Joint ownership and assignments of intellectual property rights: Part II - copyrights

In our last newsletter we reviewed joint ownership and assignments of patents.1 Here, we turn to a review of some of the significant issues surrounding joint ownership and transfer of copyrights. Both copyrights and patents are based on the same constitutional foundation and grant the owners similar rights.2 However, the rights granted to joint owners of patents and copyrights differ in several important aspects.

Joint owners of both patents and copyrights are free to exploit the property without the consent of their joint owner(s) absent agreement to the contrary. However, only joint copyright owners are obligated to account to each other for any profits earned from licensing or use of the copyright.

A brief review of the copyright ownership rules is worthwhile before reviewing a few cases in which the joint ownership of copyright rules have been applied.

Initial Ownership

Copyrights and patents allow the owners to exclude others from using the protected work or invention. Copyright ownership, as with patents, arises at creation and rests with the author or authors. The Copyright Act provides as follows:

(a) INITIAL OWNERSHIP. — Copyright in a work protected under this title vests initially in the author or authors of the work. The authors of a joint work are coowners of copyright in the work.3

Thus, the statutory scheme at creation under the copyright law is similar to the patent law. Joint inventors or creators of an invention become the initial joint owners of a patent for the invention. The Patent Act provides that "[w]hen an invention is made by two or more persons jointly, they shall apply for patent jointly."4

However, an initial difference between copyrights and patents is that copyright ownership arises automatically at creation. In the case of patents, an affirmative act of filing a patent application is required to initiate creation of the right.

It is important to keep in mind that to be coowners of a copyrighted work based on co-authorship, each author must contribute copyrightable subject matter to the work. That is, one is not a joint author where the contributions are limited to "[i]deas, refinements, and suggestions."5

In Erickson v. Trinity Theatre, for example, the Seventh Circuit Court of Appeals sought to interpret the definition of a "joint work" in the Copyright Act as a work prepared by two or more authors with the intention that their contributions be merged into inseparable or independent parts of a unitary whole.6

The legislative history of the Copyright Act of 1976 discussed this as follows:

[A] work is "joint" if the authors collaborated with each other, or if each of the authors prepared his or her contribution with the knowledge and intention that it would be merged with the contributions of other authors as "inseparable or interdependent parts of a unity whole." The touchstone here is the intention, at the time the writing is done, that the parts be absorbed or combined into an integrated unit….7

This determination of co-authorship and the resulting coownership of a copyright are issues arising under the Copyright Act. Accordingly, federal jurisdiction is exclusive.8 In contrast, as discussed below, the right to an accounting arising under the common law is generally held to be a state claim governed by state law.9

Transfer of Ownership

Once the work is created, the copyright is freely transferable as personal property. Section 201(d) of the Copyright Act provides:

(1) The ownership of a copyright may be transferred in whole or in part by any means of conveyance or by operation of law, and may be bequeathed by will or passed as personal property by the applicable laws of intestate succession.10

To be effective, a transfer of copyright ownership must be in writing:

A transfer of copyright ownership, other than by operation of law, is not valid unless an instrument of conveyance, or a note or memorandum of the transfer, is in writing and signed by the owner of the rights conveyed or such owner's duly authorized agent.11

Similarly, the transfer rules relating to patents provide that "patents shall have the attributes of personal property. Applications for patent, patents, or any interest therein shall be assignable in law by an instrument in writing."12

Right to Use

Ownership of a copyright in an independently created work gives the owner of the work the right to use and publish the copyrighted work. In the case of joint authors (now joint owners) of an independently created work, each holds an individual interest in such work, regardless of the relative contribution to the work. Thus, each coowner has an independent right to use or license the use of the copyright in an independently created work without the need to obtain the consent of the other coowners.13

The rights granted to joint copyright and patent owners to exclude and license are similar except with respect to the right to use issue, for example. The copyright law grants the owner[s] of a copyright the exclusive right to use the copyrighted work, so long as there has been independent creation thereof.14 This right is broader than rights given to patent owners, which do not include a right to use the patented invention — only to exclude others from use - and the patent owner cannot use "independent creation" as a defense if commercializing the invention also happens to infringe upon the patent rights in the invention of another.

Accountability Among Coowners

Notwithstanding the similarities on the issues of creation, transfer and joint ownership for copyrights and patents, the rights and duties of coowners of a copyrighted work differ substantially from those for joint owners of a patent. Joint owners of a copyright have an obligation to account to the other coowner[s].

Under the copyright law, a coowner of a copyright must account to other coowners for any profits earned from licensing or use of the copyright. This obligation to account is not set forth in the Copyright Act. There is no express statutory provision in the Copyright Act analogous to that which is articulated by the Patent Act.15 It is well settled that the duty to account does not derive from the copyright law's proscription of infringement in the Copyright Act. Rather, it comes from equitable doctrines relating to unjust enrichment and general principles of law governing the rights of coowners. 16

This obligation to account in copyrights is in marked contrast to the rights of joint owners of patents in the United States governed by the U.S. Patent Act as follows:

In the absence of any agreement to the contrary, each of the joint owners of a patent may make, use, offer to sell, or sell the patented invention within the United States, or import the patented invention into the United States, without the consent of and without accounting to the other owners.17

The obligation for coowners of copyrights to account is discussed in the legislative history of the 1976 Copyright Law revisions. The House Report acknowledges the lack of a statutory provision as follows:

