IP Rights That Go Bump in the Night: Horror Inc. v. Miller

It’s that time of the year. When the wind begins to chill and the nights grow longer, serving as harbingers for the inevitable truth, spooky season is upon us. As you and your neighbors begin to adorn your homes with your favorite ghouls and goblins in celebration of All Hallows’ Eve, I’d like to remind you of another reason to celebrate. For the second consecutive year, the Governor of Kentucky, Andy Beshear, has proclaimed October as Intellectual Property (IP) month in our commonwealth. In honor of this proclamation, I will share a story of IP rights that go bump in the night—the story surrounding the Second Circuit case, Horror Inc. v. Miller, 15 F.4th 232 (2d Cir. 2021).

Victor Miller is the architect behind the Friday the 13th horror movie and creator of the child who would become the infamous, goalie-masked fiend Jason Voorhees. Miller was hired to write the script for the film, consult on the location for shooting, and ultimately developed the idea for setting the film at a summer camp. Shortly after completing the final draft of the script, Manny Company (Miller’s employer) accepted an offer from investor Phil Scuderi, principal of Georgetown Productions, Inc., to finance the film in exchange for an assignment of its rights and “complete control over the screenplay and film.” Despite Miller’s vehement opposition, Scuderi proposed that, in the final scene, the character Jason—who, in Miller's Treatment and Screenplay, died as a young boy and never appeared in any of Miller's drafts—emerges from the depths of the lake as a disfigured child, and reaches out of the water to pull one of the main protagonists into the murky abyss.

The film went on to be an immediate hit, enjoying unprecedented box office success for a horror film, and has since spawned 11 sequels, among other derivative products. Several years after the release of the film, Miller began to believe that he was not receiving the additional sequel and residual payments he was due.¹ What’s more, 37 years later – akin to the nightmarish Jason Voorhees, Miller emerged from the depths to reclaim his copyright ownership by invoking his termination rights available under section 203(a) of the Copyright Act.² In response, Manny Company (“Manny”) and Horror Inc., Manny’s successor-in-interest to the Friday the 13th franchise,³ sued Miller to enjoin him from reclaiming ownership.

The Agreement

Our tale begins in 1979, when the nationwide success of the horror film Halloween⁴ inspired Sean S. Cunningham to produce his own horror film. At the time, Cunningham was a producer, director, and writer of feature films, and his company, Sean S. Cunningham Films Ltd., was a general partner of Manny Company, a limited partnership formed as a corporate vehicle for producing and distributing motion pictures. Additionally, in 1978, Manny became a signatory to the 1977 Writer’s Guild of America (WGA) Theatrical and Television Basic Agreement (also referred to as the “Minimum Basic Agreement” or the “MBA”), the then-operative collective bargaining agreement governing WGA writers and signatory employers. In late spring of 1979, Cunningham and Victor Miller, a member of the Writers Guild of America, “orally agreed that Miller would write the screen play for the horror film project.”⁵ Sometime in June of that year, Manny and Miller executed a brief, two-page document entitled “Employment Agreement,” using the 1977 WGA standard form, Writer's Flat Deal Contract.

The Employment Agreement was comprised primarily of an introduction and six numbered paragraphs which affirmed that: Miller was a member of the WGA; Manny was a signatory to the MBA; and the terms of the Employment Agreement could not be “less advantageous to Miller than the minimums provided in said MBA.” The Employment Agreement further provided that Manny employed Miller “to write a complete and finished screenplay for a proposed motion picture to be budgeted at under $1 million, and presently entitled or designated Friday 13.” In exchange, Manny promised to “pay Miller as full compensation for his services” $9,282 in two lump-sum payments: $5,569 for delivery of the first draft of the screenplay, and $3,713 for delivery of the final draft. Importantly, the Employment Agreement did not specifically contain language identifying the project as a work made for hire. This determination became the primary dispute of the case between Horror Inc. and Miller.

After Miller served the requisite notices of termination on Manny and Horror Inc., Horror Inc. sued Miller, seeking a declaration that Miller wrote the Screenplay as a “work for hire” within the meaning of the Act, making Miller's termination notices invalid. Miller, however, contended that the work was not made for hire and that authorship remains with him, giving him the right to terminate the transfer of copyright to the screenplay under 17 U.S.C.A. § 203(a)(3).

The Concept of "Work for Hire" Under the Copyright Act

The Constitution empowers Congress to “promote the ... useful Arts, by securing for limited Times to Authors ... the exclusive Right to their ... Writings.”⁶ In the Copyright Act of 1976, Congress acted on that power and stated that copyright ownership “vests initially in the author or authors of the work,” effectively making the author the presumptive owner of a work.⁷ Long-established precedent designates “the author” as the person who “actually creates the work—that is, the person who translates an idea into a fixed, tangible expression,” making the work copyrightable.⁸ Ownership confers an array of exclusive rights in copyrighted works, including a right to control and shape uses permitted to others.⁹ Further, as stated above, during certain time windows, the author may recover a copyright that he/she has transferred.

