Property, intangible

a blog about ownership of intellectual property rights and its licensing

  • Copyright Notice and Ownership

    Eminent scholar Jessica Litman has published What Notice Did, 96 B.U.L. Rev. 717 (2016), an interesting article on how copyright notice has shaped copyright ownership jurisprudence. Most interesting to me was the “head’s I win, tails you lose” nature of notice. Since 1870 an assignment had to be in writing, but publishers would name themselves as copyright owner in the notice. A legal conclusion that there had been no assignment meant that the notice was wrong and therefore the work not protected by copyright. To accommodate the problem, courts allowed for a parol transfer of common law copyright, a theory that was also the genesis of the work for hire doctrine. As a result of the Hobson’s choice:

    [C]ourts evolved unprincipled and unpredictable doctrines to justify, whenever possible, holding that the title to the copyright was effectively assigned to the person or entity named in the notice. Where undocumented parol transfers could not be inferred, or would not support the right claimed, courts applied an increasingly broad interpretation of the works made for hire doctrine…. The presumption that an author transferred his copyright whenever he submitted a copy of the work for publication persisted under the 1909 Act. The presumption may originally have arisen to prevent the forfeiture of copyright from defects in notice, but later courts applied it as a freestanding legal rule in the absence of any notice defects. Where the author claimed to have reserved any rights in his copyright, courts were unsympathetic unless the author could produce written documentation that he retained the copyright or any part of it. Unsurprisingly, the rule worked to authors’ disadvantage.

    The effects have carried forward into the post-1989 Copyright Act, one where notice is no longer required:

    Now that copyright vests upon fixation, one might think that all of the precedent surrounding assignment and transfer of common law copyrights would be irrelevant. In fact, those doctrines have proved disturbingly long-lived. First, of course, they control determinations of initial copyright ownership in works first published or registered before January 1, 1978. In twenty-first century cases involving twentieth century copyrights, the old incoherent analyses still control, and cases commonly reach irreconcilable results on identical facts.[136] Meanwhile, those analyses have slopped over to confuse courts seeking to determine who owns the copyright in more recent works. Publishers continue to presume that they own the copyrights in the works that they publish whether or not the author has executed and signed a transfer of copyright ownership.

    [136] See, e.g., Keiler v. Harlequin Enters., 751 F.3d 64 (2d Cir. 2014); Marvel Characters, Inc. v. Kirby, 726 F.3d 119 (2d Cir. 2013); Gary Friedrich Enters. v. Marvel Characters, Inc., 716 F.3d 302 (2d Cir. 2013); Mattel, Inc. v. MGA Entm’t, 616 F.3d 904 (9th Cir. 2010); Marvel Characters, Inc. v. Simon, 310 F.3d 280 (2d Cir. 2002); HarperCollins Publishers LLC v. Open Road Integrated Media, LLC, 7 F. Supp. 3d 363 (S.D.N.Y. 2014); Random House, Inc. v. Rosetta Books LLC, 150 F. Supp. 2d 613, 620-24 (S.D.N.Y. 2001), aff’d, 283 F.3d 490 (2d Cir. 2002).

    (Most internal footnotes omitted.)

    A pre-publication version of the article is here.

    Creative Commons License
    This work is licensed under a Creative Commons Attribution-NoDerivatives 4.0 International License.

    , ,

  • You Will Never Get a Copyright Registration Right

    I previously wrote about the licensing discussion in Palmer/Kane LLC v. Rosen Book Works LLC, but the decision also points out what is the near impossibility of successfully registering the copyright in a work so that you can actually have a lawsuit claiming it was infringed.

    Palmer/Kane originally alleged the infringement of 19 works, but voluntarily withdrew eight of them after the court ordered an the Register of Copyright’s opinion under 17 U.S.C. § 411(b)(2) on the validity of one registration certificate. This opinion evaluates the remaining 11 works, registered in three registrations.

