In Palmer v Alalaakkola  NZHC 2330 (September 7 2021), the New Zealand High Court ruled that copyright in an artistic work qualifies as relationship property under the Property Relationships Act 1976 (PRA).
Background to the case
Ms Alalaakkola and Mr Palmer were married for 20 years. During this time, Ms Alalaakkola created a number of original artworks. When the parties separated, the question arose whether the copyright in the artworks qualified as relationship property and should therefore be shared equally between the parties.
The PRA and Copyright Act
The PRA recognises the equal contribution of husband and wife to a marriage and prescribes how the property of married couples (i.e. the relationship property) is to be divided up when the couple separates. Section 2 of the PRA broadly defines ‘property’ as including “real property, personal property, any estate or interest in any real property or personal property, any debt or any thing in action, or any other right or interest”.
Section 11 of the PRA states that on the division of relationship property under the Act, each of the spouses or partners is entitled to share equally in the property. The equal sharing presumption may only be displaced in extraordinary circumstances that make equal sharing repugnant to justice.
Section 14 of the Copyright Act provides that copyright is a property right that exists in original literary works, artistic works, films and musical works. The Act grants owners of original works the exclusive right (copyright) to do certain things in relation to these works. Usually, copyright vests in the author of the work and protects an individual’s form of expression.
District Court decision
In March 2020, the Blenheim District Court ruled that the copyright in the artworks belonged solely to Ms Alalaakkola and did not qualify as relationship property, because:
“… the artistic skill that rests in the applicant to create the art is a personal skill or qualification particular to her, and a skill which she had prior to the relationships, that it remains her separate property. This approach is consistent with s 16 of the Copyright Act which vests the copyright in the author of the art.”
The court stated that even if copyright in the artworks did qualify as relationship property, it would not exercise its discretion to transfer the copyright to Mr Palmer, because the transfer:
- Could put Ms Alalaakkola in competition with copies of her own artworks, as she would have no control over the number of prints produced by Mr Palmer and the cost at which he may sell them; and
- Would be contrary to the clean break principle encompassed in the PRA and could potentially bring the parties into conflict throughout the life of the copyright.
Consequently, the court held that although Mr Palmer would receive a number of the paintings on division on the relationship property, he would not be receiving the associated copyright in the paintings.
High Court decision
Mr Palmer successfully appealed the decision to the High Court, where it was held that the copyright in the artworks were relationship property and therefore subject to division under the Property (Relationships) Act 1976 (PRA).
As Ms Alalaakkola created her artworks during the course of the relationship, it was found that the subsequent copyright in those works were relationship property. In support of this finding, Isac J stated:
“…considering the breadth of what has been historically classified as relationship property under the Act – an option to purchase, fishing rights under the Fisheries Act 1983, rights to compensation under the Accident Compensation Act – it is not a stretch to classify copyright as relationship property”.
In consideration of whether the exception to the equal sharing presumption applied, Isac J pointed out that the terms ‘extraordinary circumstances’ and ‘repugnant to justice’ imported a very high standard. As such emphatic language was rarely used in legislation, its use indicated that the presumption of equal division should only be departed from in rare circumstances.
On the facts, it was found that the case in question was not so out of the ordinary that an unequal division could be ordered. The fact that the marriage lasted for 20 years made it especially difficult to demonstrate that it would be repugnant to justice for there to be an equal sharing of assets.
Consequently, it was held that Mr Palmer was entitled to receive half the paintings and associated copyright created during the relationship. Valuation of the paintings would be required to ensure an equal distribution by value. It would be possible for some, none or all of the works to be vested in one party, with an adjustment to the division of the proceeds of sale of the family home in order to obtain overall equity of division.
It is somewhat surprising that this is the first time the New Zealand courts have been required to consider the interaction between the PRA and the Copyright Act 1994.
The Palmer v Alalaakkola case confirms that copyright created during the course of a relationship will qualify as relationship property. Unless the parties have contracted out of the PRA or the exception to the equal sharing presumption applies, any copyright in original works will be shared equally between the parties upon separation.
This article was first published by Managing IP. Kathleen Henning is Managing IP’s international correspondent for New Zealand.