Will Warhol Foundation v. Goldsmith impact comics?

 

Editor’s Note: The full text of the case can be found here. I will not be providing citations in my discussion below.

                The U.S. Supreme Court recently issued its decision in Andy Warhol Foundation for the Visual Arts, Inc. v. Goldsmith. The case concerned a screen print of Prince by Andy Warhol, which was based upon a photograph taken by Goldsmith. In the case, which the Court expressly limited to the Warhol Foundation’s licensing of the work to a magazine following Prince’s death, the Court found that the use was not transformative and that it did not qualify for fair use protection.

                Vanity Fair licensed from Goldsmith the right to have an artist—Warhol—use the photo as a reference to create a piece for the magazine (the “Purple Prince”). The license was for a one-time use. Warhol created the work for Vanity Fair, and he also created 15 other similar works that were all based on the same photograph taken by Goldsmith. After Prince’s death, Condé Nast licensed from the Warhol Foundation the rights to use one of these other Prince works (the “Orange Prince”). Upon the discovery of Orange Prince, Goldsmith informed the Warhol Foundation that the she believed the work infringed her copyright. The Warhol Foundation filed a declaratory judgment action in an effort to have the work declared a fair use. The district court granted summary judgment ruling it a fair use, and the Second Circuit reversed the decision. As stated above, the Supreme Court found:

…the sole question presented is whether the first fair use factor, “the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes,” §107(1), weighs in favor of AWF’s recent commercial licensing to Condé Nast. On that narrow issue, and limited to the challenged use, the Court agrees with the Second Circuit: The first factor favors Goldsmith, not AWF.

                The Court did not address whether any of the other Warhol Prince Works would qualify as a fair use. Instead, it focused solely on the licensing of the Orange Prince to a magazine, which it deemed as a commercial purpose, and the impact that license would have on the market for Goldsmith’s original photo because they “share substantially the same purpose.”

It is still too early to determine how this case will impact fair use going forward. Some commentators think that the limited ruling, as described in the quote, lessens the impact. Others, including those justices in the minority opinion, fear that this could lead to a major shift in copyright law and curtailing of fair use.

Nevertheless, comic book creators, particularly artists, should take note of the decision.

First, the Purple Prince Warhol created used Goldsmith’s photo as a reference. When it was originally created, Vanity Fair paid Goldsmith for its use as a reference and credited her. The Court also notes that Warhol regularly paid artists for the use of their works as reference. In comics, it is common for creators to use photographs as reference. This decision could encourage photographers, or those who acquire the rights to their works, to pursue litigation against those who use photos as reference.[1] Will using a photo as reference without a license be enough to justify infringement, particularly if the photo primarily exists to be licensed? The claim seems stronger today than before this case.

Second, in Goldsmith, the Court found that licensing the art was commercial use, and thus, when weighed with the other fair use factors, did not constitute fair use. The Court left open the question of how commercial does the use of the art have to be in order to weigh against fair use. To some extent all art is commercial. If you sell your art, it could be found commercial.  The Court didn’t address typical artistic commerce, and suggested a different analysis might result from typical art sales versus what occurred Goldsmith. Will use in a comic book be commercial use? I would hope that it would not be, as comics are a unique art form entitled to First Amendment and fair use protection, but comics are also a commercial art form. Using photo reference in your comic could increase the risk of potential lawsuits.

Third, if you utilize the art from your comics in other ways, you will want to be more careful with the images you choose. Will using photo referenced art on other materials, such as merchandise, prints, or posters be a commercial use? Based upon the Court’s decision, this is likely a yes.

Finally, if you are an artist, and you are using a photo referenced piece of art in your comic, you may be in violation of your contract. Most publishing contracts have the artist state that the art is original to them and will not infringe on a third-party’s rights. If your publisher gets sued because of the art you provided to them, you could be forced to pay for all of the damages and legal fees they incur because of it. This is why the representation and warranties and the indemnification sections of contracts are so important.

