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The final say on who owns copyright in works created during a relationship

The Supreme Court, New Zealand’s final court of appeal, has issued their decision on the interesting issue of whether copyright in artworks, as opposed to the artworks themselves, is relationship property under the Property (Relationships) Act 1976 (the PRA) following the breakdown of a marriage (or relationship of a similar nature).¹

In this case, the parties were married for 20 years.  The Appellant, Ms Alalääkkölä is an artist and her paintings were the family’s primary source of income during the relationship.  At the time of separation of the parties, there was a stock of unsold paintings that Ms Alalääkkölä had created during the relationship which were the artworks in issue. 

There was no dispute that the physical artworks themselves were relationship property. The Copyright Act 1994 states that copyright is a property right.²  Obviously there is an ongoing future earning potential tied to the ownership of copyright and it was this, and her reputation, that the Appellant was keen to protect by arguing that the copyrights were not “relationship property” under the PRA to be divided between the parties. 

Outcome

The Supreme Court agreed with the Court of Appeal that the copyrights in the original artistic works were “property” for the purposes of the PRA.  The Supreme Court also found that that they may be classified as relationship property.

The Supreme Court directed that the proceeding be remitted to the Family Court to decide the value and distribution or sale of the artworks and copyrights in them, with the Supreme Court giving some guidance on how different categories of works might be treated in that valuation. 

Background

The proceedings began in the Family Court, which found that copyrights in the artistic works were not relationship property for the purposes of division of property following the parties’ separation.  On appeal to the High Court, the Court found that copyright in the artistic works created during the relationship was relationship property to be included in the asset pool to be divided between the parties.

The default position under the PRA is that the parties are entitled to share equally in the relationship property.  On appeal to the Court of Appeal, the Court determined that the copyrights should remain in Ms Alalääkkölä’s exclusive legal ownership, with her former partner receiving a compensatory adjustment from other relationship property to ensure an equal division of the total pool of relationship property. 

We have discussed the Family and High Court decisions, and the Court of Appeal decision in more detail in previous articles. 

There is no right of appeal from the Court of Appeal to the Supreme Court.  It is necessary to obtain the leave of the Supreme Court to file an appeal and any appeal is limited to an approved question.  Ms Alalääkkölä sought and was granted leave to appeal to the Supreme Court for the following approved question - was  the Court of Appeal correct in their answers to the following two questions of law:

1. Are Copyrights “property” for the purposes of the PRA?; and
2. If the Copyrights are property, how should the works and rights be classified in terms of the PRA?

The Supreme Court extended the grant of leave to the question of what orders should be made consequential upon the answers given to the questions to be answered by the Supreme Court.³

The appeal to the Supreme Court

This proceeding has centred around the meaning of the term “property” under both the Copyright Act and the PRA and the term “relationship property” under the PRA.

As well as categorising copyright as a property right, the Copyright Act recognises certain moral rights which vest in the author in respect of artistic works, namely:

• the right to be identified as the author – the right of attribution);
• the right to object to derogatory treatment of the work – understood as treatment of the work that is prejudicial to the reputation or honour of the author;
• the right not to have works falsely attributed to them or falsely represented as an adaptation of their work; and
• the right to privacy of photographs and films which were taken or made for private and domestic purposes.⁴

While these moral rights may be waived, unlike copyright, they cannot be assigned.⁵ 

The Supreme Court found that:

These provisions confirm that, as the Court of Appeal held, copyright is personal property in New Zealand. The Act carefully distinguishes the rights which together comprise copyright from moral rights, providing that the former are assignable and the latter not. This is not to deny that, as Ms Alalääkkölä says, each artwork is an expression of her personality and product of her skill. It is to recognise that the Copyright Act fosters creativity partly by recognising moral rights in creative works and partly by conferring economic incentives in the form of property rights which authors may exploit for gain.⁶

The PRA defines property to include real property, personal property, any interest in any real property or personal property and any other right or interest.  The term relationship property is defined to include “all property acquired by either spouse … after their marriage …began”.  To avoid any such property being treated as relationship property, the partners would have to contract out of the application of the PRA by agreement before the marriage, civil union or de facto relationship.⁷

The Supreme Court found that copyright fits the PRA definition of “property” as “personal property” and that there was no reason to exclude intangible personal property from the definition.  Further, the Court found that if copyright were otherwise treated as an interest fixed in the physical artworks, it would still meet the definition as “any estate or interest in any ... personal property”.⁸

The Supreme Court addressed the argument that copyright is not property because it is a result of the creator’s expression of personality and skill.  The Court considered that to treat copyright as property recognised the value of the bundle of economic rights that copyright embodies.⁹

