WORK MADE FOR HIRE AGREEMENTS: Further Issues

IVAN HOFFMAN, B.A., J.D.


        A case out of the Ninth Circuit Court of Appeals has further refined the issues related to this area of copyright law.

        In Warren et. al. vs. Fox Family Worldwide et. al., these were the facts: Warren and one of  his companies entered into “a series of detailed written contracts” with MTM Productions (at the time of the suit, a subsidiary of Fox) regarding Warren’s composing music for the television series “Remington Steele.”  In exchange for the services of Warren, MTM would pay certain fees and royalties.  Warren filed suit against MTM and other defendants claiming infringement of copyright, breach of contract and other claims.  The defendants moved to dismiss the complaint and amended complaint on the grounds that Warren had no “standing” to bring the lawsuit since the agreements he signed were work made for hire agreements and thus he was not either the legal or the beneficial owner of the copyright in the various works.  Standing means the legal right to bring a litigation. (There were related claims against the other defendants which, for purposes of this article, I will not discuss since they do not directly bear on the issues I want to cover).  The trial court granted the motion to dismiss and this appeal followed.

        The foundational issue in terms of standing was whether Warren had any rights of copyright in the works since the United States Copyright Act, section 501 (b) states:

The legal or beneficial owner of an exclusive right under a copyright is entitled, subject to the requirements of section 411, to institute an action for any infringement of that particular right committed while he or she is the owner of it.
        Warren first argued that the various agreements did not constitute work made for hire agreements.  Since Warren was not an employee of MTM, the issue was whether the various agreements satisfied the requirements of the work made for hire provisions of the copyright law. (Read “Work Made For Hire Agreements”)

        The Court analyzed the language in the various agreements and concluded that the said language in fact satisfied those provisions including specifically that the requirement that “parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire” under section 101 of the said Copyright Act.  The Court found that the Copyright Act has “no requirement, either in the Act or the caselaw, that work-for-hire contracts include any specific wording.” In this regard, the Court cited to Playboy Enterprises vs. Dumas, which dealt with, among other issues, the legal parameters of what constitutes a sufficient writing.  For a discussion of that very interesting Playboy decision, read “Playboy and the Work Made For Hire Agreement”  The Court further found that factually, it was clear that the works were created “at the behest of MTM” and thus satisfied the requirement that works made for hire be “specially ordered or commissioned.”

        Warren further argued that because he was entitled to be paid royalties, that that made the relationship not a work made for hire.  Here again the Court cited to the Playboy decision in which that Court said that

“where the creator of the work receives royalties as payment, that method of payment generally weighs against find a work-for-hire relationship.”
        However, the Playboy Court and this Court said that this factor was “not conclusive.”  Additionally, this Court found that Warren was also paid a fixed sum “payable upon completion.”

        Further, the Court rejected the arguments of Warren that the agreements should be rescinded for breach of contract, the Court citing to another case that said that rescission is justified only if the breach “is of so material and substantial a nature that [it] affect[s] the very essence of the contract and serve[s] to defeat the object of the parties.”  The Court did not find evidence warranting any rescission including that the agreements themselves ruled the same out and the Court questioned the underlying law in that regard as well, at least as it applies to independent contractors.

        Significantly, the Court also rejected Warren’s arguments that he was the “beneficial owner” of the rights of copyright because he had a royalty participation.  Warren cited to the legislative history which gave as an example that a beneficial owner would be someone who had such a royalty arrangement.  The Court distinguished cases from other jurisdictions which had held that such a royalty participant would be a beneficial owner, saying that those other cases

did not address the payment of royalties in the context of a work-for-hire relationship, which involves not an assignment of rights, but an original vesting of all rights of authorship in the employer or “person for whom the work was prepared.” See 17 U.S.C. § 201 [emphasis supplied]
        The Court cited to another case with the same holding i.e. that being a royalty participant in a work made for hire relationship does not give that party any standing to bring a suit.

        The Court stated:

We therefore hold that because the Act [the Copyright Act] does not envision a work-for-hire arrangement as an “assignment,” but rather provides for initial vesting of all rights of authorship in the person for whom the work was prepared, a grant of royalties to a creator of a work for hire, absent an express contractual provision to the contrary, does not create a beneficial ownership interest in that creator. [emphasis supplied]
Conclusion

        As discussed in “Precise Contract Language,” it is always better to have the details of the relationship spelled out as clearly as possible.  It should always be the intention in drafting to seek to leave no open legal areas that can become the basis of legal dispute.  Even if this is never totally possible, the clearer the agreement the less chance there might be to have one or another party seek to find ambiguities, “loop holes” etc. on which to base a litigation.  Spending the time and fees to have professionally drafted agreements is thus almost always a cost effective approach.

        Thus while it is clear that the agreements in the main case discussed in this article were drafted by very experienced attorneys and thus said what they needed to say, often non-lawyers try to “save” money by “doing it themselves” and in the process, open themselves up to litigation that more than wipes out any “savings” they might have felt they achieved.  Read “The Do It Yourself Publishing Lawyer.”  And also read “Dignity for Designers” in the same regard if you are a web designer or site owner.

© Copyright 2003 Ivan Hoffman.  All Rights Reserved.

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This article is not intended as legal advice and is not legal advice.  This article is intended to provide only general, non-specific legal information.  The specific facts that apply to your matter may make the outcome different than would be anticipated by you.  This article is based on United States law.  You should consult with an attorney familiar with the issues and the laws of your country.  This article does not create any attorney client relationship.

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