Gary Friedrich Enterprises v. Marvel: Ghost Rider Accelerates to Trial

Second Circuit Tells Important Tale for Collaborators

In Gary Friedrich Enterprises v. Marvel, the Second Circuit reversed the Southern District of New York, holding that there exist genuine disputes of material fact regarding the intent of a comic book creator and publisher Marvel Comics to assign renewal rights in “Ghost Rider” via a 1978 written agreement, the timeliness of the creator’s ownership claim, and the authorship of the work. The decision highlights the difficulty that courts can face when evaluating vaguely and ambiguously worded form agreements between freelancers and corporations. It also provides some insight into the “repudiation” standard used when evaluating a statute of limitations defense in connection with an infringement claim.

Facts

Friedrich contended that he conceived the Ghost Rider character, related characters and the origin story for the character over the course of several years while working as a part-time freelance comic book writer in the 1960s and 1970s. Friedrich claimed that he drafted a written synopsis in 1971 on his own initiative and at his own expense. Stan Lee agreed to publish a Ghost Rider comic book in the series “Marvel Spotlight” (used to test new characters) and in return Friedrich agreed to assign his rights in the Ghost Rider characters to Marvel. Friedrich and Lee never discussed renewal rights and did not execute a written agreement.

The Ghost Rider “Spotlight” comic was published in 1972 with the credit “Conceived and written: Gary Friedrich” and an acknowledgement by Marvel editors that Friedrich had “dreamed the whole thing up.” The character quickly became popular, was assigned its own series in 1973 and ultimately ran for over 300 issues. Friedrich wrote the stories for several of the later stories on a freelance basis and does not dispute that these subsequent stories were “works made for hire.” The initial “Marvel Spotlight” story was also reprinted five times and the “Conceived and written” credit was never removed by Marvel.

In 1976, Congress replaced the 1909 Copyright Act with the current Act. Under the 1976 Act (which took effect on January 1, 1978), a work created outside of the scope of employment is considered a “work-for-hire” only if the parties have executed an express written agreement to that effect. Accordingly, in 1978, Cadence Industries, Inc. (the then-publisher of Marvel comics) required all freelancers to sign a form work-for-hire agreement that included the provisions stating that Marvel “only orders or commissions such written material or art work on an employee-for-hire basis” and that all materials “which have been or are in the future, prepared or performed” by the freelancer signing “have been and will be specially ordered or commissioned for uses as a contribution to a collection work and that as such Work was and is expressly agreed to be considered a work made for hire.” It also contained a provision stating that the freelancer signing “expressly grants to Marvel forever all rights of any kind and nature in and to the Work…” In Marvel’s view, the term “forever” would include the original term of copyright and the renewal term that applied to works created before the 1976 Act went into effect.

According to Friedrich, Cadence told Friedrich that the written agreement only covered future work and that he had to sign the agreement without alteration if he wanted to obtain further work from Marvel. Friedrich signed on July 31, 1978. Friedrich was not paid anything for signing and neither Cadence nor any subsequent Marvel publisher solicited further freelance work from him.

The initial copyright term for Ghost Rider expired at the end of 2000. Beginning in 2011, the renewal copyright would have vested in Friedrich as original author by operation of law. Nonetheless, Marvel continued to exploit the character via comic series, toys, video games and a feature film released in 2007. Most of these items did not credit Friedrich.

Friedrich allegedly was not aware of Marvel’s use of the Ghost Rider character during the renewal period until 2004 when he learned Marvel was preparing to make the Ghost Rider movie through a license to Sony Pictures. On April 6, 2004, Friedrich’s attorney wrote a letter to Sony Picture’s attorney asserting Friedrich’s right to the character. In response, Marvel asserted that Ghost Rider was a wore-for-hire. However, it continued to pay Friedrich with checks labeled “roy,” meaning “royalties” when it reprinted the “Spotlight” issue.

Friedrich claimed that he first learned about the concept of renewal rights in 2005 or 2006. He filed for and received a Renewal Copyright Registration in the “Spotlight” issue and Ghost Rider in February 2007 and assigned the rights to his company.

District Court Decision

Friedrich filed a complaint against Marvel and its licensees in April 2007, alleging copyright infringement and various state law claims. In its answer, Marvel asserted that Ghost Rider was a work-for-hire. Marvel then amended its answer to include a counterclaim against Friedrich for copyright infringement. After discovery on the ownership issues, both sides moved for summary judgment. The Southern District granted Marvel’s motion and denied Friedrich’s, holding that even if Friedrich was the sole author of Ghost Rider, he had conveyed all his remaining rights in the work to Marvel “forever.” The Southern District reasoned that the term “forever” in the contract clearly indicated the parties’ intent to convey the renewal term to Marvel. The district court’s final judgment dismissed all outstanding claims, awarded damages to Marvel and enjoined Friedrich from using the Ghost Rider copyright. Friedrich appealed.

