Startups and small businesses often hire independent contractors instead of employees. Independent contractors are great for project-based work, because you don’t have to pay a salary, benefits, and payroll taxes. But there are a lot of pitfalls you need to consider before hiring an independent contractor. This article only addresses some of the intellectual property issues you might want to consider.
Any agreements with independent contractors should be entered into prior to their commencing work as important rights may otherwise be affected. Note that you must provide “fresh” consideration (i.e., a payment) if you are going to require independent contractors to execute this agreement after they have commenced work.
An independent contractor agreement should include a well-defined description of their scope of work. Your company may not have any rights in work conducted outside of this scope of work.
An independent contractor agreement should also include provisions to protect confidential information that independent contractors working for your company may develop or otherwise come into contact with.
In addition, an independent contractor agreement should cover ownership of any intellectual property that is developed by the independent contractor. Intellectual property rights include inventions (patents) and works of authorship (copyrights). There are many factors to consider with regard to copyright ownership. It is generally preferable to employ as employees those who will be engaged in developing copyrightable material of any significance to the company.
There may be other issues that you also want to address in an independent contractor scenario. For example, you may want to include a covenant not to compete. You may also want to include an arbitration clause should a dispute arise, an indemnification clause to protect your company against liability of the acts of the independent contractor, and/or address various employment and independent contractor issues.
As with any agreement, an independent contractor agreement includes obligations that you will owe to the contracting party, in addition to obligations of the independent contractor. Therefore, it is important that you carefully read and understand the agreement in its entirety before entering into any independent contractor agreement. If you do not understand a provision, or if you have any questions or concerns, contact a business attorney before entering into an independent contractor agreement.
