Contracts & Legal

balupton · April 11, 2019, 12:49am

Glossary

W8BEN

People who are not liable for USA Taxation, yet earn money from an American entity must sign a W8BEN Form to avoid USA tax collection.

Idea-Expression Divide

Many employees are not familiar with the Idea-Expression Divide. This naivety allows companies to use catch-all IP contract terminology that can be used to intimidate employees, yet are unenforceable.

The idea–expression divide or idea–expression dichotomy limits the scope of copyright protection by differentiating an idea from the expression or manifestation of that idea.

The European Union Software Directive, Article 1.2, for example, expressly excludes from copyright ideas and principles that underlie any element of a computer program, including those that underlie its interfaces.[1][2] As stated by the European Court of Justice in SAS Institute Inc. v World Programming Ltd., “to accept that the functionality of a computer program can be protected by copyright would amount to making it possible to monopolize ideas, to the detriment of technological progress and industrial development.”[3]

In the United States the 1879 opinion of the Supreme Court in the case of Baker v. Selden [4] elaborated this doctrine, holding that, while exclusive rights to the “useful arts” (in this case bookkeeping) described in a book might be available by patent, only the description itself was protectable by copyright. In Harper & Row Publishers, Inc. v. Nation Enters. , 471 U.S. 539, 556 (1985), the Supreme Court stated that “copyright’s idea/expression dichotomy ‘strike[s] a definitional balance between the First Amendment and the Copyright Act by permitting free communication of facts while still protecting an author’s expression.’” (internal citation omitted). Additionally, in Mazer v. Stein , 347 U.S. 201, 217 (1954), the Supreme Court stated “Unlike a patent, a copyright gives no exclusive right to the art disclosed; protection is given only to the expression of the idea—not the idea itself.”

Currently it seems there is no repercussion for companies that practice such behaviour, hence why they can get away with it. It would be nice if any company that issues a contract that violates this, had its contract void, or were persecuted.

Such repercussions are standard for illegal non-compete clauses, especially in California, as seen by Season 2 of Silicon Valley.

Works Made for Hire

United States Copyright Office: Works Made for Hire

Section 101 of the Copyright Act (title 17 of the U.S. Code) defines a “work made for hire” in two parts:

a) a work prepared by an employee within the scope of his or her employment

or

b) a work 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.

Determining whether a work is made for hire can be difficult

because it is not always easy to apply the legal definition of “work made for hire.”

The Supreme Court’s decision in Community for Creative Non-Violence v. Reed addressed that definition. The Court held that one must first ascertain whether a work was pre- pared by (a) an employee or (b) an independent contractor.

If an employee created the work, part 1 of the definition above applies, and the work will generally be considered a work made for hire.

But note that the term “employee” in the definition differs from the common understanding of the term. For copyright purposes, “employee” means an employee under the general common law of agency. See the subheading “Agency Law” below.

If an independent contractor created the work, and the work was “specially ordered or commissioned,” part 2 of the definition above applies. An “independent contractor” is someone who is not an employee under the general common law of agency.

A work created by an independent contractor can be a work made for hire only if (a) it falls within one of the nine categories of works listed in part 2 above and (b) there is a written agreement between parties specifying that the work is a work made for hire.

State Laws

The laws of a contracts specified jurisdiction apply, unless the contract does not specify a jurisdiction, in which case the jurisdiction can either be the where the employer is registered or where the employee is located, sometimes the latter overrides the former.

Californian registered companies must also be wary of California’s 3 prong approach to identifying someones as a contractor or employee, if the latter prevails then California’s employment laws take precedence:

However, on April 30, 2018, the California Supreme Court rejected the Borello test in favor of a more rigid, three-prong “ABC” test. ( Dynamex Operations W., Inc. v. Super. Ct. , No. S222732 (Cal. Apr. 30, 2018).) Now, in order to classify a worker as an independent contractor, companies must prove that all three of the following are true:

The worker is free from the control and direction of the company in connection with performing the work, both in reality and under the terms of the relevant contract.

The worker performs work that is outside the usual course of the company’s business.

The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work being performed for the company.

— Are You an Employee or an Independent Contractor under California law?
— Independent Contractor vs. Employee

However, the official government resource on this matter is more complicated:

Q. How do I know if I am an employee or an independent contractor?
There is no set definition of the term “independent contractor” and as such, one must look to the interpretations of the courts and enforcement agencies to decide if in a particular situation a worker is an employee or independent contractor. In handling a matter where employment status is an issue, that is, employee or independent contractor, DLSE starts with the presumption that the worker is an employee. Labor Code Section 3357. This is a rebuttable presumption however, and the actual determination of whether a worker is an employee or independent contractor depends upon a number of factors, all of which must be considered, and none of which is controlling by itself. Consequently, it is necessary to closely examine the facts of each service relationship and then apply the law to those facts. For most matters before the Division of Labor Standards Enforcement (DLSE), depending on the remedial nature of the legislation at issue, this means applying the “multi-factor” or the “economic realities” test adopted by the California Supreme Court in the case of S. G. Borello & Sons, Inc. v Dept. of Industrial Relations (1989) 48 Cal.3d 341. In applying the economic realities test, the most significant factor to be considered is whether the person to whom service is rendered (the employer or principal) has control or the right to control the worker both as to the work done and the manner and means in which it is performed. Additional factors that may be considered depending on the issue involved are:

Whether the person performing services is engaged in an occupation or business distinct from that of the principal;

Whether or not the work is a part of the regular business of the principal or alleged employer;

Whether the principal or the worker supplies the instrumentalities, tools, and the place for the person doing the work;

The alleged employee’s investment in the equipment or materials required by his or her task or his or her employment of helpers;

Whether the service rendered requires a special skill;

The kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision;

The alleged employee’s opportunity for profit or loss depending on his or her managerial skill;

The length of time for which the services are to be performed;

The degree of permanence of the working relationship;

The method of payment, whether by time or by the job; and

Whether or not the parties believe they are creating an employer-employee relationship may have some bearing on the question, but is not determinative since this is a question of law based on objective tests.

Even where there is an absence of control over work details, an employer-employee relationship will be found if (1) the principal retains pervasive control over the operation as a whole, (2) the worker’s duties are an integral part of the operation, and (3) the nature of the work makes detailed control unnecessary. (Yellow Cab Cooperative v. Workers Compensation Appeals Board (1991) 226 Cal.App.3d 1288)

Other points to remember in determining whether a worker is an employee or independent contractor are that the existence of a written agreement purporting to establish an independent contractor relationship is not determinative (Borello, Id. at 349), and the fact that a worker is issued a 1099 form rather than a W-2 form is also not determinative with respect to independent contractor status. (Toyota Motor Sales v. Superior Court (1990) 220 Cal.App.3d 864, 877)|

— State of California: Department of Industrial Relations: Independent contractor versus employee

Californian employers must also not ask employees about their previous salary history.

Following the lead of a few other states, California passed a salary history ban that takes effect on January 1, 2018. The law, which applies to all California employers, prohibits employers from:

asking applicants about their current or past salaries or benefits

seeking such information from other sources or through an agent, or

relying on such information to decide whether to offer a job or what salary to offer.

— California Laws on Equal Pay
— State of California: Department of Industrial Relations: California Equal Pay Act

Employment

BEIPA

GitHub’s IP Contract. Co-authored, including Mike Linksvayer. Leverages definition of “works for hire”, and state-specific laws for exemptions to its catch-all.

BEIPA: Version 2 Underway

Model IP and Open Source Contribution Policy

Rackspace’s IP Contract. Authored by Van Lindberg.

ModelCo IP Policy: Overview

ModelCo IP Policy: Terms

ModelCo IP Policy: Feedback

Bevry’s Contracts

These are the contracts Bevry created and used successfully between 2005-2015, mostly as a contractor for other consulting agencies and small non-USA startups. Since 2015 I haven’t been active in the contracting space as much.

They are probably insignificant for more complicated arrangements. However, their focus on deliverables while respecting the idea-expression divide is nice and simple, and it would be nice to see more contracts adopt such terminology and distinction. As it focuses on what the contract does, rather than what it does not. Most contracts are just overly-verbose listings of all the things that the contract does not cover.

Client Confidentiality Contract.docx
Contributors License Agreement.docx
Fixed Rate Hourly Days Contract.docx

Their IP section is:

Intellectual Property
A Deliverable is an object that is provided to you to be included within the project. A Deliverable is restricted to tangible objects including digital objects such as code and designs. A Deliverable does not include imaginary objects such as thoughts, ideas and processes. You will own Deliverables that are created by Bevry solely for use in the Project, unless stated otherwise upon delivery (e.g. delivering already licensed work). It is both Bevry’s and your responsibility to ensure any Deliverables Bevry provides to you are correctly licensed for use in the project.

Their optional client confidentiality contract is as follows (used for clients that needed to keep their own clients secret):

Confidentiality
The Consultant shall not reveal any information pertaining to the relationship, practices and identity of The Company’s clients to anyone, except under the following circumstances:

The Company gave The Consultant explicit permission to do so beforehand

The information became knowledgeable to The Consultant from a source independent of The Company

5 years has passed since the enactment of this agreement

Notification
The Consultant is engaged as an advisor and co-contributor to open source software projects (e.g. DocPad). The Consultant is not engaged as a subcontractor for work to be performed for the Company’s clients.

The Company shall make every effort to prevent The Consultant having access to client project source code, client product designs, client art, and other related client concepts. This intellectual property is generally owned by the Company’s clients and requires specific permission to re-distribute or contribute to an open source software project.

If The Consultant is exposed to such information, it shall immediately notify The Company in writing and destroy all copies of such information that it may possess.

Open Information Pledge

Created by Bevry several years ago, for entities where all their work will be public domain or permissively licensed.

Patents

Open-source friendly patents contracts come in two forms, the first are contracts for the inventors of innovations that will be patented, the second are patent pools that patent-owners aggregated their patents for the purpose of mutual-defence against patent aggression.

The EFF have published Hacking the Patent System: Improved, Expanded Guide to Patent Licensing Alternatives as an overview to this field.

Patent Pools

Innovators Patent Agreement

Created by Twitter. Prevents patents being used aggressively.

Policy

Organisations that are working with governments and corporate leadership to alter policy around the world.

Studies

Various studies have been conducted on the negative effects of IP/Confidentiality/Non-Compete agreements, here are a few: