Copyright ownership in advertisement film production supports classification as a works contract, not a sale of goods.

A contract for producing and supplying advertisement films was treated as a works or service contract rather than a sale of goods liable to sales tax. The arrangement required the producer to make the films to the advertiser's script and directions, with final approval and any reshooting at the producer's cost. Under the Copyright Act, a cinematograph film includes its sound track, and where it is made for valuable consideration at the instance of a person, that person is the first owner of the copyright absent a contrary agreement. On these facts, the advertiser owned the exploitable rights in the finished films, and the sale tax assessment failed.

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Issues: Whether the contract for production and supply of advertisement films was a works contract or a contract of sale liable to sales tax.

Analysis: The contract was for production of cinematograph films at the instance of the advertiser, according to its script and directions, with the finished film subject to approval and possible reshooting at the producer's cost. Under the Copyright Act, a cinematograph film includes its sound track, copyright in such a film carries the exclusive right to make copies, exhibit and exploit it, and where a film is made for valuable consideration at the instance of a person, that person is the first owner of the copyright in the absence of a contrary agreement. On these facts, the advertiser, not the producer, had the ownership and exploitable rights in the finished films. The earlier decision treating a similar film-production arrangement as a service contract was followed, and the photographer analogy was rejected because the decisive feature here was the statutory copyright ownership in the advertiser.

Conclusion: The transaction was not a sale of goods but a works/service contract, and the sales tax assessment failed.

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