, which can easily be copied and pasted, it is extremely risky to do so without the third party's permission.  Attribution is not a defense to infringement!

Under the Copyright Act, the copyright owner has the exclusive right to reproduce the copyrighted work, prepare derivative works, distribute copies of the copyrighted work, perform the copyrighted work publicly (in the case of literary, musical, dramatic, and choreographic works, pantomimes, and motion pictures and other audiovisual works), display the copyrighted work publicly (in the case of literary, musical, dramatic, and choreographic works, pantomimes, and pictorial, graphic, or sculptural works), and perform the copyrighted work publicly by means of a digital audio transmission (in the case of sound recordings).  If your company is doing any of these things without permission, the company is at risk of copyright infringement regardless of whether there is attribution to the copyright owner as the source of the material.

Therefore, if your company is using a third party's work that is not in the public domain, you should make sure that the company either has permission from the copyright owner (whether express, implied, or through a standard license such as Creative Commons) or that the company's use falls within the copyright fair use doctrine.

Trap for the Unwary #3: "Public Domain" Does Not Mean Anything That You Can Find on the Internet

If a work is in the public domain, it may be freely used and copied by others.  The term "public domain" as used in the Copyright Act is a term of art, however, and the mere act of making a work public (such as by posting it on a blog) does not mean that it is in the public domain.

Determining whether any particular work is in the public domain can be a daunting exercise.  It depends upon a number of factors, including whether and when the work was published, whether copyright registration was obtained and renewed, and whether a copyright notice was used.  Some organizations have created flowcharts that may be used to determine whether a work is in the public domain.

As a general matter, if a work was published before 1923, it is in the public domain.  If not, you should assume that it is still protected by copyright, unless you or your attorneys are willing to undertake the analysis to determine whether the work has entered the public domain.

Trap for the Unwary #4: Fair Use Is Not as Broad as You Think it Is

Many people believe that the copyright fair use doctrine will protect their use of a third party's copyrighted materials as long as they are acting in a "fair" manner, and are not, for example, selling pirated copies.  This is not true.  The fair use doctrine is much more constrained, and is largely focused on promoting socially valuable activities such as teaching, research and criticism.  The use of copyrighted materials to advertise one's own products, for example, often does not fall under the umbrella of fair use.

The Copyright Act provides that "the fair use of a copyrighted work ... for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright. In determining whether the use made of a work in any particular case is a fair use the factors to be considered shall include—

(1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;

(2) the nature of the copyrighted work;

(3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and

(4) the effect of the use upon the potential market for or value of the copyrighted work."

There is a large body of case law addressing what constitutes fair use under the statute, and the question is necessarily fact-specific.  There are very few bright lines in this area.  The fact that the company is a non-profit, for example, may be helpful but is not enough stading alone to establish fair use.  Likewise, the fact that a copyrighted work is used in connection with teaching activities is not sufficient, by itself, to qualify the use as fair in the absence of an analysis of the other factors.

Ultimately, fair use is a defense and does not provide immunity to being sued for copyright infringement.  Caution is therefore in order.  If your business regularly involves using content owned by third parties, you should confer with an attorney to determine whether the fair use doctrine is likely to apply, and obtain recommendations as to what specific steps you can take to increase the chances that it will apply.

Copyright Registration and Notice Strategy

If your start-up company is in the business of content creation, in addition to following the guidelines above, it is important to implement a copyright registration strategy at the outset.  Copyright registrations are relatively inexpensive to obtain, and allow the company to seek statutory damages and attorneys' fees for any infringement commencing after the registration date.

Copyright registrations are also useful because they put your competitors on notice of your intellectual property rights.  This can be valuable if you are seeking copyright protection for documents or materials that your competitors might not otherwise consider proprietary, such as customized forms or user interfaces.

You do not need to obtain a copyright registration to include a copyright notice on your materials, and it is a good idea to use such a notice wherever possible.  The proper form of the notice is the symbol © or the word "Copyright," the year of first publication of the work, and the name of the copyright owner or an abbreviation by which the name can be recognized.

For example: © 2015 Foley Hoag LLP

You should also consider adding whatever other proprietary language may be appropriate, particularly if the distribution of the materials is restricted.

For example:  For use by customers of [company name] only.  Further copying or distribution is strictly prohibited.  For permissions, contact [legal@companyname.com].

Parting Thoughts

Copyright law is not intuitive, and it is easy to misstep.  It is worth spending some time during the early stages of the company's existence to address copyright issues, particularly if the company's business involves using copyrighted materials owned by third parties or the company hires non-employees to create content.  Devoting even a couple of hours to these issues at the outset can protect the company from claims by third parties and position the company to one day enforce its copyrights against competitors and others.

To view Foley Hoag's Trademark and Copyright Law Blog please click here

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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