Renewal Rights

The Second Circuit first addressed the issue of whether Friedrich assigned his renewal rights via the written agreement with Marvel. Applying the “strong presumption against the conveyance of renewal rights” set forth in Corcovado Music Corp., it concluded that the district court erred in holding as a matter of law that Friedrich had assigned his renewal rights to Marvel by signing the Agreement.

The court stated that the agreement was ambiguous on its face (and included an “ungrammatical” and “awkwardly phrased” definition of the defined term “Work” – a word of caution to transactional attorneys that their work can catch up to them). The court also held that the language was ambiguous as to whether it covered a work published six years earlier; the phrase “all work…which have been…created, prepared or performed” could be interpreted as covering prior work or simply work in progress or commissioned at the time of execution.

The court also held that the contract is ambiguous on its face with respect to whether it conveys renewal rights. It contains no explicit reference to renewal rights and most of the language merely “tracks the 1976 Act’s definition of “work made for hire.”” The court stated that if the contract only covers “work made for hire,” Marvel would be the statutory author and the freelancer would not have any renewal rights that could be assigned to Marvel. Moreover, the broad provision granting to Marvel “forever” all rights in the work does not clearly cover previous work.

Extrinsic Evidence

The court next looked to extrinsic evidence to determine whether there is a genuine dispute regarding the parties’ intent at the time of the Agreement. Because, at the time of signing, both the Ghost Rider character and Friedrich’s original comic book issue (reprinted multiple times) had become popular, the court held that “it is doubtful that the parties intended to convey rights in the valuable Ghost Rider copyright without explicitly referencing it.” Additionally, even if the parties intended for the contract to cover Ghost Rider, that alone would not mean that they intended for it to convey Friedrich’s remaining renewal rights in that work.

The court also examined Marvel’s claim that Friedrich’s action was barred by statute of limitations. It held that Marvel had to have repudiated Friedrich’s claim to ownership of the renewal rights prior to April 4, 2004 (three years before he filed suit) for his claim to be untimely. The court held that there were genuine disputes of fact as to whether (and when) Marvel publicly repudiated Friedrich’s claim, privately repudiated Friedrich’s claim in correspondence with him, and implicitly repudiated his claim by conspicuously exploiting the copyright without paying royalties.

Authorship and Work For Hire

Finally, Friedrich requested review of the district court’s decision to deny his cross-motion for summary judgment on the issue of authorship. The Second Circuit agreed that there are genuine issues of fact with respect of authorship. Marvel had published comic books starring a cowboy called Ghost Rider since 1966 and allegedly, Marvel employees were responsible for suggesting that the character be a hero (instead of a villain) and that the character be named “Johnny Blaze.” Furthermore, Marvel claimed that the comic book was created using the “Marvel method,” with Marvel retaining editorial control and paying all costs. Construing the facts in favor to Marvel, the court also held that the appearance of the character was decided in a collaborative manner between Friedrich and other creative.

In a suggestion as to how the issue may develop at trial, the court also remarked that “when construed in Marvel’s favor, the record reveals that Friedrich had nothing more than an uncopyrightable idea for a motorcycle-riding character when he presented it to Marvel because he had not yet fixed the idea into a tangible medium.”

Takeaways

This decision comes at an interesting time with respect to Ghost Rider specifically. The screen rights to the character have apparently reverted to Marvel after being controlled by Sony Pictures for a considerable period of time. With Marvel ramping up efforts in “phases two and three” of its motion picture and television strategy, it will need to mine its portfolio of characters and stories to keep viewers coming. Ghost Rider could conceivably show up in a future Avengers film, the Marvel/ABC Agents of S.H.I.E.L.D. television series or another standalone series, and could generate millions of dollars of revenue for Marvel and Disney through merchandising and licensing.

As a broader matter, this case highlights an important theme: testing the scope and the enforceability of written agreements drafted just after the 1976 Copyright Act became effective. As creative works of all kinds continue to come up for renewal, we are likely to see more cases of this nature between corporations and individuals who have subsequently come to see their work realize millions of dollars in corporate profits. While it is likely that Marvel will prevail at trial (currently scheduled for November 4th), the Second Circuit’s decision nonetheless provides guidance for parties seeking to evaluate the prospects of this kind of claim moving beyond the summary judgment phase.