• In the Category of Unusual “Writings”

    by  • January 4, 2018 • copyright • 2 Comments

    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:

    Roberts v Storix 2003 Annual Report

    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 It’s notable that it is an affirmation of a jury’s conclusion (and a non-precedential opinion).1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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    1. One of Johnson’s arguments on appeal was that the interpretation of the document wasn’t an issue for the jury. However, its interpretation required extrinsic evidence on what “all assets” meant, so it was a question for the jury. Interestingly, the trademark “Storix Software,” registered in 2002 before the incorporation, wasn’t assigned to the corporation until 2006. So there was at least some evidence that intellectual property assets were not all assigned to the corporation in 2003. 
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    2 Responses to In the Category of Unusual “Writings”

    1. Anthony Johnson
      January 16, 2018 at 2:54 pm

      Thank you for being the first of many to look into the unique circumstances of my case. Others assume from the memorandum that I was a shifty former owner that sold his company and all its assets to a third party, then tried to take it back. You have realized many points that others have not, even that I actually executed and recorded a signed transfer of the trademark, but not the copyright. The district court ignored that fact as well as my ACTUAL assignment of the copyright to my living Trust in 2012 (9 years after I allegedly “intended” to transfer it to the company).

      I understand your confusion about why I would NOT have transferred the copyright to the company (i.e. in case someone sued me for infringement), but I can’t help but take this opportunity to publicly argue my case. The answer is that I owned the entire company and the copyright, so either way, I’m paying for it. More importantly, and what I testified to at trial, is that I feared if my company went belly-up, I’d lose my copyright along with it.

      The appellate court was the first to assume the Annual Report was a memorandum of a prior ORAL agreement, which was apparently only between me and myself, but disputed 8 years later by new company owners that weren’t even employed at the time. The panel cited my statement at trial that “all assets” was intended to mean things necessary for Storix, Inc. to continue the business of Storix Software (my sole proprietorship). They failed to understand that Storix, Inc. didn’t need to own my copyright, it only needed a license to sell the software, something I never denied it had.

      The panel also didn’t address the “work for hire” issue, making me the first person to ever be designated a work for hire by his solely-owned company! Although it could be argued its irrelevant if I had actually transferred the copyright tot the company, a proper decision might have allowed me to own the derivative works that I did for 11 years after the alleged transfer.

      Not a single case cited by Storix in the entire course of the litigation actually applies to the facts of this case, but who actually read them?

      I will be filing a petition for rehearing, after being granted an extension until after the State court trial in which my same former employees have been suing me for 2 1/2 years for operating a “secret” competing company that even I don’t know about (and cross-claims). BTW, I’m still the largest (40%) shareholder of Storix, but haven’t been allowed on the premises in 3 years because of this malicious unlawful competition lawsuit against me.

    2. Anthony Johnson
      March 5, 2018 at 1:53 pm

      The jury rejected Johnson’s claim he intended only to transfer the license to sell the software, and further decided that Johnson became a work for hire upon forming the corporation, thereby also forfeiting all rights to his derivative works. This is the first case in which a document, not itself a contract or agreement, and containing no reference to the copyrights, was considered a “note or memorandum” of copyright transfer. It is also the first time a sole owner of a company was designated a work for hire for copyright ownership purposes. This serves as a lesson that a “writing” required by the Copyright Act need not necessarily be “clear”, but any ambiguous language can be interpreted as “reflecting” on an alleged oral agreement even by outsiders to the to the transaction to avoid liabilit for,infringement.

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