Rey v. Lafferty

Margret Rey (plaintiff) was one of the authors of and the holder of the copyright to the Curious George children’s books. In 1977, Rey granted Milktrain Productions (Milktrain) an option to produce and televise animated Curious George films. Milktrain approached Lafferty Harwood & Partners and its president, Richard Lafferty (collectively, Lafferty) (defendants), about financing the project. After financing was in place, Rey granted Milktrain and Lafferty a limited license to produce 104 four-minute film episodes based on the Curious George character solely for broadcast on television. The license did not mention ancillary product rights. A revised version of the license executed in 1979 recited that the original license had granted Milktrain and Lafferty the right to produce and distribute animated Curious George films for television viewing and again made no mention of ancillary product rights. There was also no grant of rights in technologies yet to be developed and no reference to future methods of exhibition. Production of the episodes was completed in 1982, and in 1983, Rey and Lafferty signed an ancillary-products agreement that gave Lafferty the right to produce books, films, tapes, records, and video productions of the 104 Curious George episodes. In exchange, Rey would receive one-third of the royalties on the licensed products. Lafferty then assigned its licensing rights to Curgeo Enterprises, which in turn licensed the television episodes to Sony Corporation, which transferred the images from television film negatives to videotape. Rey filed suit, alleging in part that Lafferty’s production of the Sony videos was not authorized under the original license agreement and was instead governed by the ancillary-products agreement, which terminated in 1989. The district court entered judgment in favor of Rey on that question and awarded her royalties under the ancillary-products agreement. Lafferty appealed.