CHAPTER 13 COPYRIGHT OWNERSHIP & WORK FOR HIRE AGREEMENTS PART 1: INTRODUCTION Copyright in and of itself is an ownership right in, for example, a photograph. As we have discussed earlier, only the copyright holder (owner) of the work can grant permission to use the work. So, an important question is: Who owns the work and has the right to grant permission of the work? Normally, when someone creates a work of art, writes a book, or composes a song, the creator owns the copyright in that art, book or song. For example, if George writes a book about the White House, George owns the copyright in his book. If Martha takes photographs of her cherry farm, she owns those photographs.
But, who owns the copyright in cases where there are more than one person involved in the creation of an artistic work? For example, what if George & Martha write a book together about wooden teeth? What if George is an employee of Cherry Tree Book Publishing Company and they ask him to write a book about difficulties of being six-feet tall? What if George takes video of inside the White House and lets Cherry Tree Production Company use it as part of a film about the presidents?
These tangled arrangements create several exceptions to the presumption that the creator owns the copyright in the work. The most common exception to the normal copyright rules is known as “works made for hire” or simply “work-for-hire” in the context of employer relationships. This chapter will explain the various types of copyright ownership, with a focus on copyright ownership as a “work-for-hire.” It will also touch on joint ownership, implied non-exclusive licenses, and assignment of copyright, and the writing requirements for all of the above. 2|Page
Remember, any decision about your rights should be made with your attorney. TIP: If a photograph or book is a “work-for-hire� then the party paying for the work usually owns it.
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CHAPTER 13 COPYRIGHT OWNERSHIP & WORK FOR HIRE AGREEMENTS PART 2: WHAT IS COPYRIGHT OWNERSHIP? A copyright is a legal property right one has in photographs, art, books, music, and artistic work. There are six exclusive copyrights and the most famous of which is the right to prevent other people from making a copy of your work without your permission. The owner of the copyright has the right to do any and all of the following rights:
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(1) to reproduce the copyrighted work in copies or phonorecords; (2) to prepare derivative works based upon the copyrighted work; (3) to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending; (4) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and motion pictures and other audiovisual works, to perform the copyrighted work publicly; (5) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and pictorial, graphic, or sculptural works, including the individual images of a motion picture or other audiovisual work, to display the copyrighted work publicly; and (6) in the case of sound recordings, to perform the copyrighted work publicly by means of a digital audio transmission. As the owner of copyright in a work, the owner may assign, transfer, or sell all or one of these rights to another person or party. A copyright owner may also license his work to another party, allowing it to be used for a particular purpose while still retaining the ownership of the copyright itself. Many businesses make 5|Page
a substantial portion of their revenue from licensing their copyrights. For example, a photographer may license a photograph to Nike for a major international shoe campaign for hundreds of thousands of dollars. A songwriter may license its hit single to a film company for use it in its new blockbuster film. A start-up software company may license its programs for use by a major computer software operating system. To do any one of those things, you have to be sure you are contracting with the correct copyright owner…otherwise, you are left holding no rights in the content and possibly facing a copyright infringement lawsuit. Determining proper copyright ownership is very important in business transactions, mergers, licenses, estate distribution, and other legal matters. This is why work-for-hire is an important concept. If an individual does not own the copyright, licensing it from him is useless. Also, businesses can lose a lot of money in licensing deals if they do not properly own the copyrights in works created by their employees.
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CHAPTER 13 COPYRIGHT OWNERSHIP & WORK FOR HIRE AGREEMENTS PART 3: WHO IS PRESUMED TO OWN THE COPYRIGHT? The law loves presumptions because it often makes interpreting the law easier and more consistent. Under the 7|Page
Copyright Act of 1909, courts generally presumed parties that paid a person for the work owned the copyright in the work. Courts reasoned that the party footing the bill for a creation should be entitled to its copyright. Courts today sometimes apply the old copyright law if a work was created before 1976. The revisions to the Copyright Act in 1976 changed these presumptions of ownership. Now, copyright ownership is presumed in the author - our friends George and Martha from the example discussed earlier. No more do companies automatically own the copyright because they foot the bill. Let’s consider how this applies. If in 1968, Abraham Lincoln Enterprises hires George to create some architectural drawings for a memorial sculpture, Abraham Lincoln Enterprises is presumed to own the copyright under the Copyright Act of 1909. On the other hand, if the arrangement is made in 1988, George would own the copyright if he is an independent contractor. Abraham Lincoln Enterprises may own the copyright if it is found that George was an employee acting within the scope of employment when creating the designs. It is important to consider when the work was created to determine who is presumed to be the author. Wait, I thought there was a presumption of ownership by George after 1976? There is, but there are exceptions to every rule, such as the work-for-hire doctrine. TIP: When looking at who is presumed to own the copyright, it is important to consider when the work was created for which presumptions to apply. 8|Page
CHAPTER 13 COPYRIGHT OWNERSHIP & WORK FOR HIRE AGREEMENTS PART 4: WHAT IS A WORK FOR HIRE? Copyright law defines a “work-for-hire” in two different ways: 1) a work-for-hire is a work prepared by an employee acting within the scope of their employment; OR 2) a work for hire is a work ordered or commissioned for use in one of nine categories if the parties expressly agree in writing that the work is a “work-for-hire.” 9|Page
What does that mean? A work-for-hire arises in the context of an employee / employer relationship for any type of work when it is part of your job duties. For certain types of works that were specially ordered or commissioned, however, you must have a special written agreement calling it a “work-for-hire.� The types of specially ordered works that require a written agreement to be a work-for-hire are: [1] a contribution to a collective work, [2] as a part of a motion picture or other audiovisual work, [3] as a translation, [4] as a supplementary work to a prior work by another author (such as forewords, afterwords, pictorial illustrations, maps, or indexes), [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
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There are two types of work-for-hire arrangements where the company owns the artwork, contrary to the presumptions of copyright law. Work Prepared By Employee First, the ownership is taken away from the author by operation of law if he is acting as an employee in the scope of his employment. So, when George toils away at his desk writing his book about the White House, Cherry Tree Book Publishing Company owns the copyright in the book George is writing. This is the most basic type of “work-for-hire.” You see it commonly today with software companies owning the code written by employees during their workday. Special Work Under An Agreement The second type of “work-for-hire” arises by agreement and is dependent on the type of work. For example, collective works, motion pictures, compilations, and tests usually involve lots of different people, writings, and jobs. The full list of nine types of work is listed above. What do they have in common? They are all common types of work that involve multiple authors and people working on the material. As a company, how can you be sure you own the rights in a work prepared by an employee or someone you commission? As an individual, how can you be sure your employer does not inadvertently get ownership of something created on your own time? We will provide tips throughout this 11 | P a g e
chapter, but a lot of it turns on the relationship between the parties. Let’s first look at who is an employee. TIP: When you hire someone to create something you may need a “work-for-hire” agreement. A sample is included at the end of this chapter.
