Many areas of state and federal law have a daily impact on the business of producing and selling creative works. This article provides a roadmap to the most important legal issues affecting the business of selling and licensing copyrights: US copyright protection, authorship, ownership, registration and enforcement against infringement, and “work for hire” and joint copyright rules.

Creation of works: automatic protection under US law
US copyright law forms the basic legal protection for books, plays, poetry, maps, board games, films and movies, musical compositions, sound recordings, fine artwork, paintings and statues, crafts, collectibles, computer software, computer games, graphic design, clothing, jewelry, industrial design, furniture, tests, educational materials, marketing collateral, websites, databases, and other written, pictorial, musical, computer-generated, sculptural and graphic works. Under the 1976 Copyright Act (“the Copyright Act”), which took effect January 1, 1978, copyright protection is automatically extended to original works in these categories at the moment they become tangible by being “fixed” in a persistent medium — whether in a preliminary form, or as a final product.

Prior to 1978, copyright protection was not automatic upon creation and could only be achieved upon registering copyright claims with the national office. Works created before 1978 are covered by the slightly different laws of the Copyright Act of 1909.

Authorship becomes ownership of copyright
Unless a work is created as a “work for hire,” ownership of the copyright is automatically conferred on the work’s creator, who is referred to as the author in the Copyright Act. If more than one person is involved in contributing to the creation of the work, a situation of “joint authorship” arises, in which each of the collaborators automatically receives an even share of the copyright’s ownership interest. “Work for hire” authorship and joint authorship will be dealt with later in the article as special cases.

The scope of copyright protection depends on the underlying characteristics of the work
While the Copyright Act automatically applies at the moment of creation and fixation of a work, the copyright claim, and protection, do not automatically cover all aspects of the work. Copyright law does not protect the basic ideas and concepts underlying a work, but only the expression of those ideas.

Second, work which includes material which is in the “public domain” is only protected to the extent of the parts of the work which are original. So, a creative work may incorporate materials which are not protectable. The entire work is protectable “as a whole”: but those sections of the work which are “public domain” materials, may not be claimed as authorship, or subject to a claim of infringement.

Further, aspects or characteristics of work which are inherently “functional” are exempt from protection. This is a very common restriction for functional elements of three-dimensional works. Sometimes this is referred to as the “merger” doctrine — when there is only one, or very few ways of expressing an idea, experts will say that the expression is “merged” with the idea.

Finally, the copyright in works which are based on other, “preexisting” works are considered to be “derivative” works — only original material contributed to the derivative work is covered by the copyright for that work; the copyright in the earlier, “preexisting” work controls the incorporated portions.

It is also useful to know that the selection and “compilation” of smaller works into a larger work creates a final product which — as a compilation — is separately and independently copyrightable. So, depending on its particular attributes, any one single creative work may be subject to a number of different claims of copyright, in different layers, for different aspects or sections of the work.

The copyright owner’s exclusive legal rights
The Copyright Act gives the owner of a creative work a number of important legal rights concerning the work. Under the law, the copyright owner has the exclusive right to do, or authorize others to do (or prevent others from doing) any of the following:

• make a “copy” of the work, in the same or a different medium;
• prepare “derivative” works based on the work;
• distribute copies of the work by sale, rental, lease or lending;
• display the work publicly; and
• transmit the work electronically.

These exclusive rights apply for the entire duration of the copyright — currently the life of the author plus seventy years, or 95 years in the case of a “work for hire.”

Rights in physical objects v. copyrights in works
Because of the different property rights involved, it is crucial for creators of works to carefully distinguish between ownership of the physical object containing copyrighted matter (a type of tangible personal property) — and ownership of the copyrights protecting the creative work embodied in the physical object. The copyrights are intangible personal property.

Sale of an original piece of creative work never automatically includes a sale of the author’s exclusive copyright rights to make and distribute copies or prepare derivative works. Similarly, sale or license of any or all of the copyright owner’s exclusive rights to another party, never automatically gives any property rights to any physical copy of the work. However, the owner of a physical copy of a creative work generally does have the right to display the physical object and exercise basic control over it, including selling it to another party.

