Marvel Characters, Inc. v. Simon

• Citation: 310 F.3d 280
• Decision Date: 07 November 2002
• Docket Number: Docket No. 02-7221.
• Parties: MARVEL CHARACTERS, INC., Plaintiff-Counter-Defendant-Appellee, v. Joseph H. SIMON, Defendant-Counter-Claimant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

310 F.3d 280

MARVEL CHARACTERS, INC., Plaintiff-Counter-Defendant-Appellee, v. Joseph H. SIMON, Defendant-Counter-Claimant-Appellant.

Docket No. 02-7221.

United States Court of Appeals, Second Circuit.

Argued: June 3, 2002.

Decided: November 7, 2002.

Ethan Horwitz, Goodwin Procter LLP, New York, NY (Kandis M. Kahn, on the brief), Ross J. Charap, Moses & Singer LLP, New York, NY, on the brief, Darby & Darby PC, New York, NY, on the brief, for Defendant-Counter-Claimant-Appellant.

David Fleischer, Paul, Hastings, Janofsky & Walker LLP, New York, NY (Jodi A. Kleinick, on the brief), for Plaintiff-Counter-Defendant-Appellee.

Kay Murray, The Authors Guild, Inc., New York, NY, for Amici Curiae The Authors Guild, Inc.; The American Society of Journalists and Authors; The American Society of Media Photographers, Inc.; The

Graphic Artists Guild; and The Society of Children's Book Writers and Illustrators.

Before: KEARSE and McLAUGHLIN, Circuit Judges, and HAIGHT, District Judge.^*

McLAUGHLIN, Circuit Judge.

This appeal requires us to examine the scope of the termination provision of the Copyright Act of 1976 (the "1976 Act"), 17 U.S.C. § 304(c). Section 304(c) grants authors (or if deceased, their statutory heirs) an inalienable right to terminate a grant in a copyright fifty-six years after the original grant "notwithstanding any agreement to the contrary." 17 U.S.C. § 304(c)(3),(5). The termination provision, however, has one salient exception: copyright grants in works created for hire cannot be terminated. 17 U.S.C. § 304(c).

The question of first impression raised here is whether a settlement agreement, entered into long after a work's creation, stipulating that a work was created for hire constitutes "any agreement to the contrary" under the 1976 Act. We conclude that it does and, therefore, reverse.

BACKGROUND

This being an appeal from a grant of summary judgment to plaintiff Marvel Comics, Inc. ("Marvel"), we view the deposition testimony, affidavits, and documentary evidence in the light most favorable to defendant Joseph H. Simon, the non-moving party. Roge v. NYP Holdings, Inc., 257 F.3d 164, 165 (2d Cir.2001).

I. Publication of Captain America Comics

In December 1940, Martin and Jean Goodman, doing business as Timely Publications and Timely Comics, Inc. (collectively "Timely") published the first issue of the now iconic Captain America Comics. Captain America, a.k.a. Steve Rogers, was an army-reject turned superhero who was charged with protecting America from all enemies, especially Nazi spies. Authorship of the comic book was attributed to Simon and Jack Kirby.

According to Simon, he created Captain America as an independent, freelance project before shopping it around to various publishers. Although there was no written agreement between the parties, Simon contends that he sold the Captain America story to Timely for a fixed page rate plus a twenty-five percent share of the profits of the comic books. Simon also maintains that he created the second through tenth issues of Captain America Comics on a freelance basis, and orally assigned his interest in Captain America Comics and the Captain America character (collectively the "Works") to Timely.

During 1941, Timely published the second through tenth issues of Captain America Comics. Shortly after their publication, Timely applied for and received certificates of registration of the copyrights for each issue of the Works. The Works were a tremendous success, and to this day continue to generate substantial revenue for Marvel, Timely's successor in interest.

II. The Copyright Act of 1909

Under the Copyright Act of 1909 (the "1909 Act"), in effect at the time of Simon's purported creation of Captain America and assignment to Timely, an author was entitled to a copyright in his work for twenty-eight years from the date of its publication. 17 U.S.C. § 24, repealed by Copyright Act of 1976, 17 U.S.C. § 101 et seq. Upon expiration of the first twenty-eight year term, the author could renew the copyright for a second twenty-eight year period (the "renewal term") simply by applying to the United States Copyright Office ("Copyright Office"). Id. The Supreme Court has noted that the renewal term operated to "permit[] the author, originally in a poor bargaining position, to renegotiate the terms of the grant once the value of the work has been tested." Stewart v. Abend, 495 U.S. 207, 218-19, 110 S.Ct. 1750, 109 L.Ed.2d 184 (1990); see also Woods v. Bourne Co., 60 F.3d 978, 982 (2d Cir.1995) ("[Through the renewal term] Congress attempted to alleviate the problem of the inability of authors to know the true monetary value of their works prior to commercial exploitation."). As the House committee which drafted the 1909 Act explained, "it should be the exclusive right of the author to take the renewal term, and the law should be framed as is the existing law, so that he could not be deprived of that right." H.R.Rep. No. 60-2222, at 14 (1909).

