instance and expense test

The instance-and-expense test is a legal standard commonly employed by courts to determine whether a product was a work made for hire. Work done by employees within the scope of their employment will generally be deemed made for hire. However, ownership rights between contractors and hiring parties may be less clear-cut. As a result, this test has important implications, because whether a work is deemed made for hire also determines who owns the rights associated with the work as well (i.e. intellectual property ownership). This test states that a work is deemed made for hire, and therefore owned by the hiring party, if it was made at the hiring party's ownership and expense. 

As the Second Circuit has explained, "instance" refers to the extent to which a hiring party provided the reason for, participated in, or had the authority to supervise the creation of the work. In particular "actual creative contributions strongly suggest that the work is made at the hiring party's instance." Notably, the presence of such authority, whether or not exercised, may be sufficient to meet this prong of the test. Conversely, if a creator creates the work of his or her own initiative, it will weigh against meeting this "instance" prong. 

Next, the "expense" prong refers to use of the hiring party's resources to create the work. Payment of a lump sum meets this prong of the test. Conversely, if a creator is compensated through royalties or a profit-sharing system, it will be indicative of a finding against a work made for hire. 

If a hiring party is able to satisfy the instance and expense test, it will be deemed the owner of the work, which can only be overcome by evidence of an agreement to the contrary. 

[Last updated in May of 2022 by the Wex Definitions Team]