What’s the solution? There’s always the most traditional and perhaps the most primitive solution: Lock up the idea. Meaning: Do everything you can to make sure that anything that anyone does for you as a developer, contractor, employee, business partner, vendor or whatever is owned by you or your new company.

And that can certainly involve “work for hire” and similar agreements, but it also involves noncompete agreements. Or in other words, “I own everything, but just to be clear, in case you think that I don’t own everything, don’t even think of going to one of my competitors or opening up your own shop across the street.”

How sweet.

Actually, putting aside the quaintness (and crassness?) of that approach, its bigger problem is a dependence on contracts rather than trust. No, that’s not quite right – contracts are fine, but they miss the point. Reliance on contracts ignores key realities of how innovation happens.

And in certain rather important technology locales in the United States (READ: California), it also ignores the law. In California, for example, courts have routinely refused to enforce noncompetition agreements.

To the first point: Innovation is collaborative. Look no further than the invention of the telephone, which as everyone knows was invented by Alexander Graham Bell. Or … was it? Well, Bell did file the first successful (and successfully defended) patent for the telephone. But as Malcolm Gladwell wrote several years ago in The New Yorker,

[Elisha] Gray was working on the telephone at the same time that Bell was. In fact, the two filed notice with the Patent Office in Washington, DC, on the same day – February 14, 1876. Bell went on to make telephones with the company that later became AT&T. Gray went on to make telephones in partnership with Western Union and Thomas Edison, and – until Gray’s team was forced to settle a lawsuit with Bell’s company – the general consensus was that Gray and Edison’s telephone was better than Bell’s telephone.

Gladwell’s story about Bell and Gray and the telephone is an anecdote to paint the scene for an “invention session” organized by Nathan Myhrvold, formerly research director at Microsoft. Myhrvold’s idea was the innovation could by organized and “fabricated” (in a not-quite fair characterization) through modeling on the lesson of the telephone invention controversy: Namely, innovation could be – is – collaborative.

Which brings us to present-day California: What really happens if a noncompete is unenforceable? This week’s Washington Post published a fascinating story on Silicon Valley’s “culture of cooperation”. (“In a cutthroat world, some Web giants thrive by cooperating”, Washington Post, Saturday February 19, 2011.)

Emblematic of the view is that of Google’s soon-to-be former CEO Eric Schmidt, quoted by the Post from a Google blog post saying “How do you be big without being evil? We don’t trap end users. So if you don’t like Google, if for whatever reason we do a bad job for you, we make it easy for you to move to our competitor.”

The Post goes on to profile some of the more obvious West Coast tech giants, including (in addition to Google) Microsoft, Twitter, Facebook and Apple. Apple is presented as the counter example to the culture of cooperation, of course, with CEO Steve Jobs recently quoted saying “Open systems don’t always win.”

And yet, that one quote is really the extent of the Post story’s Apple bashing, with an insightful discussion of what works for different companies and cultures.

The California story – and the history behind the story – began to accelerate in the 1990s when California courts refused to enforce noncompetition agreements, which particularly affected the dot-com companies of Silicon Valley seeking to lock up talent and ideas. Talent mixed and mingled, traveling wide and far, as did ideas and, ultimately, innovation. The Post cautions that Google’s self-promoted reputation for open-system may be significant and influential, but it is also limited to services whose viral promotion drives traffic for Google’s core search advertising business. And Google search does not participate in the same open-system practice.

On the other hand, Gladwell’s and Myhrvold’s point about the nature of technical innovation seems to buttress policy support for the courts’ disdain for noncompetes. The gray area involves what constitutes “general knowledge, skills, techniques and learning”, which this more expansive view of innovation suggests should never be bottled up. It is not always easy to distinguish general knowledge from company-specific ideas, facts and techniques.

Noncompetes (where enforceable) are often used to get around this problem by simply saying, “You can’t work for our competitors. Period.” Which left Hewlett-Packard having to challenge former CEO Mark Hurd’s move to Oracle based on claimed breaches of confidentiality commitments, rather than noncompete. Hard to do.

According to the AP, the student, Tony Brown, was also given the celebrity treatment by Apple and wooed for technology jobs by Google and other companies.

Ultimately, Missouri backed down, but not before overhauling the University’s technology transfer policies, at least as they relate to student development and ownership of intellectual property.  In this case, “Inventions” and copyrights that might be considered “work-for-hire”.

Here’s the interesting issue: Brown, now a graduate student at the University of Missouri’s School of Journalism, was not then and is not now an employee or contracted researcher tied to the University. He was not a grant-receiving researcher or graduate student, and he was not participating in a traditional science or other technology “lab” environment.