Hopefully, the impact of the Goldsmith decision will not be severely felt in the comic book industry, but, depending on how it is interpreted, there is the possibility of increased litigation in the future over photo referenced artist works.

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[1] This is something Jeff Trexler at the CBLDF has been mentioning as a problem for a while.

Book Review: Fandom and the Law

 

            When I saw that Marc Greenberg was writing a book discussing the legal issues surrounding fan fiction, fan art, fan films, cosplay, etc., I was intrigued. First, I was interested in seeing how Greenberg discussed these issues. These topics are difficult to tackle because the law is always changing, and the guidance attorneys look to—namely court decisions—can be sparse in this area. Second, the opinions of attorney can vary in regards to this topic. Some believe fan-created works should always be found to be acceptable under the law, some believe fan-created works should almost always be found to be unacceptable under the law, and some believe the question of whether-or-not a fan-created work is acceptable under the law depends on the circumstances. Finally, I was looking forward to reading this book because I’ve had the pleasure of meeting Marc a few times at Comic-Con. I find him to a very knowledgeable lawyer, and I was intrigued to read more about his insights on these topics.

Overall, Greenberg’s Fandom and the Law walks a fine line between trying to appeal to both attorneys and creators and occasionally stumbles while doing so. It falls short in providing a thorough evaluation of the risks fan creators may face. Nevertheless, Fandom and the Law provides a great overview of some of the legal issues surrounding fan-created works.

                In Fandom and the Law, Greenberg utilizes a mix of legal and practical advice, along with examples, throughout the book. He attempts to provide enough background knowledge in the law to educate creators on the risks they face, both from content owners and from those who might exploit their works. He also dives into some topics and areas of the law that are not relevant to creators and would only be beneficial to attorneys, such as evaluating case strategy and motion practice. This can make for uneven reading. At times, it felt like I was back in law school listening to a law professor, which makes sense considering Greenberg has been teaching law for decades.[1]

                When discussing the law, the book primarily draws from case law or disputes that involved pop culture intellectual property. Some examples Greenberg discusses, such as ComicMix and the Star Trek Axanar case, I have covered previously in my blog. While it is a nice way to narrow down the scope of the book, it does leave some case law out that can be relevant to discussions involving commercial sales of art, copyright, rights of publicity, and trademarks. Failing to do so might give readers the impression that intellectual property laws are more favorable to fan-created works than they actually are. Greenberg appears to be in favor of fan-created works, and occasionally, the book seems to minimize the legal risks fan-creators might actually face.

                The law surrounding fan-created works continues to evolve, and, as mentioned above, attorneys have differing opinions on the legality of such works and the levels of legal risk these fan-created works face. Some of the cases Greenberg discussed in his book resolved differently than anticipated after the book was published, and there are currently pending cases before the U.S. Supreme Court that may alter the law going forward. In my opinion, it is important for creators to understand that any time they are using something that they did not create in their work (such is the case in most fan-created works) they are at some risk. As whole, Greenberg’s book can be read to impart this advice, but it would have been nice to have it more explicitly laid out for aspiring creators.

                Overall, Fandom and the Law is an accessible read that will be beneficial for creators or attorneys looking for a better understanding of legal issues surrounding fan-created works.

Affiliate link below:

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[1] Sorry Marc, but it’s true.

Who owns the copyright in A.I.-generated works?

 

A.I.-generated works have been in the news for some time, and they are currently generating a lot of interest—both positive and negative. There are a lot of complicated issues with A.I.-generated works, and I am not going to discuss them all here at the moment, partially because the law is still evolving around them. However, there is one topic I briefly want to discuss: authorship and copyright protection.

In most instances, ownership of a copyrighted work initially belongs to the author of the work, and it is the owner of the copyright who can enforce those rights against others. If a work is not eligible for copyright protection, such as if it lacks creativity, is functional, or is in the public domain, then there is no copyright, and others cannot be prevented from using the work via copyright law.  

