Kirby/Marvel Settle - Law Surrounding "Work for Hire" Remains Unsettled

By Jacob Reiser

Last week, the Estate of Jack Kirby (the Kirby Estate) and Marvel Entertainment (Marvel) announced a settlement agreement, bringing to resolution a lawsuit that had been ongoing since 2009. The settlement came only days before the United States Supreme Court was scheduled to decide whether to accept the Kirby Estate's Petition for Writ of Certiorari (the Petition) and was a shock to those following the progress of the case. The settlement brings an end to the Kirby dispute but leaves in place bad precedent for independent contractors who want to reclaim copyrights to work they sold prior to 1978, the effective date when the Copyright Act of 1976 took effect.
Although the settlement renders the Petition moot, it is still worth discussing the issues it raised because many of those issues will likely be challenged again soon.

The Amazing Jack Kirby and The Quest To Reclaim His Works

If you are a comic book fan, you have probably heard of Jack Kirby; but if you're a human being living on planet Earth, you have definitely heard of the characters he helped create. Jack Kirby was a legendary comic book artist who played a major role in creating such enduring and popular superhero characters as Spiderman, Thor, Ironman, Hulk, The X-Men, Captain America, The Avengers and The Fantastic Four (the characters). The characters have dominated pop culture and the box office in the past decade, with no signs of slowing down, and grossed enormous sums of money for Marvel and its parent, The Walt Disney Company.

The case began when the Kirby Estate served various Marvel entities with Termination Notices, purporting to exercise its statutory termination rights under Section 304(c)(2) of the Copyright Act of 1976, for over 262 works created by Jack Kirby and published by Marvel between 1958 and 1963. The Copyright Act of 1976 grants an author, or the children of a deceased author, the right to recover an author's copyrights granted or transferred to another party by statutorily terminating the prior grant or transfer. However, this termination right does not apply to works made for hire.

In response to the Termination Notice, Marvel immediately filed suit and moved for Summary Judgment, seeking a declaration that the Kirby Estate had no termination rights because the characters were created as works made for hire, and thus never belonged to Kirby. The District Court ruled in favor of Marvel and found that the works at issue were made for hire, because they were made at Marvel's "instance and expense." Therefore, the court ruled that the Kirby Estate could not wrest back ownership of the characters because Marvel was considered under law as the statutory author. In August 2013, the Second Circuit Court of Appeals affirmed the lower court's ruling. The Kirby Estate then petitioned the Supreme Court for Certiorari. Although the Court was scheduled to hold a conference on September 29th to decide whether to hear the case, the case was settled several days before.

The Dastardly "Instance and Expense Test"

To understand the significance of the issues disputed in this case, it is necessary to briefly summarize the history of work made for hire under the Copyright Act of 1909.

Under present copyright law, the Copyright Act of 1976, an author is deemed to hold the copyright for his or her work by default unless the parties expressly agree in a written instrument that the work shall be considered a work made for hire. Yet under the old Copyright Act of 1909, the rights of a commissioned artist were less clear. Regarding works made for hire, the 1909 Act stated simply: "[t]he word author shall include an employer in the case of works made for hire" but the statute fails to define the phrase "works made for hire".

Initially, courts gave the word "employer" its common law meaning and ruled that only works made for an employer by a traditional employee were deemed works made for hire. However, the courts were soon faced with an issue - what about work made by freelancers for a commissioning party? How could the commissioning party feel secure in hiring a freelancer if the freelancer could turn around and sell the work to someone else? To solve this problem, the court, as articulated in Yardley v. Houghton Mifflin Co, 108 F.2d 28, 30 (2d Cir. 1939), created a default rule that, unless expressly stated otherwise, an independent contractor is deemed to have impliedly assigned his or her copyright to the commissioning party for the first copyright term (i.e. 28 years under the 1909 Act). To be clear - the independent contractor still owned the copyright. He or she was merely deemed to have assigned it to the commissioning party for the first copyright term. Accordingly, when the term expired 28 years later, the independent contractor was free to reclaim the copyright as his or her own.

However, the Second Circuit, in a string of cases beginning in 1972 with its decision in Picture Music, Inc. v. Bourne, Inc., 457 F.2d 1213, 1216 (2d Cir. 1972), retroactively re-interpreted the established work for hire precedent and created a new doctrine called the "instance and expense" test. Under the instance and expense test, a work is made at the hiring party's instance and expense when the employer induces the creation of the work and has the right to direct and supervise the manner in which the work is carried out. In practice, the instance and expense test creates what the Second Circuit called in Estate of Burne Hogarth v. Edgar Rice Burroughs, Inc., 342 F.3d 149, 166 (2d Cir. 2003), "an almost irrebuttable presumption that any person who paid an another to create a copyrightable work was the statutory 'author' under the work for hire doctrine."

