United States Court of Appeals,
EFFECTS ASSOCIATES, INC., Plaintiff-counter-defendant-Appellant,
Larry COHEN; Larco Productions, Inc.; New World Entertainment, Defendants-counter-claimants-Appellees.
Argued and Submitted March 7, 1990.
Decided July 20, 1990.
John Blair Overton, Sausalito, Cal., for plaintiff-counter- defendant-appellant.
Vincent Cox, Leopold, Petrich & Smith, Los Angeles, Cal., for defendants- counter-claimants-appellees.
Appeal from the United States District Court for the Central District of California.
Before CANBY, KOZINSKI and LEAVY, Circuit Judges.
KOZINSKI, Circuit Judge:
What we have here is a failure to compensate. Larry Cohen, a low- budget horror movie
mogul, paid less than the agreed price for special effects footage he had commissioned
from Effects Associates. Cohen then used this footage without first obtaining a
written license or assignment of the copyright; Effects sued for copyright
infringement. We consider whether a transfer of copyright without a written agreement,
an arrangement apparently not uncommon in the motion picture industry, conforms with the
requirements of the Copyright Act.
This started out as a run-of-the-mill Hollywood squabble. Defendant Larry Cohen
wrote, directed and executive produced "The Stuff," a horror movie with a dash of social
satire: Earth is invaded by an alien *556 life form that looks (and tastes) like frozen
yogurt but, alas, has some unfortunate side effects--it's addictive and takes over the
mind of anyone who eats it. Marketed by an unscrupulous entrepreneur, the Stuff becomes
a big hit. An industrial spy hired by ice cream manufacturers eventually uncovers the
terrible truth; he alerts the American people and blows up the yogurt factory, making
the world safe once again for lovers of frozen confections.
In cooking up this gustatory melodrama, Cohen asked Effects Associates, a small special
effects company, to create footage to enhance certain action sequences in the film. In
a short letter dated October 29, 1984, Effects offered to prepare seven shots, [FN1] the
most dramatic of which would depict the climactic explosion of the Stuff factory.
Cohen agreed to the deal orally, but no one said anything about who would own the
copyright in the footage.
FN1. The price originally agreed to was $62,335; in an invoice dated January 10,
1985, Effects adjusted this amount upward to $64,033.92, because of additional
expenses incurred in creating the shots.
Cohen was unhappy with the factory explosion Effects created, and he expressed his
dissatisfaction by paying Effects only half the promised amount for that shot. Effects
made several demands for the rest of the money (a little over $8,000), but Cohen
refused. Nevertheless, Cohen incorporated Effects's footage into the film and turned
it over to New World Entertainment for distribution. Effects then brought this
copyright infringement action, claiming that Cohen (along with his production company
and New World) had no right to use the special effects footage unless he paid Effects
the full contract price. Effects also brought pendent state law claims for fraud and
conspiracy to infringe copyright.
The district court initially dismissed the suit, holding that it was primarily a
contract dispute and, as such, did not arise under federal law. In an opinion
remarkable for its lucidity, we reversed and remanded, concluding that plaintiff was
"master of his claim" and could opt to pursue the copyright infringement action instead
of suing on the contract. Effects Assocs., Inc. v. Cohen, 817 F.2d 72, 73 (9th
Cir.1987). We recognized that the issue on remand would be whether Effects had
transferred to Cohen the right to use the footage. Id. at 73 & n. 1, 74.
On remand, the district court granted summary judgment to Cohen on the infringement
claim, holding that Effects had granted Cohen an implied license to use the shots.
Accordingly, the court dismissed the remaining state law claims, allowing Effects to
pursue them in state court. We review the district court's grant of summary judgment
A. Transfer of Copyright Ownership
 The law couldn't be clearer: The copyright owner of "a motion picture or other
audiovisual work" has the exclusive rights to copy, distribute or display the
copyrighted work publicly. 17 U.S.C. <section> 106 (1988). While the copyright owner
can sell or license his rights to someone else, section 204 of the Copyright Act
invalidates a purported transfer of ownership unless it is in writing. 17 U.S.C.
