Introduction
Among the most commonly litigated issues in U.S. copyright law are those related to copyright ownership.
When a copyrighted work is conceived and created by a lone author, artist, composer or programmer, with his or her own funds and equipment, the determination of initial ownership is easy. The creator is by law the "author," and as such, enjoys the benefits of ownership -- the right to license or assign the work, the rights to distribute, reproduce, transmit, adapt or change, and perform the work, and the right to sue unauthorized users for infringement.
However, when more than one person or entity is involved in the creative process, the issue becomes a bit murky, owing to different interpretations of the relevant statutes of the U.S. Copyright Act of 1976 regarding "works made for hire" and "joint works." This article will discuss those doctrines and propose some simple "preventative medicine" to help avoid litigation after the fact.
"Works Made For Hire"
A "work made for hire" is defined in section 101 of the Copyright Act as:
- a work prepared by an employee within the scope of his or her employment; or
- a work specially ordered or commissioned for use as a contribution to a collective work, as part of a motion picture or other audiovisual work, as a translation, as a supplementary work, as a compilation, as an instructional text, as a test, as answer material for a test, as an atlas, or as a sound recording, if the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire.
Although the language of the statute seems relatively straightforward, it has been the subject of countless lawsuits, finally leading to Supreme Court resolution of the interpretation of Section 101(1) in Community for Creative Non-Violence v. Reid in 1989. At the heart of the problem was the definition of "employee." Prior to the Supreme Court's decision, lower courts had different interpretations of the statute and different definitions for the term "employee."
The definition of "employee" was all-important. If the artist or author were considered to be an "employee," he or she would not have any rights in and to the work as a matter of law under section 101(1) of the Copyright Act. If the artist or author were not the "employee" (and there was no a written document transferring any of the rights to the paying party), then all rights would vest with the creative party.
Legal Confusion Over Who's an "Employee"
Before the Supreme Court's resolution of the issue, the federal appellate courts had arrived at four different standards for determining whether an "employer-employee" relationship existed: (1) the right to direct and supervise test; (2) the actual control test; (3) the agency law test; and the (4) formal salaried employee test.
The "work made for hire" litigations, and most ownership litigation, for that matter, arose under section 101(1) because the parties never discussed copyright ownership during their negotiations. As is often the case, parties discuss price, type of work, delivery date, etc., but not ownership. Because section 101(2) requires a written document (and therefore is of no help in those circumstances where the parties do not sign a document), parties attempt to stretch "employee" under section 101 as much as possible.
Under the "right to direct and supervise test," as articulated by several district courts, the commissioned party was an "employee" under section 101 if the hiring party "caused the work to be made and had a right to supervise and control the creation." This test was extremely broad, for it essentially turned every commissioned project into a "work made for hire." All that was necessary was some guidance as to what kind of work was to be created. The hiring party did not even have to actually exercise the right.
Under the "actual control" test, as articulated by the U.S. Court of Appeals for the Second Circuit in Aldon Accessories Ltd. v. Speigel, Inc. and by the Seventh Circuit in Evans Newton, Inc. v. Chicago Systems Software, the commissioned party was an "employee" if the hiring party actually did exercise control, albeit minimal control. In Aldon Accessories, the commissioning party gave input and supervision regarding the design of toys; in Evans Newton, the paying party told the software programmers what was needed and what tasks the software was to accomplish. In both cases, the amount of control exercised by the parties was sufficient. This test, although slightly different from the "right to direct and supervise" test, too, had the effect of turning most commissioned works into "works made for hire." It should be noted that both of the above tests were very close to the way that "works made for hire" were treated under the earlier Copyright Act of 1909, under which there was a presumption of authorship for the paying party. In essence, most courts, for the first decade of the new Copyright Act, were operating under the wrong set of rules.
The "agency law" test was first applied by the U.S. Court of Appeals for the Fifth Circuit in 1988 in Easter Seals Society for Crippled Children and Adults v. Playboy Enterprises, a case dealing with ownership of outtakes of generic Mardi Gras footage. Although Easter Seals told the cinematographers and videographers what it wanted, the court ruled that control and supervision were not sufficient to satisfy section 101 of the current Copyright Act of 1976, and it pointed out that the proper standard was a "radical break from the 'work for hire' doctrine under the 1909 Act." The court applied factors set forth in the Restatement of Agency -- an academic treatise -- to determine whether there was a sufficient nexus, or connection, between the commissioning party and the commissioned party. The agency law test was also applied by the D.C. Circuit in Community for Creative Non-Violence v. Reid, the case that ultimately went to the Supreme Court.
