By Larina Alton and Gabriel Ramirez-Hernandez
Disney’s latest fight to protect its intellectual property interests is no Mickey Mouse effort. The company, which owns Marvel Entertainment, is suing to assert its exclusive ownership rights after a group of five creators filed notices to terminate transfers and licenses of copyright-protected work in an attempt to retain the valuable copyrights. Among the Marvel characters playing starring roles in the legal battle are Spider-Man, Thor, Black Widow, Hawkeye, Ant-Man, and Iron Man.
Of course, Disney has been fighting for years to protect its intellectual property interests. Perhaps its most memorable effort to protect the rights to its content and creations was to pursue the Copyright Term Extension Act of 1998, colloquially referred to as the Mickey Mouse Protection Act, which extended the length of copyright protection to the life of the author plus 70 years—an increase of two decades. The current dispute over the Marvel characters involves creators Lawrence D. Lieber, the estates of Steve Ditko and Don Heck, and the heirs of Don Rico and Gene Colan. Under the Copyright Act, a creator may terminate assignment of a work after 35 years by providing at least two years’ notice.1
A creator seeking to exercise termination rights must serve notices of termination on the grantees of any assignment for the copyright-protected work and file notices of termination with the U.S. Copyright Office, stating the effective date of termination. In a successful termination action, rights that were transferred under the grant return to the creator. The creator can then renegotiate terms of a previous agreement, enter into new agreements, or otherwise make use of the copyright-protected work as the creator wishes. A creator cannot, however, terminate a “work made for hire” under this mechanism.
In response to the notices of termination that the creators filed with the U.S. Copyright Office, Disney filed complaints in U.S. District Court for the Southern District of New York seeking injunctive relief to declare the termination notices invalid and requesting attorney fees and costs. Disney alleged that any of the creators’ contributions were made at Marvel’s “instance and expense,” that Marvel retained creative control over the contributions, and that Marvel paid per page for the contributions. For these reasons, Disney argues that the works were created as works made for hire, and that consequently, the notices of termination are invalid.
Section 101 of the Copyright Act defines “work made for hire” as (1) work prepared by an employee within the scope of his or her employment, or (2) work specially ordered or commissioned for use if the parties expressly agree in a written agreement signed by both parties. The first category requires a fact-intensive inquiry guided by federal common law of agency. The U.S. Supreme Court has previously identified a non-exhaustive list of factors to assist courts in determining when a work was prepared within the scope of an employee’s employment: control over the work, control over the employee, and status and conduct of the employer.2 Although control over the work and control over the employee are factors under agency law, neither is wholly dispositive. Because the Supreme Court interpreted the legislative intent to apply the Copyright Act to a “conventional employment relationship,” less conventional employment relationships will raise challenges for both creators and assignees in asserting and defending on the work-made-for-hire basis.
Circuit courts have developed the “instance and expense” test for employment for rights vested before the 1976 Copyright Act, which considers three factors: (1) at whose instance the work was prepared, (2) whether the hiring party had the power to accept, reject, modify, or otherwise control the creation of the work, and (3) at whose expense the work was created (who bore the risk of the work’s profitability).3 Because the creators allege that their copyrights vested before 1976, the district court will apply the “instance and expense test.”4 For their part, attorneys for the creators have so far claimed that the creators were “freelancers or independent contractors, working piecemeal for car fare out of their basements,” not employees, according to the New York Times. The creators’ recent pleadings reflect this understanding, asserting that the creators were neither employees nor independent contractors, but authors who would offer completed or near-completed work to consider for potential publication. The creators recently filed their answers to the complaints, asserting that they bore the financial risk of the works because they “worked hand to mouth, at [their] own premises, using [their] own instruments and materials.”
Disney has been fighting for years to protect its intellectual property interests. Perhaps its most memorable effort to protect the rights to its content and creations was to pursue the Copyright Term Extension Act of 1998, colloquially referred to as the Mickey Mouse Protection Act.
If the creators are not “employees” under general agency law, then in order to retain its sole ownership rights, Disney must show that it has written work-for-hire or assignment agreements with them that are signed by both the creators and by Disney. So far, Disney has not asserted that such writings exist. The creators assert that the only written statement regarding ownership was not a “work for hire” agreement but an “assignment” printed the back of their checks.