<section> 204(a) (1988). [FN2] Here, no one disputes that Effects is the copyright
owner of the special effects footage used in "The Stuff," [FN3] and that defendants
copied, distributed and publicly displayed this footage without written authorization.
FN2. The Copyright Act defines "transfer of copyright ownership" as an "assignment,
mortgage, exclusive license, or any other conveyance, alienation, or hypothecation
of a copyright or of any of the exclusive rights comprised in a copyright ... but
not including a nonexclusive license." 17 U.S.C. <section> 101.
FN3. Cohen concedes that he licensed Effects to prepare the footage as a derivative
work incorporating other shots from "The Stuff," and that Effects has a valid
copyright in this footage. Appellees' Brief at 25 n. 3.
Cohen suggests that section 204's writing requirement does not apply to this situation,
advancing an argument that might be summarized, tongue in cheek, as: Moviemakers do
lunch, not contracts. Cohen concedes that "[i]n the best of all possible legal worlds"
parties would obey the writing requirement, but contends that moviemakers *557 are too
absorbed in developing "joint creative endeavors" to "focus upon the legal niceties of
copyright licenses." Appellees' Brief at 16, 18. Thus, Cohen suggests that we hold
section 204's writing requirement inapplicable here because "it [i]s customary in the
motion picture industry ... not to have written licenses." Id. at 18. To the extent
that Cohen's argument amounts to a plea to exempt moviemakers from the normal operation
of section 204 by making implied transfers of copyrights "the rule, not the exception,"
id., we reject his argument.
Common sense tells us that agreements should routinely be put in writing. This simple
practice prevents misunderstandings by spelling out the terms of a deal in black and
white, forces parties to clarify their thinking and consider problems that could
potentially arise, and encourages them to take their promises seriously because it's
harder to backtrack on a written contract than on an oral one. Copyright law dovetails
nicely with common sense by requiring that a transfer of copyright ownership be in
writing. Section 204 ensures that the creator of a work will not give away his
copyright inadvertently and forces a party who wants to use the copyrighted work to
negotiate with the creator to determine precisely what rights are being transferred and
at what price. Cf. Community for Creative Non-Violence v. Reid, 490 U.S. 730, 109
S.Ct. 2166, 2177-78, 104 L.Ed.2d 811 (1989) (describing purpose of writing requirement
for works made for hire). Most importantly, section 204 enhances predictability and
certainty of copyright ownership--"Congress' paramount goal" when it revised the Act in
1976. Community for Creative Non-Violence, 109 S.Ct. at 2177; see also Dumas v.
Gommerman, 865 F.2d 1093, 1103-04 (9th Cir.1989). Rather than look to the courts every
time they disagree as to whether a particular use of the work violates their mutual
understanding, parties need only look to the writing that sets out their respective
Section 204's writing requirement is not unduly burdensome; it necessitates neither
protracted negotiations nor substantial expense. The rule is really quite simple: If
the copyright holder agrees to transfer ownership to another party, that party must get
the copyright holder to sign a piece of paper saying so. It doesn't have to be the
Magna Charta; a one-line pro forma statement will do.
Cohen's attempt to exempt moviemakers from the requirements of the Copyright Act is
largely precluded by recent Supreme Court and circuit authority construing the
work-for-hire doctrine. [FN4] Section 101 of the Act defines, in relevant part, a work
made for hire as "a work prepared by an employee within the scope of his or her
employment." 17 U.S.C. <section> 101 (1988). Section 201(b) provides that the
copyright in such a work is presumed to vest in the employer, not the employee. 17
U.S.C. <section> 201(b) (1988). Prior to the Supreme Court's decision in Community for
Creative Non- Violence, some circuits had broadly construed section 101's use of the
term employee, holding a work to have been prepared by an employee whenever the hiring
party controlled, or had the right to control, the product. See Community for Creative
Non-Violence, 109 S.Ct. at 2172. This broad definition encompassed virtually all
contributions to books and movies because, as the Court recognized, such contributions
are "usually prepared at the instance, direction, and risk of a publisher or producer."
