Character IP Rights: Copyright, Fair Use, and AI Characters

Character IP rights come from three separate bodies of law working together: copyright protects the creative expression that makes a character original, trademark protects the character’s role as a brand identifier, and the right of publicity protects a real person’s identity when it has been folded into a character. Each covers a different dimension of what makes a character valuable, and losing one does not necessarily mean losing the others. Ownership sits alongside these protections as its own question, governed largely by whether the character was created by an employee, a contractor, or an independent author, and whether any rights transfer was put in writing.

What Copyright Actually Protects in a Character

A character qualifies for copyright when it is recorded in a fixed form and is developed enough to stand on its own. The Copyright Act covers original works captured in a tangible medium, from a hand-drawn sketch to a screenplay to a video game file.¹ The harder question is whether the character inside that work is distinct enough to be protected apart from the story it appears in.

The foundational case is Nichols v. Universal Pictures Corp., a 1930 Second Circuit decision. Judge Learned Hand wrote that the less developed a character is, the less it can be copyrighted, calling that “the penalty an author must bear for marking them too indistinctly.”² A generic archetype like “the wise old mentor” is an idea, not expression. Once a character carries a specific personality, history, and set of recognizable traits, it crosses into protectable territory.

The Ninth Circuit turned that principle into a concrete three-part test in DC Comics v. Towle, the 2015 Batmobile case. Under that test, a character must have physical as well as conceptual qualities, must be sufficiently delineated so that audiences recognize it whenever it appears, and must be “especially distinctive” with unique elements of expression.³ The character does not need to look identical in every appearance. Batman has been redesigned many times. But it does need consistent, identifiable traits that carry across works. An older and narrower “story being told” standard from Warner Bros. Pictures v. Columbia Broadcasting System only protected characters that essentially were the story rather than vehicles for the plot; the Towle test has largely overtaken it in circuits that have addressed the question.

When someone infringes a protected character, statutory damages run from $750 to $30,000 per work at the court’s discretion, with a ceiling of $150,000 for willful infringement.⁴ The owner can elect statutory damages instead of proving actual losses, which matters in character cases where the real-world harm from a knockoff product or unauthorized adaptation is hard to calculate.

How Long Copyright Lasts

Duration depends on who created the character. For a character created by an individual author on or after January 1, 1978, copyright runs for the author’s life plus 70 years. For joint works, the clock runs from the death of the last surviving author plus 70 years.⁵

Characters created as works made for hire, the standard arrangement at major studios and publishers, run on a different clock: 95 years from first publication or 120 years from creation, whichever expires first.⁵ That is why corporate-owned characters from the early twentieth century are entering the public domain one by one.

When a character’s copyright expires, only the specific version from the expired work becomes free to use. Later versions of the same character that appeared in still-copyrighted works remain protected. An early black-and-white version from the 1920s might be public domain while a modern redesign is not. Trademark can also survive the expiration: if the character functions as a brand identifier, using its name or image in a way that suggests an official product can still trigger a trademark claim.

When Fair Use Lets Someone Else Use Your Character

Not every unauthorized use is infringement. The fair use doctrine allows certain uses — parody, commentary, criticism, education — without permission. Courts weigh four factors from the Copyright Act as a balancing test, not a checklist:⁶

The purpose and character of the use, with particular weight on whether the new work is “transformative” — whether it adds new meaning or purpose rather than substituting for the original. Commercial use weighs against fair use but is not disqualifying.
The nature of the copyrighted work. Highly creative works like fictional characters get stronger protection than factual works.
The amount used. Taking the most recognizable elements of a character, such as its core visual design or catchphrases, weighs against fair use more than borrowing peripheral details.
The effect on the market. If the new work could replace the original in the marketplace, this factor cuts hardest.

