1. Skip to navigation
  2. Skip to content
  3. Skip to sidebar

How Many Pieces of Flair Do You Have? Obtaining Merchandising Rights from Actors

A recent decision from the US federal courts offers a timely reminder of the importance for producers of specifically spelling out that they are obtaining “merchandising” rights from all actors performing in their film or TV project – including from their “non-star” cast.

Eriq Gardner, reporting at THR, Esq. (‘Office Space’ Actor Loses Lawsuit Over ‘Flair’), describes the factual background to the recent decision in Duffey v Twentieth Century Fox Film Corporation (the full decision is available here):

Todd Duffey, who portrayed the minor character of “Chotchkie’s Waiter” in Office Space, sued 20th Century Fox Film over a licensing deal that ushered in an odd piece of merchandise — a box set called the Office Space Box of Flair, which included a 32-page book and 15 “flair” buttons. … Duffey was upset that the company … had used his face on both the book’s cover and one of the buttons.

 


Though he occupies relatively little screen time in it, fans of the movie Office Space should remember Duffey’s appearances in the movie – Duffey’s character earns Jennifer Aniston’s character’s ire because he wears thirty-seven pieces of “flair” (well in excess of the minimum fifteen required by the restaurant where the two characters work). As can be seen from the images for the “Box of Flair” at the Barnes & Noble website, Duffey’s image appears fairly prominently on the outside of the Box, and his image occupies the entirety of one of the buttons contained in the Box.

Duffey was a “day player” in Office Space – an actor whose role was not a “lead” role and who likely only rendered a few days of services in connection with the film. He signed a “Day Player Agreement” with the production company which produced the film, an agreement which in all likelihood was not the subject of much, if any, negotiation. Critically, for purposes of this lawsuit, Duffey’s Day Player Agreement contained the following language, which granted to the production company:

“all rights throughout the universe in and/or to all results and proceeds of [Duffey’s] services rendered [in connection with the film] … including, but not limited to, the rights to … exploit, in any manner … whatsoever now known or hereafter devised in perpetuity, any pictures, likeness or representations made hereunder, of [Duffey], including but not limited to his … poses … performances and appearances … together with the right to use and display [Duffey’s] … likeness for commercial … purposes in connection therewith.”

 


On the basis of that language, the court dismissed Duffey’s claim, concluding that the “terms admit of only one reasonable interpretation: that Duffey granted [the production company] the right to use images of his performance on Office Space merchandise”. (For my money, I would have been even more satisfied if the agreement specifically mentioned “merchandise” or “merchandising”, but you get to the same place in either event.)

The case is a useful reminder that, in the absence of express language which grants the right to use an actor’s image in merchandising, there might be a cognizable claim on the part of the actor if their image is used – and as Duffey’s situation shows, it can be difficult, if not impossible, to predict ahead of time which actors a producer will want to use in merchandising (I’m happy to wager that no one, at the time of shooting the movie, would have guessed that a day player who probably had less than ten lines of dialogue in the film would end up on a piece of merchandise created nearly a decade after the film’s original theatrical release).

For Canadian producers, the matter is of even more acute importance: unlike the SAG/AFTRA collective  bargaining agreements, which contain explicit language granting to producers certain rights in the performances rendered by SAG actors (e.g., Section 36 of the SAG Theatrical Agreement), the collective bargaining agreements for actors in English Canada (whether ACTRA or UBCP) are completely silent on the nature and scope of rights which actors grant to producers. In short, without a written agreement (for “day players”, the agreement is often attached as a “rider” to their ACTRA standard form agreement), the producer is functionally in danger of not having acquired any rights to use the performer’s image or the copyright in their performance. Various arguments might be constructed that the performer granted some kind of an implied license to the producer, but everyone’s life is going to be simpler if there’s a written agreement that everyone can point to – a written agreement which includes the right to make use of the actor’s image and likeness not only in the film/TV project itself (and advertising related to it), but also in merchandising based on it.

