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TIME, INC. v. KASTNER

July 31, 1997

TIME, INC. and DAVID McCLINTICK, Plaintiffs, against ELLIOTT KASTNER and THE BEVERLY HILLS MOTION PICTURE & MOVING COMPANY, Defendants.


The opinion of the court was delivered by: BAER

 Hon. Harold Baer, Jr., District Judge:

 Plaintiffs brought this cause of action seeking a declaratory judgment that defendants failed to acquire any of the copyright interest in an article entitled "The Predator" published by Time Inc.'s Fortune magazine, and claiming interference with prospective contractual relations. Defendants counterclaimed and alleged a cause of action for breach of contract, quantum meruit and fraud. Plaintiffs moved for partial summary judgment on its first cause of action and summary judgment dismissing defendants' counterclaims. At oral argument on July 14, 1997, I granted plaintiffs' motion for summary judgment declaring that defendants have no copyright interest in the article "The Predator" and dismissing defendants' counterclaim for fraud. I denied plaintiffs' motion for summary judgment with respect to defendants' counterclaim for quantum meruit, and reserved judgment on plaintiffs' motion with respect to defendants' counterclaims for breach of contract. I write to address this remaining issue. For the reasons stated below, plaintiffs' motion for summary judgment with respect to defendants' counterclaims for breach of contract is granted.

 I. Background

 David McClintick, an author of such books as Indecent Exposure, and Elliott Kastner, an independent movie producer, have known each other for almost fifteen years. In June 1995, McClintick called Kastner and told Kastner he was in dire financial straits and would appreciate any money Kastner could give him. Kastner sent him $ 5,000. Kastner alleges that the two agreed that in exchange, McClintick "pledged" his next project to Kastner (the "June 1995 agreement"). However, McClintick sent Kastner a letter on June 27, 1995 that stated that the $ 5,000 was a loan, repayable upon Kastner's demand at whatever interest rate he considered fair. Kastner alleges he never received this letter.

 On November 14, 1995, Fortune magazine and McClintick entered into an agreement commissioning McClintick to write the article at issue here, The Predator, *fn1" and the agreement included a provision that it was to be a work for hire with Fortune owning all rights (including copyright) in and to the article. In early 1996, McClintick began work on the article. Kastner alleges that he collaborated with McClintick on the article, believing he owned the film rights. His belief, he contends, stemmed from his understanding of the alleged June 1995 agreement. On February 24, 1996, Kastner and McClintick had lunch at Cipriani's in New York and they discussed the prospect of McClintick writing a screenplay based on the article. Kastner says it was at this meeting that he learned for the first time of McClintick's agreement with Fortune i.e., that the story was a work for hire, and the fact that McClintick did not own any rights in the article. Despite this, Kastner alleges he offered McClintick $ 75,000 to write the screenplay and that McClintick would use his best efforts to help Kastner buy the film rights to the article from Fortune (the "February 1996 agreement").

 On June 6, 1996, Kastner spoke by telephone with John Huey, the Managing Editor of Fortune, and the two discussed the film rights to the article. Huey stated that Fortune might sell the rights for half of the costs they had incurred on the project. Kastner agreed that that amount sounded reasonable and asked that Huey call him back with the exact figure (the "June 1996 Agreement"). Huey never called Kastner back. Huey then hired Amanda Urban, a literary agent, to handle the negotiations for the sale of the motion picture rights. At Ms. Urban's request, Kastner made a bid for the motion picture rights, maintaining that he already had an agreement with plaintiffs for such rights. Kastner was informed by letter on June 28, 1996 that Fortune sold the film rights to Hallmark Entertainment and that McClintick subsequently accepted an offer from Hallmark to write a screenplay based on the article. This lawsuit ensued. *fn2"

 II. Discussion

 Plaintiffs argue that defendants' contract counterclaims must be dismissed because they are premised on breach of oral contracts that allegedly transferred copyright ownership in the article and consequently are barred by § 204 of the Copyright Act. Plaintiffs argue, alternatively, that these alleged oral contracts are unenforceable because they are vague and indefinite. Defendant argues that the contracts fit within an exception to the rule and are not subject to § 204 and are not vague and indefinite.

 A. June 1995 and June 1996 Agreements

 According to the Copyright Act, a transfer of copyright ownership is not valid "other than by operation of law . . . unless an instrument of conveyance, or a note or memorandum of the transfer, is in writing and signed by the author of the rights conveyed or such owner's duly authorized agent." 17 U.S.C. § 204(a) (1996). The Copyright Act defines transfer of copyright ownership as "an assignment, . . . exclusive license, or any other conveyance . . . of a copyright or of any of the exclusive rights comprised in a copyright . . . but not including a nonexclusive license." 17 U.S.C. § 101 (1996). Section 204 also bars breach of contract claims based on oral agreements that violate that section. Valente-Kritzer Video v. Pinckney, 881 F.2d 772, 774 (9th Cir. 1989); Library Publications, Inc. v. Medical Economics Company, 548 F. Supp. 1231, 1233-34 (E.D. Pa. 1982), aff'd 714 F.2d 123 (3d Cir. 1983).

 The Copyright Act, then, carves out two exceptions to the writing requirement: nonexclusive licenses and transfers of ownership by operation of law. While the Copyright Act does not define transfer by "operation of law," courts in this Circuit have noted that transfers due to bankruptcy or mortgage foreclosure, where there is evidence of the author's express or implied consent of transfer (e.g. his overt conduct in filing for bankruptcy), are transfers by "operation of law". Brooks v. Bates, 781 F. Supp. 202, 205 (S.D.N.Y. 1991).


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