Could a Copyright Suit Alter the Marvel Universe?

from Hasbro? And will they succeed? The answers to those questions could have massive repercussions, even affecting characters in the far away Marvel universe like Iron Man, Spider Man, and Doctor Strange. Here to help us sort through this really complex case is intellectual property litigator Terence Frost, a partner Captain Uten Rosenman. So Terry tell us about the story

behind the Game of Life. So June in ninety nine, a toy designer by the name of Reuben claimer I was trying to pitch a new toy to the Milton

Bradley Company in Massachusetts. Milton Bradley took a pass on the toy, but told them they were interested in coming up with something to commemorate the hundredth anniversary of the company, so Mr Claimer asked permission to look through their archives and he found in the archives of the Milton Bradley Company the original very first game invented by Mr Milton Bradley in eighteen sixty and it was called the checkerboard

Game of Life. And Claimer decided to do a modern version of that game which would celebrate the hundredth anniversary of the founding of Milton Bradley, and Milton Bradley just loved the idea, and so Mr Claimer went back to Andrews where he was based, and being more of an ideals guy, he had to come up with somebody who could actually develop the prototype, and he talked to a guy he knew by the name of Bill Markham, who had a small company designing toys and games, and he

managed to develop a prototype of the Game of Life modern version in only six weeks. Claimer took it pitched it to Milton Bradley again. They loved it as produced, They made some tweaks to it and it was out on the store shelves by March of nineteen sixty anniversary Milton Bradley. Milton Bradley goes on to make a lot of money off of this game and ultimately is bought by the Hasbroke Company. So that's the background to the Game of Life, which is the creative work at the

centerpiece of this lawsuit. So this game has been out for some sixty years. Why a lawsuit at this point, Well, this lawsuit arises out of a change that Congress made to the copyright laws back when it revised them in nine And up to that time, copyright in the United States was governed by what was referred to as the nineteen o nine Act, which is one of the reasons that the Congress felt they needed to revise it, and so the new law became the nineteen seventy six Act.

In this nineteen seventy six Act, Congress put in a

provision that had not previously ever existed. And what that provision, Section three or four of the nineteen seventy six Acts said was that a creator that had assigned away their copyright in a creative work would have a right to terminate that assignment for a brief period time fifty six years after the copyright had originally been a paid and this was in response to numerous stories during hearings in Congress from inventors who didn't know what their rights were

at the time they signed away, copyrights weren't yet popular, didn't understand their bargaining power. Flora of stories from creators about the problem with the copyright assignments led Congress to create this sort of option whereby they could get their copyrights back after a certain period of time. And that was a right that did not exist under the nine Act. And that is the source of the problem here, because the copyright in the Game of Life is under the

nineteen o nine Act, not the NYT. Adding to the complexity here is the rule called the instance and expense rule. So the nineteen o nine Copyright Act did not contain any references whatsoever to how an independent contractor commissioned to create a work and this should be treated for copyright

law purposes. The courts developed their own rules for addressing the problem of independent contractors commissioned to create a creative work, and the rule they developed came to be known as the Instances and Expense Rule, made a certain amount of sem for the period time in which it was developed.

It essentially said that if the idea for creative work is developed by an employer and they ask a non employee of which an independent contractor, to develop that idea into the actual work, and they pay for those development costs, then they have the copyright in the ultimate work that

is created, not the independent contractor. And so that became the rule throughout the United States for any copyright that was the result of work by an independent contractor and resulted in a copyright under the nineteen o nine Act. Is that why Markham lost his case at the district court and appeals court level. So keep in mind that there was no righting of the nineteen o nine Act to terminate an assignment of your copyright that comes in

nineteen seventy ninety six Act. What the ninety Acts said, curiously is we are going to extend, expressly extend this right to terminate copyright assignments backwards in time to copyrights issues under the nineteen o nine Act. A very curious choice because obviously, when people were negotiating that assignment under the nineteen o nine Act, they were unaware that there might be a right determination in the future and could

not deal with it now. The Congress did create an exception in the nineteen Copyright Act for this section three or four right of termination. The exception was that the right would not convey backwards in time to a work