    A collection of photographs may be registered in one registration. As described by the court:

    Under those rules, group registration of published photographs is permitted only if “the photographs in the group [] have been published within the same calendar year.” 37 C.F.R. § 202.3(b)(10)(iii) (emphasis added). The rules also set forth the procedure an applicant who wishes to register published photographs as a group must follow:

    If the photographs in a group were not all published on the same date, the range of dates of publication (e.g., February 15-September 15, 2004) must be provided in space 3b of the [registration] application, and the date of publication of each photograph within the group must be identified either:

    (A) On each deposited image;
    (B) In a text file on the CD-ROM or DVD that contains the deposited photographic images;
    (C) On a list that accompanies the deposit and provides the publication date for each image; or
    (D) On a special continuation sheet (Form GR/PPh/CON) provided by the Copyright Office. Dates of publication must be provided in a way that clearly identifies the date of publication for each individual photograph in the group.

    Id. § 202.3(b)(10)(iv).

    In addition, if each photograph in the group was published within three months of the filing of the application, the applicant may “simply state the range of dates of publication (e.g., February 15-May 15, 2001) in space 3b of the application, without specifically identifying the date of publication of each photograph in the group either on the deposited image or on a continuation sheet.” Id. § 202.3(b)(10)(vi).

    Taking one of the registrations as an example, it was issued on February 2, 2005 under the title “Corbis website as uploaded July 2002.” It said in space 3b that the registered photographs were first published in July, 2002. However, Corbis had issued licenses for the subject photographs in the registration in 2000 and 2001, meaning that they must have been published before July, 2002.

    Palmer/Kane argued that, instead, these were registrations of the photographs as “compilations,” but the court wasn’t fooled:

    This argument is not credible, however, for the simple reason that plaintiff left Space 6 of its registration application – which calls for applicants registering compilations to “[g]ive a brief, general statement of the material that has been added to this work and in which copyright is claimed” – entirely blank…. Where the registration applicant leaves the portion of the copyright registration form pertaining to compilations entirely blank, this constitutes uncontroverted evidence that the photographs were never meant to be registered as a compilation.

    I’m ok with the court finding that the registrations were not for a compilation work, a theory that still had hurdles to overcome. As pointed out in a footnote,

    Although a compilation need only “display some minimal level of creativity” to be copyrightable, Feist Publ’ns, Inc., 499 U.S. at 358, the “mass registration of photographs” has been found not to satisfy this requirement where plaintiff “simply consolidated all of the photographs she had created over the past seventeen years in a single place, and offer[ed] no evidence demonstrating that she took any further steps to imbue this collection with any sort of original or creative element,” Senisi, 2015 U.S. Dist. LEXIS 160572, 2015 WL 7736545, at *3.

    But look how almost impossible it was to get the registration right. First, you have to decide whether the collection is a “compilation” or just a “group” (or, to confuse matters further, they can even be a “single work” as described in 37 C.F.R. § 202.3(b)(4)). Once you decide it’s a “group,” the regulation, not even on the form itself, says that “the range of dates of publication must be provided in space 3b of the application.” But look at the form, there is no place to put a range:

    Snip from copyright registration Palmer-Kane

    It is surprising that someone wouldn’t know to fill in a range when there isn’t room for it on the form, and instead give only the closing date for the group? Particularly if the included images themselves were dated? And you’re asking someone to puzzle out whether the photographs have been “published,” a status that even the Copyright Office won’t opine on for web-based publications?1 “Publication” is defined to include “[t]he offering to distribute copies or phonorecords to a group of persons for purposes of further distribution, public performance, or public display.” 17 U.S.C. § 101. But is that what the ordinary person thinks of as “publication”? I doubt it. Might a misunderstanding about “publication” have played a role?

    And who is harmed by this error? Certainly not the defendant; it didn’t rely on the registration status of the photo in making any kind of decision about whether to use it. It would have been nearly frivolous for the publisher to argue that it thought the work was in the public domain when it obtained the photograph from a stock photo licensing house.2

    And not the public. One purpose for “encouraging” registration (with the stick being inability to file a lawsuit unless you have one) is to create a “public record of America’s cultural and historical heritage”3 and, indeed, these photographs are now part of that public record — although query how important that actually is when they are not available to the public outside of highly controlled access within the four walls of the Library of Congress, as no deposit materials are.

    No, allowing attacks on the registration is litigation fodder, plain and simple. And in this case, successful litigation fodder for eight of the photographs, leaving three standing. The three are the ones for which there wasn’t a retroactive license, as explained in the previous post.

    Palmer/Kane LLC v. Rosen Book Works LLC, No. 15-cv-7406 (JSR) (Aug. 30, 2016 S.D.N.Y.)

