The Dangers of Not Closing the Writer's Deal


Periodical: Los Angeles Business Journal

Date: July 1994

This article was published prior to the decision of the Second Circuit in Playboy Enterprises, Inc. v. Dumas, 53 F.3d 549 (2d Cir. 1995), cert. denied, 64 U.S.L.W. 3396 (U.S. 1995) in which the court concluded that a writing which memorializes the transfer of the copyright need not be signed before the creation of the work as long as the parties had reached a work-for-hire agreement before the work was completed.  This holding, however, does not undermine the conclusion reached in the article that it is prudent for a producer to have a writer sign a work-for-hire agreement before the writer completes the project.

In the search for new material, studios and producers some times resort to old undeveloped scripts in the hopes that they can convert them into something that can sell in today’s feature film marketplace. Recent illustrations of this include Pretty Woman and Die Hard II.  The original scripts for both blockbuster films languished somewhere in the storage facilities of Disney and Fox until the idea of revamping them came to the insightful producers of these motion pictures.  That the studio owned the copyright to these films probably was never questioned since everyone in the motion picture industry knows that commissioned scripts are generally the intellectual property of the producer who employed the writer under the “work for hire” doctrine.  However, two recent court decisions may change this commonly held assumption and create a new urgency for studios and producers to document their relationships with writers well before their work is completed.

In the intense early stages of the development of motion pictures, legal niceties such as signed contracts are often placed on the back burner based on the assumption that the short form “deal memo” and industry custom will dictate the terms of the relationship between artist and producer.  It is not unusual for some artists to complete their work on a project without ever signing a contract or signing one after it is released. 

Usually this does not pose a problem and the signing of the contract amounts to a mere formality.  However, in the writer’s case, failing to secure a written agreement confirming that the intellectual property rights to the writer’s work (i.e., the copyright) belongs to the studio or producer may mean that the writer retains ownership of the copyright.  If this occurs, the studio or producer risks liability for copyright infringement in damages or an injunction preventing the release of the movie — substantial costs that could have easily been avoided if a signed contract with the writer was in place before the work was completed.

The work for hire doctrine — a phrase that is familiar to many in the entertainment business but not always understood — places the ownership of the copyright to a work with the individual or entity who compensated the person to create the work. 

If there is an employer/employee relationship the employer owns the copyright and there is no need for a written agreement.  For example, studios often have staff writers available to develop ideas submitted by producers.  Their work belongs to the studio since the staff writers are employees.

In contrast, independent contractors retain any copyrights to their work unless there is a written agreement between the parties granting the employer the copyright.  The problem is that many writers who work in the entertainment business do so on an independent contractor basis — no matter what producers believe or what their contracts say. 

To determine whether an individual is an employee or independent contractor the courts generally look to several factors such as whether the employer withholds taxes from the employee’s paycheck, whether the employer provides the equipment and space necessary for the employee to do her work, and whether the employer requires the employee to report to work at certain times.  While there are many other relevant factors, none of them are really determinative. In substance, the courts are guided by the general rule that an individual is an employee if the employer retains the right to tell the individual how to do the work. Independent contractors are usually free to do their job virtually any way they please as long as the ultimate product, in this case a screenplay, is completed.

Where producers commission writers to originate or rewrite screenplays, it is difficult to characterize the writer as an employee of the producer.  Thus, a writing confirming the employer’s retention of the copyright is essential. 

Many producers attempt to get around the writing requirement by simply including a provision in the writer’s contract that the writer is deemed to be an employee of the producer.  However, the courts have uniformly held that they are not bound by these provisions and will resort to the various factors outlined above to decide if the writer really is an employee for copyright purposes.  Thus, producers who hire writers for particular projects assume a substantial risk that the writer may later assert a copyright infringement claim if the producer does not confirm the ownership of the copyright in writing.  The critical issue is when must the agreement regarding the ownership of the copyright be confirmed in writing.

The most recent case on this subject did not involve a writer, but it is applicable because of its discussion of the work for hire statutes.  In that case, the court faced the issue of what happens to the copyright of work that is finished before the agreement regarding its ownership is completed.  Patrick Nagel, a well-known artist famous for his stylistic renderings of women, provided Playboy with prints that were used in the magazine for over a decade.  To secure the copyright ownership of the Nagel works, Playboy thought it was sufficient to simply place a statement on the checks issued to Nagel suggesting that Playboy owned the works.  The court disagreed.  It held that Nagel owned the works because the writings which purportedly gave Playboy the copyrights on a work for hire basis were executed after the creation of the works.

The court reasoned that Congress must have intended that work for hire agreements precede the creation of the work because the federal Copyright Act has a separate provision for transfer of copyrights.  If work for hire agreements under the transfer provision of the statute could follow the creation of the work, then the writing would be nothing more than an agreement transferring rights in the copyrighted work — something that was already covered in different section of the statute.  The ownership in the work would remain with the author until an agreement transferring the rights to the employer was executed.

It is important to note that a transfer of copyright after the writer completes the work is an unsatisfactory alternative (from the producer’s perspective) to requiring the writer to acknowledge in advance that the producer owns the work because it allows the writer to retain ownership of the copyright. 

Giving a writer access to story ideas without ensuring that whatever the writer does to develop those ideas remains the property of the producer is simply too risky for the producer.  Moreover, the failure to confirm the work for hire relationship between the producer and the writer may create a number of other problems for the producer including the inability to find a financier or distributor for the motion picture.  Most producers, however, know enough to prevent writers from keeping any interest in the producer’s property.  However, problems arise when the producer does not confirm his ownership in the work at the proper time.

The court in another recent case faced a copyright ownership issue similar to the one in the dispute between Patrick Nagel and Playboy.  In that case, the court was faced with the question of who owned the copyright to a series of pictures used in a catalog along with pictures from other photographers.  The catalog’s publisher believed that it owned the copyright to the pictures because it had a signed writing saying so. 

The court held that the photographer retained the copyright ownership because the writing which purportedly placed the copyright in the publisher was not prepared until after the pictures had been taken.  The court stated that a primary reason to require that any writing placing the copyright in the employer be executed prior to the completion of the work is to make ownership of property rights in intellectual property clear and definite in order to make the property readily marketable.

The lesson is clear.  If you hire writers in anything other than the traditional employer/employee setting, you must obtain a signed writing from the writer before any work is performed or else jeopardize your ownership in the writer’s work.

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