My previous post on the contract drafter as copyright violator sidestepped a very pertinent question—under U.S. law, who owns the copyright in a contract that a law firm drafts for its client?
Law Firm or Lawyer?
This question has two parts. First, as between a law firm and the lawyer who drafts the contract, who owns the copyright?
The answer could depend on who does the drafting. 17 U.S.C. § 101 states that a “work made for hire” includes “a work prepared by an employee within the scope of his or her employment.” And 17 U.S.C. 201(b) states that “In the case of a work made for hire, the employer or other person for whom the work was prepared is considered the author for purposes of this title, and, unless the parties have expressly agreed otherwise in a written instrument signed by them, owns all of the rights comprised in the copyright.”
An associate would be considered an employee of the associate’s law firm. See, for example, Hishon v. King & Spalding, 467 U.S. 69, 76 (1984) (referring to “an associate’s status as an employee” of respondent law firm). Consequently, the copyright in any contract drafted by an associate in his or her capacity as an associate would belong to the law firm.
By contrast, “Partners are not generally regarded as employees of partnerships.” Brown v. Flowers, 297 F. Supp. 2d 846, 852 (M.D.N.C. 2003) (determining that a recording prepared by a partner in a two-person partnership was not a work for hire as it had not been prepared by an employee). Because 17 U.S.C. 201(a) states that “Copyright in a work protected under this title vests initially in the author or authors of the work,” this case suggests that a law-firm partner would retain the copyright in any contracts drafted by that partner, unless in the partnership agreement the partner grants copyright to the law firm. But whether a big-firm partner should be considered an employee is a hot topic, at least for purposes of employment laws. See, for example, Martha Neil, Who Is a Partner?, ABA Journal, June 2005, at 34. Because Brown v. Flowers didn’t involve a law firm, I wouldn’t expect it to be the last word on this subject.
One implication of all this is that any associate leaving a law firm would, strictly speaking, be violating the law firm’s copyright by taking and subsequently using copies of contracts that the associate had worked on while at the firm.
But as I mentioned in my previous post on copyright, the vast majority of contracts prepared by law firms are either outright copies that aren’t entitled to copyright protection or are contracts that derive copyright protection from their status as compilations, meaning that a law firm would likely have a hard time demonstrating breach of copyright.
And consider the situation facing a departing associate. If a first-year associate leaves a firm without taking any form contracts, he or she would likely not be any the worse for it. But if Fred, a fifth-year associate, were to show up at a new firm without a library of form contracts, he would have to either cadge forms from his new colleagues or root around for forms on the SEC’s EDGAR system or elsewhere. Besides looking a little foolish, Fred would lose significant amounts of time either becoming used to the new forms, retooling them to suit his needs, or some combination of these two approaches.
Given these considerations, I suspect that as a general matter departing associates have a more expansive view of what it would be appropriate for them to take with them. I also suspect that law firms turn a blind eye to departing associates’ copying contracts that they worked on—at least I haven’t found anything in the literature to suggest that law firms consider this an issue. After all, if a law firm were inclined to zealously protect its copyright, it would have to prevent associates from leaving with their deal bibles and velobound closing binders—an unlikely notion.
In any event, a departing associate can either go about discretely copying contracts or disclose to the law firm what he or she has in mind. Law-firm consultant Ed Poll suggests, in this article, that the latter approach is best. At the risk of sounding wishy-washy, I suggest that which approach an associate takes could depend on the circumstances. I suspect that at some law firms, making a formal request to copy contracts would set in motion an interminable round of dithering and bureaucratic posturing.
If a law firm engages in the sort of innovative drafting initiate that I discussed in my previous copyright post, it might want to establish guidelines regarding what an associate may and may not take. It might want to explore allowing associates to take, for reference purposes, copies of contracts from transactions they had worked on, but at the same time making it clear that flat-out copying of those contracts wouldn’t be acceptable. And it might want to ensure that in its partnership agreement the partners grant the law firm whatever copyright they otherwise would have in contracts prepared for any transactions that the partners handle.
Note that surreptitious copying of partners’ form contracts—as recounted in this article by law-firm consultant Ellen Freedman—is an altogether different matter. And so is the question of how to handle a client’s files when the billing lawyer leaves the firm.
Law Firm or Client?
The second part of the question is who, as between the law firm (or partner) and the client, owns the copyright?
If the contract constitutes a work for hire, under 17 U.S.C. 201(b) the client would own the copyright. But to constitute a work for hire, the law firm, in drafting the contract, would have to be acting as “an employee within the scope of his or her employment,” as required under 17 U.S.C. § 101. (The definition of work for hire also encompasses certain works specially ordered or commissioned, but a contract drafted by a law firm wouldn’t constitute such a work.)
For guidance on determining whether for copyright purposes a law firm acts as an employee with respect to its client, the case to consult is Community for Creative Non-Violence v. Reid, 490 U.S. 730 (1989).
Plaintiff CCNV, a nonprofit organization, paid defendant Reid $15,000 to create a sculpture of a modern Nativity scene. The facts showed that CCNV supervised and directed Reid in some particulars, but that in others he acted independently. The Supreme Court summarized its inquiry as follows: “In determining whether a hired party is an employee under the general common law of agency, we consider the hiring party’s right to control the manner and means by which the product is accomplished.” Id. at 751. The court considered a various factors, including whether the hiring party had the right to assign additional projects to the hired party. It held that because CCNV lacked such control, Reid was the copyright owner.
None of the cases that have considered the meaning of “employee” for purposes of the definition of “work for hire” have considered whether a legal entity such as a partnership, as opposed to an individual, can be an employee. (For an account of those cases, see 1-5 Nimmer on Copyright § 5.03[B][a].) But setting aside that issue, the level of control that a law firm exerts in performing work for clients is, if you consider the factors listed in Community for Creative Non-Violence, that of an independent contractor rather than an employee.
And it follows that if a law firm that drafts a contract for a client is in that capacity acting as an independent contractor, it would, under 17 U.S.C. 201(a), own the copyright in that contract.
What does this mean for law firms and their clients? If a client asks a law firm to draft a form of agreement to be used by its businesspeople, it’s unlikely that the law firm would subsequently object that such copying violates its copyright, and it’s hard to imagine how it could plausibly do so.
Here’s a more likely scenario: A client asks its law firm to draft a form of agreement for a new kind of transaction. The client ends up paying the law firm plenty for their work, and the client’s personnel spend many hours helping the lawyers grasp the technical and business nuances that have to be addressed in the agreement. Subsequently the client finds that law firm has cheerfully been selling to other clients a substantially identical form of agreement. From a copyright perspective, the law firm is at liberty to do so, and it’s unlikely that a law firm would agree to forget that it had ever worked on a given agreement. Perhaps the best that the client could hope for is that the law firm would agree not to use that form of agreement in representing the client’s competitors.
And then there’s the issue of what constitutes violation of a law firm’s copyright in a contract. That’s the subject of my earlier post on copyright.