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CHAPTER 13 COPYRIGHT OWNERSHIP & WORK FOR HIRE AGREEMENTS PART 5: EMPLOYEE VERSUS NON-EMPLOYEE You commute to the office every day in rush hour traffic, but are you an employee? While it may seem like an easy question, it is not always the case. According to the U.S. Labor Department up to 30 percent of companies incorrectly classify employees as independent contractors. Employee versus independent contractor status is an important question for copyright ownership, taxes, medical and dental benefits, and more. When one commonly thinks of an employee, you think of a person who works for a company at an office building and receives a W-2 tax form. In contrast, when one thinks of an 13 | P a g e
“independent contractor,” it is usually as someone that is working for a company or another person for a specific project or length of time and they could work at home, at a coffee shop, or the company office building. But, under copyright, it is not so simple. Work-for-hire occurs (and a company owns the copyright) when a work is prepared by an employee acting within the scope of employment. For a while in copyright law, the question of whether someone was an employee or an independent contractor was muddled. In the copyright world, the definition of “employee” differs from the common understanding of the term. In the copyright context, an employee is reviewed under the common law of agency. Agency makes the employer responsible for and benefit from the employee’s actions. Origins Of The Employee Test: Community for Creative Non-Violence v. Reid After many years, the Supreme Court applied the law of agency in the copyright context by providing 12 factors to determine if someone is an employee or an independent contractor (non-employee). Reid remains the definitive case on the question of employee vs. independent contractor. 490 U.S. 730 (1989). The Reid Court had to consider the following facts. In 1985, the Community for Creative Non-Violence (CCNV), a non-profit company, wanted to participate in Washington, 14 | P a g e
D.C.’s, annual Christmastime Pageant of Peace by sponsoring a display that sought to dramatize the plight of the homeless. They wanted to create: [A] sculpture of a modern Nativity scene in which, in lieu of the traditional Holy Family, the two adult figures and the infant would appear as contemporary homeless people huddled on a streetside steam grate. The family was to be black (most of the homeless in Washington being black); the 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. They 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.’”
CCNV asked Baltimore sculptor James Earl Reid to 15 | P a g e
sculpt the three figures. CCNV would make the steam grate and pedestal. Reid offered to donate his time and CCNV agreed to pay for the materials. CCNV and Reid never discussed copyright, nor did they have a written agreement. Reid completed the sculpture in time for the 1985 Christmastime Pageant of Peace. Reid named the sculpture “Third World America.” The next January, CCNV returned the sculpture to Reid for minor repairs. A few weeks later, CCNV decided to take the sculpture on a tour, but Reid objected because he believed the sculpture would not survive the trip. Reid refused to return the sculpture and CCNV demanded it back, both sides claiming copyright in the sculpture. As you might guess, a lawsuit commenced over who owned the sculpture. The trial court found that CCNV was the owner of the sculpture because CCNV was the “motivating force in the statue’s production.” The idea for the statute came from CCNV and CCNV directed enough of Reid’s work to ensure he produced what CCNV wanted. The appellate court overruled the trial court, because under agency law, Reid was an independent contractor, the court concluded that the work was not “prepared by an employee.” When the U.S. Supreme Court finally heard the case, it took the opportunity to clarify the difference between an employee and an independent contractor, and the resulting rights from each relationship. 16 | P a g e
There are two ways a work can be a “work-for-hire” the Court observed: one way is for the work to be a creation of an employee within the scope of their employment, and the other way is for a special type of work to be created by an independent contractor who agrees in writing to make a workfor-hire. TIP: It is worth noting that a work-for-hire agreement can apply to any type of work, per Reid. Although it’s a bit different than the text of the statute, it is common practice. To tell if someone is an employee or an independent contractor, you consider the scope of the “hiring party’s right to control the manner and means by which the product is accomplished.” The Court provided 12 factors to consider in evaluating the right to control and if someone is an employee or independent contractor: 1. The skill required to create the work; 2. The source of the instruments and tools to create the work; 3. The location of the work (ie: where the work was performed); 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; 17 | P a g e
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 business; 11. The provision of employee benefits; and 12. The tax treatment of the hired party. TIP: Use the 12 factors to make a checklist applying each to your situation. At the end weigh all the factors together to determine if they are in favor of the creator or the hiring party. Here is how the Court applied its 12-factor test: FACTOR
FACTS
The “hiring party's right to control the manner and means by which the product is accomplished."
CCNV articulated the subject and composition, supplied models, occasionally supervised the work and constructed part of the sculpture.
Factor Favors: CCNV Reid was a sculptor, “a skilled occupation” to the Court.
1. The skill required to create the work
Factor Favors: REID 2. The source of the instrumentalities and tools
Reid supplied his own tools for the work.
Factor Favors: REID 3. The location of the work
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Reid’s studio in Baltimore. The distance made daily supervision “practically impossible.”
Factor Favors: REID 4. The duration of the relationship between the parties
CCNV retained Reid for less than two months. The court considered this “a relatively short” period.
Factor Favors: REID 5. Whether the hiring party has the right to assign additional projects to the hired party
CCNV had “no right to assign additional projects to Reid.”
Factor Favors: REID 6. The extent of the hired party’s discretion over when and how long to work
CCNV only gave Reid a deadline for completing the sculpture. As a result, Reid “had absolute freedom to decide when and how long to work.”
Factor Favors: REID 7. The method of payment
CCNV paid Reid “$15,000, a sum dependent on ‘completion of a specific job, a method by which independent contractors are often compensated.”
Factor Favors: REID 8. The hired party’s role in hiring and paying assistants
Reid had “total discretion in hiring and paying assistants.”
Factor Favors: REID
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9. Whether the work is part of the regular business of the hiring party
CCNV was not in the “regular business” of creating sculptures.
Factor Favors: REID 10. Whether the hiring party is in business
CCNV “is not a business at all,” but instead a nonprofit.
Factor Favors: REID 11. The provision of employee benefits
CCNV did not pay or provide for any employee benefits, contributions to unemployment insurance, or contributions to workers’ compensation for Reid, or for Reid’s assistants.
Factor Favors: REID 12. The tax treatment of the hired party
CCNV did not pay payroll or Social Security taxes for Reid or Reid’s assistants.
Factor Favors: REID FINAL SCORE REID: 12
CCNV: 1
WINNER: REID! Applying these factors, the Court found Reid was an independent contractor because the majority of the factors favored Reid. Although CCNV directed Reid’s work to ensure he made the sculpture to CCNV’s specifications, this direction was insufficient to make Reid an employee.
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As a result, CCNV did not own the copyright of Third World America under the “work-for-hire� doctrine. One final note about this case: although the Court found CCNV was not the author of Third World America, the Court remanded the case back to the trial court to determine if CCNV could be a joint author of the sculpture. If CCNV was a joint author, it would be entitled to being a co-owner of the copyright in the sculpture. We will talk about joint ownership later in this chapter. After all that, the two parties reached an agreement. Reid would be recognized as the sole author of Third World America. CCNV would be the sole owner of the original sculpture. Reid would own all rights in respect to threedimensional reproductions of the sculpture, but both CCNV and Reid would be co-owners of the rights to two-dimensional reproductions of the sculpture. Community for Creative NonViolence v. Reid, 1991 U.S. Dist. Lexis 21020, 1991 WL 415523, (D.D.C. Jan. 7, 1991). TIP: When in doubt, write it out! Put the ownership agreement in writing to clarify for later. Better to be safe, than sorry.