, ,

How Many Pieces of Flair Do You Have? Obtaining Merchandising Rights from Actors

Optioning Film or TV Rights in a Book – A Checklist

As Torontonians know, we are in the midst of a mayoral election campaign; in all the excitement surrounding the candidate debates, it may have slipped into the rearview mirror that last month it was announced that the film rights for Crazytown: the Rob Ford Story, Robin Doolittle’s bestselling book about Toronto’s current mayor, had been sold to a Toronto-based production company. What are some of the considerations to be taken into account when structuring and negotiating an agreement to make a movie based on a book?

  • Option vs Purchase. Most often, the deal to make a movie based on a book takes the form of an exclusive “option” agreement. What that means is that the producer has acquired not the exclusive right to make the movie, but has acquired the exclusive right to purchase the right to make the movie. In other words, there are usually some conditions precedent which the producer needs to satisfy before they can actually go ahead and make the movie, the most important condition (from the author’s perspective) being the payment of a “purchase” price. Why are agreements structured as options? Because the producer usually needs time to make arrangements to actually finance the making of the movie – and while the producer is running around trying to gather the money to make the movie, they need to “secure” the exclusive rights in the book, so that the author doesn’t go and give the rights to some other producer. By entering into an option agreement, the producer is basically acquiring the right to go to potential investors and financiers of the movie and say “hey, I’ve got the exclusive right to make a movie based on this book – want to be a part of it?”
  • Who Owns the Rights?  For the film producer, it is critical to ascertain who actually controls the right to make an audio-visual project based on the book (what I’ll refer to throughout this post as the “AV rights”). Often the publisher of the book will have acquired the AV rights in their publishing contract with the author – but it certainly is not unusual for an author to have retained the AV rights. Even if a producer is able to satisfy themselves that the author has the AV rights, it will be prudent to obtain from the publisher a quitclaim or release wherein the publisher confirms that they do not control the AV rights.
  • Option Fee. The option fee is the amount which the producer pays to acquire the exclusive option. This fee is usually paid on signing of the option agreement (or very soon thereafter), and is often a relatively nominal amount – but is entirely open to negotiation. Only blockbuster bestsellers will see an option fee in the high five- or (even more rarely) six-figure range. An ancillary issue is whether the option fee is “applicable” against the purchase price – in other words, when the producer has to make payment of the purchase price (which we’ll discuss below) do they get to reduce the amount of the purchase price by the amount of the option fee (and any payments for extensions, also discussed below) which they have already paid? It is often the case that the initial option fee is “applied” against (i.e., reduces) the purchase price, but subsequent payments to extend the option period beyond its initial duration are not – again, however, the point is really a function of the negotiations between the parties.
  • Option Period and Payments for Extensions. How long the initial option period lasts for is likewise subject to negotiation, though there are some general parameters: producers will usually be reluctant to enter into an option period which is less than one year, and authors will usually be reluctant to agreement to an option period which is longer than two years – so an initial option period of 12-18th months is fairly common. Given the vagaries of the film/TV production process, however, the “initial” option period is usually just a starting point: producers will often want the ability to extend the option period beyond its initial duration – but it will cost them, and they will not be able to extend the option period indefinitely. The amount of any extension payment is usually a multiple of the initial option fee.
  • Purchase Price – Amount and Form. Here’s where things get funky. The purchase price is the amount which the producer has to pay in order to actually obtain the exclusive right to make the movie – payment of the purchase price is what converts the producer’s right from an option to an actual conveyance of rights. The amount of the purchase price is often related to its form: Is the purchase price simply a flat dollar amount which is pre-agreed by the parties at the time of entering into the contract? Or will the amount of the purchase price be determined by reference to a formula which takes into account the budget of the film or TV project? Authors will often want the purchase price to be determined by reference to a formula: the producer making a $3 million movie based on the book is a very different proposition than the producer making a $30 million movie based on the book. By contrast, the producer will often want to place some restrictions on the size of the purchase price they need to pay – and so the purchase price often is expressed as a percentage (usually somewhere between 1.5-4%) of the budget of the film/TV show, subject to a floor and ceiling on the amount. That way, the author knows they won’t get less than $x, and the producer knows they won’t have to pay more than $y. Easy enough, but which budget will be used as the reference point? The “in-going” budget which is used at the start of principal photography, or the “final” budget after all costs have actually been expended? Will there be any exclusions from the budget which is used to calculate the purchase price (such as deferred payments owing to cast and crew who agreed to forego an upfront payment in an effort to get the movie made)?