made for higher under the nineteen o nine Act. Now, the problem with the way they drafted it was the nineteen o nine Act does not contain the words work made for higher And so the courts now have been left to interpret how do we deal with an independent contractor who developed a copyright work under the nineteen o nine Act and is now seeking to terminate the assignment

of that be right to the third party. Do we apply current law as it's understood now, or do we apply this instances an expense to test which was the law under the nineteen o nine Act. And that's the conundrum that the lower courts are facing here. And Mr Markham and the heirs to his estate lost in the lower courts because they believed that the law developed under

the nineteen o nine Copyright Act. In other words, the instance is an expense rule should apply to explain what a work made for higher is under the nine Act. And they found in the particular instance of this lawsuit that what Mr Markham had done with respect to the Game of Life was a work made for higher because it had been commissioned at the instance of Milton Bradley, and they had paid for the development expenses. Therefore it was work made for higher and there was no right determination.

So he lost in the District Court of Rhode Island and again in the First Circuit on appeal, and now he's going to the Supreme Court saying all those lower courts got it wrong. And there's a split in the circuits. Although the courts that are most involved in copyright, the Second and the Ninth Circuits, have said the rule still

stands for old works. That's correct. So the state applied now is that the Second Circuit, the Ninth Circuit, which you correctly identified as the most important courts of appeal at the federal level for copy r law, and the First Circuit, which covers New England, they have all said that we apply this instance and expense rule from the nineteen o nine Act to determine what a work made for higher is under Section three or four of However,

the Eleventh Circuit, down in Florida, Georgia's southeastern part of the United States, has said none of that can't be right. The right to terminate Section three or four is in the x Act, and therefore we have to use the

law of the to determine that right now, June. As you know, the Spring Court is not required in the Constitution to take every single appeal that goes to It has discretionary powers in most cases except four cases between two sovereign states Georgia and North Carolina suit each other, they have to take that. But all the rest of

the cases, it's a discretionary jurisdiction. And so you file a petition for certain c r which is what the Markham State has done here asking the Court to review this case because it's important and one of the things that the Spring Court looks at to determine whether the cases we're taking on appeal is is there a split in the circuit courts, Because the Spreme Court is of the view that if there's a split in the circuit courts, um different law is being applied based on the portion

of the country that you're in, and we have to fix that. There has to be a uniform law across the United States, so it doesn't matter which circuit you're it. And therefore there's very strong reason here because of that circuit split to believe the Supreme Court scoring accept this case, and that has been confirmed recently by the fact that the Supreme Court asked, in a very unusual manner for the Hasbroke Company, which acquired all the rights and interests

of Milton Bradley, asked Hasbroke Company, who won below. They asked them to respond to this petition for certain cry, which is usually a signal that the Supreme Court is inclined to accept the case. And so my betting is that they're going to take this case. And here it's sometime next fall. Explain the significance of this case. It's not about just the Game of Life has such wide repercussions if the rules changed. Oh, this case has millions, if not billions of dollars at stake over and beyond

the Game of Life. There's a lot of money at stake ins because Game of Life is the second most popular board game of all time, selling something like thirty million copies worldwide. So there's a lot of money at stake in this case. But the real money at stake has to do with all the copyrights from the fifties and sixties that are still valid. They were procured and issued under the nineteen o nine Act, and so we

have copyrights for the entire Marvel Comic book universe. All those character rights could be terminated by the creators if the Supreme Court rules in favor of the market state here and says that there is a right to terminate. Keep in mind that copyrights issued in the nineteen o nine Act exists for years, and so any copyright issued between the years nineteen seven nineteen seventy seven are still

in effect. And we're issued in the nineteen o nine Act, and therefore, potentially, now out of the blue, the creators, to the extent that they've assigned away their copyright, will have a right to terminate. And that's a very big deal given the number, the large number of copyrights issued during that fifty year period. I find the ability to recapture the copyright a little bit troubling because so much goes into the success of a board game, let's say,

beyond just its creation. There's the marketing, there's the promotion, the packaging, the production, the distribution, a host of things. And for someone to be able to come back after all that's been done and recapture the copyright because I didn't know about the success of the products, so they didn't know about their bargaining position. It seems unfair, and Junior, you're exactly right, and it extends beyond just the game of life and what's gone into making it so popular.

