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1978 Agreement Did Not Unambiguously Give Marvel Renewal Rights to Ghost Rider

Friday, June 14, 2013
By Tamlin H. Bason

A 1978 agreement that ostensibly transferred all copyright interests in the Ghost Rider comic book character from the character's creator to Marvel was ambiguous with respect to renewal rights, and therefore the district court erred when it dismissed the creator's copyright infringement claims, the U.S. Court of Appeals for the Second Circuit held June 11 (Gary Friedrich Enterprises L.L.C. v. Marvel Characters Inc., 2d Cir., No. 12-893-cv, 6/11/13).

The district court granted Marvel summary judgment after it determined that the agreement's language transferring to Marvel “forever all rights of any kind and nature in and to the Work” clearly evidenced an intent to transfer to Marvel all renewal terms in the Ghost Rider copyrights.

But that phrase, and in particular the word “work,” is rendered ambiguous by the remainder of the agreement, the appeals court said. It noted that the form agreement made no reference to the renewal rights of the comic book character. Rather, the agreement seemed instead to clarify that all work done by the plaintiff--who was a freelance artist at the time--was on a work-for-hire basis. Indeed, the court said, on its face the agreement appears to only apply to future works, and thus it is not clear that the parties intended for “work” to include copyrighted works that were created in the early 1970s. The appeals court thus vacated the district court's decision and remanded for a trial to determine ownership of the renewal rights. 

Ghost Rider First Appears in 1972 Comic

Gary Friedrich worked as a freelance comic book author in the late 1960s and early 1970s. During this time, Friedrich finalized an idea for a character that he had been working on for decades. The character was a motorcycle-riding superhero with a flaming skull for a head. Friedrich called the character Ghost Rider.

In 1972, Marvel Characters Inc.'s predecessor, Marvel Comic Group, ran the first comic featuring the Ghost Rider character in the Marvel Spotlight magazine. Although written by Friedrich, the comic was illustrated by Mike Ploog, and others, including Marvel's Stan Lee, provided input on the comic. Prior to publication of the first Ghost Rider comic, Marvel required Friedrich to assign it his rights in the Ghost Rider character.

Ghost Rider became popular and over the next six years Marvel published numerous more comics featuring the character, and even gave the character its own comic books series in 1973. Friedrich wrote many of these comics on a work-for-hire basis. 

Changes to Copyright Act Prompt New Agreement

Congress in 1976 enacted a new Copyright Act that made sweeping changes to some of the nation's copyright laws. One such change clarified that work done outside of the scope of normal employment will be considered a work-for-hire relationship only “if the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire.” 17 U.S.C. § 101.

The distinction is important because works made for hire are explicitly exempt from the termination rights available to creators pursuant to another provision of the 1976 Act. Under Section 304(c), a creator and his or her heirs have the right to terminate grants of rights made before 1978, regardless of the terms of the initial transfer assignments.

In 1978, Cadence Industries Inc., the company that at the time published Marvel's comic books, required Friedrich and all other freelance artists to sign agreements specifying that all freelance work was done on a work-for-hire basis. Friedrich was told at the time that he was required to sign the agreement if he wanted to continue to do freelance work for Marvel. Friedrich was also told that the agreement covered only future works.

After signing the agreement, Friedrich was never again asked to do freelance work for Marvel.

The original copyright term for the Ghost Rider character expired in 2000, 28 years after the first comic was published. At that time, the renewal term of 67 years would have vested with Friedrich, absent an agreement explicitly transferring those rights to Marvel or a third party. Marvel, however, continued to exploit the Ghost Rider character in comic books, in a 2005 movie, and in a 2007 video game.

Friedrich claims that he learned of Marvel's continued exploitation of the character in 2004 when he became aware that the Ghost Ridermovie was being filmed. Friedrich's attorney sent Sony Pictures, the company producing the movie, a letter claiming copyright ownership in the character. Marvel responded to the letter by claiming that the Ghost Rider character was created pursuant to a work-for-hire relationship and thus, the company said, the renewal rights vested with Marvel.

