This September 2021 decision addresses complex aspects of Copyright Law involving both copyright ownership issues and termination rights wherein the Creator of a work can reclaim rights in an originally assigned copyright 35-40 years after the work’s assignment. The commentator has previously posted blogs discussing the importance of properly categorizing the work’s Creator as a work-for-hire under the Copyright Act. Failure to do so may result in a situation wherein the plaintiff in a copyright infringement case may actually not be the owner of the registered copyright. Under such circumstances, a copyright infringement case may be dismissed because the plaintiff, as a non-owner, may not have standing to sue for copyright infringement.
The public policy underlying the Copyright Act’s termination right under 17 U.S.C. § 203 is to give Creators a second chance when the work they licensed or sold (assigned) becomes more valuable than anticipated. Improper classification of the Creator also impacts a Creator’s termination rights because the Creator of a work-for-hire cannot invoke a termination right. Disputes over termination rights often turn on an analysis of the nature of the Creator’s relationship to the work.
The defendant in Horror (Victor Miller) was the screenplay writer of the 1980 horror movie “Friday the 13th”. The screenplay was created for Manny, Inc. which later transferred its copyright in Miller’s screenplay to Georgetown Productions, Inc. It was Georgetown Productions that registered the screenplay as a work-for-hire. The rights were later acquired by Horror, Inc. In 2016, Miller notified both the “first” company which had retained his screenplay writing services decades before and Horror, Inc. that he planned to exercise his termination rights.
Horror filed an action in the U.S. District Court of Connecticut, seeking a declaration that the screenplay was a work-for-hire by an employee and not subject to termination. The district court disagreed with Horror’s position, finding that Miller had instead been an independent contractor and the screenplay did not qualify as a work-for-hire. Horror appealed. The Second Circuit affirmed the lower court’s decision.
Employment Status Analysis
In arriving at its “independent contractor” conclusion, the Second Circuit discounted the plaintiffs’ position that Miller had been an employee at the time he wrote the screenplay. The plaintiffs’ argument focused on Miller’s membership in the Writers Guild of America (WGA) at the time he was hired to create the screenplay as grounds for his designation as an employee and the registered work’s classification as a work-for-hire. Miller’s original agreement with Manny was conducted under a collective bargaining agreement governing WHA’s writers and signatory employers like Manny.
The Second Circuit concluded that Horror wrongly relied on labor law’s framework defining “employee.” Instead, Copyright law controls the analysis; its concept of employment is grounded in the “common law of agency” and serves different purposes from labor law.
The Second Circuit relied on the Supreme Court’s 1989 seminal case of Community for Creative Non-Violence v. Reid where the High Court laid out the scope of employment framework for establishing copyright ownership under 17 U.S.C. § 102. In discussing CCNV, the Second Circuit noted that “the Copyright Act uses a more restrictive definition of employment” in order to protect authors whereas labor law construes employment broadly “to serve workers and their collective bargaining interests and establishing rights” including safety and pay rights. Thus, Miller’s membership in the WGA and Manny’s status as a signatory employer to their collective bargaining agreement did not create an employment relationship that converted the screenplay into a work-for-hire.
In determining that Miller was an independent contractor who had the right to terminate Horror’s copyright, the Second Circuit considered CCNV’s enumerated factors for establishing whether the Creator of the work was indeed an employee:
- Miller’s previous screenwriting employment and graduate degree in theater established his expertise and skill in screenwriting requiring little oversight/direction;
- Manny, Inc. never provided Miller with typical employment benefits such as health insurance of paid vacation time;
- Manny, Inc. never withheld or deducted any taxes or social security payments from the two lump sums he received for his screen-writing services.
- Nothing in Miller’s employment agreement with Manny, Inc. could be construed as granting Manny the right to assign additional projects.
- Miller was the only person credited as the screenplay writer.
Certain types of commissioned works may also qualify as a work-for-hire under the Copyright Act when the Creator is an independent contractor and not an employee but only if the Creator and the commissioning party have both signed an agreement stating that the work is a work-for-hire. Additionally, the work must fall into one of the Copyright Act’s nine enumerated classifications for this type of work-for-hire. Screenplays are not one of the enumerated classifications. Here, the agreement between Manny and Miller never specified that the screenplay would be a work-for-hire. Even if the screenplay would have qualified as one of the enumerated classifications, the absence of the required agreement eliminated any chance of establishing the screenplay as a work-for-hire under the “independent contractor” scenario.
As a result of the Second Circuit’s decision, Miller now has the right to terminate his copyright. He will presumably try to negotiate a licensing agreement seeking royalties commensurate with the movie franchise’s success.
Comments
Copyrights enjoy a long lifetime but nobody has a crystal ball. Parties who are contemplating obtaining the rights to a copyrighted work(s) should consider the money-making potential with the knowledge that the work’s Creator (including his/her estate) could seek to terminate the copyright 35-40 years into the future. Parties who are acquiring the rights as a successor-in-interest should consider the possibility of termination and determine if the work was a bona fide work-for-hire: 1) by an employee; or 2) via a “work for hire” agreement signed by both the Creator/independent contractor and the hiring party for certain classifications of works. Why? Because a “true” work-for-hire is not eligible for termination. On the other hand, independent contractors may not wish to have their work designated as a work-for-hire and instead assign the rights in return for monetary compensation to preserve their termination rights.
As the Horror decision shows, a registration which specifies a work as a work-for-hire does not necessarily make it so. Had this been a copyright infringement lawsuit brought by Horror against another party, chances are that an astute copyright infringement attorney would have challenged Horror’s ownership and standing as the owner of the registered copyright. Why? Because the Creator was never an employee. Nor would the work have likely qualified as a work-for-hire under the “independent contractor” alternative provided for under the Copyright Act.
Copyright law is complex even though at first blush it appears relatively simple due to the ease of completing a copyright registration application. However, numerous pitfalls abound for the unwary and even the issuance of a registration does not mean that the registration is absolutely immune from problems as the Horror decision demonstrates.
Copyrights can be extremely valuable intellectual property assets. Make sure you understand the pitfalls to avoid problems down the road where your ownership may be questioned or the Creator may have the right to exercise termination rights. Contact us for a complimentary consultation on your copyright matters.
WE THANK YOU READING THIS BLOG AND HOPE YOU FOUND IT INFORMATIVE. HOWEVER, THE CONTENT IS PROVIDED FOR INFORMATION ONLY AND DOES NOT CONSTITUTE LEGAL ADVICE OR AN ATTORNEY-CLIENT RELATIONSHIP.
©2021
Troy & Schwartz, LLC
Where Legal Meets Entrepreneurship™
(305) 279-4740
