Marvel Worldwide, Inc. v. Kirby

US Dist. Ct., S.D. New York

777 F.Supp.2d 720 (S.D.N.Y. 2011)

Facts:

Jack Kirby, now deceased, worked on famous (and valuable) Marvel comics, such as The Amazing Spider Man, The Incredible Hulk, Iron Man and The X-Men.  The relevant works were created during the years 1958-1963.  There was no evidence of a contemporaneous written contract between Marvel and Kirby relating to any of the works at issue.

During the time that the relevant works were created, Stan Lee was the art director and editor of Marvel Comics, and responsible for the “creative editorial aspects” of the comic books published.  Lee supervised the creation and publication of Marvel comics from beginning to end.  According to the “Marvel Method”, Lee gave the artist the general contours of the story he had in mind: an outline of the plot, a description of the hero, and suggestions for how the story should look.  Artists only began to draw “pages” when they received an assignment and plot synopsis from Lee, were always constrained by Lee’s plot lines, and  Lee retained the right to edit or alter their work, or to reject the pages altogether and not publish them if he did not like them.

Marvel’s artists were paid a flat per-page rate for artwork and the scripts they produced.

In 1972 (well after the works were created),  Kirby signed a written agreement assigning to Marvel, “any and all right, title and interest [Kirby] may have or control” in all the work that Kirby created for Marvel.  The agreement also contained the following: “Kirby acknowledges and agrees that all his work on the Materials and all his work which created or related to the Rights, was done as an employee for hire” for Marvel’s publisher.

In 2009, pursuant to Section 304(c) (located here), Kirby’s heirs served the Marvel parties with notices purporting to terminate Kirby’s assignment of his federally protected copyrights in a number of Marvel comics.

Decision:

This case is about whether Kirby’s work on the Marvel comics qualified as works made for hire under the Copyright Act of 1909.  If it did, then Marvel owned the copyright in such works without the possibility of termination of transfer.  If it did not, then then Kirby’s heirs had the statutory right to take back those copyrights, no matter the impact on a recent corporate acquisition or on earnings from blockbuster movies made and yet to be made.  The Court determined that these works were indeed works made for hire.

The terms “employer” and “employee for hire” were not defined in the 1909 Act.  The court employed the “instance and expense” test to determine whether a work commissioned from an independent contractor qualified as a work for hire under the 1909 Act.  Under this test, the copyright belongs to the person at whose instance and expense the work was created.  A work is made at the hiring party’s instance and expense when the employer induces the creation of the work and has the right to direct and supervise the manner in which the work is carried out.

Key in the court’s analysis was the fact that Kirby did not create the artwork that is the subject of the termination notices until Lee assigned him to do so.  Kirby did not produce work on “spec.”  Lee had complete editorial and stylistic control over the work that Marvel published.  If, for instance, Lee wanted a character’s frown changed to a smile to suit the story’s dialogue, the artist made the change.   Additionally, it was Lee who generated the plot or synopsis from which an artist created the pencil drawing for each assignment.  The fact that there was no written contract between the parties was immaterial.

The “expense” test is satisfied where a hiring party simply pays an independent contractor a sum certain for his or her work.  The focus is on who bore the risk of the work’s profitability—a fixed sum weighs in favor of satisfaction of the expense test, and a royalty payment weighs against.

The Kirby heirs were unable to rebut the presumption that the works were made for hire, in spite of the 1972 agreement.  Because the court determined that the relevant works were produced at the instance and expense of Marvel, the works were made for hire.  Accordingly, The Kirby Heirs’ termination notices were rendered without force or effect, leaving them with nothing.

Analysis:

Kirby’s works were created prior to 1978.  Accordingly, the copyright law in effect at the time of the creation of the works—the 1909 Act—applied in this case.  Under the 1909 Act, and in the Second Circuit, a work commissioned from an independent contractor qualifies as a work made for hire if it was made at the “instance and expense” of the hiring party.

This standard was substantially revised by the Copyright Act of 1976 (which took effect in 1978).  See here.  These revisions substantially narrowed the scope of work for hire from independent contractors from that which pertained under the 1909 Act.  These were artist friendly changes—the looser the standard (instance and expense), the more works made for hire and the less transfers artists could terminate; the tighter the standard (e.g., “works prepared by an employee within the scope of his employment”) the less works made for hire and the more transfers artists can terminate.

Does this mean that recording artists can disregard this case?  NO.  Sound recordings were first granted federal copyright protection in 1972.  This case, and the “instance and expense” standard, can apply to any recording  in its first term on January 1, 1978.  For example, if you recorded an album in 1973 and it was released in 1974, whether your recordings are works made for hire may be determined with reference to the “instance and expense” test, but will not be determined with reference to the tighter standard under the Copyright Act of 1978.

As the court in this case noted, at least with respect to the “expense” portion of the test, a fixed sum weighs in satisfaction of the expense test, and a royalty payment weighs against.  However, other cases have held that even when a creator receives a fixed sum, e.g., a non-refundable advance, this is sufficient to meet the requirement that the works are made at the employer’s expense.  The reasoning is that, even though the creator reaps the benefits of the success of the work, the employer assumes the risk of loss on the project.