The Act does, however, create an exception to the general authorship rule regarding “works made for hire.” Regarding those works, “the employer or other person for whom the work was prepared is considered the author,”¹⁰ and in such cases the original creator has no corresponding termination right. Section 101 of the Act defines two mutually exclusive categories of work for hire: 1) a work made by an employee within the scope of his employment is a work for hire; and 2) a specially commissioned work that is subject to an express agreement that the work will be treated as one made for hire is such a work.¹¹

In Horror Inc., the Second Circuit pointed out that, generally, the party relying on the work-for-hire exception bears the burden of demonstrating that it applies.¹² In this case, Horror Inc. conceded that the Screenplay did not qualify under the “specially commissioned work” definition, because although the parties entered into a written agreement, the WGA form contract that they signed did not provide that the Screenplay was a work for hire. Thus, the parties did not expressly agree that it be treated as such, requisite under § 101, to be considered a specially commissioned work. As a result, the parties’ dispute centered on whether Miller was “writing within the scope of the employment” as Manny's “employee” when he composed the Screenplay.

Applying the Reid Framework

Although it uses the terms “employee,” “employment,” and “scope of employment” in critical provisions, the Copyright Act does not define these terms. Consequently, as the court pointed out, “the application of these terms is left to the courts.”¹³ In Reid, the Supreme Court explained that, in using these terms, Congress “intended to describe the conventional master-servant relationship as understood by common-law agency doctrine,” and thus courts should “rely on the general common law of agency” to determine whether the individual is an employee or an independent contractor.¹⁴ Thus, if the individual qualifies as an employee “under the general common law of agency,” and the work is prepared within the scope of his employment, then the work that he prepares for his employer is a work for hire. If, however, the individual is merely an independent contractor “as understood by common-law agency doctrine,” then the work will not qualify as a work for hire under § 101. To aid in this inquiry, the Supreme Court created a framework for distinguishing between an employee and a non-employee author in matters of copyright, by identifying 13 non-exhaustive factors, now referred to as the Reid Factors.¹⁵

For brevity, this article will not analyze all 13 factors. Conveniently, in Horror Inc. the Second Circuit pointed out that it had already flagged five core considerations that “will almost always be relevant to the Reid analysis and should be given more weight in the analysis, because they will usually be highly probative of the true nature of the employment relationship.”¹⁶ Those factors are: “(1) the hiring party's right to control the manner and means of creation; (2) the skill required of the hired party; (3) the provision of employee benefits; (4) the tax treatment of the hired party; and (5) whether the hiring party has the right to assign additional projects to the hired party.”¹⁷ In deciding whether Miller was writing within the scope of employment, the Second Circuit relied on the declarations of the parties as to the conjuring of the Friday the 13th screenplay to take an ax to Horror Inc.’s arguments in a manner even the macabre-masked manslayer would have fancied.

Statement of the Facts

The following statement of the facts was taken from the District Court’s opinion, which was based on the record at summary judgment:

• After Cunningham recruited Miller for the project, Miller wrote various versions of the Treatment and Screenplay over the course of approximately two months. As with Miller and Cunningham's past collaborations, the two worked closely together to develop the two documents.
• Miller described how, during the writing process, the pair “enthusiastically bounced ideas off of one another” and that Miller and Cunningham met at each other's homes to discuss ideas for the Film.
• Miller drafted the Treatment and Screenplay at his own home, on his own typewriter, using his own typewriter ribbon and paper.
• Miller made use of Cunningham's photocopier and photocopy paper, and Cunningham's assistant retyped the second draft of the Screenplay to reformat the draft to contain certain margin content.
• Miller usually did his writing in the morning because he was a “morning person” and preferred to write between “7 a.m. and noon,” and not because Cunningham would dictate Miller's specific work hours.
• Miller was responsible, however, for conforming his completion of screenplay drafts to the demands of the Film's broader production schedule.
• Cunningham had no right to assign Miller additional projects beyond the writing of the Screenplay provided in the Contract.
• The parties dispute the extent to which Cunningham dictated the contents of the Treatment and Screenplay; Cunningham averred that he “tutored Miller on key elements of successful horror films,” and “retained final authority over what went into, or stayed out of, the Screenplay."
• According to Cunningham, sometimes, while “Miller drafted on his typewriter, Cunningham stood over Miller's shoulder making suggestions and contributions.”
• In contrast, although Miller acknowledges that Cunningham provided “notes or suggestions” on the Screenplay drafts, he contends that “Cunningham did not dictate what Miller should do or write.”
• The parties agreed that Cunningham made the following general suggestions: that the killings throughout the movie should be “personal” (and that guns are “impersonal” ways to kill in movies); that the killer should always remain masked; and that a major character should be killed early on.
• It is undisputed that, although Cunningham and Miller often collaborated on the Treatment and Screenplay, Miller consistently received “sole ‘written by’ credit” as the screenwriter for the Film.
• It is further undisputed that the revised ending of the film was insisted upon by Phil Scuderi.

