Work for Hire Agreements Do Not Provide Beneficial Copyright Ownership

The defendants succeeded in dismissing the copyright claims outright and in dismissing the state law claims with leave to refile them in state court. The U.S. District Court for the Central District of California determined that the compositions were “works made for hire” and that Warren could not therefore be a legal or beneficial owner of the copyrights in those works. The District Court rejected Warren's arguments that MTM's breach allowed him to rescind the agreements and take back legal ownership of the copyrights, or alternatively, that he was a beneficial owner because he was compensated by royalties rather than a salary.

The Ninth Circuit determined that the compositions were indeed works made for hire as defined in '101 of the Copyright Act. They were “specially ordered or commissioned for use … as a part of a motion picture or other audiovisual work,” and the parties “expressly agree[d] [that it was] considered a work made for hire.” There was no dispute that the first contract provided that MTM would own all rights to the music composed for the series by Warren. Subsequent contracts were even more explicit that the compositions were works for hire. Although the agreements did not use the statutory words “specially ordered or commissioned,” the Ninth Circuit found that neither the Copyright Act nor the case law required the use of specific wording to create a work-for-hire relationship.

That the contracts were titled “Music Employment Agreement” was likewise irrelevant, the court observed, as a document's title is not dispositive in determining whether a work-for-hire relationship exists. The internal designation of the compositions as works for hire and the provision that MTM was the author for all purposes were sufficient to create the relationship. The plain language of the agreements conclusively demonstrated that Warren created the compositions at the request of MTM, including language that MTM's judgment was final in all artistic and creative matters and that MTM could direct Warren's services.

Warren argued that the use of royalties rather than salary as compensation was inconsistent with a work-for-hire relationship. However, the Ninth Circuit found that this factor was also inconclusive. Although the Second Circuit had held that the use of royalties as compensation “generally” weighed against a work-for-hire arrangement, it also said that “the absence of a fixed salary … is never conclusive.” Playboy Enterprises v. Dumas, 53 F.3d 549, 555 (2d Cir. 1995), quoting Picture Music, Inc. v. Bourne, Inc., 457 F.2d 1213, 1216 (2d Cir. 1972). Also, Warren received royalties as only one of several forms of compensation, including a “fixed sum payable on completion.”

Nor was the Ninth Circuit persuaded that the composition of nearly 2,000 works could not be specially ordered or commissioned, as a weekly television show requires “substantial quantities” of music. Moreover, Warren's statements that he never intended to enter into a work-for-hire relationship cannot contradict the explicit and unambiguous contract language.

Although the Ninth Circuit agreed that a material and substantial breach of contract would justify rescinding a license agreement, the court found that the breach must constitute a “total failure in the performance of the contract.” Rano v. Sipa Press, Inc., 987 F.2d 580, 586 (9th Cir. 1993). Here, the agreements expressly provided money damages for breach and barred a claim for rescission.

To Warren's contention that he was a beneficial owner of the copyrights because of the contractual grant of royalties, the Ninth Circuit responded that such a principle did not apply where the rights originally vested in the person for whom the work for hire was prepared. The court followed the holding of the Seventh Circuit that the creator of a work for hire (as opposed to an assignor) cannot be a beneficial owner of the copyright unless there was an express grant of such rights. Moran v. London Records, Ltd., 827 F.2d 180 (7th Cir. 1987). Warren therefore had no ownership in the copyrights, legal or beneficial, and thus no standing to sue for copyright infringement.

The concept of a work made for hire is often misunderstood and is commonly thought to mean any work created by an independent contractor. However, '101 of the Copyright Act is explicit about the definition of a work made for hire. It is either a work prepared by an employee within the scope of his or her employment or is the specially ordered or commissioned type of work described by the Ninth Circuit. Moreover, in the commissioned work case, the type of work must fall into one of 10 specifically delineated categories in the Act, namely: 1) a contribution to a collective work; 2) a part of a motion picture or other audiovisual work; 3) a sound recording; 4) a translation; 5) a supplementary work; 6) a compilation; 7) an instructional text; 8) a test; 9) answer material for a test; or 10) an atlas.

Even if the work falls within one of the enumerated classes, the parties must agree in writing that the commissioned work is a work for hire.

If the work does not fall into one of the specific classes, the parties cannot by agreement define it as a work for hire. In such cases, it is common to include assignment language in the agreement if the commissioning party wishes to own the copyright. It is not unusual to find assignment language in true work-for-hire agreements, in an excess of caution. However, as the Ninth Circuit observed, there are some courts that will recognize a beneficial ownership interest in the creator of the work if the creator has assigned the work as opposed to agreeing to a work-for-hire arrangement. If you have a true work for hire arrangement and you add assignment language to the agreement, it is possible that you will create the copyright ownership interest in the creator of the work that you are trying to avoid with the work-for-hire agreement. However, if it is later determined that the arrangement was not a true work for hire, the assignment language will preserve the commissioning party's legal ownership of the copyright, although it may be subject to a beneficial interest in the creator of the work.

In order to sue for copyright infringement, it is necessary for the plaintiff to be either the legal or beneficial owner of the copyright in the infringed work. The U.S. Court of Appeals for the Ninth Circuit has found that the creator of a work made for hire cannot be either a legal or beneficial owner of a copyright in such a work.

Richard Warren, the sole shareholder and employee of Triplet Music Enterprises, Inc., contracted with MTM Productions to compose music for the “Remington Steele” television program. Warren was required by a series of contracts to compose the music and MTM was to compensate Warren with a royalty percentage of all sales of broadcast rights to the television series made to third parties not affiliated with the performance rights companies BMI and ASCAP.

