Property, intangible

a blog about ownership of intellectual property rights and its licensing

Were the Assignments Valid?

Sometimes a case sends you back to the basics. This was one of those cases for me.

Copyright infringement claims against Dollar General appear to be the driving force behind a sequence of assignments of the copyrights for some toys. The relevant chain of title for the copyrights was Acquawood => Focus Brand Limited => Banzai International Limited => plaintiff Swift Harvest. The three assignments were largely the same, except that the last one included a license-back to Banzai. The assignment expressly included assignment of claims against Dollar General.

Dollar General challenged Swift Harvest’s standing to bring the infringement claims. Dollar General argued that the assignments were without consideration, and therefore invalid. The court agreed (all internal citations removed):

Under California law, a contract is valid if there is mutual assent between the parties and valid consideration. A written instrument is presumptive evidence of consideration. The presumption is rebuttable .…

Because the assignment agreements have been executed in written contracts, there is presumptive evidence of consideration. In order to rebut this presumption, Dollar General must produce evidence showing that the contracts lack consideration. Dollar General argues that the contracts on their face lack consideration because Banzai assigned its intellectual property rights in the Subject Works to Swift Harvest in exchange for nothing in return. The agreement contains a license-back provision which grants to Banzai a license to use the transferred intellectual property of the Subject Works. Yet, this right was one that Banzai already had prior to entering the agreement.…
Swift Harvest argues that the contract contains consideration because Banzai, in granting its intellectual property rights to Swift Harvest, is relieved from “the burden of prosecuting claims regarding those rights and assets.” Although this argument has some surface appeal, the Court concludes upon further consideration of the assignment agreement as written, that the right to forbear from prosecuting its intellectual property rights is illusory and confers no benefit upon Banzai that it did not already have. Banzai, as the presumed owner of intellectual property rights has no affirmative obligation to prosecute its rights or to enforce its rights against infringers. Nor does the assignment agreement contain any language requiring Swift Harvest to do so. Had it contained such language or required Swift Harvest to share with Banzai the fruits of any such enforcement, then Banzai would be given the benefit of having the intellectual property rights of the Subject Works protected at Swift Harvest’s expense and the agreement would have been supported with consideration.
As the agreement is written, however, Banzai assigned away its intellectual property rights for nothing in exchange.
Because the various assignment agreements are not supported by consideration, and Swift Harvest has no other basis for its ownership of the intellectual property of the Subject Works, Swift Harvest cannot claim ownership of the intellectual property rights on the basis of which it has sued Dollar General. As such, Swift Harvest’s claims as to all Subject Works fail as a matter of law.

That all sounds ok. But wait a minute – can one not gift a copyright? I’m pretty sure you can. “Although copyright transfers are often made by contract, they need not be. An assignment or exclusive license of copyrights is treated like a conveyance of property, which may be achieved by gift or sale. See M. Nimmer & D. Nimmer, 3 Nimmer on Copyright § 10.02[B] [5], at 10–25 (1994).” Johnson v. Jones, 885 F. Supp. 1008, 1013 (E.D. Mich. 1995). “Title may be transferred by gift. M. Nimmer, The Law of Copyright § 8.12[B] (1984 ed.).” Walt Disney Prods. v. Basmajian, 600 F. Supp. 439, 442 (S.D.N.Y. 1984).

The Restatement of Contracts set out the the requirements for an irrevocable transfer without consideration:

(1) Unless a contrary intention is manifested, a gratuitous assignment is irrevocable if

(a) the assignment is in a writing either signed or under seal that is delivered by the assignor; or
(b) the assignment is accompanied by delivery of a writing of a type customarily accepted as a symbol or as evidence of the right assigned.

Restatement (Second) of Contracts, § 338. In California (the governing law of the agreements in this case), gifts are irrevocable. Cal. Civ. Code §§ 1146-48.

The Copyright Act describes the attributes of the writing needed to transfer ownership and is written broadly enough that it encompasses gifts:

(a) 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 sequence of assignments to Swift Harvest meet the legal standard for transfer by gift and the requirements of the Copyright Act – they were in writing signed by the assignor. No consideration was required.

Swift Harvest USA, LLC v. Dollar General Corp., No. 17-8644 DMG (GJSx) (Dec. 28 2018).

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2 responses to “Were the Assignments Valid?”

  1. I always understood that an assignment does not have to be a contract. I would have thought Swift Harvest would have raised that argument.

  2. Swift Harvest had to argue it acquired Banzai’s intellectual property by either assignment or gift – the two being mutually exclusive because the former requires consideration and the latter requires there not to be. Civ. Code, §1146. A gift under California law also requires evidence of “donative intent” to make the gift which, here, is lacking because asserting such intent would almost certainly contradict the language in the transfer agreement. I think Swift Harvest chose correctly for that reason and because it did provide consideration. Specifically, Swift Harvest took over from Banzai the trademark-law imposed burden to enforce the trade dress it acquired and licensed back to Banzai. The assignment agreement did not have to make that obligation explicit because it’s imposed by law. The court was wrong to assert that “Banzai, as the presumed owner of intellectual property rights has no affirmative obligation to prosecute its rights or to enforce its rights against infringers.” It did, and Swift Harvest took on that obligation.

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