While the sale of physical copies of a copyrighted work may be accomplished by a simple exchange of goods and money, the sale of a copyright, or permission to use the creative work (also known as a “license”) may only be achieved in a written transfer agreement signed by the owner. The owner need not transfer all of the exclusive rights — copyrights are “divisible” and may be carved up in any way the owner sees fit. Each of the exclusive rights listed above may be permanently sold, or temporarily licensed, to one or more parties. In addition, the owner may place any conditions upon the transfer that he or she deems appropriate, such as time limitations, geographic restrictions, etc. Written transfer agreements may be recorded in the US Copyright Office as evidence of ownership rights.

Registering copyrights: registering copyright ownership claims
Copyright registration is separate from copyright ownership and represents the formal making of a legal claim of ownership in a creative work — in exactly the same way that a deed represents a claim of ownership in a piece of land.

Since 1978, copyright protection in the US has been automatic and has not depended on registration with the US Copyright Office. However, registration is necessary for an owner to take advantage of the most important benefits of the Copyright Act; it is the only way one can bring a lawsuit to enforce a copyright against infringers. Registration is accomplished by filling out the appropriate Copyright Office form (TX, VA, PA, SR, SE) and sending it, together with a “deposit” copy of the work and the $45 registration fee, to the Copyright Office. Federal regulations apply to the correct preparation of the deposit copy and differ greatly depending upon the specific type of creative work.

Using copyright notices on works
It is no longer necessary to place a copyright notice on the original, or on each copy of a creative work, to claim automatic protection. Prior to March 1, 1989 (the date when the US joined an international copyright treaty called the Berne Convention) the familiar “c-in-a-circle” symbol ©, or the word “copyright,” together with the owner’s name and year of creation, was required to keep ownership of creative works protectable – without the notice symbol the work would become unprotectable and the ownership would fall into the “public domain.”

This legal notice requirement still applies to works created prior to 1989. While copyright notices are no longer legally required, it is still an excellent idea for writers to routinely place them on work in which they intend to claim their ownership rights.

Enforcing copyrights against infringers
Ownership of copyright entitles the holder of the rights to enforce the copyright against infringers in federal court. Depending on the nature of the harm to the copyright owner (or to the artist’s moral rights), the holder of the rights may be entitled sue the infringing party either for money damages, or injunctive relief against wrongful activities, or both. Works created in the United States must be registered with the Copyright Office before a lawsuit may be filed.

The production and commercial or non-commercial distribution of unauthorized copies of works entitles the copyright owner to receive damages in the form of lost profits, as well as an injunction against any further infringing activity by the wrongdoer. The further creation of works which are derived from, based upon, or are otherwise substantially similar to the creative work in question is also actionable in court, entitling the copyright owner to prove actual damages caused by the infringement and to get injunctive relief against further activity. If it is too late to stop the activity, damages in compensation for the injury may be awarded.

While the value of a work may be priceless, as a practical matter, the money damages awarded to compensate a copyright owner for infringement or injury to a work are almost always overshadowed by the legal costs of a successful lawsuit. For this reason, the Copyright Act has an unusual “American Rule” provision which states that owners of works which are registered with the Copyright Office before infringement may collect their attorney’s fees from the losing party as well as their damages. Damages may be calculated in two ways; actual damages (the amount actually lost), or “statutory damages” which the court awards in its discretion, up to $100,000 per violation. Due to this incentive, even though registration is not required for copyright protection, it is essentially required for the copyright owner to take full advantage of enforcement rights conferred by the Copyright Act. Creative works should always be registered promptly.

Special issues with creative works and copyright — work for hire, joint works, and derivative works
The Supreme Court case of Community for Creative Non-Violence v. Reid, decided in 1989, addressed issues of creative work ownership in the case where a party hires another to create a work — a “work for hire.” Despite the publicity surrounding this decision, a majority of the public still commonly believes that when a creative worker is paid to create a work “for hire,” the hiring party automatically purchases the copyrights in the work simply by paying the creative worker for performing the work. In the daily business of producing creative work for a living, it is crucial for creative and knowledge workers to determine whether a particular work is created “for hire” or not — if a work is created as a “work for hire,” the hiring party — and not the worker — is considered to be the author as well as the copyright owner controlling all rights in the work, and the length of copyright protection is set at 95 years (rather than the life of the creator plus seventy).

