Sept/Oct ’07 Guild News

Advocacy Report

Incorporation and Copyrights: Hold on to Your Rights!
Martha Graham Teaches Us More Than Dance

© 2007 Lisa Shaftel, National Advocacy Committee Chairperson   

Should you incorporate your business? Should you incorporate as a for-profit or not-for-profit? Talk to your accountant or an attorney about the differences in purpose between the two, as well as the tax and liability issues. In either case, it’s also important to understand what can happen to your copyrights and how to protect them. 

If artists choose to set up a small corporation for their business, they can name themselves the director, sole officer, and shareholder of the corporation. Any intellectual property they create within their corporation’s business belongs to the corporation and therefore solely to them if they have named themselves the sole officer. But what if your business is educational, a museum, or a performance facility and you want the tax breaks of a nonprofit? The consequences of becoming a nonprofit may impact your intellectual property very differently, as Martha Graham’s heir discovered. 

A nonprofit organization is defined as  “a group organized for purposes other than generating profit and in which no part of the organization's income is distributed to its members, directors, or officers.”  [Legal Information Institute, Cornell University Law School] 

A foundation is a specific type of nonprofit organization established to maintain or aid social, educational, charitable, religious, or other activities serving the common welfare. A foundation’s funds and programs are managed by its own trustees or directors. For example, an artist could set up a school as a foundation and make him/herself an employee who teaches classes. 

Dancer and choreographer Martha Graham, [1894-1991], was one of the founders of “modern” dance. She began choreographing and performing her own work in the 1920s and continued to choreograph long after retiring from performing in 1970 at the age of 76. Ms. Graham established her school, The Martha Graham Center of Contemporary Dance, in 1927. Ms. Graham was also a founding member of the dance division of the Juilliard School in 1951.

Initially, Ms. Graham set up her school as a sole proprietorship, much the same way self-employed artists run their businesses. By the 1940s, Graham decided to set up two not-for-profit corporations for tax reasons, and to turn over the funding and legal matters to others so that she could focus on her creative work. Those two corporations eventually became one legal entity, the Martha Graham Center of Contemporary Dance, Inc.  Basically, she set up a nonprofit corporation to run the business of her dance school and performances, which she had no desire to do herself. She hired other people to serve as the Board of Directors of her nonprofit. Although in practice she was the creative and artistic director of her nonprofit, she became in the legal sense an employee of the foundation; she received a regular paycheck. 

At the time she set up the nonprofit, Ms. Graham did not write up an express agreement with the Center stating that she retained the copyrights of her works. Big mistake.

Without stating in writing otherwise at the time she set up her nonprofit corporation, Ms. Graham’s copyrights under the “Work Made For Hire” statue of US Copyright Law, belonged to the corporation–the Center—and not her. Apparently Ms. Graham did not understand this when she wrote her will (two years before her death) and bequeathed her estate, including the rights and interests in her work to Ronald Protas, her assistant and close friend. The fact that Ms. Graham did not name specific titles of her works in her will didn’t matter. Legally, Graham didn’t own the rights of ANY of her works created after the formation of her nonprofit and therefore could not bequeath them to anyone upon her death.

The story of the inheritance of Martha Graham’s copyrights becomes even stranger and fodder for a Law & Order script. Graham met Protas in 1967, when she was in her seventies and he was a 26-year-old freelance photographer. He latched onto her quickly and became her confidante. The members of the Board of Trustees of the Center suspected his motives. After her death, Protas became Artistic Director of the Center and later had a “dispute” with the Board of Trustees. The Center experienced financial problems and closed briefly, during which time Protas set up the Martha Graham School and Dance Foundation and claimed that his new group had exclusive rights to Graham’s works because she’d bequeathed them to him in her will. Protas also registered “Martha Graham” and “Martha Graham Technique” as trademarks. Then the Center re-opened when it received two financial grants.

Well, you know what happened next!  This is the court segment of the Law & Order episode. Protas sued the Center to prevent Graham’s school from performing her dances and infringing on her copyrights, which he claimed he now owned, resulting in the case, Martha Graham School & Dance Foundation., Inc. v. Martha Graham Center of Contemporary Dance, Inc. 224 f. Supp. 2d 567 (S.D.N.Y. 2002). Many decisions and appeals followed. What complicated this particular case was that copyright law changed several times between 1929 and 1991, when the works were created. And during that time, some works, which were published without evidence of copyright notice (when that was a requirement under copyright law), had become public domain.  What a mess! 

