A recent decision by the Second Circuit Court of Appeals will keep numerous superheroes as copyrighted property of Marvel Comics.

In Marvel Characters Inc. v. Kirby, heirs of the late comic artist Jack Kirby sought to “terminate” his transfers of copyrights to characters created for Marvel during the 1950s and 1960s. The heirs’ efforts were grounded by the “work made for hire” exception.

With the termination of transfer provisions in Sections 304 and 203 of the Copyright Act, Congress gave creators a second chance to realize the full value of their work, by allowing for termination of transfers made at a time when the long-term market value of a work is not known. But termination does not apply to works made for hire.

“If a work is made for hire, the employer is considered the author and owner from the beginning,” says Kevin Parks, a member in Leydig’s Chicago office. “In this situation, there is no copyright ‘transfer’ at the time of creation, and, therefore, no transfer to be ‘terminated’ when the statutory period runs.”

Due to the age of the works in Kirby, the work for hire issue was addressed using a traditional “instance and expense” test.

Kirby was a freelancer, not a salaried employee, but the court looked beyond the surface of the relationship to explore the full environment in which copyrighted materials were created. The court found that the parties had a “close and continuous” relationship during the years in question, with Marvel closely supervising and directing the artist’s work. Thus, the works were made at Marvel’s “instance.”

In turn, Marvel’s payment of a flat rate for the drawings, as opposed to a royalty arrangement, helped satisfy the “expense” requirement, resulting in a work for hire scenario, and a decision for Marvel.

“The outcome would likely be different if the works were evaluated under the current Copyright Act,” says Parks, “as the instance and expense test is no longer in vogue.”

Nevertheless, for companies that hire freelancers as well as full-time artists, Parks says, Kirby underscores the importance of defining working relationships clearly to avoid future copyright battles.