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Simple English definitions for legal terms
instance and expense test
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A quick definition of instance and expense test:
The instance-and-expense test is a way for courts to decide who owns the rights to a product. If someone makes something while working for someone else, the owner of the company usually owns the rights to it. But if someone is hired to make something and uses their own resources, they might own the rights instead. The test looks at whether the company told the person what to make and paid for it, or if the person made it on their own and got paid later. If the company wins the test, they own the product unless there's a different agreement.
A more thorough explanation:
The instance-and-expense test is a legal standard used by courts to determine whether a product was a work made for hire. This means that the ownership rights of the work are determined by who paid for it and who had control over its creation. If a work is deemed made for hire, the hiring party owns the rights associated with the work, including intellectual property ownership.
The instance-and-expense test has two parts:
- Instance: This refers to the extent to which the hiring party provided the reason for, participated in, or had the authority to supervise the creation of the work. If the hiring party provided the creative direction or had the authority to supervise the work, it is more likely to be deemed a work made for hire. If the creator created the work on their own initiative, it is less likely to be deemed a work made for hire.
- Expense: This refers to the use of the hiring party's resources to create the work. If the hiring party paid for the work with a lump sum, it is more likely to be deemed a work made for hire. If the creator is compensated through royalties or a profit-sharing system, it is less likely to be deemed a work made for hire.
If the hiring party satisfies the instance and expense test, they will be deemed the owner of the work, unless there is evidence of an agreement to the contrary.
An example of the instance-and-expense test is a company hiring a graphic designer to create a logo. If the company provides the designer with specific instructions on what they want the logo to look like and has the authority to supervise the designer's work, this satisfies the instance prong of the test. If the company pays the designer a lump sum for the work, this satisfies the expense prong of the test. Therefore, the logo would be deemed a work made for hire, and the company would own the rights to the logo.