Cases: Copyright license must be in writing

The requirement that a copyright license be in writing doomed a distributor’s claim for rights to exclusive distribution, even though the parties had been performing under an oral agreement for several years, according to a new case from the U.S. Court of Appeals for the Fifth Circuit.

The case involved the popular VeggieTales children’s video series, which was created by Phil Vischer and owned by Big Idea Productions.  The videos were originally sold through Christian bookstores, but after they became popular Big Idea was approached by Lyrick Studios, of Barney and Bob the Builder fame.  Lyrick proposed to take over distribution of VeggieTales.  Its proposal provided that nothing would be binding until a final agreement were reached.

The parties continued to negotiate; Lyrick sent a fax outlining issues still to be resolved.  The parties finally spoke and the telephone and allegedly worked out all the details.  A 16-page contract was prepared but never signed.  The parties nevertheless proceeded, and Lyrick began distributing the videos.  A few years later, Big Idea decided to change distributors, and Lyrick sued, claiming breach of contract.  Lyrick won an $11 million jury verdict.

The problem with the contract claim, said the Fifth Circuit, is that an exclusive copyright license must be in writing to be effective.  At trial, Lyrick relied on an internal Big Idea memo which stated, “[W]e agreed over the phone to this contract. I would say that we have an agreement in force.”  Lyrick had never seen this memo until the litigation was in progress.  After looking at the meager precedent, the court held that such an internal memo was not sufficient to satisfy the writing requirement.  Faxes between the parties suggested that negotiations were still going on, and this memo was not intended either as a memo of the agreement or as a communication to the other party.  Therefore it did not suffice for a copyright license.  The jury verdict was reversed and the case dismissed.

Lyrick Studios, Inc. v. Big Idea Productions, Inc., 2005 U.S. App. LEXIS 16164 (5th Cir., August 5, 2005).