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CHAPTER 13 COPYRIGHT OWNERSHIP & WORK FOR HIRE AGREEMENTS PART 6: APPLYING THE REID FACTORS TO EMPLOYEES The 12-factor test enumerated in Reid can be applied in various ways depending upon the specific situation of the relationship between the parties. Due to the sheer number of factors involved, it can be a very confusing and time-consuming inquiry to determine if the creator is an employee or independent contractor. Over the years, courts have routinely applied the Reid factors in cases determining copyright ownership. The following case examples give you an idea of how your specific 22 | P a g e
arrangement may affect copyright ownership for certain types of jobs and works of art. 1.
Magazine Photographers
The Third Circuit had the opportunity to review the relationship between a photographer and a magazine in Marco v. Accent Pub. Co., Inc., 969 F.2d 1547 (3rd Cir. 1992).
Accent Publishing hired Ed Marco, an experienced photographer, to take still life photographs of jewelry for Accent Magazine, a trade journal for the costume jewelry industry. After Marco and Accent parted ways, there was a disagreement over ownership of these photos. Here is how the Third Circuit applied the Reid factors:
FACTOR Generally: The hiring party’s right to control the manner and means by which the product is accomplished.
FACTS
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The majority of time, Marco worked on still-lifes without any supervision. On the few times live models were used, Accent’s Art Director would be present to pose the models. If Accent was not satisfied with the photographs they retained the right to
have Marco reshoot to photos. Accent “supplied jewelry, props, models, sketches intended to describe the exact composition of the photographs, and, at some sessions, an Art Director.” When the Art Director was present, however, his contributions were limited.
Factor Favors: LEANS ACCENT, but not dispositive. Marco had ten years’ experience and a Bachelor of Fine Arts from the Philadelphia College of Art. While Marco was not Ansel Adams, he wasn’t an untrained clerk “snapping mug shots with an instamatic.”
1. The skill required
Factor Favors: MARCO 2. The source of the instrumentalities and tools
Marco provided the photography equipment; Accent provided the jewelry and the props.
Factor Favors: INCONCLUSIVE 3. The location of the work
Marco shot the pictures in his studio.
Factor Favors: MARCO 4. The duration of the relationship between the parties
About six months. Marco made images for “about six consecutive [monthly] issues of the magazine and then for one or two later issues. He thus worked during every month except one over the course of his business with Accent.” Marco did not have a regular schedule or hours.
Factor Favors: MARCO 5. Whether the hiring party has the right to assign additional projects to the hired party
Accent had no right to assign more work to Marco. Accent’s right to reshoot is only a right to final approval of the photograph.
Factor Favors: MARCO 6. The extent of the hired party’s discretion over when and how long to work
“Marco shot the pictures in his own studio on his own time, subject to Accent’s deadlines.” Deadlines do not, however, “alter an independent contractor’s discretion over work hours.”
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7. The method of payment
Marco paid by the job, resulting in Marco receiving about $450 per issue/per month.
Factor Favors: MARCO 8. The hired party’s role in hiring and paying assistants
Accent picked the models, but there was no evidence who chose the assistants.
Factor Favors: INCONCLUSIVE 9. Whether the work is part of the regular business of the hiring party
Yes. Accent is a trade magazine that “regularly publishes photographs of its own conception.”
Factor Favors: ACCENT 10. Whether the hiring party is in business
Yes. Accent is a business.
Factor Favors: ACCENT 11. The provision employee benefits
of
No. Accent did not pay employee benefits.
Factor Favors: MARCO 12. The tax treatment of the hired party
No. Accent did not withhold taxes; Marco paid his own taxes.
Factor Favors: MARCO FINAL SCORE Factor Favors Factor Favors ACCENT: 3 MARCO: 8
WINNER: MARCO! On appeal, the Third Circuit Court of Appeals overruled the trial court and found Marco was an independent contractor because: “A magazine publisher’s regular practice of commissioning photographs of its own conception does not create an employment relationship with an experienced photographer 25 | P a g e
who uses his own equipment; who works at his own studio, on days and times of his choosing, without photography assistants hired by the publisher; and who receives payment without income tax withheld, without employee benefits, for discrete assignments rather than for hour or periodic work.� In other words, Marco WAS NOT AN EMPLOYEE and owned the copyrights in his photographs.
TIP: It takes more than just the payment of money for services rendered to make someone an employee.
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2.
Performers
Super Bowl XXXVIII was a great game. Back in February, 2004, the New England Patriots beat the Carolina Panthers 32 to 29 on a field goal while the final seconds ticked away. Although it was a thrilling game, the Patriot’s final drive was not the reason most people remember the game. That honor belongs to the Halftime Show when Justin Timberlake exposed Janet Jackson’s breast, later termed a “wardrobe malfunction.” The Federal Communications Commission (FCC) fined CBS, the broadcaster of Super Bowl XXXVIII, for exposing America to Janet Jackson’s breast and claimed that CBS was responsible for the actions of Jackson and Timberlake because they were “employees” during the Halftime Show. In Chapter 5 we discussed who was liable, or “on the hook” for damages relating to copyright infringement. An employer is vicariously liable for damages committed by their employee within the course and scope of the employee’s employment. Trying to avoid liability for the Halftime Show, CBS argued that Timberlake and Jackson were not employees, but instead independent contractors. Considering the factors for an employee compared to independent contractors, the Third Circuit Court of Appeals determined that only three factors suggested that Timberlake 27 | P a g e
and Jackson were employees of CBS. CBS Corp v. F.C.C., 535 F.3d 167 (3rd Cir. 2008). The Third Circuit had a difficult time determining whether CBS had the right to control the manner and means by which the product is accomplished, ie: the actual live dance performance. CBS supervised the Halftime Show and had the right to approve all aspects of the show’s performance, but this control did not extend to all aspects of the performer’s work. For example, the performers “provided their own choreography.” CBS reviewed the performers’ choice of sets and wardrobes, but “the performers retained discretion to make those choices in the first instance and provided some of their own materials.” But in the end, even having extensive control does not necessarily make someone an employee. Here’s the play-by-play:
FACTOR 1. The skill required
FACTS A lot of skill. “[T]he skill required of a performer hired to sing and dance as the headlining act for the Halftime Show…is substantial even relative to the job of a general entertainer, which is itself a skilled occupation.
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4. The duration of the relationship between the parties
Short. Brief, one-time performance during the Halftime Show.
Factor Favors: 7. The method of payment
One-time, lump-sum contractual payments…rather than by salaries or other similar forms of remittances…
Factor Favors: 8. The hired party’s role in hiring and paying assistants
Jackson and Timberlake “selected and hired their own choreographers, backup dancers, and other assistants without any involvement on the part of CBS.”
Factor Favors: 9. Whether the work is part of the regular business of the hiring party
Yes. CBS regularly produces shows for national broadcast.
Factor Favors: 10. Whether the hiring party is in business
Yes. CBS is in business.
Factor Favors: 11. The provision employee benefits
of
No. CBS did not pay Jackson or Timberlake employee benefits.
Factor Favors: 12. The tax treatment of the hired party
No. CBS paid no employment tax, which would be required by federal law if Jackson and Timberlake were performers.