I mean, think about your typical movie. Yes, you have to acquire the character, right, but somebody still has to write the story. The actors have to perform at the director has to direct it, the editor has to edit it, the found editor has to bring in the sounds. The distribution company has to get out there marketing and get into theaters make it popular. All those things are things that the owner of the copyright and the character did

not do to make a fame. And that owner of that character copy right now will have an opportunity to terminate their assignment, which will stop any future movies being made, and to renegotiate the right. And I don't think Congress fully thought through what they were doing here when they put section three or four in the They clearly bought hook line and sinker all these tales of low from artists and writers that they were being taken advantage of.

And there is some of that that went on but there was also a lot of just good old honest bargaining that went on. And if the purchasers of those assigned copyrights had known that there was this right to terminate in the future, they would have factored that into their economic analysis and not paid as much in the first place. Are they would have bargained in the first place for the right to give up that termination in

the future. And because they didn't know that this termination right existed in nineteen sixty, for example, when the copyright Game of Life was a sign, they could not possibly negotiate that way. And so it is in some respects very unfair to the owners of these copyright assignments to now go back in time and force a renegotiation. I mean, with this conservative court disturbed the Marvel universe in this way.

It's a great question, June, because we are at a nodal point in Supreme Court jurisprudence with respect the copyright law. The two great champions of copyright law at different ends of the spectrum, for Justice Ginsburg and Justice Bryer. Justice Ginsburg passed away she believed in a very strong protection for copyright. We can see how her voice was missed on the Court during the Oracle case, which was decided the last term, in which the side that believed in

a weak copyright prevailed. Because she was not there to articulate the need for a strong copyright system. Justice Bryer, on the other hand, has always been her antagonist with respect the copyright laws. He has always argued in favor of a weaker copyright protection system. We saw him prevail

in the Oracle case last term. If this case involving the Game of Life would come up while he was still on the court, I would say that there's a very significant risk that he would overturn or certainly try to overturn and get the votes in the court the lower court decision and say that there was a termination

right in the copy right. It is likely that this case will not come before the Spring Court until next October at the earliest, and my understanding is that just as Brides likely to be off the court at that point, in which case we will have a Supreme Court that is truly bereft of any deep knowledge or experience with the copyright laws to the United States, and we will have to see who steps up to fill the spots less vacant by Justice Ginsburg, Justice Brier in the copyright

field of the Supreme Court, and it's anybody's guests how this court might rule on this case. I will tell you this, If the Supreme Court agrees to take this case, um, we are going to see a flood of amacus briefs taking one side or the other. Certainly, the owners of assignments of nineteen o nine Act copyrights will be arguing to affirm the decision below, and the assignees of nineteen o nine Act copyrights are going to be flooding the courts with a meekus briefs arguing that there should be

a right of termination. It will arguably be one of the busiest dockets that the Supreme Court has seen years because of the vested interests and the sheer amount of money at stake. It will be fascinating to see what happens. Terry, thanks so much. That's intellectual property litigator Terence Ross of Katon.

I'm June Gross. When you're listening to Bloomberg. After years of public humiliation over sexual abuse allegations that rocked the British royal family, Prince Andrew is sparing himself a courtroom showdown by settling with his accuser. Andrew has consistently denied Virginia Drew Freese claim that he was one of several men to whom Jeffrey Epstein lent her for sexual abuse

when she was a teenager. His failure to get the lawsuit dismissed last month set off a cascade of repercussions, leading to Buckingham Palace stripping him of honorific titles and royal patronage. Is Andrew has agreed to settle the case for an undisclosed sum. Here to tell us more is Bloomberg Legal editor Anthony Lynn. Did this settlement come as a surprise to people who are watching the case? I think, ultimately not. I do think it was a surprise how

early it came. I think a lot of people thought maybe this would get a little closer, a little further. But a lot of people who have been following, you know, litigation relating to Jeffrey Epstein did not expect this ultimately go to trial. So ultimately the fact that it was settled wasn't that surprising. But he'd been taking a sort of scorched earth approach to her claims, indicating he wanted

to vindicate his name at trial. Yeah, I think certainly the litigation strategy right up until the settlement was pretty aggressive in terms of saying she consented to some aspects of this, you know that she was out for money. But clearly there was a turning point in the sense of when the judge basically denied his motion dismissed the case. So he was facing a number of issues. For instance, he would have had to sit for a deposition soon.

