00 CIV. 9569 (DLC)
March 15, 2002
Peter Herbert, Lankler, Siffert Wohl, New York, NY, for Plaintiffs.
David B. Smallman, Steinhart Falconer, New York, NY, Roger L. Zissu, Evan C. Gourvitz, Fross, Zelnick, Lehrman, Zissu, P.C., New York, NY, for Defendant.
OPINION AND ORDER
In 1999, the Walt Disney Company ("Disney") released an animated motion picture based on the story of Tarzan, a fictional character from the jungles of Africa created almost a century earlier by author Edgar Rice Burroughs ("Burroughs"). For generations, Burroughs' Tarzan stories have been retold through books, movies, and in comic strips. One of the most famous illustrators of the story was Burne Hogarth ("Hogarth"). Spurred by the release of the Disney film, and hoping to share in monies Disney paid to Burroughs's heirs, Hogarth's heirs have brought suit against Edgar Rice Burroughs, Inc. ("ERB"), the corporate vehicle that holds the copyrights in Burroughs' work.
The plaintiffs' claims rest in the first instance on their copyright claims to two illustrated books, "Tarzan of the Apes," published in 1972 (the "1972 Book"), and "Jungle Tales of Tarzan," published in 1976 (the "1976 Book") (collectively, the "Books"). Hogarth contributed the wonderfully complex illustrations in each of these Books and lengthy introductions in each book praise his artistic genius. The Books, however, were a commercial failure and have long been out of print. Plaintiffs seek a declaration that Hogarth was the sole author of the Books, and that, because Hogarth died prior to the commencement of the Books' renewal copyright terms, plaintiffs should succeed to the renewal terms as Hogarth's descendants pursuant to 17 U.S.C. § 304(a)(1)(C).
Plaintiffs also seek, pursuant to a 1970 agreement between Hogarth and ERB, a portion of the licensing fee paid to ERB by Disney in connection with Disney's production of the 1999 movie "Tarzan" (the "Movie"). Specifically, plaintiffs seek 50% of that portion of the licensing fee attributable to the rights allegedly granted to Disney in the Books. Finally, asserting breach of contract, plaintiffs seek the return of the original artwork their father created for the 1972 Book.
For its part, ERB contends, among other things, that the Books were works for hire and that, as the hiring party, it is their author and the sole claimant of their renewal terms. ERB further contends that it did not license the Books to Disney and that, even if it did, the terms of the 1970 Agreement do not entitle plaintiffs to share in the licensing fee. It denies that the plaintiffs are contractually entitled to the original art for the 1972 Book.
Plaintiffs filed this action on December 15, 2000. They filed an amended complaint on January 26, 2001. A bench trial was held by consent of the parties on March 11, 2002. In accordance with the Individual Practices of this Court in civil bench trials, and without objection, the parties submitted the direct testimony of their witnesses by affidavit as well as the documentary evidence in advance of trial. Plaintiffs submitted the affidavits of Maurice Horn ("Horn"), an historian and critic of illustration; Arthur Schneck ("Schneck"), Hogarth's personal attorney; Richard Hogarth, Hogarth's son; and Donald Holden ("Holden"), Hogarth's editor at Watson-Guptill Publications ("Watson-Guptill"). Plaintiffs also relied on excerpts from the deposition testimony of Sandra Galfas ("Galfas"), President of ERB; Danton Burroughs, Burroughs's grandson; Mark Kenchelian ("Kenchelian"), Senior Vice-President for Business and Legal Affairs at Walt Disney Pictures and Television when Disney negotiated with ERB for rights to the Tarzan story; and Chris Buck ("Buck"), Co-Director of Animation for the Movie. Defendant submitted the affidavit of Galfas. Defendant also relied on excerpts from the deposition testimony of Schneck, Holden, Hogarth, Kenchelian, and Buck. All parties also submitted counter designations from the various depositions. All of plaintiffs' affiants were cross-examined at trial; the plaintiffs declined to cross-examine Galfas. Since many of the critical events in the case occurred in the 1970s or even earlier, and the principals in those events are essentially unavailable (either because of death in the case of Hogarth and Marion Burroughs or the parties' decision not to depose him in the case of Robert Hodes), it is the documentary evidence from that era that has been the most valuable and reliable source of evidence. In light of the evidence submitted at trial, the following constitutes this Court's findings of fact and conclusions of law.
Edgar Rice Burroughs lived from 1875 to 1950. He published his first Tarzan novel, "Tarzan of the Apes," in 1912, and his twenty-sixth and last, "Tarzan and the Foreign Legion," in 1944. See Irwin Porges, Edgar Rice Burroughs: The Man Who Created Tarzan (1975) (the definitive biography). "Tarzan of the Apes," and "Jungle Tales of Tarzan," first published in 1916-17, are now in the public domain in the United States. Copyright protection for these and the other Tarzan novels continues to exist in certain member countries of the Berne Union. Burroughs established ERB in 1923, to manage the rights in his literary creations; it is owned by Burroughs' descendants. Burne Hogarth was born in 1911, and trained at an early age at the School of the Art Institute of Chicago. In 1937, he was hired by United Features Syndicate, Inc. ("United Features") to illustrate the syndicated comic strip "Tarzan." He continued to do so with only brief interruptions until 1950. During that time, he developed a highly distinctive and still widely acclaimed style of illustrating Tarzan and his universe. In 1950, Hogarth discontinued his work on the syndicated comic strip to co-found the School of Visual Arts in New York, where he served as an instructor of anatomical drawing until his retirement in 1970. While teaching at the School of Visual Arts, Hogarth authored several classic texts on illustration, including "Dynamic Anatomy," "Drawing the Human Head," and "Dynamic Figure Drawing." Hogarth died in January 1996.
Copyright in Hogarth's Tarzan Comic Strips
As noted, it was United Features that hired Hogarth to illustrate Tarzan comic strips. The contract between ERB and United Features required that the comic strips be submitted to ERB for prior approval, that United Features obtain copyrights in the name of ERB, to whom the contract referred as the "owner," and that a notice appear with each strip identifying ERB as the owner and Burroughs as the author.
Plaintiffs do not dispute that Hogarth's work on the comic strip was done as an employee for hire. The original copyright registrations for the individual comic strips list ERB as the claimant of the copyrights and the following under the "Author" heading: "Edgar Rice Burroughs and Don Garden, of United States, authors of text; Burne Hogarth, of United States, author of pictures." The renewal copyright registrations for the individual comic strips identify ERB as the "[p]roprietor of copyright in a work made for hire." Under the heading "Authors of Renewable Matter" is the same entry as appeared under the "Author" heading in the original registration: "Edgar Rice Burroughs and Don Garden, of United States, authors of text; Burne Hogarth, of United States, author of pictures."
The Book Project Takes Shape
Almost twenty years after Hogarth stopped working on the comic strips, he and ERB joined forces again on another Tarzan project. The idea of the Books came from discussions in the late 1960s between Hogarth and Robert Hodes ("Hodes"), who was then the Vice President of ERB in charge of its day-to-day operations.
During their first meeting in Paris in 1967, Hogarth and Hodes spoke about the possibility of Hogarth's returning to the illustration of the Tarzan story in a Sunday color comic strip format, although they disagreed over the terms of his compensation. In September 1969, Hogarth wrote Hodes a short letter seeking to reopen discussion of ways to exploit what Hogarth called the "TARZAN page." Hodes replied favorably and asked Hogarth for his ideas on possible projects. In October 1969, Hogarth suggested that he "take up the illustration of the TARZAN Sunday Color Page," which could lead to reproductions of the pages in, among other media, "hard cover books," silk-screened color posters, and animated films. Hogarth spoke in inspired terms of his desire to take Tarzan illustration to a new level:
What has become quite apparent for some time is the rise of a new reading public which takes `pop' culture and `pop' art quite seriously and is ready to accept new standards of higher aesthetic judgment as to what is called art. In my opinion, I think it is possible for the comic strip to reach the status of a new dimension, and I think it is possible to do this with the character and personality of TARZAN.
Later that month, Hodes replied that the "Sunday page" was a dying medium (and expressed to Hogarth great enthusiasm that the producers of the musical "Hair" were bringing "Tarzan" to Broadway). Hodes assured Hogarth that ERB would want "to give the artist a fair share of the proceeds resulting from his labors" should they undertake any project with him. Hogarth suggested in response that he would be willing to accept less compensation, at least in the early stages of a Sunday page project. Hodes replied on December 12, 1969, that ERB's comic book projects were in a state of flux, and that he and Hogarth "will have to suspend our discussions temporarily." Six months later, in June 1970, Hogarth sent Hodes a copy of his newly published book "Dynamic Figure Drawing," and expressed his concern that "your letter of six months ago (Dec. 12) left our discussion indeterminate and in a state of doubt." He revealed that he was "dispos[ing] of" his interests in the School of Visual Arts and would be free to devote his entire time to the creation of art. In his reply dated June 29, 1970, Hodes asked: "[C]an you suggest some new type of material that can bring TARZAN to an entirely different market?" (Emphasis in original).
Before receiving a reply from Hogarth, Hodes wrote on July 15, 1970, to suggest the production of "a quality, high priced edition of an adult version of TARZAN OF THE APES in graphic form." The next day, on July 16, 1970, Hodes wrote again, and described in detail his idea for a "graphic edition of TARZAN OF THE APES." Hodes saw the greatest hurdle as finding a U.S. publisher and believed it would be necessary to have all the artwork completed before approaching the publisher. Hodes envisioned a series of books on Tarzan followed by illustrated books on other Burroughs themes. Hodes proposed terms for the project that anticipated in many respects ERB's final agreement with Hogarth:
1. We would commission you to produce the work at a cost that would be paid one-half now and one-half out of the first proceeds of the book from all sources whatsoever. That one-half deferred payment is the extent of your speculation, or risk.
2. We would undertake to find a U.S. publisher and to sell off the foreign rights. All expenses would be borne by us, and this, together with the sum paid to you, would be our risk.
3. The worldwide proceeds from the first book would go first to make up your deferment, and then to make up our own actual expenditures. After that, proceeds would be split 50-50.
4. Should the first book be successful, we would obtain sufficient worldwide advances to cover your and our costs of producing the next work, and so on for as long as the public continues to accept these books, with profits from all sources being divided equally. Should any of your work be reprinted in newspapers or magazines, you would also share equally.
(Emphasis supplied; emphasis in original removed). Hodes continued: "I must leave all artistic considerations to you, but believe me, I know a market exixts [sic] abroad for such a series. If I had one completed book and the covers for about ten more, I could make one trip to the Frankfurt Book Fair, open our own ERB exhibit there and come home with orders and advances from most of Europe." (Emphasis in original). By letter dated July 21, 1970, Hogarth responded that "[y]our proposal sounds like a capital idea. . . . Your thoughts on the general procedure and arrangement are eminently fair and attractive; but beyond these, the idea is completely captivating."