    Creative Commons License
    This work is licensed under a Creative Commons Attribution-NoDerivatives 4.0 International License.

    1. “The definition of ‘publication’ in the U.S. copyright law does not specifically address online transmission. As has been the long-standing practice, the Copyright Office asks the applicant, who knows the facts surrounding distribution of copies of a work, to determine whether the work is published or not.” Copyright Office, Circular 66. No wonder the publishing houses don’t bother getting the licenses. ↩
    2. But not entirely, Getty has been known to do it. ↩
    3. Copyright Office, Circular 1a. ↩
    , ,

  • If It’s Retroactive It’s Not a “License”

    This is a big one. As I’ve written about in the past (recursive link), there is a huge upheaval in the stock photography industry over the use of photos in textbooks. In Palmer/Kane LLC v. Rosen Book Works LLC, plaintiff Palmer/Kane licensed the rights in its photos through several agencies, the relevant one here being Corbis.

    The textbook industry claims that it is common practice for publishers to use photos in books before obtaining the license for their use. In fact, the Palmer/Kane court said that it was a "persuasive showing."

    For those of you who don’t remember contracts class, there is a hierarchy for how one goes about interpreting contracts:

    In the interpretation of a promise or agreement or a term thereof, the following standards of preference are generally applicable: … (b) express terms are given greater weight than course of performance, course of dealing, and usage of trade, course of performance is given greater weight than course of dealing or usage of trade, and course of dealing is given greater weight than usage of trade.

    Restatement 2d of Contracts, § 203. So standard industry practice can be relevant to understanding the terms of an agreement.

    But the defendant’s theory that "we’ve always done it that way!" didn’t matter here, as explained by the court:

    Nonetheless, evidence of custom and course of dealing cannot displace rights conferred by the copyright laws. See Dun & Bradstreet Software Servs., Inc, v. Grace Consulting, Inc., 307 F.3d 197, 211 (3d Cir. 2002) ("A defense of industry custom and practice in the face of the protective provisions of the Copyright Act could undermine the purposes and objectives of the statute and reduce it to rubble."); Weinstein Co. v. Smokewood Entm’t Grp., LLC, 664 F. Supp. 2d 332, 348 (S.D.N.Y. 2009) ("[N]otwithstanding plaintiff’s claims about ‘custom and practice’ in the entertainment industry, federal copyright law dictates the terms by which an exclusive license can be granted."). Rosen does not appear to seriously contend that its agreements with Corbis authorized pre-license use (something of a contradiction in terms), but rather that Corbis essentially looked the other way in the face of infringement. Cf. Spelman  Decl. dated June 25, 2016, ¶ 6 ("In my experience Corbis did not treat a customer’s use of a licensed photo in excess of or beyond the terms of the license in question as copyright infringement, but rather as a contractual matter to be resolved as part of the ongoing, mutually beneficial relationship between the publisher and Corbis."). But that Corbis may have chosen not to view defendant’s pre-license use as "infringing" is neither here nor there. Infringement is infringement, regardless of what Corbis and Rosen may have chosen to call it.

    But wait, there’s more. The Palmer/Kane court, in the Southern District of New York, an influential copyright venue, also disagreed with the conclusion of four of its sister courts that the license eventually taken by the publisher was effective retroactively. Instrumental to the conclusion here is the proper interpretation of Davis v. Blige, 505 F.3d. 90 (2d Cir. 2007), a controversial decision involving the ability of a joint owner of a copyright to retroactively license an infringer. The four earlier courts distinguished Davis on the basis that it was a co-ownership situation, not sole ownership. But the Palmer/Kane court wasn’t buying it (forgive the lengthy block quote but it’s worth it):

    As a threshold matter, this Court is not of the view that it has the discretion to narrow the scope of Davis‘s holding on the basis that Davis was animated by a set of considerations that are arguably not relevant here. That, of course, begs the question whether what Davis described as its holding – "that a license or assignment in copyright can only act prospectively" – was truly its holding in the precedential sense. See Davis, 505 F.3d at 104. While the metaphysical line between dictum and holding "is not always easy to draw," "’where a panel confronts an issue germane to the eventual resolution of the case, and resolves it after reasoned consideration in a published opinion, that ruling becomes the law of the circuit, regardless of whether doing so is necessary in some strict logical sense.’" Cetacean Cmty. v. Bush, 386 F.3d 1169, 1173 (9th Cir. 2004) (quoting United States v. Johnson, 256 F.3d 895, 914 (9th Cir. 2001) (Kozinski, J., concurring)). Such is the case here, where the principle established by the Second Circuit in Davis – and identified by that Court as its holding – is unambiguous and the result of full judicial consideration.

