By: James Kachmar
The Ninth Circuit recently revisited the “Work Made for Hire” Doctrine in connection with a copyright infringement case in US Auto Parts Network, Inc. v. Parts Geek, LLC. The Ninth Circuit concluded that an employer can be the owner of copyrighted material when it is prepared by an employee in the course of his or her employment under the work made for hire doctrine.
The case arose out of an online auto part business, Partsbin, that was created in the mid-1990s. Partsbin entered into a licensing agreement with a computer programmer, Lucas Thomason, who had prepared an order processing software program called Manager while self-employed. Thomason gave Partsbin a “perpetual license to use” the Manager software. Approximately a year later, Partsbin hired Thomason as its “director of eServices,” where he continued to make modifications and enhancements to the Manager software to fit Partsbin’s business changes. Over the next several years Thomason, as a Partsbin employee, developed at least four more versions of the Manager software. Partsbin became an internet success story and in 2006 was acquired by US Auto Parts Network (“USAP”). The acquisition included its intellectual property. After the acquisition USAP, hired many of Partsbin’s key employees, including Thomason. Thomason’s primary role was to “manage” the Manager software by modifying and enhancing it to accommodate the needs of Partsbin. His efforts created two additional versions of the Manager software.
In 2008, Thomason resigned from USAP and joined with the original Partsbin founders to start a new car parts retailer named Parts Geek. Thomason created a new software program for Parts Geek that was called Admin. By the end of 2009, Parts Geek had grown into shown itself to be another success and USAP began to investigate the similarities between Parts Geek’s Admin software with features found in Partsbin’s Manager software. USAP brought a copyright infringement claim against Parts Geek and Thomason (as well as others). The lower court granted summary judgment to Parts Geek and Thomason on its copyright infringement claim and concluded that USAP did not own the copyright to the Manager software because Thomason never agreed to transfer his copyright interests to either Partsbin or USAP. Thus, USAP had no standing to sue for copyright infringement.
USAP appealed the grant of summary judgment against it and argued that it had a copyright interest in the Manager software because the enhancements and modifications to it made after its acquisition of Partsbin was “work made for hire” by Thomason. The Ninth Circuit recognized that the copyright Act contains a provision that allows employers to be the copyright owner of an employee’s “work made for hire.” Given that software source code can be subject to copyright protection, the Act carves out an important exception to the general rule that the creator of the copyrighted work is generally the author for copyright purposes. This work made for hire exception provides that if a work is made for hire “the employer or the other person for whom the work was prepared is considered the author” and owns the copyright “unless the parties have expressly agreed otherwise in a written instrument signed by them.”
The Ninth Circuit recognized that the Copyright Act does not specifically define “employee” or “scope of employment” but that other circuits have used the common law definitions of employee/agency. The Ninth Circuit held that the “work made for hire” doctrine would apply if USAP could show (1) Thomason was an employee of Partsbin/USAP; (2) the development of the Manager code was the type of work he was employed to perform; and (3) the work occurred substantially within his authorized work hours and was actuated by purpose to serve Parts Bin/USAP.
Given the evidence presented, the Ninth Circuit held that it was a issue of triable fact whether Thomason was an employee for purposes of the work made for hire doctrine given his job title and services rendered during his employment by Partsbin/USAP. Given this issue of fact and without an express writing to the contrary, Partsbin/USAP could be the author of the work made for hire and able to bring a copyright infringement action.
The US Auto Parts decision is a reminder to employers and businesses that they may wish to review their intellectual property materials and policies to ensure that all copyrightable materials prepared by their employees belong to the employer/business. This will give the employer/business an upper hand should the employee take IP information to a new employer and try to assert that he or she is the owner of the copyright.