Monday, June 6, 2011

Assigned RIghts to Employer; Now Wants Them Back

Dear Rich: I did contractor work for a software company and assigned them rights to a program I created back in 2004. In return I got royalty payments for a while and now the company has stopped marketing the software. Is there a way for me to get the rights back to the software without causing a big problem? Okay, we're imagining the two guys shaking hands in the photo are you and your employer after reaching some kind of solution (the guy in the blue shirt is from the Dear Rich Staff). We hope this isn't just wishful thinking on our part because assignments are permanent transfers of ownership and few companies are inclined to return rights after they've paid for them (Just ask Simon & Schuster). We're also not clear what type of assignment you made (you can review the various types here). Three possible ways of getting the rights back include:
  • The company gives the rights back voluntarily. If you are still on good terms with the company, it's possible they may work something out with you. They may even allow you to exploit the software in return for a cut of your profits. Or perhaps they'll simply sell it back at a reduced price. You won't know until you ask. And whatever you agree upon, get it in writing, of course.
  • The agreement you signed provides for some method of reversion.  Occasionally, an assignment provides for reversion of rights. This is rare because assignments, by their nature, are permanent transfers. But occasionally, a patent or a copyright assignment permits the assignor to re-acquire rights if certain conditions are met -- for example, the assignee stops exploiting the work, or the assignor buys it back for an agreed-upon fee. In any case, you should review the agreement in case it does include a reversion provision. (By the way, there may be confusing tax implications if an assignor reclaims rights after categorizing the assignment payment as capital gains and not as ordinary income.)
  • The employer breached the assignment agreement and you can use that breach as the basis for terminating the assignment. We're not sure if you're ready for this approach as it usually involves litigation, but if you can prove a material breach of the assignment agreement,  the rights may be re-assigned to you. You're most likely to achieve this outcome if you can demonstrate that the company induced you to enter the agreement based on fraud. You may also be able to argue that the company materially breached the agreement and failed to cure the breach -- for example, never paid royalties or provided accountings. But this is a tough strategy to implement because a court faced with a failure to pay royalties may allow the company to retain the ownership, provided that damages are paid to the assignor (you).
Keep in mind that if you do get the rights back, you'll also need the cooperation of the company in registering the assignment (whether it is copyright or patent rights) and in transferring rights back to you.