    Moreover, the policy considerations allegedly motivating Davis do in fact apply to the sole-ownership context. As for "the need for predictability and certainty," many copyrights owners contract with a licensing agent to license their works, as plaintiff did with Corbis here. Davis, 505 F.3d at 105. If a licensing agent may license works retroactively, the sole copyright holder is not all that differently situated – in terms of its ability to "reliably and definitively determine if and when an infringement occurred" – than a copyright co-owner whose infringement claim may be extinguished by another co-owner’s action. Id. The licensing agent is of course acting as the copyright holder’s agent, but the copyright holder is still placed in the unenviable position of being generally unable to know, with certainty, that its infringement claim will not be extinguished by the grant of a retroactive license. See id. ("If retroactive transfers and licenses were permissible, one could never reliably and definitively determine if and when an infringement occurred, because an infringement could be ‘undone’ by the very sort of maneuver attempted by defendants in this case.").

    As for the desirability of discouraging infringement, it is difficult to see how the availability of a retroactive license does not "lower[] the cost of infringement to infringers" even in the sole-ownership context, particularly given that the licensing fees that have been contractually predetermined between the infringer and the licensing agency will often be dwarfed by the statutory damages that would have been available in an infringement action. Id. at 106; see 17 U.S.C. § 504(c) (providing for statutory damages of up to $30,000 per work infringed in general, and up to $150,000 per work infringed if the Court finds willful infringement). Thus, while these two policy considerations might be more stark in the context of copyright co-ownership, they are at play in the sole-ownership context as well. See N. Jersey Media Grp. Inc., 2015 U.S. Dist. LEXIS 29191, 2015 WL 1086566, at 4 n.6 (finding that "the policy reasons underpinning the court’s holding in Davis are similarly present" where there is a sole copyright holder).

    The fact that "[a]n owner who wishes to release unilaterally his own accrued claims may do so using whatever language he chooses — including by calling the negotiated settlement the proverbial ‘banana’ — ", Davis, 505 F.3d at 104, is of no help to Rosen. In obtaining the February 2008 License, Rosen plainly was not entering into a "negotiated settlement" with Corbis. There was no recognition by either Rosen or Corbis that infringement had occurred and, in fact, Rosen denies that it infringed. Notwithstanding its reference to the "proverbial ‘banana,’" the Davis Court explicitly cautioned against conflating settlements and retroactive licenses:

    Licenses and assignments function differently from settlements and releases, and the use of the term "retroactive license" for "settlement" or "release" by the parties causes unnecessary confusion and potentially creates legal mischief.

    . . .

    In its simplest form, a license means only leave to do a thing which the licensor would otherwise have a right to prevent. A retroactive license or assignment purports to authorize a past use that was originally unauthorized. Unlike a settlement, which recognizes an unauthorized use but waives a settling owner’s accrued claims of liability, a retroactive license or assignment would — if given legal effect – erase []the unauthorized use from history . . . .

    Id. at 102-03 (emphasis added) (citation and internal quotation marks omitted). That parties may call a negotiated settlement whatever they wish does not mean that a retroactive license is, by definition, a negotiated settlement. This Court thus cannot bless an allegedly retroactive license by pretending that the license was in fact a negotiated settlement. The Second Circuit might one day limit the scope of Davis in the manner Rosen seeks. But until such time, this Court cannot disregard Davis‘s categorical conclusion "that a license or assignment in copyright can only act prospectively." Id. at 104.

    The court, “constrained to disagree” with the earlier decisions, is either prescient or half-baked, I’m not sure which.

    And this case is one that keeps on giving. I first started to read it because it also has a section on copyright registrations. I’ll post about that later too. But the licensing discussion was too interesting to not write about first.

    Palmer/Kane LLC v. Rosen Book Works LLC, No. 15-cv-7406 (JSR) (Aug. 30, 2016 S.D.N.Y.)