The "formal salaried employee" test was established in 1989 by the U.S. Court of Appeals for the Ninth Circuit in Dumas v. Gommerman, a case involving rights to prints made from work created by the late artist Patrick Nagel. The Ninth Circuit, in a simple and elegant approach, held that an "employee" was one who worked regular hours and received a regular salary. All others were not employees, and were to be treated under section 101(2) of the Act, that dealt with works "specially ordered or commissioned."
The Supreme Court Decides Who's an "Employee"
To resolve the confusion among the courts over the work-made-for-hire provision of the 1976 Act, the Supreme Court granted agreed to review Community for Creative Non-Violence v. Reid, in the spring of 1989. It is interesting to note that earlier in the dispute, the Supreme Court had the opportunity to review the issue, but declined to do so, thereby exacerbating the problem by delaying the time that it took for resolution.
Although Community for Creative Non-Violence v. Reid involved a non-profit organization and a sculptor, it attracted great attention because of the decision's potential impact on major industrial and commercial entities. The corporate community was concerned because the scope of the Supreme Court's decision would be extremely broad, applying to photographs, illustrations, music, film and even computer software. In addition, classification of a work as a work made for hire has profound implications, affecting not only the initial ownership rights, but also the renewal rights and the termination rights. If a work becomes a work made for hire, the commissioned party loses all copyright rights. If the work is not a work made for hire, then the commissioned creator may retain, or possibly recapture, important substantive rights.
The dispute in Reid involved the Community for Creative Non-Violence ("CCNV"), a non-profit unincorporated association dedicated to the welfare of the homeless. In 1985, CCNV decided to have a statute created to dramatize the plight of the homeless for the annual Christmastime Pageant of Peace in Washington, D.C. Mitch Snyder, a member and trustee of CCNV, and fellow CCNV members conceived the idea for the display -- a sculpture of the traditional Holy Family, with the two adult figures and the infant appearing as contemporary homeless people huddled on a street-side steam grate.
[T]he figures were to be life-sized, and the steam grate would be positioned atop a platform "pedestal," or base, within which special-effects equipment would be enclosed to emit simulated "steam" through the grid to swirl about the figures. also settled upon a title for the work-- "Third World America"-- and a legend for the pedestal: "and still there is no room at the inn."
Snyder contacted the artist, James Earl Reid, to create the figures. Reid and Snyder spoke by telephone twice. Reid agreed to sculpt the figures for Third World America and a shopping cart for their belongings. Reid initially proposed that the statue be cast in bronze, but later suggested that the work be made from a less costly and more manageable material known as "Design Cast 62." The parties agreed that the project would cost no more than $15,000, and Reid agreed to donate his artistic services. There was no written agreement and neither party, at any time before the creation of the work, mentioned copyright.
After receiving an advance of $3,000, Reid presented Snyder with several sketches of the proposed design of the statue. Throughout November and December of 1985, Reid worked exclusively on the statue, assisted at various times by people who were paid by CCNV. On several occasions, members of CCNV visited Reid to check on his progress and to coordinate CCNV's construction of the base. In addition, CCNV rejected Reid's proposal to use suitcases or shopping bags to hold the family's personal belongings, insisting instead on a shopping cart. There was no discussion of ownership of the copyright at anytime during the visits of CCNV members or during creation of the statue. In the months that followed, the relationship between the parties deteriorated and a dispute regarding ownership of the statue developed.
After a two-day trial, the district court in Washington, D.C., determined that the statue was a work made for hire and that Snyder, as trustee for CCNV, was the exclusive owner of the copyright. The district court adopted an "actual control" standard and reasoned that Reid was a statutory "employee" under the work-made-for-hire provision of the 1976 Copyright Act because Snyder and CCNV "conceived the idea of a contemporary Nativity scene to contrast with the national celebration of the season," and "directed enough of Reid's effort to assure that, in the end, he had produced what they, not he, wanted."
The Court of Appeals for the District of Columbia Circuit correctly reversed and ruled that Third World America was not a work made for hire. Applying the factors specified under Easter Seal's agency test, the court determined that Reid was not an "employee" under section 101(1) of the work made for hire provision, but rather an independent contractor. Regarding section 101(2) of the work-made-for-hire definition, the court of appeals reasoned that since a statue did not fall within one of the enumerated categories, and since there was no written instrument signed by the parties, the statue could not be classified as a work made for hire under that subsection. However, the court of appeals sent the case back to the trial court to determine the factual issue of whether there was sufficient creative collaboration by both parties for the work to be classified as a joint work.
The Supreme Court affirmed the decision of the court of appeals. It analyzed and rejected both the "right to direct and supervise" test and the "actual control" test, and instead followed the analytical lead established by the Easter Seal case and continued by the Dumas case and the court of appeals.