When is a creative work a “work for hire”?
The determination of whether a creative work is created “for hire” is complex, involving the application of the “work for hire” rules in the US Copyright Law, together with a determination of the common-law status of the worker as either an employee or independent contractor of the hiring party. The Copyright Act states that a work is a “work for hire” if it is either:

• prepared by an employee within the scope of his or her employment, — OR –
• is a specially ordered or commissioned work created for use as a contribution to a collective work, as part of a motion picture or other audiovisual work, as a translation or a supplementary work, as a compilation, as an instructional text, as a test, as answer material for a test, or as an atlas, and the parties have signed a written “work for hire” agreement.

That’s it. Can someone create a “work for hire” by stating that this rule will apply in a contract between the parties? No. This is a facts-and-circumstances test. The work must (A) fit into the laundry list of works listed in the Copyright Act as “works for hire,” OR it must (B) be created by an employee (not a contractor) and in the scope of employment (ie, not on the side, but as part of the employee’s assigned work). Anything lacking BOTH of these attributes is not a “work for hire,” regardless of what any contract or company policy says.

CCNV v. Reid: not a “work for hire” but a “joint copyright” example
In the case of CCNV v. Reid, a non-profit organization hired a sculptor to render a modern sculpture of the Christian nativity scene in which parents and baby Jesus would appear as a contemporary African-American homeless family huddled on a steam grate from which swirling steam would emit. Reid, the sculptor, agreed to create the figures; the non-profit organization would separately build the pedestal and grate. The total budget for the project was $15,000 and Reid’s services, which were discussed as being donated in kind, were not separately itemized. There was no written agreement or discussion of copyright ownership. CCNV additionally requested that the figures should recline, and not sit or stand as Reid proposed; and insisted that the family’s belongings be gathered in a shopping cart rather than in bags or suitcases as suggested by the artist. Reid delivered the figures to CCNV, at which point they were joined by CCNV to the steam grate and pedestal, and Reid was paid the remaining money out of the budget for his materials. When CCNV proposed to take the sculpture on tour to raise money for the homeless, Reid objected, the parties filed competing copyright registrations, and CCNV sued Reid.

Before the US Supreme Court decided the case of CCNV v. Reid, application of different “work for hire” rules and rationales created considerable confusion in the courts as well as in the business public. In this landmark case, both CCNV and Reid agreed that the second half of the “work for hire” rules, concerning specially commissioned works, did not apply, and that only the first half of the definition was in question. Even with this simplification, the lowest court held that Reid’s work was a “work for hire” because CCNV conceived of the original idea and exercised direction and control over Reid’s execution of the work. The federal appeals court disagreed, stating that Reid was not an employee but an independent contractor.

The US Supreme Court agreed with the district court. It held that a number of factors traditionally examined to determine whether a worker is an employee or an independent contractor were applicable. The court held that among all these traditional legal factors in deciding the contractor vs. employee issue, “direction and control” of the work was by far the most important factor in determining “work for hire” status.

Other factors to be considered include the skills required to render the work, the source of the materials and tools, the location of the work, the duration of the relationship between the parties, the control of the hiring party over when and how long to work, the method of payment, the hiring party’s role in hiring and paying assistants, whether the hiring party is in business and whether the work is part of the hiring party’s regular business, the method of payment and tax treatment of the artist for withholding and reporting purposes, and whether other traditional employment benefits are provided.
Applying these factors, the Supreme Court found the Reid was an independent contractor and that the sculpture was not a “work for hire.”

Now comes the frequently overlooked “real” lesson from this case: the Supreme Court decided that regardless of the “work for hire” and “employee vs. contractor” issues, CCNV could be a “joint author” with Reid in the creation of the work. The US Supreme Court actually returned the case to the district court to determine whether CCNV legally owned half of the legal rights in the work, for its contribution to the creative process.

