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Informal Agreement Does Not Mean Done Deal

By Katerina E. Milenkovski, Litigation News Associate Editor – February 22, 2013

 

An email exchange between attorneys for an author and a movie producer proposing terms of a deal, where one party says “Let me know if this is okay and we’ll send paperwork” and the other responds “Done . . . thanks!” does not create a binding contract sufficient to transfer a copyright, according to the California Court of Appeals. MVP Entertainment, Inc. v. Frost [PDF]. The case interprets Section 204 of the Copyright Act, which governs transfers of copyright ownership.


MVP sought to make a movie out of a book authored by Frost. In seeking the rights to do so, MVP’s attorney corresponded with Frost’s attorney as indicated above. After this email exchange, MVP’s attorney subsequently sent Frost’s attorney a proposed written agreement for signature. The agreement was never signed, however, and Frost ultimately decided he did not want MVP to make his book into a movie.


MVP sued, bringing claims of breach of contract and promissory estoppel, among others. The trial court granted summary judgment to Frost on his claims based on Section 204 of the Copyright Act, holding that a transfer of copyright ownership is invalid unless signed by the owner or the owner’s duly authorized agent.


Appellate Court Upholds Summary Judgment
On appeal, the California Court of Appeals upheld the trial court’s grant of summary judgment. Finding that there could be no valid transfer of the copyright without a writing, the court stated that Section 204’s writing requirement is more stringent and serves a different purpose than the common law statute of frauds. Because it was undisputed that Frost’s attorney did not have actual authority to transfer Frost’s copyright, there could be no contract.


Contrary to MVP’s arguments, the court found that ostensible authority was insufficient to form a contract because the Copyright Act plainly requires a writing signed by the owner or the owner’s “duly authorized agent.” As there was no “duly authorized agent,” the statutory requirements were not met and, as a result, all of MVP’s causes of action failed because MVP could not raise any triable facts about compliance with Section 204.


Ostensible Authority Does Not Satisfy the Copyright Act
“I think the court reached the right conclusion applying the legal principles,” says Naomi Jane Gray, San Francisco, cochair of the Copyrights Subcommittee of the ABA Section of Litigation’s Intellectual Property Litigation Committee. “To meet Section 204’s requirements, ostensible authority isn’t enough. Actual authority is needed. The statute doesn’t say what is meant by a duly authorized agent,” continues Gray, “but it seems that ostensible authority just isn’t enough. The statute requires express authorization. This requirement is different from other provisions of law requiring signatures because it is not just meant to be evidentiary. It is more than that. There simply can’t be a transfer unless you have fulfilled this writing requirement. The requirement serves the purpose of making sure copyright owners don’t accidentally give away their copyrights.”


“This case is simply another affirmation that although a copyright transfer doesn’t have to be, as the court said, a magna carta, it has to clearly indicate what is being transferred and that the person transferring it has the right to do so,” notes Andrew Berger, New York, cochair of the Copyrights Subcommittee of the Intellectual Property Litigation Committee. “It’s almost tilting at windmills for the plaintiff to bring this action. To think that such a casual email, saying little more than ‘done,’ can create a deal is really wishful thinking. I’m glad the court said the transaction needs to be more formal than that.”


Berger indicates that it is unclear to what extent a court might interpret the same email exchange differently outside the context of copyright law, but believes the standard is higher to transfer a copyright for good reason. “Often, artists’ and writers’ business sense is not as good as their artistic sense,” he explains. “The requirements in Section 204 are a protection mechanism, to make sure copyrights are not unintentionally transferred.”


Intent to Sign Not Established
MVP also argued, unsuccessfully, that the “Done . . . thanks!” email, which was signed “Werth,” short for Alan Wertheimer, Frost’s attorney, constituted Wertheimer’s electronic signature under the Electronic Signatures in Global and National Commerce Act. “To meet requirements of the Electronic Signature Act, the signature has to be made with intent,” explains Gray. “Even leaving aside the Section 204 writing requirement, you don’t have that intent in the email exchange described in the opinion. It seems pretty clear that the parties were agreeing that there would be a written contract prepared. To me, that suggests that there was no agreement yet.” “The notion of using a nickname as a signature sounds kind of outlandish to me as well,” adds Gray.


MVP also argued promissory estoppel, but the court never addressed that claim in substance, noting that estoppel cannot save a contract that fails to comply with the requirements of Section 204. When asked about estoppel in the copyright context, Berger notes that it might be possible, but believes that there has to be a pattern of conduct that someone relies on, something more than existed in this case. “It goes back to common sense,” says Berger. “If you lead someone to believe it is your copyright, there’s something called an implied license. It happens all the time. But that’s not in the facts here.”


Keywords: contract, copyright, Copyright Act, electronic signature, ostensible authority


 
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