Property, intangible

a blog about ownership of intellectual property rights and its licensing

The Effect of Reed Elsevier v. Muchnick

Section 411 of the Copyright Act says that “no civil action for infringement of the copyright in any United States work shall be instituted until preregistration or registration of the copyright claim has been made in accordance with this title.” In Reed Elsevier, Inc. v. Muchnick, the Supreme Court held that § 411 is a “claim processing rule” rather than a jurisdictional requirement, so that a registration (or at least attempt to register) is “a statutory condition that requires a party to take some action before filing a lawsuit,” but its absence does not deprive a court of jurisdiction over the claim. What this mostly means is that a challenge to the absence of a registration is not under Fed. R. Civ. P. 12(b)(1), for lack of subject matter jurisdiction, but rather under Fed. R. Civ. P. 12(b)(6) for failure to state a claim.

Reed Elsevier didn’t address the vexing question of whether one must only have filed an application, or instead one must have received the Certificate of Registration, before the precondition is satisfied and neither will I—that’s just a timing issue. I’m more curious about under what circumstances a court will adjudicate a copyright-related claim when there is no certificate at all, as was the case for some of the works in Reed Elsevier. Is there any situation where the registration requirement is altogether excused?

In Brainstorm Interactive, Inc. v. School Specialty, Inc., the court identified two equitable defenses that might excuse the requirement, waiver and equitable estoppel. Waiver was apparently the basis in Reed Elsevier, as well as in Paycom Payroll, LLC v. Richison, 758 F.3d 1198, 1203 (10th Cir. July 11, 2014) and Tattoo Art, Inc. v. TAT Int’l, LLC, 794 F. Supp. 2d 634, 657, 662-63 (E.D. Va. 2011) aff’d, 498 F. App’x 341 (4th Cir. 2012) (appeal blogged here). In Paycom Payroll, the parties agreed to compare the similarity of a later version of software than the one registered. Tattoo Art was a breach of license case where the defendant conceded that the works were copyrighted and the only infringement question was the scope of its license.

But plaintiffs aren’t doing very well where the court examines the question. In Brainstorm, the plaintiff alleged it could not register the copyright in its works because defendant School Specialty had possession of the only master copies of the works. Brainstorm argued that the defendant was therefore equitably estopped from raising the registration requirement. The court  agreed that, in theory, equitable estoppel might excuse the precondition of registration, but not here:

[T]he undisputed record demonstrates that Brainstorm has at least one copy of some of the products, and it could have registered those products, or preregistered those products even if the copyright office had demanded a second copy. Brainstorm’s utter failure to take any action to register the copyrights shows a complete lack of diligence on its part until after it brought suit, upending its reliance on defendant’s alleged failure to return the physical masters to excuse its lack of registration.

As for the second point, assuming plaintiff could somehow blame defendant for its complete failure to register the copyrights, it is patently unreasonable for a company to give its only copy of an alleged valuable physical masters to a licensee for safekeeping. At the very least, plaintiff has failed to demonstrate that its actions were reasonable. Plaintiff had a range of reasonable options available to it: (1) secure copyright registrations before handing off its only copy of the physical master to defendant; (2) make a second copy of the physical masters; or (3) specifically require their return after the initial production run to register the copyrights at that time.

In Beardmore v. Jacobson, the plaintiffs argued they didn’t have to register because it would mean making a commitment about whether the work had been assigned or not (which the court referred to as a “work for hire” arrangement) and therefore risk a claim for fraudulent registration, but that didn’t get any traction either:

Plaintiffs’ concern regarding fraud within the copyright application is unfounded if they genuinely believe the APP is their sole property and was not made as a “work for hire.” The copyright application does not inquire whether or not other parties believe the work was made for hire. Even if it is later determined that the APP was a work made for hire, inadvertent errors in an application for copyright registration do not constitute application fraud. If Plaintiffs do not consider the APP to be a work for hire, they are not required to describe the APP as such on the copyright application simply because Defendant claims it is so, and it will not contain the “knowingly inaccurate information” that is required for copyright fraud.

So as far as a I know we’re still waiting to see a case where a plaintiff has a legitimate excuse for not having first registered its copyright. If anyone has seen one, let us know in the comments.

Brainstorm Interactive, Inc. v. School Specialty, Inc., No. 14-cv-50-wmc (W.D. Wisc. Dec. 5, 2014).

Beardmore v. Jacobson, No. 4:13-CV-361 (S.D. Tex. July 14, 2014)

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