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October 2012

U.S. Auto Parts Network, Inc. v. Parts Geeks LLC Addresses Ownership of Derivative Works Under the Made For Hire Doctrine

In U.S. Auto Parts Network, Inc. v. Parts Geeks LLC, Nos. 10-56194, 10-56129, 2012 WL 3764704 (9th Cir. Aug. 31, 2012), the Ninth Circuit held that modifications to a computer program made by an employee were owned by the employer pursuant to the “work for hire” doctrine.  In this case, the court addressed two fundamental issues in copyright law, namely, the “work for hire” and “derivative work” doctrines.  Under the “work for hire” doctrine the employer for whom work is prepared is considered the author and owner of the work unless the parties have expressly agreed in writing otherwise. This doctrine carves out an exception to the rule that copyright ownership initially vests with the author of the work.  A “derivative work” is a work based upon one or more preexisting works that recasts, transforms or adapts the preexisting work. 

At issue in this case was the ownership of certain software for managing e-commerce or more specifically, the enhancements to this software.  The plaintiff, U.S. Auto Parts Network (“USAP”), asserted that Parts Geeks and its programmer pilfered and then infringed certain software enhancements which had been created by the programmer while employed with Partsbin.  USAP had acquired Partsbin and claimed ownership of these enhancements. 

In response to these claims, Parts Geeks countered that they had not infringed any copyrights held by USAP since USAP did not have copyright ownership in the software or any enhancements.  Specifically, Parts Geeks pointed out that the software was used by USAP and its predecessor Partsbin under license from the programmer who developed and owned the software.  Moreover, they asserted that any copyrights in any improvements to the software were not owned by Partsbin since the programmer had not agreed to transfer these improvements to Partsbin. 

The Court found that the while the programmer owned the copyrights to the original program created before he was hired by Partsbin, the subsequent modifications to the software constituted derivative works.  These derivative works were owned by Partsbin because they were created by the programmer within the scope of his employment and the parties had not stipulated in writing that ownership would remain with the programmer.  Thus, these copyrights were transferred to USAP as part of its acquisition of Partsbin.  Based upon these facts, the Court concluded that it was error to grant Parts Geeks summary judgment on the ground that USAP could not show ownership interest in the software enhancements.