Assignment and delegation are terms that have specific meanings in U.S. contract law. I am basing this post on a Quora answer that I wrote recently. Please see What are assignment and delegation in contract law?
In contract law, “assignment” can have a narrower meaning and a broader meaning. To start, I will discuss the narrower meaning. (more…)
I recently introduced a client to the document called a Stock Assignment Separate from Certificate. While well-known to business lawyers, this document is not known to most business owners.
The client was implementing employee and management stock plans. To provide stock for the plans, the corporation was going to repurchase shares from the founders.
The CFO asked whether and how the founders should complete and sign the assignment provision on the back of their share certificates.
In “Copyright: Why You Need Presence of Mind about Present Assignments“, I wrote about why copyright assignments should be expressed as present assignments (e.g., “I hereby assign”) rather than obligations to assign in the future (e.g., “I hereby agree to assign”). This suggestion applies to assignment of patents, too.
A researcher at Stanford University, in collaboration with Roche predecessor Cetus, developed methods for quantifying Human Immunodeficiency Virus in human blood samples, and correlating those measurements to the therapeutic effectiveness of antiretroviral drugs.
In Independent Contractors: How to Assign Copyrights, I provided sample language for an independent contractor’s assignment of copyrights to a client. This post explains why the present assignment aspect of that language is critical.
Here (with emphasis added) is the relevant portion of the pivotal sentence:
Contractor hereby irrevocably assigns, transfers and conveys to Client all of its right, title and interest in and to the Deliverables, including complete, unconditional and worldwide ownership of all intellectual property rights in any draft or final version of the Deliverables.
This post explains how to make sure that you own work product and intellectual property (IP) when you use a freelancer service. Most of the following first appeared on Quora. Please see How can I protect my source code and its Intellectual Property Right while working with a very large team of remote freelancers (Upwork and Fiverr etc)? Are freelancing platforms ensuring IP protection?
When you use a freelancing platform, you need to ensure that you have an agreement with each freelancer. And that agreement must assign to you all work product and all intellectual property rights.(more…)
It is common knowledge that California generally prohibits post-employment non-compete provisions. However, people know far less about law pertaining to post-employment non-solicitation provisions.
In this post, I will describe existing post-employment non-compete and non-solicitation case law. Then I will discuss a recent case that may signal a new direction.
Background – Non-competition Provisions Disfavored
Moonlighting employees in California have a right to hold down their second jobs (or to work on startups in their spare time).
The right to moonlight – and to engage in other activities on one’s own time – is expressed in Labor Code Section 96(k).
Labor Code Section 96
Section 96 identifies, generally, the types of employee claims that the California Labor Commissioner is obligated to accept. These include, for example, claims pertaining to payment of wages and expenses; damages arising from misrepresented conditions of employment; claims for vacation pay; and awards for workers’ compensation benefits.
Moonlighting is addressed as follows. (more…)
In California, a “work made for hire” (WMFH) provision in a contract can convert a contractor to an employee. This post describes the statutory basis for this little-known area of the law.
Before providing details, I will note that the (likely unwanted) ability to convert a contractor to an employee will arise only under narrowly-defined circumstances.
- The independent contractor must be an individual rather than a legal entity (a corporation or limited liability company).
- The relevant contract must expressly specify WMFH treatment for the contractor’s work product.
- The contractual relationship must be governed by California law. (I don’t know whether any other states have similar laws.)
Furthermore, you have formed a legal entity to turn the patent, once it issues, into a revenue stream. (See Should I form an LLC or a corporation?)
This post explains how you can assign the patent application to your new entity so your startup company can begin conducting business. (more…)
This post is based on (and is an edited version of) a Quora question and my answer. Q. How do you switch from a sole proprietorship to a corporation? You do, of course, want to keep all your intellectual property and brand and street cred and so on. Can you treat that as equity?
A. Yes, you can treat the assets of your sole proprietorship as the consideration for which your shares are issued. You need to create an agreement by which you (as an individual) assign those assets (including the intellectual property rights therein) to the corporation. This is, of course, a friendly transaction, so the assignment agreement can be simple – no need for endless pages of legal boilerplate to protect against litigation that never will occur.
Dana H. Shultz, Attorney at Law +1 510-547-0545 dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.
Recently I have received several questions about assigning LLC (limited liability company) memberships. Here is a brief summary of California law on this topic.
Section references below have been updated to reflect California’s new LLC law that took effect on January 1, 2014 (see RULLCA Brings New LLC Laws to California in 2014).
The applicable statutes are Corporations Code Sections 17705.01-17705.04. If assignment of membership interests (known as “transferable interests” under RULLCA) is not covered in the LLC’s Articles of Organization or Operating Agreement, the the following statutory provisions apply:
Several months ago, I wrote about the circumstances under which courts will find an implied copyright license if there has not been an assignment of copyright. (If You Don’t Set the Terms of a Copyright License, a Court Will) In a recent case (Estate of Hevia v. Portrio Corp.), the U.S. Court of Appeals for the First Circuit held that there was an implied copyright license in a partnership context.
