By Cheryl Beise, J.D.
Heirs of "Game of Life" developer failed to overcome work-for-hire doctrine in bid to terminate developer’s original transfer of rights to Hasbro predecessor.
The federal district court in Providence, Rhode Island, correctly determined that heirs of toy developer Bill Markham could not reacquire copyrights to the boardgame "The Game of Life" from Hasbro, Inc., and the heirs of the late radio and television personality Art Linkletter, the U.S. Court of Appeals in Boston had held. Markham’s heirs sought to terminate under 17 U.S.C. §304 transfers of rights Markham had made to Hasbro’s predecessor-in-interest, the Milton Bradley Company, and a firm co-owned by Linkletter. Because Markham created the game at "the instance and expense" of toy developer Milton Klamer, the game qualified as a "work-for-hire" exception to statutory termination rights (Markham Concepts, Inc. v. Hasbro, Inc., June 14, 2021, Lipez, K.).
The Game of Life. In 1959, toy developer Reuben Klamer was engaged by Milton Bradley Company to develop a product to commemorate the company’s centennial in 1960. Klamer stumbled on a copy of a game created by company namesake Milton Bradley, himself, in 1860, called "The Checkered Game of Life," which Klamer decided to update to appeal to a contemporary American audience. For help in transforming his concept into a prototype boardgame, Klamer reached out to experienced game designer Bill Markham. At that time, Markham owned a product development firm that employed two artists named Grace Chambers and Leonard Israel. Markham and Klamer together contributed key features of the game. Chambers worked on the graphical design of the game board and Israel worked on the box cover art. A prototype of the game was produced and pitched to a group of Milton Bradley executives. Also present was Art Linkletter, a well- known radio and television personality. Klamer and Linkletter were co-founders of a company called Link Research Corporation ("Link"), which developed products and used Linkletter's celebrity to promote them. Part of the pitch was that Linkletter would help market the Game of Life.
Rights transfer agreements. Milton Bradley decided to market the game, and two agreements regarding rights followed. The first, entered on September 21, 1959, was a License Agreement between Link and Milton Bradley. This agreement gave Milton Bradley the exclusive right to manufacture and market the game, which it stated that Link "had ... designed and constructed." The License Agreement also allowed Milton Bradley to use Linkletter’s name and image in its advertising of the game, and required Linkletter to plug the game 52 times on his nationally televised show. In return, Link received a $5,000 advance and a six percent royalty on sales.
The second agreement, executed on October 20, 1959, was an Assignment Agreement between Link and Markham, under which Markham transferred his rights in the game to Link, in exchange for a royalty stream amounting to 30 percent of six percent royalty Link was receiving, along with an advance and reimbursement of some of Markham’s incidental costs in developing the prototype, including Chambers’s and Israel’s salaries. The Assignment Agreement stated that Markham had "invented, designed and developed" the game.
Copyright registration. Milton Bradley refined the Game of Life 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 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.
Present dispute—termination rights. In the decades following publication of the game, Markham and Klamer clashed over who deserved credit for creating the game. Markham believed his share of royalties under the assignment agreement was unfairly low. Markham passed away in 1993. In the present dispute, Markham's successors-in-interest sued Klamer, the heirs of Art Linkletter, and Hasbro, seeking (among other things) to terminate the Assignment Agreement under Section 304 of the Copyright Act. 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. However, termination rights provided in Section 304 do not extend to "works made for hire."
Works made for hire. After a bench trial, the district court concluded that termination was not available to Markham’s heirs because the facts of the case fell squarely within the work-for-hire exception. Because the game was created in 1959, it was governed by the Copyright Act of 1909, which contained the concept of a work for hire but lacked a statutory definition of the term. Turning to case law for guidance, the district court noted that the First Circuit had borrowed an "instance-and-expense" test from the Second and Ninth Circuits. This test provided that the presumptive "author" and copyright holder of a commissioned work was the commissioning party at whose "instance and expense" the work was done.
