How would a contractor paid a weekly rate by Company X make ownership distinctions between works created for X and works for others?

April 8, 2008 11:19 AM

I've been offered a new contract/consulting job where I would be paid not by the hour or for a specific deliverable, but at a flat weekly rate. Under this arrangement, how might I make intellectual property distinctions between works that will belong to this client, and outside works I may do for myself or others?

This is a new situation for me. Every time I've done contract work before, the arrangement has been either:

(1) We want you to produce a deliverable, and we will give you $N for producing it. When you deliver and we pay you, we have <insert agreed rights here> to the deliverable.
(2) We will pay you $H per hour for time you spend working on things for us. Work produced on time you bill to us is owned by us as a work-for-hire unless otherwise agreed.

Under either arrangement, it's easy to make distinctions between ownership of work done for multiple clients. Under this new-to-me weekly-rate potential arrangement with Company X, there are no specific deliverables defined yet, just an expectation of minimum availability for work, and there's no billing by time, so I'm not sure how to handle this specific point.

Company X is in New York, and the agreement they have sent me appears to assign them all rights to my works which "in whole or in part, concern or relate to or are useful in the Company Business" if they're created during the term of the agreement.

Since some of the other projects I work on are potentially related to or useful in any web development project, and since a web application development is what I'll be doing for Company X, it seems to me there's a significant overlapping scope problem here. I'm trying to explore what else to propose that strikes a good faith balance between my interests and theirs.

Note: I realize you may not be a lawyer, and that if you are, you are not my lawyer, and that I am most likely to get the best possible answers to my question by taking it to a lawyer versed in New York employment and creative property law. So I welcome specific recommendations of such lawyers as one type of possible answer to my question.

However, I figure it's also possible there's a few common solutions, or there may be some readers here who've negotiated situations like this before and have come up with agreeable solutions, and I'd love to hear from anybody who feels they have some knowledge to contribute here.

posted by weston to work & money (12 comments total)

Well, hopefully, the projects you work on will still be laid out in writing in advance, right? I would aim for a contract that gave the client ownership (only) of the work which they specified in writing that you were to do for them. (IANAL)
posted by winston at 11:30 AM on April 8

Depending on your level of desperation in acquiring and retaining this job, you should not sign and cross out any inventions clauses in any contracts that purport to give the company rights over your thoughts and notes while under contract to them. Come to an agreement that they can use what you wrote for them without restrictions on your use of the underlying technology and architecture as a work for hire, but there's no reason they should have perpetual rights over some turnkey website authentication function or product display logic that is so generic as to both be reusable and pointless to own.

This would also be a good time to come to an agreement about your use of the specific work that you've done for them so that you aren't back here in a year asking how you should include work done for a company's internal use on your resume, which is asked here a couplefew times a year.
posted by rhizome at 11:55 AM on April 8

What you describe most closely resembles a retainer arrangement, where a client pays you a set monthly fee that assures preferential access to you and the service you provide.

Before I sign on the dotted line, I'd want to get a serious reading of what they anticipate your future workload to be. Such an arrangement can be quite financially beneficial to them if they are planning to bury you with work. Your "per-hour" rate could crash through the floor in such cases.

Additionally, as rhizome points out, you need to carefully scan the contract to make sure they aren't putting their hooks into anything you do, whether specifically ordered by them or not. Definitely have language written into the contract that provides rights to your client only on the final deliverable that they contract with you to provide.
posted by Thorzdad at 12:19 PM on April 8

You say you're a contractor but that's not a decision you or the company gets to make, it's a determination of law. Calling yourself a contractor doesn't make it so.

So your first question should be, when you talk to your lawyer: Am I really a contractor?

That's not an obvious analysis, either. Among other things, control over the work done, who sets the work schedule, how you're paid (!), and where you work are important considerations.

That aside, this part is pretty clear:

appears to assign them all rights to my works which "in whole or in part, concern or relate to or are useful in the Company Business" if they're created during the term of the agreement.

The contract probably also defines what the term of the contract is.

So the simple answer to your question is this: if the contract is as you describe it, there's really nothing you can do to differentiate work for them from work for someone else because, by definition, there is no work for anyone else, they get it all.

