It’s hard to remember what life was like before software permeated every aspect of business management – from inventory control, marketing, point-of-sale transactions and shipping to human resources, sales analytics and customer relationship management. Businesses today are purchasing software or contracting with software developers to support virtually every function of their enterprise.

Any buyer of software – or photos, text, graphics, music, video or other copyright-protected work – needs to understand that the rules governing ownership and use of such material are different from the rules governing other types of personal property. Typically, one who buys inventory or equipment and takes possession becomes the owner. However, people who assume that the same rule applies to copyrighted material often learn the hard way that it is a different animal.

Consider the following typical example.

Company A pays a developer to create an enterprise software program tailored to the company’s unique business processes. The company comes up with the functional requirements and other ideas, and the developer writes the code implementing those ideas. The documentation for the deal consists only of the company’s purchase order and the developer’s invoices.

A few years down the road, the company has the opportunity to sell its assets for a princely sum. One of the company’s crown jewels is its custom software. The buyer wants the company and its owners to warrant that the company can transfer ownership of, or at least a license to use, that software to the buyer.

To its surprise, the company discovers that even though it had paid the developer to write the software, not only does the company not own it, but the buyer won’t have the right to use the software after the sale. To make matters worse, the buyer discovers that the developer is now licensing similar software to the company’s competitors. A key asset that made the company an attractive acquisition is no longer available to the buyer.

Copyright law is clear: If a work is covered by copyright, the person who created it owns it and has the exclusive right to control its use, reproduction, modification and distribution. That’s true even for material posted on the Internet – regardless of whether the material has a copyright notice or has been registered with the United States Copyright Office.

There are a few exceptions.

1. If material was created by an employee in the course and scope of employment, the employer owns the copyright. This is known as a “work made for hire.”
2. Ownership of the copyright can be transferred if the creator signs a written document.
3. The person who paid an independent contractor to create the work has an implied license that allows use of the work in that person’s business. However, those usage rights cannot be transferred to anyone else.
4. Some instances are “fair use” – as in commentary, satire and some other situations that do not deprive the copyright owner of the ability to make money from the work.

The consequences of ignoring another person’s copyrights can be devastating. Not only can copyright infringement be a crime, but if the owner registered the copyright with the U.S. Copyright Office before the infringement occurred, the infringer could be liable for up to $150,000 for each work that is infringed plus, in certain cases, attorney fees.

The bottom line is that people should know what they’re paying for. Be sure to secure a written contract that gives the company ownership, or at least rights that are tantamount to ownership such as the right to modify, copy, distribute, sublicense and assign the work to others (such as a buyer).

Be clear about ownership interest and rights up front. Get it in writing before any work begins. If an RFP is being issued for the development or use of copyrighted works, be explicit about copyright ownership, and ask the creator to warrant that he or she owns the copyright and other intellectual property rights, and that one’s use of the work won’t infringe any other person’s rights.

This will be especially important if the company is put up for sale. Prospective buyers will want the company to own the intellectual property rights it is using and be able to gain them via transfer.

Vicki Ballou is a partner in the intellectual property practice group at Tonkon Torp. Contact her at 503-802-2028 or at vicki.ballou@tonkon.com.

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In any business, transitioning from one generation to the next can be tricky. Customers, employees and the community typically are familiar with the current leaders of an organization and have formed opinions about the “brand” based on that leadership. But like life itself, today’s leaders must eventually give way to another generation if the organization is to be sustainable.

How that transition occurs can affect an organization’s longevity, especially in professional services firms, where principal assets are people and their intellectual capital and healthy client relationships. Lawyers, accountants, architects and marketing professionals work in a world where the name on the door matters. The people carrying on that name must be perceived as worthy stewards of the legacy.

Firms invest significant time and money attracting stellar young professionals to eventually carry on the firm’s work and reputation. How do they nurture and retain them in a climate where switching firms mid-career is now the norm? And, how do they prepare clients, employees and the community to accept the next generation of leaders? Hint: It doesn’t happen overnight.

Our law firm has approached these challenges with five strategies that should work for other professional services firms:

Mentoring – If you expect professionals new to your firm to absorb and demonstrate the firm’s way of doing business, then you must invest time in genuine mentoring. We typically assign two mentors to each new lawyer – one to direct professional development, ensuring a breadth and depth of expertise, and the other to be a social mentor, nurturing relationships for the associate within the firm and in the larger business and civic community. We also encourage informal mentoring relationships. It is one of the best ways to transition multiple perspectives from one generation to the next.

Exposure – You want internal and external stakeholders to recognize the talent and achievement of rising stars in your company. One approach, which worked for us, is to organize partners and associates into small teams designed to cultivate relationships and share aptitudes across the firm. Also encourage associates to get into the community as volunteers and board members, and help them identify opportunities that match their interests. This gives them exposure and recognition both as individuals and representatives of our firm. In addition to their community activities, we ask our lawyers to engage in pro bono matters and give credit for those services toward their annual billable hour goals.

Flexibility – Professional services by nature produce periods of high stress and long hours as practitioners work to meet client needs. While the client always comes first, we must be acutely aware that work-life balance is critical to personal and professional satisfaction and health. So, whether the issue is a new baby, a sick spouse, aging parents, a personal health problem or a desire to travel for a period of time, at our firm we find solutions to accommodate the things that come up in life, without compromising our commitment to clients. This flexibility prevents burnout and contributes to retention in a profession that hasn’t always been attuned to the personal needs of attorneys and their families. We find that young lawyers, in particular, seek flexibility as much as they seek professional challenge and opportunity. In fact, research indicates that providing flexibility increases retention.

Compensation – Senior members of any professional services firm are individuals who have achieved a level of success and experience that typically puts them at the top of the compensation structure.  While this is appropriate, it is also important to ensure that up-and-comers feel valued for their contributions and are sufficiently compensated to keep them engaged with the organization. This means not allowing huge compensation disparities to develop between a firm’s senior leadership and the professionals who are taking on increasing responsibility for the day-to-day work of the firm.

Innovation – Professional service firms that succeed in rolling leadership from one generation to the next are those that embrace change rather than resist it. Two areas where our firm has applied innovation, for example, are in technology and the design of our offices.

By providing smart phones and remote access to documents and files, for example, we help our professionals maintain or even improve productivity whether they’re at their desks here or somewhere else. Young lawyers can go home at a reasonable hour, spend time with their families and still get their work done – in ways that fit their individual lives. When you have invested in the professional development of potential future leaders, you want to look for ways to make it easy for them to stay. Technology is one of those ways.

When it comes to office design, look for ways to create a productive and collegial work environment. Our firm recently took advantage of our lease renewal to make tenant improvements that reflect how the firm has evolved in size and scope. With our four-generation workplace and our emphasis on tailoring multidiscipline teams to meet individual client needs, we wanted spaces for collaboration and connection among attorneys. We established open gathering spaces – including an espresso bar – where lawyers can informally meet. The office changes are already producing more collaboration and greater collegiality.

These strategies aren’t rocket science, but they reflect a deliberate effort to engage and support the up-and-coming generation of professionals. It’s just smart business for an organization to create an environment to develop and showcase its future leaders.

Vicki Ballou is a partner in Tonkon Torp’s Intellectual Property Practice Group and the firm’s work-life balance liaison. She can be reached at 503-802-2028 or at Vicki.ballou@tonkon.com.

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