How to Determine Who's an "Employee"
The Supreme Court examined the 1976 Act's legislative history at length and concluded that:
The Act, which almost completely revised existing copyright law, was the product of two decades of negotiation by representatives of creators and copyright-using industries, supervised by the Copyright Office and, to a lesser extent, by Congress. Despite the lengthy history of negotiation and compromise which ultimately produced the Act, two things remained constant. First, interested parties and Congress at all times viewed works by employees and commissioned works by independent contractors as separate entities. Second, in using the term "employee," the parties and Congress meant to refer to a hired party in a conventional employment relationship.
The Court also noted that "Congress' paramount goal in revising the 1976 Act [was to enhance] predictability and certainty of copyright ownership." Consistent with that goal, the Court reasoned that "In a 'copyright marketplace,' the parties negotiate with an expectation that one of them will own the copyright in the completed work.... With that expectation, the parties at the outset can settle on relevant contractual terms, such as the price for the work and the ownership of reproduction rights." The Court then set forth standards for determining what is a work made for hire, using the rationale articulated in Easter Seal.
Under this approach, in determining a work made for hire, the threshold test is whether the work was prepared by an "employee" or an independent contractor. This threshold determination of the status of the hired party or artist is to be analyzed under the principles of agency law. In making the determination whether the party commissioned is within an agency relationship, the court considered the following factors: (1) the skill required; (2) the source of the instrumentalities and tools used in the project; (3) the location of the work; (4) the duration of the relationship between the parties; (5) whether the hiring party has the right to assign additional projects to the hired party; (6) the extent of the hired party's discretion over when and how long to work; (7) the method of payment; (8) the hired party's role in hiring and paying assistants; (9) whether the work is part of the regular business of the hiring party; (10) whether the hiring party is in the business preformed by the hired party; (11) the provision of employee benefits; and (12) the tax treatment of the hired party. No single one of the factors is determinative. Courts should consider them and make a balancing decision. In later cases, these factors have been referred to as the Reid factors. After C.C.N.V. v. Reid, the rights would belong to the creative parties, in the absence of an agreement to the contrary.
Although the Supreme Court set out the factors under agency law that are to be applied to determine whether an "employer-employee" relationship exists, there has still been litigation in the 1990s under section 101(1) in which courts have had to balance the factors, such as Aymes v. Bonelli and Carter v. Helmsley-Spear in the Southern District of New York and in the Second Circuit.
If the hired party is an "employee" under the law of agency, then section 101(1) of the work-made-for-hire provision applies, and the analysis is complete -- the work is a work made for hire. If the hired party is an independent contractor, then section 101(2) applies. Under section 101(2), there are two elements that must be met: (1) the work must fall into one of the ten enumerated categories and (2) there must be a signed written instrument stating that the work is a work made for hire. This is very important. A work can only be a "work made for hire" if the work falls into one of the categories; merely calling any work a "work made for hire" will not suffice.
For example, in Lulirama Ltd.,Inc. v. Axcess Broadcast Services, Inc., the work in question was a commercial jingle. The U.S. Court of Appeals for the Fifth Circuit, in 1997, reversed a ruling in favor of the paying party because "jingles" are not in the ten enumerated categories in section 101(2). The appeals court then sent the case back to the trial court to determine whether any of the jingles were created to be part of a television advertisement. If so, those jingles could be "works made for hire" as part of "a motion picture or other audiovisual work," one of the specified categories.
The categories were the result of much lobbying and compromise by certain industries. Note that "motion pictures and other audiovisual works" is a category, but plays and other theatrical productions, statues, paintings, and other works of fine art are not. "Sound recordings," the newest category, was added in late 1999.
The Importance of a Written Agreement
In addition to the previous conflict regarding who is an "employee" for purposes of the "work made for hire" doctrine under section 101(1), another split of authority exists regarding the sufficiency and timing of the writing under section 101(2). In Schiller & Schmidt v. Nordisco Corp., the U.S. Court of Appeals for the Seventh Circuit ruled that in order for a work to be classified as a "work made for hire," the written agreement must be signed before the work is created. The agreement may not be signed as a convenient afterthought to give the commissioning party authorship rights.
The issue has recently been considered in other jurisdictions as well. In Magnuson v. Video Yesteryear, the U.S. Court of Appeals for the Ninth Circuit ruled that a subsequent writing may meet the writing requirement, provided that the writing reflects the true intent of the parties and there is no dispute between the parties as to the terms. The court ruled, in essence, that it is the meeting of the minds of the parties, and not reduction to writing, that must be contemporaneous. The Second Circuit, in Dumas v. Playboy Enterprises, held that statements written on a check after completion of a work may or may not qualify as sufficient based upon the intent of the parties.
