Independent contractors & intellectual property

Intellectual property (IP) created by an independent contractor is considered the property of the independent contractor by law, unless otherwise stated in the contract. If your hirer wants to own any IP you create, this should be decided prior to entering a contract.

A contract may require you to create something, like a software program, a document or a plan for a house. However, the creator of intellectual property is not always the owner. The owner will have certain rights (called 'intellectual property rights') that will allow them to license or sell the creation. The owner may also be able to stop other people from making money out of those creations, even the creator.

As an independent contractor, you will automatically own any intellectual property in the works, articles or inventions you produce, such as copyright. If the hirer wants to own the intellectual property you create, this must be specifically outlined in the contract. It is advisable to first seek legal advice about clauses that give intellectual property rights to the hirer.

Intellectual property clauses in contracts 

There are two different clauses you might come across.

  • Where you own the intellectual property you create: The intellectual property rights in any materials prepared by the hirer reside with the hirer. The hirer acknowledges that the intellectual property rights in any materials prepared by the independent contractor reside with the independent contractor.
  • Where the hirer owns the intellectual property you create: The independent contractor acknowledges that intellectual property rights in all material vests or will vest with the hirer. The hirer gives the independent contractor a revocable, non-assignable and royalty-free licence to use such material.

Example

Lee is contracted to develop a software program to manage Rekall Ltd's inventory for $5000. The contract states that the intellectual property rights in any material developed by Lee under the contract will belong to Rekall Ltd. It states that Lee is provided with a licence to use the software only for the purposes of the contract.

Lee completes the task, and is very pleased with the software. If he tries to sell the software to another company, he will be in breach of the intellectual property clause in his contract with Rekall Ltd. This is because the company owns the software, not Lee.

Confidential information

If you want to retain control over your confidential information (for example, client lists, pricing information or other 'trade secrets'), the contract should include a clause to protect that information. It can also specify the type of information that is confidential so that both parties understand exactly what needs to be protected (for example, 'information regarding the contractor's profit margins').

Example of a confidentiality clause

The hirer will not, without written consent from the contractor, disclose any confidential information of the contractor to a third party. Confidential information includes profit margins and pricing information disclosed in this contract.

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