Do I own intellectual property created by independent contractors and consultants I engage?

While an employer owns intellectual property created by employees in the course of employment, the same rule does not apply when engaging a contractor or consultant.

In the absence of a contract to the contrary, a contractor or consultant will own the intellectual property that the contractor or consultant creates.

If the agreement by which a contractor or consultant is engaged is silent about the ownership of intellectual property, at best the law will imply a licence from the contractor to you, to enable you to use the intellectual property created by the contractor or consultant.

But you will not own that intellectual property.

When you engage a contractor or consultant, and you expect to own the intellectual property arising from the engagement, you must expressly provide for this in the engagement agreement.

How far should ownership of intellectual property be claimed in a contractor's agreement?

Some intellectual property created by a contractor in the course of an engagement, or included in what is delivered to you, will be the contractor's 'tools of trade' or other pre-existing intellectual property in which the contractor will expect to retain ownership.

Example

You contract a software developer to write a new computer program for you.

The software developer has a library of utilities and tools, which are computer programs used to build a new application. Examples are tools to allocate a date and time to a database entry, or a tool that will generate a specific type of report with particular characteristics.

These computer programs are 'tools of trade' for the software developer, which the software developer has developed to be efficient and more competitive, and which the software developer includes repeatedly in computer applications that are custom written for the developer's clients.

The computer program that is delivered to you may contain these 'tools of trade' repeatedly used by the software developer.

If the software developer transferred ownership of the copyright in the code for these 'tools of trade' to you, the software developer would be unable to re-use those tools of trade for later projects.

Or, if the software developer had previously transferred ownership of the copyright in the code for these 'tools of trade' to a previous client, the software developer would be delivering to you a computer program that infringed the copyright of the previous client.

Where this is legitimately the case, the contractor's agreement should not provide for ownership of all intellectual property to be transferred to you.

Instead, the contractor's agreement should make a distinction between the following:

  1. The contractor's intellectual property that is in the nature of a 'tool of trade'. Ownership of this 'tool of trade' intellectual property should be retained by the contractor.
    However, the contractor must grant a licence to you to enable you to use that 'tool of trade' intellectual property to the extent required for you to be able to use your new intellectual property without infringement.
    This licence should be non-exclusive, not require any further payment, be irrevocable, and be able to be sub-licensed.
  2. The new intellectual property arising in the course of the contractor's engagement, that is, all the intellectual property created by the contractor for you, other than 'tool of trade' intellectual property.
    This new intellectual property should be owned by you.

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