There is also no need for a specific statutory provision concerning the rights and duties of the coowners of a work; court-made law on this point is left undisturbed. Under the bill, as under the present law, coowners of a copyright would be treated generally as tenants in common, with each coowner having an independent right to use or license the use of a work, subject to a duty of accounting to the other coowners for any profits.18

Agreements to Vary the Default Copyright Rule

As in the case of patents, these general or default rules of ownership and exploitation of copyright can be varied by an agreement between the coowners — but such an agreement must be in writing. Such agreements and transfers in writing may be recorded at the Copyright Office.19

Application of the Default Copyright Rule

The general default rules apply to jointly owned copyrights regardless of whether ownership was created by co-authorship or by transfer. This is true regardless of the amount of the relative contribution and of the form of the copyrighted work. For example, Erickson v. Trinity Theatre involved three plays and videotapes;20 Oddo v. Ries involved a book describing how to restore Ford F-100 pickup trucks, in part based on a manuscript that contained much but not all the material to be included, and was a reworking of previously published magazine articles written by one partner;21 Goodman v. Lee involved ownership of the song "Let the Good Times Roll;"22 Gaiman v. McFarlane involved rights to comic-book characters;23 and Janky v. Lake County Convention and Visitor Bureau involved a promotional song by a doo-wop group "Stormy Weather."24

For example, in Oddo v. Ries, Oddo and Ries entered into a partnership in March 1978 to create and publish a book describing how to restore Ford F-100 pickup trucks. According to the partnership agreement, Ries was to provide capital and supervise the business end of the venture; Oddo was to write and edit the book. By January 1980, Oddo had delivered to Ries a manuscript that contained much but not all of the material the partners planned to include in the book. This manuscript consisted partly of a reworking of previously published magazine articles that Oddo had written and partly of new material, also written by Oddo, which had never before been published. At about this time, Ries became dissatisfied with the progress Oddo had made on the manuscript. Ries hired another writer to complete Oddo's manuscript and then published the finished product. The book that Ries eventually published contained substantial quantities of Oddo's manuscript and also contained material added by the new writer. Based on these facts, the court found that Ries could not infringe the partnership's copyrights in the manuscript or the book created pursuant to the partnership agreement. On the other hand, Ries could infringe the earlier copyrights to the articles and could be required to account to Oddo for any profits he made from use of the copyrights in the articles.25

Referring to another example, Goodman v. Lee, Shirley Goodman filed an action in 1985 against Audrey and Nikki Lee (the Lees), respectively the widow and daughter of Leonard Lee (Leonard). Goodman sought a declaration that, together with Leonard, she was a co-author of the 1956 rock-and-roll hit "Let the Good Times Roll" and for an accounting from the Lees for all royalties received from the use and exploitation of that song. After a jury trial and several post-trial hearings, the district court entered a final judgment declaring Goodman a joint owner of the copyright of "Let the Good Times Roll." The court ordered the Register of Copyrights to identify her as a co-author and joint owner of the copyright registration and awarded her one half of all royalties received by the Lees from 1976 to 1993, together with prejudgment interest computed for those dates at the rates set forth in the Louisiana Civil Code. This case highlights the rule courts have exclusive original jurisdiction over claims for declaratory judgment to establish co-authorship under the Copyright Act which necessitate the application and interpretation of the copyright ownership provisions of the Act. Having found co-ownership, applicability of federal law ended and Goodman's claim for an accounting was governed in all respects by state law, which law provided that she was entitled to recover her share of the proceeds collected by the Lees for the use of "Let the Good Times Roll." Goodman was not entitled to recover any part of the royalties received by Leonard before his death, as Goodman failed to name either his estate or its succession representative as a defendant in the action. Under Louisiana law, once a succession has been opened judicially, it is a distinct legal entity that answers for the decedent's obligations until the succession proceedings have been closed. Similarly, the three-year statute of limitations under the copyright law was deemed not to apply to the action for an accounting. The court noted: "[n]owhere in the Act, however, do its provisions detail any action available to a coowner for an accounting. Instead, as discussed above, such an action is governed by state law."26

In Janky v. Lake County Convention and Visitors Bureau, the composer of a promotional song sought to enjoin performance of the song by Lake County, Indiana. Cheryl Janky alleged that she composed the song and obtained an initial copyright listing herself as the sole author and never gave the county visitors bureau permission to use it. Henry Farag was a band member with Janky who, Janky admitted, recommended changes that were adopted and accounted for 10 percent of the lyrical content. At this point, a new copyright registration was filed listing Farag as a co-author. Farag then licensed the bureau to use the song. Janky filed another copyright registration, again listing herself as the sole owner. She then sought to enjoin the use by the bureau and damages. The Seventh Circuit Court of Appeals held that even though the band member contributed only 10 percent of the song, he was a joint owner of the copyright with the composer in the song. Therefore, he could license the song without the other coowner composer's consent. The copyright filed by the composer after the song was revised was registered identifying the band member as an author and the work as joint. This acknowledgment was considered strong evidence of the requisite intent to create a joint work under Section 102 of the Copyright Act.27

Conclusion

These default rules strongly suggest that a suitable ownership agreement between joint owners of copyright may be beneficial, and, depending on the facts of a particular case, it may be desirable to define in writing the rights of the respective coowners as to use, license and accounting prior to creation of the work.

The default rules allowing a joint owner of a copyright to use the work without consent — yet be under an obligation to account — allows for unintended consequences. This is true especially in the case where one co-author contributes a substantial portion of the work. Thus, it may be beneficial to address allocation of the respective use and ownership rights to an income stream by written agreement at an early time in the relationship, and such an agreement may best be in writing.