Reactions and Reform
The new default rule in favor of the commissioning party met with substantial resistance, not least of all in Congress. Among the systemic reforms put in place by the Copyright Act of 1976 was a provision establishing that a commissioned work is made for hire only "if the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire."
In addition, as noted above, Congress indirectly addressed the renewal problem exemplified by the Siegel case by creating the termination right. Although copyrights going forward would have a single lengthened term, authors and their heirs whose material was still in copyright as of the 1976 Act’s effective date — January 1, 1978 — would be able to reclaim the copyright for the remaining extra years. Moreover, creators of new material under the 1976 Act would be able to exercise the termination right 35 years after assigning or licensing their work.
One of the interesting things about the 1976 Act’s work-for-hire and termination right provisions is that they were actually drafted in a negotiated compromise with various industry representatives back in 1965. It was only after this compromise was reached and the media world was anticipating the enactment of termination rights that application of work-for-hire standards to freelance material became an issue in federal court — up until then, the notion of applying work-for-hire status to material not prepared by an employee was semantically incoherent.
This adds a new spin to a couple of things that started happening in the copyright work starting in 1965. Some companies started requiring creators to sign work-for-hire contracts. Part of this was a response to the renewal filings made for material whose value had surprisingly lasted beyond 28 years, such as the stories and characters in comic books — we see this, for instance, in Marvel’s 1969 settlement with Joe Simon and a related Marvel contract signed in 1972 by Simon’s Captain America co-creator, Jack Kirby.
More generally, the prospect of a new copyright act including the 1965 compromise also appears to have led to changes in the culture of freelancing contracts. Some corporate attorneys also started making work-for-hire contracts a normal part of freelance deals, in clear anticipation of a new requirement that work-for-hire status be in writing. The possibility also exists that some attorneys started arguing for this retroactive new work-for-hire rule as a means of preemptively gutting the termination right.
As the appellate ruling in Marvel v. Kirby illustrates, the reforms ultimately put in place in the 1976 Act are of little comfort to many creators and heirs whose material was originally copyrighted under the 1909 Act. The 1976 Act may now require express written terms to classify freelance material as work made for hire, but the Second Circuit can — and does — reach a different conclusion about earlier freelance creations.
Kirby for Hire
The Marvel opinion serves as a telling illustration of how the presumption in favor of the purchaser under the 1909 Act can prevent the exercise of termination rights. As for the operative legal standard, the Second Circuit summarizes the instance-and-expense test's two eponymous components as follows:
• "'Instance' refers to the extent to which the hiring party provided the impetus for, participated in, or had the power to supervise the creation of the work." (44)
• "The 'expense' component refers to the resources the hiring party invests in the creation of the work." (46)
In assessing Kirby's work, the court concludes that Kirby had a "close and continuous" (49) working relationship with Stan Lee sufficient to have constituted working at Marvel's instance. Although Kirby occasionally produced material for other companies, Kirby
created the relevant works pursuant to Marvel’s assignment or with Marvel specifically in mind. Kirby’s ongoing partnership with Marvel, however unbalanced and under-remunerative to the artist, is therefore what induced Kirby’s creation of the works. (50)
In other words, despite Kirby’s selling material to other publishers — a hallmark of independent contractor status — the fact that Marvel was a steady client was sufficient to make all of the material that Kirby sold to Marvel work made for hire, even if Kirby had developed that material independent of any prior request or direction from the company. Accordingly,
Marvel's inducement, right to supervise, exercise of that right, and creative contribution with respect to Kirby's work during the relevant time period is more than enough to establish that the works were created at Marvel's instance. (51)
As for whether Lee or Kirby — and in the case of Spider-Man, Steve Ditko — was most responsible for creating the characters that transformed Marvel from a struggling small business to a global entertainment empire, the court concludes the question is irrelevant. A finding that all of the Marvel characters are the product of Kirby's creative genius would make no difference to the material’s work-for-hire status, since
the hired party's ingenuity and acumen are a substantial reason for the hiring party to have enlisted him. It makes little sense to foreclose a finding that work is made for hire because the hired artist indeed put his exceptional gifts to work for the party that contracted for their benefit. (52)
The same goes for Marvel’s failure to return Kirby’s original artwork at the time of publication, an issue that the appellate court does not bother to acknowledge.
As for the second component of the test, the court concludes that Marvel's payment of a page rate was sufficient to establish that the work was performed at its expense. The occasional rejection of some of Kirby's pages was a sign of control, while the lack of royalties was a straightforward indication that Kirby did not have a financial stake in the material and Marvel bore the bulk of the economic risk.
By virtue of the instance-and-expense test, Kirby was in a far different position from what he might have expected from established precedent in the early 1960s and subsequent contractual language describing his earlier work.
For example, in 1972, Kirby entered an agreement in which he agreed to “assign” all of his rights in his Marvel work to the company. In the context of legal precedent prior to the shift to the instance-and-expense test, the language of assignment was consistent with the formalization of the 1909 Act’s default rule, according to which a freelancer assigned rights to the commissioning party unless the written contract states otherwise.
