The Contract Drafter as Copyright Violator

[Update: Go here for my article on this topic.]

A forthcoming Missouri Law Review article by Davida Isaacs—it was featured in a recent item on the Wall Street Journal’s Law Blog—discusses whether one could bring a claim for copyright infringement based on unauthorized copying of litigation documents. This article was also mentioned in an item by Gordon Smith on Conglomerate Blog regarding whether contracts benefit from copyright protection.

When trawling the “material contracts” filed on the SEC’s EDGAR database, I’ve sometimes asked myself whether I would be committing a copyright violation if I were to download a contract from EDGAR, make minor modifications, and bill a client for it. Consequently, these blog postings caught my eye.

Although the item on Conglomerate Blog and the related comments suggest that such copying is permissible, I don’t think there’s much argument that contracts are entitled to copyright protection. 1-2 Nimmer on Copyright § 2.18[E] asserts as much: “There appear to be no valid grounds why legal forms such as contracts, insurance policies, pleadings and other legal documents should not be protected under the law of copyright.”

That doesn’t mean that every contract is so protected. If I copy someone else’s contract verbatim, changing only the party names, dates, and other factual information, a court would likely find the contract insufficiently original and creative to support a claim of copyright violation if someone in turn were to copy my copy.

But it doesn’t take much to show originality and creativity. One step up from outright copying is lifting from precedent contracts, and tweaking and rearranging into a new contract, standard provisions of the sort that have been used, with minor variations, in countless transactions. Such a contract could plausibly be considered, for copyright purposes, to be a compilation, and as such would be entitled to copyright protection.

There are two ways to be more creative, for copyright purposes, in drafting a contract. First, you could prepare a contract that reflects a new kind of transaction, or a variation on an existing transaction. (Copyright would of course only cover expression of that innovation rather than the innovation itself.)

In his article Copyright Protection for Attorney Work Product: Practical and Ethical Considerations, 10 J. Intell. Prop. L. 255 (2003), Judge Stanley F. Birch, Jr., recounts a conversation with a lawyer from a firm that was in demand as the leader in preparing documentation for a particular kind of real estate transaction. That lawyer complained how another law firm had copied wholesale his firm’s documentation; Judge Birch recommended that the lawyer “sue the bastards,” and it does seem that the aggrieved firm would have been able to make a strong case for violation of copyright. (Judge Birch recounts how the offending firm ultimately compensated the other firm for use of its work product.)

The second way to add creativity to a contract would be to refine its language so that it’s noticeably different from traditional contract language. In this context, consider the case American Family Life Insurance Co. of Columbus v. Assurant, Inc. (N.D. Ga. 2006). (This case is discussed in an article in a Foley & Lardner LLP newsletter, and that article was mentioned on ContractsProf Blog.) American Family Life Insurance Co. of Columbus (better known as AFLAC) devoted significant resources to drafting supplemental insurance policies in a “narrative” style that it though customers would find easier to read. The defendants produced their own supplemental insurance policies, some early versions of which were verbatim copies of AFLAC’s policies. AFLAC sued, claiming violation of copyright. The court held that AFLAC had a copyrightable interest in the new narrative-style policies and that the defendants had closely copied the narrative-style benefits sections of two AFLAC policies. The court granted summary judgment and a preliminary injunction in favor of AFLAC.

This case suggests that overhauling the language of a contract so as to make it more readable than run-of-the-mill contract language would create a copyrightable interest in that new language. As such, this case is of more than theoretical interest to me, because revising a contract to incorporate the recommendations that I make in A Manual of Style for Contract Drafting would represent an instance of this kind of overhauling.

Conglomerate Blog suggests that even if contract language is protected by copyright, unauthorized copying should be permitted as “fair use.” But there’s little to support this conclusion. For example, the Missouri Law Review article argues that unauthorized copying of litigation documents doesn’t diminish their market value. Leaving aside the question of whether that’s in fact the case with litigation documents, it’s not necessarily the case with contracts. If a law firm is able to produce for its clients contracts that are distinctive in terms of substance or language, the law firm would derive a competitive advantage that it would lose if its competitors were able to copy those contracts with impunity.