For the remainder of 1970, Hodes sought out a publisher for what would become the 1972 Book while Hogarth worked on initial drawings to aid in the effort. By August of 1970, Hodes had initiated discussions with Swallow Press regarding a hardbound edition of the first book and with Bantam Books regarding a paperback edition. Through the intervention of Hogarth, Hodes also met in October 1970 with Jules Perel ("Perel"), the President of Watson-Guptill, which had already published several of Hogarth's art instruction books. Despite Hogarth's ultimate preference for Bantam Books as the publisher, Hodes chose Watson-Guptill. In October 1970, Hodes wrote to Donald Holden ("Holden"), Editor of Watson-Guptill, with a copy to Hogarth, setting out the terms of a proposed agreement between ERB and Watson-Guptill for the publication of the 1972 Book. Hodes listed in pertinent part:
1. Your contract is directly with Edgar Rice Burroughs, Inc. We undertake to provide the services of Burne Hogarth to furnish you with artwork and text for your proposed illustrated book of Tarzan of the Apes . . . . You have no financial obligations whatsoever to Mr. Hogarth. We do.
2. You are responsible for designing and producing the book, and, in general, supervising Mr. Hogarth's work . . . . We reserve the right to require all parties to produce a book that reasonably and substantially tells the story of Tarzan of the Apes as Edgar Rice Burroughs told that story in his classic novel. . . . As for the artwork itself, we cannot and do not presume to influence or control the work of Mr. Hogarth.
3. Any costs involved in the design, typesetting, photography, and/or production of the book will be borne by you. Only the payments to Mr. Hogarth shall be our responsibility.
The 1970 Agreement Between ERB and Hogarth
By letter agreement dated November 16, 1970 (the "1970 Agreement"), but not signed by Hogarth until February 16, 1971, ERB and Hogarth established the terms of their relationship with respect to the creation of the 1972 Book and any such books thereafter. Hogarth's attorney, Arthur Schneck, spoke by telephone with Hodes on at least one occasion in 1971 regarding the contract and on at least one occasion in 1972 regarding an amendment to the contract.
Paragraph 1 of the 1970 Agreement states:
You [Hogarth] will create a book along the lines we [ERB] have discussed with Watson-Guptill based upon approximately one-half of Tarzan of the Apes. . . . The creative details will be worked out between you and our publisher. . . ."
Paragraph 2 grants to ERB a right of approval. It states:
We will have the right to approve the content of the books, but our sole interest in this regard will be to preserve the Burroughs `flavor.' We may give you our artistic suggestions from time to time, but you will be the final judge of the artwork as distinguished from the story or text.
Paragraph 3 sets forth Hogarth's compensation:
For all of your services and for all rights being granted, we will pay you, your estate, personal representatives, heirs and beneficiaries, for the term of the copyright, including renewals:
(a) $2,500 on January 1, 1974;
(b) $2,500 on the completion of all your work; and
(c) 50% of all net monies realized by us from the exploitation of the book. That is, your participation extends to hardcover editions, serializations, and the like and to the use of the artwork contained in the book or any significant portion of it for other media, such as film strips, animated television productions, premium booklets, art portfolios or similar uses. However, we shall have the right to use any and all of your artwork in connection with our own business activities without being obligated to pay you therefor, just as long as we do not use the book as a creative unit in such activities. Examples of this "free use" are: The use of isolated pictures as covers or illustrations for our books or in our advertising or in connection with items of merchandising.
(Emphasis supplied). This paragraph is a combination of what were two separate paragraphs in a prior draft of the 1970 Agreement, the first of which concerned the exploitation of the book in print form, the second the exploitation of the book from "sources other than direct publication of the book in printed form," such as the "licensing or sale of the book for use in connection with items of merchandise or in connection with television." Hogarth's request to benefit from the exploitation of his work in media other than books had prompted the parties to draft the second paragraph. The language in the final agreement concerning "the use of artwork contained in the book" replaced language that appeared in the second paragraph of the prior draft.
As amended by a letter agreement dated November 30, 1972, paragraph 3 of the 1970 Agreement also defines the term "net monies:"
The term "net monies" means the monies we are paid after first deducting agents' commissions (if any) and after deducting the sum of $5,000 for your services and $5,000 for our services for promoting, packaging and selling the project.
Thus, after the first $10,000 of royalties payments, if any, from Watson-Guptill, all royalties would be split equally between ERB and Hogarth. This amendment effectively limited ERB's right to recover its expenses before paying royalties to $10,000.
Paragraph 5 consists of a commitment by ERB exclusively to employ Hogarth in the creation of the artwork for the planned books. It states: "You [Hogarth] will create the subsequent books and we agree not to employ anybody else to create them, provided you are prepared to create them." (Emphasis supplied).
Paragraph 7 divided the original art for the project between the parties and states:
We agree that the physical possession and ownership of the original artwork shall be shared on the following basis: We shall own the originals for the first book, you shall own them for the second book, we for the third book, you for the fourth book and so on. We have indicated to you that we desire the physical possession and ownership of the foregoing artwork in order to place it in an Edgar Rice Burroughs Museum. In the event at any time any of such original artwork created by you and owned by us shall be sold, you shall be entitled to 50% of the net monies paid for such artwork after first deducting agents' commissions, if any.
You agree that in the event you should decide to sell any of the original artwork created by you and owned by you, you shall give us first refusal to purchase the artwork upon the same terms as the artwork is offered to others.
Paragraph 8 concerns the copyright in the projected books:
The book will be copyrighted in the name of Edgar Rice Burroughs, Inc. and we shall be the exclusive proprietors thereof, subject always to our obligation to pay you your participation. You hereby grant us whatever rights we need to obtain the copyright in our name and to extend and renew that copyright wherever and whenever we can.
In February 1971, when Hodes sent copies of the agreement to Hogarth for his signature, Hodes noted that Schneck "has fulfilled his own role in the same spirit of cooperation that you and I enjoy together." In the same month, Hogarth responded in a letter accompanying Hodes's copy of the fully executed 1970 Agreement: "This merely puts in formal terms things we've talked about in terms of procedures and goals. More important is the feeling engendered in the project and our mutual sense of commitment and wholehearted enthusiasm which cannot be be [sic] entered into this prosaic record."
1972 Agreement Between ERB and Watson-Guptill
On February 25, 1972, ERB entered into an agreement with Watson-Guptill granting it worldwide English language hardcover publication rights in the 1972 Book and the option to publish other books thereafter (the "1972 Agreement"). In the 1972 Agreement, ERB warranted that it was the "sole author and proprietor" of the 1972 Book. The agreement also granted ERB a right of approval: "[Y]ou [ERB] shall have the absolute right to approve the text and artwork, which you have seen and which you hereby approve." Hogarth kept a copy of the 1972 Agreement in his own files.
The Preparation and Publication of the 1972 Book
Hogarth and Hodes worked closely in the preparation of the 1972 Book. Hogarth sent Hodes an initial draft of the script of the book. Hodes reviewed the script in detail and made extensive revisions, which he sent to Hogarth with a marked-up copy of the novel "Tarzan of the Apes" for Hogarth's reference.
Black Michael turned to Clayton with a word of thanks. And thus was forged the first link in what was to form a chain of circumstance in a life of one yet unborn such as has never probably been paralleled in the history of man. Black Michael turned to Clayton with a word of gruff thanks. The incident had ended, but thus was forged the first link of what was destined to form a chain of circumstances ending in a life of one yet unborn such as has never been paralleled in the life of man.
Hodes's version was used in the published edition of the book. Hodes also frequently crossed out entire pages of Hogarth's proposed text and urged their replacement with direct quotations from the Burroughs novel.
Hodes also gave Hogarth directions regarding the illustrations. He suggested which scenes to illustrate and occasionally which should fill a complete page. For example, he advised Hogarth to devote full-page treatments to the night of Tarzan's birth, to the moment just after Tarzan vanquishes his foe Tublat, and to the intervention by Lord Greystoke, Tarzan's father, in an attempted mutiny by the crew of the "Fuwalda." This latter suggestion by Hodes is particularly noteworthy in that Greystoke's intervention is not a significant moment in the story, but is nevertheless one which is especially well-suited to a full-page illustration. In each of these instances, Hogarth had planned smaller panel illustrations of the events, but created them as Hodes directed for the final edition of the 1972 Book. Elsewhere, Hodes recommended when illustrations should not appear, as when he suggested to Hogarth "a full page of text here, with only a border of drawings — a nice change of pace. I would use beginning of Chapter 3." Many similar suggestions by Hodes were incorporated into the final published version of the 1972 Book.
Correspondence between the two suggests that Hogarth kept Hodes up to date on the progress of his work. In May 1971, Hogarth wrote what he called a "progress of artwork report" to Hodes, in which he stated that "I've been slow with this first stage I know, but Don[ald Holden of Watson-Guptill] tells me the deadline is elastic and to go at my own pace." Hogarth concluded by telling Hodes that "I'll write you anon when we can approve another batch of copy." Hogarth worked at home in his home studio in Pleasantville, New York, and used his own materials in the creation of the artwork for the 1972 Book. On at least one occasion, Hodes visited Hogarth's studio so that the two could work on the book together. Hodes described the progress on the Book to ERB's Board and assured the Board that ERB maintained ownership of the artwork. The Board's discussion included such detailed matters as whether it should require Hogarth to change Tarzan's face on the 1972 Book's cover illustration to make it less effeminate.
In February 1972, as the 1972 Book was nearing completion, Donald Holden wrote to Hodes regarding the content of its jacket, title page, and copyright page. Holden stated:
I'm particularly concerned about the credits. Exactly how should we credit Hogarth and [Edgar Rice] Burroughs?
Should it be Tarzan of the Apes by Burne Hogarth, based on the novel by Edgar Rice Burroughs? Should it be Tarzan of the Apes/drawings by Burne Hogarth/text by Edgar Rice Burroughs? Or just what?
Holden also enclosed a copy of a template copyright page for Hodes's review. Hodes replied, in pertinent part:
Edgar Rice Burroughs'
Tarzan of the Apes
. . . .
Same as jacket, but adding, in smaller type,
Original Text of
Edgar Rice Burroughs
Adapted by Robert M. Hodes
That's for my mother, who always wanted me to be a writer.
The copyright page is okay, if the copyright notice reads:
Copyright c 1972 by Edgar
Rice Burroughs, Inc.
All of the foregoing is subject to the comments, suggestions and approval of Burne [Hogarth].
(Emphasis in original).
As published, the cover of the 1972 Book consists of text set upon a distinctive Hogarth image of a muscular Tarzan figure emerging out of the jungle. The text "Tarzan of the Apes" and "Edgar Rice Burroughs" appears in the top quarter of the cover with the word "Tarzan" in very large type and "Edgar Rice Burroughs" appearing in small type in a box above it. "By Burne Hogarth" appears in large type in the bottom quarter of the page along with the phrase "Totally New." The title page consists of "Tarzan of the Apes," "By Burne Hogarth," and "Original text by Edgar Rice Burroughs adapted by Robert M. Hodes." The copyright notice states "Copyright (c) 1972 by Edgar Rice Burroughs, Inc." The copyright page also contains an eloquent dedication to Hogarth's father.
The 1972 Book begins with a 25-page essay by the historian Maurice Horn, entitled "The Magic of Burne Hogarth," including an extensive bibliography of works on Hogarth and museography of showings of Hogarth's work. The book is 160 pages in length, 122 of which consist of color illustrations with text in comic book format.