Warren sued MTM, its parent Fox Family Worldwide, Inc., The Christian Broadcast Network and Princess Cruise Line, Ltd. He claimed copyright infringement, breach of contract for failure to pay the full amount of royalties due and several other state law causes of action. He claimed to have created more than 1,900 musical works used in the television series, that MTM and Fox infringed his copyrights by continuing to broadcast and license the series without full payment and that the MTM licenses to CBN and Princess were invalid because they were made after MTM breached its agreement. Warren also claimed that MTM's breach caused the copyrights in the music to revert to him.

The defendants succeeded in dismissing the copyright claims outright and in dismissing the state law claims with leave to refile them in state court. The U.S. District Court for the Central District of California determined that the compositions were “works made for hire” and that Warren could not therefore be a legal or beneficial owner of the copyrights in those works. The District Court rejected Warren's arguments that MTM's breach allowed him to rescind the agreements and take back legal ownership of the copyrights, or alternatively, that he was a beneficial owner because he was compensated by royalties rather than a salary.

The Ninth Circuit determined that the compositions were indeed works made for hire as defined in '101 of the Copyright Act. They were “specially ordered or commissioned for use … as a part of a motion picture or other audiovisual work,” and the parties “expressly agree[d] [that it was] considered a work made for hire.” There was no dispute that the first contract provided that MTM would own all rights to the music composed for the series by Warren. Subsequent contracts were even more explicit that the compositions were works for hire. Although the agreements did not use the statutory words “specially ordered or commissioned,” the Ninth Circuit found that neither the Copyright Act nor the case law required the use of specific wording to create a work-for-hire relationship.

That the contracts were titled “Music Employment Agreement” was likewise irrelevant, the court observed, as a document's title is not dispositive in determining whether a work-for-hire relationship exists. The internal designation of the compositions as works for hire and the provision that MTM was the author for all purposes were sufficient to create the relationship. The plain language of the agreements conclusively demonstrated that Warren created the compositions at the request of MTM, including language that MTM's judgment was final in all artistic and creative matters and that MTM could direct Warren's services.

Warren argued that the use of royalties rather than salary as compensation was inconsistent with a work-for-hire relationship. However, the Ninth Circuit found that this factor was also inconclusive. Although the Second Circuit had held that the use of royalties as compensation “generally” weighed against a work-for-hire arrangement, it also said that “the absence of a fixed salary … is never conclusive.” Playboy Enterprises v. Dumas , 53 F.3d 549, 555 (2d Cir. 1995), quoting Picture Music, Inc. v. Bourne, Inc., 457 F.2d 1213, 1216 (2d Cir. 1972). Also, Warren received royalties as only one of several forms of compensation, including a “fixed sum payable on completion.”

Nor was the Ninth Circuit persuaded that the composition of nearly 2,000 works could not be specially ordered or commissioned, as a weekly television show requires “substantial quantities” of music. Moreover, Warren's statements that he never intended to enter into a work-for-hire relationship cannot contradict the explicit and unambiguous contract language.

Although the Ninth Circuit agreed that a material and substantial breach of contract would justify rescinding a license agreement, the court found that the breach must constitute a “total failure in the performance of the contract.” Rano v. Sipa Press, Inc., 987 F.2d 580, 586 (9th Cir. 1993). Here, the agreements expressly provided money damages for breach and barred a claim for rescission.

To Warren's contention that he was a beneficial owner of the copyrights because of the contractual grant of royalties, the Ninth Circuit responded that such a principle did not apply where the rights originally vested in the person for whom the work for hire was prepared. The court followed the holding of the Seventh Circuit that the creator of a work for hire (as opposed to an assignor) cannot be a beneficial owner of the copyright unless there was an express grant of such rights. Moran v. London Records, Ltd., 827 F.2d 180 (7th Cir. 1987). Warren therefore had no ownership in the copyrights, legal or beneficial, and thus no standing to sue for copyright infringement.

The concept of a work made for hire is often misunderstood and is commonly thought to mean any work created by an independent contractor. However, '101 of the Copyright Act is explicit about the definition of a work made for hire. It is either a work prepared by an employee within the scope of his or her employment or is the specially ordered or commissioned type of work described by the Ninth Circuit. Moreover, in the commissioned work case, the type of work must fall into one of 10 specifically delineated categories in the Act, namely: 1) a contribution to a collective work; 2) a part of a motion picture or other audiovisual work; 3) a sound recording; 4) a translation; 5) a supplementary work; 6) a compilation; 7) an instructional text; 8) a test; 9) answer material for a test; or 10) an atlas.

Even if the work falls within one of the enumerated classes, the parties must agree in writing that the commissioned work is a work for hire.

If the work does not fall into one of the specific classes, the parties cannot by agreement define it as a work for hire. In such cases, it is common to include assignment language in the agreement if the commissioning party wishes to own the copyright. It is not unusual to find assignment language in true work-for-hire agreements, in an excess of caution. However, as the Ninth Circuit observed, there are some courts that will recognize a beneficial ownership interest in the creator of the work if the creator has assigned the work as opposed to agreeing to a work-for-hire arrangement. If you have a true work for hire arrangement and you add assignment language to the agreement, it is possible that you will create the copyright ownership interest in the creator of the work that you are trying to avoid with the work-for-hire agreement. However, if it is later determined that the arrangement was not a true work for hire, the assignment language will preserve the commissioning party's legal ownership of the copyright, although it may be subject to a beneficial interest in the creator of the work.