Factor Favors: FINAL SCORE Factor Favors Factor Favors CBS: 6 FCC: 3 29 | P a g e
Timberlake and Jackson WERE NOT EMPLOYEES OF CBS. As shown above, the FCC did not pay employment taxes on the performers, did not provide them benefits, did not select assistant performers, paid Jackson & Timberlake in a one-time lump sum payment, the skill was extremely specialized and the duration of the relationship was extremely brief. As a result, “the relevant factors here weigh heavily in favor of a determination that Jackson and Timberlake were independent contractors rather than employees of CBS.” In the grand scheme of things, this meant that CBS was not liable for the FCC violations that Timberlake and Jackson may have committed since they were not employees of CBS. This saves CBS a whole lot of money, to say the least. There was also a policy rationale behind the Third Circuit’s findings. Under the FCC’s rationale, all band members “contracted to play a one-song set on a talk show or a ‘oneshow-only’ televised concert special presumably would be employees of the broadcaster. These performers – who frequently promote their work through brief contractual relationships with media outlets – would be ‘employees’ of dozens of employers every year.” Treating each short-term performer as a work-for-hire would cause a tangled web in the employment tax and liability realms. It would also cause television broadcasters to reconsider hiring performers for live programming if they were held liable for any offensive content provided by the performer, which in 30 | P a g e
turn would limit artistic performances and undermine the purpose of the Copyright Act to promote the arts. TIP: Short-term specialty performers are more likely considered independent contractors. 3.
Computer Programmers
Many companies and inventors nowadays work in the computer programming and software manufacture fields. With the rise of smartphones and portable computers, there is more and more demand for software “apps.� Small computer start-up companies are popping up everywhere to fill this demand. Since the majority of computer programming work can be done from just about anywhere, the tangled web of employee vs. independent contractor becomes more precarious. In the case of JustMed, Inc. v Byce, a small compter start-up had an idea to create software for a hands-free digital audio larynx, basically voice software. 600 F.3d 1118 (9th Cir. 2010). Both Mr. Joel Just and Mr. Michael Byce came up with the idea together on vacation. They worked on the project together. Later, Byce had some family difficulties that stopped his work on the project and Just incorporated as JustMed. JustMed hired a software designer who authored the code for a few years until he resigned and was replaced by Byce. Byce, however, did not work at the JustMed offices. Instead, Byce worked from his home in Idaho and corresponded with JustMed via phone and email. Byce set his own hours and occasionally met with JustMed in Oregon, Idaho, or somewhere in between. 31 | P a g e
JustMed provided Byce with the original code and other materials, such as an example voice box, schematics, and data sheets, to test the software. Although there was no written employment agreement between the parties and no tax withholding form (until years later), Byce was included on the company profile brochure and had JustMed business cards referring to him as the “Director of Research and Development” and the “Director of Engineering.” As far as pay, Byce received shares of company stock, similar in practice to other start-ups in the industry. In 2005, Byce became concerned about his finances and requested payment from JustMed, which issued 3 checks as payment in May, June, and July of 2005, and Byce filled out a tax form. Although based on the 12 Reid factors, it appears that Byce may be an independent contractor since he made his own hours, did not have taxes withheld, and did not receive payment, the Ninth Circuit found that Byce was actually an employee! Here is how the Ninth Circuit reviewed the factors:
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FACTOR
FACTS
1. The skill required to create the work
Computer programming is a skilled profession
Factor Favors: Independent Contractor (Byce) 2. The source of the instrumentalities and tools
JustMed provided code, example voice box, and schematics.
Factor Favors: Employee (JustMed) 3. The location of the work
Byce worked from home and set his own hours, but this was not particularly relevant to a start-up computer programming company.
Factor Favors: Inconclusive 4. The duration of the relationship between the parties
Parties contemplated a relationship of indefinite duration since there was no end date for the relationship or specific method of determining a final product.
Factor Favors: Employee (JustMed) 5. Whether the hiring party has the right to assign additional projects to the hired party
Byce did other projects for JustMed, such as demonstrating the unit at tradeshows, updating the company website, and his formal title with JustMed.
Factor Favors: Employee (JustMed) 6. The extent of the hired party’s discretion over when and how long to work
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Byce mostly controlled when and how he worked, conducting his software programming at home in Idaho. But, the business model of a software start-up does not require the project be competed in a particular manner or that the company continually oversee the work.
Factor Favors: Inconclusive 7. The method of payment
Byce was paid a regular monthly salary in the same way as other JustMed employees, even though much of the salary came in the form of stock.
Factor Favors: Employee (JustMed) 8. The hired party’s role in hiring and paying assistants
Not really an issue here…
Factor Favors: 9. Whether the work is part of the regular business of the hiring party
JustMed’s primary business was the design of this audio software and thus, Byce was integral to JustMed’s primary business.
Factor Favors: Employee (JustMed) 10. Whether the hiring party is in business
JustMed was a business.
Factor Favors: Employee (JustMed) 11. The provision of employee benefits
JustMed did not pay Byce benefits.
Factor Favors: Independent Contractor (Byce) 12. The tax treatment of the hired party
Byce did not complete W-4 forms until toward the end of the arrangement.
Factor Favors: Independent Contractor (Byce)
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FINAL SCORE Factor Favors Byce: 3
Factor Favors JustMed: 6
WINNER: JustMed! As you can see, many of the factors were split between an employee and an independent contractor relationship. The Ninth Circuit reasoned, however, that this tax and benefit treatment was most likely attributable to the start-up nature of the business and, due to that fact, JustMed conducted its business more informally than an established business might. The Court found that Byce was treated similarly to other employees, including with the payment in stock options. Simply because a business is a start-up, “should not make the company more susceptible to losing control over software integral to its product.� 600 F.3d at 1128. Programmers contracting with start-ups should be cautious about the arrangement between the parties. Simply because you get paid in stock options does not mean that there is not a work-for-hire employment relationship. Start-ups can feel secure paying programmers in stock options while retaining copyright in their software, but only if that is common practice within the industry and within the company itself.
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CHAPTER 13 COPYRIGHT OWNERSHIP &WORK FOR HIRE AGREEMENTS PART 7: TAKE-AWAYS FROM THE 12-FACTOR EMPLOYEE TEST As discussed in Part 5, the 12-factor test can get complicated, to say the least. Since no one factor is determinative, it really is a balancing act among all the factors and the total arrangement between the parties. It can be time-consuming to chart out the 12-factors every day when trying to run a business or create beautiful artwork. Here are a few main points to remember and review if they exist in your present relationship:
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1. Deadlines do not equal discretion over the work. 2. Reshoots or do-overs are not the right to assign more work. 3. The higher the degree of skill and experience required to make the work, the higher the likelihood of an independent contractor relationship…and thus ownership by the creator. 4. No tax or benefits paid to the creator, the higher the likelihood of independent contractor relationship. 5. The shorter the duration of the arrangement, the higher the likelihood of independent contractor relationship. 6. If the type of work is outside the regular course of business of the employer, the higher the likelihood of an independent contractor relationship. 7. Payment for services can include stock options, especially in cases of start-up companies. 8. Just because something is created on your own time, does not mean it is outside the scope of your employment. TIP: No one factor is determinative, but there are some things to look out for.
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CHAPTER 13 COPYRIGHT OWNERSHIP & WORK FOR HIRE AGREEMENTS PART 8: “SCOPE OF EMPLOYMENT” AS EMPLOYEE WORK-FOR-HIRE Now that you have figured out if you are an employee or independent contractor, the next question is: are you acting within the scope of your employment?
