You Choose: Four Years of Litigation or Taking Care of the Copyright Portfolio

By Dave Rein

As one of my daughters has discovered Calvin & Hobbes cartoons, I wonder whether she'll be inspired to try some of Calvin's outlandish ideas such as barreling down a steep hillside and over the abyss in a red wagon or if she'll make the proverbial "note to self" not to follow Calvin when the last frame shows the resulting crash.

I get it.  There are metaphors and life lessons and the yearning for a more exciting life.  But, I'm not sure that casting away the "dull and boring" best practices is a good way to protect one's intellectual property.  The Seventh Circuit in Schrock v. Learning Curve Int'l, Inc. helped clarify some lingering questions about derivatives in the copyright world -- at least in that circuit.  As I mentioned in an earlier post, to do so, the parties spent four years just to get to an oral argument before the Court of Appeals.

In reading the opinion, two things struck me that might have avoided the litigation or at least kept it from being so prolonged.  First, it could have registered its copyrights in the toys.  Some of the toy maker's registrations only applied to literary works related to the toys, but not the toys themselves.  Whether the toy maker was the owner of the copyrights and whether they were properly registered (and therefore entitled to all presumptions that follow) was a matter the judges expressed considerable interest in at oral argument.  

Second, the licensing agreement between the toy maker and the photographer consisted of the terms stated in the photographer's invoices.  Leaving the determination of who owns a copyright and its licensing terms to the battle of the forms should make the true copyright owner nervous.  In Schrock, the toy maker realized what happened years after it started doing business with the photographer and asked him to sign a "work for hire contract".   He refused, but even if the photographer had signed the contract years after he first provided photographs, that may not have solved the problem.  Some jurisdictions require that the contract be signed before the work is created or at least require that it memorialize an oral agreement made before the work's creation. That may have been too high a hurdle in this case although it likely would have been effective if entered at the onset of the work.

Regardless of whether a work-for-hire contract would have been effective, the court noted that the parties could have contractually agreed that the photographer would not register his copyrights in the photographs.  Actually, it did more than note that issue.  It remanded the case back to the district court to determine if the parties agreed to such a limitation.   

Certainly keeping up with copyright registrations and thousands of contracts is a constant struggle for companies or individuals that continuously create new content.  In these times when general counsels are under increasing pressure to reduce their departments' budgets, it is even harder to do so.  The challenge then is how can they convince upper management of the wisdom to spend money now to avoid paying even more later.

The parties' ordeal in Schrock may be useful to show that even companies with good copyright practices might benefit if more resources are devoted to auditing the company's contracts and copyrights and maintaining them. Litigation is not always avoidable, but anyone who owns copyrights and enters into contracts involving copyrights might be able to avoid prolonging the litigation and save money in the long run. At least it is better than throwing your copyrights on a red wagon with Calvin and hoping that they fly safely across the abyss.