The decedent, Roberto Hevia-Acosta, was an architect. Following his death, his estate and heirs waged an intensive legal battle against his business partner over copyrights in the decedent’s architectural designs.
The company in question provides contract personnel for IT projects. Here is the agreement that candidates have to sign to be proposed for a client’s project [emphasis added]: (more…)
After reading If You Don’t Set the Terms of a Copyright License, a Court Will, a (non-lawyer) friend wrote: “I work with subcontractors on a regular basis in the creative area (photographers, graphic artists, website designers, etc.).? Do you know where I can find a sample [copyright assignment provision]?”
Several months ago, I wrote that the “fair use” defense to copyright infringement often is poorly understood. The U.S. Postal Service illustrates this point. A recent court decision held that a postage stamp infringed the copyrights in certain sculptures and was not fair use thereof.
John Alli took a photo of the Memorial. The Postal Service paid Alli $1,500 for the right to use that photo for a 37-cent stamp commemorating the 50th anniversary of the armistice of the Korean War. Alli told the Postal Service that it would need permission from the owner of the copyright in the sculptures; the Postal Service did not seek such permission. (more…)
Almost a year ago, I wrote about why independent contractors (as contrasted to employees) own the copyrights in works that they create. As a result, a prudent customer will ensure that the contractor assigns its copyrights to the customer (Work Made for Hire – a Term Made for Confusion). This post discusses the implied copyright license that is granted in the absence of an assignment.
If there is no assignment provision, a court will determine that there is an implied license under the copyright. The rationale is that it would be unfair to deprive the customer of all rights in a work for which the customer has paid. The issue, then, will be the terms of the implied license. (more…)
This post is based on an answer that I provided on Avvo. The user wanted to know whether he could assign a fictitious business name (FBN) – or, colloquially, assign a DBA, short for “doing business as” – from his sole-proprietor business to a limited liability company (LLC) that he was about to form.
He probably would assign all of the sole-proprietor assets (and liabilities) to the new LLC. However, there are special considerations if one wants to assign a DBA / FBN. (more…)
When it comes to protecting intellectual property (IP), non-disclosure agreements (NDAs) are ubiquitous. What many entrepreneurs fail to realize, however, is that securing IP requires more than an NDA. For an NDA to do its job, the company must actually own the IP in the first place!
The most serious ownership problems arise when there is no written agreement between the company and the individual developing the IP. Depending on the nature of the IP (for example, whether copyright or patent protection applies) and whether the developer is an employee of the company or an independent contractor, the developer may own the IP. If this is the case, the company has, at most, a non-exclusive license.
A software company (“Client”) had to dismiss one of its developers (let’s call her “Alice”). The problem was Alice’s incompetence.
But there was a complication: Alice was pregnant. Adding to Client’s frustration, Alice, without permission or advance notice, was taking more time off than she was entitled to. Client wanted to be rid of Alice but did not want to be charged with discrimination based on sex or pregnancy.
Focusing on the Issue
I worked with Client’s CEO and Alice’s manager. We agreed right away to ignore the unauthorized time off. The amount of money at stake was relatively small, and we were concerned that raising time off as an issue could entangle us in Alice’s pregnancy-related medical needs.
From time to time, clients with established businesses have asked me to bring order to their legal affairs. I refer to this as ” corporate housekeeping “.
Usually, the request results from an extraordinary, but desirable, event. This might be an acquisition offer, a prospective new investor, or a restructuring for tax purposes. In each instance, the client quickly realizes that it has not been paying close enough attention to legal documentation.
Although the clients are in different industries, their stories are similar. In essence, they limit their legal activities and expenditures to those required to bring business in the door, satisfy customers’ needs, and pay employees. This approach works on a day-to-day basis. Yet when the extraordinary event comes up, the company suddenly needs to devote scarce resources to legal clean-up. (more…)
In my experience, a document’s level of detail should be driven by the nature of the business transaction and the parties’ relationship. I will give some examples both from in-house work and from my private practice that pertain to agreements with independent contractors.
Long and Detailed
When I was VP and Legal Counsel at Visa, I negotiated hundreds of contracts. Given that most were for IT products or services, a lot of money often was at stake, especially if a relationship was to continue for a period of years.
Accordingly, I prepared a series of detailed standard-form agreements – typically 15-20 pages – that served as a starting point. To minimize the amount of negotiation that would be required, the agreements were reasonably balanced, yet they, nevertheless, protected my client’s essential business and legal interests.
The agreements were long, but the length was justified by (a) the size of the deals and (b) the fact that each standard-form agreement would be used many times in the future, with minor revisions as required.
Some companies force employees to sign proprietary rights agreements under which the employee automatically assigns to the company any patent applications that the employee files within one year following separation from the company. I have always considered these provisions unjustifiable. California law apparently has reached the same conclusion.
Applied Materials Made a Mistake
In Applied Materials, Inc. v. Advanced Micro-Fabrication Equipment (Shanghai) Co., et al., 630 F.Supp.2d 1084 (2009), the U.S. District Court for the Northern District of California held that such a provision is unlawful. (more…)