Joint copyright authorship and ownership
Determining whether a work has more than one author is a question of circumstances and intent. There are two types of joint creation under the Copyright Act:

• where the contributions of each artist are inseparable from the contributions by the other artists to the work; or
• where the contributions of each artist are interdependent.

Inseparable contributions are the result of a creative process in which the creators work closely together, to the point where separate, discrete contributions cannot be easily identified as coming from either writer. Interdependent contributions result from a creation process where the creators work primarily on their own, different contributions — but each creator’s contribution depends heavily on the others’ contributions to bring meaning to the work as a whole. In situations similar to CCNV v. Reid, it is frequently the case that a court concludes that the parties are joint authors, and that therefore all parties have joint ownership rights in the work.

Joint authorship of a creative work should be carefully distinguished from a situation in which a creator produces a work which is a derivative work that is based on another, already-existing work. No creator may create a derivative work based on a pre-existing, copyrighted work without the permission of the copyright owner of the pre-existing work; further, the copyright rights of the creator in the derivative work extend only to the portion of the later work which is an original contribution; the creator receives no rights in the earlier, pre-existing work.

Joint ownership rights in copyrighted works are like joint custody — both “parents” get equal rights unless otherwise agreed in writing. Apart from joint ownership which results automatically from joint authorship by more than one artist, a single copyright owner can create a joint ownership situation by transferring partial ownership of copyright rights in a work of art to more than one party. This has dramatic practical effects, tying all co-owners into a close (usually unwanted) economic relationship concerning the work.

Joint copyright owners of a work each have a right to profit from each owner’s nonexclusive licenses of the right to make copies, distribute copies by sale, lease or lending, or make derivatives of the original work. This right to profit is subject to a duty of contribution, which requires that each joint owner must contribute shares of his or her own profits from the commercial activity to the other joint owners. In many states, joint owners are also liable to the other joint owners for undertaking commercial activity or distribution which subsequently has a negative economic impact on the value of the copyright as an undivided whole. This is sometimes called a duty to account.

While no one joint owner of a copyright may sell the entire copyright, a joint owner may sell his or her portion or joint interest in the copyright, or leave it in a will to his heirs, without the permission of the other owners. This can result in “strange bedfellows”: people doing business with other people they never intended to be involved with. The whole work, however, may not be transferred, unless each of the joint owners agrees to do so in writing.

From a practical standpoint, joint ownership of a work almost always prevents a creative work from attaining its highest economic value — because exclusive rights in a work are always more valuable than nonexclusive rights.

For this reason, if two or more people are involved in the creation of a copyrighted work, they usually sign a written agreement setting out rules of joint ownership, and limiting their abilities to license copyrights in the work independently of each other, without the permission of the other joint owners. Arborlaw can help you plan for joint copyright creative and ownership situations.

Conclusion
The Copyright Act is the single most important tool in protecting a creator’s right to derive economic benefits from his or her creative abilities — with the law being designed for the benefit and protection of the creator. It is crucial for creators to know the operation of the law, and to consciously choose to DO — or NOT DO — the things necessary to achieve the most desirable legal results.

In some cases, copyright ownership is DO NOTHING — a creative party creating original works retains ownership of the copyrights in his or her work. Even in cases where a hiring party pays a creator to produce a work, the creator will still retain ownership of the copyrights, unless the hiring party has input and exercises a considerable amount of direction and control over the artistic process of creation.

Copyright protection and enforcement against infringement both require the creator to DO — by registering copyrights correctly and promptly after the work is fixed in a tangible medium.

Regardless of the Copyright Act’s “work for hire” and ownership rules, there is limitless potential for misunderstanding and legal disputes, which can be avoided by using written agreements clearly setting out the objectives of each economic transaction, prior to the act of creation, whenever possible. From the standpoint of the creative party, who is almost always economically in a less advantageous bargaining position, such agreements are almost always beneficial.

Copyright 1999 - 2007 Carol Ruth Shepherd.

If you have issues concerning copyrights and copyright protection ownership and you need to consult an experienced attorney, you can reach Carol at (734) 668-4646.