  • Purchase Price – Timing and Process. How the purchase price gets paid and how the option actually gets exercised should be the subject of close attention when drafting an option agreement. The process and payment mechanic (e.g., in order to exercise the option, the producer has to deliver a written notice to this particular person at this particular address, along with payment of the purchase price in this particular way (such as by money order or wire transfer)) should be spelled out in detail. Where the purchase price is to be determined by reference to the budget, there should also be a mechanism which allows for a portion of the purchase price to be paid “up-front” upon exercise of the option (because the relevant amount of the budget might not be known at the time of exercise of the option) with a “catch-up” payment to be made later on, once the final amount of the budget can be determined. Authors will want the option agreement to include a mechanism which makes it clear that the commencement of principal photography is deemed to be an automatic exercise of the option, necessitating payment of the purchase price.
  • Contingent Compensation. Another oft-contentious area – the possibilities for contingent compensation are limited only by the parties’ imaginations and tolerance for drawn-out negotiations. Contingent compensation might take the form of box office bonuses, net profit participation, additional payments to the author if the book achieves “bestseller” status on one chart or another, etc. Don’t forget audit and reporting language!
  • Subsequent Productions. If the producer is granted rights to produce more than one audio-visual project based on the author’s book, the agreement will need to spell out what sorts of payments (if any) the author is entitled to for such subsequent productions (which can include sequels, prequels, remakes, spin-offs, TV-series-based-on-movies, etc.).
  • Scope of Rights Granted. What exactly are the rights being granted to the producer? Is it the right to make a single audio-visual production? Or multiple productions? Can they make sequels? Prequels? Spin-offs? Remakes? Can they create merchandise based on the movie? Can they publish the movie’s screenplay as a stand-alone work? Can they create a theme park ride based on their movie? What about a videogame? Specificity in the wording of the nature of rights being granted will be rewarded down the road.
  • Credit. The precise form of the author’s credit will need to be determined. This can take multiple forms, whether on-screen or in promotional materials for the AV project. Some examples: the on-screen credit might read “Based on the book [insert title] written by [insert author name]” – but will that be a main title credit on a separate card, or just a credit in the end credit roll? Is the author going to get credit in paid advertising? Does the paid ad credit get included just in the “billing block” or does the credit get included in the “artwork” so that it is plainly visible to viewers of the ad? In really exceptional cases, the credit obligation might include the right/obligation to use the author’s name as part of the title of the movie (e.g., “John Grisham’s The Firm“). Oh, the contortions we go through in specifying these things…
  • Consultation/Approval/Participation. For the most part, unless the author is a J.K. Rowling or John Grisham calibre superstar, most producers are going to be loathe to give any sort of consultation or approval right to an author – the producer just wants to go off and get their movie made without interference from an author who thinks that their character would never say the lines in the screenplay. But, hey, it never hurts to try and ask for the right to approve or be consulted about things like the title, the casting, the screenplay, the promotional campaign, etc. If an author is feeling particularly bold, they might want to argue for a small role in the picture (non-speaking!), or to be engaged as a paid consultant on the project.
  • Reserved Rights. Properly drafted grants of rights should make it clear precisely what rights are being granted from the author to the producer – but it can be helpful to have just-as-clearly-drafted provisions which set out what rights are being retained (or “reserved”) by the author. This is often a jumble of “non-core” rights, but ones which can prove lucrative: radio rights, live stage rights, print publication (e.g., graphic novels), etc. Authors will want to make it clear that the author has the right to create “author-written” sequels to their own book.
  • Ownership of Development Materials. The producer will inevitably create what are referred to as “development” materials while they, er, “develop” their audio-visual project – things like draft screenplays or character designs if the project will be an animated one. Who gets to keep those materials if the option is not exercised should be addressed.
  • Reversion. Sometimes the producer will exercise their option, pay the purchase price and then… the movie/TV show never actually gets made. For the author, that’s a terrible position to be in: they have conveyed the AV rights in their book, and those AV rights are just sitting on a shelf, unexploited. In order to ensure that doesn’t happen, agreements will include a “reversion” clause, which stipulates that, even after exercise of the option, if the audio-visual project has not been commercially released within a certain number of years (usually somewhere between 4-7 years), the AV rights revert back to the author. The producer will try to make such reversion subject to the producer’s right to be repaid any costs which the producer expended in purchasing the rights and developing the project.