I wouldn't sign that contract until you clear it with a lawyer.
posted by toomuchpete at 12:32 PM on April 8

Among other things, control over the work done, who sets the work schedule, how you're paid (!), and where you work are important considerations.

That's interesting -- I've come up against this in discussion of tax issues, but it's interesting to think about how it might effect the IP issues. Does anyone know if it does?

I'll largely control my schedule and place where I work (in fact, I'll be doing most of it from California rather than in NY). Work deadlines may be set by Company X, and there's some expectations about minimum availability. I invoice them for applicable weeks (expected to be most weeks for the term of the contract) and they send payment.
posted by weston at 12:54 PM on April 8

You are not a lawyer and you sound like you don't want to hire one. Why not use the talent of the company's lawyers? Tell them why you have an issue, tell them about the other types of projects you will work on and ask them to craft language which will protect their IP and leave you free to create IP for others. Their lawyer, of course, will have their best interests in mind, not yours, but that won't necessarily prevent him or her from drafting language that might be appropriate here. Without your own lawyer you will be somewhat at a disadvantage in interpreting the language, but probably not that much, especially given the way you have already analyzed this situation.
posted by caddis at 1:17 PM on April 8

I am still a few weeks from my JD and have not passed a bar. I am not a lawyer. This is not legal advice, and my previous suggestion to go see one still stands.

It's interesting to think about how it might effect the IP issues. Does anyone know if it does?

Probably not inherently, but it could. For example, most employees find the boundaries very well defined. When they're in the building, using a company laptop, or working expressly on company business, they're "at work"... any other time, they're not. Absent any language to the contrary, the work they do when they're not "at work" is their own the work they do when they are "at work" is the company's... in most cases, i'd assume that, without specific language someone hiring a contractor gets what they pay for and nothing more.

It seems your problem is determining when you are "at work" and when you're not, though based on the small snippet of language you've given, it doesn't appear to matter. Having not seen the whole contract, I can't answer for certain, but certainly the possibility exists that they could (as you fear) claim anything (and everything) you create while you're under contract.

"Why not use the talent of the company's lawyers?"

To the extent that caddis is suggesting you negotiate, I agree. But you're not using the lawyers, you're telling the company which terms are unacceptable (and why) and they'd use their lawyers to try to find some middle ground. Going directly to legal is bad for a number of reasons. First and foremost: you are not their client and they do not represent your interests. This is no different than the criminal that thinks the DA is his friend. The second reason is that it's probably not going to work anyway, who's really going to say "Yeah, you just chat with legal and figure it out?"

figure out what a short consultation with a contract/employment lawyer would cost (it's typically not as much as you think), and then consider the possible negative consequences of getting screwed here.

A lot of it would depend on the likelihood of picking up more work and the quantity of it.

Also keep in mind that if you go through with this and another job comes up, you could always get specific permission to do the other job (if so, get it in writing), but if this is a likely event, it's probably better to just do it now.
posted by toomuchpete at 1:40 PM on April 8

This sounds like a retainer, and you'll maintain your contractor status if you make that clear. Three things you might consider:

Cap your hours: When I do retainers, I limit the number of hours the client gets each month. If they use up their hours, I charge them an hourly rate for the excess. If they don't use all their hours, too bad for them. Hours don't carry over. This is the same approach that I've seen others use. It will also make more clear that this is not a job and you still control your time.

Use a separate agreement for each project: You might treat the retainer as a master services agreement, and use a shorter letter of agreement for each project. That way, you might be able to draw the IP lines more clearly.

Make very clear this is not a job: It sounds like you're a contractor to me, since you have multiple clients, you control the schedule and location, and the setup really sounds like a retainer more than a job. As a result, the IP is yours until the client pays you in full, and your contract should make that clear. However, it sounds like the client wants to view you as an off-site employee. Making clear that this is a retainer, not a job, will help emphasize that they don't have unlimited access to your time or ideas and you retain the right to do work for other clients at the same time. (A narrowly focused non-compete might be reasonable if it applies only to the duration of the retainer, but I'd try to avoid that, too.)

