• The Copyright License As a Property Right

    by  • August 3, 2015 • copyright • 1 Comment

    There are a slew of lawsuits against textbook publishers alleging use of stock photography beyond the scope of the original license (recursive link). Whether one characterizes it as massive intentional infringement, or a simple failure of the publishers to track their use and true-up on their licenses, it looks like it is a pervasive practice in the industry to print more books than the quantity licensed and to sell in unlicensed territories. The publishers have been fighting tooth and nail, throwing up every defense they can, in order to avoid getting the substantive question of infringement.

    A legal challenge that plaintiff Minden Pictures has been fighting is whether a photo agency representing multiple photographers has standing for the copyright infringement claim. Over the course of several years and several lawsuits Minden Pictures had its photographers sign different agreements trying to get one that a court will agree is a basis for standing. In its first suit against Pearson Education, Inc., Minden Pictures claimed that two agreements gave it standing, the original Agency Agreements and subsequent Assignments. As covered here, the court refused to consider the Agency Agreements as a discovery sanction and held that the Assignments provided only a “bare right to sue,” not an ownership interest. The decision was appealed but voluntarily dismissed.

    Minden Pictures then sued John Wiley & Sons, relying on the Agency Agreements as its basis for standing. The Agency Agreements

    limit in some aspects, but preserve in others, the photographers’ ability to make use of their photographs themselves. The Agreements specify that the photographers “shall not issue any Licenses to any Images, except as provided under this Agreement.” But they reserve some authority for personal and, in some cases, commercial use. All of the Agreements permit the photographers to use the images “for personal promotion.” Some permit the photographers to issue licenses for the “editorial use of images in books and magazines.” A small number permit the photographers to license images for “commercial” uses, or for “advertising.” In other words, the Agreements generally permit the photographers to issue some licenses themselves, subject to the terms of the individual Agreements, but prohibit them from hiring a licensing agent other than Minden.

    The district court held that the Agency Agreements did not give Minden Pictures standing, holding that the Agency Agreements first, weren’t an assignment, and second, weren’t an exclusive license because the photographers retained some ability to license the same rights. Minden Pictures appealed and now the Court of Appeals for the Ninth Circuit has reversed.

    We start with a some clarification on a point that isn’t always clear, particularly in copyright, which is the difference between an assignment and a license:

    [T]he Copyright Act … specifies that the owner can transfer a right, or a share of such a right, via “an assignment, … exclusive license, or any other conveyance, … whether or not it is limited in time or place of effect.” Id. § 101. That is, either an assignment (which transfers legal title to the transferee) or an exclusive license (which transfers an exclusive permission to use to the transferee) qualifies as a “transfer” of a right in a copyright for the purposes of the Act.

    The court clarifies its point that the right to grant licenses is itself an exclusive right:

    First, we have no doubt — indeed, we do not understand Wiley to contest — that the Agency Agreements transferred an interest in a legally cognizable right in the photographers’ copyrights. The Agency Agreements explicitly permit Minden to reproduce, and to authorize the reproduction of, the copyrighted photographs. Reproduction is one of the six “exclusive rights” described in the Act. Further, Wiley does not appear to dispute that, as the photographers’ licensing agent, Minden had the right “to authorize” both the distribution and the display of the photographs by granting licenses to third parties such as Wiley. The right “to authorize” these acts is also an “exclusive right” under the Act. See id. § 106(3), (5). Minden thus had an interest in a legally cognizable right under the copyrights. The only question is what kind of interest Minden possessed.

    Wiley argued that, because the photographers themselves retained the right to license, Minden Pictures’ right to license wasn’t exclusive. But

    This argument runs contrary to the divisibility principle embodied by the 1976 Act, and to the bulk of the caselaw and commentary in this field. Wiley’s argument is inconsistent with the notion that, under the 1976 Act, a single copyright, or right thereunder, may be divided between parties, with each co-owner entitled to sue to protect his or her interest in the right. As we recently explained in the context of copyright ownership, “the word ‘exclusive’ in [the Act] cannot mean that only sole owners possess ‘exclusive’ rights.” Corbello [v. DeVito, 777 F.3d 1058, 1065 (9th Cir. 2015]. “If an ‘exclusive right’ could only be possessed by a sole owner of a copyright, a co-owner would be unable to bring an infringement action to protect his interest.”

    We see no reason why the divisibility principle should not apply with equal force when the interest granted is an exclusive license to grant licenses to others.

    Okay, so there can be co-existing exclusive licensees. But how do we know whether a license is exclusive?

    The reason the Act prevents a holder of a “nonexclusive license” to use a copyrighted photograph from bringing an infringement action against others who use the same photograph is that such a licensee has no more than a privilege that protects him from a claim of infringement by the owner of the copyright. That is, because such a licensee has been granted rights only vis-à-vis the licensor, not vis-à-vis the world, he or she has no legal right to exclude others from using the copyrighted work, and thus no standing to bring an infringement suit. But when a licensee has been granted rights vis-à-vis the world — even if he or she shares those rights with another party, including the owner of the copyright — we see nothing in the Copyright Act that requires us to deem such an arrangement a mere “nonexclusive license” insufficient to give rise to standing to sue….