It’s not clear from the reports whether he was receiving student aid, although aid was not a part of the University’s argument for its rights. In any event, under the University’s “Collected Rules and Regulations” receipt of student aid does not by itself cause a recipient to be deemed an “employee” of the University for IP ownership purposes.

Rather, Missouri argued that as an enrolled student at the University, developing the technology in a University class and presumably using University resources to do so, the University had a valid ownership claim to the intellectual property.

The AP story notes that the class professor had no involvement in the development of the app. And there was sufficient ambiguity in the relationship between Brown and the classwork itself – as well as, evidently, ambiguity in the applicability of the school’s IP policy to student work – to throw doubt into the strength of Missouri’s position.

Not surprisingly, Missouri modified its IP policies. But perhaps surprisingly, the changes were somewhat liberalizing.

Two particular provisions clarify that the University will not claim rights to non-“employee” student work when …

The Invention … was developed by a student as part of a University class project using no greater University resources than those generally available to all other students within the class or than those available to the student as part of his/her enrollment with the University.

Or

The Invention … was developed by a student on his/her own free time, outside of any University class or sponsored activity, and using no greater University resources than those generally available to all other students as part of their enrollment with the University.

The key does seem to be the “using no greater University resources than those generally available to all other students” etc. language.

AP went on to cite Yale and Carnegie Mellon as leaders in the trend to create clarity so as, presumably, to make themselves more inventor- and entrepreneur-friendly. “Missouri and some other universities are hoping that giving students more rights, along with other incentives to invent, will make the institution more attractive to young entrepreneurs.”

Interestingly, Missouri’s School of Journalism issued an online press release last April touting another successful app developed by Tony Brown, this time a news aggregator app for Apple’s iPad.

The implication from the release is that Brown’s news app was developed much more collaboratively with the School’s faculty and resources, as well as other student inventors. The further implication, then, is that the University claimed rights in the news app, which may be significant in that, according to the release, a previous Brown news app was “became the fifth highest-rated news application on the iTunes store in the week following its launch”.

For a group that tends to dispute everything even a position that would presumably only side in their own interest, academics too must concede the legal ambiguity of the copyright law’s “work for hire” doctrine when applied to the academic setting.  What is probably not in dispute is, as one commentator describes it, that “Traditionally, it was presumed that educators owned copyrights to academic work they have authored or created.”

True, it was (and is still) assumed, but it was never codified in the Copyright Act and never directly established by caselaw.  That too is not in dispute.  Thus to characterize a theoretical university’s position, on the bare facts of the employment relationship: “Educational institutions … claim an interest in the work and point to the faculty’s use of their resources in its creation.  Institutions also can assert that producing such work is part of the educators’ employment obligation.” (http://ow.ly/18O9A)

To be sure, with exceptions for adjuncts and other guest lecturers, most teachers would be considered employees of their colleges and universities.  It is hard to imagine that most teachers would care to dispute that claim, as evidenced by their benefits eligibility, academic protections and broad use of school resources, among other obvious indicia.

The reality is – or, until recently, was – that none of this really mattered.  Not much was at stake in the pre-online and –distance education days.  In one of the rare but prominent pre-internet era cases addressing the issue at all, an “academic exception” to the copyright work for hire doctrine was acknowledged based both on tradition and policy.  The University of Chicago’s and Federal Judge Richard Posner wrote for the 7th Circuit in Hays v. Sony Corp. of America (847 F.2d 412, 416 (7th Cir. 1988)):

“Although college and university teachers do academic writing as part of their employment responsibilities and use their employer’s paper, copier, secretarial staff, and (often) computer facilities in that writing, the universal assumption and practice was that (in the absence of an explicit agreement as to who had the right to copyright) the right to copyright such writing belonged to the teacher rather than to the college or university.

“Nevertheless it is widely believed that the 1976 Act abolished the teacher exception [citations omitted] – though, if so, probably inadvertently . . . .  To a literalist of statutory interpretation, the conclusion that the Act abolished the exception may seem inescapable . . . .  But considering the havoc that such a conclusion would wreak in the settled practices of academic institutions, the lack of fit between the policy of the work-for-hire doctrine and the conditions of academic production, and the absence of any indication that Congress meant to abolish the teacher exception, we might, if forced to decide the issue, conclude that the exception has survived.”

In any event, a university’s hard-line position on this might only be ‘theoretical’ because, as noted by the Sloan Consortium, “[m]any institutions have created policies that formally recognize the academic exception and have voluntarily given faculty ownership of scholarly and teaching works.”

