A Copyright Horror Story
Producers beware! A recent ruling from the Second Circuit serves as a reminder that producers’ ownership of some copyrights may be jeopardized by the Copyright Act’s reclamation provision.
Just in time for Halloween, the Court of Appeals for the Second Circuit (which encompasses New York) issued its opinion in Horror Inc. v. Miller, No. 18-3123 (2d Cir. Sept. 30 2021). The Court affirmed the lower court’s ruling that Victor Miller, who wrote the original “Friday the 13th” screenplay, could terminate his 1979 copyright grant to Horror Inc., the producer of the movie franchise, and reclaim the copyright. The district court’s ruling turned on the question of whether Miller drafted the screenplay as an employee of Horror Inc., or as an independent contractor.
Under the Copyright Act, copyright ownership initially vests with the author of a copyrighted work. Generally, this is the party who actually created the work, but in the case of a work made for hire, it is with the person for whom the work was prepared. The Copyright Act also sets out certain procedures allowing the initial author to eventually terminate the transfer of its copyright interest. Accordingly, if a work is not made for hire, the author can eventually reclaim its copyright.
A work made for hire can arise in two situations. First, a work prepared by an employee within the scope of the employment. Second, a “work specially ordered or commissioned . . . if the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire.”
In Horror, the producers conceded that the screenplay was not specially commissioned. Although the norm for Hollywood production is to execute work-for-hire agreements, the contract with Miller did not contain any express agreement regarding work-for-hire status, or any other express arrangement regarding copyright. Thus, their ownership in the screenplay rested entirely on whether Miller was an employee acting within the scope of his employment when he drafted the screenplay.
The district court rejected Miller’s status as an employee. Importantly, to make its determination, the court did not apply the tests to determine whether someone is an employee under an ordinary labor law analysis. Instead, the court invoked the general principles of agency law, and applied the multi-factorial analysis set forth in the Supreme Court’s opinion in Community for Creative Non- Violence v. Reid, 490 U.S. 730, 737 (1989).
In upholding the district court’s ruling, the Second Circuit explained that “copyright law is grounded in the common law of agency and the Reid framework serves different purposes than do the labor law concepts regarding employment relationships, there is no sound basis for using labor law to override copyright law goals.” The Court of Appeals then conducted a thorough review of Miller’s employment status. The Court affirmed the district court, reasoning that Horror Inc. only had limited control over Miller’s creative process, relied on Miller’s expertise, skill, and creativity in writing the screenplay, never provided employee benefits to Miller, never deducted taxes from Miller’s compensation, and had limited rights to assign new projects when the screenplay was complete. In short, Miller was an independent contractor, not an employee.
The Second Circuit’s opinion does not need to be a horror story for everyone. It should serve as a reminder that, when hiring someone to produce works that are subject to copyright (screenplays, books, software code, articles, etc.), the employer should expressly enter into a work-for-hire agreement, to ensure it owns the copyright from the start. But before entering into any such agreement, consult with a lawyer to ensure that the project will be considered a work made for hire.
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