Thursday, November 5, 2009

Seventh Circuit Reverses Judgment In Thomas & Friends Copyright Dispute

In Schrock v. Learning Curve International (08-1296), the Seventh Circuit reversed the district court's judgment relating to copyright protection to the popular “Thomas & Friends” train characters.  The court's holding follows:
The district court granted summary judgment for the defendants, holding that Schrock has no copyright in the photos. The court classified the photos as “derivative works” under the Copyright Act—derivative, that is, of the “Thomas & Friends” characters, for which HIT owns the copyright—and held that Schrock needed permission from Learning Curve (HIT’s licensee) not only to make the photographs but also to copyright them. Because Schrock had permission to make but not permission to copyright the photos, the court dismissed his claim for copyright infringement.
We reverse. We assume for purposes of this decision that the district court correctly classified Schrock’s photographs as derivative works. It does not follow, however, that Schrock needed authorization from Learning Curve to copyright the photos. As long as he was authorized to make the photos (he was), he owned the copyright in the photos to the extent of their incremental original expression. In requiring permission to make and permission to copyright the photos, the district court relied on language in Gracen v. Bradford Exchange, 698 F.2d 300 (7th Cir. 1983), suggesting that both are required for copyright in a derivative work. We have more recently explained, however, that copyright in a derivative work arises by operation of law—not through authority from the owner of the copyright in the underlying work—although the parties may alter this default rule by agreement. See Liu v. Price Waterhouse LLP, 302 F.3d 749, 755 (7th Cir. 2002). Schrock created the photos with permission and therefore owned the copyright to the photos provided they satisfied the other requirements for copyright and the parties did not contract around the default rule.
We also take this opportunity to clarify another aspect of Gracen that is prone to misapplication. Gracen said that “a derivative work must be substantially different from the underlying work to be copyrightable.” 698 F.2d at 305. This statement should not be understood to require a heightened standard of originality for copyright in a derivative work. We have more recently explained that “the only ‘originality’ required for [a] new work to be copyrightable . . . is enough expressive variation from public-domain or other existing works to enable the new work to be readily distinguished from its predecessors.” Bucklew v. Hawkins, Ash, Baptie & Co., LLP, 329 F.3d 923, 929 (7th Cir. 2003). Here, Schrock’s photos of Learning Curve’s “Thomas & Friends” toys possessed sufficient incremental original expression to qualify for copyright.
But the record doesn’t tell us enough about the agreements between the parties for us to determine whether they agreed to alter the default rule regarding copyright or whether Learning Curve had an implied license to continue to use Schrock’s photos. Whether Schrock could copyright his photographs and maintain an infringement action against the defendants depends on the contractual understandings between Schrock, Learning Curve, and HIT. Accordingly, we remand to the district court for further proceedings consistent with this opinion.


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