The upshot is that the district court determined that all works created by Ms. Graham between 1956-1991, while she was legally an “employee” of the Center, were works made for hire. Graham hired herself as Program Director and Artistic Director, filed W-2 tax forms, received a regular salary on the Center’s payroll, and also received employee benefits.

The moral of the story is, if you set up a not-for-profit corporation to manage your business, and you legally become an employee of your corporation, be sure to include a document at the time of incorporation stating that you personally and solely own the copyrights to all your works created during the scope of your employment, and that the rights are not shared by the officers, board, or trustees. If you don’t do this, the corporation, not you, will own your copyrights. And you—or your heirs—cannot get your copyrights back.

What Does the Contract Term, “All Rights in Perpetuity,” Mean?

© 2007Lisa Shaftel, National Advocacy Committee Chairperson
 
We have been alerted by the Authors Guild of new copyright terms in Simon & Schuster’s 2007 publishing contracts demanding a transfer of “all rights in perpetuity” to the publisher in print-on-demand contracts.

The Authors Guild and the Graphic Artists Guild urge you NOT TO SIGN "all rights in perpetuity" contracts. 

Traditionally, publishing contracts provided for a reversion of rights to the author after some milestone. This allowed the author to take their work to another publisher for a better deal, self-publish, or repurpose their work some time after the work’s popularity had waned.
 
The U.S. Constitution provides for the ownership of copyright for a “limited term,” but does not define what the limit of term is.  Copyright Law is defined in Title 17 of the United States Code (a description of permanent laws), not in the U.S. Constitution.  When a copyright bill is adopted, Title 17 of the U.S. Code is changed; the US Constitution is not amended.

U.S. Copyright Law presently defines the term of copyright protection as life of the author + 70 years, or 95 years from the date of publication for a Work Made for Hire or for an anonymous work. After the term has expired, works lose copyright protection and pass into the public domain. That means they are free for anyone to use.

A contract may not contain terms or provisions that violate U.S. Law or the Constitution.  Therefore, “perpetuity” cannot override the term of copyright protection/ownership defined in our copyright law.  In the case of a contract pertaining to copyright ownership, “perpetuity” legally means for the entire length of term, not forever and ever.

“All rights in perpetuity” is the legal equivalent of a “grant of all rights” without any stipulation of period of time. So, if you grant a publisher, business, or other client “all rights in perpetuity” to your work, you are granting them all rights until 70 years after your death; the full term of copyright protection.

However, there is a big difference between signing an “all rights in perpetuity” contract and a “work-made-for-hire” contract.   “All rights in perpetuity” acknowledges that the author/creator is the legal author/creator of the work, and he/she is transferring all of his/her rights to another person or business in the agreement.  In this case, the rule of reversion (giving rights back to the author/creator after 35 years) applies.  You still have the legal right to get your copyright back and have the legal right to negotiate a termination of rights.  But, “work made for hire” defines the legal author/creator of record as whoever is designated in the agreement, someone other than the person who actually created the work.  That means that the actual author/creator has never legally been the author/creator of the work, and the reversion of rights rule does not apply.  If you sign a “work-made-for-hire” contract, you will never be able to get your copyright back.

If a client wants a transfer of “all rights,” try as best you can to negotiate a milestone after which the copyright reverts back to you.  Get it in writing in the contract.  If the client insists on a “work-made-for-hire” contract, instead try to negotiate a transfer of “all rights” with no term specified. At least you still retain the copyright and authorship of your work, and at the very least, you will get the rights to your work back after 35 years.

You and your heirs need to keep track of the calendar.  In order to get your rights back after 35 years, you have a five-year window of opportunity to notify in writing the person/business whom you granted your rights to that you are reclaiming your copyright.  You must also notify the Copyright Office.  If you fail to notify in writing the person/business whom you granted your rights, that person/business will automatically own the copyright after the 40th year for the remainder of the term.

Here's a list of additional articles in this issue:

Comping and Infringement

2007 Member's Guide to Benefits

Click here for a pdf of the complete issue.