But I’m not suggesting that corporate lawyers should stop copying from contracts they find on EDGAR or elsewhere. It’s a safe assumption that the vast majority of contracts are either outright copies that aren’t entitled to copyright protection or contracts that derive copyright protection from their status as compilations. Because any compilation contract would resemble countless other contracts, a law firm would likely have a hard time demonstrating breach of copyright of its compilation contract. And even if were able to do so, its damages would likely be nominal, because compiling such contracts is a relatively quick scissor-and-paste exercise. So you should feel free to copy a run-of-the-mill compilation contract, not because doing so constitutes fair use, but because the likelihood of someone knowing of that copying and having any interest in preventing it are exceedingly remote.

But what if you’ve invested significant resources in developing a form of contract that you plan on selling repeatedly? What if, for example, your business consists of making available to law firms an online document-assembly engine that allows their lawyers to generate high-quality corporate documents very quickly? You might want to consider implementing a copyright protection program.

One element of any copyright protection program would be to include a copyright notice in each iteration of a given contract. A notice wouldn’t be necessary—innocent copying is not a defense to copyright infringement—but it would put others on notice of your copyright and would likely dissuade copying. It would be best to place the copyright notice in the body of the contract, among the “miscellaneous” provisions, rather than putting it in a footer, given that footers are often omitted when a contract is copied. In particular, a copyright notice that’s in a footer would likely be omitted when a contract is filed on EDGAR.

Another component of a copyright protection program would be to devise electronic searches that can be relied on to retrieve copies—authorized or infringing—of your contract and little or nothing else. You’d want to run the searches periodically on EDGAR, Lexis, Westlaw, and the Internet.

Of course, I’ve yet to hear of anyone implementing a copyright protection program for contracts. But in many respects contract drafting is ripe for change, and copyright protection could perhaps be included among the possible avenues of innovation.

Posted in Process | 3 Comments

  • Michael Fleming

    Need we add yet another group of things that have in the past been deemed to be public resources and turned into property? I won’t argue with Nimmer or the law in general (although, just to take back my own promise, one wonders about the copyrightability of certain contract phrasing that really couldn’t be said in any appreciably different manner — contracts are functional more than they are prose). But, at least on policy reasons, is this where we want to take the practice of law? We learn from our history. Sometimes that’s to the bad (as Ken frequently points out when we carry forward anachronisms like ‘represent and warrant’). But, on the whole, I think this is for the good. If I had needed to worry about copyright when I was beginning my long journey of learning how to draft (which will continue until this ticker stops ticking), I would have been severely undermined. My personal ‘form book’ of today is a conglomeration of things I’ve done, that I copied from others, and that my previous employers may well ‘own’ from a copyright perspective. If I were tasked with analyzing the copyrights in such I would probably go get a new career first.

    Even if we can claim these things as property, shouldn’t we be encouraging the profession as a whole by encouraging sharing and learning? That concept works well within the common law (whose jurists are not claiming copyright in their opinions to my knowledge, even those state judges who conceivably could do so) — And it should carry through to much of the rest of the practice as well.

    (I’m willing to concede that we shouldn’t be copying each other’s firm marketing Web sites, although you’d think that every firm has copied every other firm’s site from the looks of their things…)

    (And, I fully realize that the above almost parrots the arguments of the open-source community in software — So be it.)

  • Ken Adams

    Michael: I might quibble with a couple of the points you make. For example, you draw a distinction between functionality and prose that you might be hard-pressed to justify.

    But more generally, as I say in my post, I’m not suggesting that lawyers should as a general matter stop copying contracts. Instead, I’m saying that if a given law firm devotes resources to producing contracts that are original and creative, it’s clear that those contracts would be entitled to copyright protection. Sure, it would be nice to be able to copy them with impunity, but that’s the case with any work protected by copyright.

    And as regards encouraging sharing and learning, that could be used as an argument for vitiating copyright across the board. That one can secure copyright protection suggests that a more compelling policy argument is that one wants to encourage those who devote resources to creating original and creative works.

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