November 30, 1997

THREE LEGAL TERMS YOU REALLY NEED TO KNOW

Edited by Dennis Berman

Previous columns have looked at legal news events and how they affected our evolving digital world. The truth is, however, that the questions most likely to come up in your business aren't tied to a Supreme Court decision or even a new state law. Most likely, they'll be basic, nuts-and-bolts stuff: What does this contract term mean? Who owns this piece of code, or that photo? How do I protect my art, my idea, or even my company name from unauthorized use? And in the worst case, when something goes wrong with a deal, what can I do to them, and what can they do to me?

Unfortunately, understanding the answers to these questions means wading through often-incomprehensible legalese. Let's start with a brief primer on three common, but crucial, legal terms you're most likely to run into: copyright, trademark, and work-made-for-hire, sometimes called work-for-hire.

Copyright: Among the most important concepts in Internet business transactions, since almost everything carried over the Net is protected in some way by copyright. Copyright is the legal protection granted to an author or artist for a literary or artistic work. Congress expressly added computer programs to the definition of "literary works" some years ago. Copyright allows the creator of a work to prohibit or control not only copying but also the work's public performance, retransmission, and adaptation. Copyright does not, however, protect book titles or company and product names (see the discussion below on trademarks).

Under U.S. and most international laws, copyright is automatically established upon creation, without filing or marking of any kind. However, filing with the U.S. Copyright Office or adding a copyright notice (e.g. 1997 Jonathan I. Ezor) may be necessary before suing for infringement and may increase the amount of damages an author can collect. By the way, although copyright filings are public documents, software developers who are concerned about divulging trade secrets can file nonconfidential portions of the source code.

How long do these copyrights last? As outlined by the U.S. Copyright Office, "A work that is created on or after January 1, 1978, is automatically protected from the moment of its creation and is ordinarily given a term enduring for the author's life, plus an additional 50 years. For certain joint works, the term lasts for 50 years after the last surviving author's death. For works made for hire, and for anonymous and pseudonymous works (unless the author's identity is revealed in Copyright Office records), the duration of copyright will be 75 years from publication or 100 years from creation, whichever is shorter."

Trademark: The legal structure for protection for slogans, logos, and names within a specific industry. Under case law, you get a limited amount of trademark protection by just using a mark in public commerce and letting people know that you consider it a protected mark (indicated by placing a "tm" next to the mark). This is called "common law" protection. However, registration of a mark with the U.S. Patent & Trademark Office provides national protection of a specific trademark within a given type of goods or services.

Registered trademarks get 10 years of initial protection, provided an "affidavit of use" showing continued usage is filed during the sixth year. Failure to do so can lead to loss of federal rights, as the mark is deemed "abandoned" or "canceled." Inexpensive electronic database searches will show current and lapsed registrations; more expensive "full" searches will include single-state registrations, yellow pages listings, references in articles, and even Internet use. A good trademark attorney can help you with the searching and registration process.

Federal registration of a trademark also brings with it certain benefits under InterNIC's current domain-name issuing system (InterNIC is the body that issues Web addresses, with most businesses receiving the familar .com designation). While registering a trademark does not automatically result in the issuance of the corresponding domain name, InterNIC's policies do allow a registered trademark holder to object to, and even freeze, a domain name that is exactly the same as the registered mark. Whether or not there is an exact match, the trademark holder and domain-name registrant will often get into an often costly dispute about the rights to use the domain name. (See Enterprise Online News, 5/9/97, "The Web's Domain-Name Game Is Getting Trickier.")

Work-Made-for-Hire: A common but generally misunderstood category of copyright transfer. Under U.S. copyright law, in certain specific situations, a copyrighted work created by one person is automatically owned by the person or company that employs the creator. These situations are:

First, where the creator is an actual employee; or second, where the work is "specially ordered or commissioned for use as a contribution to a collective work, as a part of a motion picture or other audiovisual work, as a translation, as a supplementary work, as a compilation, as an instructional text, as a test, as answer material for a test, or as an atlas, if the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire."

These exclusive statutory categories do not include what most people think of as a typical work-made-for-hire: where a developer is contracted to do custom work for a client. Without specifically agreeing in writing to a copyright transfer, the law would hold that the developer -- and not the client -- would own and control all of the custom project and its future uses. While this may be appropriate in some instances, for example, where the client is putting very little of its own identity or customization into a project, it isn't appropriate in many others.

Accordingly, some Net contracts take a "just in case" approach: They state that the work should be considered work-made-for-hire material as defined under federal copyright law. If it still doesn't meet that definition, then the developer agrees to transfer and assign all rights to the client. Of course, in some projects, the client may receive a license rather than ownership of some of the deliverables, in which case the developer retains control over how the materials may be used, copied, modified, or resold. Most deals, in fact, are combinations of work-made-for-hire and licensing, with each party walking away with what it needs to affordably continue its business.

As you can see, the actual meanings of copyright, trademark, and work-made-for-hire are quite different from how they are commonly understood. It is vital for anyone doing business online -- or for that matter, offline -- to understand exactly what protection the law gives to creative brands and works.

By Jonathan I. Ezor in New York

Ezor (jonathan.ezor@poppe.com) is the director of legal affairs for Poppe Tyson Inc., a multinational interactive and traditional advertising and marketing agency based in New York City. His work focuses on Internet and traditional advertising and marketing, as well as copyright and trademark issues. The opinions expressed here do not necessarily reflect those of Poppe Tyson or its affiliates.