                In my opinion, one of the biggest issues that will determine how A.I.-generated works will impact creators is if copyright protection applies to these works. If an A.I.-generated work cannot be protected by copyright, then it will lack value for many companies. Without copyright protection, it would be incredibly difficult, if not impossible, to protect the work from use by others.

                When asked about this previously, my response has been that, based on the law as it stands, A.I.-generated works are not protected by copyright. Recently, the Copyright Office has issued two notices that provide further insight into how A.I.-generated works will be viewed.

                In the first memo, the Copyright Office clarified how copyright ownership would be applied to a graphic novel, Zarya of the Dawn, created using images from Midjourney.[1] The Copyright Office stated that Kristina Kashtanova would receive copyright protection in the text she wrote and the “selection, coordination, and arrangement of the Work’s written and visual elements.” The images generated by Midjourney, however, would not be protected by copyright because they were not created by a human. Essentially, Kashtanova owns the rights to the text and the overall appearance of the graphic novel, but not to the underlying images.

                In the second, the Copyright Office is proposing how it would treat applications for copyright protection of works created using A.I. The Copyright Office has stated that the determination of copyright protection will vary on a case-by-case basis. However, works generated purely by A.I. without addition or revision by a human author will not be entitled to copyright protection, and for works where a human author has used A.I.-generated work to create something else, the human author would receive copyright protection for the “human-authored aspects of the work…” or for the entire work if it is sufficiently creative enough to constitute “an original work of authorship.”[2]

                These two pieces appear to be in line with the current state of U.S. copyright law. A copyrighted work must be created by a human, but the amount of creativity needed to obtain a thin amount of copyright protection can be minimal. For instance, I can take a selection of public domain works, compile them into a book, and I would likely receive copyright protection for the book based upon the selection and arrangement of the works. Others are free to use the works independently, but using the same public domain works in the same arrangement as I selected could be a violation of my copyright.

                Fighting over authorship and copyright ownership is likely to be a major topic going forward. In order for A.I.-generated works to have true value, akin to traditionally human-authored works, then some form of copyright protection will be needed. The current state of the law affords A.I.-generated work minimal or no protection. The only way this will change is through litigation, and I find it hard to believe courts will diverge too far from the Copyright Office’s current interpretation of the law, or through lobbying to change the law.

                Personally, I would prefer a bright line rule of law prohibiting protection for A.I.-generated works. The primary reason for my view is because this technology will likely result in the loss of jobs for countless artists, writers, and other creatives. Second, I just don’t see the benefit of rewarding these types of works with copyright protection as they don’t really have artistic merit, and finally, because if A.I.-generated works are entitled to protection, the amount of litigation or threatened litigation that would ensue would be astronomical due to the ease with which A.I.-generated works are created and the amount of works that will be generated.

                Only time will tell how these issues will resolve, but I will be closely following the law as applied to A.I.-generated works very closely.  

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[1] https://copyright.gov/docs/zarya-of-the-dawn.pdf

[2] https://www.federalregister.gov/documents/2023/03/16/2023-05321/copyright-registration-guidance-works-containing-material-generated-by-artificial-intelligence

The Basics of Option Agreements - Part 4

 

Editor’s Note: This is part 4 on my series discussing option agreements. You can find parts 1, 2, and 3 at the links.

            In order to wrap up my series on option agreements, I want to discuss compensation other than the initial option fee and purchase price, and I want to briefly discuss shopping agreements.

When negotiating an option agreement, the initial focus will be on the option fee and the purchase price. These are important, but additional forms of compensation should be offered by the studios, and if not, then should be requested. If you are lucky enough to have a work that is optioned before it has been released, then you should request bonuses if the book is on any best seller lists or wins any awards. For a TV series, creators typically receive a royalty for each episode. It is also common to receive a bonus if the series is sold or runs for a set number of episodes. Creators also receive a small percentage of the overall minimum adjusted gross revenue of the work and a percentage of merchandise sales as well. These are just a few of the other forms of compensation creators can receive when a property is optioned and produced, and creators should make sure they are included.

