IP Law Daily, COPYRIGHT—CDCal: Writer’s Creation and Delivery of Screenplay Created Implied License to Use Work to Promote Film, (Mar 14, 2013)

By Mark Engstrom, J.D.

A screenwriter could not pursue copyright claims against a psychic (and others) who, after hiring the writer to author a screenplay about the psychic’s life story, used the writer’s completed work to promote, without his permission, a film based on the screenplay, the federal district court in Los Angeles has ruled (Fontana v. Harra, March 12 , 2013, Snyder, C.). Because the court determined that the psychic had received an implied license to use the screenplay, under an oral agreement with the writer, the copyright claim was dismissed without prejudice.

The parties agreed that the writer would write the script and co-produce of the film. They also agreed that no portion of the script would be used by any defendant for any purpose until the writer had been paid the full amount that he was owed. According to the writer, that “full amount” was between $140,000 and $180,000 for his script-writing services and between $60,000 and $170,000 for his production services, plus a portion of the film’s net profits and gross revenues. In addition, his writing fee was to be paid out of the film’s “first funds” from investors. Although investments in the film exceeded a million dollars, the writer had not received anything beyond an advance payment of $13,000.

Generally, a transfer of copyright ownership had to be in writing. A non-exclusive license to use a copyrighted work, however, did not transfer copyright ownership. Therefore, the writing requirement that governed the transfer of ownership to a copyright did not govern the grant of a non-exclusive license. Accordingly, a nonexclusive license could be granted orally, and could be implied from the parties’ conduct, as well.

In the Ninth Circuit, an implied license existed if: (1) a presumed licensee requested the creation of a work; (2) a presumed licensor created that work and delivered it to the licensee; and (3) the licensor intended that the licensee would copy and distribute the created work. In the case, only the third element (the licensor’s intent) was disputed by the parties.

Nonpayment. The writer argued that he did not intend to grant a license that would allow the defendants to use his screenplay because he had not been paid in full for his services. Under Effects Associates Inc. v. Cohen (908 F.2d 555), however, the Ninth Circuit found that, when a plaintiff has created a work at a defendant’s request and has “handed it over,” the defendant’s failure to pay the plaintiff in full did not void an implied license that had arisen from an oral agreement (or the parties’ conduct). Failure to provide payment in full could void an implied license only if the agreement contained a “conditions precedent” clause that required full payment. Because those clauses were disfavored, they only arose when they were stated in “plain, unambiguous language.” Although an oral agreement and course of performance could, in some circumstances, state a conditions precedent clause in “plain, unambiguous language,” the sparse allegations in this case did not plausibly assert those circumstances.

Ultimately, if a plaintiff entered an oral agreement to create a work for a defendant to copy or distribute, and if the defendant failed to pay the plaintiff in full for the services that were rendered, the plaintiff’s proper course of action was a breach of contract claim, not a copyright infringement claim. The court thus rejected the writer’s argument that an implied license did not exist because the writer had not been paid in full for his services.

Parties’ relationship. The writer argued that the parties’ “ongoing relationship” (the first prong of the Fourth Circuit’s “Nelson-Salabes” test for determining whether a plaintiff possessed the requisite intent to grant a non-exclusive copyright license) weighed against an implied license. Although a strict application of the Nelson-Salabes test to the facts of this case did, indeed, suggest that the writer had not granted a license to the defendants, the court questioned the applicability of that test to the writer’s claim.

Significantly, the decisions that established and applied the Nelson-Salabes test “d[id] not suggest that [the test] should be mechanically followed in all of the diverse factual settings where an author’s intent to license [wa]s an issue.” Moreover, recent decisions provided grounds for questioning the broad applicability of the test. According to the court, the existence of an ongoing relationship could be probative of an intent to create a license or the absence of an intent to create a license; it also could be probative of nothing at all, with respect to intent. The court thus rejected a mechanical application of the Nelson- Salabes test in favor of an examination of the facts.

Presumably, if the parties had agreed that the defendants would use the writer’s screenplay to create and promote a film only if the writer became one of the film’s producers, this fact could show that the writer had never intended his screenplay to be used absent his involvement in the production of the film. Crucially, though, the writer did not allege any connection between his role as a screenwriter and his role as a producer. Instead, his allegations stated that the agreement to provide screenwriting services was separate from the agreement to provide production services. (“It was also agreed that, given his extensive production experience, plaintiff would be employed on the film as a co-producer.”). Without allegations of a connection between the screenwriting agreement and the production agreement, the mere fact that the parties had contemplated an ongoing relationship did not show that the writer did not have an intent to allow the defendants to use his screenplay to create and promote a film. Consequently, the ongoing relationship between the parties was not, by itself, probative of the parties’ intent.

Intent to create a non-exclusive license. The court concluded that the writer had intended to create an implied, non-exclusive license. First, his intent was clear from the nature of the parties’ oral agreement. The writer, for example, alleged that (1) the psychic had hired him to write a screenplay about her life story and (2) the writer would be “paid out of the first monies that were invested in the film.” These allegations showed that the parties knew that the screenplay would be used to create a film. Moreover, the writer was hired to write a screenplay, and screenplays were written for movies. It would be unusual, the court explained, to create a screenplay for some other purpose. Moreover, if he wrote, delivered, and received partial payment for a screenplay that the defendants would use in some other way, the screenwriter was obligated to identify that use.

In addition, the writer allegedly performed “a substantial amount of production work on the film” and attended a meeting in which the parties and the film’s investors had discussed how the film would be financed. After that meeting, the writer purportedly sent the defendants a draft agreement that stated that he would receive a portion of the film’s profits as compensation for his screenwriting services.

These facts unambiguously showed that the screenwriter had written and delivered his script with the intent that the defendants would use it to create and promote a film. This intent led to a non-exclusive license that provided the defendants with a right to use the screenplay. On the facts he alleged, the screenwriter could not maintain that the defendants had no right to use his screenplay to create and promote a film.

The case is No. CV 12-10708 CAS (JCGx).

Attorneys: Edwin F. McPherson (McPherson Rane LLP) for Fred Fontana. Steven T. Lowe (Lowe Law) for Carmen Harra.

Companies: Carman Harra Enterprises, Inc.; Global Entertainment Movies, LLC; Sibilo & Harra Entertainment, LLC

Cases: Copyright CaliforniaNews