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Although this seems straightforward, actions performed outside of work can sometimes still be actions within the scope of your employment. There is a three-part test for whether an employee’s actions are within their scope of employment: 1) the action/conduct is within the kind the employee is employed to perform; 2) the action/conduct occurs substantially within the authorized time and space limits; and 3) the action/conduct is spurred for the purpose of serving the employer. All three factors have to be present for an action to be within an employee’s “scope of employment.” For example, if a computer engineer working for a software company develops a software program in his free time away from work this could theoretically be within the employee’s “scope of employment.” This type of situation happened to Charles Roeslin, an employee of the District of Columbia’s Department of Employment Services (“D.O.E.S.”). Roeslin developed a software program on his own time and his employer later 39 | P a g e
claimed it owned the copyright. Roeslin v. District of Columbia, 921 F.Supp. 793 (D.D.C. 1995). Roeslin was hired by D.O.E.S. as a Labor Economist. Roeslin was not a computer programmer and was not expected to do any computer programming. Roeslin, however, decided to create a software system that would streamline work at D.O.E.S. With his own money, 3,000 hours of his own time, and two years of development, Roeslin completed what he called the DC-790 program. Roeslin tested the DC-790 program at D.O.E.S.. Roeslin then incorporated the program into his workplace and his fellow employees began using the DC-790 program. A few months after the DC-790 program was implemented, Roeslin learned that D.O.E.S. was telling other government agencies that the District had a proprietary interest in the program. After arguing with his supervisors about who owned the software, Roeslin registered his copyright in the DC790 program and filed suit to determine copyright ownership. Normally, when someone registers a copyright the presumption is that the person registering the copyright owns the copyright. Applying that presumption, the District had to prove that the DC-790 was a “work-for-hire” because Roeslin registered the copyright. There was no dispute that Roeslin was an employee of the District. Instead, the question before the court was whether Roeslin created the DC-790 system within the “scope of his employment.” 40 | P a g e
The court examined Roeslin’s duties as a Labor Economist applying the factors as follows: Prong 1: Was The Action/Conduct Within The Kind The Employee Is Employed To Perform? Court’s Answer: NO, because: 1) “[D]eveloping computer software is not the kind of work plaintiff was employed to perform.” 2) “Plaintiff was hired as a labor economist, not as a computer programmer.” 3) “There is no reference in [Roeslin’s] job description to computer programming; nor was his supervisor aware of whether [Roeslin] had any programming skills when he was hired.” 4) “[Roeslin] was not hired to create a computer program that would assist the entire office…” Prong 2: Did The Development Of The DC-790 System Occur “Substantially Within The Authorized Time And Space Limits?” Court’s Answer: NO, because: 1) Roeslin spent “3,000 hours outside of normal working hours creating the modules of the DC-790 system.” 2) Roeslin “did this at home using a computer he purchased with his own funds.” Prong 3: Did Roeslin Create The System, At Least In Part, In Order To Serve His Employer? 41 | P a g e
Court’s Answer: NO. 1) Roeslin created the program for two reasons: “(1) to create job opportunities for himself; and (2) to prove it could be done.” 2) While the DC-790 system benefited the District, and while this may have partly motivated Roeslin’s act of creation, Roeslin’s primary motivation in creating the DC-790 system was self-interest. 3) Additionally, “it is disingenuous for the District to initially have stated that [Roeslin] could not create the system, and now assert that [Roeslin] did so for the District’s benefit.” A party must prove all three prongs of the scope of employment test to have a work-for-hire arrangement. The District could not demonstrate that it met any of the three factors and creation of the DC-790 was NOT IN ROESLIN’S “SCOPE OF EMPLOYMENT. So copyright in the DC-790 belonged to Roeslin despite the fact that he was an employee of D.O.E.S.. Although these findings seem pretty obvious, D.O.E.S. raised several important factual examples that face software companies and other employers on a daily basis. Employers should keep an eye out for the following activities, because they alone do not make an employee’s actions within the scope of their employment. Fact 1: It did not matter that Roeslin used computers at work. Use of computers alone does not prove that computer 42 | P a g e
programming is part of the employee’s job duties or necessary to perform job duties. Many people use computers at work and they are not computer programmers because the two skills are quite different. Many people operate computers, few have the technical ability or training necessary to program them. Fact 2: Providing training on a type of skill does not necessarily bring the act within the scope of employment. Courts still look to whether the training skill is typically done by that type of work. Companies should carefully review providing extra-curricular training and educational incentives to employees that may be inside or outside the standard activities of the employee so as not to affect copyright ownership. Fact 3: Do not discourage an employee from creating a system, then allege you own the copyright. In Roeslin, the court was not impressed by the fact that the District actively discouraged Roeslin from developing the DC-790 system, then in hindsight claimed that it was within the scope of his employment. Fact 4: Allowing an employee to test its ideas and creations on the job does not mean it is within the scope of employment. The court found that although Roeslin tested each module at work and used them in the office once they were operational, the substantial amount of time spent creating the DC-790 system was done on his own time outside of the office. Another caveat of the Roeslin case is that the facts occurred in 1995, in the early years of computer programming. Numerous technology companies and start-ups have created 43 | P a g e
restrictions on their employees and language in employment agreements to prevent these types of issues from arising. Consider the differences in the Roeslin holding and the JustMed holding separated by about 15 years.
TIP: AS AN EMPLOYER: It is a good idea to incorporate workfor-hire provisions into the employment agreement, especially when there is the possibility of making products as a result of information obtained at the workplace.
TIP: AS AN EMPLOYEE: It is important to accurately track time, expenses, and materials when creating a product outside the workplace and avoid testing or implementing it at the workplace.
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CHAPTER 13 COPYRIGHT OWNERSHIP & WORK FOR HIRE AGREEMENTS PART 9: SPECIALLY ORDERED WORKS AS THE SECOND TYPE OF WORK-FOR-HIRE The second type of work-for-hire arises with specially ordered works of a certain type, if the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire. An employee within the scope of employment, discussed earlier, creates the first type of workfor-hire regardless of whether there is a writing. A specially ordered or commissioned work becomes a work-for-hire if it satisfies two things. First, the type of specially ordered or commissioned work must fall into one of nine specific categories of copyrightable works. Not just any type of work applies here. Second, there must be a written 45 | P a g e
agreement between two parties that expressly states that the work created is a work for hire. How is this different from employee works-for-hire? Unlike employee works-for-hire, these specially commissioned works require a written instrument to transfer copyright ownership to the commissioner. Unlike employee works-forhire- this writing requirement is only applicable to nine types of specially ordered or commissioned works. Let’s get started by looking at the nine types of works where this applies. 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. 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. Remember, for the above works, they must be specially ordered or commissioned. This would not apply if you independently decided to create a test or an atlas, for example. The above types of works appear pretty straightforward, but some require additional explanation.
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First, a “contribution to a collective work” would be those type works with multiple authors and contributors, such as magazines where there are columnists providing articles and artists providing illustrations as part of the full finished magazine product. Second, part of a “motion picture or other audiovisual work” would include Hollywood films, but not music songs. There has to be an element of both audio and visual. Third, a translation. That one is pretty self-explanatory. Fourth, a “supplementary work” includes “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. Examples are forewords, afterwords, pictorial illustrations, maps, charts, tables, editorial notes, musical arrangements, answer material for tests, bibliographies, appendixes, and indexes. Basically, all those things that come before or after the main meat and potatoes work.
