Is Your Company Making this Mistake When it Comes to Employees and Intellectual Property?

Ghost-Rider-Marvel-1.jpgA lawsuit, Friedrich v Marvel Entertainment (PDF), filed by a former employee claiming ownership rights to intellectual property was recently dismissed in favor of the employer.

This suit also provides valuable lessons for employers about the importance of securing ownership rights in intellectual property created by employees and independent contractors, and making sure that ownership is documented. 

Background of the Ghost Rider Intellectual Property

Gary Friedrich sued his former employer comic book publisher Marvel Entertainment, LLC claiming that he created the comic book character Ghost Rider back in the early 1970s. The value of the Ghost Rider character significantly increased since the 1970s because of increased revenue from movies, video games, and promotional products. In fact, Ghost Rider, as played by Nick Cage, returns to the big screen beginning this weekend in the "Spirit of Vengeance.

The Copyright Infringement Claims Against Marvel & the "Work Made for Hire" Defense

Under the Copyright Act, a copyright normally vests initially in the author or authors who created the work. 17 USC 201(a). But when the copyright work is a "work made for hire," the employer or other person for whom the work was prepared is considered the author. 17 USC 201(b).

In regards to employers, under 17 USC 101, a work is considered a work made for hire if it is:

  1. A work prepared by an employee within the scope of his or her employment; or 
  2. A work specially ordered or commissioned for use as a contribution to a collective work, as a part of a motion picture or other audiovisual work, as a translation, as a supplementary work, as a compilation, as an instructional text, as a test, as answer material for a test, or as an atlas, if the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire.

Marvel took the position that the Ghost Rider character was created as a "work for hire" under the copyright laws and, therefore, Marvel and its successor companies continued to be the owner of all rights and interests in the intellectual property. 

What Can Go Wrong in a Work Made for Hire Defense 

Normally establishing a "work made for hire" defense is relatively straight forward, e.g., you produce the written agreement establishing the fact. But Marvel ran into a number of issues that jeopardized its defense:  

First, Mr. Friedrich signed a "work made for hire" agreement in 1978. But Ghost Rider was created in the beginning of the 1970s. 

Second, at the time Mr. Friedrich would have created Ghost Rider, he claimed he was employed to read and respond to fan mail and, therefore, the Ghost Rider character was created outside the scope of his employment.  

Third, Marvel attempted to support its "work made for hire" defense, based on its practice at the time of placing a legend on the reverse side of all checks used to pay individuals like Mr. Friedrich who had made creative contributions to Marvel. That legend provided that the payee acknowledged the rights in and to the work for which payment was being made belonged to Marvel. Marvel, however, ran into a problem supporting this defense because the checks issued and presumably signed by Mr. Friedrich no longer existed (remember, these checks would have been issued back in the 1970s).

Despite these issues, Marvel was able to eventually (after over four years of litigation) convince the Court that Mr. Friedrich had in fact accepted and negotiated the checks that contained the language relinquishing all rights to the subject intellectual property. 

Closing Thoughts

While the employer (Marvel) eventually prevailed in the ownership dispute over the intellectual property, it is important to note that it took over four years of litigation to do so. In all likelihood the time and expense for this litigation could have been significantly decreased had the ownership issues involving the intellectual property been better handled and documented.  

In this regard, for companies that want to make certain they are the owner of a work - whether the work is created by an employee or independent contractor - the best advice is to require employees and independent contractors to execute an assignment and work-made-for-hire agreement at the outset of the relationship so that copyright ownership vest in the company.

For more information about drafting work made for hire agreements and other employment-related agreements, contact Jason M. Shinn.  

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