• Contract Interpretation Quiz

    by  • November 1, 2009 • copyright

    Interpret this contract, reproduced below in full:

    In consideration of the sum of One Dollar ($1.00) and other good, valuable, and adequate consideration, the receipt and sufficiency of which is acknowledged, the undersigned does hereby sell, assign, transfer, and set over to Bridgeport Music, Inc., its respective successors and assigns, fifty percent (50%) of his interest now owned or subsequently procured in the universe-wide copyright in and to the following musical composition(s) set forth in Exhibit A attached hereto, and all of the universe-wide right, title, and interest of the undersigned, vested or contingent, therein and thereto, including all claims for infringement of the copyrights whether now or hereafter existing, for the maximum terms of copyright, including any extensions and/or renewals thereto, throughout the universe.[*]

    The assignor sues for copyright infringement. Does the assignor have standing, or did it assign all claims for copyright infringement to the assignee?

    According to the Eastern District of Texas, the assignor didn’t have standing. According to the Fifth Circuit, it did.

    The appeals court said that the assignment had two clauses, the clear assignment of half interest in the copyright and the second clause assigning “all of the universe-wide right, title, and interest of the undersigned, vested or contingent, therein and thereto, including all claims for infringement.” The district court concluded that the plain language of this second clause assigned all interest in copyright infringement claims, but the appeals court decided that the lower court’s interpretation “ignores the language of the clause as a whole and renders the contract contradictory.”

    If the second clause is read to mean that [the assignor] assigned all of its rights to pursue copyright infringement claims related to the compositions, then it would also necessarily mean that [the assignor] had assigned all of its interest in the compositions, given that the second clause also stated that [the assignor] assigned ‘all of [its] interest’ in the compositions. This result would contradict the clear language of the first clause, which states that [the assignor] assigned only 50% of its interest in the musical compositions.

    The court explained that “The proper reading of the two clauses is that the second clause operates as a clarification of the 50% interest assigned in the first clause. Thus, the second clause clarifies that the 50% share is a full share, rather than an income, participation, royalty, or some other limited share in the copyright.”

    Ambiguous is an understatement for the contract, but it does seem the intent was that the second clause was meant to explain exactly what kinds of interests were assigned in half, i.e., all of them. Therefore, the plaintiff had standing. The assignee was also to be joined, so all parties in interest were represented in the suit.

    * See here for discussion of assignments “throughout the universe.”

    In re Isbell Records, Inc., No. 09-40343, 2009 WL 3386546 (5th Cir. Oct. 22, 2009).

    © 2009 Pamela Chestek