III. The Prior Actions

As the initial twenty-eight year term of copyright in the Captain America Works neared its completion, Simon commenced two separate lawsuits (the "Prior Actions") against the Goodmans and their affiliates.

In October 1966, Simon sued in New York State Supreme Court (the "State Action") claiming that, because he was the author of the Works, the Goodmans' exploitation of the Captain America character constituted unfair competition and misappropriation of his state law property rights. See Complaint, Joseph H. Simon v. Martin Goodman and Jean Goodman, individually and d/b/a Magazine Mgmt. Co., Krantz Films, Inc., R.K.O. Gen., Inc., and Weston Merch. Corp. (R. at 117). Simon sought an accounting, damages, and injunctive relief in the State Action. See id.

One year later, Simon filed a similar action against the Goodmans and their affiliates in the United States District Court for the Southern District of New York (the "Federal Action"). In this action, Simon sought a declaratory judgment that he, as the author of the Works, had the sole and exclusive right to the renewal term of the copyright in the Works. See Complaint, Joseph H. Simon v. Martin Goodman and Jean Goodman, individually and d/b/a Magazine Mgmt. Co. and Timely Comics, Inc. (R. at 142-48). He also sought injunctive relief to prohibit the Goodmans from applying for renewal registrations of the Works. See id. Simon was represented by counsel in the Prior Actions.

In both of the Prior Actions, the defendants denied that Simon was the sole author of the Works. In the State Action, the defendants specifically argued that Simon's contributions to the Works were made as an "employee for hire." See Defendants' Answer and Counterclaims (R. at 136-39). In the Federal Action, the defendants asserted a counterclaim for a judgment declaring that Timely owned the copyrights in the Works and therefore Simon should be enjoined from applying to renew such copyrights. See Defendants' Answer (R. at 150-55). While the Prior Actions were pending, Timely's successor in interest applied to the Copyright Office for renewal of the copyrights in the Works.

In November 1969, after two years of discovery, the parties to the Prior Actions entered into a settlement agreement (the "Settlement Agreement"). In the Settlement Agreement, Simon acknowledged that his contribution to the Works "was done as an employee for hire of the Goodmans." (R. at 185). Pursuant to this Settlement Agreement, Simon assigned "any and all right, title and interest he may have or control or which he has had or controlled in [the Works] (without warranty that he has had or controlled any such right, title or interest)" to the Goodmans and their affiliates. (R. at 179-80). The parties to both actions filed stipulations with the respective courts dismissing with prejudice "all claims and matters alleged, threatened, implied or set forth in any of the pleadings filed by [Simon]." (R. at 188-91).

IV. The Copyright Act of 1976

The legislative purpose behind the 1909 Act's renewal right — to provide authors a second chance to benefit from their works — was dealt a serious blow by the Supreme Court's decision in Fred Fisher Music Co. v. M. Witmark & Sons, 318 U.S. 643, 63 S.Ct. 773, 87 L.Ed. 1055 (1943). See Woods, 60 F.3d at 982. In Fisher Music, the Supreme Court addressed the renewal rights in the ever-popular (not to mention mellifluous) song "When Irish Eyes Are Smiling." The Court held that renewal rights were assignable by an author during the initial copyright term, before the renewal right vested. See id., 318 U.S. at 656-59, 63 S.Ct. 773.

Not surprisingly, after Fisher Music publishers began to insist that authors assign both their initial and renewal rights to them in one transfer. The natural effect of this, of course, was to eliminate the author's renewal right under the 1909 Act.

In 1976, Congress enacted a comprehensive revision of the Copyright Act. See Pub.L. No. 94-553 (1976)(codified at 17 U.S.C. §§ 101-810); see also Mills Music, Inc. v. Snyder, 469 U.S. 153, 159-62, 105 S.Ct. 638, 83 L.Ed.2d 556 (1985). Responding to the continual erosion of authors' rights subsequent to the 1909 Act, Congress extended the duration of copyrights then in their renewal terms for an additional nineteen years (the "extended renewal term"). See 17 U.S.C. § 304(b). More significantly, however, the 1976 Act gave new protections to authors. It allowed authors to terminate the rights of a grantee to whom the author had transferred rights in the original work. See 17 U.S.C. § 304(c); Woods, 60 F.3d at 982. This termination provision provides, in relevant part:

In the case of any copyright subsisting in either its first or renewal term on January 1, 1978, other than a copyright in a work made for hire, the exclusive or nonexclusive grant of a transfer or license of the renewal copyright or any right under it, executed before January 1, 1978, by any of the persons designated [by statute]...