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I am contemplating an offer for the design and development of some themes for a CMS. The payment option is reimbursement based on the sale with a commission after the reimbursement for time spent in development. I typically would not do this but it is a friend that I am helping to get started. I will be the only one developing and I know this won't be based on "who we like the best" type of work. So I am battling the following:

  • How can I legally write the contract?
  • Is there a name for this type of work?
  • Even if the ideas are someone else's can I write a contract waving the intellectual property to myself until reimbursement?
  • Is this a common practice?

Sorry if this question has been asked but upon my searches here I didn't see anything that may answer my question. If it is called something in particular please let me know so I can search for something.

  • Whatever you do, please take Professional Legal Advice relating to any form of contract. The contract is only there for when things go wrong... everyone knows what they meant ;-) – Andrew Aug 1 '13 at 9:34
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Ideas are meaningless. They don't create value. Without actual inputs in the form of work, they'll never manifest into anything that can be bought or sold. The only intellectual property involved in your scenario are the actual designs and themes for the CMS that you will produce.

This isn't just my opinion. Cornell University Law School's Legal Information Institute, USC Title 17 Section 102 states the following:

(b) In no case does copyright protection for an original work of authorship extend to any idea, procedure, process, system, method of operation, concept, principle, or discovery, regardless of the form in which it is described, explained, illustrated, or embodied in such work.

(Bold, italicized emphasis is mine.)

Since you're in the United States, you're governed by United States Copyright Law, which states the following in Cornell University Law School's - 17 USC § 201:

(a) Initial Ownership.— Copyright in a work protected under this title vests initially in the author or authors of the work. The authors of a joint work are coowners of copyright in the work.

(b) Works Made for Hire.— 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.

According to the law, as stated above, the copyright for a work initially belongs to the author, unless the work is part of a "work made for hire". In cases where the work is part of a work made for hire, the person commissioning the work owns the copyright, not the author.

If you have no contract written and you're not an employee, then according to USC Title 17 Section 101, as cited below from Cornell University Law School, the work is not a work for hire and hence the copyright belongs to you and whomever else actively works on the deliverables:

A “work made for hire” is—

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

(2) 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. For the purpose of the foregoing sentence, a “supplementary work” is a work prepared for publication as a secondary adjunct to a work by another author for the purpose of introducing, concluding, illustrating, explaining, revising, commenting upon, or assisting in the use of the other work, such as forewords, afterwords, pictorial illustrations, maps, charts, tables, editorial notes, musical arrangements, answer material for tests, bibliographies, appendixes, and indexes, and an “instructional text” is a literary, pictorial, or graphic work prepared for publication and with the purpose of use in systematic instructional activities.

(Bold, italics emphasis is mine.)

In summary, unless you explicitly agree in writing with the other party, your friend, that the work is a work made for hire, and your friend isn't doing any of the work to create the designs or themes, according to US Copyright Law, the copyright ownership falls to you. Note that "work" does not mean merely coming up with a cool idea while daydreaming, or staring into space, or chasing the eye floaters in your eyes.. If you're not actually physically putting together the work, you're not the author.

Now, it sounds like your role in this is temporary, which means your friend likely doesn't intend to enter into a partnership with you. Therefore, it's in his or her best interests to enter into a written, contractual agreement that clearly outlines who owns what and to what rights and responsibilities each party has in regards to the works. You could certainly outline that the copyright ownership awarded to you transfers in full to your friend when payment is received in full.

However, do not rely solely on the information here in this post. I've studied business law, but I'm not an attorney nor am I an authority on this matter. If you visit any of the sources I've referenced, you'll see that the law is very verbose and very deep. Consequently, there may be hidden legal loopholes that I in my limited wisdom did not foresee. The best course of action is to see an attorney who specializes in business law and/or copyright law, and hire that person to draft a professional contractual agreement that doesn't violate local, state, or federal laws. Illegal contracts may not be enforceable, and a licensed attorney will help make sure that you have a solid contract that will help prevent any problems or disagreements down the line.

If you're thinking, "Man, that sounds like a lot of work, and my friend wouldn't do anything unsavory", keep in mind that the goal of a contract isn't to beat someone over the head with it when things go bad; instead, it's designed to prevent unexpected and/or unforeseen problems and misunderstandings from turning into very heated and expensive legal battles. In many cases, a disagreement is resolved by never actually having a disagreement in the first place, by having everything clearly written out beforehand so that everyone is clear what his or her role is, both at the start of the work and once the work is completed.

For further reading, please see the United States Copyright Office - Works Made For Hire.

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