Markham’s successors-in-interest appealed the district court’s judgment, arguing that the district court erred in using the instance and expense test, and, even under that test, reached the wrong conclusion.
Instance and expense test. The First Circuit began by noting that the standard of a commissioned work-for-hire under the 1909 Copyright Act—the instance and expense test—governed this case.
Markham’s heirs argued that the instance and expense test was no longer applicable, even as to pre-1978 works. In support of their position, the heirs cited 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"—the first half of the definition of "work made for hire" under the 1976 Copyright Act. The second half of the "work made for hire" definition describes "a work specifically ordered or commissioned…" According to Markham’s heirs, Reid requires courts to read the 1909 Act's reference to "employer" in light of standard agency principles, and thus forecloses the instance and expense test. In other words, the 1909 Act work for hire doctrine only applies to employer-employee relationships and does not include commissioned works.
The First Circuit was bound to reject this argument under its own precedent. Four years after Reid, in Forward v. Thorogood, 985 F.2d 604, 606 (1st Cir. 1993), the First Circuit 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. In that case, the panel found that the tapes made by a band were not a work for hire under the instance and expense test.
Markham’s heirs alternatively argued that the First Circuit was free to "correct" Forward because the instance and expense test was inconsistent with the Supreme Court's analysis in Reid. The First Circuit disagreed. Forward was not inconsistent with Reid, and in fact the Forward panel cited Reid three times. The court said it was "skeptical that the Supreme Court, in construing the 1976 Act, casually and implicitly did away with a well- established test under a different Act." At least two other circuit courts—the Second and Ninth Circuit—have held that Reid does not require abandonment of the 1909 Act’s instance and expense test.
Application of instance and expense test. Markham’s heirs alternatively contended that even under the instance and expense test, they prevailed.
The heirs first maintained that the game failed to satisfy the second prong of the test because it was not made at Klamer's expense. According to the First Circuit, this argument failed because the evidence "amply supports the district court's finding that the game was created at Klamer's expense." During the relevant time period—when the game was being developed—Klamer bore the primary risk, as he was on the hook for the costs if Milton Bradley passed on the game. 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. Markham's downside was limited. Even though Markham was paid by a royalty rather than a sum certain—which is typical for the usual work for hire relationship—Markham's initial royalty payment ($773.05) was a non-refundable advance. Under these facts, the court observed that the arrangement resembled payment of a sum certain plus a running royalty, rather than a pure royalty deal. The court found no error in the district court’s determination that the game was made at Klamer’s expense.
Markham’s heirs’ next argued that the instance and expense test created 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 was enough to rebut the presumption. While this was a "closer question," the First Circuit noted that Markham’s heirs bore the burden of providing clear and specific evidence of a contrary agreement. The court found that the language of the agreement did not amount to an express contractual reservation of the copyright in Markham.
Because the evidence amply supported the district court's conclusion that the game was created at the instance and expense of Klamer and that there was insufficient evidence to rebut the resulting work for hire presumption, the appeals court did not need to address Markham’s heirs alternative theory for affirmance: that the game was a work for hire created by Chambers and Israel, with Markham as the "employer."
The district court’s judgment was affirmed.
The case is No. 19-1927.
Attorneys: Robert M. Pollaro (Cadwalader, Wickersham & Taft LLP) for Markham Concepts, Inc. Joshua C. Krumholz (Holland & Knight LLP) for Hasbro, Inc. Patricia L. Glaser (Glaser Weil Fink Howard Avchen & Shapiro LLP) for Reuben Klamer. Christine K. Bush (Thompson Coburn LLP) for Max Candiotty, Thomas Feiman, Dawn Linkletter Griffin, Laura Linkletter Rich, Dennis Linkletter, Michael Linkletter, Sharon Linkletter, and Robert Miller.
Companies: Markham Concepts, Inc.; Hasbro, Inc.
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