Friedrich received renewal registrations for the original Ghost Rider comic and for the Ghost Rider character in 2007. He then assigned those rights to his company, Gary Friedrich Enterprises L.L.C. 

District Court: Marvel Owns Renewal Rights

Friedrich filed a complaint for copyright infringement against Marvel and its licensees in the U.S. District Court for the Southern District of Illinois. The case was transferred to the Southern District of New York.

Marvel filed an answer claiming that Ghost Rider was a work made for hire. Marvel also argued that Ghost Rider was a collaboration, and thus that Friedrich was never the sole author of the work. Moreover, Friedrich's infringement claim was barred by the statute of limitations, Marvel argued. The company then filed a copyright infringement counterclaim Both parties moved for summary judgment.

Judge Katherine B. Forrest granted Marvel summary judgment after determining that the 1978 agreement clearly evinced an intent to transfer the renewal rights in the Ghost Rider character to Marvel. 837 F. Supp. 2d 337 (S.D.N.Y. 2011). This conclusion was based primarily on the agreement's use of the term “forever.” The district court also granted Marvel $17,000 in damages based on Friedrich's use of the Ghost Rider character. Friedrich appealed. 

Relevant Provision 'Awkwardly Phrased.'

“An author may assign his renewal rights during the copyright's initial term, but 'there is a strong presumption against the conveyance of renewal rights,' ” the Second Circuit said, quoting Corcovado Music Corp. v. Hollis Music Inc., 981 F.2d 679, 684, 26 U.S.P.Q.2d 1632 (2d Cir. 1993).

That presumption, the court said, can only be rebutted by language in a transfer agreement that expressly transfers the author's renewal rights to another.

The problem with the 1978 agreement in this case, the court said, is that “the critical sentence defining the 'Work' covered by the Agreement is ungrammatical and awkwardly phrased.” The relevant portion of the agreement states:

In consideration of MARVEL's commissioning and ordering from SUPPLIER written material or art work and paying therefor, SUPPLIER acknowledges, agrees and confirms that any and all work, writing, art work material or services (the “Work”) which have been or are in the future created, prepared or performed by SUPPLIER for the Marvel Comics Group have been and will be specially ordered or commissioned for use as a contribution to a collective work and that as such Work was and is expressly agreed to be considered a work made for hire.  

“This opaque cluster of clauses is simply not clear and parsing through its dense provisions does little to elucidate its meaning,” Judge Denny Chin said. Chief among the many problems in that sentence is that “the language is ambiguous as to whether it covered a work published six years earlier,” the court said. 

Marvel Tripped Up By Form Language

The court also took issue with the generic use of the term “supplier,” and with the agreement's failure to specify whether the supplier--in this case Friedrich--had ever before performed work for Marvel. The agreement also does not reference the Ghost Rider works, the court noted.

The agreement does, however, cover all works that “have been … created,” Marvel argued, and thus the agreement should be broadly construed to apply to the work Friedrich performed before signing the agreement.

“[B]ut the entire agreement suggests that this was a forward-looking contract only intended to cover work submitted after the Agreement was signed,” the court said. “Read in this context, work that 'have [sic] been …created'--to the extent the phrase has a discernible meaning--may refer to work that was in progress when the Agreement was executed, even though Marvel may have commissioned that work, and the freelance artist may have begun working on it, before the Agreement was formally reduced to writing.” 

Renewal Rights Not Mentioned in Agreement

Furthermore, the court noted that the agreement is completely silent on the issue of renewal rights. The court said that the agreement instead tracks the statutory definition of work-for-hire in an apparent attempt to vest original ownership of the copyrights with Marvel. In that case, the renewal rights would also vest with Marvel, and Friedrich would never be entitled to terminate Marvel's rights in the works under Section 304.

But, Marvel is entitled to the copyrights in Ghost Rider under the work-for-hire theory only if the agreement applies to past as well as future works, the court said. Marvel's reliance on the “forever” language is thus not persuasive, the court said.

The “forever” language does not unambiguously assign to Marvel Friedrich's renewal rights--as the district court found--because it is not clear what specifically is subject to the forever language, the court said. “The broadness of the language would be of no help to Marvel if the Agreement were intended to cover only future work,” the court said.

