Tuesday, May 08, 2007

Copyright in Outside Counsel's Work

Outside counsel perform many tasks for their clients outside of litigation, including drafting corporate documents and forms. When outside clients draft such documents at the request of their clients, who owns the copyright, assuming an original work? This issue was recently addressed by the Federal Circuit in Pods, Inc. v. Porta Stor, Inc., 2007 WL 1226740 (Fed. Cir. April 27, 2007)(available also at the Federal Circuit's website).

The parties were storage and moving companies that deliver storage containers to customers. Plaintiff had a patent on an apparatus and method for lifting a storage container from the ground on to a transport vehicle or vice versa, which explains how the case got to the Federal Circuit, since plaintiff alleged defendant's apparatus infringed this patent. There was a copyright claim too, and under Federal Circuit rules, that circuit applies the law from the circuit in which the district court sat; that meant in this case the law of the Eleventh Circuit. The copyright claim was alleged reproduction of a rental agreement. The whole case went to a jury, except the copyright claim, which the district court kept from the jury, holding as a matter of law that plaintiff did not own the copyright in the rental agreement since it found that agreement had been drafted by its outside counsel. Plaintiff did not argue work for hire under the second prong, and obviously failed to prevail on the first prong.

On appeal, the Federal Circuit reversed the grant of summary judgment, sending the copyright claim back for trial. The reversal was based on testimony indicating that joint authorship was possible. This possibility stemmed from the following trial testimony:

The only evidence at trial on the issue of joint ownership was the testimony of PODS president and CEO Peter Warhurst. On direct examination, Warhurst testified that PODS “went back to the [outside] attorney that helped draft the original mini-storage contract and he ... modified it for the uniqueness of ... the PODS business.” Likewise, when asked whether a document was “the rental agreement that the lawyer developed with your input,” Warhurst said “[t]hat's correct.” Id. (emphasis added). Similarly, he testified on cross-examination as follows:

Q: Who wrote the document for you?

A: The, uh-the lease agreement?

Q: Yes.

A: I believe that it was the outside counsel that we had hired.


Q: And the attorney who wrote the original document, Mr. Silver-Silverman?

A: I believe that's who we used at that time, yes.

Q: He was an attorney who had had [sic] an office, he wasn't an employee of PODS, was he?

A: Correct.

However, on redirect examination, Warhurst testified as follows:

Q: You are the president of Pods, Inc.?

A: I am.

Q: And ... on your executive group are vice-presidents, am I correct?

A: Yes, sir.

Q: Would it be fair to say that all of the executive group had some participation in the creation of that unique rental agreement in conjunction with the lawyer?

A: Uh, my staff and the lawyers worked together to create the document, yes, sir.

J.A. at 2135 (emphasis added).

Based on this testimony (and in particular the very leading question asked on redirect,
Would it be fair to say that all of the executive group had some participation in the creation of that unique rental agreement in conjunction with the lawyer?, the Federal Circuit wrote:

Warhurst's testimony is inconsistent as to whether the outside counsel was the sole author or whether the outside counsel and PODS employees jointly created the work. It is also unclear as to the extent of the employee contributions. Mere participation in, contributions to, and review of the work of an independent contractor by PODS employees would not necessarily create a joint work. See M.G.B. Homes, 903 F.2d at 1492-93 (finding no co-ownership where home builder reviewed architect's drawings, made suggestions and corrections, and had final approval authority). The evidence is plainly insufficient to warrant JMOL in favor of PODS on the question of joint ownership, and the district court erred in granting JMOL.

The question then becomes whether to direct the award of JMOL in favor of Porta Stor or to remand for a new trial. Despite the somewhat skimpy record as to employee contribution, we cannot say that “a reasonable jury would not have a legally sufficient evidentiary basis to find for [PODS] on [the copyright ownership] issue.” Fed.R.Civ.P. 50(a)(1). A jury could have believed that the contributions of the PODS employees were sufficiently significant to find the employees joint authors of the work.

Thus, we conclude that the district court erred in granting JMOL on copyright infringement and that the jury should have been permitted to determine whether PODS had carried its burden to establish ownership of the copyright. We therefore remand the case to the district court for the limited purpose of holding a new trial on the copyright infringement issue solely on the theory of joint ownership.


Anonymous said...

Wow, what a lesson learned! I am not sure why counsel for the Plaintiff did not argue work for hire, in the beginning of this lawsuit. Any idea why they failed to do so?

Now they have to go back on remand and try and produce testimony from employees regarding whether their contributions were sufficiently significant to find them joint authors. An uphill battle, at best!

Anonymous said...

Why didn't Plaintiff argue work for hire? Probably because there was no written WfH agreement. See subsection (2) of the definition of "Work for Hire" in 17 USC 101. WfH for non-employees is a bright line test -- either you have a written agreement that satisfies the statute or you don't.

On the merits, I think the Fed Circuit botched this one. One of the critical (and oft-overlooked) elements required for joint authorship is that there was an agreement between the authors to be joint authors -- it's not sufficient to just prove individual contributions. In the usual commissioned work situation -- where the client provides ideas, suggestions, edits, and generally directs the photographer, architect, or other artisan -- the lack of proof of any evidence of an agreement to be joint authors usually dooms the joint authorship claim.

Maybe I missed something, but I saw no indication from the opinion that there was any affirmative evidence of any such agreement (indeed, I'd be surprised if there was any under this fact pattern). Absent proof of this essential element of the affirmative defense, summary judgment for the copyright owner was appropriate.

LKB in Houston

William Patry said...

Indeed, LBK, I saw no such evidence either of an intent for joint authorship. On the written agreement and work for hire, such a work wouldn't qualify under prong two anyway; it is also difficult to see how any ordinary attonrey-client relationship would qualify under prong 1.

Anonymous said...

AC3 says:
Its hard to tell from the post but it seems that the rental agreement may not have been written from scratch by the outside council. It seems entirely plausible that some or most of the contract was boilerplate which would clearly not be copyright by the client.

William Patry said...

See footnote 6, although this doesn't answer the question about the agreement being a derivative work.