Work-for-hire or transfer of copyright? Understanding your rights
In the publishing world, the concepts of “work-for-hire” and “transfer of copyright” can be challenging to navigate. Authors are often confronted in the publishing agreements by language that is vague and complicated, such as:
“The work will be a work-made-for-hire as defined by the Copyright Act, but, if the work is deemed not a work-for-hire, author hereby irrevocably transfers all right, title and interest in the work to the publisher for the entire term of copyright throughout the world.”
Why would a publisher prefer the work to be a work-for-hire than an outright transfer and what is the difference between a work-for-hire and an irrevocable transfer of all right, title and interest? To answer these questions, one must have a clear understanding of the definition of each practice.
There are, in fact, material differences between these two copyright concepts. A work-for-hire is not a transfer at all. It is a work that is “authored” from its inception by the company or institution that commissioned the work. Though the actual creator was a human being, the copyright act recognizes that, since people do the work for companies, this is a way for the companies to be authors.
Works-made-for hire come into existence through two mechanisms. Most commonly, if the work in issue was created by an employee of a company within the scope of her employment, then it is automatically a work-for-hire. Alternatively, a work can be for-hire if the creator was not an employee but was commissioned by a company to create the work. The creator in that case would need to have agreed that the work would be a work-for-hire before creating it and the work-for-hire agreement must be in writing and signed by the parties. Otherwise, the work will not be a work-for-hire, no matter if the parties stipulate that it is. Moreover, if a creator comes to a publisher with a newsworthy article, photograph, or other work and offers it for publication, the publisher cannot then claim it to be a work-for-hire since it was created by the time the creator approached the publisher.
Transfers of Copyright
When works cannot be deemed a work-for-hire, the creator can transfer all right, title and interest in the work to a company. In this case, the creator is the “author” for copyright purposes and s/he transfers a property interest in the work.
Since a work-for-hire is a work that was authored by the company, the company’s ownership cannot be undermined by any technicalities. A transfer, however, is a different story, with implications and opportunities driven by the current copyright act.
U.S. Copyright Act
The current copyright act went into effect in 1978. Before that, the 1909 Act was in many respects very publisher friendly. It assumed, for example, that a copyright was indivisible; that is, you couldn’t divide it up into many little exclusive and non-exclusive licensing streams. A work was either owned by the author or by the publisher, not shared. Therefore, as a general rule, the first publication of a work created the presumption that the work was owned outright by the publisher and not by the author.
In the late 1970s, when Congress was considering the enactment of the new copyright act, it decided to give authors more leverage and help them keep their copyrights. One of the paternalistic measures Congress took was in the transfer of copyright provision. Under the new act, even if an author signs a binding agreement promising to transfer all right, title and interest in a work, in perpetuity and worldwide, the author would still have a right to terminate the transfer after 35 years.
Congress created a fairly sophisticated but clear mechanism by which an author, joint authors, or their respective heirs could terminate a transfer of copyright ownership. The only exception to this rule was a transfer by a last will and testament. In the case of joint authors, a termination would have to be undertaken by a majority of authors or authors’ interests in the event one or more of them were dead. The timing, notice and filing formalities were all carefully laid out in the Copyright Act, all of which must be followed closely.
Therefore, the difference between a work-made-for-hire and a transfer of copyright is that a transfer can be terminated while a work-for-hire cannot be terminated. In 1978, the 35 years seemed like a long time away. However, starting in 2013, the first terminations started coming due. Now, in 2016, we are seeing a lot of authors, musicians, and filmmakers terminate the perpetual rights they granted 35 years ago.
In fact, a number of creators are now arguing that, while the contracts may have said that the works were made-for-hire, in fact they were not. Since a non-employee can only create a work-for-hire where the work was created after being commissioned, creators are claiming that in fact, their works were created before the company commissioned the work even if the contracts indicated to the contrary. If the authors prevail in this argument, it opens the door to a termination right.
Finally, what happens when an author terminates a grant? Presumably, the author will still want the work to be published and monetized. That is not a problem under the Copyright Act. The author can terminate and license back the rights to the very same publisher or to another publisher. However, the author may want to limit the license this time to a specific number of years, or may want to seek a higher percentage royalty, or perhaps get a lump sum payment as a signing bonus. The Copyright Act helps the author all those years later get a better deal.
The termination right arises under U.S. law, and not necessarily abroad. Therefore, a foreign rights deal may not be subject to termination under the law of the country that governs. In addition, authors should note that the 35-year period runs from the most recent contract transferring ownership. So any amendment or renewal will restart the clock.
In sum, it is better for an author to transfer rights than to create a work-for-hire. At least then, the author will have a second chance to reconsider the disposition of her work. Authors who created works in the early 1980s should consider their rights to terminate a grant to a publisher. Terminations open up new potential revenue streams for authors and tend not to tarnish publishing relationships when handled professionally.
Contributor: Ed Klaris is principal of Klaris IP, a law firm based in New York City specializing in intellectual property, media law, and the sale and acquisition of literary property. Klaris is also an adjunct professor of law at Columbia Law School.
Klaris will be presenting a session entitled Intellectual Property Rights: What you should know at TAA’s 2016 Textbook & Academic Authoring Conference.