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An oral agreement – is it worth the paper it isn’t written on? Commissioning copyright works.

 Summary

  • Binding legal agreements can be solely verbal or a combination of conversations and writing, such as emails.
  • But, if the parties disagree on the terms, they can be difficult to enforce.
  • When businesses commission copyright works, they normally do not receive ownership of the copyright unless this is in writing.
  • The commissioning party will usually receive a licence to use and reproduce the work in certain ways.
  • Courts have had to work out the scope of the licence if this has been left unsaid.
  • The best way to avoid such disputes is for the whole agreement to be set out in writing.

 

Oral agreements

Oral agreements (or contracts), where the parties agree only verbally, are legal agreements, but the problem comes when trying to enforce them – especially if the parties disagree about what was said.  Even if the parties do agree about what was said, what about what was left unsaid?  If the words don’t cover all issues necessary to make the agreement work, a Court may have to decide what the parties meant by looking at their conduct and the circumstances surrounding the making of the agreement.

Commissioning copyright works

It may come as a surprise to some, but when a business commissions a copyright work (eg a literary work such as a report, or an artistic work such as a photo or logo), the business does not normally own the copyright unless this is set out in writing.  Instead, normally, the business will receive a licence (or permission to use and reproduce the work). If the parties have not agreed on how the work may be used, a Court will typically consider that the work can be used for the purpose for which it was created, as the parties understood this at the time of making the agreement.

It is clear from this that it is much better to write down any agreement to avoid such disputes.

Case study

Facts

An example of how an oral agreement can go horribly wrong is found in a recent decision by the High Court.  A photographer took photos of properties for real estate agents for the sale or lease of the properties.  He was usually phoned by an agent, told the details of the property and asked to attend to take photos. Nothing was said about how the photos could be used.  The photos were used in various ways, including being uploaded to the realestate.com.au website (REA).  From there the photos were also posted to a website of a different company, RP Data, that provided historical real estate information to agents.

The REA website contained terms including that each estate agent gave “an irrevocable, perpetual, world-wide, royalty free licence” of uploaded content to REA for its business purposes, and it could sub-license (allow others to use the content).  As is usually the case with website T&Cs, the agents could not change these terms.

Dispute

The photographer sued REA and RP Data for copyright infringement, claiming that the licence he gave the estate agents was limited to the marketing campaigns and did not include any historical use of the photos after the campaigns ended.  They argued that each agreement where the agent commissioned the copyright work included a term that the agents were able to grant sub-licences to REA on its usual T&Cs.

The photographer lost before a single Judge of the Federal Court and then appealed and won before the Full Court of the Federal Court (three Judges). Readestate.com.au and RP Data then appealed to the highest court in Australia, the High Court, and they won.  Imagine the costs involved in this dispute!

High Court decision

The High Court held that there was no copyright infringement because the photographer knew at the time of making each agreement with each estate agent that they uploaded his photos to the REA website and that this was central to the marketing of the properties.  He also knew that his photos were uploaded to the RP Data website.  However, for four years the photographer did not object to this.

When an agreement does not specify everything that it needs to work as an agreement, and the parties disagree and go to Court, the Court will look at what was said or written (eg in emails) as well as the circumstances surrounding the transaction at the time the parties made their agreement.  The Court does not look at what one party actually believed about the transaction (their subjective intention) if they did not tell the other party their thoughts.  So, one party may believe that the agreement means X, but the Court will look at everything objectively and may hold that the agreement means Y.

In this case, the photographer’s knowledge of what was done with his photos and his failure to object were the main reasons why the High Court found against him. What a copyright owner knows about how their work is to be used when they reach an agreement is critical to the scope of the licence they give.

Another case study

Facts

A different result was reached in an older case about an artist who was commissioned by an advertising agency to supply drawings for Weiss, a fashion brand. The parties disagreed about what was said.  The agent claimed that he said that they were trying to put the artist’s drawings “on everything from towels to T shirts” and she would be paid additional fees for “merchandising rights”.  He followed it up with a letter referring to payment for “all rights” for her drawings.

However the Judge did not believe the agent’s evidence and preferred the artist’s version of the conversations.  She was only aware that the payment was for use of her drawings on shopping bags, caps and T shirts used as promotional items for Weiss clothing.

Weiss Art (a separate company to Weiss about which the artist knew nothing) used the artist’s drawings on a wide range of merchandise that had nothing to do with Weiss clothing.  These included towels, sheets, deckchairs, greeting cards etc.

Decision

The artist sued for copyright infringement and won.  Unlike the photographer in the case above, the artist was not aware of the intended uses of her copyright works at the time that she was commissioned to produce them.

Solution

Both of these court cases could have been avoided if the parties had set out their agreement in writing, including what could and could not be done with the copyright works.

The real estate agents in the first case repeatedly engaged the photographer to take photos of properties.  Each agent could have had a template agreement setting out the terms on which they commission copyright works (which would include uploading photos to realestate.com.au on the T&Cs of that website). The details of the photographer and property, as well as the price and deadline, could be completed for each new job.

It seems that, in the second case, the agent was trying to hide from the artist the full extent of the intended use of her drawings.  This is never a good idea when commissioning copyright works.  If you wish to use copyright works in a certain way, you must tell the copyright owner.  Alternatively you may seek from the author:

  • a written copyright assignment (which provides maximum flexibility); or
  • a very broad licence – like the one on the REA website (preferably in writing).

 

I can assist clients with drafting copyright licences and assignments, as well as other commercial agreements. https://ipbymargaret.com.au/contact/

This blog provides general information only, and is not intended as legal advice specific to your circumstances.  Please seek the advice of a legal professional if you have any particular questions.

Liability limited by a scheme approved under Professional Standards Legislation

© Margaret Ryan, Melbourne, Australia, 2023

An oral agreement – is it worth the paper it isn’t written on? Commissioning copyright works.