legal - Copyright ownership: paid by hour vs. paid by project

I am a freelance web designer. I am working out a contract with a client to revamp an existing site and freshen the design.

In my contract I have some language which I adapted from the AIGA boilerplate about copyright. The gist is this:

• I am developing a design for Client. I will create three comp designs. Client chooses one and we revise it until Client is happy with it. Three rounds of revisions are included; anything after that is paid by the hour on top of the original estimate.


• I own the copyright to all the designs. When Client submits the final payment for the entire website, Client owns the copyright to the finished site and its design.


• If Client cancels the project before it's finished, I retain the copyright to the unfinished, revised chosen design, unless we specifically agree that I will sell it to him.


• I estimate the site will cost $X. I submit invoices at various milestones in the project. I keep track of my work hourly, and Client pays for the work I've done (that is, if I estimate the job will cost $X because it will take me Y hours, and it takes me Y + 3, I will charge for three more hours of my time; if it takes Y - three, I will charge for three hours less).

The client came back with revisions about copyright, saying he thinks that he owns the copyright to all the comps "because it's my site."

I asked a non-designer friend who's a reasonably high corporate muckety-muck, and he thinks that the copyright hinges on how I'm being paid:

If I'm setting up the contract as hourly, then it is "work-for-hire" (even though I don't have that anywhere in the contract) and Client owns all the copyright to all three comps. If I'm setting up the contract as "work for project" (Client pays $X for finished website, however many hours it takes), then I would own the comp copyrights.

This doesn't make sense to me. Why would Client get the rights to two (or more) designs which he isn't using? If we agreed that he was going to pay for all three designs, that's fine, but two of them he didn't like. Why should he get to keep them and use them with some other designer?

Does basing my fee on hours worked somehow make this job "work for hire"? Does "hourly work for hire" somehow change copyright?

(ETA Client and I are both in the U.S.)

Answer

I don't really understand. If the contract states you retain copyright to all preliminary designs, sketches, and mock-ups It doesn't matter how you invoice. The contract states what the client does and does not (or will and will not) own.

It's traditional for freelance designers to retain all rights to preliminary work unless it's otherwise stated in the contract. Pay me in seashells every 20 minutes... the contract still states what is being transferred.

In the strictest sense of the term, all freelance is work-for-hire. Primarily because the work would not be instigated without the client. Where the difference really lies is WHERE the work is completed - On your equipment with your personal tools or at their place of business with their tools. If you use their tools, they do traditionally own everything.

Edited to add a couple supporting links:

FindLaw.com Not specific to this situation, but a great article about general guidelines.

AIGA-SF This is avery good Q&A about this issue

About.com eh.. it's About.com.. take it with a grain of salt but it does support the traditional view of ownership.