Parody draws the most attention in character disputes. In Campbell v. Acuff-Rose Music, the Supreme Court held that a commercial parody can qualify as fair use because parody by its nature transforms the original, repurposing the work to comment on or mock it. The Court emphasized that the more transformative the new work, the less weight its commercial nature carries.⁷ A satirical cartoon reimagining a famous superhero stands a better chance than a knockoff toy that copies the design without adding commentary. Fair use is always case-specific. Non-commercial and educational uses are not automatically protected, and commercial uses are not automatically infringement.

What Trademark Adds on Top of Copyright

Copyright protects the creative expression behind a character; trademark protects the character’s role as a brand identifier. When consumers see a character’s name, logo, or distinctive look and immediately associate it with a particular company, that character functions as a trademark under the Lanham Act.⁸ The purpose is to prevent consumer confusion about who made or authorized a product.

For a character to qualify, the public must associate it with a specific commercial source, a concept known as secondary meaning. A character that lives only inside a novel may not qualify. A character on lunch boxes, t-shirts, and theme park signage almost certainly does. Trademark rights attach to commercial use, not artistic creation.

Registering a character trademark with the U.S. Patent and Trademark Office creates a legal presumption of ownership and grants the exclusive right to use the mark nationwide.⁹ The base filing fee for an electronic application is $350 per class of goods or services.¹⁰ A character used on both clothing and video games would need separate filings for each class. Unlike copyright, trademark protection can last indefinitely, but only with active upkeep: declarations of continued use and periodic renewals are required at set intervals, and missing the windows kills the registration.¹¹

Rights holders also have to police their marks. If a character name becomes so commonly used that it stops identifying a particular source, a process called genericide, the trademark can be lost entirely.

A character’s total visual presentation can also be protected as trade dress. Trade dress covers the overall commercial image of a product, its design, color scheme, shape, and general look and feel, when that image identifies the source.¹² A character’s distinctive costume, palette, or silhouette can be protectable without registering each element separately. The main limitation is functionality: design features that serve a practical purpose rather than an aesthetic one cannot be claimed as trade dress, and product design always requires proof that consumers associate the look with a specific source.

When a Real Person Is Behind the Character

If a character draws on a real person’s identity, their face, voice, mannerisms, or overall persona, a separate legal issue arises. The right of publicity lets individuals control the commercial use of their identity. Unlike copyright and trademark, this right is governed entirely by state law, and the specifics vary significantly. Most states recognize some version, either by statute or common law.

Where statutes exist, they typically let a person recover the greater of a minimum statutory amount or actual damages when their identity is used commercially without consent, plus any profits the infringer earned. Punitive damages and injunctions are available in many jurisdictions. Some states extend the right beyond death, allowing heirs to control a deceased person’s commercial image for a set period.

This right runs independently from copyright. A video game developer who creates a hyper-realistic character modeled on a real athlete faces a publicity claim even if the code and artwork are entirely original. The issue is whose identity the work exploits for commercial gain. Purely transformative creative works that add significant new elements beyond a mere celebrity portrait receive greater First Amendment protection, and courts balance the individual’s commercial interest against the public interest in free expression.

Who Actually Owns the Character

Ownership is often more contentious than protection. The default rule turns on the relationship between the creator and whoever paid for the work.

Work Made for Hire

When an employee creates a character within the scope of their job, the employer is the legal author and owns all rights from the moment of creation.¹³ That is the work-made-for-hire doctrine, and it is how major studios and publishers own the characters their staff produce.

For independent contractors, the rules are stricter. A commissioned work only qualifies as work made for hire if it fits within one of nine specific statutory categories, including contributions to a collective work, parts of a motion picture, translations, and compilations, and the parties sign a written agreement designating it as such before the work is created.¹⁴ A freelance illustrator who designs a character for a comic book publisher keeps the copyright unless both conditions are met. This is where disputes explode: companies often assume they own what they paid for, but without the paperwork, they do not.

Transferring Ownership

If a character is not a work made for hire, the creator owns it and can transfer rights, but only through a written document signed by the rights holder. Oral agreements to sell or assign a character are not enforceable under copyright law.¹⁵ The requirement exists to protect creators from being talked out of their rights in a handshake deal. The written assignment can be recorded with the U.S. Copyright Office to establish a public record of who holds the rights, which matters when production companies perform due diligence before investing in a property.