The foregoing list does not address provisions which are not specific to option agreements, such as representations and warranties, “no injunctive relief” clauses, dispute resolution, etc.; nor does it address extra-contractual matters such as the need for conducting a chain of title review on the project.

A final thought: perhaps moreso than other film/TV-related contracts, option agreements require significant input from author’s agents, who can advise on what is “market” for certain elements of the agreement with reference to the particular book being optioned, particularly those relating to payment and credit.

, ,

Optioning Film or TV Rights in a Book – A Checklist

Enforceability of Depiction Releases Redux – MHR Board Game Design v CBC

Whatever else one might want to say about the CBC television series Dragons’ Den, this much is indisputable: no other television show in Canadian history has been as important for advancing the state of Canadian jurisprudence regarding the enforceability of depiction releases. In the most recent case, a lawyer who appeared on the show had his claim against the CBC dismissed on a motion for summary judgment. Depiction releases typically contain language which not only allows a producer to make use of footage and photographs of a TV show participant, but which also specifically precludes the participant from suing the producers or broadcasters of the show for any reason – one previously unsettled issue was the extent to which such language (which is generally provided to participants on a “take it or leave it” basis) would be enforced by the courts. The answer appears unambiguous: a properly drafted release will be fully enforced by the courts and there appears to be little or no ambit for an unhappy show participant to sue in the shadow of one – however, there may be some remaining glimmers of hope for unhappy TV show participants, discussed at the end of this post.

Over the last few years, Dragons’ Den has been the subject of multiple lawsuits filed by individuals who appeared on the show and who felt aggrieved at the manner in which they had been portrayed on-air. The first of these cases, which we previously discussed here and  here, was Turmel v CBC (Dragons’ Den) (see 2010 ONSC 5318 2011 ONSC 2400 and 2011 ONCA 519), wherein the Ontario Court of Appeal confirmed that a “depiction release” (sometimes referred to as a “participation release” or even just a “release”) signed by a participant in a “reality” TV show was enforceable against the participant to bar any claim from being advanced by the participant based on his unhappiness over his depiction (in Turmel, the plaintiff based his claim in both defamation and breach of contract).

At the end of June 2013, the Ontario courts had occasion to pronounce again on the enforceability of depiction releases, again in the context of Dragons’ Den. In the case of MHR Board Game Design Inc. v. Canadian Broadcasting Corporation, 2013 ONSC 4457, the court again held that a depiction release signed by a participant in the show was enforceable to prevent the plaintiff from advancing a claim against the broadcaster. (See news coverage here.) In MHR Board Game Design, however, the plaintiff was a lawyer and so the arguments advanced were a touch more subtle than those advanced in Turmel, and therefore worthy of additional attention.

In MHR Board Game Design, the nub of the plaintiff’s argument was that the recording of his presentation to the panel of investors who comprise the titular “Dragons” was edited in such a way as to be a complete misrepresentation of what had actually occurred – to speak colloquially, the plaintiff argued that what had been a relatively uneventful, if unsuccessful, pitch was deliberately and misleadingly edited to make it look like a fiasco had occurred. From the judgment:

[3] The essence of the plaintiffs’ claims are that the short segment of the original recording that was broadcast is not only a “complete misrepresentation” of the original recording, but that the defendant’s conduct amounted to “gross and reckless negligence, intentional misconduct, malice and bad faith”.  The plaintiffs have sued the defendant for breach of contract, defamation, breach of duty of care, and injurious falsehood.

[4] Mr. Ribeiro alleges that the specific conduct involved in this case is not within the exoneration clauses of the Consent and Release or alternatively, that it would be unconscionable or contrary to public policy to enforce its terms.  He recognizes that the Consent and Release affords a very broad editing discretion to the defendant but submits that, because the Release is so broad in its terms, the exercise of such editing discretion engages a corresponding implied duty to do so reasonably and in good faith.