Id. at 2173. The Court rejected this rule as inconsistent with both the language and
purpose of the Copyright Act. Id. at 2172-74, 2177-78. It held instead that the term
employee was to be defined according to general agency principles, id. at 2173, 2178;
where a non-employee contributes to a book or movie, as Effects did here, the exclusive
rights of copyright ownership vest in the creator of the contribution, unless there is a
written agreement to the contrary. See id. at 2173.
FN4. Because Effects is not an employee and there is no written agreement stating
that plaintiff's footage is a work made for hire, Cohen can't take advantage of this
doctrine. See pp. 556-557 supra. In any event, Cohen has waived this argument by
failing to raise it below. See S.O.S., Inc. v. Payday, Inc., 886 F.2d 1081, 1087
This is similar to the conclusion we had reached several months earlier in Dumas v.
*558 Gommerman. We had reasoned that, while many individuals may contribute to the
final product, the Act does no more than give publishers and producers "statutory
permission " to contract with the various contributors for the rights of authorship.
865 F.2d at 1101 (quoting Easter Seal Soc'y v. Playboy Enters., 815 F.2d 323, 329 (5th
Cir.1987), cert. denied 485 U.S. 981, 108 S.Ct. 1280, 99 L.Ed.2d 491 (1988) (emphasis
original)). Absent an express transfer of ownership, a contributor who is not an
employee retains ownership of his copyright. See id.
Thus, section 101 specifically addresses the movie and book publishing industries,
affording moviemakers a simple, straightforward way of obtaining ownership of the
copyright in a creative contribution--namely, a written agreement. The Supreme Court
and this circuit, while recognizing the custom and practice in the industry, have
refused to permit moviemakers to sidestep section 204's writing requirement.
Accordingly, we find unpersuasive Cohen's contention that section 204's writing
requirement, which singles out no particular group, somehow doesn't apply to him. As
section 204 makes no special allowances for the movie industry, neither do we.
B. Nonexclusive Licenses
 Although we reject any suggestion that moviemakers are immune to section 204, we
note that there is a narrow exception to the writing requirement that may apply here.
Section 204 provides that all transfers of copyright ownership must be in writing;
section 101 defines transfers of ownership broadly, but expressly removes from the scope
of section 204 a "nonexclusive license." See note 2 supra. The sole issue that
remains, then, is whether Cohen had a nonexclusive license to use plaintiff's special
 The leading treatise on copyright law states that "[a] nonexclusive license may be
granted orally, or may even be implied from conduct." 3 M. Nimmer & D. Nimmer, Nimmer
on Copyright <section> 10.03[A], at 10-36 (1989). Cohen relies on the latter
proposition; he insists that, although Effects never gave him a written or oral
license, Effects's conduct created an implied license to use the footage in "The Stuff."
Cohen relies largely on our decision in Oddo v. Ries, 743 F.2d 630 (9th Cir.1984).
There, we held that Oddo, the author of a series of articles on how to restore Ford
F-100 pickup trucks, had impliedly granted a limited non- exclusive license to Ries, a
publisher, to use plaintiff's articles in a book on the same topic. We relied on the
fact that Oddo and Ries had formed a partnership to create and publish the book, with
Oddo writing and Ries providing capital. Id. at 632 & n. 1. Oddo prepared a
manuscript consisting partly of material taken from his prior articles and submitted it
to Ries. Id. at 632. Because the manuscript incorporated pre-existing material, it
was a derivative work; by publishing it, Ries would have necessarily infringed the
copyright in Oddo's articles, unless Oddo had granted him a license. Id. at 634. We
concluded that, in preparing and handing over to Ries a manuscript intended for
publication that, if published, would infringe Oddo's copyright, Oddo "impliedly gave
the partnership a license to use the articles insofar as they were incorporated in the
manuscript, for without such a license, Oddo's contribution to the partnership venture
would have been of minimal value." Id. [FN5]
FN5. Oddo did nevertheless prevail, but on other grounds. Ries was unhappy with
Oddo's manuscript and hired another writer to do the job right. This writer added
much new material, but also used large chunks of Oddo's manuscript, thereby
incorporating portions of Oddo's pre-existing articles. 743 F.2d at 632. By
publishing the other writer's book, Ries exceeded the scope of his implied license
to use Oddo's articles and was liable for copyright infringement. Id. at 634.