Of particular note, Disney has not asserted that it had an implied license. “An implied license is created when one party (1) creates a work at another person’s request; (2) delivers the work to that person; and (3) intends that the person copy and distribute the work.”5 Although an implied license is a relatively well-developed defense to copyright infringement, its viability as a defense to copyright termination has yet to be decided by the Supreme Court. On one hand, the Copyright Act excludes assignment of nonexclusive licenses from the definition of “transfer of copyright ownership,” because the creator retains the rights in common. But on the other hand, the plain language of section 203 is arguably more expansive than the language in the copyright infringement context because it includes “the exclusive or nonexclusive grant of a transfer or license of copyright or of any right under a copyright.”6 (Emphasis added.)
In Korman v. HBC Florida, Inc., the 11th Circuit considered the case of a former employee who had written several jingles for a radio station where she worked, but had no written agreement with the station. The station argued that the jingle writer worked on “a freelance basis” and that because there was no writing expressing the duration, any implied license could not be considered “executed” under section 203. In other words, the radio station argued that section 203 did not apply to implied licenses. The 11th Circuit rejected that argument and concluded that the right to terminate applies to “all nonexclusive grants of a license” and that “nothing in the statute excludes those that are implied.”7 No circuit court has taken up the issue since Korman8 and no circuit court has reviewed these arguments in the context of section 304 (c) (covering transfers and licenses under the Copyright Term Extension Act), which employs similar language.
As these matters proceed, we can expect to see disputes related to these issues as the case progresses. With such valuable and inspiring intellectual property at issue, and Disney’s longstanding commitment to the preservation of its asserted ownership rights, the dispute could be just as entertaining as any other in the Marvel universe. At least for the lawyers.
LARINA ALTON, a registered patent attorney with the U.S. Patent and Trademark Office, is a litigation partner at Maslon LLP in Minneapolis. Her expertise includes patent, trademark, and copyright laws. larina.alton@maslon.com
GABRIEL RAMIREZ-HERNANDEZ, an attorney in Maslon’s litigation group, focuses on assisting clients in intellectual property disputes, insurance, construction, and general business litigation. gabriel.ramirez-hernandez@maslon.com
Notes
1 17 U.S.C. §§203 (general termination of transfers and licenses) and 304 (c) (termination of transfers and licenses covering extended by the Copyright Term Extension Act).
2 See Community for Creative Non-Violence v. Reid, 490 U.S. 730, 109 S.Ct. 2166 (1989) (citing to Restatement (Second) of Agency §228 (1958)).
3 See Twentieth Century Fox Film Corp. v. Entertainment Distributing, 429 F.3d 869 (9th Cir. 2005).
4 The court will apply the “instance and expense” test even though the 2nd Circuit recognizes and employs the 13 factors set forth in Reid, 490 U.S. at 737 for rights vested after the 1976 Copyright Act. Compare Marvel Characters, Inc. v. Kirby, 726 F.3d 119, 137 (2d Cir. 2013) (applying instance and expense test to rights vested before 1976), with Horror Inc. v. Miller, 15 F.4th 232, 244 (2d Cir. 2021) (applying Reid factors to rights vested after enactment of 1976 act in the course of ruling that the screenwriter for the original Friday the 13th film could reclaim the rights to his script under the termination rights of Section 203 because, among other factors, he was not paid benefits and was not treated as an employee for tax purposes).
5 Latimer v. Roaring Toyz, Inc., 601 F.3d 1224, 1235 (11th Cir. 2010).
6 17 U.S.C. §203 (a).
7 182 F.3d 1291, 1294 (11th Cir. 1999).
8 The 9th Circuit signaled approval of Korman’s interpretation of section 203 but the issue was not dispositive. Garcia v. Google, Inc., 786 F.3d 733, 743 (9th Cir. 2015) (disposing of injunctive relief for copyright infringement because plaintiff failed to establish that law clearly favored her position). One federal district court, without significant analysis, appeared to contradict Korman on this issue. See C.D.S., Inc. v. Zetler, 298 F. Supp. 3d 727, 765 (S.D.N.Y. 2018) (suggesting that an indefinite duration to an implied license precluded the creator’s rights under section 203). Because C.D.S. was recently decided in the same district in which Disney has filed for declaratory relief, its arguments contrary to Korman may have more traction there than in other forums. The 2nd Circuit recently alluded to independent contractors’ section 203 termination rights, but the defendant in that matter made no assertion that it enjoyed an implied license. Horror Inc., 15 F.4th at 256 (“In sum, Miller must be considered the author of the Screenplay, and the Act empowers him now to terminate the rights in the Screenplay that he earlier permitted the Companies.”).