Another form of compensation is consultant or producer roles. This tends to be a stickier point for studios than other forms of compensation, but creators should seek them out. As I mentioned in a previous post on executive producer credits, they can be prestigious, and they can be a nice source of additional income. Depending on your role, you can receive additional payments and bonuses based  on the success of the adaptation and contributions you provide.    

Finally, I want to briefly talk about shopping agreements. Shopping agreements are most often used when a third-party has interest in adapting your property and wants to see if they can drum up interest in it. If they are successful, then they will have the ability to either adapt the work or participate in the adaptation. Often, these will include a small fee, or no fee, paid to you. These are also typically shorter than option agreements. I tend to be wary of these types of agreements, particularly if there is no fee paid to the creator, but they can be useful in developing a project that might not have gone anywhere otherwise.

The ins-and-outs of option agreements and, to a lesser extent, shopping agreements, can be overwhelming. However, having a basic idea of what to expect, and knowing what you might want out of the deal, will go a long way toward making the process easier for you, and it will hopefully allow you find a deal that will satisfy you.

The Basics of Option Agreements - Part 3

 

Editor’s Note: This is part 3 on my series discussing option agreements. You can find part 1 and part 2 at the links.

                Previously in my series on option agreements, I discussed the basics of what an option entails, rudimentary numbers, and some of the intricacies around the rights being granted. This post will discuss termination and reversion. Simply put, termination is when the agreement ends or is terminated  and reversion is when the rights being granted revert back to you. Sometimes these terms may be used interchangeably, but there is a meaningful difference.

As I mentioned in my first post, an option is usually granted for 12-18 months with the ability to extend. This would be the Term of the agreement, and if the option is not exercised, the agreement would terminate. There may also be language allowing either party to terminate an agreement early if certain things occur, usually involving a breach of one of the party’s obligations.

A reversion is when rights that have been granted to a third party revert back to you, which would only occur if the option had been exercised which means the third party has acquired the rights to adapt your work. It is usually viewed differently than an early termination because no party is in breach of the agreement or has otherwise violated the agreement. Often, it means that time has run out to develop the work, or the work has stopped being exploited.

Key elements of a reversion are when it takes place, what is included and how much money is the third party entitled to for the reversion.

It is common for reversion to take place if development has not occurred within a set amount of time, or if production has not started on a project within two years from the exercise of the option. It can also revert if a pilot is produced but not picked up, and if a series was started and then cancelled.  

It is also important to address what is included. Sometimes it is a complete reversion, and you now own everything the studio worked on. Sometimes, it is just a reversion of underlying rights, and the materials the studio developed will be frozen, with neither party able to use them. This latter part is more common with developmental materials if the option is not exercised than if it is. However, it’s still important to be aware of it.

If the property is subject to reversion, then it is common for the third party who exercised the option to request to be repaid all money it has spent on the property plus interest, a royalty payment, and a future percentage of backend. This can vary depending on who is requesting it, but you will see it in most option agreements. The figure can also vary depending on how much time has passed.

My next post will wrap up this series and will address other types of consideration and a brief mention of shopping agreements.

Aftershock filed bankruptcy. What now?

 

NOTE: I do not generally practice bankruptcy law, and, as stated elsewhere on this blog, the below does not constitute legal advice or create an attorney-client relationship. Consult with your attorney to address your specific legal needs.               

The news recently broke that Aftershock Comics filed for chapter 11 bankruptcy. Contrary to the opinion of many, this does not mean that Aftershock Comics will be immediately going out of business. Chapter 11 bankruptcy is primarily used by businesses to hold off creditors, reorganize their debt, and continue operating. That is the intent, anyways. If it is unsuccessful, then the company may end up selling off its assets to pay back creditors or otherwise be dissolved.

Unfortunately, the bankruptcy process can take some time to complete. Those who are owed, or likely to be owed, money (the creditors) should be receiving official documents regarding the bankruptcy and relevant deadlines. Once received, creditors should review them carefully.