The Supreme Court also addressed the argument that treating copyright as relationship property would deter creative activity by conferring property rights on the non-author spouse.  In the Court’s view, that seemed unlikely for a number of reasons including that a person enters the relationship willingly and hopes it would endure, the relationship may at one time have fostered creativity, the partner may have helped to monetise it or may have contributed in ways which allowed the author to create the works that brought the copyrights into existence.  Under the PRA ownership remains with the author partner unless and until a court assigns property to the non‑author partner (or the parties agree otherwise).  Further, to the extent that an author fears a relationship property claim they can contract out of the PRA.¹⁰

In this case, the Supreme Court could understand the reasonable fears of Ms Alalääkkölä of derogatory treatment of the artistic works and breach of her moral rights if copyright in any unpublished work was distributed to her former partner under the PRA and exploited in a way that was profitable to him but was a cost to her reputation and future earning potential.¹¹  This was identified as a complication to any valuation made for the purposes of division of property under the PRA.  The Court noted that this task would be easier if the parties agree that the works and copyrights should remain with the author, allowing her to manage the works and copyrights as she sees fit.¹²

The Court was of the view that these considerations suggest that courts should design orders to minimise conflict in the distribution of property and unnecessary harm to the author’s future reputation and income.¹³

In relation to the thorny issue of valuation, the Supreme Court offered guidance for the Family Court and found it appropriate to adopt Ms Alalääkkölä’s four categories of artistic works:

1. incomplete, unsuitable or damaged works (likely to be reused as canvases for new works);
2. her private collection of paintings comprising a personal diary of her life and including nudes and some works she now considers culturally insensitive;
3. one-off unique paintings (some commissioned) to be sold on the basis that they would remain the only copy in existence with Ms Alalääkkölä retaining copyright but undertaking not to exploit it; and
4. works which have been, or were intended to be, the subject of multiple copies where Ms Alalääkkölä retains the copyright for exploitation.¹⁴

The Supreme Court proceeded on the basis that the copyrights in issue are confined to those in any unsold physical works.

The Court was sympathetic to the notion, that as the artist, Ms Alalääkkölä enjoys the right to decide when a given work is complete, whether it is fit for public viewing, and when it should leave the private domain.  The Court considered that the right to decide whether and when to disclose any work to the public should be respected so far as it can be exercised consistent with a just division of relationship property.  Therefore, in this case, a just division would be equal by value, and as long as that is achieved the relationship property may be distributed in a manner which protects Ms Alalääkkölä’s control over previously unpublished works that she does not now wish to publish. 

The Supreme Court directed that any works that the Family Court finds to fall into the first category should be valued on the basis that they will not be released to the public but will remain in the private domain.  The Court recognised that this may mean that the value of these words, if any, is as canvases that Ms Alalääkkölä may reuse for future works.¹⁵ 

In relation to works falling into the second category, the Supreme Court directed that they should also be valued on the basis they will not be sold or otherwise disclosed to the public during Ms Alalääkkölä’s lifetime or by her executor.  This would affect the market value, if any, of this category of works.¹⁶

The Supreme Court directed that works falling into the third category should be valued on the basis that they will remain the only copies in existence.  Therefore, any value in the copyright is exploited by selling the painting as a work which will remain the only copy in existence.  In other words, the value of the copyright should be reflected in the price of the physical work.¹⁷ 

Finally, in relation to works falling into the fourth category, the Supreme Court directed that they should be valued on the assumption that the works will be sold on the basis that the copyrights may be exploited.¹⁸

The Supreme Court made the following observations about the valuation of works falling into the third and fourth categories.¹⁹  The Court recognised that the valuer’s opinion of the value of the artworks as at the valuation date may be reduced if they were all offered for sale at once.  In other words, the valuation may need to recognise that any actual sales would take place over time, which would affect the value of the works and copyrights at the valuation date.

Further, there was evidence that it will be difficult to value the works accurately.  For that reason, the Supreme Court did not wish to exclude the possibility that, when presented with a valuation, either party may invite the Family Court to direct that some works be sold to establish market value, rather than accept a valuation that they believe is wrong. 

The appeal was dismissed and the proceeding remitted to the Family Court to decide the value and distribution of the artworks and copyright. 

Final thoughts

Obviously, the finding that copyright is property is straightforward given the wording of the Copyright Act.  

Whether copyright then becomes relationship property seems to be dependent on the type of works in issue and the surrounding circumstances.  In this case, the copyrights were found to be relationship property, but I note the Supreme Court's finding that copyright may be classified as relationship property.  This leaves the door open for a different finding in another case. 

As canvassed by the Supreme Court, the valuation of any copyrights found to be relationship property will be the tricky issue.  For now, that is an issue to be considered and decided by the Family Court.  

Elena Szentivanyi – March 2025

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