## Facts

- Avtec Systems, Inc. provided space-related computer services to the federal government, including satellite-orbit simulations.
- Jeffrey G. Peiffer worked for Avtec as a programmer; his duties included implementing computer simulations, specifically satellite-orbit simulations.
- In 1985, Peiffer developed a satellite-orbit simulation program (the “.309” version).
- Peiffer demonstrated the program to Avtec personnel and later used it during his performance appraisal to show initiative.
- Avtec personnel suggested modifications to improve the program’s usefulness as a marketing tool; Peiffer billed some time for those enhancements to an Avtec account.
- Peiffer received a bonus tied to demonstrating the program to help win a contract and made similar demonstrations to other clients.
- Avtec marketed the program as unique to Avtec, but the parties did not memorialize ownership terms.
- Peiffer later developed a further version for commercialization with Kisak–Kisak, Inc. and Paul Kisak, leading Avtec to sue for copyright infringement and related state-law claims.

## Issues

1. Whether Avtec owned the copyright in the “.309” program as a work made for hire because it was prepared by an employee within the scope of employment under 17 U.S.C. § 201(b).
2. If Avtec owned the copyright, whether Peiffer’s later commercial version infringed that copyright.
3. Whether Peiffer misappropriated Avtec trade secrets or breached fiduciary duties in connection with developing and commercializing the later version.
4. Whether the district court applied the correct legal standard for determining “scope of employment” in the work-for-hire analysis.

## Decision

- The Fourth Circuit affirmed in part, vacated in part, and remanded.
- The court held that the district court used an incorrect legal standard in evaluating whether the program was created within the scope of Peiffer’s employment for work-for-hire purposes.
- The court vacated the determinations that Avtec owned the copyright under a work-for-hire theory and that Peiffer’s later version infringed, and remanded for application of the correct test.
- The court vacated aspects of the rulings on trade secret misappropriation and related relief for reconsideration under proper legal and factual analysis.
- The court affirmed the finding of breach of fiduciary duty in certain respects but vacated the damages analysis and remanded.

## Legal Principles

- Under 17 U.S.C. § 201(b), an employer owns a work made for hire when it is prepared by an employee within the scope of employment.
- “Scope of employment” is assessed under general agency principles requiring all of the following:
  - the work is of the kind the employee is employed to perform;
  - the work occurs substantially within authorized time and space limits; and
  - the work is actuated, at least in part, by a purpose to serve the employer.
- All three scope-of-employment elements must be satisfied; failure of any element defeats a work-for-hire claim.
- Copyright ownership and infringement determinations in employee-created software disputes often require fact-intensive application of the scope-of-employment test, rather than reliance on generalized job-relatedness or later workplace use.

## Conclusion

The Fourth Circuit required a strict, three-part agency-law test to decide whether an employee-created software program is a work made for hire, vacated the district court’s ownership and infringement rulings that rested on an incorrect standard, and remanded for reconsideration along with related trade-secret and fiduciary-duty remedies.


Avtec Sys., Inc. v. Peiffer, 21 F.3d 568 (4th Cir. 1994)