You know, they were getting this evidence from, for instances, his former personal assistant. So there were these sort of immediate, you know, obstacles in his path that I guess he wanted to avoid. Did the judge ever rule on his argument that this litigation was covered by a release that Dreffrey signed as part of a settlement with Epstein, No,

the judge never explicitly ruled on that. So that was the core argument that he put forth in his motion to dismissed that this two thousand and nine settlement between two for and Epstein Um included him, and Duffer's lawyers said that there was there was no possible way that he could have been included in that as a potential defendant.

The agreement said all potential defendants. UM, and the judge basically said it was it was too early to rule on that because there was a there was more evidence to be discovered on that basically, and so that that

he basically reserved judgment on that. It seemed as if this was going to be and he said, she said, I mean, essentially, I think it's it's um, there's no UM, there's no dispute that he was friendly with Epstein and that he was apparently very close friends with Glenn Maxwell, who was you know, Epstein's former girlfriend who was just

convicted in Manhattan of sex trafficking. So UM, you know, there there is a lot of you know, he can't deny that he knew them and that you know, and that they were involved in this, uh, in this scheme. But um, but whether he actually abused Virginia Duffrey. I mean, they are the only two people I think who could say one we or the other. And why wasn't this

claim barred by the statute of limitations. Well, there is a law that was passed in New York at UM that extended the time for people who were um sort of childhood victims of sexual abuse to bring claims and that's actually why Duffrey, I think sued when she did UM these claims that she's she's made them publicly before. UM. But but yes, she specifically references the fact that New

York passed this law. I think in the wake of UH, you know, I think, like Harvey Weinstein and some of the other me two cases, do you know why she wasn't called to testify against Maxwell? Well, I don't know why specifically. UM. I think there are potentially you could you could see that there might have been issues with some of the testimony that other witnesses had brought up.

There was one witness who mentioned that Gruffrey was the one who brought her into Maxwell and Epstein's world for instance. UM so and and this is something that Andrew has alluded to and even more publicly. I guess Alan Dershwitz, who Virginia drew for his o sol suing and accusing of similar conduct, though he has denied it, UM has aggressively raised that fact in his defense, saying that that

this shows that she's culpable in her own way. In the settlement, he admitted to no wrongdoing, but his tone was quite different from what we've heard from him before describe a tone that was conciliatory, I I thought, in the sense of um, you know, compared especially to the language in his motion dismissed last October and in the more recent UM answer formal answer to the to the complaint, which he only had to file after losing on the motion to dismiss, where he specifically said he was going

to raise these defenses like consent. Uh. He specifically raised legal tense of unclean hands, um, you know, basically suggesting she she was as fault in this as well. She's not you know, a blameless person in in in in her own sexual abuse, which um, you know, it's pretty

harsh defense to bring up and and um. In this this latest statement, he is commending her for her bravery and you know, and and saying, you know how much sympathy has for for all the victims, and you know, part of the agreement is that he's going to make a substantial donation to her charity, which is UH is supposed to support victims rights. The Telegraph in the UK is reporting that the sum will be more than twelve billion British pounds, which is more than he supposedly has.

I mean, we've certainly reported that his his net worth, at least I believe it was some years ago, was estimated at five or six million pounds um. You know, I certainly seen the British papers have suggested that Buckingham Palaces is paying for this. So I don't know where that money is coming from um or in fact, whether

that's that amount is accurate. Okay, thanks Tony. That's Bloomberg Legal editor Anthony Lynn counterfeits Gerald's former global co head of equities helped violate SEC rules on recording commissions on trades. That was a jury's verdict after a week long trial at which Adam Matta Such and other traders trying to cast blame on a permissive culture at the firm. Joining me is Bloomberg Legal reporter Crystal Mesh. What was he on trial for? So he was on trial for, It's

kind of interesting. He was not. He's not accused of violating rules himself. He's accused of helping the firm avoid SEC rules that you know require broker dealers to provide detailed compensation information so that you know, customers and regulators whoever can identify who's bociated with what trades. So was the culture of Cantor on trial as well, not really. There have been a lot of you know, UM stories about Cantor over the years and its culture UM, so