 The district court agreed with Cohen, and we agree with the district court: Oddo
controls here. Like the plaintiff in Oddo, Effects created a work at defendant's
request and handed it over, intending that defendant copy and distribute it. [FN6] *559
To hold that Effects did not at the same time convey a license to use the footage in
"The Stuff" would mean that plaintiff's contribution to the film was "of minimal value,"
a conclusion that can't be squared with the fact that Cohen paid Effects almost $56,000
for this footage. Accordingly, we conclude that Effects impliedly granted nonexclusive
licenses to Cohen and his production company to incorporate the special effects footage
into "The Stuff" and to New World Entertainment to distribute the film. [FN7]
FN6. As the district court found, "every objective fact concerning the transaction
at issue supports a finding that an implied license existed." Order Granting
Summary Judgment (Aug. 26, 1988) at 2. Effects's copyright registration certificate
states that the footage is to be used in "The Stuff," so does the letter agreement
of October 29, 1984, and Effects's President James Danforth agreed at his deposition
that this was his understanding. CR 24 at 11. Also, Effects delivered the film
negatives to Cohen, never warning him that cutting the negatives into the film would
constitute copyright infringement. CR 24 at 29. While delivery of acopy "does
not of itself convey any rights in the copyrighted work," 17 U.S.C. <section> 202
(1988) (emphasis added), it is one factor that may be relied upon in determining
that an implied license has been granted.
FN7. Plaintiff argues that an implied license is an equitable remedy, akin to
estoppel, for which Cohen does not qualify because he hasn't paid in full the
agreed-to price for the footage. We reject this argument. Plaintiff cites no
authority for the proposition that an implied license is equitable in nature; it
seems to us to be a creature of law, much like any other implied-in-fact contract.
See, e.g., Landsberg v. Scrabble Crossword Game Players, Inc., 802 F.2d 1193, 1199
(9th Cir.1986). In any event, it is unclear that a balancing of equities would
favor plaintiff, who has been paid almost $56,000 for footage that is worthless to
Cohen should plaintiff prevail.
Nor can we construe payment in full as a condition precedent to implying a license.
Conditions precedent are disfavored and will not be read into a contract unless
required by plain, unambiguous language. Sulmeyer v. United States (In re Bubble Up
Delaware, Inc.), 684 F.2d 1259, 1264 (9th Cir.1982). The language of the October
29, 1984, agreement doesn't support a conclusion that full payment was a condition
precedent to Cohen's use of the footage. Moreover, Effects's president conceded at
his deposition that he never told Cohen that a failure to pay would be viewed as
copyright infringement. CR 24 at 29.
We affirm the district court's grant of summary judgment in favor of Cohen and the
other defendants. We note, however, that plaintiff doesn't leave this court
empty-handed. Copyright ownership is comprised of a bundle of rights; in granting a
nonexclusive license to Cohen, Effects has given up only one stick from that bundle--the
right to sue Cohen for copyright infringement. It retains the right to sue him in state
court on a variety of other grounds, including breach of contract. Additionally,
Effects may license, sell or give away for nothing its remaining rights in the special
effects footage. Those rights may not be particularly valuable, of course: "The Stuff"
was something less than a blockbuster, and it remains to be seen whether there's a
market for shots featuring great gobs of alien yogurt oozing out of a defunct factory.
On the other hand, the shots may have much potential for use in music videos. See
generally Kozinski & Banner, Who's Afraid of Commercial Speech?, 76 Va.L.Rev. 627, 641
(1990). In any event, whatever Effects chooses to do with the footage, Cohen will have
no basis for complaining. And that's an important lesson that licensees of more
versatile film properties may want to take to heart.
908 F.2d 555, 1990 Copr.L.Dec. P 26,605, 15 U.S.P.Q.2d 1559