Copyright

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The film industry revolves around copyright, so an understanding of the basic issues relating to copyright is critical for understanding almost any film transaction.

Country-by-Country Determination. Copyright exists on a country-by-country basis, and the rights and remedies of the copyright holder vary from country to country. The owner of a film actually owns separate copyrights in each country. Under the Berne Convention, publication in one country will trigger copyright protection in the other signatory countries, but based on the law of each of those countries. The Berne Convention does not supply a uniform copyright law. This article discusses the U.S. Copyright Act, and the reader should not assume that the same rules apply outside the U.S. Some foreign countries do follow the U.S. model, but most foreign countries have different models. It is important to consult each country’s laws to determine the rules applicable to exploitation of a film in that country.

Protected Works. The Copyright Act protects “original works of authorship” that are “fixed in any tangible medium of expression.” Thus, an original screenplay is deemed to be a copyrighted work from the moment it is “fixed” in writing. Copyright protection for a motion picture arises as each frame is shot and therefore becomes fixed in a tangible medium. A motion picture is a separate work, although it incorporates other copyrighted works, such as the screenplay and the music soundtrack. However, to bring a copyright lawsuit, the plaintiff must first register the work in the U.S. Copyright Office, and there are other advantages as well, so it behooves copyright owners to register each work early.

Derivative Works. Copyright protection also extends to “derivative works,” which are defined as works of authorship that are “based upon” a copyrighted work. The single most litigated issue under the Copyright Act is whether a given work is an infringing derivative work “based upon” a copyrighted work owned by another person. On the one hand, copyright protection does not extend to the underlying ideas contained within a copyrighted work; copyright protection is only intended to extend to the particular expression of the underlying idea. On the other hand, copyright protection extends far beyond verbatim copies of the original work. Ultimately, it is a matter of degree, and judges and juries tend to rule with their hearts on the issue.

Term of Copyright. For works created by individuals, the copyright term is the individual’s life plus seventy years. If the individual licenses the work to a third party, the individual automatically retains the non-waivable right to terminate the license after thirty-five years, which generally runs from the date of grant. However, this termination right does not apply with respect to any derivative works created by the licensee under the license. For example, if the owner of a novel licenses the film rights to a film company, which makes a film in reliance on the license, the individual cannot terminate the film company’s right to exploit the film after thirty-five years.

In the case of a “work made for hire,” the copyright term is ninety-five years from the date of publication. A “work made for hire” is either of the following:

1. A work made by an employee for an employer, whether or not pursuant to a written contract.

2. For certain types of works (including films), any work that is created pursuant to a written contract that expressly provides that it is created as a “work made for hire” for another party.

In both of these cases, the work will be owned by the employer or the party the work is made for, respectively, and the individual creating the work will have no ownership rights to the work.

Transfers. With very little effort, a copyright can be splintered into thousands of pieces. Critically, under the Copyright Act the owner of the exclusive right to any of these pieces is treated as the owner of an interest in the copyright, even if the document is titled a “license”. For example, the owner of the exclusive right to show a film right now in the room you are reading in is treated as the proud owner of an interest in the copyright to the extent of this right. This fact is referred to as the “bologna theory” of copyright; the overall copyright is treated as the bologna, which can be carved up into endless smaller pieces of bologna.

As bologna is carved up with a knife, a copyright is carved up with words. Thus, the precise drafting of all copyright-related documents is critical. It is important to carefully delineate who owns derivative rights, such as sequels and spin-offs, and who owns the right to exploit a work in future media that are not yet invented. To grant exclusive rights, the grant must be in writing, must expressly grant exclusive rights, and must be signed by the transferor. Any valid grant not meeting all three of these requirements is automatically treated as the grant of non-exclusive rights.

Everything Else. The word “copyright” is also used as a shorthand to refer to “everything else.” For example, if I grant you exclusive theatrical rights, but I retain the copyright, you will have exclusive theatrical rights to the original work, but I will retain the exclusive right to exploit the original work in all other media and to exploit all derivative works in all media. In contrast, assume that you own the copyright, but I am granted the exclusive right to exploit the work and all derivative works in all media in perpetuity. What do you own? (“Naked copyright,” which is only worth bragging rights.)

Competing Transfers. Who prevails if the copyright owner transfers the same exclusive rights to two different parties? The Copyright Act provides for a registration and recording system to answer this question. To use Copyright Act terminology, a work itself is “registered” for copyright, and transfers of exclusive rights in the work are “recorded.” As long as the underlying work is registered, the first transferee to record its transfer with the Copyright Office prevails (unless this transferee knew of a prior conflicting transfer at the time of its transfer). The moral of the story is that before you pay for a license of rights, first undertake a search of the Copyright Office to make sure that the underlying work is registered and that all prior links in your chain of title are properly recorded, and then pay and promptly record your transfer.

Fair Use Defense. The Copyright Act permits a “fair use” defense to what would otherwise be copyright infringement. Although the fair use statute lists a number of factors, and “fair” is in the eye of the relevant judge, the most important factor is whether the particular new work in question is aimed at the same market as the original work.

No Copyright Protection for Facts. Facts cannot be copyrighted, so there is no need to pay to use factual information from various nonfiction works, including articles and books to make a film as long as you don’t copy the “expression” of the underlying factual work, such as following too closely the narrative storyline it uses. The Ninth Circuit (which includes California) held that if the author of a work presents the work as factual, they are estopped from later arguing otherwise to make a copyright claim that someone used fictional elements from the work in a film.

Conclusion. The problem with copyright disputes is that merely to be sued is to lose, because legal defense costs are so high, and these suits generally cannot be thrown out at the summary judgment stage. Therefore, the industry practice is to have armies of people that do nothing but obtain clearances on everything. The practice has become so pervasive as to be absurd. I routinely advise clients to rely on the fair use defense, but even when my clients are brave, their insurance companies are not. With no insurance, there is no loan. With no loan . . . . You get the picture.