The Marvel court, however, concludes that the company was just covering its legal bases by having Kirby sign away copyrights he never owned. Or as the court puts it in the hip lingo of kids today, “we decline to infer from Marvel's suspenders that it had agreed to give Kirby its belt.” The inclusion of a clause stating that Kirby’s previous work was work for hire is taken at face value, rather than, as with a similar provision in the the case of Joe Simon’s Captain America termination filing, a retroactive attempt to recharacterize the work that should be disregarded In the termination-rights context.
What’s Wrong with this Picture?
The Marvel court is surprisingly straightforward about what it is doing. At the time Kirby created the Marvel characters, it acknowledges, Second Circuit precedent indicated that a freelancer merely assigned the original copyright, which would have given his heirs the right to terminate the transfer and reclaim his copyrights. However, over a series of opinions culminating in the 1974 Siegel case, the court had shifted to a different rule, making the instance-and-expense test the basis for determining that freelance material was actually no different from work made by an employee.
If this seems unfair to you, you’re not alone. Attorneys, judges, and even Supreme Court justices have tried unsuccessfully to challenge this for years.
For instance, the Supreme Court has addressed the problematic nature of this approach in a 1989 case, Community for Creative Non-Violence v. Reid, which notes that some courts — including the Second Circuit — had departed from earlier precedent by applying the instance-and-expense test to freelance work.
The Court highlights two key issues with the shift to treating work by non-employees as work made for hire. One problem is that it was a relatively recent innovation inconsistent with the 1909 Act’s previously controlling precedent. For decades, including the period of time which Kirby, Steve Ditko, and other creators were producing innovative and now quite lucrative material for Marvel, the default rule was that the creator of a commissioned work holds the original copyright. Work for hire, in contrast, was a category applicable only to material prepared by employees.
In addition, the Court concludes that the instance-and-expense test is inconsistent with both the copyright statute and its underlying purpose, which is in part to provide a workable basis for bargaining between parties. By focusing on the purchaser’s control, the instance-and-expense test creates a situation in which the parties to a deal would not know the legal status of a work until after it was complete, forcing the creator to predict whether the material is likely to be considered work for hire or work with a valuable copyright interest to sell.
The explanation of the instance-and-expense test in Marvel v. Kirby is the latest in a series of rulings in which the Second Circuit and other courts layeth the smacketh down on Community for Creative Non-Violence. Because the Court's precise ruling in that case technically concerned the applicability of the 1976 Act to earlier contracts, the Second Circuit takes the position that the Court’s critique of the instance-and-expense test was mere dicta, a non-binding discussion, thus leaving the Second Circuit free to go on its merry instance-and-expense testing way.
Another notable and more recent challenge can be found in the Ninth Circuit. In her dissent to the 2005 case finding that the autobiography of President Eisenhower was work made for hire, Judge Dorothy Nelson — former dean of the USC law school and the judge for whom I clerked after law school — counters the majority’s finding with an argument with direct relevance to the Kirby case:
As the majority explains, the 1909 Copyright Act does not contain a definition for the term "work-for-hire." The majority describes how courts have developed the doctrine establishing the meaning of the term, and how that doctrine has evolved to encompass a broader range of employment relationships. As the majority acknowledges, this court-made doctrine initially held that only works created by traditional "employees" fell under the "work for hire" doctrine. It was not until the 1960s that this Circuit for the first time included work created by independent contractors in the scope of the "work for hire" doctrine. The presumption that a given work is "for hire" is simply that — a presumption, "based on the presumed mutual intent of the parties." I conclude that as the law stood in 1948, it is unlikely that either party to the transaction viewed the sale of Crusade in Europe to Doubleday as the creation of a work for hire. No one has suggested that in 1948, when Eisenhower entered his deal with Doubleday, he was in a traditional employment relationship with Doubleday. Yet the law governing "work for hire" in 1948 extended only to such relationships. Thus, I fail to see how the majority can conclude that the parties intended the work to be "for hire" when that doctrine was understood to encompass only works created by employees.
What’s interesting about this argument is that despite its resonance with the Supreme Court’s own critique of the instance-and-expense test as the basis for finding freelance material to be work made for hire, the Court declined to grant cert and hear the case.
... And the Court Taketh Away
Given the Supreme Court’s history of failing to grant cert when appellants call attention to the retroactive application of the rebooted legal standard for work-for-hire under the 1909 Act, a successful challenge is likely going to require developing another line of argument. Ironically, the Second Circuit itself points the way for a new approach in a case conveniently omitted from its historical overview of the work-for-hire doctrine.
The case of Roth v. Pritikin involved a Siegel-and-Shuster-esque contract in which June Roth sold the rights to her recipes to a doctor whose book went on to become a multi-million-dollar bestseller. The contract was signed before the 1976 Act took effect, but Roth argued that Congress intended for the 1976 Act's work-for-hire writing requirement to apply to all contracts in effect as of January 1, 1978, not just contracts written on or after that date.
The Second Circuit disagreed, citing two important constitutional provisions: due process and the takings clause.