The phrase "instance and expense" first appeared in a case called Brattleboro Pub. Co. v. Winmill Pub. Corp., 369 F.2d 565, 567 (2d Cir. 1966). In Brattleboro, in a short and otherwise unremarkable decision, the Court found an implied assignment of an independent contractor's advertisement to a publisher of a newspaper. In support of its conclusion, the Court reasoned that where an independent contractor is solicited by a commissioning party to execute a commission for pay, fairness demands a presumption that the hiring party desires to control the publication and the artist consents. The court termed this analysis "instance and expense."

Nowhere in the decision, however, did the Brattleboro Court grant ownership of the copyright to the hiring party or demonstrate an intention to depart from the implied assignment precedent. Yet the instance and expense analysis soon took on a life of its own.

In the 1972 case of Picture Music, the Second Circuit, formally recognized the instance and expense test as the only consideration in determining the ownership of an independent contractor's copyright. Citing a combination of Yardley and Brattleboro as support for its ruling, the court retroactively re-interpreted established precedent to imply that an automatic assignment of a copyright while retaining the right of renewal actually meant that the commissioned material is in fact work made for hire i.e. the property of the commissioning party, if it was made at the "instance and expense" of the commissioning party. Relying on its decision in Picture Music, the Court erroneously continued with this new analysis in a string of cases, thus entrenching the doctrine of instance and expense as the law.

The 2nd Circuit Thwarts The Supreme Court

The United States Supreme Court, in Cmty. for Creative Non-Violence v. Reid, 490 U.S. 730 (1989), criticized the Second Circuit's use of the instance and expense test to grant copyrights for work created by an independent contractor to a commissioning party. In dicta, the Court made the following three points: First, the instance and expense analysis gave a different meaning to the plain language of the word "employer" in the 1909 Act, which by its established common law meaning excludes independent contractor. Second, the factors used in the instance and expense test were vague, subjective and overbroad. Third, the instance and expense test was contrary to decades of established precedent in the Second Circuit. (The Petition filed by the Kirby Estate urging the Supreme Court to hear the Kirby case largely mirrored all three of these points.)

The Second Circuit, for its part, is well aware of its re-interpretation of the law and has admitted as much. In Hogarth, the Court engaged in a thorough discussion of the history of work for hire case law and conceded that Picture Music misconstrued Yardley and Brattleboro to re-interpret established precedent. Furthermore, the Court acknowledged the Supreme Court's criticisms, and that the "content of a Supreme Court opinion . . . permits us to reject a precedent of this Court without the need for in banc reconsideration." Still, in what can only be described as a bizarre decision, the Court declined to overrule Picture Music and other subsequent cases and dismissed the Supreme Court's criticisms as non-binding dictum and "an insufficient basis to warrant a panel's disregard of two clear holdings of this Court".

A Hero Must Rise

The Kirby case may have been settled, but we will almost certainly see the issue of an independent contractor's work for hire status challenged again. As those following news about the termination right provision are aware, the music industry has been deluged with Termination Notices in the past two years and issues like the exact nature of work for hire are almost inevitably lurking in the background. (See the EASL Blog entry on the topic http://nysbar.com/blogs/EASL/2011/10)

According to the Amici Curiae Brief by the Screen Actors Guild and other unions representing creative artists, over 200 of the songs on Rolling Stone's top 500 list of all time were released before 1978. As record labels' copyrights terms on those songs expire, the Brief argued, the artists who sold their rights will be unable to reclaim them under the so-called instance and expense test.

There is no way to know for sure if the Supreme Court might have picked up the Kirby case for review; but in the months leading up to scheduled conference on September 29th, there were growing signs it might indeed have done so. The Petition for Certiorari had received significant support from various artist organizations and unions and five Amicus Curiae briefs were filed by influential individuals, urging the Supreme Court to hear the case. Marvel, for its part, was sufficiently concerned by this possibility that it settled a case it had just won on Summary Judgment at the Second Circuit Court of Appeals.

For now, we must wait for another copyright crusader to bring the evil instance and expense doctrine to justice. However one can be sure, with the termination rights for many works just now becoming ripe, we likely won't have to wait too long.

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This page contains a single entry from the blog posted on October 8, 2014 9:58 AM.

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