Joint Ownership of Copyrighted Works
The 1976 Act defines a joint work as one "prepared by two or more authors with the intention that their contributions be merged into inseparable or interdependent parts of a unitary whole."
Despite this seemingly straightforward language, there is currently a split between the U.S. Courts of Appeals for the Second and Seventh Circuits on the one hand and the Third Circuit on the other hand regarding the requirements necessary for a work to be a "joint work." It should also be noted that there is a disagreement between the authors of two of the major copyright treatises, Nimmer and Goldstein, regarding whether the contributions of the collaborators must be independently copyrightable. Nimmer believes that there is not such requirement; Goldstein writes that for there to be a "joint work," the contributions of the collaborators must be able to stand alone as copyrightable material.
In Childress v. Taylor, a 1991 case involving a play about the African-American comedienne "Moms Mabley," the U.S. Court of Appeals for the Second Circuit ruled that for a work to be a "joint work," two requirements must be met. First, the contributions of each party involved must be "original," and, second, the parties must have the intent to be joint authors. The court based its holding that "originality" is required in large part upon Justice O'Connor's holding in the Feist case that "originality" is a constitutional requirement, and that an "author" is, therefore, one who contributes original expression.
Despite the fact that most cases ruled that "intent" meant just what the statute said -- "intention that their contributions be merged into inseparable or interdependent parts of a unitary whole" -- the U.S. Court of Appeals for the Second Circuit ruled that it was more "in the spirit of copyright" to require an intent to be joint authors. In the Childress case, because the parties -- an actress and a playwright -- could not agree on copyright ownership of the play they wrote together, the court found that the intent prong was not satisfied, and, therefore, the resultant work was not a "joint work." By concentrating on the "intent" prong, the court felt that it did not have to address whether the actresses' contributions were independently copyrightable.
In Erickson v. Trinity Theatre, Inc., also involving a playwright and an actress, the U.S. Court of Appeals for the Seventh Circuit followed the two-pronged test articulated above in Childress v. Taylor. The court ruled that the actors were not "joint authors" of the plays and affirmed the district court's injunction of performances of the plays or displays of videotapes of the plays. It was clear from the facts of the case that the playwright and the actors did not share the "intent" to be joint authors. Regarding the copyrightability of the contributions issue, the court followed the lead articulated by Professor Paul Goldstein that the individual contributions of collaborators must themselves be independently copyrightable and followed by the Second Circuit:
We agree with the Childress court's observation that the copyrightability test "strikes an appropriate balance in the domains of both copyright and contract law.".... Section 201(b) of the [Copyright] Act allows any person to contract with another to create a work and endow the employer with authorship status under the Act.... A contributor of uncopyrightable ideas may also protect her rights to compensation under the Act by contract. Section 201(d) of the Act provides in part that any of the exclusive ownership rights comprised in a copyright may be transferred from the person who satisfied the requirements for obtaining the copyright to one who contracts for such rights.... Thus, anyone who contributes to the creation of a work, either as patron, employer, or contributor of ideas, has the opportunity to share in the profits produced by the work through an appropriate contractual arrangement.... In order for the plays to be joint works under the Act, Trinity also must show that actors' contributions to Ms. Erickson's work could have been independently copyrighted. Trinity cannot establish this requirement for any of the above works. The actors, on the whole, could not identify specific contributions that they had made to Ms. Erickson's works. Even when Michael Osborne was able to do so, the contributions that he identified were not independently copyrightable. Ideas, refinements, and suggestions, standing alone, are not the subjects of copyrights. Consequently, Trinity cannot establish the two necessary elements of the copyrightability test and its claims must fail. Trinity cannot establish joint authorship to the plays at issue.
Childress was also followed in a 1998 Second Circuit case, Thomson v. Larson, a case involving the successful Broadway musical, "RENT." In Larson, the New York Theatre Workshop ("NYTW"), a non-profit theatre company in the East Village. hired Lynn Thomson, a professor of playwrighting at NYU, to assist with clarifying the storyline of the musical. Thomson was to be paid the sum of $2,000 "in full consideration of the services to be rendered". Thomson was to "provide dramaturgical assistance and research to the playwright and director" and would also receive billing credit in the show as "Dramaturg." The contract was silent with respect to copyright ownership. In rejecting Thomson's joint authorship claim, the Second Circuit held that Larson "never regarded himself as a joint author with Mr. Thomson." Therefore, the Childress intent requirement was not met.
