Property, intangible

a blog about ownership of intellectual property rights and its licensing

Standing is a Lot Easier for Copyrights

I’m curious about the different legal standards that the courts apply in patent versus copyright cases when deciding whether a plaintiff who acquired the rights through transfer has standing. Patent law seems draconian, as exemplified by Abraxis Bioscience, Inc. v. Navinta, LLC.  In Abraxis (blogged here and here), standing for a patent infringement suit was foiled by a complex transfer that would have been perfectly fine under New York law, the choice of law for the transaction, but that wasn’t under the law of the Federal Circuit. Even an assignment to a corporate family member, perhaps carefully worded for tax purposes, can deprive a party of standing for patent infringement, like here and here. Often there are attempts to fix the problem with confirmatory assignments, but often the effort fails.

Compare this to copyright cases. Twice in the past few weeks I’ve seen a statement like this, which I find somewhat remarkable: “When the parties to an assignment have no dispute over the transfer, third-party infringers lack standing to invoke Section 204’s writing requirement to avoid suit.” Malibu Media, LLC v. Does, No. 12-2078 (E.D. Pa. Jan. 3, 2013). In Malibu Media the assignor was an individual who created the company to which he later assigned his copyright, so it makes some sense not to sweat the details. But the court in Capital Concepts, Inc. d/b/a bCreative, Inc. v. Mountain Corp. said the same thing, in a situation where the assignor was an independent contractor.

Why the difference? Here’s the statutory language:

“Applications for patent, patents, or any interest therein, shall be assignable in law by an instrument in writing.” 35 U.S.C. § 261.

“A patentee shall have remedy by civil action for infringement of his patent.” 35 U.S.C. § 281.

“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.

“The legal or beneficial owner of an exclusive right under a copyright is entitled, subject to the requirements of section 411, to institute an action for any infringement of that particular right committed while he or she is the owner of it . . . .” 17 U.S.C. § 501.

I don’t really see any support in the statutory language for the different treatment between patent and copyright cases. We have “patentee” and “owner”–equivalent terms–as the only ones who may bring suit. Transfers have to be in writing in both cases. In both cases, the burden is on the plaintiff to prove ownership–which is the point that I think the copyright cases play fast and loose with. I mean seriously, a defendant doesn’t have standing to ask that the plaintiff be put to its proof that it owns the rights it is asserting? Personally, I think that’s a bit of crazy talk.

This appears to be the genesis of the reasoning on the copyright side:

Under the pre-1978 copyright law, exclusive licenses could be granted orally or by conduct. [Nimmer], Sec. 10.03[B], at 10-37 (1980). Under the new Copyright Act, however, Eden’s claim of an informal grant of an exclusive license seemingly must fail in light of the statute of frauds provision of the new Act, which states that an exclusive license “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….” 17 U.S.C. Sec. 204(a) (Supp. IV 1980). However, since the purpose of the provision is to protect copyright holders from persons mistakenly or fraudulently claiming oral licenses, the “note or memorandum of the transfer” need not be made at the time when the license is initiated; the requirement is satisfied by the copyright owner’s later execution of a writing which confirms the agreement. See Dan-Dee Imports, Inc. v. Well-Made Toy Mfg. Corp., 524 F.Supp. 615, 618-19 (E.D.N.Y.1981); 3 M. Nimmer, supra, Sec. 10.03[A], at 10-34 (1982); cf. Khan v. Leo Feist, Inc., 165 F.2d 188, 191-92 (2d Cir.1947) (A. Hand, J.) (applying British law). In this case, in which the copyright holder appears to have no dispute with its licensee on this matter, it would be anomalous to permit a third party infringer to invoke this provision against the licensee.

Eden Toys, Inc. v. Florelee Undergarment Co., Inc., 697 F.2d 27, 36 (2d Cir. 1982).  The case was then remanded for the district court to determine whether there had been a written license. Id. (“If Paddington granted Eden an informal exclusive license to sell Paddington Bear products in the market in which Florelee sold–adult clothing–and that informal license was later confirmed in a writing signed by Paddington, Eden may sue in its own name ….”).

But the statement in dicta about “being anomalous” has now taken on a life of its own, preventing a defendant from even challenging ownership:

[The defendant] … simply does not having standing under § 204. The statute is in the nature of a statute of frauds and is designed to resolve disputes among copyright owners and transferees. As the court said in Imperial Residential Design, “the chief purpose of section 204(a), (like the Statute of Frauds), is to resolve disputes between copyright owners and transferees and to protect copyright holders from persons mistakenly or fraudulently claiming oral licenses or copyright ownership.” The court went on to say that, where there is no dispute between the copyright owner and the transferee about the status of the copyright, “it would be unusual and unwarranted to permit a third-party infringer to invoke section 204(a) to avoid suit for copyright infringement.”

Billy-Bob Teeth, Inc. v. Novelty, Inc., 329 F.3d 586, 592-93 (7th Cir., 2003), quoting Imperial Residential Design, Inc. v. Palms Dev. Group, Inc., 70 F.3d 96, 99 (11th Cir.1995).

So somehow, through a bit of judicial activism, or impatience with the parties, the copyright jurisprudence has gone from “it’s ok to execute a document after the fact” (still a point with which the Federal Circuit disagrees in patent jurisprudence) to “a defendant doesn’t even have standing to challenge ownership.” That’s a little too far in my book.

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