Sale of the 1972 Book
The 1972 Book was released in September in a run of 50,000 copies. At first, it appeared to be selling well. By the summer of 1973, however, sales had slowed considerably. In April 1974, Perel wrote to Hodes that "sales are proving quite disappointing" and that Watson-Guptill had decided to remainder most of the 20,000 copies still in its inventory. Hogarth attributed the 1972 Book's failure to a number of factors, including problems with the color process printing that "virtually ruined the black line finesse" of his drawings, the decision to pitch the book to the art market, the art market's rejection of the book, other failures in marketing strategy, and a devastating dispute between Hodes and Watson-Guptill regarding a payment for films necessary to publish the book abroad.
The Dispute Over the Color Separation Films
With ERB and Watson-Guptill both facing substantial losses, a dispute arose between them over Watson-Guptill's refusal to provide ERB with a set of color separation films for the 1972 Book. ERB hoped to provide these films to foreign publishers to facilitate overseas publication. Hodes insisted that Watson-Guptill was contractually bound to provide ERB with a free set of these films. Watson-Guptill disagreed. With the two parties at an impasse, both refused to go forward with the next book.
In August 1974, Hogarth wrote Hodes a long letter describing his disillusionment over the course of events. He indicated his frustration with the dispute between ERB and Watson-Guptill:
In the friction between ERB and W-G I tried in every way to stay neutral, to smooth things out. . . . [A]ll I could do was sit tight and wait for a disagreement to simmer down so that I could get some straight cooperative agreement and contract going. . . . Under the circumstances I am more than a standby participant in the project; not only am I creating the material and putting the basis for the relationship in a single frame, I have the most to lose; and no voice in the deteriorating events.
(Emphasis supplied). Hogarth also spoke of the personal sacrifices his participation in the book project entailed, including flying to Paris to meet Hodes in early 1973, to work on the draft of the 1976 Book and paying one-half of his expenses for the trip:
As you know, Bob, from the inception of your plans for the Tarzan books I was to create, I never made any inordinate demands at any time. I lent my cooperation in every way to make this a viable undertaking. . . .
At no time was there any thought that I might have incurred expenses while working or while promoting the books in the U.S. and elsewhere, nor did I raise any question about them. . . . In February of 1973, when you were tight for time to come to the U.S. . . ., I made the effort at your suggestion . . . to come to Paris . . . So I spent time and paid half the expenses on a project that was not my responsibility to produce.
(Emphasis added). Referring to the possibility of a new contract between ERB and Watson-Guptill for the publication of the 1976 Book, Hogarth also stated that "[i]f a contract is worked out with W-G, I'd like full participation in the negotiation as an equal, and a full disclosure of the results, in hand."
In 1975, when a German publisher seemed ready to publish the 1972 Book if it had the films, Hogarth stepped in to resolve the dispute between ERB and Watson-Guptill by offering to pay for the color separation films himself. Watson-Guptill then agreed to supply a set of the films to ERB and charged the $4,000 cost against Hogarth's royalty accounts for other (non-Tarzan) books.
By 1976, Hogarth had become so disillusioned with Hodes that he warned the editor of a French publishing house to make sure that any contract terms negotiated with Hodes were spelled out clearly. Following Hodes's departure from ERB in 1976, ERB reimbursed Hogarth for half the amount of the cost of the films and provided him with certain other benefits.
The Preparation, Publication and Sale of the 1976 Book
Work began on the 1976 Book in late 1972, and was completed sometime in 1974 or 1975. Reflecting the participants' dim view of the prospects for commercial success, instead of a full color hard cover book, the 1976 Book was a black and white soft cover book. Hodes was, in his words, "in despair" over the decision to publish in black and white. The record is not as well developed concerning the preparation of the 1976 Book, but correspondence of the time between Hogarth and Hodes suggests that the two did not work as closely on it as they had on the 1972 Book. Hodes wrote to Hogarth in August of 1972, to inform him that Jules Perel wanted work to begin on the second book immediately. Hodes also proposed the story on which the second book would be based:
Our original plan was to complete Apes in book #2. I am having second thoughts about that because it takes Tarzan out of the jungle (and thus out of your own milieu). Enclosed is a copy of Jungle Tales of Tarzan — read it and see if you see any possibility of using it for #2.
On January 2, 1973, Hogarth wrote to Hodes that he had begun work on the script of the second book:
I've taken the bull by the horns, and have proceeded on the caption breakdown of the Jungle Tales as our next work. I must say that I've wanted to confer with you a number of times to get your opinion on several things. . . . At this writing the Burroughs text is overlong; I've had to eliminate a number of stories to get a tighter book with the limits of the last number of pages. I am on the last pages of the complete adaptation, and I think it reads well. But I need your advice and counsel, as well as your objective opinion on your own terms for the book, without being swayed by what I have done.
Later that month, Hogarth sent Hodes his script adaptation. The record contains no further correspondence between Hogarth and Hodes on the preparation of the 1976 Book.
The cover page of the 1976 Book consists of text set upon a montage of distinctive Hogarth Tarzan imagery, including two small images of Tarzan in motion, an image of the elephant Tantur, and a larger image of Tarzan in which he is made to appear both resolute and brooding. "Edgar Rice Burroughs" appears in small type below the title and "By Burne Hogarth" appears in slightly larger type midway along the right side of the page above the phrase "All New!" The title page consists of the title, "By Burne Hogarth," and "Original text by Edgar Rice Burroughs adapted by Burne Hogarth and Robert M. Hodes." The copyright notice on the next page states "Copyright (c) 1976 by Edgar Rice Burroughs, Inc." The copyright page also contains a dedication to Hogarth's mother. In the Acknowledgments, Hogarth thanks "Robert M. Hodes, Vice President of Edgar Rice Burroughs, Inc., who first suggested the book venture, aided in the adaptations, and energetically created a network of multilingual, international co-productions." The 35-page introduction by Professor Walter James Miller of New York University is entitled "Burne Hogarth and the Art of Pictorial Fiction."
Like the 1972 Book, the 1976 Book was a commercial failure. ERB never received any accounting from Watson-Guptill of the book's sales, which, at any rate, appear to have been so slow that the book was remaindered nearly simultaneously with its release. In April 1978, ERB notified Watson-Guptill that its publication rights were terminated for breach of contract. ERB eventually decided that the legal costs of filing suit seeking an audit of Watson-Guptill would outweigh the potential recovery, if any, that might result from the action.
The Original Copyright Registrations of the Books
Paragraph 4A of the 1972 Agreement between ERB and Watson-Guptill states that "[w]e [Watson-Guptill] shall apply for copyright in your [ERB's] name in the United States, and you shall apply for renewals and extensions of this copyright." Pursuant to this provision, an employee of Watson-Guptill, one Claire Hardiman ("Hardiman"), filled out a copyright registration application for the 1972 Book, dated June 12, 1973, which the Copyright Office received on June 15, 1973. Hardiman listed "Edgar Rice Burroughs, Inc." as the copyright "claimant" or "owner." Under the heading "Authors," the application instructed that "[w]here a work was made for hire, the employer is the author." Hardiman listed "Edgar Rice Burroughs (deceased)" and "(illustrated) by Burne Hogarth" as authors. Under the "New Matter in This Version" heading, Hardiman wrote that "[t]his book is Burne Hogarth's pictorial version of Edgar Rice Burroughs' novel." The Copyright Office issued a registration Certificate which repeated Hardiman's information verbatim and carried Copyright Registration Number A 442848.
On October 6, 1976, one Donna Wilkinson ("Wilkinson"), also an employee of Watson-Guptill, filled out a copyright registration application for the 1976 Book, which the Copyright Office received on October 8, 1976. Wilkinson listed "Edgard [sic] Rice Burroughs, Inc." as the copyright claimant or owner and "Burne Hogarth" as the author. Wilkinson left the new matter section blank. As before, the Copyright Office issued a registration Certificate which repeated Wilkinson's information verbatim, including the misspelling of Edgar, and carried Copyright Registration Number A 789026. ERB received copies of the original registrations in the 1970s.
Marion Burroughs Takes the Helm at ERB
ERB's Board dismissed Hodes on August 20, 1976. Eventually, Marion Burroughs, the wife of Burroughs's son Hulbert Burroughs, took command of ERB's operations. While ERB and Hogarth never completed another project together, under Marion Burroughs's competent leadership, a degree of trust and normalcy returned to ERB's commercial ventures, including its relationship with Hogarth. When disagreements did arise, Marion Burroughs invariably responded with a grace and clarity that permitted the relationship with Hogarth to survive on good terms. Several of the episodes during her tenure yield evidence about what ERB and Hogarth understood their rights regarding the Books to be and the terms on which they would engage in any commercial venture.
1977 Special Edition Project
In 1977, Hogarth agreed to create ten illustrations for another ERB project — a Special Edition of "Tarzan of the Apes" ("Special Edition") to be produced by Richard Pryor ("Pryor") of Nostaligia Enterprises. ERB proposed the creation of 1,000 leather bound volumes and 2,000 cloth bound volumes, and Hogarth enthusiastically added the suggestion that they be accompanied by leather slipcases bearing a bronze medallion he would design.
When Hogarth received a draft contract for the project from Pryor, he objected immediately to the contract term "man for hire" on the ground that the tax laws required it to be clear that he was an "independent, self-employed professional." He suggested terms like "Art Director" instead.
As it turned out, ERB's attorney Michael Sherman ("Sherman") had drafted the contract Nostalgia had presented to Hogarth and in that contract described Hogarth as an "employee for hire" of Nostalgia. Sherman anticipated that ERB would hold the copyright in the Special Edition and that Pryor would assign the copyright in Hogarth's artwork to ERB upon its creation. When Hogarth came to understand that the language was linked to copyright issues he became angry. According to Hogarth, his attorney labeled the contract "one of the worst he has ever seen." To Hogarth its terms implied that his contributions to the Special Edition were "mean and immaterial." (Emphasis in original). He proposed a joint copyright with ERB in the artwork for the Special Edition.
Marion Burroughs explained to Hogarth her understanding, based on her conversations with her copyright counsel Alan Latman, of the need for ERB to hold the copyright in its name, including the danger that "copyrights and their renewals have the habit of outliving their authors." She emphasized her friendship with and high regard for Hogarth, but told him firmly in her letter of May 25, 1977, that the "only terms" ERB could offer Hogarth were the terms it demanded in all of its projects, that the copyright belong exclusively to ERB.
The contract between ERB and Pryor for this project provided that each copy in the Special Edition would include a notice that the copyright was held by ERB and that Pryor was granted a license solely to publish and sell the Special Edition.
Paragraph 4 addressed Hogarth's contribution and read in pertinent part as follows:
We understand that you intend to engage an artist to create new illustrative artwork (the "Artwork") for the Edition at your sole cost and expense. Such artist shall be your employee-for-hire and the copyright in the Artwork (and all renewals or extensions of copyright now or hereafter provided) shall be our sole and exclusive property free and clear of any interests of such artist or any other party; provided, however, that you may agree with the artist that the artist shall have the limited rights to sell the original of the Artwork and to exhibit it in art galleries and museums, and the like, but no other rights whatsoever.
Upon creation of the Artwork you shall assign to us the copyright thereto (and all renewal and extensions of the copyright now or hereafter provided) and all rights therein (subject to the rights permitted to be granted to the artist as set forth above) including, but not limited to, all rights to sell, exploit and distribute reproductions of the Artwork for any purpose (e.g. trade, merchandising, advertising and promotion); provided, however, that we shall not exploit the Artwork for any commercial tie-up or merchandising item without your prior consent in each instance.
The contract between Pryor and Hogarth provided that Nostalgia Enterprises would employ Hogarth to create ten works of art to illustrate portions of a limited edition of "Tarzan of the Apes" that were "mutually" agreed upon in return for $10,000. Nostalgia was to publish the limited edition pursuant to a license from ERB. The costs and expense of maintaining Hogarth's studio would be born by Hogarth and he was required to certify that the art had been created while he was an employee for Nostalgia and that Nostalgia was the author. The contract specified that the copyright for the eight of the ten originals that Hogarth was permitted to retain belonged to ERB and that a notice to that effect had to be attached to each of them, and that no reproductions or copies could be made by Hogarth or any purchaser without permission from ERB. ERB had a right of first refusal in the event Hogarth sold the art.
Hogarth's objections to the contract centered on two paragraphs:
4(c) Each of the Works shall be wholly original with you and shall not be copied in whole or in part from any other work of any nature or medium whatsoever (except the portions of the Novel that are illustrated by the Work in question), nor shall any part of the Work be in the public domain throughout the world nor infringe upon any right of any third party of any nature whatsoever.
5. All rights of every kind and character whatsoever, whether now known or hereafter devised, and the complete, unconditional and unencumbered title exclusively and perpetually in and to each of the works (including, but not limited to, all sketches, drawings, layouts, designs, reproductions, and all other version(s) thereof) shall belong to us including, but not limited to, the universal copyright(s) (including any common law copyright and all renewals, extension or reversions of any copyright now or hereafter provided), the right to sell, lend, exhibit, use, publish, copy, reproduce and exploit each of the Works by any means or medium of any nature whatsoever whether now known or hereafter devised, and the right to license others to do any of the foregoing. You acknowledge and agree that you are acting solely and entirely as our employee-for-hire under this Agreement and that each of the Works shall be a "work-for-hire" within the meaning of the United States Copyright Law now or hereafter in effect and that we shall be the "author-in-law" of each of the Works as provided in such Law. You further acknowledge that we intend to assign to Burroughs all of our right, title and interest in each of the Works as set forth above upon creation thereof and that Burroughs shall be entitled to the benefit of all of our rights hereunder free and clear of any obligation or liability to you except as provided [below].
Hogarth was particularly insulted by the clause requiring that each work he created be "wholly original" with him and not copied from other works. He asked: What would an "attorney or paper pusher know about creating a piece of art?" Hogarth construed the clause as one intended to get him to quit the project.
The other clause that Hogarth apparently discussed in detail with his own attorney gave ERB "rights of every kind and character" and "unconditional title" to "each of the Works," including "all sketches, drawings, layouts, designs, reproductions, and all other version(s) therof." (Emphasis as given by Hogarth). Hogarth felt this clause had been devised "to get into my head, my studio, my cabinets, my future, [and] my estate." Hogarth could not understand why ERB needed a right to his "unpublished drawings, layouts, sketches, etc." (Same). He objected to a "surrender of my right to my drawings, and all the generation of sketches." (Same). In his view, those preliminary designs were "not subject to" ERB's copyright at all. (Same). Viewing the contract as requiring a "complete surrender" and not being "desperate for the money," Hogarth decided to reject the project.
Discussions Regarding the Books Following 1976
For a few years following the publication of the 1976 Book, Hogarth and ERB had occasion to discuss either the Books themselves or the original art from the Books. For example, in 1976, Hogarth advised a person interested in publishing Tarzan material that the rights were not his to license and referred him to ERB. He observed that "I share equally with Burroughs on all recent work we have done together. But they are the channel through which authorization proceeds." In 1977, when a publisher who had used Hogarth's drawings from the Books without ERB's permission referred to correspondence with Hogarth, ERB wrote: "Mr. Hogarth is, of course, the artist and our friend. He is not, however, the owner of the copyright on the drawings you used." ERB demanded a $2,000 payment from the publisher. Hogarth assured Marion Burroughs that he "would never have given anyone authorization to print anything of ERB, Inc. under my permission. That is stupid, on the face of it." (Emphasis in original). On another occasion in 1977, Hogarth promptly forwarded an inquiry regarding the rights to animate the Books to ERB. In 1981, when Hogarth and ERB discussed publishing some of the drawings from the 1976 Book, both acted as if it were ERB's decision alone whether to exploit the 1976 Book "piecemeal" or not. Finally, before Hogarth used drawings from the 1976 Book in one of his art instruction books, he offered to pay ERB for the right — an offer that was graciously declined — and agreed in writing to incorporate ERB's copyright notice in his book.
At the very end of the correspondence between Hogarth and ERB, they discuss the original art for the 1976 Book that Hogarth retained. In November 1972, Hogarth's attorney Schneck and Hodes had agreed that the original art from the 1972 Book would belong to ERB "for inclusion in its museum," that the original art for the 1976 Book would belong to Hogarth, that Hogarth would insure all of the original art, since it was in his possession, and that ERB would pay one-half of the cost of the insurance. Pursuant to that agreement, in 1974, Hogarth gave the original art for the 1972 Book to Danton Burroughs. Hodes and Danton acknowledged at the same time that the original art for the 1976 Book belonged to Hogarth.
In 1980, a prospective buyer approached Hogarth and indicated an interest in buying the original art from the Books that Hogarth held. Hogarth promptly contacted Marion Burroughs. She advised Hogarth that ERB might desire to exercise its contractual right of first refusal, a right incorporated in the 1970 Agreement, but in the event Hogarth sold the art to someone else, that it could not be publicly displayed without a copyright notice, or reproduced or copied without written authorization from ERB. Hogarth acknowledged, without any reservation, ERB's copyright ownership in the original art. He wrote to Marion Burroughs on April 20, 1980: "As to your wishes regarding ERB's unquestioned copyright ownership, and residual authorization practice, this will be properly conveyed to any buyer."
1979 Correction of Copyright for the 1976 Book
Having received a copy of the original copyright registration for the 1976 Book in late 1978, on February 20, 1979, Marion Burroughs submitted a Certificate of Supplementary Copyright Registration for the 1976 Book. Marion requested that the Copyright Office correct the spelling of "Edgar" and "[a]dd name of Edgar Rice Burroughs as author of original text. Citizenship: USA (deceased)." The Copyright Office updated the registration accordingly.
The 1994 License Agreement between ERB and Disney In July 1993, over a decade after the events just described, Disney contacted ERB to inquire about the availability of the Tarzan character for animated motion pictures and television programs. In her notes to the first meeting between Disney and ERB, ERB's President Sandra Galfas recorded that a Disney representative expressed enthusiasm for "the strength of the Tarzan and Jane story as a romance and as a primal myth" and suggested that the Tarzan story lent "itself well to developing a series of projects that would firmly establish a franchise in the character." After lengthy negotiations, ERB and Disney entered into three agreements, dated as of April 1, 1994: an Option, a Rights Agreement, and a Merchandising and Publishing Agreement (collectively, the "Disney License"). Unlike the 1970 Agreement, the Disney License is a highly-sophisticated contract and the history of the negotiations that led to its execution is well-documented.
Paragraph 1(a) of the Rights Agreement defines the subject matter of the Disney License as consisting of the Burroughs trademark TARZAN ("Trademark"), and . . . the characters, plots, settings, themes, and incidents contained in or suggested by all or any portion of the stories (individually referred to as the "Story" and collectively referred to as the "Stories") written by Edgar Rice Burroughs, schedules of which are attached hereto as Exhibit "A" and Exhibit "B." For purposes of this Agreement, the Trademark and Stories are collectively referred to as the "Property."
Exhibits A and B to the Rights Agreement list the twenty-five Tarzan novels written by Burroughs for which U.S. or Berne Convention copyright protection existed at the time of the agreement in 1994. Paragraph 14(b)(ii) of the Rights Agreement also serves to define the "Stories" being licensed. There, ERB warrants "[t]hat the Stories are original with Edgar Rice Burroughs; that neither the Stories nor any part hereof are taken from or based upon any other material or any motion picture."
The Rights Agreement also accounts for motion picture and television programs involving the Tarzan character that ERB has or may license. In paragraph 14(b)(vi) of the Rights Agreement, ERB warrants
[t]hat the motion picture and television programs set forth in Exhibit "C [sic] attached hereto, all based in whole or in part on the Property, have been heretofore produced, in which productions, Disney acknowledges there exists a continuing right to exploit, but aside from the productions specified in Exhibit "C" and the productions that may be produced pursuant to the agreements in Exhibit "D" attached hereto, no other theatrical or television motion pictures or television programs have been produced or authorized by or with the knowledge or consent of Burroughs.
Exhibit C consists of three schedules which together list a total of 215 motion picture or television programs involving the Tarzan character. Exhibit D consists of one schedule listing two agreements. The 1972 and 1976 Books are not listed in Exhibits A or C, nor are they listed in the schedules of Exhibits C and D.
Certain other provisions of the Disney License are significant for purposes of the instant case. The credit provision of the Rights Agreement provides that Disney will use the following form in crediting Burroughs:
(i) "based on the Story `[name of Story or Stories]' by Edgar Rice Burroughs", if the motion picture or television program is based upon a Story or Stories, and
(ii) "Based on the `TARZAN' stories created by Edgar Rice Burroughs," if the motion picture or television program is not based upon a Story or Stories but is based upon the character TARZAN. . . .
The advertising provision of the Rights Agreement grants Disney the right to use a limited number of "words from any single Story" in its advertising for a "Tarzan" motion picture or television program. Neither the credits nor the advertising provisions reference artwork.
Paragraph 10(b) consists of a "blackout clause" by which ERB agreed not to allow any licensee of live action motion picture rights in the Tarzan stories, with the exception of one previously licensed licensee, to release its movie during a period extending from one year before to one year after the release date of the Disney Movie.
In paragraph 14(b)(ix) of the Rights Agreement, ERB warrants that it knows of no authorized stories involving the Tarzan character other than those listed in Exhibits A and B and that none of the comic book licenses include motion picture rights:
(ix) (A) That, except as set forth in Exhibits "A" and "B," and except as set forth in subparagraph (B) below, to the best of Burroughs' knowledge, there are no other stories authorized by Burroughs or its predecessors in interest in which the TARZAN character appears. If there are any other Stories in which Burroughs has an interest, such stories shall be deemed Stories hereunder to the extent of Burroughs' rights therein, if any.
(B) Burroughs has, over the years licensed various comic book publishers to prepare, create and publish comic books based upon the Property. The current license with respect to comic book rights is Dark Horse. All of such licensees (including Dark Horse) have been authorized by Burroughs to prepare stories for use in connection with the exploitation of the licensed comic book rights. None of the comic book licenses, including Dark Horse, have the motion picture or television rights in the stories created for the comic books.
During the drafting of the Disney License, Disney sought various changes in the contract's language to broaden its scope. Specifically, by letter dated April 20, 1994, Disney requested that ERB expressly add the "right to create artwork" to the "enumerated rights" listed in the Rights Agreement as well as to the "Rights During Option Period" section of the Option. ERB agreed to this request. By the same letter, Disney also requested that ERB amend paragraph 1(b)(viii) of the "Grant of Rights" section of the Rights Agreement "to rants [sic] all other gihts [sic] with respect to the property not expressly reserved to Burroughs." ERB did not accede to this request. In the executed agreement, paragraph 1(b)(viii) provides that ERB grants "[s]uch other rights with respect to the Property as are hereinafter set forth."
The Production of the Movie
Several times through the course of negotiations, production and promotion of the Movie, Disney employees visited ERB's offices in Tarzana, California for the purpose of inspecting ERB's extensive archive of Tarzan-related materials, which included the Books. The record does not indicate whether any Disney employees viewed the Books specifically. ERB employees also gave Disney employees various Tarzan materials as personal gifts and promotional inducements. Among these were sets and individual copies of the original Tarzan novels, a copy of the 1974 comic book "The Return of Tarzan" illustrated by Joe Kubert, a copy of Hal Foster's version of 1929 "Tarzan of the Apes," copies of the "Tarzan Encyclopedia," a copy of the three-volume "Edgar Rice Burroughs Library of Illustration" by Russ Cochran, and copies of the television documentaries "Tarzan: the Legacy of Edgar Rice Burroughs" and "Investigating Tarzan." Of these materials, only the television documentaries included Hogarth images from the Books.
Plaintiffs have submitted a two-paragraph thank you note written by a Disney animator to Hogarth to show that Hogarth gave a series of five seminars on illustration to Disney animators sometime in 1988. Plaintiffs have failed to specify, however, who was in attendance at these seminars, where they occurred, or what significance they have with respect to the Disney License.
Disney also prepared an electronic press kit for the Movie which included various reproductions from the history of Tarzan illustration. Among these were three illustrations by Burne Hogarth, none of which was taken from the Books. Disney wrote to ERB for permission to use these materials, which ERB granted. To date, Disney has paid ERB $15 million.
The Origins of This Litigation
On September 14, 1999, two months after the official release of the Movie, Barbara Hoffman ("Hoffman"), counsel at the time to the Hogarth Estate, sent a cease and desist letter to Disney. In essence, Hoffman asserted a claim of copyright infringement based on Disney's access to Hogarth's work, including the Books, and the Movie's "substantial copying" of that work. Her letter did not identify, however, the basis for the claim that Hogarth or his heirs held the copyright in the Books or in any of Hogarth's Tarzan work. Disney responded forcefully that Hoffman's allegations were baseless, as did ERB. This litigation ensued.
Conclusions of Law
Plaintiffs assert three independent claims: a copyright claim and two breach of contract claims. First, plaintiffs argue that Hogarth was the sole "author" of the Books under the 1909 Copyright Act, 17 U.S.C. § 24, et seq. (1976) (repealed) ("1909 Act"), and that, as his heirs, they alone are entitled to the renewal copyright terms in the Books. Second, plaintiffs assert that they are entitled to a share of the proceeds of the Disney License under paragraph 3(c) of the 1970 Agreement. Third, plaintiffs assert that ERB breached paragraph 7 of the 1970 Agreement by retaining possession of the original artwork for the 1972 Book but failing to establish a museum for its display. Each of these claims is considered in turn.
I. The Copyright Claim
As established in the United States Constitution, the primary objective of copyright law is "[t]o promote the Progress of Science and useful Arts," and to do so "by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries." U.S. Const. art I, § 8, cl. 8. Although there are a variety of conceivable justifications for copyright protection, see generally Edwin Hettinger, Justifying Intellectual Property, 18 Phil. Pub. Aff. 31 (1989), the incentive scheme set forth in the Copyright Clause is essentially economic in nature. "The economic philosophy behind the clause empowering Congress to grant patents and copyrights is the conviction that encouragement of individual effort by personal gain is the best way to advance the public welfare through the talents of authors and inventors in "`Science and useful Arts.'" Mazer v. Stein, 347 U.S. 201, 219 (1954). In sum, the Copyright Clause grants limited property rights to authors "as a financial incentive to create," Attia v. Society of the New York Hosp., 201 F.3d 50, 54 (2d Cir. 1999), all with a view to promoting the "general good." Id.
At issue in this case is the question of who, between ERB and Hogarth, is the "author" of the Books and by that status entitled to the financial rewards, if any, from control of the copyright. If this were simply a matter of determining who created the illustrations in the Books, then this case would likely never have been brought. What is required here, however, is a more complicated analysis, one which begins with the distinction between the meaning of the term "author" in its common dictionary sense and the meaning of the term "author" as a legal conclusion in copyright law. ERB does not deny that Hogarth is the author of the illustrations in the Books in the common dictionary sense, i.e., in the sense that he is their creator or source. ERB does deny, however, that Hogarth is the author of the Books in the legal sense, i.e., in the sense that Hogarth is the person in whom the statutory copyright in the Books initially vested and to whose heirs the renewal term of the copyright reverted when he died before commencement of that term.
Typically, the author in the common dictionary sense is also the author for purposes of copyright law. Here, however, ERB argues that because it made the initial effort to hire Hogarth to author the works, paid him to do so, bore the expenses for the project, and had control over the final product, it is the "author" of the Books for purposes of copyright law. In essence, ERB claims that the Books were "works for hire" and that it is therefore entitled to the financial rewards copyright law traditionally grants to encourage such efforts.
A. The Copyright Registration Certificates
The starting point for any analysis of this issue is the copyright registrations for the Books. It is well settled that a certificate of registration "constitute(s) prima facie evidence of the validity of the copyright and of the facts stated in the certificate." 17 U.S.C. § 410(c) (Copyright Act of 1976); cf. Novelty Textile Mills, Inc. v. Joan Fabrics Corp., 588 F.2d 1090, 1092 n. 1 (2d Cir. 1977) (certificate given same effect under 1909 Copyright Act). Nonetheless, "a certificate of registration creates no irrebuttable presumption of copyright validity. Extending a presumption of validity to a certificate of copyright merely orders the burdens of proof." Carol Barnhart, Inc. v. Econ. Cover Corp., 773 F.2d 411, 414 (2d Cir. 1985) (citations omitted). Furthermore, "[w]here other evidence in the record casts doubt on the question, validity will not be assumed." Durham Indus., Inc. v. Tomy Corp., 630 F.2d 905, 908 (2d Cir. 1980).
Here, there is extensive evidence that the registrations are not reliable. Although the registrations for the Books identify Hogarth as an "author" of the 1972 Book and as the "author" of the 1976 Book, the registration for the 1972 Book fails to identify Hodes as an author of the text adaptation while the registration for the 1976 Book makes no mention of Burroughs's authorship of the original story. The registration for the 1976 Book also leaves the "New Matter in This Version" section blank despite the fact that a substantial part of the 1976 Book had been previously published in the 1910s under the title "Jungle Tales of Tarzan." Moreover, as discussed below, ERB has shown through a preponderance of the evidence that the Books were made at its instance and expense, qualifying them as works for hire and making ERB their legal author. For all of these reasons, the listing of Hogarth as the "author" of the Books in these registrations should be understood to indicate nothing more than the common dictionary sense of the word. This is the same sense in which Hogarth was described as an author in the comic strip registrations, even though all agree he was, as a legal matter, an employee for hire when he drew them.
B. The Work for Hire Status of the Books
Because the Books were published prior to January 1, 1978, the effective date of the Copyright Act of 1976, the 1909 Act governs the question of whether the Books are works for hire. See Playboy Enter., Inc. v. Dumas, 53 F.3d 549, 553 (2d Cir. 1995). Under the 1909 Act, the word "author" includes "an employer in the case of works made for hire." 17 U.S.C. § 26 (1909). "Under this definition, an `employer' who hires another to create a copyrightable work is the `author' of the work for purposes of the statute, absent an agreement to the contrary." Playboy, 53 F.3d at 554. The 1909 Act did not, however, define the terms "employer" or "works made for hire." Id. In the Second Circuit, "[a]n independent contractor is an `employee' and a hiring party is an `employer' for purposes of the statute if the work is made at the hiring party's instance and expense." Id. (emphasis supplied).
The "instance and expense" test is met when the "motivating factor in producing the work was the employer who induced the creation." Id. (citation omitted). Where an independent contractor would not have created the work but for the hiring party's assignment to do so, then the work is made at the hiring party's "instance." Id. at 556. Further, "an essential element of the employer-employee relationship, is the right of the employer to direct and supervise the manner in which the [artist] performs his work." Id. at 554 (citation omitted). If the hiring party "took the initiative in engaging [the artist]" and "had the power to accept, reject, or modify her work," then the work is a work for hire. Picture Music, Inc. v. Bourne, Inc., 457 F.2d 1213, 1217 (2d Cir. 1972).
All of this is consistent with the underlying purpose of copyright law. In the work for hire context, the law directs its incentives towards the person who initiates, funds and guides the creative activity, namely, the employer, but for whose patronage the creative work would never have been made. Copyright law "is intended to motivate the creative activity of authors . . . by the provision of a special reward," Sony Corp. v. Universal City Studios, Inc., 464 U.S. 417, 429 (1984), and for this reason it grants the rewards of authorship to the employer "when the motivating factor in producing the work [i]s the employer who induced the creation." Siegel v. Nat. Periodical Publications, Inc., 508 F.2d 909, 914 (2d Cir. 1974) (citation omitted).
Hogarth's desire to return to Tarzan after a twenty-year hiatus and his willingness to experiment with new formats undeniably led to the production of the Books. Nonetheless, his early contacts with Hodes were not sufficiently definite to support the proposition that the Books were produced at Hogarth's "instance." Not every solicitation requesting an opportunity to perform work constitutes an instancing. See Niss v. Columbia Pictures Indus. Inc., 57 U.S.P.Q.2d 1346, 1353-55 (S.D.N.Y. 2000) (screenplay which was not fully developed prior to employment was work for hire); In re Marvel Ent'mt Group, No. 97 Civ. 638 (RRM), 2000 WL 1677764, at *14 (D.Del. 2000) (comic book characters were not sufficiently developed before employment to preclude work for hire).
For purposes of the instance and expense test, the book project was first "instanced" by Hodes in his July 1970 letters, which predicted all of the principal terms for the production of the 1972 and 1976 Books. In his reply, Hogarth called Hodes's proposal a "capital idea," and, in the Acknowledgments section of the 1976 Book, thanked Hodes for "first suggest[ing] the book venture." Even more significantly, it is beyond cavil that Hogarth would not have undertaken production of artwork for the Books, let alone brought the Books to publication, without receiving the assignment from ERB to do so. He always recognized that ERB controlled completely the rights to Tarzan and the Tarzan stories.
Finally, the evidence that survives shows that Hodes closely supervised the creation of both Books. He heavily revised the script for the 1972 Book, changed the set of stories to be illustrated in the 1976 Book, and occasionally even made suggestions to Hogarth about the subjects for and dimensions of his drawings. The contracts with Hogarth and with Watson-Guptill reserved to ERB ultimate control over the Books and it exercised that control. The fact that Hogarth, a master illustrator with extensive prior experience working on the subject of Tarzan, was treated with deference and respect in the execution of the art is not sufficient to undercut the strong evidence that the Books were made at ERB's instance. Although the fact that Hogarth was an independent contractor rather than an employee may establish a higher standard for finding that ERB instanced the Books, the finding is nevertheless particularly appropriate where, as here, the work being commissioned is derivative of a pre-existing work whose copyright is owned by the commissioning party. Cf. 3 Melville B. Nimmer David Nimmer, Nimmer on Copyright § 9.03(D) (2001).
Although the issue of at whose expense the Books were created is a closer call than the issue of at whose instance they were created, ERB has nevertheless shown that the Books were produced at its expense: ERB's non-refundable advance against royalties to Hogarth of $5,000, the $5,000 cap on its deduction from royalties for its expenses in addition to the Hogarth advance, the salaried work of its executive Hodes, its obligation to procure domestic and foreign publishers and negotiate the terms of the publishing contracts (contracts executed by ERB and not Hogarth), and its full assumption of the risk of loss on the project.
Hogarth's royalty participation and his work on the Books in his home studio with his own materials do not require a contrary result. "[W]here the creator of a work receives royalties as payment, that method of payment weighs against finding a work-for-hire relationship." Playboy, 53 F.3d at 555. "[T]he absence of a fixed salary, however, is never conclusive." Picture Music, 457 F.2d at 1216. Where, as here, the creator receives both a fixed sum and royalties, the fact that the creator received a fixed sum is sufficient to meet the requirement that the works be made at the employer's expense. See id. (finding work for hire when only payment was in royalties). As to the circumstances of Hogarth's production of the artwork for the Books in his home studio, that factor goes only to the question of whether "an artist worked as an independent contractor and not as a formal employee." Playboy, 53 F.3d at 555. It has "no bearing on whether the work was made at the hiring party's expense." Id.
Plaintiffs argue that Hogarth paid "half" of ERB's expenses in connection with the production and sale of the Books. This calculation is based on an interpretation of the "net monies" provisions of the 1970 Agreement, which allowed ERB to deduct not only the payment of $5,000 to Hogarth, but also an additional $5,000 in expenses before it was required to pay royalties to Hogarth. To the extent that plaintiffs have accurately described this provision of the contract at all, their description is only accurate as to the first $10,000 in ERB's expenses. After that amount, ERB bore all of the its own expenses without any contribution from Hogarth.
Plaintiffs also argue that because Hogarth paid half of the cost of his trip to Paris, half of the cost of the production of the color separation films, and half of the cost of the insurance on the original artwork for the 1972 Book, the Books were produced at least in part at his expense. Hogarth, however, was never contractually bound to pay any of these costs and may in any event have been reimbursed for more than half of the cost for the color separation films. Hogarth decided to pay for the color separation films for the 1972 Book, and to travel to Paris to obtain Hodes's revisions and approval for a draft of the 1976 Book, to speed along each project. Since the 1970 Agreement gave Hogarth title to half of the original art, his payment of half of the insurance for the art is an understandable collateral arrangement. Research has uncovered no case under the 1909 Act in which an artist has managed unilaterally to disrupt a work for hire arrangement by paying certain costs of the project that he was not contractually bound to pay. Such a result is certainly not warranted here, where Hogarth's contributions to cover expenses were minimal compared to ERB's.
3. Rebuttal Evidence
Since the Books were produced at the instance and expense of ERB, there is a presumption that the Books were works for hire. Playboy, 53 F.3d at 556. This presumption may be overcome, however, by evidence of a written or oral agreement to the contrary. Id. at 554. The independent contractor has the burden of proving that such an agreement existed. Id.
Plaintiffs claim that Hogarth was the "sole author" of the Books and that his death prior to the commencement of the copyright renewal terms for the Books means that his prior assignment of the renewal terms to ERB failed to vest. They point to the lengthy introductions in each of the Books praising Hogarth's artistry and the dedication of the Books to Hogarth's parents. These facts shed little light on the identity of the legal author of the Books. They do underscore not only Hogarth's enormous contribution to the Books, but also that ERB and Hogarth each hoped to benefit from emphasizing to the public that these Books were the occasion for reuniting Hogarth's art with Tarzan. The combination of a well-known artist and famous story, however, does not by itself demonstrate an agreement that the work is not one made for hire.
The plaintiffs next assert that the 1970 Agreement precludes ERB "as a matter of law" from asserting that Hogarth was an employee for hire. Specifically, plaintiffs argue that the 1970 Agreement contains none of the traditional indicia of a work for hire contract, e.g., phrases such as "[w]e hereby employ and engage you," see Muller v. Walt Disney Prods., 871 F. Supp. 678, 680 (S.D.N.Y. 1994). Yet the 1970 Agreement does contain comparable indicia. For example, ERB agreed in paragraph five of the agreement that it would not "employ anybody else to create [the Books], provided you are prepared to create them." In paragraph three, ERB agrees to compensate Hogarth "[f]or all of your services." Similarly, in his October 1970 letter to Watson-Guptill, Hodes writes that ERB "undertake[s] to provide the services of Burne Hogarth." Finally, in Hodes's July 16, 1970 letter to Hogarth, ERB's intent is made clear. Hodes writes that "[w]e [ERB] would commission you to produce the work." (Emphasis supplied). Arguing about the degree of control ERB had over Hogarth's efforts, the parties dispute the meaning of paragraph 2 of the 1970 Agreement, repeated here:
We will have the right to approve the content of the books, but our sole interest in this regard will be to preserve the Burroughs `flavor.' We may give you our artistic suggestions from time to time, but you will be the final judge of the artwork as distinguished from the story or text.
During the production of the Books in the 1970s, Hogarth and ERB never had cause to question the meaning of this paragraph. The import of the paragraph, as of Hodes's July 1970 letters to Hogarth, is that Hogarth's artistic decisions would be accorded great deference, but that ERB reserved the right ultimately to approve the "content of the books." In practice, Hodes exercised that control. He consistently reviewed and edited Hogarth's work, and Hogarth actively solicited Hodes's ideas and approval. Neither Book would have been published without Hodes's approval.
In this connection, plaintiffs set great store in Schmid Bros. v. W. Goebel Porzellanfabrik KG, 589 F. Supp. 497 (E.D.N Y 1985). There, the Honorable Eugene H. Nickerson held that Sister Hummel was a joint author of her porcelain figurines. Id. at 501. In making this determination, Judge Nickerson wrote: the licensing agreements . . . gave [Sister Hummel]
full artistic control over the line to bear her name. She had the final say as to which of the works would be reproduced and how faithfully. Moreover, she in fact exercised that control.
Id. at 503. In the instant case, however, Hogarth did not have the "final say" as to which works would be reproduced nor did he exercise that control. In fact, Hodes chose the stories that Hogarth would illustrate, he gave guidance regarding the size and subject of panels, and Hogarth submitted all that he did to Hodes for approval. Furthermore, because ERB owned the copyright in the underlying Tarzan stories as well as rights to the Tarzan trademark, neither party questioned that ERB had ultimate control over Hogarth's work. See Picture Music, 457 F.2d at 1216 ("[S]ince Disney had control of the original song on which Miss Ronell's work was based, Disney . . . at all times had the right to direct and supervise Miss Ronell's work.").
ERB's position as the final arbiter is also supported by the fact that the 1970 Agreement grants ERB the copyright in Hogarth's work but makes no guarantee that it will publish the work regardless of the acceptability of the final product. This conclusion is reinforced by the 1972 Agreement — which Hogarth kept in his files even though he was not a signatory — which also grants an "absolute right to approve the text and artwork" to ERB without any mention of Hogarth. When disputes arose between Watson-Guptill and ERB which threatened the publication of the 1976 Book, Hogarth could do little more than, as he put it, "sit tight and wait for a disagreement to simmer down." Under the 1970 and 1972 Agreements, he had no contractual right to intervene. Nor did he have any recourse when, to his great disappointment, his artwork in the 1976 Book was published not in color, but in black and white. It is simply not accurate — despite the plaintiffs' insistence at trial — to describe Hogarth as an equal partner with ERB.
At trial, plaintiffs argued that because the 1970 Agreement did not give ERB control over Hogarth's every pen stroke, it constitutes an "agreement to the contrary." Plaintiffs could cite no case law, however, to support the proposition that a proprietor's degree of control must extend over every aspect of the independent contractor's work, or to put it another way, that the presumption in favor of a finding that this is a work for hire can be rebutted by an agreement between ERB and Hogarth that ERB would not exercise control over the execution of his drawings even though it could choose the stories he would illustrate and could decide whether to publish all or none of his drawings. The case law suggests the contrary. The Picture Music standard, quoted above, for assessing control in a work-for-hire framework is stated in the alternative: if the hiring party has "the power to accept, reject, or modify her work," Picture Music, 457 F.2d at 1217 (emphasis supplied), then the work is a work for hire.
Notwithstanding the great respect ERB conferred on Hogarth and his skill as an artist, the relationship between ERB and Hogarth was a relationship of hiring party and independent contractor, one in which the former had an unconditional right to accept or reject the latter's work. In any event, the plaintiffs have not shown that Hogarth and ERB had an agreement that ERB would not exercise control over the execution of his drawings. ERB's Board discussed whether Tarzan's face should be redrawn; Hodes involved himself deeply in the drawings for at least the 1972 Book; and, the 1976 Book was printed in black and white to Hogarth's dismay.
Finally, plaintiffs argue that the conveyance of rights by Hogarth in paragraph eight of the 1970 Agreement "necessarily" recognized that Hogarth had reserved the copyright in his work. If the work had been a work for hire, they argue, Hogarth would have had no rights to convey. In paragraph eight, the 1970
Agreement announced that [t]he book will be copyrighted in the names of [ERB] and we shall be the exclusive proprietors thereof, subject always to our obligation to pay you your participation. You hereby grant us whatever rights we need to obtain the copyright in our name and to extend and renew that copyright wherever and whenever we can.
(Emphasis supplied). In Playboy, the Second Circuit heard a similar argument in the context of contractual provisions as ambiguous as those in the instant case. Playboy, 53 F.3d at 557.
Because the 1909 Act only governed works after they were published, and left their protection before publication to common law copyright, the Court in Playboy found it entirely possible that such language merely protected the rights of the hiring party before publication. Here, the evidence is far stronger that ERB included this passage in the contract for that very reason. The proposed contract for the ill-fated Special Edition project contained a provision almost identical to that in the 1970 Agreement, including an assignment of rights to the renewal term, and was at the same time explicitly intended as a work for hire arrangement. Furthermore, unlike the contract at issue in Playboy or the work for hire provision drafted for the Special Edition project, paragraph 8 explicitly refers to ERB as the "proprietor" of the copyrights in the Books. Although not dispositive of the issue, the term "proprietor" is used by the 1909 Act and caselaw under it to refer to employers who induce the creation of a work for hire and thus own the copyright in it. See, e.g., Shapiro, Bernstein Co. v. Bryan, 123 F.2d 697, 700 (2d Cir. 1941) ("[W]hen the employer has become the proprietor of the original copyright because it was made by an employee `for hire,' the right of renewal goes with it, unlike an assignment.")
Plaintiffs cite Dolman v. Agee, 157 F.3d 708 (9th Cir. 1998), and Marascalco v. Fantasy Inc., 17 U.S.P.Q.2d 1409 (C.D.Cal. 1990), for the proposition that a contract provision in which the creator of a work assigns his rights to the renewal term of a copyright in the work necessarily precludes a determination that the assignee is the proprietor of the work as a work for hire since a renewal term assignment can only refer to a statutory copyright assignment. Dolman does not address the assignment of the renewal term or even provide the language of the assignment at issue there. In any event, there was insufficient evidence in Dolman of a work for hire, 157 F.3d at 712, and the employer was challenging an assignment even though its subsidiary had received the benefit of the assignment. Id. at 713. In Marascalco, the court relied on the assignment of the renewal term as additional evidence that the work was not one made for hire. 17 U.S.P.Q.2d at *1410. Like Dolman, Marascalco involved an employee rather than an independent contractor. Neither case is sufficiently compelling to suggest a departure from the reasoning of the Second Circuit in Playboy.
Even if the precise import of paragraph 8 to the 1970 Agreement remains unclear, and an explanation for its language consistent with a work for hire arrangement is "at least plausible," Playboy, 53 F.3d 557, the conclusion would be only that paragraph eight neither "proves [n]or disproves that the parties intended something other than a work-for-hire relationship." Id. The plaintiffs cannot therefore adduce the 1970 Agreement to overcome the presumption that the Books were works for hire.
The soundness of this conclusion is underscored by the absence of record support for the plaintiffs' claim that Hogarth held the copyright to the Books as their sole author or that he ever perceived that he did. In contrast, there is a profusion of evidence that Hogarth always considered ERB the sole and exclusive owner of all copyright interest in the Books, including in his original art published in the Books, that he recognized that ERB had sole and exclusive control over the project, and that he was quite satisfied to gain from Tarzan's renown, if not from any intellectual property rights. The reason for this understanding is not hard to glean. There was never any question but that the character Tarzan and the Tarzan stories authored by Burroughs were owned exclusively by ERB and that ERB had worked hard to protect and preserve those rights. They were the legacy bequeathed by Burroughs to his heirs. We need not explore here the ramifications for ERB's rights with respect both to trademark and copyright if the heirs of one of Tarzan's many illustrators are found somehow to have gained an ownership interest in even one part of that legacy.
The result reached here is not meant to impugn Hogarth's artistry, prominence, or even genius as an illustrator. If the purpose of copyright law is to promote original expression, however, then the holder of a copyright in an underlying work must be able to hire others — including great artists — to create original expression that is derivative of that underlying work without risking loss of exclusive control over the copyright. ERB undertook to do precisely that when it commissioned Hogarth to illustrate the Books. The evidence is compelling that ERB would have undertaken the project on no other terms. The evidence also shows that Hogarth fully understood this when he accepted the commission. For him, the perceived benefits of reuniting his creative energies with his beloved subject, Tarzan, were great. There is no inequity in finding that he functioned in this endeavor as an employee for hire. It is not only the objective facts underlying the instance and expense test that dictate this result. It is just as apparent that at the time Hogarth agreed to produce the books, it was the joint understanding and intent of the parties that, for purposes of copyright law, the Books would be works for hire.
4. Time Bars
Plaintiffs also argue that ERB is time-barred from asserting work for hire authorship of the Books because it failed to correct the Books' copyright registrations listing Hogarth as an author of the illustrations of the 1972 Book and as the author of the entirety of the 1976 Book. Plaintiffs' argument proceeds in three steps. First, plaintiffs rely on Merchant v. Levy, 92 F.3d 51, 56 (2d Cir. 1996), for the proposition that a claim of authorship of a copyrighted work made more than three years after the claim has accrued is time-barred pursuant to 17 U.S.C. § 507, which reads "[n]o civil action shall be maintained under the provisions of this title unless it is commenced within three years after the claim accrued." Second, plaintiffs rely on Stone v. Williams, 970 F.2d 1043 (2d Cir. 1992), for the proposition that a "cause of action accrues when a [claimant] knows or has reason to know of the injury upon which the claim is premised." Id. at 1048. Third, plaintiffs argue that the mistaken copyright registrations for the Books constituted a "self-inflicted injury" for purposes of claim accrual since it impaired ERB's rights to the copyright during the renewal term, and that ERB was aware of this "injury" when it received a copy of the Books' registrations in 1973 and in 1978, and when it revised the registration for the 1976 Book in 1979. Thus, plaintiffs conclude, because ERB has been or should have been aware of the copyright registration forms since the 1970s, it is time-barred from arguing that any of the facts alleged in those applications are erroneous.
In a related argument, plaintiffs assert that the defendant cannot resort to the work for hire doctrine because one of its outside counsel saw the copyright registrations prior to 1982. The record, including evidence examined by the Court in camera at the request of the parties, is clear that that attorney was not asked by ERB to advise it about the legal effect of either those registrations or the 1970 Agreement with respect to the work for hire doctrine until after the plaintiffs sent their demand letter to Disney in 1999. The only assistance requested from counsel in connection with the registration forms was assistance in correcting the misspelled name "Edgar" in the registration for the 1976 Book. In response, the attorney forwarded copyright office forms that could be used to correct the mistake with instructions for their use. Possession by outside counsel of the registrations without any request for, or rendering of, advice about the issues now at issue does not bar the defendant from relying on the work for hire doctrine.
By this extended syllogism, plaintiffs seek to transform a prima facie presumption in favor of the facts alleged in a copyright registration into a conclusive presumption. Neither the 1909 Act nor the 1976 Act contains any provision suggesting that copyright registrations are, after a certain period of time, incontestable. Cf. 15 U.S.C. § 1065 (trademark registration may become incontestable if certain conditions are met, among them that the mark has been in continuous use for five years since the date of registration). This may explain why plaintiffs can identify no case in which the filing of a copyright registration adverse to a party's authorship status, without more, constitutes an injury that will begin the running of the statute of limitations period. Moreover, in Merchant, the "injury" that triggered the running of the limitations period was qualitatively different from the filing of an allegedly mistaken registration certificate. In Merchant, plaintiffs' injury consisted of the refusal by defendants and their predecessors, despite demands from plaintiffs, to pay royalties to plaintiffs from the exploitation of a well-known musical composition that the plaintiffs had written and recorded. Merchant, 92 F.3d at 52-53.
Here, in contrast, both ERB and Hogarth acted from the beginning as if ERB was the "author" of the Books for purposes of copyright ownership. ERB knew of no injury because there was none. The injury came at the earliest in 1999, when Hogarth's heirs asserted an undefined copyright claim in their letter to Disney.
Plaintiffs' arguments with respect to equitable estoppel and laches are similarly misguided. Until Disney's production of the Movie in 1999, none of the parties relied on the copyright registrations to their detriment in any cognizable manner. See Kosakow v. New Rochell Radiology Assoc., P.C., 274 F.3d 706, 725 (2001) (Under federal law, the "doctrine of equitable estoppel is properly invoked where the enforcement of the rights of one party would work an injustice upon the other party due to the latter's justifiable reliance upon the former's words or conduct."); General Elec. Capital Corp. v. Armadora, 37 F.3d 41, 45 (2d Cir. 1994) ("Under New York law, equitable estoppel requires a showing of," inter alia, "[r]eliance upon the misrepresentations which causes the innocent party to change its position to its substantial detriment."); Ivani Contracting Corp. v. City of New York, 103 F.3d 257, 259 (2d Cir. 1997) (equitable defense of laches requires a showing of unreasonable delay by the party seeking equitable relief, resulting in prejudice to the party against whom the relief is sought).
II. The Paragraph 3(c) Breach of Contract Claim
Whether or not plaintiffs have any copyright interest in the Books, the 1970 Agreement gave Hogarth and his heirs the right to share in "monies realized from the exploitation" of the Books. The prominence of the contract claim is underscored by the fact that over the course of this litigation, plaintiffs have abandoned any copyright claim based on any alleged substantial similarity between Hogarth's artwork in the Books and the animated artwork in the Movie. Instead, plaintiffs now allege only that ERB gave Disney the right to "use" the Books when it licensed the Books to Disney, and that by the terms of paragraph 3(c) of the 1970 Agreement, plaintiffs are entitled to half of what Disney paid for that right. This breach of contract claim requires the analysis of two contracts: the Disney License and the 1970 Agreement.
A. The Disney License
The Disney License contains a California choice of law provision. "New York law is clear in cases involving a contract with an express choice-of-law provision: Absent fraud or violation of public policy, a court is to apply the law selected in the contract as long as the state selected has sufficient contacts with the transaction." Hartford Fire Ins. Co. v. Orient Overseas Containers Lines (UK) Ltd., 230 F.3d 549, 556 (2d Cir. 2000). In light of ERB and Disney's extensive contacts with the state of California, the Court applies California law to the interpretation of the Disney License.
Under California law, the fundamental goal of contract interpretation is to give effect to the mutual intent of the parties as it existed at the time of contracting. Cal. Civ. Code § 1636; City of Atascadero v. Merrill Lynch, Pierce, Fenner Smith, Inc., 68 Cal.App.4th 445, 473-74 (Ct.App. 1998). When a contract is reduced to writing, this intent "is to be ascertained from the writing alone, if possible." Cal. Civ. Code § 1639; see also Brinton v. Bankers Pension Servs., Inc., 76 Cal.App.4th 550, 559 (Ct.App. 1999). Extrinsic evidence may be admitted to explain the meaning of a written instrument if it "is relevant to prove a meaning to which the language of the contract is reasonably susceptible." Barris Indus. v. Worldvision Enter., 875 F.2d 1446, 1450 (9th Cir. 1989) (citing Pacific Gas Elec. Co. v. G.W. Thomas Drayage Rigging Co., 69 Cal.2d 33, 37 (1968)). Under California law, "[a] written contract must be read as a whole and every part interpreted with reference to the whole. Preference must be given to reasonable interpretations as opposed to those that are unreasonable, or that would make the contract illusory." Shakey's Inc. v. Covalt, 704 F.2d 426, 434 (9th Cir. 1983) (citations omitted).
The Disney License indicates in clear and unambiguous language that ERB intended to license to Disney, and Disney intended to be licensed, rights only in the trademark TARZAN and the written works of Edgar Rice Burroughs listed in Exhibits A and B of the Rights Agreement. This is the clear meaning of paragraph 1(a) of the Rights Agreement, quoted above, as well as of ERB's warranty in paragraph 14(b)(ii) that the "Stories are original with Edgar Rice Burroughs." The credits and advertising provisions of the Rights Agreement also show that ERB and Disney were concerned only with the written works of Burroughs. There is no dispute that the works listed in Exhibits A and B do not include the Books.
Plaintiffs' claim rests entirely on one paragraph of the Disney License — paragraph 14(b)(ix)(A):
(ix) (A) That, except as set forth in Exhibits "A" and "B," and except as set forth in subparagraph (B) below, to the best of [ERB's] knowledge, there are no other stories authorized by Burroughs or its predecessors in interest in which the TARZAN character appears. If there are any other Stories in which Burroughs has an interest, such stories shall be deemed Stories hereunder to the extent of Burroughs' rights therein, if any.
(Emphasis supplied). Plaintiffs contend that while "Stories" as defined in paragraph 1(a) refers to the narrow category of works written by Burroughs, "stories" as used in paragraph 14(b)(ix)(A) refers to a broader category of works authorized by ERB in which Tarzan appears. Thus, plaintiffs reason, while the Books may not constitute "Stories" as defined in paragraph 1(a), they are nevertheless "stories" for purposes of paragraph 14(b)(ix)(A). To the extent that paragraph 14(b)(ix)(A) provides that "stories shall be deemed Stories hereunder to the extent of [ERB's] rights therein," plaintiffs argue that the Books qualify as Stories under the Rights Agreement and were therefore licensed to Disney by the terms of the Disney License. In essence, then, plaintiffs contend that the Rights Agreement gives two definitions of the term "Story," the first in paragraph 1(a) and the second in paragraph 14(b)(ix), and that the latter definition is controlling.
This construction makes no sense. ERB and Disney were well aware not only of the Books but of years of comic strips and movies in which the Tarzan character appears. If the clause "stories authorized by [ERB]" was intended to refer to such material, then it would have been absurd for ERB to warrant that, with the exception of the original works written by Burroughs that are listed in Exhibits A and B, "to the best of [ERB's] knowledge, there are no other stories authorized by [ERB]."
Unconnected to any specific clause in the Disney License, plaintiffs also argue that the rights to animate the Books were effectively licensed to Disney since, if ERB allowed someone else to animate the books, that would constitute a breach of the Disney License. This argument proves too much. The hypothetical breach described by the plaintiffs flows from Disney's rights to animate the tales written by Burroughs. The Books are affected only because they are derived from the same tales. That does not mean, however, that ERB licensed the Books to Disney. The explicit terms of the license will not stand such a construction.
There is a far less elaborate and more reasonable construction of paragraph 14(b)(ix)(A) than the one proffered by the plaintiffs. It is one which also has the virtue of being consistent with paragraph 1(a), the other provisions of the license, and the history of the negotiations between ERB and Disney. See Cal. Civ. Code § 1641 ("The whole of a contract is to be taken together, so as to give effect to every part, if reasonably practicable, each clause helping to interpret the other."). The function of paragraph 14(b)(ix)(A) was to give Disney rights in any material written by Burroughs in which Tarzan appears that has not yet been discovered, is unpublished, or is not listed in Exhibits A or B. By these terms, and by the terms of paragraph 14(b)(ix)(B), ERB warranted to Disney that during the license period, no other company would be licensed to produce a competing animated motion picture or television program based on Tarzan by virtue of newly discovered writings of Burroughs for which the Disney license did not account.
Extrinsic evidence overwhelmingly supports this interpretation of paragraph 14(b)(ix)(A). In the negotiations leading up to the executed agreement, Disney requested that ERB add "the right to create artwork" to the Option and Rights Agreement because Disney believed that the language granting it the right to prepare "other material" and "designs for motion pictures" was not sufficiently broad to cover graphic depictions. This request, and ERB's accession to it, is consistent with a belief on the part of both parties that Disney was not being granted any rights in illustrations or artwork owned by ERB. Similarly, ERB's refusal, with respect to paragraph 1(b)(viii), to grant all other rights not expressly reserved is consistent with its desire to limit the rights granted to Disney to the literary works written by Burroughs, and to only specific rights in those works.
The intent of ERB and Disney not to license the Books may also be inferred from their subsequent conduct. See United States Cellular Inv. Co. of Los Angeles, Inc. v. GTE Mobilnet, Inc., ___ F.3d ___, 2002 WL 243623, at *6 (Feb. 21, 2002 9th Cir.) ("Under California law, a court may consider the subsequent acts and conduct of the parties in the execution of the contract in order to determine the intent of those parties."). Plaintiffs have not pointed to any conduct by Disney that would suggest that Disney believed it had a right in the Books let alone made actual use of them. In fact, Disney's conduct suggests the contrary. In May 1999, while in the process of preparing an electronic press kit for the Movie, Disney wrote to ERB to ask for permission to use various images of Tarzan from ERB's archives — three of which were by Hogarth, incidentally, although none were from the Books.
In an attempt to counter the clear meaning of the contract and its confirmation by extensive extrinsic evidence, plaintiffs cite the deposition testimony of Mark Kenchelian, Senior Vice-President of Business and Legal Affairs, Walt Disney Pictures and Television, who represented Disney in the negotiations between ERB and Disney that led to the execution of the Disney License. Throughout his deposition, Kenchelian repeatedly stated, in essence, his understanding that Disney was "getting all rights to all the Tarzan books, and if there were any rights that were going to be excluded . . . that that would be specifically identified." Notwithstanding the tenacity with which Kenchelian stuck to this story through the course of his deposition, it is not consistent with either the Disney License or the record of the negotiations leading to its execution. As noted above, Kenchelian did not persuade ERB to grant all rights not expressly reserved. On the contrary, paragraph 1(b)(viii) provides only that ERB grants "[s]uch other rights with respect to the Property as are hereinafter set forth." Nor did Kenchelian win for his employer "all" rights. The rights conferred on Disney are precisely defined in paragraph 1 of the Rights Agreement. Nonetheless, the license that Kenchelian did negotiate was effective in granting Disney the exclusive right to animate the Tarzan tales written by Burroughs that are listed in Exhibits A and B or that are unpublished.
B. The 1970 Agreement
Even assuming that ERB did license to Disney rights in the Books, plaintiffs must still show that the provisions of the 1970 Agreement entitle them to share in the licensing fee paid by Disney. The 1970 Agreement contains no choice of law provision. The parties agree, however, that New York law should be applied. That agreement is sufficient to establish choice of law. See American Fuel Corp. v. Utah Energy Dev. Co., 122 F.3d 130, 134 (2d Cir. 1997).
Under New York law, the primary objective of contract interpretation "is to give effect to the intent of the parties as revealed by the language they chose to use." Seiden v. ANC Holdings, Inc., 959 F.2d 425, 428 (2d Cir. 1992). Where, as here, the written agreement does not contain an integration clause, the court must determine whether the agreement is integrated "by reading the writing in the light of surrounding circumstances, and by determining whether or not the agreement was one which the parties would ordinarily be expected to embody in the writing." Braten v. Bankers Trust Co., 60 N.Y.2d 155, 162 (1983). The "surrounding circumstances" suggest that ERB and Hogarth did not intend the 1970 Agreement to be an integrated agreement. After execution of the agreement, the two parties continued to negotiate issues with which the agreement had dealt. In light of these circumstances, extrinsic evidence may be considered to interpret the contract. See Bourne v. Walt Disney Co., 68 F.3d 621, 628 (2d Cir. 1995) (if the court concludes that the agreement was not intended to be a complete integration, then extrinsic evidence may be admitted for purposes of contract interpretation).
In seeking to establish their entitlement to a share of the Disney license fee, plaintiffs rely on paragraph 3(c) of the 1970
Agreement, which states in pertinent part that we [ERB] will pay you [Hogarth] . . . 50% of all net monies realized by us from the exploitation of the book. That is, your participation extends to hardcover editions, serializations, and the like and to the use of the artwork contained in the book or any significant portion of it for other media, such as film strips, animated television productions, premium booklets, art portfolios or similar uses.
(Emphasis supplied). Paragraph 3(c) specifies two ways that the Books may be "exploit[ed]," first, by the republication of the Books in other formats, and second, by the "use of the artwork" within the Books in other media, "such as film strips [or] animated television productions." Plaintiffs do not argue that ERB's alleged licensing of the Books to Disney falls within the first form of exploitation. Rather, plaintiffs contend that the act of licensing constitutes a "use of the artwork . . . for other media," specifically the Movie, and that the artwork was "use[d]" for purposes of paragraph 3(c) when ERB granted to Disney the right to make use of the Books, regardless of whether Disney actually availed itself of this right in making the Movie. The plaintiffs do not contend for purposes of this analysis that the Movie actually used any of Hogarth's art from the Books or that there is any similarity between the images in the Books and the Movie.
The Disney License did not, however, define "use" to include use of the artwork in the Books. Paragraph 1(a) of the license gave Disney the right to create "animated motion pictures . . . based upon the characters, plots, settings, themes and incidents in or suggested by" the Stories. Thus, even if the Books qualify as Stories under the Disney License — which they do not ___, only certain elements of Books were licensed, namely, their "characters, plots, setting, themes and incidents." Plaintiffs cannot reasonably claim ownership rights over these elements of the Books since they were clearly based on Burroughs's original novels.
It is notable that the Disney License expressly gave permission to Disney to use a limited number of words from the stories for purposes solely of advertising the Movie. There is no similar provision for artwork. The terms of paragraph 3(c) of the 1970 Agreement limit Hogarth's entitlement specifically to the "use of the artwork" in the Books. Plaintiffs cannot claim any share of the Disney License fee because the Disney License never granted Disney the right to make "use of the artwork," if any, in the Stories.
Finally, the construction that plaintiffs impose on the second component of the exploitation rights in the 1970 Agreement was a construction specifically rejected in the negotiation of the agreement. The phrase "use of the artwork contained in the book" was included in the 1970 Agreement instead of the clause "licensing or sale of the book for use in connection with . . . television." It would appear that Hogarth and ERB each benefitted from the language chosen for the final agreement: Hogarth succeeded in broadening the clause to refer to "other media" without any limitation, and ERB succeeded in limiting the clause to the "use of the artwork" from the Books.
III. The Original Art for the 1972 Book
Plaintiffs' final claim is that they are entitled to the original art for the 1972 Book since it is undisputed that ERB never built a museum. The 1970 Agreement gave the original art for the first book to ERB and for the second book to Hogarth. In 1974, Hogarth delivered the original art for the 1972 Book to ERB. In the more than two decades that followed until his death in 1996, Hogarth never requested the return of that art because ERB had failed to build a museum. His conduct is compelling evidence that he did not consider ERB's failure a material breach of the 1970 Agreement or a ground permitting him to demand the art.
The language in the 1970 Agreement itself indicates that ERB is entitled to the art even though it has not been placed in a museum. The contract divided the art in a sentence that made no reference to a museum. The reference to a museum is contained in a second sentence and is described as a reason ERB "desire[s]" the artwork. Finally, the contract described how the proceeds of any sale of ERB's artwork would be divided with Hogarth. A sale by ERB, of course, would have been inconsistent with ERB's placing the art in a museum.
For the foregoing reasons, plaintiffs' petition for a declaration that Hogarth is the sole author of the Books and that plaintiffs are successors to the copyright renewal terms of the Books is denied. Plaintiffs' claims for breach of contract are also denied. The Clerk of Court shall enter judgment for defendant and close the case.