Property, intangible

I previously wrote about a puzzling case, Small Justice LLC v. Xcentric Ventures L.L.C., with the defendant better know as Ripoff Report. The First Circuit has now grappled with it, although based on a revised district court opinion amended with a highly consequential footnote.

To distill it down as much as possible, a lawyer, Goren, got a bad review on Ripoff Report written by one DuPont. Goren went to state court where DuPont defaulted and Goren had the court assign the copyright in DuPont’s postings to him. Goren then assigned the copyright to Small Justice and sued Ripoff Report for defamation and related claims, as well as for a declaration of copyright ownership and copyright infringement. I’m writing only about the copyright part of the case; you can read about the Section 230 part of the case here.

The various opinions are about what kind of ownership interest Ripoff Report has in the post. The First Circuit, quoting the district court, summarizes the original holding:

First, the District Court concluded that the plaintiffs’ copyright infringement claim failed because the District Court determined that DuPont had “transferred copyright ownership to Xcentric by means of an enforceable browsewrap agreement.” According to the District Court, DuPont made that transfer pursuant to the Ripoff Report’s terms and conditions, which provided, in part, that a user of the site agreed to “grant … to Xcentric an irrevocable, perpetual, fully-paid, worldwide exclusive license to use, copy, perform, display and distribute” the user’s posting.

Let’s pause here. The district court recognized, correctly, that an exclusive license is an ownership interest. However, despite the clear wording in the “browsewrap” agreement that Xcentric was only granted an exclusive license, the district court also said that “DuPont ceased to be a holder of copyright and had no remaining rights to assign to Goren pursuant to Goren’s Superior Court action.” The court thus did not distinguish between the ownership of a partial interest (an exclusive license) and the ownership of the entire interest (an assignment). Maybe the court thought that the license was so complete that nothing was retained by Goren, but if so it would have been nice to mention that.

Moving on, next we have an interesting twist. The district court, apparently sua sponte, invited the parties to comment on a new proposed footnote, although advising that “the judgment would not change.” The footnote, which was ultimately added as note 4 to the concluding sentence of Section V.A on page 11,¹ says:

Even if 17 U.S.C. § 204, D. 64 at 9, 21 n. 22, applies, the ultimate result here is the same. Section 204 provides that the transfer of a copyright is achieved only with an affirmative action on the part of the transferor, stating that “[a] transfer of copyright ownership, other than by operation of law, is not valid unless an instrument of conveyance, or note or memorandum of 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. Assuming a written and signed conveyance was required here, the browsewrap agreement was insufficient because it did not require the user’s affirmative assent, instead relying on the user’s use of the ROR as an expression of assent. See Murphy v. Lazarev, 589 Fed. Appx. 757, 765 (6th Cir. 2014) (explaining that “[a] written and signed conveyance is necessary to use copyright material”); cf. Metro. Reg’l Info. Sys., Inc. v. Am. Home Realty Network, Inc., 888 F. Supp. 2d 691, 696, 708 (D. Md. 2012), aff’d, 722 F.3d 591 (4th Cir. 2013) (enforcing online subscription agreement executed by users containing an exclusive assignment of copyright to uploaded photographs). Evaluated under Section 204, Xcentric did not acquire an exclusive license to the Reports by way of the terms and conditions, and DuPont, as the author of the Reports, retained copyright ownership. Even so, DuPont conveyed a nonexclusive, irrevocable license to Xcentric to display the Reports by means of the check box. Section 204’s requirements are inapplicable to a nonexclusive license because it is not a “transfer of copyright ownership” under 17 U.S.C. § 101. See Murphy, 589 Fed. Appx. at 765 (stating that “a nonexclusive license may be granted orally, or may be implied from conduct” because “a nonexclusive license is not a transfer of ownership under 17 U.S.C. § 101 and is not, therefore, subject to the writing requirement of § 204”) (internal quotation marks and alterations omitted). Under this scenario, Xcentric is not the owner of the copyright to the Reports, but it may display them in perpetuity. Accordingly, summary judgment still enters in Xcentric’s favor.

So with a footnote, the district court went from Xcentric as owner of the full copyright to a nonexclusive license.

On appeal the First Circuit affirmed the copyright claims. As to the copyright infringement claim, Small Justice didn’t argue on appeal that Xcentric’s publication was outside the scope of the nonexclusive license, but rather there was no nonexclusive license because (i) there was no consideration for it or (ii) it was unenforceable on public policy grounds, because posts might be libel per se yet Ripoff Report promises not to remove them.

As to consideration, that was Ripoff Report’s publication of the post. The public policy argument was WTF: “[T]he plaintiffs offer no basis for concluding that this public policy provides a reason to hold the nonexclusive license itself invalid. The fact that one holds such a license does not in and of itself protect one from liability for libeling another. Furthermore, even assuming that DuPont’s postings were per se libelous, no aspect of copyright law protects the holder of such a license from liability for libel, and nothing in the District Court’s opinion suggests otherwise.”

Which leaves us with Small Justice’s declaratory judgment claim that it was the copyright owner of the posts. Small Justice alleged error in the district court’s statement that Xcentric was a copyright owner, but given the new footnote the district court hadn’t held that: “[r]ather, the District Court appears to have concluded only that Xcentric is not the copyright holder.” And one with a valid license to publish the material.

Eric Goldman writes:

Even among the many cases we’ve blogged, this case stands out as particularly noteworthy because it exposes an ugly interface between copyright and reputation management. Goren didn’t want copyright ownership to “promote the progress of science.” Like the doctors in Medical Justice’s decrepit program to pre-acquire the copyrights to unwritten reviews of their patients, the real goal of copyright ownership was to suppress the content. To me, this turns copyright law on its head, by making our society dumber, not smarter. Jessica Silbey and I are co-authoring a paper on how and why copyright has emerged as a reputation management tool of choice, and the paper prominently features this case as an example. The fact that the appeals court reached a satisfying outcome is nice. However, the fact it took four years of litigation to reach this result, when most defendants would have given up long ago, is symptomatic of copyright law’s overreach. We need to build industrial-grade doctrines in copyright law to prevent its misuse as a reputation management tool.

I don’t know if the outcome – the inability to suppress critical content resulting from intertwined contract law, licensing law, assignment law, and the special case of protecting Aleksandr Solzhenitsyn’s copyrights – was the system working as it should, albeit in an unforeseen way, or a happy accident.

Small Justice LLC v. Xcentric Ventures LLC, Nos. 1501506, 16-1085 (1st Cir. Oct. 11, 2017).

Small Justice LLC v. Xcentric Ventures LLC, Civil Action No. 13-cv-11701 (D. Mass. Sep. 30, 2015) (adding footnote).

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