Property, intangible

a blog about ownership of intellectual property rights and its licensing

A Licensor and Licensee Have Ownership Rights, But Not of the Same Thing

I raised an eyebrow reading the decision in Beard v. Helman. The court seems to have a misunderstanding about the difference between an owner and a licensee.

After a casual conversation at a Renaissance fair, plaintiff Beard designed for defendant Helman a dragon image to be used for a boot button. There was originally an oral agreement for the use of the image. Because of the difficulty of manufacture, it took Helman a number of years to actually produce the button. When Beard learned of it, the two disputed the terms of the license – credit to be given, whether Beard would receive a pair boots or only just some manufactured buttons, and how the design would be promoted.

The decision is largely a straight-up contract interpretation case: what was an offer, what was a counteroffer versus acceptance – good Contracts 101 stuff, ultimately to be decided by the jury.

But this is what raised my eyebrow. Beard had offered Helman an exclusive license for use on boot buttons. The court held that the exchange of correspondence, between the parties, could have resulted a contract confirming the exclusive license – so far, so good. The court also noted, correctly, that an exclusive licensee has an ownership interest:

Although ownership generally remains with the party who registers the copyright, where that individual provides another with an “exclusive license,” such a license is considered a transfer of the copyright ownership to the party that receives the license.[FN135]

[FN135] 17 U.S.C. § 101. See also MacLean Assocs., Inc. v. Wm. M. Mercer-Meidinger-Hansen, Inc., 952 F.2d 769, 778 (3d Cir. 1991) (“The owner of a copyright can transfer ownership of the copyright by selling it or by exclusively licensing it”).

Here, it is undisputed that Beard granted Helman an oral license in 2008, and that license may have been exclusive. In 2020, both parties confirmed the existence of that license in writing during their email exchanges.

These facts may be sufficient to establish a valid exclusive license for Helman to use the Image, as the oral license was later confirmed in writing. However, there remains a genuine dispute of material fact as to whether the license was in fact exclusive. Although Beard did state that he had granted Helman “exclusivity on the use of the [Image] and my art on your boot buttons,” it is not entirely clear that Beard—who is not a lawyer—meant to use the word “exclusive” in a legal sense. There is simply no information in the current record to indicate that either party intended for Helman to have an exclusive right to use the Image and, therefore, the Court cannot conclude as a matter of law that Beard lacks standing to pursue a claim of copyright infringement against Defendants.

Wait, what? If you are the the licensor, you may not have standing to bring a claim against your exclusive licensee??

Section 101 indeed characterizes an exclusive license as an ownership interest. But a license does not strip the licensor of any ownership interest or its right to bring an infringement claim. The rights owned are different – an assignment transfers legal title to the transferee while an exclusive license transfers an exclusive permission to use to the transferee. Minden Pictures, Inc. v. John Wiley & Sons, Inc., 795 F.3d 997, 1003 (9th Cir. 2015). The defendant, and thus the court, erred in characterizing the licensee’s ownership interest as of the same character as the licensor’s and assuming that there could only be one owner.

Whether a licensee is an infringer is well-settled doctrine. A license is an affirmative defense to copyright infringement. Once the license is raised as a defense, the legal question becomes whether the complained-of behavior resulted in a copyright infringement. If the conduct falls within the license, the infringement claim is dismissed. If the conduct is not excused by the license and otherwise violates the Copyright Act, the plaintiff prevails absent another defense. William F. Patry, Patry on Copyright § 17:44 (Mar. 2022 update).

The court’s acceptance of the framing as a matter of standing is short-circuiting the correct analysis. No harm here since the court didn’t dismiss, but let’s hope we don’t see it again.

Beard v. Helman, No. 4:21-cv-0080 (M.D. Pa. Mar. 31, 2022)

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