The plaintiff advanced a number of arguments relating to the release. First, he argued that the release did not specifically name “defamation” as one of the precluded causes of action – the court dispatched that argument summarily, stating that the “broad language of the Consent and Release is clearly intended to cover all causes of action and it would be robbed of its effect if it did not cover negligence”.

The next argument put forth by the plaintiff was that the wording in the depiction release which stated that his “appearance, depiction and/or portrayal” in the program “may be disparaging, defamatory, embarrassing or of an otherwise unfavourable nature which may expose [him] to public ridicule, humiliation or condemnation” was only intended to extend to the reactions of the Dragons, and should not be interpreted so broadly that it permitted the producers to edit the footage in a manner which would give rise to such results. The court similarly rejected that argument: because the depiction release contained language giving the CBC “the sole discretion to edit, cut, alter, rearrange or revise the sales pitch for broadcasting” and because the plaintiff therefore  “acknowledged that the program as aired would be edited in the “sole discretion” of the Producer[, he] must have understood the release extended beyond the comments of the Dragons.”

As stated by the court:

The clauses in the contract relied upon by the defendant are clear and unambiguous.  The express terms provide exceptionally broad protection for the CBC against any liability to a participant on the program.  That protection is not hidden in fine print.  It is crystal clear.

…  It is hard to imagine any stronger language than the words found in paragraphs 9 and 27 of the Consent and Release.  … I find that the Consent and Release by its express and unambiguous terms releases the defendant from every claim identified in the Statement of Claim.

As a result of that conclusion, the depiction release functioned as “a complete bar” to the plaintiff’s claims, unless it would be “unconscionable or contrary to public policy to enforce the contract or if the defendant itself breached the contract”. The court next turned its attention to whether either of those conditions had been satisfied in the court at hand – and found that they had not been satisfied. The court found that, relying on the decision in Turmel, there were no grounds for deeming the depiction release to be unconscionable, and further that no evidence had been advanced that enforcing the contract would be contrary to public policy.

The plaintiff’s final redoubt was to argue that the depiction release had been breached by the defendants and therefore could not be relied upon them as a defence. In crafting such an argument, the plaintiff was forced to acknowledge that, per the editing language noted above, there did not seem to be any express limitation on the latitude afforded to the CBC regarding editing. Instead, the plaintiff argued, the depiction release contained an “implied duty of good faith” when editing the footage – the court rejected this for a lack of evidence:

However, the evidence fails to establish any breach of the contract by the defendant.  First, even assuming an implied duty can be read into the contract, it is not self evident that the broadcast segment actually constituted a misrepresentation of Mr. Ribeiro’s sales pitch. Though the Dragons expressed interest in the game itself and enjoyed playing it, it was at the same time clear that they were unwilling to invest in its commercial viability.  Second, even assuming that the broadcast segment somehow distorted the nature of what transpired during the sales pitch, there is no evidence whatsoever to support Mr. Ribeiro’s allegation that the editing was done maliciously or recklessly.  In the final analysis there is simply no evidence to support the bald allegation of a lack of good faith in the editing exercise.

All of the above being said, while the enforceability of depiction releases seems to be relatively open-and-shut, there remain some ambiguities at the margins. It seems that the court has left open the possibility that if the plaintiff’s evidence had demonstrated that the editing constituted a “misrepresentation” of what had happened and/or that the editing had been done “maliciously or recklessly”, then there might be some scope for finding that there had been a breach of an implied covenant of good faith – however, there remains a major hurdle for a plaintiff wishing to avail themselves of that argument: it would have to be proven that the depiction release actually did contain an implied covenant of good faith. The other remaining tendril of hope is a successful argument that the enforcement of the depiction release would be contrary to public policy – the court held that the enforcement of the Dragons’ Den depiction release would not be contrary to public policy, but that seemed to be largely because the plaintiff had not advanced any arguments on that point (of course, it’s not clear that there are any cogent arguments that enforcing a depiction release could be contrary to public policy, but lawyers are a clever bunch…).

