United States Court of Appeals For the First Circuit
No. 19-1927
MARKHAM CONCEPTS, INC.; LORRAINE MARKHAM, individually and in her capacity as trustee of the Bill and Lorraine Markham Exemption Trust and the Lorraine Markham Family Trust; SUSAN GARRETSON,
Plaintiffs, Appellants,
v.
HASBRO, INC.; REUBEN KLAMER; DAWN LINKLETTER GRIFFIN; SHARON LINKLETTER; MICHAEL LINKLETTER; LAURA LINKLETTER RICH; DENNIS LINKLETTER; THOMAS FEIMAN, in his capacity as co-trustee of the Irvin S. and Ida Mae Atkins Family Trust; ROBERT MILLER, in his capacity as co-trustee of the Irvin S. and Ida Mae Atkins Family Trust; MAX CANDIOTTY, in his capacity as co-trustee of the Irvin S. and Ida Mae Atkins Family Trust,
Defendants, Appellees,
IDA MAE ATKINS,
Defendant.
APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF RHODE ISLAND
[Hon. William E. Smith, U.S. District Judge]
Before
Thompson, Lipez, and Kayatta, Circuit Judges.
Robert M. Pollaro, with whom David Cole, John T. Moehringer, and Cadwalader, Wickersham & Taft LLP were on brief, for appellants.
Joshua C. Krumholz, with whom Courtney L. Batliner, Mark T. Goracke, Patricia K. Rocha, Holland & Knight LLP, and Adler Pollock & Sheehan P.C. were on brief, for appellee Hasbro, Inc.
Patricia L. Glaser, with whom Erica J. Van Loon, Joshua J. Pollack, Thomas P. Burke Jr., Lathrop GPM LLP, and Glaser Weil Fink Howard Avchen & Shapiro LLP were on brief, for appellee Reuben Klamer.
Christine K. Bush, Ryan M. Gainor, David B. Jinkins, Hinckley, Allen, & Snyder LLP, and Thompson Coburn LLP on brief for appellees Max Candiotty, Thomas Feiman, Dawn Linkletter Griffin, Laura Linkletter Rich, Dennis Linkletter, Michael Linkletter, Sharon Linkletter, and Robert Miller.
June 14, 2021 LIPEZ, Circuit Judge. "The Game of Life" is a classic
family board game, introduced in 1960 by the Milton Bradley Company
to great success. This case involves a long-running dispute
between Rueben Klamer, a toy developer who came up with the initial
concept of the game, and Bill Markham, a game designer whom Klamer
approached to design and create the actual game prototype.
Eventually, their dispute (which now involves various assignees,
heirs, and successors-in-interest) reduced to one primary issue:
whether the game qualified as a "work for hire" under the Copyright
Act of 1909. If it did, Markham's successors-in-interest would
not possess the termination rights that would allow them to
reassert control over the copyright in the game. After considering
the evidence produced at a bench trial, the district court
concluded that the game was, indeed, such a work. Plaintiff-
appellants, who all trace their interest in the game to Markham,
challenge that determination. We affirm.
I.
We begin with a summary of the facts, as found by the
district court. In 1959, Bill Markham, an experienced game
designer and the head of a California-based product development
company, was approached by Rueben Klamer, a toy developer with
extensive industry contacts. Klamer had just visited Milton
Bradley's Massachusetts headquarters, where he had been asked to
develop an idea for a product that would commemorate the company's
- 3 - 1960 centennial. While searching for inspiration in the company's
archive, he discovered a copy of the company's first board game:
"The Checkered Game of Life," created by Milton Bradley himself in
1860. The original game was intended to instill its youthful
players with lessons about vice and virtue. Klamer saw potential
in an updated version, modified to reflect contemporary American
society and values. On the trip back to California, Klamer
developed the concept, even scribbling some thoughts on the flight
home. Klamer was more of an ideas person, though, and he needed
help developing the concept and creating a working prototype that
could be pitched to Milton Bradley. Klamer chose Markham's firm
partly because of two talented artists who worked there: Grace
Chambers and Leonard Israel.
Markham and his team started work on the project in the
summer of 1959. To ensure that a product launch coincided with
Milton Bradley's 1960 centennial, they rushed to produce a
prototype in just a few weeks. Markham and Klamer together
contributed key features of the game: play would advance along a
track winding through a three-dimensional game board, with a
spinner determining how far players would move on each turn
(thereby progressing through various "life milestones"). Klamer
visited Markham's firm once or twice per week to offer feedback on
the development of the physical game board and the box cover.
Chambers built most of the prototype board. She constructed
- 4 - houses, mountains, and the elevated track out of balsa wood,
cardboard, and paper. Israel focused on the art for the
prototype's box cover. He produced various sketches, Markham and
Klamer chose the one they liked best, and Chambers integrated it
into a box cover. As the game took shape, Markham, Klamer,
Chambers, and Israel would all play the prototype together,
suggesting (and vetoing) various rules and refinements. Sue
Markham, Bill's wife and a copywriter by trade, memorialized the
agreed-upon changes in what became the prototype's rulebook.
After approximately six weeks, the prototype was ready.
At a meeting at Chasen's (a famous Hollywood restaurant), Klamer
and Markham pitched it to a group of Milton Bradley executives.
Also present was an associate of Klamer's, Art Linkletter, a well-
known radio and television personality. Klamer and Linkletter
were co-founders of a company called Link Research Corporation,
which developed products and used Linkletter's celebrity to
promote them. Part of the pitch was that Linkletter could help
market the game. The pitch worked. The Milton Bradley executives
liked the game and thought that it had commercial potential.
The parties subsequently entered into two agreements
regarding rights to the game. The first was a license agreement
between Link Research and Milton Bradley. It gave Milton Bradley
the exclusive right to make and sell the game and noted that Link
Research "ha[d] had . . . [the game] designed and constructed."
- 5 - The license agreement also gave Milton Bradley the right to use
Linkletter's name and image in promoting the game. In exchange,
Link Research would receive a six percent royalty on sales,
including a $5,000 non-refundable advance. The second was an
assignment agreement between Link Research and Markham. Stating
that Markham had "invented, designed[,] and developed [the] game,"
it assigned "all of [Markham's] right, title[,] and interest in
and to the Game[] to LINK." In exchange, it gave Markham thirty
percent of Link Research's six percent royalty, including a $773.05
non-refundable advance. It also noted that Markham would be paid
$2,423.16 to cover the costs of producing the prototype. In fact,
Klamer had agreed at the beginning of the project to cover
Markham's costs, and Markham had already billed Link Research for
his expenses (including the salaries of Chambers and Israel and
the cost of the materials used to create the prototype). Klamer
ultimately paid Markham's bill from the $5,000 Milton Bradley
advance.
Milton Bradley, meanwhile, began refining the prototype
and made some design changes, often with input from Markham and
Klamer. It ultimately published the game in early 1960. Milton
Bradley applied to register copyrights in the game board and rules
later that year, identifying itself as the author of both.
Separately, Link Research applied for copyright registration of
the game's box, and likewise identified Milton Bradley as the
- 6 - author. The game was a hit, and even today remains a money-maker
for Hasbro, which acquired Milton Bradley (and rights to the game)
in the 1980s.
In the decades following publication, however, Markham
and Klamer clashed (in and out of court) over who deserved credit
for creating the game. Generally speaking, Markham felt that he
was not given proper public recognition for his role, and that his
share of the royalties under the assignment agreement was unfairly
low. Markham passed away in 1993.
This litigation is the latest chapter in the dispute
over the origins of the game. Markham's successors-in-interest
sued Klamer, the heirs of Art Linkletter, and Hasbro, seeking
(among other things) a judicial declaration that they possess
"termination rights" under the 1976 Copyright Act. Such rights
give the authors of works the power to terminate the grant of a
copyright after a certain period of time, see 17 U.S.C. §§ 203,
304(c), and 304(d),1 thereby permitting them to extricate
1These various termination provisions apply in different circumstances. Here, because the copyright in the game was secured, and any relevant grant was executed, before 1978, § 304(c) governs. It provides:
In the case of any copyright subsisting in either its first or renewal term on January 1, 1978, other than a copyright in a work made for hire, the exclusive or nonexclusive grant of a transfer or license of the renewal copyright or any right under it, executed before
- 7 - themselves from "ill-advised" grants made before the "true value"
of their work was apparent. Mills Music, Inc. v. Snyder, 469 U.S.
153, 172-73 (1985). With termination rights, Markham's
successors-in-interest would be able to cancel the original
assignment agreement and presumably negotiate a more lucrative
royalty deal. There is, however, a crucial qualifier. As all
parties agree, termination rights do not extend to "work[s] made
for hire." 17 U.S.C. § 304(c); see also 3 Melville B. Nimmer &
David Nimmer, Nimmer on Copyright § 11.02[A][2] (2020) (noting
that the law "disallow[s] all works for hire from termination").
Accordingly, whether the game qualified as a work for hire became
the focal point of the case.
After a bench trial (which included testimony from
Klamer, Chambers, and Israel), the district court concluded that
the game was a work for hire under the so-called "instance and
expense" test. Specifically, the court found that Klamer "provided
the instance for and b[ore] the expense of the prototype's
invention." As a result, according to the court, Markham's
successors-in-interest lacked termination rights under the 1976
Copyright Act. They now challenge that conclusion on appeal,
January 1, 1978, . . . is subject to termination under the following conditions: [listing conditions].
17 U.S.C. § 304(c).
- 8 - arguing that the district court erred in using the instance and
expense test, and, even under that test, reached the wrong
conclusion. They also challenge the court's failure to strike one
of the defendants' discovery responses.
II.
A. Standard of review
When reviewing a district court's judgment following a
bench trial, we defer to the court's findings of fact (unless
clearly erroneous), but not to its legal conclusions (which we
consider de novo). See Rojas-Buscaglia v. Taburno-Vasarhelyi, 897
F.3d 15, 23 (1st Cir. 2018). A more flexible standard governs so-
called mixed questions of fact and law. See In re IDC Clambakes,
Inc., 727 F.3d 58, 64 (1st Cir. 2013) ("The more fact intensive
the question, the more deferential the level of review (though
never more deferential than the 'clear error' standard); the more
law intensive the question, the less deferential the level of
review.").
B. What work-for-hire test applies?
1. Doctrinal background
American copyright law has long recognized that a work
created by an employee belongs to the employer, who is then viewed
as the author and copyright holder. See Bleistein v. Donaldson
Lithographing Co., 188 U.S. 239, 248 (1903). This judge-made
doctrine was "later codified in the Copyright Act of 1909."
- 9 - Forward v. Thorogood, 985 F.2d 604, 606 (1st Cir. 1993). However,
the 1909 Act did not provide much detail. It indicated that "[t]he
word 'author' shall include an employer in the case of works made
for hire," 17 U.S.C. § 26 (1976 ed.) (1909 Act), but did not define
"employer" or "works made for hire." As a result, "the task of
shaping these terms fell to the courts." Cmty. for Creative Non-
Violence v. Reid, 490 U.S. 730, 744 (1989).
Initially, courts limited the doctrine to "the
traditional employer-employee relationship," that is, to "a work
created by an employee acting within the scope of employment."
Forward, 985 F.2d at 606. Later, however, courts extended the
doctrine "to include commissioned works created by independent
contractors." Id. In these situations, courts would "treat[] the
contractor as an employee and creat[e] a presumption of copyright
ownership in the commissioning party at whose 'instance and
expense' the work was done." Id.; see also 1 Nimmer on Copyright
§ 5.03[B][1][a][i] (noting that, under the 1909 Act, "the courts
expanded the definition of 'employer' to include a hiring party
who had the right to control or supervise the artist's work"). In
practice, this test often favors the hiring party. See Roger E.
Schechter & John R. Thomas, Principles of Copyright Law § 5.2.1
(1st ed. 2010) (noting that, "[e]ven in situations very far removed
from the typical employer-employee case," the test "was often
satisfied because the hiring party was the one who was the
- 10 - 'motivating factor' for the project and who had at least a
theoretical 'right to supervise' the work").
In the Copyright Act of 1976, Congress introduced a more
explicit, two-part framework that applied to works created on or
after January 1, 1978 (the effective date of the Act). 17 U.S.C.
§ 101; Forward, 985 F.2d at 605. The 1976 Act defined a "work
made for hire" as either:
(1) a work prepared by an employee within the scope of his or her employment; or
(2) a work specially ordered or commissioned for use as a contribution to a collective work, as a part of a motion picture or other audiovisual work, as a translation, as a supplementary work, as a compilation, as an instructional text, as a test, as answer material for a test, or as an atlas, if the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire.
17 U.S.C. § 101. By adopting this two-part definition, Congress
seemingly "meant to address the situation of the full-time or
conventional employee in the first provision, and the situation of
the independent contractor in the second." Principles of Copyright
Law § 5.2.2. Significantly, Congress's new approach was friendlier
to commissioned parties than under the 1909 Act, at least in
certain ways. In the absence of an employee-employer relationship,
only specific kinds of works could be treated as works for hire,
and then only if there was a written agreement to do so. See id.
- 11 - The latest relevant development, for our purposes, came
in Community for Creative Non-Violence v. Reid, 490 U.S. 730
(1989). Reid dealt with the proper interpretation of "a work
prepared by an employee within the scope of his or her employment"
-- that is, the first way in which a work can qualify as a work
for hire under the 1976 Act. 490 U.S. at 738 (quoting 17 U.S.C.
§ 101(1)). Noting that the Act did not define "employee," Reid
explained that the term should "be understood in light of the
general common law of agency." Id. at 739-41. In so holding, the
Court rejected an approach to § 101(1), adopted by some circuits,
that had deemed a hired party an "employee" if the hiring party
had "a right to control" or "actual control of" the work. Id. at
742.
2. Discussion
Because The Game of Life was created long before the
1976 Act took effect, there is no question that the standard for
a work for hire under the 1909 Act governs. See Forward, 985 F.2d
at 606 n.2 (noting that the 1976 Act "altered the works for hire
doctrine," but only "prospectively"). However, appellants claim
that the instance and expense test -- the prevailing approach under
the 1909 Act for determining whether a commissioned work is a work
for hire -- is no longer applicable, even as to pre-1978 works.
This is so, they argue, because of Reid. Appellants acknowledge
that Reid addressed the 1976 Act, but they maintain that its
- 12 - underlying logic applies equally to the 1909 Act. They argue that
Reid requires courts to read the 1909 Act's reference to
"employer"2 in light of standard agency principles, and thus
forecloses the instance and expense test. In other words,
according to appellants, the work-for-hire doctrine under the 1909
Act is limited to works produced under a traditional employer-
employee relationship defined by principles of agency law, and
does not extend to commissioned works, for which the lower courts
developed the instance and expense test. In that circumstance,
Markham would retain his status as the original author, a status
precluded by the work for hire doctrine, and enjoy the termination
rights that go with that original author status. Appellants thus
urge us (or the district court on remand) to apply the agency law
factors set forth in Reid in order to determine whether Klamer
qualifies as an employer. Upon doing so, they say, it would be
clear that he does not, and the game would therefore not qualify
as a work for hire.
Reid did not specifically address the meaning of the word 2
"employer" because the provision at issue -- the first part of the work-for-hire definition in the 1976 Act -- does not use the term. See 17 U.S.C. § 101(1) (referring to "a work prepared by an employee within the scope of his or her employment"). Nonetheless, Reid could fairly be read to mean that the term "employer" also should be understood in light of standard agency principles. See 490 U.S. at 740 (noting that, in the past, "we have concluded that Congress intended terms such as 'employee,' 'employer,' and 'scope of employment' to be understood in light of agency law").
- 13 - Even if we were disposed to appellants' view, however,
it does not account for our own precedent. In Forward, which was
decided four years after Reid, we applied the instance and expense
test to a work governed by the 1909 Act, noting that the test
controlled whether a commissioned work qualified as a work for
hire. See id. at 606. Under our law of the circuit doctrine, we
are bound to apply a prior panel decision that is closely on point.
Tomasella v. Nestlé USA, Inc., 962 F.3d 60, 83 (1st Cir. 2020)
(citing San Juan Cable LLC v. P.R. Tel. Co., 612 F.3d 25, 33 (1st
Cir. 2010)). Facing this obstacle, appellants argue that Forward
is not binding precedent on the validity of the instance and
expense test because the applicability of the test was not
contested there (and, indeed, both the test and Reid were "barely
mentioned" in the opinion). We disagree. As we have often
observed, "'when a statement in a judicial decision is essential
to the result reached in the case, it becomes part of the court's
holding.' The result, along with those portions of the opinion
necessary to the result, are binding." Arcam Pharm. Corp. v.
Faría, 513 F.3d 1, 3 (1st Cir. 2007) (quoting Rossiter v. Potter,
357 F.3d 26, 31 (1st Cir. 2004)).
The facts of Forward plainly demonstrate that the
instance and expense test was essential to the result there. John
Forward was a music aficionado and record collector who became a
fan of a band -- George Thorogood and the Destroyers -- after
- 14 - seeing them play at a Boston nightclub in 1975. Forward, 985 F.2d
at 604. Drawing on his industry contacts, Forward arranged and
paid for two recording sessions for the band at Rounder Records,
with the aim of producing a demo tape that would get the attention
of the label. Id. at 604-05. Besides suggesting specific songs
to be recorded, Forward's input was limited to arranging and paying
for the sessions. Id. at 605. Rounder Records liked what it heard
and signed the band to a contract; the band agreed that Forward
could keep the 1976 demo tapes for his own use and enjoyment. Id.
More than a decade later, after the band had achieved wider
success, Forward informed the band that he was planning to sell
the tapes as part of a commercial release. Id. The band objected,
and Forward sought a declaratory judgment that he held copyright
ownership in the tapes. Id. In part, he argued that the tapes
were commissioned works for hire under the 1909 Act because they
were created at his instance and expense -- and, thus, he was the
presumptive copyright owner. Id. at 606.
Applying the instance and expense test, the panel
rejected Forward's argument. Id. The panel found that the
evidence supported the district court's conclusion that "although
Forward booked and paid for the studio time, he neither employed
nor commissioned the band members nor did he compensate or agree
to compensate them." Id. In short, "Forward was a fan and friend
who fostered [the band's] effort [to secure a record contract],
- 15 - not the Archbishop of Saltzburg [sic] commissioning works by
Mozart." Id. Put simply, Forward applied the instance and expense
test to reach the outcome it did. Accordingly, the panel
necessarily held that, post-Reid, the instance and expense test
remained applicable to commissioned works under the 1909 Act. That
holding is binding on us here.
Anticipating that we might conclude that Forward is
binding, Markham's successors-in-interest also argue that we are
somehow free to "correct" it because the instance and expense test
is inconsistent with the Court's analysis in Reid. That argument
misses the mark. Although a "controlling intervening event" --
such as "a Supreme Court opinion on the point" -- can allow a panel
to depart from our court's precedent, United States v. Walker-
Couvertier, 860 F.3d 1, 8 (1st Cir. 2017) (quoting United States
v. Chhien, 266 F.3d 1, 11 (1st Cir. 2001)), that is not the
situation here. Reid was decided before Forward, and, indeed, the
Forward panel cited Reid three times. See 985 F.2d at 605, 606,
& 606 n.2. Hence, as a panel, we are not free to abandon Forward.
See United States v. García-Cartagena, 953 F.3d 14, 27-28 (1st
Cir. 2020) (rejecting a party's attempt to cast doubt on an
applicable panel decision based on a case decided before that panel
decision); United States v. Troy, 618 F.3d 27, 36 (1st Cir. 2010)
(noting that Supreme Court cases that precede prior panel decisions
are "impuissant against the law of the circuit rule").
- 16 - Moreover, even if we had authority to abrogate a prior
panel opinion on the ground that it misconstrued then-existing
Supreme Court precedent, we would be disinclined to do so in this
case. While appellants' view of Reid has at least one influential
adherent,3 we are skeptical that the Supreme Court, in construing
the 1976 Act, casually and implicitly did away with a well-
established test under a different Act. We also note that the
Second and Ninth Circuits have determined that Reid does not
require abandonment of the 1909 Act's instance and expense test.
See Twentieth Century Fox Film Corp. v. Entm't Distrib., 429 F.3d
869, 878 (9th Cir. 2005), abrogated on other grounds by Rimini
St., Inc. v. Oracle USA, Inc., 139 S. Ct. 873 (2019); Estate of
Burne Hogarth v. Edgar Rice Burroughs, Inc., 342 F.3d 149, 162-63
(2d Cir. 2003).4 And finally, although the Eleventh Circuit noted
that some of Reid's observations were in tension with the instance
3 See 1 Nimmer on Copyright § 5.03 [B][2][c] n.157 (arguing that the correct view under the 1909 Act is that "A [the hiring party] acquire[s] initial copyright in the work, but that this occur[s] by implied assignment from B, an independent contractor, and not by reason of A's status as 'author' under an employment for hire"). 4 The Supreme Court has also been presented with, but has declined to take up, the question of whether Reid abrogated the instance and expense test as to commissioned works. See Pet. for Writ of Cert., Dastar Corp. v. Random House, Inc., No. 05-1259, 2006 WL 849912 at *i (Mar. 28, 2006), cert. denied, 548 U.S. 919 (June 26, 2006) (presenting the question of "[w]hether under the Copyright Act of 1909 a commissioning party is an 'employer' entitled to renew the copyright in a work for hire").
- 17 - and expense test, see M.G.B. Homes, Inc. v. Ameron Homes, Inc.,
903 F.2d 1486, 1490 (11th Cir. 1990), abrogated in part by Reed
Elsevier, Inc. v. Muchnick, 559 U.S. 154, 160 & n.2 (2010), those
comments were made in a case, like Reid, that was governed by the
1976 Act and thus are dicta. See id. at 1490 n.10.
In sum, we stand by the approach in Forward and reiterate
that the instance and expense test applies to works governed by
the 1909 Act.
C. Application of the instance and expense test
Even under the instance and expense test, Markham's
successors-in-interest insist that they prevail. They offer two
arguments, both of which were considered and rejected by the
district court. First, they maintain that the game fails to
satisfy the second prong of the test because it was not made at
Klamer's expense. Second, arguing that the test creates only a
presumption that the work qualifies as a work for hire, they
contend that language in the assignment agreement between Link
Research and Markham is enough to rebut the presumption. We
construe these arguments as raising fact-intensive mixed
questions, which we review with some deference to the district
court. See In re IDC Clambakes, Inc., 727 F.3d at 64.
As to the first argument, the evidence amply supports
the district court's finding that the game was created at Klamer's
expense. In general, the expense requirement looks to the parties'
- 18 - relative investment of resources in the work and the related
financial risk. See Marvel Characters, Inc. v. Kirby, 726 F.3d
119, 140 (2d Cir. 2013) (noting that the overall purpose of the
expense requirement is to "reward[] with ownership the party that
bears the risk with respect to the work's success"). Here, Klamer
promised at the outset to pay Markham any costs incurred --
regardless of whether Milton Bradley ultimately liked the game and
paid for the rights. Hence, if the dinner at Chasen's had gone
poorly, Klamer still would have been obligated to pay Markham's
costs.5 As a result, Markham's downside was limited.
Appellants argue that the game was in fact made at the
expense of Milton Bradley, not Klamer, with the result that Klamer
cannot satisfy the instance and expense test. They seize on the
district court's passing remark that "[a]n argument could have
been made (but was not)" that the game was made at the expense of
Milton Bradley, as "it was Milton Bradley that, once it accepted
the Game, paid Klamer $5,000 and bore the risk of its failure to
sell to the public." Markham Concepts, Inc. v. Hasbro, Inc., 355
F. Supp. 3d 119, 129 n.5 (D.R.I. 2019). But the district court's
5 Appellants claim that Klamer's "alleged" oral promise to reimburse Markham was "unenforceable," and thus "if the deal to sell the Game had fallen apart, Klamer could have walked away with no legal obligation to actually reimburse [Bill] Markham." But they provide no factual basis for the assertion that the alleged promise was never made and no legal support for the notion that such an oral promise is unenforceable.
- 19 - remark focuses on a later stage in the chronology, after the
creation of the work. No doubt, after Milton Bradley paid for the
rights to the game, it ran the risk of not recouping its
investment. But at the more relevant time period -- when the
prototype was being developed -- it was Klamer who bore the primary
risk, as he was on the hook for the costs if Milton Bradley passed
on the game.
As for Markham himself, it is true that he was paid in
the form of a royalty, rather than a sum certain, which "generally
weighs against finding a 'work for hire' relationship." Urbont v.
Sony Music Entm't, 831 F.3d 80, 90 (2d Cir. 2016). However, the
form of payment is "not conclusive," Warren v. Fox Family
Worldwide, Inc., 328 F.3d 1136, 1142 (9th Cir. 2003), and
distinguishing between a royalty and fixed sum payment can be "a
rather inexact method" of determining which party bears the main
financial risk. Marvel Characters, 726 F.3d at 140. In this case,
we think it significant that Markham's initial royalty payment
($773.05) was a non-refundable advance, meaning that he could keep
the money even if the game did not sell a single copy. In that
respect, the arrangement resembled payment of a sum certain plus
a running royalty, rather than a pure royalty deal. See Warren,
328 F.3d at 1142-43 (finding a work-for-hire relationship when the
hired party was paid a fixed sum and a royalty); cf. Picture Music,
Inc. v. Bourne, Inc., 314 F. Supp. 640, 651 (S.D.N.Y. 1970), aff'd,
- 20 - 457 F.2d 1213 (2d Cir. 1972) ("[T]he fact that the author was
obliged to repay advances on royalties which were never accrued is
an indicant that the relationship was not an employment for
hire[.]" (emphasis added)). Overall, we find no error, clear or
otherwise, in the district court's determination that the game was
made at Klamer's expense.6
The second argument -- that the assignment agreement
rebuts the presumption created by the instance and expense
test -- presents a closer question. Some cases suggest that a
contemporaneous agreement can clarify that a work, even if made at
the instance and expense of another, is not a work for hire (and
therefore that the hired party remains the "author," entitled to
termination rights). Assuming that a contemporaneous agreement
6 Appellants argue that the district court's factfinding was flawed because the court credited Israel's and Chambers' testimony at trial (which emphasized their and Sue Markham's contributions to the game) over contemporaneous written evidence and prior statements (which reflected a larger role for Bill Markham). But even if the court erred by giving greater weight to the trial testimony -- and thus understating Bill Markham's contributions -- that mistake would be immaterial to the instance and expense inquiry as to Klamer. As described above, that doctrine does not consider whose hands-on efforts produced the work -- it focuses on who paid for and directed the work. Regardless, we are unpersuaded that there was error. Appellants were free to impeach the testimony they criticize. Thereafter, it was the district court's job to sort through the evidence and decide what and who was credible. See, e.g., Carr v. PMS Fishing Corp., 191 F.3d 1, 7 (1st Cir. 1999) ("[I]n a bench trial, credibility calls are for the trier.").
- 21 - could indeed alter the game's work-for-hire status,7 the
independent contractor bears the burden of showing that such a
contrary agreement was made, see Playboy Enters., Inc. v. Dumas,
53 F.3d 549, 554–55 (2d Cir. 1995), and courts generally demand
clear and specific evidence of such an agreement, see Lin-Brook
Builders Hardware v. Gertler, 352 F.2d 298, 300 (9th Cir. 1965)
(requiring "an express contractual reservation of the copyright in
the artist" to rebut the presumption); see also 1 Nimmer on
Copyright § 5.03[B][2][c] (requiring "persuasive evidence" of a
contrary agreement).
Markham's successors-in-interest point to two parts of
the assignment agreement which, they say, overcome the
7We merely assume this point because the cases explaining how an agreement affects the work-for-hire designation are inconsistent, and this case does not require us to make a choice. Some cases do suggest that an agreement can rebut the presumption that a work qualifies as a work for hire in the first instance. See Marvel Characters, 726 F.3d at 143 ("Because Marvel has satisfied the instance and expense test, a presumption arises that the works in question were 'works made for hire' under section 304(c). This presumption can be overcome only by evidence of an agreement to the contrary contemporaneous with the creation of the works."). But other sources suggest that an agreement can only clarify who holds the copyright in the work. See Playboy Enters., Inc. v. Dumas, 53 F.3d 549, 556 n.3 (2d Cir. 1995) ("The district court held that even if the instance and expense test was met, the works were not made for hire because of th[e] agreement. This finding is in error because once the instance and expense . . . [test is] met, the works are for hire under the 1909 Act."); see also 3 Nimmer on Copyright § 11.02[A][2] ("Generally, the parties may not, by agreement, alter the legal consequences -- such as the term of copyright -- that flow from the fact that a work is made 'for hire.' But the parties may, by agreement, vary the ownership between them of rights in a work made 'for hire.'").
- 22 - presumption. First, the agreement recited that, "[a]t the request
of LINK, MARKHAM has invented, designed[,] and developed a game
tentatively known as 'THE GAME OF LIFE.'" But that language falls
well short of an express reservation of copyright. In fact,
insofar as it makes clear that the work was done "[a]t the request"
of Link, it supports, rather than undermines, the idea that the
game was a work for hire.
Second, the agreement provided that
[u]pon the request of LINK, MARKHAM will pursue any copyright, trade-mark and patent applications . . . to which he may be entitled as the inventor, designer and developer of the Game . . . . MARKHAM will assign any such copyright, trade-mark, patent or application therefor to LINK, provided that said assignments will revert to MARKHAM upon the termination of this agreement.
We agree with the district court that this language is best read
not as a reservation in Markham, but as a kind of failsafe for
Link. That is, it makes clear that if, contrary to expectations,
Markham were entitled to the copyright in the game, he would, at
Link's request, assign it over. See Marvel Characters, 726 F.3d
at 143 (suggesting that a freelancer's assignments could be
"redundancies insisted upon by [the hiring party] to protect its
rights" rather than an indication that the hiring party "did not
already own the rights"). This reading is supported by the
tentative, open-ended language ("to which he may be entitled,"
"any such copyright") (emphasis added), which appears to be an
- 23 - attempt to cover all conceivable bases without acknowledging that
any rights actually belong to Markham. Regardless, this language
is not the required "express contractual reservation of the
copyright in the artist." Lin-Brook, 352 F.2d at 300. The
district court thus supportably found that the assignment
agreement did not overcome the presumption that the game was a
work for hire made for Klamer. As a result, Markham "never owned
the copyrights to assign," and "there are no rights the assignment
of which his . . . heirs may now terminate." Marvel Characters,
726 F.3d at 137.8
Because the evidence amply supports the district court's
conclusion that the game was created at the instance and expense
of Klamer and that there is insufficient evidence to rebut the
resulting work for hire presumption, we need not address the
defendants' alternative theory for affirmance: that the game was
a work for hire created by Chambers and Israel -- with Markham as
the "employer." This alternative argument -- essentially, another
8 In a separate provision not relied upon by Markham's successors-in-interest, the agreement also states that "MARKHAM does hereby assign all of his right, title[,] and interest in and to the Game, to LINK, and LINK accepts said assignment." This statement is consistent with the understanding that the agreement gave Link whatever rights Markham may have had in the game, without making any representation about the nature of those rights or the status of the work. In other words, the provision falls short of clear and specific evidence that the game was not intended to be a work for hire. See 1 Nimmer on Copyright § 5.03[B][2][c] (requiring "persuasive evidence" of a contrary agreement).
- 24 - way of establishing that the game was a work for hire -- would
also mean that no termination rights exist and would similarly
spell defeat for Markham's successors-in-interest.
The outline of this alternative theory seems to have
emerged in supplementary interrogatory responses made after the
close of discovery and shortly before trial. Plaintiffs
unsuccessfully moved to "preclude" this new theory and strike the
underlying responses. They challenge the district court's
rejection of their motion on appeal. But discovery rulings are
reviewed only for abuse of discretion, and reversal requires a
showing that the ruling was both "plainly wrong" and resulted in
"substantial prejudice." In re Subpoena to Witzel, 531 F.3d 113,
117 (1st Cir. 2008) (quoting Saldana–Sanchez v. Lopez–Gerena, 256
F.3d 1, 8 (1st Cir. 2001)).
Even assuming the district court erred, and we are not
suggesting that it did, we fail to understand how its ruling caused
substantial prejudice. As appellants essentially concede, the
district court did not adopt the alternative theory -- and neither
do we. Appellants' real concern, as we understand it, is that the
interrogatories introduced novel testimony from Israel and
Chambers indicating that they had a much more prominent role in
the creation of the game than previously disclosed. But, as noted
above, to the extent the updated interrogatory responses were
inconsistent with earlier depositions of Israel and Chambers (or
- 25 - their ultimate testimony at trial), appellants had the opportunity
to cross-examine them at trial and impeach them with any
inconsistencies. See supra note 6.
Accordingly, the judgment of the district court is
affirmed. So ordered.
- 26 -