Excerpted from Oklahoma Employment Law Letter, written by attorneys at the law firm Doerner, Saunders, Daniel & Anderson, LLP

Your marketing department needs help from an ad agency across town. IT needs to hire a contractor to upgrade your network. Customer service needs a developer to write a new program for tracking complaints and service calls.

Rather than hiring a full-time employee to take care of a less-than-full-time project, you outsource. And it seems intuitive that if you pay that outside source for his work, you own the finished product, right? Maybe ... but maybe not.

Who owns the work?

When you hire a contractor with specialized knowledge - for example, a software developer or an advertising executive - you're paying for her expertise, but not the underlying rights to what she creates. The general rule is, the independent contractor retains the right to any works she creates if there isn't a written agreement to the contrary. Obviously, the starting point for any outsourcing agreement is to get it in writing. Of course, that goes for pretty much any business transaction, but it's especially important here.

Let's say you hire a local photographer to take some pictures at the dedication of your new office building. You don't have a contract. You pay his fee, he gives you some proofs or forwards you a digital file, and you order the pictures you want.

Fast-forward six months to when your website is being redesigned. Someone downloads a photo of the new building onto your website. What's wrong with that? It's your picture, right? Not if you didn't have a written agreement with the photographer. You own only the physical picture, not the right to reproduce it on your website or anywhere else.

When a contractor creates something that would ordinarily be protected by a copyright, he owns it, no matter how much you paid for it, unless you've specified otherwise in a written agreement.

Software development is a good example of what we're talking about because it's often contracted. Even if the development project took three years and cost half a million dollars, you don't own the software if the developer isn't your employee and there's no written agreement saying you do.

What should be in your agreement?

So what needs to be in this agreement that seems to be so crucial? Your contract should cover five main points:

1.       Specify the scope of the project, what's to be created, and how the contractor will be compensated.

2.       Agree on what you want each party to have or own at the end of the project.

3.       Specify that you want the end result to be a work made for hire.

4.       Specify that the independent contractor will assign and transfer any and all rights in the project, work, and products to you and will execute any necessary documents to that end.

5.       Get a statement saying the contractor's work will be original and won't violate someone else's intellectual property rights.

Agreeing on what you want to own at the end of the project is important. Sometimes, especially in software development, the developer doesn't want to assign the rights to the product entirely because there are some basic components that may be useful to him on the next project he takes on. What do you do then? You can find another developer, or you can think about what you really want to do with the software.

Is it important that you be able to do more than just use it? Do you want to be able to make more copies of it or download it so your employees can use it at home or at another location? How about upgrading or customizing it later as your workplace changes? You'll need to own the underlying intellectual property rights to do all of those things.

Owning the copyright to something gives the creator a bundle of five exclusive rights: the right to reproduce it, distribute it, display it in public, perform it in public, and create derivative works. Those rights can be kept or given away one at a time or in a bundle (an assignment.)

If your contractor wants to keep some of the rights to his creation, it's not the end of the world. You can negotiate that part of the agreement and reduce the price you're paying to reflect that he isn't giving you the creative work in its entirety.

Or you can take the first four rights - reproduction, distribution, display, and performance - and let him keep a nonexclusive right to make derivative works (so your company can make them, too.)

The important thing to remember is, when you've hired a contractor, you keep only the physical copy of whatever was created - software, a new employee manual, a safety handbook. You don't get anything else unless you agree on it in writing.

Trademarks, service marks are different

The rule is different when you've asked a marketing or advertising agency to help you design a new logo to serve as a trademark for your business. Trademarks and service marks identify the source of a particular product or service, and they don't exist as intellectual property without some attachment or relationship to certain goods or services.

In the United States and other common-law countries, the first person to use a trademark is the owner of that mark as it relates to the goods and services it's used on. Just dreaming up XENOBON while you're playing Scrabble doesn't mean you can cash in when a company comes along and by coincidence decides that's a perfect name.

Here's another example of what we're talking about. The Madison Avenue advertising agency that dreams up the next Pepsi product isn't actually in the business of bottling and making soft drinks. It's in the business of developing advertising campaigns. Since a trademark can't exist without use and an agency that creates trademarks isn't likely to use the trademark itself for whatever product or service you're offering, that agency has no rights to the trademark. (But it will have a contractual right to be paid for the work it did to produce the trademark for you.)

The origination of a word or phrase without an attachment to a particular product doesn't generate any ownership rights. So, unlike the software or employment manuals we discussed earlier, when you pay an agency to create a trademark for you, your company will own that trademark once you start using it with a product or service.

Real world

Finally, here's some practical advice. Most developers, graphic designers, or ad agencies that have been in business for a while know the rules and aren't likely to give you a hard time about who owns what after the work is done. They're also going to understand the need to reduce agreements to writing. In fact, they'll often have contracts addressing the points we've covered. Of course, you'll want your own attorney to review any contracts before you sign them.