In this day and age more and more business is transacted over the internet and by e-mail, including contract negotiation. However, practitioners should be cautious because, in a novel ruling, a Federal Court recently held in a copyright infringement case that an exchange of e-mail does not fulfill the signed writing requirements of §204 of the 1976 Copyright Act. Given the rapidly developing ways of the internet marketplace, this may not always be the case. However, it is, for now, the only Federal case that appears to deal with this emerging technology issue.

The case was commenced by Corky Ballas, a U.K. resident, in New Jersey State Court as a contract case. Defendant, Gennaro Tedesco, a music producer, removed the case to the U.S. District for the Northern District of New Jersey alleging the case concerned ownership rights in Tedesco's copyrighted sound recordings. Plaintiff had alleged that the e-mails exchanged by the parties, combined with the payment of money by Ballas to Tedesco, either created a joint work, a work for hire, or a license of the copyrights to Ballas by contract. However, the Court held that defendants prevailed on their defensive copyright claim and were entitled to retain ownership of the sound recordings.

To understand the significance of the ruling and the care that must be taken in securing a signed, written agreement with the creator of a work before moving forward with a project, it is best to go back to the beginning.

Corky Ballas, is a competitor in the DanceSport industry, commonly known as ballroom dancing. Defendant, Gennaro Tedesco, is a music producer and defendant with a production company and recording studio. Tedesco was introduced to Ballas who was interested in having Tedesco produce his latest project, a CD for the competitive dance music audience focusing on music from the movie "Titanic." The CD was to be titled "Titanic Passion". Although the parties did not meet face to face, over the next several months they corresponded through computer e-mails.

The e-mails reflected that the parties discussed a deal whereby Ballas would pay Tedesco a fee for the creation and recording of the musical arrangements, production, mixing and mastering of the CD. Ballas suggested titles to be recorded and sent several checks as a down payment for Tedesco to start work on the project although Ballas did not actually participate in the recording process and only went to defendants' studio one time to hear how the recording sessions were progressing.

In July 1998 the parties exchanged drafts of a proposed final agreement through e-mails. Due to disagreements with various terms, the parties relationship ceased and negotiations ended before the project was finished.

Defendants went on to complete the recording project over the next several months. Thereafter, Tedesco obtained a certificate of registration from the United States Copyright Office for the finished sound recordings which he embodied on a CD entitled "Fire Vol.1." On or about November of 1998, Defendants began marketing that CD.

Once the action was commenced in State Court and then removed to Federal Court, plaintiff made his three arguments in an attempt to rebut the presumption arising from Defendants' primafacie case but the Judge found all three arguments to be without merit - 2 of the 3 because the e-mails did not constitute a signed writing.

First, the Court determined that the recordings were not a joint work because Tedesco, not Ballas, was the "author" of the recordings. Ballas' song and tempo suggestions were ideas, not copyrightable expression. Moreover, the Court found there was no intent to collaborate as joint authors. As to the issue of plaintiff's financial investment, a contribution must be one of authorship to constitute the contributor a joint author, and one who merely contributes financing should not, by reason of such fact, be entitled to any claim as a joint author.

Next, the Court determined that Ballas did not meet the rigorous test required under the case law to be deemed an "employer" of Tedesco (which looks, interalia, at skill, control, source of instrumentalities, method of payment and whether unemployment insurance and other employee benefits are paid), so the sound recordings could not have been "work-for-hire" without a signed, written agreement, which did not exist since the exchange of e-mails was the only written documentation in this case.

Finally, the Court determined that there was not an excluisve license from Tedesco to Ballas because there was no signed, writing. Not only was the series of e-mail correspondence ambiguous, but the e-mails were held not to meet the specific criteria of a signed writing as required by the Copyright Act to transfer any rights from Tedesco to Plaintiff.

Since a primafacie case of copyright infringement creates a rebuttable presumption of irreparable harm in the 3rd Circuit, and having shown a likelihood of success on the merits of their copyright claim, Judge Greenaway rescinded the State Court injunction against Tedesco and enjoined Ballas from any further use of Tedesco's copyrighted sound recordings. The money previously paid by Ballas to Tedesco was to be held in escrow pending a determination of damages and legal fees for Tedesco.

Originally published in Entertainment Law & Finance
Wallace Collins is an entertainment lawyer . He was a recording artist for Epic Records before attending Fordham Law School. 

Specializing in Entertainment Law & Intellectual Property Matters

Wallace E. J. Collins III, Esq.
250 East 39th St. (Suite 9K)
New York, New York 10016
Tel: 212 661-3656

Email: Wallace Collins

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