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Fifth, a “compilation.” This would be similar to number one above since it is a work compiled of several authors and works. Sixth, an “instructional text” is a literary, pictorial, or graphic work prepared for publication and with the purpose of use in systematic instructional activities. You know, all those school textbooks… Seventh, speaking of school…tests and… Eighth, answer materials for tests are also included in this type of work-for-hire. Ninth, an atlas, which is a collection of multiple maps of multiple places. Keep in mind that an individual map would not fit into this category. Now, if your work fits into one of the above categories AND has been specially commissioned, you need to look out for who owns the work. The second prong of this type of work-for-hire requires that there be a written instrument expressly agreeing that the work is considered a work-for-hire. This means that without a writing, even if the work was specially commissioned, the artist would retain ownership of the copyright. On the contrary, if there is a writing agreeing it’s a work-for-hire, the commissioner would gain ownership of the copyright. 48 | P a g e
Remember, you can still have a work-for-hire agreement for any type of work, but the above types require one for the ownership to transfer. TIP: If the work is part of a compilation, part of a motion picture, or other of the nine categories, consider whether there is a writing sufficient to make the piece a work-for-hire transferring the ownership from the creator to the commissioner.
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CHAPTER 13 COPYRIGHT OWNERSHIP & WORK FOR HIRE AGREEMENTS PART 10: FLOWING THROUGH WORK-FOR-HIRE TYPES To help you make sense of the two types of work-forhire arrangements, we have created a flow-chart for you below.
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COPYRIGHT OWNERSHIP: EMPLOYEE VS. INDEPENDENT CONTRACTOR AUTHOR OWNED Employee
©
within scope of employment Employee outside scope of employment
©
Independent Contractor
©
with written agreement releasing rights and creation belongs to one of the 9 categories Independent Contractor no written agreement
©
Independent Contractor creation does not belong to one of the 9 categories
©
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BUSINESS OWNED
CHAPTER 13 COPYRIGHT OWNERSHIP & WORK FOR HIRE AGREEMENTS PART 11: JOINT AUTHORSHIP Remember George and Martha from our example earlier in this chapter…what if George and Martha write a book together about wooden teeth? Well, as discussed above, if George is specially ordering the work or hiring Martha to write it, the work-for-hire analysis applies. But, if George and Martha are just friends or associates, the work may be what is called a “joint authorship.” This means that George and Martha jointly own the copyright. This seems easy, but does not automatically apply in every situation. Separate original contributions are not always sufficient to support a claim of joint authorship. For example, an original contribution by a sound engineer or editor, does not always rise to the level of a copyrightable work. 53 | P a g e
A “joint work” under the Copyright Act is defined as “prepared by two or more authors with the intention that their contributions be merged into inseparable or interdependent parts of a unitary whole.” 17 U.S.C. §101. First, you need to have two or more authors. We have that prong satisfied with George and Martha. Second, they need the intention that their contributions be merged. This prong looks to what the parties thought when they entered into the relationship. If George and Martha agree that a book on wooden teeth is to be the end product, we have the required intent. If, on the other hand, George plans to have an entire book on wooden teeth but Martha wants to keep her chapters on carving teeth separate, they do not have the required intent for a joint work. Third, the intent must be that they are merged into inseparable or interdependent parts of a unitary whole. Rap artist Jay-Z faced a similar situation when a guest in his recording studio added an off-the-cuff vocal melody to a recording in progress. The court found that Jay-Z did not have the intent to share authorship with the visitor. Explaining there is a difference between the intention to share the rights of authorship and the intention only to enter into a relationship that creates a copyrightable work. Ulloa v. Universal Music & Video Dist. Corp., 303 F.Supp.29 409 (S.D.N.Y. 2004). If there is no written contract, courts look at whether each party intended that all parties would be identified as coauthors and how the parties regarded themselves in relation to work. Kaplan v. Vincent, 937 F.Supp.307 (S.D.N.Y. 1996). 54 | P a g e
The Second Circuit, which includes New York, in addition to the intent of the parties, also requires that each individual contribution must be independently copyrightable. Design Options, Inc. v. BellePointe, Inc., 940 F.Sup. 86 (S.D.N.Y. 1996). In other words, each piece must have the requisite originality to be copyrightable. This takes us back to the sound engineer who may or may not be a co-author since simply increasing the bass on a record may not be sufficient in itself to be independently copyrightable. TIP: Before creating a work with another, talk about whether the pieces will be merged into one work so to make it a joint work.
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CHAPTER 13 COPYRIGHT OWNERSHIP & WORK FOR HIRE AGREEMENTS PART 12: COPYRIGHT ASSIGNMENT If there is no agreement prior to creating a work, all is not lost. Copyright may be transferred to another party by an assignment, but it must be in writing. 17 U.S.C. ยง 204 . George and Martha are not the only ones that can have a dispute over wooden teeth. That is exactly what happened in the case of Billy-Bob Teeth, Inc. v. Novelty, Inc. when questions of copyright assignment arose. 329 F.3d 586 (7th Cir. 2003). Ugly, crooked, oversized, novelty teeth are big business. Popular for Halloween costumes and as part of the Austin 56 | P a g e
Powers film series. Friends Jonah White and Rich Bailey started creating novelty teeth as a gag sometime around 1993 and ended up with a successful business. Bailey and White began making the teeth out of a kitchen, but eventually began operating as BillyBob Teeth, Inc. in 1996 with White and Bailey each owning 50%. Novelty began selling infringing copies of the teeth and Billy-Bob, Inc. initiated the present suit. As mentioned in the introduction, this case turned around who was the rightful owner of the copyright in the fake teeth. Billy-Bob Teeth, Inc. obtained copyright registrations for the teeth in 1999, for teeth designed by White listing BillyBob, Inc. as the employer for hire of White. The trouble was, the teeth were created prior to the existence of the corporation. To solve that immediate problem, White signed a copyright assignment in 2001 assigning copyright in his works to BillyBob Teeth, Inc. In straightening out who owned copyright in the crooked teeth, the court first explained that Billy-Bob Teeth, Inc. could not own the works as works-for-hire since it was not in existence at the time the teeth were created. Second, the teeth were not any of the nine categories of commissioned works and there could not have been an advance agreement between BillyBob, Inc. and White that they would be commissioned works (since the corporation did not exist).
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Since they were not works for hire, was White’s assignment sufficient to transfer the copyright to Billy-Bob Teeth, Inc.? The assignment clearly listed the parties, the works at issue, and the rights being conveyed, “including but not limited to all ownership, U.S. and international copyrights…and the right to sue for past, present, and future infringement.” It also stated that the assignment of rights to Billy Bob Teeth, Inc. occurred in May 1996. White further testified that upon incorporation the copyrights were transferred to the corporation, despite the lack of a formal writing at that time. Based on all of this evidence, the Seventh Circuit found that the assignment was valid and Billy-Bob Teeth, Inc. had standing to sue Novelty for the infringement. TIP: When taking a bite out of crime, it is important to ensure that you have the proper rights, including the right to sue for infringement. If you do not have it, it can be assigned after the fact, but you may need to show prior intent to transfer.
