Effects Associates, Inc. v. Cohen
908 F.2d 555, 1990 WL 100364 (1990)
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Rule of Law:
While a transfer of copyright ownership requires a written agreement under § 204 of the Copyright Act, a nonexclusive license to use the copyrighted work can be implied from the conduct of the parties.
Facts:
- Larry Cohen, a filmmaker, orally commissioned Effects Associates to create special effects footage for his movie, 'The Stuff.'
- Effects Associates sent a letter outlining the shots to be created, including a climactic factory explosion.
- The parties did not have a written agreement regarding copyright ownership of the footage.
- Effects created and delivered the footage to Cohen for incorporation into the film.
- A dispute arose when Cohen, dissatisfied with the factory explosion shot, paid only half of the agreed-upon price for that specific shot.
- Despite the payment dispute, Cohen incorporated all of the special effects footage from Effects into the final version of 'The Stuff.'
- Cohen's production company subsequently delivered the completed film, including the disputed footage, to New World Entertainment for distribution.
Procedural Posture:
- Effects Associates sued Larry Cohen and others in the U.S. District Court (trial court) for copyright infringement.
- The district court initially dismissed the suit, holding it was a contract dispute that did not arise under federal law.
- Effects Associates appealed to the U.S. Court of Appeals for the Ninth Circuit.
- The Court of Appeals reversed the dismissal and remanded the case to the district court, holding that the plaintiff was 'master of his claim' and could pursue the copyright infringement action.
- On remand, the district court granted summary judgment to Cohen, holding that Effects had granted an implied license to use the footage.
- Effects Associates, as the appellant, appealed the district court's grant of summary judgment to the U.S. Court of Appeals for the Ninth Circuit.
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Issue:
Does a copyright owner who creates a work at another's request and delivers that work for its intended use grant the other party an implied nonexclusive license to use the work?
Opinions:
Majority - Kozinski, Circuit Judge
Yes. A copyright owner grants an implied nonexclusive license when they create a work at the request of another party and deliver it with the intent that it be used by that party for its intended purpose. The court first rejected Cohen's argument that industry custom exempts moviemakers from the Copyright Act's § 204 requirement that any transfer of copyright ownership must be in writing. The court affirmed that this writing requirement is crucial for predictability and certainty. However, the court noted that § 204's requirement does not apply to a 'nonexclusive license.' Based on the precedent set in Oddo v. Ries, the court found that an implied license was created by Effects's conduct. Effects created the footage at Cohen's request, for the specific purpose of being used in 'The Stuff,' and delivered it to Cohen. To hold that no license was granted would render Effects's contribution 'of minimal value,' a conclusion inconsistent with the fact that Cohen paid a substantial sum for the work. Therefore, Effects impliedly granted Cohen a nonexclusive license to incorporate the footage into the film and for its subsequent distribution.
Analysis:
This case establishes a significant precedent by clarifying the distinction between a transfer of copyright ownership, which requires a writing, and the granting of a nonexclusive license, which can be implied from conduct. It provides a crucial framework for disputes involving commissioned creative works where formal agreements are absent. The ruling prevents creators from using a copyright infringement claim as leverage in what is fundamentally a contract dispute over payment, thereby protecting commissioners who have received and paid for a work for a specific, understood purpose. This decision forces courts to look at the parties' objective actions to determine if permission to use a work was granted, promoting a practical, common-sense approach in industries where informal agreements are common.
