Nos. 10–56194, 10–56129, 2012 WL 3764704 (9th Cir. Aug. 31, 2012)

In US Auto Parts Network Inc. v. Parts Geek LLC, Nos. 10–56194, 10–56129, 2012 WL 3764704 (9th Cir. Aug. 31, 2012), the Ninth Circuit ruled that the modifications to a computer program made by an employee were owned by the employer pursuant to the “work for hire” doctrine. Both parties sell car parts to consumers online. Before working for Partsbin, a company once owned by the defendants, an employee created “Manager2000,” a computer program designed to help the defendant process customer orders over the internet. Partsbin subsequently hired the programmer, who, on his own initiative, made several “modifications and enhancements” to Manager2000, updating the program to fit with the new business needs of the growing company. There was no record of a written agreement between the programmer and the company regarding ownership rights to those modifications. Later, plaintiff US Auto Parts (“USAP”) purchased Partsbin, including all its intellectual property. USAP hired the programmer, but he subsequently left and began to work for a new company started by the defendants, Parts Geek. The programmer developed another program for Parts Geek that performed substantially the same functions as Manager2000, namely fulfilling online customer orders. USAP sued alleging that this new program infringed USAP’s copyrights in Manager2000.

At issue was whether USAP owned copyrights to the alterations to Manager2000 under the work for hire doctrine. This doctrine carves out an exception to the rule that copyright ownership initially vests with the author of the work. Under the doctrine, a work is made “for hire” and if the work was prepared by the employee within the scope of his or her employment. Unless the parties agree in writing otherwise, copyrights to works made for hire are owned by the employer, not the employee.

The court found that the programmer owned copyrights to the original program, created before he was hired by Partsbin. However, the subsequent modifications to Manager2000 constituted a derivative work. A derivative work is a work based upon a preexisting work that recasts, transforms, or adapts the preexisting work and are independently copyrightable. Partsbin owned the copyrights in these derivative works because the changes were made while the programmer was employed by Partsbin within the scope of his employment and the parties did not agree in writing otherwise. Such copyrights were transferred to USAP as part of its acquisition of Partsbin. Therefore, the district court erred in granting summary judgment on the ground that USAP could not show any such ownership interest as a matter of law.