The Second Circuit's Decision

When applying the aforementioned probative factors, the Second Circuit concluded that, in regards to control, it was difficult to develop a clear picture of whether Manny maintained the “right to control the manner and means of creation” yet, on balance, the right to control factor tipped slightly in favor of Manny and Horror Inc. However, it was undisputed that: Miller used his own expertise and creativity to write the screenplay; Manny never provided health insurance, paid vacation, worker’s compensation benefits, a pension plan, or any other types of benefits that courts have traditionally found probative of employee status; Manny never withheld or deducted any taxes, social security, Medicare, or other comparable amounts from his compensation and that Miller’s compensation was paid precisely as designated in the two-page form agreement; and the Employment Agreement between Manny and Miller described the job that it covered as “all of the writing necessary to complete the final screenplay,” and therefore was devoid of any suggestion that Manny could assign additional projects. After weighing all the factors, the court agreed with, and affirmed, the District Court’s decision that Miller was an independent contractor, and that Miller did not prepare the Screenplay as a work for hire, making Miller the “author” of the Screenplay and entitled to terminate Manny's and Horror Inc.'s rights.¹⁸

Conclusion

This case serves as a cautionary tale to those who employ individuals to create copyrightable works and intend to retain ownership rights to such works. As Horror Inc. discovered, one must take careful consideration as to how a contract is drafted and whether it contains an express agreement that the commissioned work will be a work made for hire. Or, in absence of such a provision, whether the relationship of the parties is to a degree that the individual qualifies as an employee under the general common law of agency, and the work is prepared within the scope of their employment. Like Victor Miller, if an employee relationship is not present, authorship remains with the original creator, and their right to terminate any transfer of rights will loom in the shadows, awaiting its opportunity to be invoked. Businesses should take heed and draft their contracts accordingly.

Stites & Harbison, PLLC’s full-service Intellectual Property & Technology Group regularly assists clients in the acquisition, management, licensing, and litigation of patents, copyrights, trademarks, and trade secrets. For questions, comments, or assistance with any intellectual property-related matters, please contact the author or any of the other attorneys in the IPT group.

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¹In the late 1980s, the WGA pursued the matter on Miller’s behalf, and Miller received a settlement of $27,396.46.
²17 U.S.C.A. § 203(a)(3) (Termination of the grant may be effected at any time during a period of five years beginning at the end of 35 years from the date of execution of the grant.)
³Horror, Inc. acquired its rights and interests in the Friday the 13th franchise and the original Friday the 13th film and screenplay from its predecessors-in-interest Georgetown Productions, Inc., Jason Productions Inc., Friday Four Inc., and Terror Inc.
⁴In 1978, Halloween’s box office gross revenue was $41 million. That roughly translates to $198 million today.
⁵Horror Inc. v. Miller, 15 F.4th 232 (2d Cir. 2021)
⁶U.S. Const. art. I, § 8, cl. 8.
⁷17 U.S.C. § 201(a)
⁸Cmty. for Creative Non-Violence v. Reid, 490 U.S. 730, 109 S. Ct. 2166, 104 L. Ed. 2d 811 (1989); see also Medforms, Inc. v. Healthcare Mgmt. Sols., Inc., 290 F.3d 98, 107 (2d Cir. 2002); L. Batlin & Son, Inc. v. Snyder, 536 F.2d 486, 490 (2d Cir. 1976).
⁹17 U.S.C. § 106
¹⁰17 U.S.C. § 201(b)
¹¹17 U.S.C. § 101; Reid, 490 U.S. at 738, 109 S.Ct. 2166. (emphasis added).
¹²Woods v. Bourne Co., 60 F.3d at 993-94 (2d Cir. 1995); F.T.C. v. Morton Salt Co., 334 U.S. 37, 44-45, 68 S.Ct. 822, 92 L.Ed. 1196 (1948) (“The general rule of statutory construction that the burden of proving justification or exemption under a special exception to ... a statute generally rests on one who claims its benefits ....”).
¹³Aymes v. Bonelli, 980 F.2d 857, 860 (2d Cir. 1992).
¹⁴Id. at 740, 109 S.Ct. 2166
¹⁵Cmty. for Creative Non-Violence v. Reid, 490 U.S. at 751-53, 109 S.Ct. 2166.
¹⁶Aymes v. Bonelli, 980 F.2d at 861
¹⁷Id.
¹⁸The district court ruled that Miller’s termination notices effected a reversion of the copyright to the screenplay, but declined to analyze the extent to which Miller can claim copyright in the monstrous “Jason” character, because that character appeared only briefly in the original screenplay and film, and because “Horror may very well be able to argue that the Jason character present in later films is distinct from the Jason character briefly present in the first film, and Horror or other participants may be able to stake a claim to have added sufficient independently copyrightable material to Jason in the sequels to hold independent copyright in the adult Jason character.” Horror Inc. v. Miller, 335 F. Supp. 3d 273 (D. Conn. 2018), aff'd, 15 F.4th 232 (2d Cir. 2021).