    Put more simply, we agree with the Seventh Circuit that the essence of an “exclusive” license under the Act is that “the copyright holder permits the licensee to use the protected material for a specific use and further promises that the same permission will not be given to others.” I.A.E., Inc. v. Shaver, 74 F.3d 768, 775 (7th Cir. 1996).

    The court says that it is creating a rule consistent with what the Federal Circuit recently had to say about patent licensing in WiAV Solutions LLC v. Motorola, Inc. (blogged here). But WiAV is a little different, it held that “If the accused neither possesses nor can obtain such a license, the exclusive licensee’s exclusionary rights with respect to that accused party are violated by any acts of infringement that such party is alleged to have committed, and the injury predicate to constitutional standing is met.” In WiAV, this means examining the scope of the existing licenses to see whether the defendant could have obtained one elsewhere and, if it could not, the licensee had standing.

    In Minden Pictures, some of the photographers could have granted a license to the defendant too, but the Minden Pictures court did not remand to the district court to decide that factual question on a case-by-case basis. Rather, it held that, even where the defendants, in theory, could have taken a license from the photographer instead of the agency, the agency’s license was nevertheless exclusive:

    [T]he photographers have promised that Minden, and only Minden, will have the power, as the photographers’ licensing agent, to authorize third parties to reproduce, distribute, and display the photographs. That the photographers have retained some limited degree of authority to grant licenses themselves does not eliminate Minden’s interest in the copyright as the sole entity to act as the photographers’ licensing agent. It merely means that both Minden and the photographers, under the terms of the Agreements, can prevent those third parties who have not received permission to use the photographs from using them. To hold otherwise would be inconsistent with the divisibility principle embodied by the 1976 Act.

    So this standard is somewhat broader than under patent law, but justifiably so. The Patent Act has no concept of divisibility and it is a longstanding principle that the exclusive licensee whose exclusivity has been infringed can be a party only as long as it is joined by the patent owner. Indep. Wireless Tel. Co. v. Radio Corp. of Am., 269 U.S. 459, 466, 46 S.Ct. 166, 168 (1926).

    Unlike the Patent Act, however, the Copyright Act does expressly give an exclusive licensee an independent basis for standing:

    If the photographers had never entered into the Agency Agreements, but instead had issued licenses directly to Wiley, there would be no doubt that they could bring infringement actions over the violations Minden alleges in its complaint. We see no reason why, having appointed Minden to manage the commercial use of their photographs in the first instance as their licensing agent, the photographers should not also be able to rely on Minden to protect and defend the licenses that it has issued on their behalf. Nothing in the text of the Copyright Act, nor in the Agency Agreements, compels a contrary conclusion.

    One of the justifications for requiring both parties to be joined for patent infringement claims is to protect the defendant against multiple claims. After this decision it is a theoretical possibility with a copyright infringement claim, but the rules of joinder can be applied to avoid unfairness to the defendant. It also means that the the defendant cannot escape liability merely by pointing out that hypothetically it could have obtained a license elsewhere; instead, it will need to actually get that license.

    The Minden Pictures court gave a nod to the practical aspects in its decision, too:

    By honoring the parties’ contracting expectations, we also remove what would otherwise be a significant practical disadvantage in seeking to protect a copyrighted work. If Minden could not bring an infringement suit on behalf of the photographers for whom it serves as a licensing agent, those photographers would have to bring suit individually, either in individual actions or in a single suit under Federal Rule of Civil Procedure 20. Both procedural alternatives have significant disadvantages. In a suit against Wiley brought by an individual photographer, alleging infringement only as to his or her own photographs, the expenses of litigation would very likely dwarf any potential recovery. And in a suit under Rule 20, both the total cost of litigation and the burdens of coordination would be significant, given the complexities of litigating on behalf of thirty-some named plaintiffs. The practical disadvantages of these two alternatives compared with the prospect of licensing agents bringing suit as sole plaintiffs are likely obvious to defendants such as Wiley, and it is not implausible that Minden’s inability to bring an infringement suit would be an incentive to engage in infringing behavior.

    So for patents, a license is sufficiently exclusive for standing if the defendant could not have obtained a license from anyone else, which requires an examination of all the existing licenses. For copyright, a license is exclusive simply if the copyright owner’s grant to the licensee includes a promise not to grant the same right to anyone else.

    And the tide has just turned for the stock photography plaintiffs.

    Minden Pictures, Inc. v. John Wiley & Sons, Inc., No. 14-15267 (9th Cir. July 29, 2015).
    Minden Pictures, Inc. v. John Wiley & Sons, Inc., No. C-12-4601 EMC (N.D. Calif. Jan. 27, 2014).

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