Churches and Other Not-For-Profits Face Unique Issues When Determining Who Owns the Intellectual Property They Create

Churches and other not-for-profits are filled with creative people that are…well….creating. Ministers are writing sermons and books, music leaders are writing beautiful choruses, graphics people and web designers are illustrating messages and the website with fantastic and sophisticated creations. These items that are created as the organization fulfills its mission are works of intellectual property. Creative works like the ones described above are subject to copyright law. Who owns this intellectual property? The organization or the individual that created it?

The answers to these questions can be found in federal copyright law (with a little tax thrown in for good measure). Why does it matter?  It matters because IP created by church or non-profit employees can be extremely valuable. In the bankruptcy case involving the Crystal Cathedral and Rev. Robert Schuller, Rev. Schuller has held up the disposition of the bankruptcy by claiming that the estate owes him millions of dollars for his books and sermons, intellectual property that he says rightfully belongs to him instead of the church. Rev. Schuller claims that the church exceed the rights he granted to it in the IP and its current use of the IP amounts to copyright infringement. According to Dr. Schuller, he assigned his interest to the church for free but only on the condition that the church would use it to secure his retirement benefits. Because the bankruptcy filing puts his retirement benefits in jeopardy, he wants those copyrights (or the value of the copyrights) returned to him. He’s seeking immediate payments in excess of $5 million dollars, the return of the IP, and unspecified damages. While the Crystal Cathedral Bankruptcy raises issues that are beyond the scope of this blog post, it does underscore how valuable the ownership of copyrights can be and why it is important for churches and other charitable organizations to recognize and address these issues on the front end.

The ownership rules are pretty straightforward. Generally, if an employee creates intellectual property on the job, it belongs to the employer under the “work made for hire” doctrine. After all, the employer was paying the employee’s salary, providing him or her with a place to work, a computer, access to research, etc. However, in the absence of a specific policy on this point or a requirement that the employee agree that all IP created on the job belongs to the employer, these issues can get murky very quickly. Does that result change if the worker is characterized as an independent contractor and not an employee?  (For the purpose of this type of analysis, courts tend to be liberal in finding independent contractors to be “employees.”) Also, in today’s modern workplace, employees work at home, at all hours of the night, at Starbucks, on their iPhones, using the internet for research. How do we know when things were created by an “employee” “at work” any more?

To avoid ambiguity and misunderstandings, the safest course is to have a written policy, acknowledged by the worker, that  IP created in the course of the individual fulfilling his or her job functions belongs to the church or the not-for-profit. This simple agreement on the front end can save many thousands of dollars of litigation down the road once the parties are fighting over IP that turns out to be extremely valuable, ala The Purpose Driven Life books. If the employee wants to create content “off the clock,” it should be done somewhere other than the workplace, on a computer that was not supplied by the employer. If the employee–a minister for example– wants to use content created outside his job responsibilities in his sermons, he should only do so with an express acknowledgement by the church that the content is owned by the employee and is an exception to the work made for hire doctrine.

Unlike for-profit employers, churches and other non-profits may face unique issues when determining who owns intellectual property. What if the church wants to give that content or IP that should otherwise belong to the church to the minister? After all, ministers work hard for what is sometimes very little compensation. Shouldn’t he or she be able to supplement a minister’s salary with royalties from content he or she created on the job? The answer to this question is “probably not.” Because churches are not-for-profit corporations, they are subject to strict rules on the handling of their financial affairs. Giving valuable IP to the creating employee might seem “kind,” it could be viewed by the IRS as allowing “inurement,” or improperly funneling assets of the church to a particular individual. If the IRS deemed a gift of the IP to be an “inurement,” it could jeopardize the church’s tax exempt status or even result in tax liabilities or penalties for the minister or church board members. While I am not aware of a church ever losing its tax-exempt status for this reason, it is certainly a possible argument and risk, which the church should take seriously. It is advisable that a church or not-for-profit have a competent attorney review its policies, procedures, and agreements related to its intellectual property to minimize the risk and exposure related to this sort of transaction. It is critical that the church’s or non-profits’ creativity be used to further its mission, not as an obstacle that could lead to confusion, expense, and litigation later.

2 responses to “Churches and Other Not-For-Profits Face Unique Issues When Determining Who Owns the Intellectual Property They Create

  1. Schuller is a fooler; a crook, greedy and self-serving; serves him right…

    • Regardless of your feelings on Dr. Schuller personally, he created some valuable IP. I haven’t seen the agreements controlling the transfer of the IP to the church but the agreements should have addressed what would happen in the event of bankruptcy and how that would affect the transfer. If they did not, the bankruptcy creates ambiguity and invites expensive litigation, all of which lowers the likelihood of creditors getting paid in full.

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