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A work made for hire provision in a commercial contract converts the commissioning customer into the first author for copyright purposes in accordance with the requirements of the U.S. Copyright Act. 

A work’s status as a work made for hire affects the authorship, copyright ownership, copyright term, and termination rights in that work.

• Authorship - If a work is a work made for hire, the employer or the party that specially ordered or commissioned that work is the author of that work.
• Copyright Ownership  - If a work is made for hire, the employer or the party that specially ordered or commissioned that work is the initial owner of the copyright in the work unless the employer or the commissioning party has signed a written agreement to the contrary with the work’s creator.
• Copyright Term - The term of copyright protection in a work made for hire with an entity as the first author is 95 years from the date of publication or 120 years from the date of creation, whichever expires first. Contrast this with works authored by an individual, which have a term of the life of the author plus 70 years. The rights of an author or the author’s heirs to terminate an assignment or license do not apply to works made for hire. 

"The Developed Works are considered works made for hire owned by Customer upon their creation."

Notice how this language mirrors the statutory language, avoiding any claim that the provision is different than the statute. The language we're mirroring from the definition is: "the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire."

Customers need to be extra careful as failing to meet the requirements of work made for hire could mean that the customer does not own the copyrighted rights that it thought it owns.

• Employment status in California - Customers can be deemed employers if there is a work made for hire provision in certain circumstances. If the contract is governed by CA law and involves an individual on the other side, check with a CA employment lawyer.
• Making sure that the vendor has the right - Vendors cannot assign rights they don't have.  If the vendor has the work performed by an independent contractor and there is no assignment of the contractor's rights to the vendor, it cannot be a work made for hire. Customers can do this through warranties as to ownership or the right necessary to perform its obligations.
• Limiting it to commissioned works - Work made for hire only applies if a customer commissions the work. Customers should avoid attempting this classification for existing copyrighted works or products already in production.
• Clearly defining the scope - Customers need to pay careful attention to the  defined term and its scope. In the sample language above, Customer owns "Developed Works" as works made for hire. But what if the definition of "Developed Works" does not include all the works that the customer believes should be included.
• Limiting to covered work types - Customers should not rely on work made for hire to transfer ownership for any other kinds of intellectual property. 
• Pay attention to timing of when it is deemed a work made for hire- Customers need to make sure that the work made for hire designation occurs at creation of the work, not delivery of or payment for the product. 
• Always have a signed written agreement - The statute limits works made for hire to written agreements signed by the parties. Make sure that there is a signature when works made for hire are used.

Vendors have similar issues as the customers, but reversed.

• Minimizing scope - Vendors will want to keep the scope  as narrow as possible to avoid assigning other rights that should not have been included.
• Confirm authority to grant right in the designated works - If a vendor is designating a work as work made for hire, the vendor must ensure that it has the proper rights to make that happen. A vendor cannot assign rights it doesn't have itself.

In the end, the vendor has less risk with these provisions as the benefits of the work made for hire status generally are on the customer side.

Section 101 of the Copyright Act defines a “work made for hire” as

A. A work prepared by an employee within the scope of his or her employment or

B. A work specially ordered or commissioned for use [as one of nine categories] if the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire.

The categories in part B of the definition are: 

1. as a contribution to a collective work,
2. as a part of a motion picture or other audiovisual work,
3. as a translation,
4. 4. as a supplementary work,
5. as a compilation,
6. as an instructional text,
7. as a test,
8. as answer material for a test, or
9. as an atlas.

These are the definitions of the terms used in part B:

• A “collective work” is a work, such as a periodical, anthology, or encyclopedia, in which a number of contributions, constituting separate and independent works in themselves, are assembled into a collective whole.
• A “motion picture” is an audiovisual work consisting of a series of related images that, when shown in succession, impart an impression of motion, together with accompanying sounds, if any.
• An “audiovisual work” is a work consisting of a series of related images that are intrinsically intended to be shown by the use of machines or devices, together with accompanying sounds, if any. This definition holds regardless of the nature of the material objects in which the work is embodied.
• A “supplementary work” is a work prepared for publication as a secondary adjunct to a work by another author for the purpose of introducing, concluding, illustrating, explaining, revising, commenting upon, or assisting in the use of the other work, such as forewords, afterwords, pictorial illustrations, maps, charts, tables, editorial notes, musical arrangements, answer material for tests, bibliographies, appendixes, and indexes.
• A “compilation” is a work formed by the collection and assembling of preexisting material or data that are selected, coordinated, or arranged in such a way that the resulting work as a whole constitutes an original work of authorship.
• An “instructional text” is a literary, pictorial, or graphic work prepared for publication and intended for use in systematic instructional activities.