I wouldn't accept the clause that says the company owns any of your works that "in whole or in part, concern or relate to or are useful in the Company Business." They're hiring you to perform specific work; they don't own your brain. The IP wording should refer to a specific project for that client, not everything you might do during the term of the retainer.

I wouldn't use the client's lawyers. I'd get my own. I think my last contract review was about $300 (done by a junior member of the law firm). It required a brief phone call and a couple of emails and took about a week.

I also wouldn't ask permission to work for other clients. This would encourage the main client to view you as an employee. Protect your contractor status, and you can work with whoever you want without notifying anyone, at least within the limitations imposed by any non-compete you've signed.
posted by PatoPata at 1:54 PM on April 8

You are not a lawyer and you sound like you don't want to hire one.

I'm actually not opposed to the idea, and would happily take specific recommendations of NY lawyers to talk to take the problem to.

Mostly what I'm looking for is potentially useful ways of reigning in the agreement to distinguish between stuff that will belong to me or others, and stuff that will belong to Company X.
posted by weston at 2:04 PM on April 8

I am connected with many NYC lawyers, but frankly they aren't worth it for an individual, at $600 plus per hour rates. When you interview lawyers, make sure you ask how many similar agreements they have worked on. Anything less than a few dozen or so is right out. Many IP lawyers have absolutely pathetic experience in this area. Someone who has handled dozens of these things has a much better sense of what is reasonable and what isn't and will also have the experience to find more creative solutions. Find the ones that do have experience; it isn't that hard.

I still think your best option is to get a first cut from the company, and I am a lawyer up kind of guy. See what they come up with first if you want to save some coin. If the agreement is clear that you are a contractor rather than employee the tables are somewhat in your favor and you can rely upon the language of the agreement to define the ownership situation. Read it carefully. The whole work for hire doctrine is a nightmare for the company, but that does not really help you that much. They need lawyers more than you do on that point. Be careful to narrowly define the rights that the company gets. For something like your area, the key is usually to define the product areas in which the hiring company gets IP rights, to distinguish between a product area and a broad technology area. If you write a web page for toothpaste, you should be able to adapt that same code for motor oil, etc. Putting some examples of interpretation into the agreement can be helpful sometimes, especially if you have specific concerns and these examples address them - you get toothpaste, I get motor oil and other unrelated products. Since you have not been specific about these things, and I understand why not, it is difficult to be more specific. Basically, I think you sound like someone who can make that first cut yourself. If you are at all uncomfortable about the way the language of the agreement divides the rights then lawyer up. A decent lawyer in NYC in this area will be $200/hr and up.
posted by caddis at 3:32 PM on April 8

To just clarify something, my primary concern is this:

Company X is in New York, and the agreement they have sent me appears to assign them all rights to my works which "in whole or in part, concern or relate to or are useful in the Company Business" if they're created during the term of the agreement.

As a web developer, here's the nightmare scenario I'd be worried about:


This Company hires you do to some web design work. While under contract with them, you get some web design work that requires you to do some pretty cool AJAX/javascript/UI stuff. Company finds out, sees the work, and thinks that AJAX would be really cool on their site... so instead of asking you to write it for them, too, they demand that you give it to them for free since it was created during the term of the agreement and, by the way, since it belongs to them now (with assignment work-for-hire becomes irrelevant), they want the other company to stop using it.


Likely? Of course not. It's more likely that this is boilerplate language that the company doesn't even know exists.

Go ahead and haggle with them if you're up to it, but get it all in writin. Having one HR person say "We're not worried about your side work" isn't really going to help you very much when some bigwig at the company thinks they're entitled to cherry-pick your stuff.
posted by toomuchpete at 4:06 PM on April 8

toomuchpete, that's more or less my concern. I had a situation similar to what you describe come up briefly at my last full-time job where an officer apparently threatened someone I did side work for over ownership of that work. Nothing came of it, but it heightened my awareness of this as a problem.

caddis, I appreciate the confidence. I probably will try communicating my concerns and offering some proposals to the company and seeing what they come back with. And if this doesn't work, $200/hr for a lawyer probably wouldn't break me assuming efficient work and a non-drawn out process ($600/hr, on the other hand, could be a significant problem) -- feel free to send me recommendations if you're comfortable.
posted by weston at 5:00 PM on April 8