Intellectual Property and Estates: Where Creativity and Planning Intersect

• Publication year: 2017
• Author: By Kelley A. Way, Esq.*

INTELLECTUAL PROPERTY AND ESTATES: WHERE CREATIVITY AND PLANNING INTERSECT

By Kelley A. Way, Esq.*

When in the business of managing another's assets, whether through conservatorship, probate, or trust administration, sooner or later one will encounter unusual assets. Intellectual property (IP) assets ? specifically, copyrights, trademarks, patents, and the right of publicity ? require special knowledge. This article explains these areas of law generally and then discusses how estate planners and fiduciaries should handle these assets when such assets are part of a client's estate. While a practitioner may not always have clients with intellectual property, it is common enough in California that everyone should be familiar with the law surrounding these assets to properly manage them.

I. COPYRIGHT

Copyrights are governed exclusively by federal law. Copyright law exists for two reasons: first, to incentivize people to create, as a means to enrich society and culture; and second, to ensure that creators¹ are able to profit from their creations. Copyrightable works are defined as "original works of authorship fixed in a tangible medium of expression."² This definition is broken down into two parts. First, the work must be original, creative, and have a human author.³ The bar for creativity is rather low, though there are cases where a copyright was denied for lack of creativity.⁴ Second, the work must be "fixed," i.e., recorded in some format that allows it to be perceived by others. This second requirement is very broadly interpreted; even having the work stored in a computer's short-term memory is considered sufficient for fixation.⁵ Under the 1976 Copyright Act,⁶ a copyright is granted as soon as these conditions are met, though it is still advisable to register the copyright with the Copyright Office, for reasons discussed below.

A. Rights Conferred Under Copyright Law

A copyright consists of a bundle of rights, all of which are exclusive to the copyright owner. These rights are divisible, allowing the owner to give away some rights while keeping others.⁷

The first right granted under copyright law is the right of reproduction (a.k.a. the right to copy, or the copy right).⁸ This is the right that gives copyright law its name. Only the copyright owner has the right to make reproductions of the copyrighted work or to give permission for others to reproduce it.

The second right granted under copyright law is the right to make derivative works, i.e., works that are based on the copyrighted work.⁹ Movies are very often a derivative work of a book or video game. Other examples of derivative works include translations and sequels. Fan art and fan fiction ? where fans of a book, TV series, or movie create their own stories or artwork involving the characters or universe of the story ? technically are violations of this right (though one must be careful when dealing with this problem, as actions taken against a fan may alienate the overall fan base for the work).

The third right granted under copyright law is the right of distribution.¹⁰ The copyright owner is the only person allowed to sell the copyrighted work. This right is limited to the first sale of any particular copy of the work; once that copy is sold, the new owner is free to resell it without consulting the copyright owner. This is referred to as the "first sale" doctrine.¹¹

The fourth right granted under copyright law is the right of public performance.¹² This includes book readings, movie showings, plays, or performing music in front of a crowd. Any performance of a copyrighted work in a public setting or with an audience that does not include family or close friends qualifies as a public performance.

The fifth right granted under copyright law is the right of public display.¹³ This right applies primarily to artwork; permission from the copyright owner is required to display the work in a public setting such as a museum (or, as a more common example, on social media).

The sixth and final right granted under copyright law is the right of public transmission of sound recordings.¹⁴ As the name implies, it applies exclusively to audio works, to ensure that copyright owners are paid when their songs are played on the radio, at a restaurant or other public venue, or through an on-demand streaming service.

B. Copyright Infringement

Infringement, or a violation of intellectual property rights, is the biggest danger to any IP asset, although the definition of infringement varies for each type of asset. For copyright, it consists of taking any of the actions named above without the permission of the copyright owner. To prove infringement, all one needs to show is that the infringer had access to the owner's work and that the infringer's work is substantially similar to the owner's.

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C. Copyright Protection

Protecting a copyright can generally be split into two distinct steps: maximizing all the protections available under copyright law and then promptly enforcing the copyright when it is infringed upon. Step one is accomplished by registering the work with the United States Copyright Office.¹⁵ While registration is no longer a requirement to have a valid copyright, it is advisable for the following reasons:

1. Registration puts others on notice that the work is protected under copyright and that the owner has an interest in protecting it;
2. It is required before the owner can bring a lawsuit against an infringer; and
3. If the work was registered before the infringement started, the court can award statutory damages.

Whether or not the work is registered, the owner must actively police the work and regularly search for infringing products or content to prevent loss of income or diminution of the copyright's value. If the owner lacks the time or knowledge to do this, the owner can designate someone, such as an employee or a professional agency, to act as an agent. The copyright owner, or the owner's designated agent, will be the only persons conducting this search; the owner cannot rely on outside parties bringing an infringer to his or her attention. If an infringer is found online, the rights-holder can send a notice (known as a "takedown notice")¹⁶ to the website hosting the content demanding it be removed. Under the terms of the Digital Millennium Copyright Act (DMCA), websites are required to remove infringing content when properly notified, or they will be liable for contributory infringement.¹⁷ Many websites, like Amazon¹⁸ and Google,¹⁹ have formal systems to receive and process DMCA takedown notices. Each service provider is required to designate an agent to receive these takedown notices and to make that agent's identity and contact information available to the public on the service provider's website and to the Register of Copyrights who keeps the information in a directory available to the public.²⁰ Some Internet service providers, including Google,²¹ participate in the Lumen project, which is an independent third party research organization studying the use of takedown notices.²² The Lumen database provides a large number of examples of takedown notices for anyone to peruse and study. Elements of a formal DMCA takedown notice can be found at 17 USC section 512(c)(3) or by typing "DMCA takedown" into a search engine.

If the infringer continues to engage in infringing conduct, or the infringement is taking place off the Internet (for example, selling print copies of an infringing work at a physical venue), a cease-and-desist letter is required. There are no formal requirements for such a letter; it is simply an attempt to resolve the issue before proceeding to the next step, litigation. In a typical cease-and-desist letter, the owner, or the owner's agent, notifies the infringer of the owner's rights to the work; that the infringer's actions are infringing on those rights; and that the owner will proceed to take further action, including litigation, if the infringement does not stop. The cease-and-desist letter is effective in most cases, but there may still be occasions where the copyright owner will need to enforce the rights to the work through litigation.

D. Duration of Copyright

The rights granted under copyright cannot last forever; the United States Constitution requires that they be of limited duration.²³ Once a copyright expires, the work is free of any restrictions and may be used by anyone for any purpose. A work whose copyright has expired, or that never had a copyright to begin with, is in the "public domain."

A copyright's duration will depend on when the copyright was issued. Under the 1909 Copyright Act,²⁴ registration with the Copyright Office was required in order to have a valid copyright. Once granted, the author had a copyright for 28 years, with an optional renewal period of an additional 28 years. There were two reasons for splitting the copyright term into two separate periods: (1) it allowed works to go into the public domain faster if the author didn't care enough (or didn't know enough) to renew; and (2) a second copyright term gave the author another opportunity to profit from the work, since it may be difficult to judge the ultimate value of a creative work when negotiating a grant of rights to a company interested in exploiting it. This is especially true if the work is the author's first to enter the market. As a case in point, the authors of the original Superman comic sold their rights to the work for $130. All works after that were made as a work-for-hire. Under the work-for-hire doctrine, any works created by employees that are within the scope of their employment (e.g., creating comic books for an employer that publishes comic books) are owned by the employer, and the employer is deemed to be the original author for purposes of copyright law.²⁵ The authors of Superman and their heirs engaged in multiple lawsuits in an attempt to realize profits from the Superman franchise.²⁶

While an optional renewal term for copyrights was a good...