Why it matters: Do third parties have standing to raise the "work for hire" defense in a copyright ownership dispute? The Second Circuit says yes. On July 29, 2016, the Second Circuit in Urbont v. Sony Music Entertainment held that the district court properly determined that the defendants had standing to raise a "work for hire" defense to the plaintiff's copyright infringement claim even though they were not the party who had allegedly done the hiring. The Second Circuit reversed and remanded the case back to the district court, however, finding that the district court erred when it granted summary judgment in favor of the defendants after ruling that a "work for hire" arrangement existed as a matter of law and the plaintiff had failed to raise sufficient issues of material fact to convince the court otherwise.

Detailed decision: On July 29, 2016, the Second Circuit in Urbont v. Sony Music Entertainment held that the Southern District of New York court had properly held that Sony Music Entertainment (d.b.a. Epic Records and Razor Sharp Records, LLC) and Dennis Coles (d.b.a. Ghostface Killah) (collectively, Defendants) had standing to raise a "work for hire" defense to the copyright infringement claim filed by plaintiff Jack Urbont (Urbont) with respect to the theme song for the Marvel Entertainment Group (Marvel) character "Iron Man." This is noteworthy because the alleged hiring was done by Marvel—not a party to the lawsuit—instead of the Defendants. Even though it affirmed the district court's ruling that the Defendants had standing to assert the "work for hire" defense, however, the Second Circuit reversed and vacated the district court's grant of summary judgment in favor of the Defendants, determining that the district court had erred when it concluded that Urbont failed to raise sufficient triable issues of material fact to counter the district court's finding that a "work for hire" arrangement existed as a matter of law.

Relevant facts and procedural background

To briefly sum up the relevant background facts, what is not in dispute is that Urbont (described in the opinion as a "composer and music producer who has written theme songs for many well-known television shows") wrote theme songs for several of the characters in the Marvel Superheroes Television Show (series) in 1966, including the theme song for Iron Man (Iron Man Composition). What is in dispute is the nature of the arrangement pursuant to which he came to write those songs. Urbont claimed that he composed, recorded and produced the theme songs at his own cost and submitted them to Marvel creator Stan Lee (Lee) "on spec," hoping that Lee would use them but with no prior commitment to do so. Urbont further claimed that Marvel understood and orally agreed that this "on spec" arrangement was "contingent on his [Urbont] retaining ownership rights in the work." Urbont cited to many facts to support this claim, set forth in detail in the opinion. On the other hand, the Defendants argued and cited facts to support the argument that Marvel—again, not a party to the lawsuit—had retained Urbont to compose the theme songs under a "work for hire" arrangement pursuant to which he did not retain copyright ownership.

In 2000, Defendant hip-hop artist Dennis Coles (a.k.a. Ghost Face Killah), Sony Music Entertainment and Razor Sharp Records produced and released an album entitled "Supreme Clientele" that featured the Iron Man Composition on two of the tracks. The Defendants admittedly did not seek permission from Urbont to use the work. In 2011, Urbont filed suit against the Defendants in which he alleged copyright infringement under the federal Copyright Act as well as under New York state law (among other state law claims). As one of their defenses, the Defendants claimed that the Iron Man Composition was created under a "work for hire" arrangement with third party Marvel and therefore Urbont did not own the copyright.

In 2015, the district court granted summary judgment in favor of the Defendants after ruling that (1) the Defendants had standing to assert the "work for hire" defense, (2) as a matter of law, the Iron Man Composition was indeed a "work for hire," and (3) Urbont had not raised sufficient triable issues of material fact regarding an ownership agreement with Marvel or otherwise to persuade the court that the arrangement was not a "work for hire." The Court also dismissed Urbont's state law claims (we focus only on the federal claims here). Urbont appealed to the Second Circuit after the district court denied his motion for reconsideration.

Second Circuit decision

The Second Circuit affirmed the district court's ruling that the Defendants had standing to assert the "work for hire" defense even though they were not parties to any ownership agreement between Urbont and Marvel. However, the Court said that the district court had erred in granting summary judgment in favor of the Defendants when it concluded that Urbont had failed to raise sufficient triable issues of material fact to counter the district court's determination that the Iron Man Composition was a "work for hire" as a matter of law.

Third-party standing to raise the "work for hire" defense

The Court began its analysis by stating that the ability of a third party to assert the "work for hire" defense was one of first impression for the Court: "This Court has not explicitly decided whether a third party to an alleged employer-employee relationship has standing to raise a 'work for hire' defense to copyright infringement." The Court pointed out that the Eleventh Circuit and the Ninth Circuit, albeit under distinguishable sets of facts, have split on the issue (the Eleventh Circuit has ruled that third parties do have standing to assert the defense, while the Ninth Circuit has ruled that they do not).

The Court was "unpersuaded" by Urbont's argument that the Defendants lacked third-party standing to assert the "work for hire" defense because there was no evidence that Marvel itself had ever asserted it or had ever questioned Urbont's ownership of the copyright—Urbont likened it to third parties not being able to challenge the validity of an otherwise undisputed copyright transfer under Section 204(a) of the Copyright Act. The Court distinguished the Ninth Circuit case and others cited by Urbont in support of this argument, stating that, unlike in those cases, Marvel was not a party to the lawsuit and "has not had the opportunity to clarify its position with respect to ownership of the copyright... it is thus uncertain whether Marvel would dispute Urbont's copyright ownership."

Moreover, the Court rejected Urbont's Section 204(a) transfer of copyright analogy because "Section 204(a), a statute of frauds provision for copyright transfers, was designed to 'protect copyright holders from persons mistakenly or fraudulently claiming oral licenses.' " By contrast, "the 'work for hire' doctrine guides the determination of ownership rights as between employers and employees or independent contractors." The Court said that, in any copyright infringement suit—whether as an element of the copyright infringement claim or in order to establish standing—the plaintiff "bears the burden of proving ownership of the copyright … whether such ownership is challenged by an ostensible employer or by a third party." The Court cited case law precedent when noting that "even courts that have precluded third parties from challenging a plaintiff's ownership rights under the statute of frauds provision in Section 204 have permitted those [third] parties to challenge the validity of the underlying ownership transfer."

The Court thus concluded that "third parties to an alleged employer-employee relationship have standing to raise a 'work for hire' defense against a claim of copyright infringement."

Summary judgment vacated

After reviewing in depth the factual evidence presented by Urbont to the district court to back up his claim to copyright ownership in the Iron Man Composition, the Court reversed and remanded the case back to the district court. The Court said that, while the district court had cited many strong factors in support of its finding that the Iron Man Composition was a "work for hire" as a matter of law, "there are other factors that the district court did not explicitly consider" and that "[c]onsidering all of these factors, we conclude that genuine issues of material fact remain as to whether the Iron Man Composition was created at Marvel's instance and expense [one test for "work for hire" arrangements]." Furthermore, the Court held that "the district court erred in concluding that Urbont failed as a matter of law to produce evidence sufficient to rebut the presumption that Marvel owned the work." The Court thus concluded that "Urbont has raised genuine issues of material fact with respect to his claim of copyright infringement, and we vacate the district court's grant of summary judgment in favor of the [Defendants.]"

After remand, the two parties reached an undisclosed settlement on October 6, 2016.

See here to read the Second Circuit's 7/29/16 opinion in Urbont v. Sony Music Entertainment.