Marvel settlement with Kirby leaves freelancers’ rights in doubt

September 29, 2014

(Reuters) – There were at least two reasons why U.S. Supreme Court watchers were paying attention to a petition for review by Jack Kirby’s heirs. The first is obvious: Kirby was a legendary comic-book artist and writer who had a big role in the creation of the X-Men, Thor, the Hulk and the Fantastic Four – enduring characters that continue to generate big returns for Marvel Entertainment and its parent, the Walt Disney Company. The other reason why this case was notable is more abstruse, but ultimately of bigger consequence than Jack Kirby’s rights to characters he helped create: Can freelancers reclaim copyrights to work they sold before the Copyright Act of 1976 took effect?

A settlement announced on Friday – just before the Supreme Court was to discuss the Kirby case at its conference Monday – has ended the battle between Kirby and Marvel (alas, on undisclosed terms). But their deal leaves intact bad precedent for other independent contractors who want to take back the rights to their old work.

That’s no small thing. Disney, after all, was worried enough that the Supreme Court might make it easier for creators to reclaim their copyrights that it settled a case it had won on summary judgment at the 2nd U.S. Court of Appeals instead of risking its priceless stake in Marvel superheroes. And according to five amicus briefs that urged the Supreme Court to hear the Kirby case, the test that the 2nd Circuit applied to determine whether Kirby’s drawings were work-for-hire that belonged to Marvel will deprive countless freelance writers and artists of any shot at sharing in the long-term success of work they sold before the 1978 effective date of the 1976 law.

Granted, 1976 seems like a long time ago, but not when you think about all of the movies, shows, books and records based on old works. A brief by the Screen Actors Guild and other unions representing creative artists, for instance, says that 200 of the songs on Rolling Stone’s top 500 of all time list were released before 1978. As record labels’ copyrights on those songs expire, the brief said, the artists who sold their rights won’t be able to reclaim them under the so-called “instance and expense” test applied in the Kirby case.

Congress intended otherwise when it revised copyright law, according to briefs by the Kirby heirs and their amicus supporters. This gets complicated, so please indulge me in a short discourse on the history of freelancers and copyrights in the United States.

Until the 1960s, courts interpreted the original Copyright Act of 1909 to rest rights in commissioned works with independent creators, not purchasers of the works. If you were employed by a newspaper or magazine, for example, the magazine owned the rights to articles you wrote under the 1909 law’s basic work-for-hire provision; if you were a freelancer who was assigned a story by a publisher, you were presumed to control the copyright. But beginning in the late 1950s, appellate courts, led by the 2nd Circuit, began to hold that freelancers were akin to employees in certain circumstances. If a publisher commissioned a piece and paid the independent contractor’s expenses – an inquiry that became known as the “instance and expense” test – then the piece was considered work-for-hire and rights belonged to the publisher.

Congress rebalanced rights when it spelled out what constitutes work-for-hire in the 1976 law. And in a 1989 ruling called Community for Creative Non-Violence v. Reid, the Supreme Court held that the old instance-and-expense test does not apply to works covered by the new law. The CCNV decision, however, left uncertainty – at least in the minds of judges of the 2nd Circuit – about works that predate the 1976 law.

You might be wondering why any of this matters if freelancers assigned copyrights to publishers when they sold their works. The answer is that, in addition to redefining work-for-hire, the 1976 law also enabled creators to reclaim their rights after 56 years. (Technically, the law says that creators of pre-1978 works can “terminate” the copyright they assigned to publishers after publishers have held the right for two terms of 28 years each, or 56 years.) Under the 1976 law, freelancers who create work of enduring value deserve to own it after the publisher’s term is up.

But not, according to the 2nd Circuit, if their work predates the 1976 law and satisfies the instance-and-expense test. In a 2003 decision involving rights to illustrations in Edgar Rice Burroughs’ Tarzan books, a 2nd Circuit panel said that it was “given pause” by the Supreme Court’s discussion of work-for-hire in the CCNV case, but the judges concluded that the decision didn’t apply to cases governed by the 1909 law instead of its 1976 successor. The CCNV opinion’s discussion of the old instance-and-expense test, the 2nd Circuit said, “is dictum of a weak variety, and not grounds to relieve us from our obligation to follow” 2nd Circuit precedent giving publishers the right to freelancers’ work under the old test.

The 2nd Circuit’s ruling last year in the Kirby case reached the same conclusion. The appeals court granted Marvel summary judgment, holding that Kirby was working at Marvel’s direction and expense. And as a result of the settlement between the Kirby heirs and Marvel, that decision will remain the last word on independent contractors’ rights to pre-1978 work.

Disney’s brief opposing cert focused on the difference between the 1909 and 1976 definitions of work-for-hire. It also pointed out that no federal appellate court considering work governed by the 1909 copyright law has contradicted the 2nd Circuit’s instance-and-expense test. Disney lawyer Bruce Rich of Weil, Gotshal & Manges declined to comment beyond the joint statement put out by Marvel and the Kirby heirs.

The Kirby heirs were represented by Marc Toberoff of Toberoff & Associates, who specializes in copyright litigation over enduring comic book characters. (Thomas Goldstein of Goldstein & Russell was the heirs’ Supreme Court counsel.) Toberoff said he could not comment specifically on this case or the settlement, but said that, in terms of the law, the issue of creators’ rights to reclaim the work they did as independent contractors isn’t going away. (Termination rights kick in only after 56 years, so disputes over work published after 1958 or 1959 aren’t even ripe.)

“This is precedent that needs to change,” Toberoff said. “There will be other cases.”

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