In addition to being lengthy, the bankruptcy process can also be incredibly frustrating. There are going to be things that will seem unfair and anger many. For instance, now that Aftershock has filed for bankruptcy, they cannot assign property in exchange for waiving debt without the court’s permission, and creditors cannot knowingly harass the company for payment. Some people who have recently received payments may be asked to return them. There is also the possibility that some people may be required to continue working with the company even though they haven’t been paid. Finally, even though someone might be owed money, there is still a strong chance that they will (i) receive less than what they are owed or (ii) receive nothing at all.

There are likely to be a lot of twists and turns to this, and every creditor will have to decide how involved they want to be. Some questions to ask are:

1)      Do you want to just follow along with the process and see what happens?

2)      If eligible, do you want to be actively involved and try to influence and shape the reorganization process?

3)      How much time and money do you want to spend on this? Is it worth it versus what is owed?

While we wait for more information, if you think you are owed money, make sure you are listed as a creditor. If you are listed, then verify that the listed information is accurate. If you are not listed, then you will need to file a claim before the relevant deadlines. Now is also a good time to review your contract and gather all relevant information and evidence regarding any claims you may have against Aftershock.  Finally, it may make sense to consult with an attorney to evaluate your options.

The Basics of Option Agreements - Part 2

 Editor’s Note: This is part 2 on my series discussing option agreements. You can find part 1 here.

If you are approached about having a work optioned, the first thing you need to understand is if you have the rights to grant the option. Who else may have an interest in the rights to your work and will need to be consulted? Do you have to involve any of your co-creators? If you did not do all of the work yourself, or you did not acquire all of the rights for yourself, then you will need to involve them. Do you have an agent? Do they have the right to negotiate media deals on your behalf? If they do, you’ll need to get them involved. Also, do you still have the right to negotiate or grant the option? You will have to review your publishing agreement. Some publishers leave media rights with the creators. Some publishers merely want a cut of any option money you receive. Some want to negotiate it on your behalf and have the contractual right to do so. Worse yet, some have acquired the rights to negotiate and dispose of it without your involvement. You’ll need to see who else you need to involve and what rights you currently have.

When optioning a work, it is important to specify what is being included in the option. It is important to clarify if it just includes the main comic book or a specific series, or if it also includes any future works developed relating to the main comic book. Ideally, as a creator, you want to limit it as much as possible, as it gives you more opportunities to exploit the work and profit from it. However, most studios will want the right to incorporate or develop direct sequels into media adaptations. It is important to make sure it is addressed, and if needed, the compensation adjusted to account for the inclusion of additional works.

                The next key element of an option is what rights are being granted. For most production houses and studios, they want the right to almost everything. They will usually want film and TV rights, theatrical, radio, publishing, etc. Sometimes, however, a third party may only be interested in acquiring the rights for one thing, such as film or theatrical. Usually this is done because it is often cheaper to acquire limited rights, and the third party may not have the ability to exploit a full set of rights.

When granting rights in an option, anything you are able to reserve might be able to be licensed later on for additional money. These are called reserved rights. If possible, you should try and retain theatrical, radio/podcast, or games/video game rights. Another lucrative right is merchandising. Most studios will want the right to make and sell merchandise, and you will usually receive a separate royalty for these goods. Sometimes, you may be able to retain some limited merchandising rights to create goods based upon the original work (think goods based on a comic versus goods based on the movie).  This is something creators should push for, as it gives you an extra revenue stream. Every situation and studio is different.  With very few exceptions, creators should almost always retain publishing rights.

When dealing with the distribution and acquisition of rights, it is also common for studios to request that certain rights are frozen or subject to a right of first negotiation/refusal. If rights are frozen, then that means that one or both parties cannot exploit the rights, typically for a set amount of time, without the other party’s permission. If any reserved rights are subject to a right of first negotiation, rights of last refusal, or something similar, it means the party optioning the rights has the ability to negotiate for any rights it has not previously acquired. 

            Next time, I will discuss reversion and termination.