The court determined that the plain language of the agreement did not rebut the presumption that Friedrich did not transfer the renewal rights to Marvel. 

Extrinsic Evidence Also Cuts Against Marvel

The court next considered other factors to determine if the parties' actions at the time of the agreement evinced an intention to transfer renewal rights.

Most relevant, the court said, was that Friedrich was told that the agreement would only apply to future work. Friedrich was also not paid anything to sign the agreement, the court noted. Moreover, when the agreement was signed the Ghost Rider series was incredibly popular.

“Given that context, it is doubtful the parties intended to convey rights in the valuable Ghost Rider copyright without explicitly referencing it,” the court said. “It is more likely that the Agreement only covered ongoing or future work.” 

No Post Facto Work-For-Hire Agreements

Additionally, even if the parties intended for the Ghost Rider works to be included under the agreement, that alone would not necessarily entitle Marvel to the original copyrights because “the Agreement could not render Ghost Rider a 'work made for hire' ex post facto, even if the extrinsic evidence shows the parties had the intent to do so,” the court said.

Marvel must demonstrate that the original creation of the Ghost Rider character was under a work-for-hire relationship, the court said. The evidence does not entitle Marvel to summary judgment on that issue, the court said.

On the balance, it is possible that the parties never considered renewal rights when the 1978 agreement was said. “Accordingly, the district court erred in granting summary judgment based on the Agreement,” the court said. 

Claims Not Barred by Statute of Limitations

Marvel argued in the alternative that Friedrich's infringement claims were barred by the statute of limitations.

The statute of limitations is three years for an infringement claim (17 U.S.C. §507(b)), from the date when the claim accrued. A claim can begin to accrue when repudiation of ownership is communicated to the plaintiff.

Marvel argued that it publicly, privately, and impliedly repudiated Friedrich's claim to Ghost Rider.

Public repudiation happened when the Copyright Registration for the very first Ghost Ridercomic identified Marvel as the owner, the company said. The court noted that the registration only identified Marvel as the owner of the initial copyright term, and therefore it was not a public repudiation of Friedrich's rights to the renewal term.

The only conclusive evidence with respect to private repudiation was the letter Marvel sent to Friedrich in 2004 in which it informed him that Ghost Rider was a made for hire work. But Friedrich filed his complaint less than three years after receiving Marvel's letter and so his infringement claims were within the relevant statute of limitations, the court said. Genuine disputes exist with respect to Marvel's other alleged instances of private repudiation, the court said.

Likewise, Marvel is also not entitled to summary judgment on an implied repudiation theory, the court said. That theory was based on the fact that Marvel exploited the Ghost Rider copyrights without paying royalties to Friedrich between the renewal period in 2000 and 2004--when Friedrich claims to have become aware of Marvel's exploitation. The court noted that Marvel did not invest heavily in the exploitation of the Ghost Rider character during this time period until it authorized the film in 2004. Accordingly, “There is a genuine dispute as to whether a reasonably diligent person would have been put on notice by this activity,” the court said. 

Friedrich Not Entitled to Judgement on Authorship

The court next turned to Friedrich's request that the Second Circuit review the district court's denial of the parties' cross-motions for summary judgment on the issue of authorship.

The appeals court declined to overturn that decision. The court said the evidence does not conclusively demonstrate that Friedrich was the sole creator of Ghost Rider, but instead suggests that the creation may have been a collaborative effort that included as many as three other individuals, all of whom were paid by Marvel.

“If accepted as true, a jury could easily conclude from these facts that Ghost Rider was a 'work made for hire' and thus that Marvel was the sole statutory author,” the court said. Friedrich is thus not entitled to summary judgment on the issue of authorship, the court said.

Judges Christopher F. Droney and Ralph K. Winter Jr. joined the court's opinion.

Friedrich was represented by Charles S. Kramer of Riezman Berger, St. Louis. Marvel was represented by Robert Bruce Rich of Weil, Gotshal & Mange, New York.

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