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CHAPTER 13 COPYRIGHT OWNERSHIP & WORK FOR HIRE AGREEMENTS PART 13: WRITING REQUIREMENTS Throughout this chapter, we have been discussing different types of copyright ownership and explaining that certain types of arrangements require a writing to be valid. Remember, a specially commissioned work in one of nine special categories requires a writing to be a work-for-hire. 59 | P a g e
Other times, parties can just prepare a work-for-hire agreement to cover all their bases. So, what goes into the writing? Ideally, it’s a written contract that identifies the parties, the work at issue, payment terms, and includes the words “work-for-hire” and “assigns all rights in interest”…along with some other legalese. Less formal agreements, however, have been found sufficient to create a work-for-hire agreement. For example, let’s look at the case of the Playboy paintings. Most people are familiar with the magazine Playboy (some more than others) as a monthly publication with articles, photographs, original paintings, and other content. Playboy worked with freelance artist Patrick Nagel from 1974 to 1984 to have Nagel provide original paintings based on Playboy articles for that month’s issue. Reid factors aside, the court looked closely at the writings between the parties that appeared on the backs of checks issued in payment to Nagel over the years. Playboy Enterprises, Inc. v. Dumas, 53 F.3d 549 (2nd Cir. 1995). Playboy paid Nagel via check, each with a legend endorsement. The legends came in three different forms over the years. First, Legend A said: “By endorsement of this check, payee acknowledges payment in full for the assignment to Playboy Enterprises, Inc. of all right title 60 | P a g e
and interest to the following items [description followed]. Second, Legend B said: By endorsement, payee: acknowledges payment in full for services rendered on a workmade-for-hire basis in connection with the Work named on the face of this check and confirms ownership by Playboy Enterprises, Inc. of all right title and interest (except physical possession) including all rights of copyright, in and to the Work. Third, Legend C said: It contains the entire understanding of the parties and may not be changed except by a writing signed by both parties. By endorsement, payee acknowledges payment in full for services rendered on a workmade-for-hire basis in connection with the Work named on the face of this check and confirms ownership by Playboy Enterprises, Inc. of all right title and interest (except physical possession) including all rights of copyright, in and to the Work. Nagel endorsed and deposited the checks. These endorsed checks were the only writings signed by Nagel relating to Playboy ownership of the works. Were signed checks sufficient to transfer ownership of the work as a work-for-hire? The district court found the writing insufficient to be a work-for-hire agreement (under the 1976 Copyright Act) because they were signed after the creation of the works. The district court argued that work-for-hire agreements must be made prior to the work, otherwise they were simply transfers governed under section 204 of the Copyright Act. Based on this fact pattern, the Second Circuit overruled the district court finding that the writing requirement can be met 61 | P a g e
by a writing executed after the work is created if it confirms a prior agreement made before the creation of the work. The next question is whether the language and the writings were sufficient to create a work-for-hire agreement. Legend A was insufficient because it did not use the catchphrase work-for-hire. Use of “assignment” is not sufficient. Legends B & C were acceptable as work-for-hire agreements since they contained the explicit “work-for-hire” phrase. But, Nagel and Playboy had to show (1) that both Nagel and Playboy signed the check and (2) that this was the understanding of the parties prior to execution of the check. The evidence of prior agreement was conflicting. Industry practice was that the only rights transferred were a one-time reproduction right, but Playboy’s usual practice was the opposite. But, the parties themselves used Legends B & C consistently for a period of 5 years. The court found that Playboy drafted the checks clearly intending for the work to be a work-for-hire. Nagel’s signing and cashing the checks assumed that he consented to characterization as a work-forhire. Although endorsing the first check may not have been evidence of a prior understanding, continued endorsement of the subsequent checks inferred a pre-creation consent as a workfor-hire. The bare bones of this case are that writings on a check, if signed by both parties, can be sufficient writings to create a work-for-hire agreement. They must have the phrase “work-forhire” included in the language of the check. The parties must 62 | P a g e
have a prior intent that it is a work-for-hire if the checks are prepared after creation of the work. And the instrument must be signed by both parties. TIP: Language on a check for payment can be very important in determining rights in a work. Read a check before endorsing it. What about informal communications? The writing must be signed by both parties and have a meeting of the minds. For example, people routinely use emails to exchange documents and discuss matters. In rejecting an email exchange as a work-for-hire agreement, the court properly invalidated an email exchange because it only consisted of an offer to make the song a work-for-hire in exchange for Coca-Cola agreeing to other conditions, no meeting of the minds took place, and neither party signed an agreement (in email or elsewhere). Vergara Hermosilla v. Coca-Cola Company, 717 F. Supp. 2d 1297, 1304 (S.D.Fla. 2010). In the entertainment industry, many deals are done over lunch, so what if the parties write out their terms on a napkin. Would the writing on a napkin be enough to meet the writing requirements? Based on Vergara, if the napkin is signed by both parties, has a meeting of the minds, and includes the words “work-forhire� it is likely enough to meet the writing requirements. In other contract matters, notations on the 63 | P a g e
back of a restaurant receipt signed by both parties was sufficient to transfer ownership of land, so it stands to reason that this rule would apply to deals over lunch. See e.g. Lucy v. Zehmer, 196 Va. 493 (Sup. Ct. Va., 1954); but see Shelander v. Johnstech Intern. Corp., WL 1408068 (Ct. App. Minn., April 14, 2014)(writing on napkin did not modify agreement because was only signed by one party). What these cases teach us is that deals can be done in various forms at any time, even after a work is completed. A writing is valid, no matter what its written on, if it is in writing, signed by both parties, and there is a meeting of the minds that the agreement is a “work-for-hire.�
TIP: Both parties must sign the writing to be valid, whether it is on a check, receipt, napkin, or email.
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CHAPTER 13 COPYRIGHT OWNERSHIP & WORK FOR HIRE AGREEMENTS PART 14: IMPLIED NON-EXCLUSIVE LICENSES It has been said a lot, when it doubt, put it in writing. Writings are instrumental in determining rights in a work. Here is the trouble. Since people starting a business tend to always think that the arrangement will work out positively, they tend to overlook the need to put things in writing just in case it sours. Also, sometimes creative people are just so excited to get to work, that thy overlook all of the writing requirements to transfer. Even if there is not a writing, you can still transfer or acquire some copyright in a work, known as an “implied nonexclusive license.�
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An implied non-exclusive license looks at the intent of the parties as implied by their actions. It grants a non-exclusive license to use the work, meaning the creator can still allow others to use the work. Figuring this problem out can be like living in a horror movie… In the case of Effects Associates, Inc. v. Cohen, a special effects company brought a copyright infringement action against a filmmaker for use of his footage in a horror movie about yogurt. You can’t make this stuff up. 908 F.2d 555 (9th Cir. 1990).
