Intellectual property rights - work for hire clauses

Ownership of the supplier’s work product that is commonly addressed “work for hire clauses” is an item that is frequently negotiated. Most buyers are of the opinion that if I pay for it I want to own it. Most Suppliers will have the attitude that I'm bringing all my existing knowledge into this that the Buyer isn't paying for and therefore I should own it or have rights to it. In drafting and negotiation such a clause they key is to understanding why you want it or need it and thinking about why the Supplier will want it.

For items that are copyrightable a work for hire provision is usually there to allow the buyer to have free use of the item in any way they want without having to go back to the supplier each time they want to change something or use it in a different manner. For items that could be patented buyers may want to have ownership for the potential revenue a patent may bring or to have a competitive edge in the marketplace. The last thing you want to do is pay for the development, and have the supplier be able to sell the same thing to the competition for far less than what you paid.

Frequently having 100% ownership of all rights by the Buyer may not work and if you insist upon having them and the supplier agrees, you will pay a premium for that work so total ownership may not be always the best answer.

Letting the Supplier have total ownership may be cheaper in the initial cost, but if you will need to change or modify it, since the Supplier would own the intellectual property right, you would need the Supplier’s approval to make any derivative work, and that can force you into having to go back to the Supplier to have them do each and every change and that can be costly.

In most negotiations the parties can usually find an acceptable middle ground. There are many alternatives available depending upon what the motivation is for ownership on both sides.
The most common variables are who owns it? What license grants to use it are provided?
What restrictions are there on use such as who or what it may be used with or when may it be used? Here are several examples:
1. The buyer could own work product and give the supplier an unlimited right to use it for a license fee. That approach helps recover some of your investment if there are other potential uses.
2. The buyer can own the work product and give the Supplier the right to use it for a fee, but restrict where or with whom it may be used. That approach would be used if you had competitive concerns.
3. The buyer can own it, and allow the supplier to use it without a license fee after a specified period has been exhausted. You could use this approach to allow them to freely use it as competitive value only lasts so long.
4. The supplier can own it where they give the buyer the right to use, modify, etc. make derivatives or, and sublicense the use. That approach keeps you from having to come back to the Supplier each time you want to change or modify it. In this approach I would want to pay significantly less for the work.
5. If you will be jointly involved in the activity where both parties may create patentable or copyrightable items, the Buyer could own what they individually create without any license grant to the supplier on the buyer owned intellectual property and the supplier could own what they create with appropriate license grants to the buyer for the supplier owned intellectual property.