Wal-Mart learns a lesson in copyright licensing the hard wayApril 10, 2008

A story in yesterday's Wall Street Journal (via Bill Patry) illustrates how important it is for parties to a transaction to know what they're getting up-front.

Starting way back in the 1970s, Wal-Mart hired an outside company, Flagler Productions, to document various aspects of Wal-Mart's operations. Flagler produced videos of Wal-Mart corporate officers and directors, "often in unguarded moments." The original agreement to produce the videos was made with just a handshake, with apparently no written contract between the parties. In total, Flagler produced over 15,000 tapes over the course of over 30 years.

In 2006, Wal-Mart stopped using Flagler. As a result of losing this source of income, Flagler has now made its library of Wal-Mart video available to the public, and is seeking to sell its footage. Needless to say, Wal-Mart isn't happy about this turn of events.

How could this happen? In short, assuming there really is no written contract, Wal-Mart probably has no recourse. This is because under copyright law, in the absence of a written agreement to the contrary, the copyright in works created by an independent contractor is generally held by the independent contractor (in this case Flagler), and not by the client (in this case Wal-Mart) who hired them to produce the works. All the client gets is a non-exclusive license to use the produced work.

What this means here is that, under copyright law, Flagler is the owner of the videos, and is free to exploit the copyright in whatever way it sees fit. Flagler has already begun placing clips of the videos on YouTube. All this because Wal-Mart didn't get a written agreement up-front.

This situation all too frequently happens to businesses, simply because they don't realize that when they hire an independent contractor, they probably aren't getting the exclusive right to use that contractor's work unless they agree to that in writing up-front. This can come up in situations from hiring someone to do your company's web design, to having a marketing firm prepare brochures or other promotional materials, or having a computer programmer write some custom software.

Situations like these face businesses every day, which is why it's important to consult with competent intellectual property lawyers early on so you make sure not only that you get what you pay for, but that you know what you're getting.

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