Enforceability of Depiction Releases Redux – MHR Board Game Design v CBC

Checklist: Reviewing Stock Library Content Licenses

When a film or television producer wants to make use of content supplied by a “stock” library (such as photographs, film clips or music), it is necessary for their legal counsel to review the license agreement in order to assess compliance with the clearance procedures of the E&O (errors and omissions) insurance policy obtained for the particular project. The standard-form license agreements provided by many online stock library providers should be carefully reviewed by counsel for potentially problematic clauses which impact the suitability of the license for the project.

This checklist is not intended to be a comprehensive contract checklist, but rather seeks to highlight problematic clauses which have been noticed in multiple licenses provided by stock libraries.

  • Is the license transferable and/or sub-licensable?
    • restrictions on assignability/transferability can pose particular problems for “service” productions in Canada, where a Canadian single-purpose corporation creates the production and then transfers all copyright in the production – and the benefit of all contracts entered into in respect of the production – to the “real” copyright owner (often located in the United States)
  • Are there any restrictions on the number of copies which can be made of the licensed work?
    • for example, a license for a photograph may state that only 50,000 copies of the photograph may be made pursuant to the license – once you add up the number of prints, DVDs and digital downloads which a movie can end up spawning, the threshold might be exceeded
  • Are there any circumstances in which the license can be revoked?
    • some stock licenses allow for the licenses to be revoked not only for breach of the license by the licensee, but for any reason whatsoever – all the licensor has to do is provide written notice of the revocation; in those circumstances, the licenses usually provide that the licensor is entitled to demand that the licensee cease use of the previously-licensed work following date of the notice
  • Are there any representations/warranties as to ownership of the licensed material?
    • if the material is provided on an “as is, where is” basis, query why the licensor is not willing to “stand behind” the license
  • Are there any restrictions on the manner in which the photography can be used?
    • some licenses will prohibit alteration or modification of the licensed material, or will specify that the licensed material cannot be used in specific ways (e.g., cannot be used to suggest endorsements or that the licensed material cannot be used in conjunction with certain types of “offensive” material or in relation to “sensitive” topics) or will specify the manner in which the licensed material can be used (and uses outside the specified uses will be deemed breaches)
  • Are there limitations on the rights granted?
    • for example, does the license specify that the licensee is responsible for further “clearing” of any rights embedded in the photography (such as the publicity/personality rights of people depicted in the photograph or any trade-marks or logos depicted in the photograph)
  • What are the credit obligations specified in the license?
    • Failure to abide by the credit obligations could result in the license being unenforceable or revocable.

Because not all stock library licenses are the same, they require scrutiny  – they may have none, some or all of the potentially problematic provisions noted above. As an example, the license terms for stockfreeimages.com contain an express disclaimer of representations and warranties (i.e., the licensed material is provided on an “as is” basis, with no representations as to title or anything else), a limit on the number of copies which can be made of the licensed material, a express obligation on the licensee to further clear any rights embedded in the licensed materials (such as the personality rights of individuals appearing in the photos), images cannot be used in connection with “sensitive topics” (such as “mental or physical health issues, social issues, sexual activity, sexual orientation or related, substance abuse, crime or other subjects that can be considered to be offensive or unflattering to any of the models included in the image”) and it is not clear from the wording of the license that including a photo in a film or TV project would even be permissible (the listed of permitted uses mentions only “web sites, magazines, newspapers, books or booklets, for book covers, flyers, application software programs (apps), to make fine art prints or any other advertising and promotional material, in either printed or electronic media, as long as the item in which the image appears does not contradict any of the restrictions below”). That’s not to say that there’s anything wrong with the products and services being offered by stockfreeimages.com – it’s just to say that they might not be suitable for inclusion in films or TV projects.