Reclaiming Rights After 35 Years

One of the more powerful and less understood provisions in copyright law lets original creators take back rights they previously transferred. For any grant made on or after January 1, 1978, the author can terminate the transfer during a five-year window that opens 35 years after the grant was executed.¹⁶ If the grant covers publication rights, the window begins at the earlier of 35 years from publication or 40 years from the date the grant was signed.

This right cannot be waived. Even if the creator signed a contract promising never to terminate, the statute overrides that promise. The creator must serve written notice on the current rights holder between two and ten years before the chosen termination date, and a copy must be recorded with the Copyright Office before the termination takes effect.¹⁷

There are limits. The termination right does not apply to works made for hire, because the employer is the legal author and there is no individual creator with a right to reclaim. Derivative works already created under the original grant, such as a film adaptation, can continue to be exploited after termination, but the rights holder can no longer authorize new derivative works based on the character.¹⁶ For a creator who signed away a character early in their career, this is the statutory second chance, and the notice windows are unforgiving.

AI-Generated Characters

Generative AI has opened a new fault line. The U.S. Copyright Office’s position is that copyright protects only material that is the product of human creativity. The term “author” in both the Constitution and the Copyright Act excludes non-humans, and the Office will not register works produced by a machine operating without creative input from a human author.¹⁸

That does not put AI tools off-limits. A human who uses AI while exercising meaningful creative control over the output, selecting, arranging, and modifying AI-generated elements, may register copyright in the human-authored portions. The Office evaluates these cases individually. In its 2023 decision on Zarya of the Dawn, the Office registered the human-written text and overall arrangement of a graphic novel while denying protection for the individual AI-generated images inside it.¹⁸

The practical line for character creators: a character designed entirely by AI, with no meaningful human selection or creative direction, almost certainly cannot be copyrighted. A character where AI assisted with visual concepts but a human made the final creative decisions about personality, backstory, and distinctive traits stands on stronger ground, though the AI-generated components should be disclosed in any registration application. The area is still developing, and the Copyright Office has signaled that further rulemaking is ongoing.

1
Office of the Law Revision Counsel. 17 U.S. Code 102 – Subject Matter of Copyright: In General
2
Justia. Nichols v. Universal Pictures Corp.
3
Ninth Circuit District and Bankruptcy Courts. 17.3 Copyright – Subject Matter – Generally (17 U.S.C. 102)
4
Office of the Law Revision Counsel. 17 U.S.C. 504 – Remedies for Infringement: Damages and Profits
5
Office of the Law Revision Counsel. 17 U.S.C. 302 – Duration of Copyright: Works Created on or After January 1, 1978
6
Office of the Law Revision Counsel. 17 U.S. Code 107 – Limitations on Exclusive Rights: Fair Use
7
Justia. Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569 (1994)
8
Office of the Law Revision Counsel. 15 U.S.C. Chapter 22 – Trademarks
9
United States Patent and Trademark Office. Why Register Your Trademark
10
United States Patent and Trademark Office. USPTO Fee Schedule
11
United States Patent and Trademark Office. Registration Maintenance/Renewal/Correction Forms
12
Office of the Law Revision Counsel. 15 U.S.C. 1125 – False Designations of Origin, False Descriptions, and Dilution Forbidden
13
Office of the Law Revision Counsel. 17 U.S. Code 201 – Ownership of Copyright
14
Office of the Law Revision Counsel. 17 U.S.C. 101 – Definitions
15
U.S. Copyright Office. 17 U.S.C. Chapter 2 – Copyright Ownership and Transfer
16
Office of the Law Revision Counsel. 17 U.S.C. 203 – Termination of Transfers and Licenses Granted by the Author
17
U.S. Copyright Office. Notices of Termination
18
U.S. Copyright Office. Copyright Registration Guidance: Works Containing Material Generated by Artificial Intelligence