Property, intangible

I don’t expect to ever see something that trumps the pawn ticket as a writing documenting a transfer (or attempted transfer) of rights. But, in the copyright realm we have a contender – an Annual Report. It’s embedded below:

It says “2003 represents the first 10 months in the life of Storix as a Corporation. Prior to 2003, Storix Software was a sole proprietorship. All assets from Storix Software were transferred to Storix Inc., as of its incorporation as of February 24, 2003.”

The 9th Circuit held that this was a valid writing transferring copyright. It’s notable that it is an affirmation of a jury’s conclusion (and a non-precedential opinion).¹

The appeals court opinion doesn’t tell us how it is that Johnson came to sue the company of which, in 2003, he was President – we have to dig into the district court case for that. Johnson was a sole proprietor, d/b/a “Storix Software,” from 1998 until he incorporated in 2003. He was the sole owner of the corporation until 2011, when he was diagnosed with cancer which he thought might be terminal, so he gave ownership of 60% of the company to employees. After Johnson recovered he returned to work and developed new software, but the company didn’t adopt it. From a Johnson brief:

However, without any reasonable inquiry, investigation, testing, or otherwise independent analysis of Johnson’s work, the board members rejected and refused to implement any such network security features, claiming they were not necessary. When Johnson tried to exercise his right, as the owner of the Original Work, to control the design of the derivative works, the other Storix, Inc. board members denied him such right, claiming that Johnson was no longer “in a management position.”

So we have a lawsuit. Johnson challenged two aspects of the Annual Report, that he hadn’t signed it in his personal capacity and that it wasn’t contemporaneous with the assignment of the software. The second point is easy; at least in the 9th Circuit it doesn’t have to be a contemporaneous writing.

The first point is a little more interesting. Section 204(a) of the Copyright Act 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.” This is how the appeals court addressed the point:

First, Section 204(a) does not necessitate the form of the signature to be in the transferor’s personal capacity. The purpose of Section 204(a)’s writing requirement is to prevent inadvertent transfers and fraudulent claims of copyright ownership. Magnuson v. Video Yesteryear, 85 F.3d 1424, 1428-29 (9th Cir. 1996). That concern is virtually absent when Johnson himself admitted to writing and signing the Annual Report that memorialized a transfer of at least some assets to his own wholly-owned company. Johnson conceded that a transfer of some assets did occur, including computers, desks, supplies, and “whatever was necessary to continue doing business as Storix, the same thing that I was doing as Storix Software.”

I have a couple of problems with this reasoning. “Memorialized a transfer.” Indeed, it is evidence of a transfer but not a transfer itself. It uses the past tense to describe the transaction, “were transferred.” This is a description of a past event, not the occurrence of the event itself.

It’s also a bit of an artful dodge to avoid the question of Johnson’s capacity when signing by relying on the rationale for § 204 instead of what it actually requires. There is no question that “Anthony Johnson, President,” would have been the assignee and the statute requires a writing “signed by the owner of the rights conveyed.” I suppose you can argue that Johnson as President was the duly authorized agent for Johnson personally, but the court didn’t.

But we’re talking here about 10 years before anyone probably thought about the ownership of the copyright, without rights to which the company would not exist. Needless to say, there was no written license, something a prudent copyright owner would have put in place if the relationship had been what Johnson claimed. I also suspect that, had it been in Johnson’s interest before 2011 for the company to own the copyright, to bring a copyright infringement lawsuit for example, Johnson and his company would have agreed the company owned the copyright. So I don’t have any beef with the outcome, it is expedient and equitable. But it’s a bit of squirrely reasoning at an appeals court level. Which I guess is why they make them non-precedential.

Johnson v Storix, Inc., No. 16-55439 (9th Cir. Dec. 19, 2017).

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