that kind of loomed over it a little bit. But this was more of a This is more of a case about um, you know, compensation, and it's it's a rare look into you know, how you know, Wall Street firms are compensated and how compensation works, and it's just something you don't see a lot of the SEC cases. If they bring criminal charges along with them, they go to trial, but rarely do we get SEC cases that go all the way to trial like this. So it was very revealing about how they pay people and what

they how they distribute commissions and things like that. Because so that was probably the most impressing part about it tell us about who the SEC sued initially. So they initially sued Mattasich and another trader, Joseph Ludovico, who was one of the sales traders who split commissions with him.

Ludovico UM had paid Manasuch at least fifty eight thousand dollars in one year, so he was one of the leading people that split these commissions with it, and it was actually his testimony to Finra that tipped everybody off to this commission splitting scheme that they were doing. He testified at the trial and he kind of backed up what Manisi should argued is that this was kind of an open secret that everyone exchanged personal checks on the

desk open. It was not anything that was hidden. Ludovico settled with the SEC. Why didn't settle, Well, that's a very good question. Um, you know, that would be one of the first questions I would ask him. Um. You know, his lawyers decline to comment after the case other than to say, you know that they're considering there their next options, which you know could indicate an appeal, um. But it's

almost a reputational thing. They weren't really um seeking any anything other than a monetary fine and you know, an injunction blocking him from violating this rule again. But he's not at the firm anymore. So that's kind of I think this was just more him trying to maintain its reputation and fight the SEC. His lawyers argued that, you know, he was a scapegoat, that he was thrown under the bus for something that was done regularly. Um. By other

traders and other employees at Cantor. What's wrong with this? Well, the problem is is that this has been going on since the sect rule of the issue was dated back

to two thousand one. UM. But Cancer traders never really got any guidance on this and it wasn't really necessarily known as you know, the years went by and you know, firms were required to track things more closely, you know, reveal more of their communications, you know, as electronics communication kind of makes its way in the wall street, which has done over the past twenty years, which these allegations

date back to. You know, the more and more they have to comply with these rules, the more and more they start to push out people who are allegedly didn't comply with them. So he had other traders testified that

this was done routinely at Cantor. Yes, they all said that they So nobody really said anything to the people about this rule until two thousand four teen when the chief compliance officer, who also testified it at the trial, UM, you know, issued a memo saying you can't share um split, you know, any kind of pay with any other employees that Cancer in connection with official business. So you know, after that they got it just kind of stopped. But the traders who got up all said that they thought

that that was a new policy. They had not aware that they could not do this before. But there was also some testimony that some of these other arrangements where you know, commissions were split or something like that, UM either went through some sort of approval channels UM or you know, we're unofficially condoned by the firm. So what was that issue at trial was something that happened before.

In other words, this wasn't ongoing. No, it stopped in two thousand fourteen, but they didn't pick up their probe in two thousand eighteen, and that's when it appears that they allowed him to resign. It seems a little odd to bring this to trial. I mean the SEC, like I said, all the SEC cases get settled, so and you know they don't the government doesn't tend to give up a lot of time UM, and especially the SEC

doesn't get a lot of these cases. Look if these cases, if an SEC case is a fairly um substantial case, it's probably going to result in criminal charges. We saw that today with another case. So you know, when the SEC has its own case they fight and um, Mattafitch did not give up. He fought the whole way through. This is just civils. Do we know how much he's facing and fines We don't. That still has to be determined by the judge. And what did Cantor pay and fines?

Canner paid um one point to five million to resolve the claims without admitting or denying wrongdoing. Thanks for being on the show, Chris. That's Chris Dalmash, Bloomberg Legal Reporter. And that's it for this edition of The Bloomberg Law Show. Remember you can always get the latest legal news on our Bloomberg Law podcast. You can find them on Apple Podcasts, Spotify, and at www dot Bloomberg dot com, slash podcast Slash Law, and remember to tune to The Bloomberg Laws Show every

week night at ten p m. Wall Street Time. I'm June Grossow, and you're listening to Bloomberg