In the usual Hollywood custom, Cohen and Effects Associates had a handshake deal likely created during the industry custom of “let’s do lunch.” Cohen wrote, directed, and executive produced a horror film about an alien life form that looks like frozen yogurt. Cohen hired Effects Associates to prepare special effects footage of an explosion at the evil yogurt factory. The parties never discussed who would own the copyright in the explosion sequence, but it was to be included in the finished film. Cohen was unhappy with the sequence and only paid Effects Associates half what the parties had agreed upon. 66 | P a g e
Cohen still incorporated the sequence into the final film. This is where the deal starts to melt. Cohen argued he owned the sequence as a work-for-hire. Effects Associates argued it retained ownership rights in the explosion sequence. After scolding the parties for not having an agreement, despite Cohen’s argument that everything in Hollywood is done on a handshake, the court found that what Cohen really had was an implied non-exclusive license to use the sequence and that Effects Associates retained copyright in the sequence. Here, Effects Associates created the explosion sequence at Cohen’s request, and handed it over with the intent that Cohen copy and distribute it. To find otherwise would be that Effects Associates’ contribution was only of minimal value, which did not square with Cohen’s payment of almost $56,000 for the footage. Since Effects Associates retained ownership in the copyright, it was free to license and distribute its yogurt explosion to other companies…assuming there is a market for “great gobs of alien yogurt oozing out of a defunct factory.” TIP: When creating works to be included as part of a larger work, consider whether you are granting a non-exclusive license or merging ownership of the copyright itself as a joint work.
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CHAPTER 13 COPYRIGHT OWNERSHIP & WORK FOR HIRE AGREEMENTS PART 15: THE MYTHS OF WORK-FOR-HIRE 68 | P a g e
Myth Busters No. 1
“If I pay an artist to make a sculpture, and I get them to sign a work-for-hire agreement, I own the copyright to the sculpture.� True.
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Myth Busters No. 2
“If an employee creates something on work time, the employer owns the copyright in the work.” False. While this is a factor, it is only one of the three factors of the “scope of employment” test. The test requires all three factors to be met before a work is considered within the scope of employment.
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Myth Busters No. 3
“I paid someone to write a book, I own the copyright.� False. If the person is not an employee acting within the scope of their employment, without a workfor-hire agreement, the writer retains the copyright.
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CHAPTER 13 COPYRIGHT OWNERSHIP & WORK FOR HIRE AGREEMENTS PART 16: JUST THE ESSENTIALS OF “WORK-FORHIRE” 72 | P a g e
Just the Essentials
Work-for-Hire: “Bite Sized” A “work-for-hire” can be created either 1) by an employee acting within the scope of their employment; or 2) by an independent contractor whose work is specially commissioned as one of the nine work-for-hire categories and has signed a work-for-hire agreement.
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Just the Essentials
Employee: “Bite Sized”
An employee is determined by considering the scope of the “hiring party’s right to control the manner and means by which the product is accomplished.” This can be determined by weighing the twelve factors used by the Supreme Court in Reid.
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Just the Essentials
Scope of Employment: “Bite Sized�
There is a 3-factor test to determine whether an employee is acting within their scope of employment, all of which must be present: 1) the action/conduct is within the kind the employee is employed to perform; 2) the action/conduct occurs substantially within the authorized time and space limits; and 3) the action/conduct is spurred for the purpose of serving the employer.
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Just the Essentials
Work-for-Hire Agreement: “Bite Sized� A work-for-hire agreement is an agreement between a hiring party and an independent contractor (or two similar parties) that expressly states that the work created is a work for hire.
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Just the Essentials
Specially Ordered Works: “Bite Sized”
One of the nine categories of works that require a written agreement to become a “work-forhire.” They include: [1] a contribution to a collective work, [2] as a part of a motion picture or other audiovisual work, [3] as a translation, [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.
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Just the Essentials
Supplementary Works: “Bite Sized”
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. Examples include forewords, afterwords, pictorial illustrations, maps, charts, tables, editorial notes, musical arrangements, answer material for tests, bibliographies, appendixes, and indexes.
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CHAPTER 13 COPYRIGHT OWNERSHIP & WORK FOR HIRE AGREEMENTS PART 17: SAMPLE WORK-FOR-HIRE AGREEMENT The following is a sample work-for-hire agreement provided for demonstration purposes. As always, consult with an attorney first before entering into any work-for-hire agreement.
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This is an Agreement between [NAME OF ARTIST], (hereafter “Artist”), normally doing business at [FULL ADDRESS] and [NAME OF HIRING PARTY], (hereafter “Hiring Party”), normally doing business at [FULL ADDRESS]. This Agreement covers the creation, preparation and production of [PROJECT TITLE OR DESCRIPTION] (hereafter “Artwork”), further described in [ADDENDUM] and the submission of ideas and materials therefor. Hiring Party shall pay Artist the amount of $____ in good and valuable consideration [upon satisfactory completion of PROJECT TITLE OR DESCRIPTION] [or by DATE]. Artist will deliver to Hiring Party at [DATE] the Artwork in form and content satisfactory to Hiring Party. Artist is an independent contractor and not an employee of Hiring Party. It is understood and agreed that Artwork is being developed by Artist for the sole and exclusive use of Hiring Party that shall be deemed to be the sole and exclusive owner of all right, title, and interest therein, including all copyright and proprietary rights relating thereto. All work performed by Artist on projects and all Artwork generated in connection therewith is and shall be considered as "Works Made for Hire" (as defined under the U.S. Copyright Laws) and, as such, shall be owned by and for the benefit of Hiring Party. At Hiring Party’s sole and absolute discretion, Hiring Party may make any changes in, deletions from, or additions to Artwork. Hiring Party is not under any obligation to use Artwork or derivative materials. 80 | P a g e
If for any reason, the results and proceeds of Artist's services hereunder are determined at any time not to be a work made for hire, Artist will and hereby does assign to Hiring Party all right, title and interest in such Artwork, but not limited to, all copyright and proprietary rights relating thereto. Upon request, Artist will take such steps as are necessary to enable Hiring Party to record such assignment, at Hiring Party's expense. Artist will sign, upon request, any documents needed to confirm that any specific Artwork is a Work Made for Hire and to effectuate the assignment of its rights to Hiring Party. Credit for the work shall read: credit to artist, provided that a substantial portion of Artist's work is used in Hiring Party's final product. No inadvertent failure by Hiring Party to comply with the credit line shall constitute a breach of this Agreement. Artist represents and warrants to Hiring Party that to the best of their knowledge the concepts, ideas, copy sketches, artwork, electronic files and other materials produced do not infringe on any copyright, personal or proprietary rights of others, and that they have the unencumbered right to enter into this Agreement. Artist will indemnify Hiring Party from any damage or loss, including attorney's fees, rising out of any breach of this warranty. Artist grants Hiring Party the right to issue and authorize publicity concerning Artist and to use Artist's name and approved biographical data in connection with the distribution and advertising of the project. 81 | P a g e
Any proprietary information, trade secrets and working relationships between Artist and Hiring Party and its clients must be considered strictly confidential, and may not be disclosed to any third party, either directly or indirectly. With reasonable cause, either party reserves the right to cancel this Agreement without obligation by giving 30 days written notice to the other party of the intent to terminate. In the event that either party shall be in default of its material obligations under this Agreement and shall fail to remedy such default within 60 days after receipt of written notice thereof, this Agreement shall terminate upon expiration of the 60 day period. Should Artist's commission be cancelled or postponed for any reason before the final stage, Hiring Party agrees to pay a cancellation fee based on work completed. Please indicate acceptance of the terms set forth above by signing this Agreement.
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