While the Second Circuit and the Seventh Circuit are in concert regarding the standards for the formation of a "joint work," other courts have seen the matter differently. The Third Circuit, for example, in Andrien v. Southern Ocean County Chamber of Commerce, rejected the requirement articulated in both Childress and Erickson that each author or collaborator contribute material that is independently copyrightable. The court cited the Nimmer treatise for the proposition that joint authors need not make independently copyrightable contributions.
It should also be noted that because there are two elements that must be satisfied, the failure to meet either of them takes the work out of being classified as a "joint work." In both Childress and Larson, the Second Circuit based its holding on the failure to meet the "intent" requirement. The court did not address a major problem based upon the facts of those cases -- a scenario that will inevitably lead to more "joint works" litigation. If there is no "intent," and the parties do, indeed, contribute copyrightable material, what are the respective rights of the parties? May each collaborator enjoin the other from commercializing the final combined work? May one party demand that his/her contributions be excised from the combined work? Should one party have a limited implied non-exclusive license to use the work for its intended purpose? These questions were all left unanswered, and will surely arise in the future.
Why "Authorship" is Better Than Ownership by Assignment
It should be noted that rights in both the "work made for hire" situations and "joint work" situations, rights in the work may be obtained by the respective parties by an assignment of rights. While under section 204 of the Copyright Act, the transfer must be in writing, an agreement or memorandum signed by the transferor after the fact is valid. The question immediately arises, why not attempt to get rights by assignment? As a last resource, it is desirable to not having any rights.
However, there are advantages to being the "author" as opposed to an owner by way of assignment. The primary advantage is not having to worry about the termination provisions of sections 203 and 304 of the Act. Under section 203, which applies to works created after January 1, 1978, a grantor may terminate the grant during a five-year window thirty-five years after the grant is made. The termination may be effectuated even despite express language to the contrary in the agreement. Under section 304, which applies to works created prior to January 1, 1978, the grantor has two opportunities to terminate the transfer. The first one is at the end of the fifty-sixth year after copyright was obtained. The second opportunity is at the end of the seventy-fifth year of protection. This fits in with the 1909 Act's duration of potential protection for ninety-five years after the enactment of the recent Sonny Bono Copyright Term Extension Act.
If one is the "author," one need not worry about being bothered by termination at some time in the future. Parties, therefore, attempt to get rights as "authors" instead of by assignment.
Conclusion
In most of the cases involving ownership disputes, there was nothing in writing between the parties. Therefore, in the "work made for hire cases," the paying party attempted to stretch the definition of "employee." In "joint work" cases, the lack of a writing between the parties has led courts to conclude that there was no evidence of "intent to be joint authors." It is surprising that when parties agree as to price, nature of the work, nature of contributions, project schedule, etc., that that do not also reach an agreement with respect to copyright ownership. Not discussing it will not make the future problem go away.
In all situations in which a creative party is either working with or for someone else, the most prudent thing is to put everything in writing. Make sure that all parties understand the rights and obligations. In "work made for hire" situations, it is often good to recite the specific category, if it applies, right in the agreement. For example, "The parties agree that the chapters being written by the author are contributions to collective works, and as such are 'works made for hire' under section 101(2) of the Copyright Act." A "belt and suspenders" approach would be to have the work assignable as a back-up in the event that a court finds that the work does not fit into one of the categories. Adding a clause such as the following should cover that contingency: "The parties agree that the work is a 'work made for hire.' In the event that a court should deem the work to not be a 'work made for hire,' Party A immediately upon such determination assigns to Party B all right, title, and interest in and to the work."
In the "joint work" cases, a writing is important for several reasons. First, a writing clearly shows whether or not there is an intent to be joint owners. In addition, there are other reasons for agreeing to things in a written instrument. Joint owners are essentially "tenants-in-common." Each one may commercialize the work and grant non-exclusive licenses to the work without the permission of the other joint author(s). However, assignments and exclusive licenses can only be done with the permission of the others. Without an agreement, the parties own the work in pro-rata share. With a work created by two people, if one party contributed 80% of the material and effort and the other collaborator contributed only 20%, in the absence of an agreement, the two of them are 50/50 owners. An 80/20 share can be agreed to by contract. Also, because each party is free to license the work, if one desires to only license the work to PBS, and the other is willing to license the work to Jerry Springer there is nothing that the party with the higher standards can do. Parties can agree to restrictions at the same time that they are agreeing to ownership or royalty shares.
In any arrangement, it is always important to establish the respective rights, obligations, and restrictions of the parties. In creative endeavors, because of the way that the courts are interpreting the relevant statutes, and the consequent problems that ensue, it is especially important to agree up front and put it in writing.