Due process is an issue raised by both the Supreme Court’s historical dicta and Judge Nelson’s dissent — here, the Second Circuit was saying that the retroactive application of the 1976 Act would have deprived parties of their property rights arbitrarily or without sufficient procedural safeguards.
As for the matter of takings, the Second Circuit was arguing that the retroactive application of the 1976 Act would unconstitutionally deprive Pritikin of property rights — in this case, the recipe's copyright as work-for-hire – for a public purpose without just compensation.
This same argument can be applied to the Second Circuit's decision to shift from categorizing freelance work as an assignment of copyright to work-for-hire. By changing the law, the court unconstitutionally appropriated the copyrights owned by Kirby and other similarly situated freelance creators and gave them outright to their assignees. Moreover, the Kirby family’s termination rights case makes clear that the creators were not the only ones whose property was taken — the copyrights were taken from the creators’ heirs as well.
To a degree unparalleled in previous opinions analyzing this issue, the Marvel court is rather open about the fact that in 1972 the Second Circuit changed the default rule governing freelancers and work-for-hire under the 1909 Act. The opinion doesn’t try to mask what has happened by claiming that the new standard that began to emerge after Lin-Brook was just an expansion or merger of the old doctrine into the new. Rather, the Marvel ruling is clear: in the Second Circuit, it wasn’t until the line of cases running from Brattleboro through Siegel that the court fully established the instance-and-expense test for freelance work. Before then, freelancers had a right to take their copyrights back.
Some of you might be wondering why, if this is so egregiously unconstitutional, the Second Circuit and Supreme Court would have overlooked the due process and takings issues raised by its work-for-hire jurisprudence. There are several reasons for this, but perhaps the strongest is the ongoing evolution of the Supreme Court's own jurisprudence on takings by the judicial branch.
The application of the takings clause to the appropriation of property by Congress, regulatory agencies, the executive branch, states and municipalities has a long and rich history. The focus on judicial takings is somewhat more recent. As a number of Supreme Court watchers have noted, the Court has shown an interest developing its doctrine in this area in recent years, most notably in the 2010 case of Stop the Beach Renourishment, Inc. v. Florida Dept. of Environmental Protection. In this case, a plurality of four justices within a unanimous opinion concluded that when a judicial decision “that purports merely to clarify property rights” actually “declares that what was once an established right of private property no longer exists, it has taken that property, no less than if the State had physically appropriated it or destroyed its value by regulation.”
Equally intriguing for our purposes is the ideological alignment on takings matters and the reason why the rest of the judges didn’t join the plurality on judicial takings. Conservative judges — such as Scalia, Roberts, Alito, and Thomas in the quotes above — are often inclined to take an interest in a takings case, since it involves the government ostensibly overstepping its bounds. More moderate and liberal judges tend to be a bit more reticent to curb takings, as exemplified by their decision to hold back on the matter until it was presented more directly in a future case.
The Marvel v. Kirby appeal could offer an attractive case for justices on both sides of the ideological fence to resolve the question of judicial takings in a mutually acceptable way. On the one hand, it is a documentable case of judges unilaterally depriving freelancers and their heirs of substantial property rights, including both the original copyright and the right to terminate the earlier transfer. In this case it’s all intellectual property, but as the court indicates in Stop the Beach Renourishment, property rights are property rights, no matter how intangible.
Yet Marvel v. Kirby is also a case that does not involve keeping the government from using specific property to promote the public good. It is instead a case that could be of interest to the Court’s more moderate and liberal justices, inasmuch as the nation’s leading copyright courts arbitrarily effected a massive transfer of wealth from creators and their heirs to companies already enjoying a superior bargaining position.
Moreover, previous cases involving the instance-and-expense test did not provide an underlying dispute with interests so compelling and current as the termination rights at stake in the Kirby dispute, which could be another factor increasing the odds of Supreme Court review. Both the 1976 Act and an earlier Supreme Court opinion have implicitly rejected the legal standard on which the appellate court relied. The Marvel v. Kirby case offers a way of addressing this issue without mucking up a host of earlier transactions. The purchasers of freelance work get to keep the assigned copyright for the entire length of the remaining copyright term — it’s just that now freelance creators and their heirs would be able to exercise their termination rights.
When Jack Kirby returned to Marvel in 1976, his first Captain America storyline envisioned a country at risk of betraying its ideals. In Kirby's epic "Madbomb" saga, an ostensibly benevolent elite conspires to brainwash everyone else into becoming "labor zombies," gladly taking orders in exchange for a paycheck. Captain America and the Falcon managed to save the nation in time for its bicentennial, but Kirby's own struggle to secure his rights as a freelance creator reached a less triumphal outcome.
There is much more that can be said about the Marvel v. Kirby appellate ruling, but for our purposes the most important takeaway is that this case is not necessarily over. There hasn’t been a 1909 Act copyright case raising such important and far-reaching issues for almost a quarter of a century, and the Kirby case could provide the perfect platform for a ruling that could make termination rights in pre-1978 material more than just a legal fiction for many creators and their families. Just as Jack Kirby revolutionized graphic storytelling, his family's quest to reclaim his innovative creations has the potential to revolutionize copyright law.