Any actual kerfuffle over this issue was one of recent making, illustrated by a dispute about ten years ago between Harvard Law School and Harvard law professor member Arthur Miller.  Without permission from Harvard, Miller had contracted with Concord University School of Law to videotape law lectures for use by Concord’s students.  This despite Harvard’s policy prohibiting faculty from outside teaching without permission.  (Miller evidently argued that, since the sessions were videotapes only and not live lectures, he was not technically “teaching” and not thereby violating the Harvard policy.)

As already noted, this issue hardly mattered until the relatively recent rise of the internet and the accompanying explosive commercial growth of online education.  In 2000, for example, the New York Times described this venture involving Williams College:

“Global Education Network, a company founded partly by Herb Allen, the president of the venture-capital firm Allen & Co., has approached Williams and Brown University, among others, with an invitation to contribute course material to a proposed for-profit Web site providing on line liberal arts education for adults.  Officials at Williams have said that the venture could earn the institution upwards of $250,000 per year, per course, for up to 10 courses.”

The looming academic food fight was noted only in parenthetical, discussing a different venture involving the University of Chicago where “Payment to participating professors has not yet been set.”

So, then, there is academic research and publishing tradition, there is copyright “work for hire” doctrine, there is caselaw including from one of the foremost conservative federal judges (and, not incidentally, academic heavy-weight).  There is analogy from patent law and university technology transfer practices, where inventions and discoveries are almost always owned by the institution for which a researcher works.  But there is no “academic exception” to “work for hire” doctrine, leaving faculty and non-faculty researchers and teachers potentially subject to the uncertainties of a fast-changing academic and commercial marketplace.  Academic copyright and research policies have attempted to allay faculty concerns, as have teacher participation in commercial ventures like those described above for Williams and Chicago.

I will write more on this subject shortly.

Significance of “Work Made for Hire”: The significance of a work being deemed “work made for hire” is that the beneficiary of that designation owns full copyright in the work outright and exclusively.  Thus, as between an employee an employer, the employer owns the copyright to any works created by that employee within the scope of his or her employment.  Likewise for a party contracting for the creation of a work from a non-employee.

“Work Made For Hire” and Non-Employees: For a work created by a non-employee to qualify as “work made for hire”, all three of the following criteria must be satisfied:

1. The work must be specially ordered or commissioned. In other words, the thing being contracted for must be something newly created for purposes of the particular transaction at issue, as opposed to sale or license of something already existing.

2. The work must be the subject of a written agreement or other written material, created and signed by both parties prior to beginning the work, stating their mutual intent that the work is to be considered “work made for hire”.

3. The work must fall into one or more of the nine categories enumerated in the Copyright Act, 17 USC §101.  These categories are:

a. A translation;

b. A motion picture contribution or other audiovisual work;

c. A collective work contribution (example: a magazine article, or contribution to an anthology or encyclopedia:

d. An atlas;

e. A compilation;

f.  An instructional text;

g. A test;

h. Answer material for a test; or

i. A supplemental work such as a preface to a book, a foreword, illustration, or musical arrangement.

Disputes as to “work made for hire” arise under several common areas, in particular these:

1. The distinction between an employee and a non-employee or independent contractor.  This issue was addressed in 1989 by the US Supreme Court in Community for Creative Non-Violence v. Reid, 490 U.S. 730 (1989).  A common scenario involves a party who commissioned a work in the absence of a written agreement as to “work made for hire”, arguing that the author or artist was in fact a statutory employee.  An employee might also argue that, while conceding the employee-employer relationship, nonetheless the work was created outside of the scope of the employment relationship.

2. Nonqualification of the relevant work under one or more of the nine categories enumerated in the Copyright Act.  Addressing this point, contracts often have an “belt and suspenders” kind of clause involving language providing that in the event a work is deemed not a “work made for hire” that, nonetheless, the author has agreed to an assignment of the full copyright to the commissioning party.  This is common particularly with software development agreements, since software is clearly not an included category in Section 101 of the Copyright Act.

Copyright Act of 1976:

http://www.copyright.gov/title17/

Other resources:

http://www.developerdotstar.com/mag/articles/daniels_softwarecopyright.html

http://www.metrocorpcounsel.com/current.php?artType=view&artMonth=July&artYear=2009&EntryNo=8329

http://www.theiplawblog.com/archives/-copyright-law-ownership-issues-underlying-the-work-made-for-hire-doctrine.html