• “By Operation of Law”

    by  • December 3, 2015 • copyright • 3 Comments

    I’m seeing what I believe is a misunderstanding of the statutory section describing transfer of copyright. Section 204(a) of the Copyright Act, titled “Execution of Transfers of Copyright Ownership,” says

    A transfer of copyright ownership, other than by operation of law, is not valid unless an instrument of conveyance, or a note or memorandum of the transfer, is in writing and signed by the owner of the rights conveyed or such owner’s duly authorized agent.

    But there have been a couple of cases lately that only contemplate the possibilities of a signed writing or a work made for hire, ignoring that the Copyright Act expressly acknowledges that copyright ownership may be determined “by operation of law.”

    For example, “by operation of law” can be the result of the division of property in a divorce, inheritance, bankruptcy, or the distribution of assets on an entity’s dissolution. No signed writing is required in these cases.

    But there are a couple of cases that leave me puzzled. First we have Estate of Shaw v. Marcus. Ownership of photographs was resolved through a verbal settlement in open court that was transcribed, but it was never reduced to a written agreement. The agreement was:

    An entity will be formed…. The name of that entity will be the Shaw Family Archives…. That entity shall own and take possession of, in a manner set forth below, all of the photographs involved in this litigation. . . . That includes each and every photograph shot by either Sam Shaw or Larry Shaw during the course of their respective careers [or] lifetimes .ll together with those photographs taken by third parties which either of them claim as being owned by them via some gift or sale from a third party, all subject to claims by third parties.

    Many legal shenanigans and years later, on a motion to dismiss in a later intra-family dispute, the court had to decide what the legal effect of the 2002 verbal agreement was. Here we go:

    1. Legal or Equitable Transfer

    a) It is plausible that the 2002 Settlement is an enforceable transfer.

    It is plausible that the 2002 Settlement transferred copyrights to Shaw Family Archives. Copyright Act § 204(a) sets forth the prerequisites for transferring a copyright:

    A transfer of copyright ownership, other than by operation of law, is not valid unless an instrument of conveyance, or a note or memorandum of the transfer, is in writing and signed by the owner of the rights conveyed or such owner’s duly authorized agent.

    17 U.S.C. § 204(a). The principal purpose of the writing requirement …

    Wait, what? The court is considering whether a transcription of a verbal ageement meets the requirements for a signed writing? Surely that’s not what we would normally think of as an “instrument of conveyance” or “writing.” It goes on:

    b) The allocution satisfies the signature requirement.

    The Court also rejects Shaw Family Defendants’ argument that the transcript cannot satisfy § 204(a) because it was not signed. Signature requirements are typically imposed to ensure that parties to an agreement have the present intention to adopt or accept a writing. Here, the court’s allocution at the end of the 2002 Settlement transcript serves that very purpose. The Judicial Hearing Officer personally addressed Larry, Edie, Meta, and David at the end of the proceedings and asked each in turn whether they “heard the terms of the stipulation,” “discussed it with” counsel, and “agree with it,” and each party said “yes.” There is no genuine question concerning the parties’ intent to be bound by the terms expressed on the record—it was the single most unambiguous manifestation of intent in the entire transcript. The Court will not dismiss on this basis.

    Well yes, they intended to be bound, but is an allocution a “signature” under the Copyright Act? A lot of things can be a signature, emails for example, or a “continue” button, but at least justify for me how a spoken word meets the definition of “signature.”

    And these contortions were probably unnecessary, because the verbal agreement was most likely the basis for a binding act by a court. Aren’t the events in 2002 more likely to be a transfer of copyright “by operation of law” rather than a signed writing?

    In the second case we have a plaintiff making an argument that there was a transfer of the ownership of copyright in source code by operation of law, specifically “under the operation of California law … governing partnerships, promoters, agents, fiduciaries and cofounders, not as a question of employment, work for hire … or joint work.” Procedurally the plaintiff, Swipe & Bite, was trying remand to state court a claim that was removed to federal court on the basis that the claim arose under copyright law. For whatever reason Swipe & Bite, as the master of its claims, didn’t want federal jurisdiction. It expressly disclaimed all authorship theories (which would indeed arise under copyright law) in favor of a theory that there was a transfer by operation of law. But for some reason the court didn’t see it,

    Swipe & Bite’s claims involve Defendants. alleged wrongful taking of code, along with other company property, determining ownership is required in order to resolve their claims. See id. ¶¶ 37, 65, 71, 75, 90. Swipe & Bite expressly disclaims software ownership based on the work-for-hire doctrine, but provides no other legal basis to claim ownership of the code written by Defendants. See id. ¶¶ 18, 23. As in JustMed, there is no written agreement as to ownership alleged, and ownership will turn on the application of the work-for-hire doctrine.

    Uh – no. The plaintiff did provide another legal basis, the law “governing partnerships, promoters, agents, fiduciaries and cofounders.” One remedy for a breach of a fiduciary duty is forfeiture, i.e., the court could hold that the copyright is owned by Swipe & Bite notwithstanding who the author was or whether there was a signed writing. The court messed this one up.

    Estate of Shaw v. Marcus, No. 7:14-cv-3849 (NSR); No. 7:14-cv-5653 (NSR) (E.D.N.Y. Sept. 22, 2015).

    Swipe & Bite, Inc.v. Chow, No. 15-cv-03997-JST (N.D. Calif. Nov. 23, 2015).

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    3 Responses to “By Operation of Law”

    1. Dan Ballard
      December 3, 2015 at 9:49 am

      I think it likely Section 201(e) precluded the court in the Swipe & Bite case from seizing the copyright to remedy the breach of fiduciary duty.

      But I see no reason [including Sections 201(a) and 204(a)] why the rule under state partnership law that assets created for the benefit of a partnership are assets of the partnership, not the partner who created the asset — in that case, a copyrightable work.

      Yes, that could create a patchwork of state laws controlling copyright transfers. But that’s the situation now. And we also tolerate a patchwork of copyright licensing law.

    2. Pam
      December 13, 2015 at 2:15 pm

      “Forfeiture” was an inapt word choice on my part. It wouldn’t be a forfeiture as contemplated by Section 201(e), but rather ownership as dictated by the fiduciary duty of the author to the entity.

    3. Pingback: “By Operation of Law” Addendum | Property, intangible®

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