Checklist: Reviewing Stock Library Content Licenses

Chain of Title – Corporate Copyright Ownership

When reviewing the “chain of title” for an entertainment product (borrowing from Gordon Firemark, “chain of title” is “the paper trail that establishes a person or company’s right to take proposed action with respect to a piece of property”), questions may arise regarding the ownership status of copyrighted works which were created by individuals who are shareholders, officers and/or directors of a corporation and who did not sign an agreement with the corporation which expressly granted to the corporation copyright in the works which they created in their capacity as officers and/or directors.  This can often arise in situations where a “closely-held” corporation (owned by, say, one, two or three individuals) is used as the business vehicle for an individual – the most straight-forward example would be the so-called “loan-out” or “personal services” corporation which might be used by a key creative (such as a writer, director, performer, designer, etc.), but could also apply where one or more people render their services “through” a corporation (such as a team of designers).

Canadian courts have been generally consistent in holding that works created by officers and directors of closely-held corporations will be owned by the corporation, even if there is no written agreement expressly setting forth that arrangement.  For the most recent court pronouncement to this effect, see Harmony Consulting Ltd. v. G.A. Foss Transport Ltd. (2011 FC 340).

A bit of background: the Copyright Act (Canada) stipulates that the author of a work is the first owner of copyright in that work, unless (a) the author was (i) in the employment of some other person (ii) under a contract of service or apprenticeship, and (b) the work “was made in the course of his employment by that person” – if both of those criteria are met, then the employer of the author will be the first owner of copyright in the work.  When it comes to “closely-held” corporations – let’s use the example of a screenwriter who uses a loan-out corporation, of which the screenwriter is the sole shareholder, director and officer – it’s not always obvious that those criteria have been met.  Is an officer/director of a loan-out corporation properly considered an “employee”? Have they entered into a “contract of service”?  It is not always the case that the individual has memorialized their relationship with the corporation into a written document (of course, a contract need not be in writing to exist).  Rather than get mired in analytical gymnastics, Canadian courts have adopted the following approach (from Harmony Consulting Ltd. v. G.A. Foss Transport Ltd.):

This principle [i.e., the “work made in the course of employment mechanism] is also generally applicable to officers, directors, and key employees who create a work for the benefit of the corporation. Ownership normally vests in the corporation in the absence of an agreement to the contrary; see Dubois v. Systèmes de Gestion et d’Aanalyse de Données Media, (1991), 41 C.P.R. (3d) 92 (Que. S.C.), Setym International inc. c. Belout, [2001] J.Q. no 3819 (Que. S.C.) (Q.L.) and B & S Publications Inc. v. Max-Contacts Inc., [2001] 287 A.R. 201 (Q.B.).

The court went on to quote from David Vaver’s 2000 Copyright Law text (at page 85 – I’m going to quote an additional sentence that the court did not):

Problems of copyright ownership also arise in cases involving senior officers of corporations especially presidents or chief executives of closely-held companies. These officers sometimes do not reduce to writing their status or obligations to the corporation which they often regard as their alter ego or instrument. The officer will also usually be an employee of the company whether or not a written contract of service exists. Copyright in most work produced for the company’s benefit will therefore be owned by the company as is also true for comparable work done by lower-level employees.  Thus the copyright in design and art work produced for the business in the course of running a one-person corporation is typically owned outright by the corporation.

It is worth noting that Vaver’s 2011 Intellectual Property Law text uses somewhat different language to treat the same matter (from page 127):

… one would expect that copyright in work produced on the job by the president or sole shareholder of a one-person corporation, who treats the company virtually as her alter ego, would belong to the corporation; and so it usually does.  The president or sole shareholder may sometimes qualify as an employee [citation omitted] but would in any event usually hold the copyright in trust for the company in order to fulfil the duty of good faith owed to the company. [citation omitted] [emphasis added]

I’ve added the emphasis in that passage because I think it worth highlighting that, on Vaver’s account, at least, it may not be required that the shareholder/officer/director satisfy, strictly speaking, any test of “employment” since they will functionally be held to hold the copyright in trust for the corporation – which should suffice for chain of title analysis purposes.  Ideally, of course, one would obtain a written instrument signed by the shareholder/officer/director which confirmed that copyright in the work had been assigned to the corporation – but in situations where that isn’t possible, the foregoing analysis offered by the courts (with an able assist from Professor Vaver) might be relied upon.

Chain of Title – Corporate Copyright Ownership