    Creative Commons License
    This work is licensed under a Creative Commons Attribution-NoDerivatives 4.0 International License.

    , , ,

  • Copyright Registrations Confusing Things Again – Updated

    I have not been shy in expressing my opinion about the copyright registration system. I’m not a fan of the requirement that one must have a registration before a lawsuit can be filed; as a result, the first stages of a copyright infringement lawsuit are collateral attacks on the registration.

    Cisco alleged infringement of the “Cisco CLI,” “CLI” being a commonly used initialism for “command line interface,” a non-graphical software interface. Cisco provided copies of 26 copyright registrations and applications for the software.

    Arista Networks was started by former Cisco executives. Cisco alleged that Arista copied some of its software, in its brief citing public statements by Arista, “The training is very easy and a Cisco CCIE expert would be able to use Arista right away, because we have similar command-line interfaces and operational look and feel. Where we don’t have to invent, we don’t.” So you can see why Cisco had reason to believe that its software was copied.

    I have looked at the Cisco registrations and they are a thing of beauty. A summary of the registrations is below:

    Work Reg. Date Reg. No. Previous registrations Reason for new registration
    Cisco IOS 11.0 6/14/2002 TXu 1-036-057 No
    Cisco IOS 11.1 6/14/2002, 8/20/2002 TX 5-531-435/ TXu 1-048-5691 Yes Pending 2002 Changed version
    Cisco IOS 11.2 6/14/2002 TXu-1-036-063 Yes Pending 2002 Not indicated
    Cisco IOS 11.3 6/14/2002, 1/14/2003 TXu 1-036-062/ TXu 1-057-804 Yes Pending 2002 Changed version
    Cisco IOS 12 6/14/2002, 1/14/2003 TXu 1-036-064/ TXu 1-057-805 Yes Pending 2002 Changed version
    Cisco IOS 12.1 6/14/2002, 1/14/2003 TXu 1-036-066/ TXu 1-057-807 Yes Pending 2002 Changed version
    Cisco IOS 12.2 6/14/2002, 1/14/2003 TXu 1-036-065/ TXu 1-057-806 Yes Pending 2002 Changed version
    Cisco IOS 12.3 6/26/2004 TXu 1-188-975 Yes, TXu 1-036-065 Changed version
    Cisco IOS 12.4 8/12/2005 TXu 1-259-162 Yes, TXu 1-188-975 Changed version
    Cisco IOS 15.0 11/28/2014 TX 7-938-524 Yes, TXu 1-259-162 N/A
    Cisco IOS 15.1 11/28/2014 TX 7-938-525 Pending 2014 N/A
    Cisco IOS 15.2 11/24/2014 TX 7-937-159 Pending 2014 N/A
    Cisco IOS 15.4 11/26/2014 TX 7-938-341 Pending 2014 N/A
    Cisco IOS XR version 3.0 4/29/2005 TXu 1-237-896 No N/A
    Cisco IOS XR version 3.2 10/19/2005 TXu 1-270-592 TXu 1-237-896 Changed version
    Cisco IOS XR version 3.3 7/19/2006 TXu 1-336-997 TXu 1-270-592 Changed version
    Cisco IOS XR version 3.4 3/2/2007 TXu 1-334-750 Pending 2006 Changed version
    Cisco IOS XR version 3.5 7/17/2007 TXu 1-592-305 TXu 1-344-750 Changed version
    Cisco IOS XR version 4.3 11/14/2014 TX 7-933-364 TXu 1-592-305 N/A
    Cisco IOS XR version 5.2 1/14/2014 TX 7-933-353 Pending 2014 N/A
    Cisco IOS XE version 2.1 11/24/2014 TX 7-937-240 N/A N/A

    As you can see, Cisco, with great thoroughness, provided registrations for the various versions of the IOS software as well as IOS XE and IOS XR. Where appropriate, in the application field called “Previous Registration,” Cisco responded “yes” and stated that “this is a changed version of the work.”

    From the list shown it’s clear there are no more than three works that Cisco claims infringed, IOS, IOS SR and IOS XE. The relationship of the three isn’t clear, and it could be that XR and XE contain IOS, as a Cisco white paper (and Reddit) suggest.

    Nevertheless, Arista successfully confused the court over the relevance of the copyright registrations, convincing the court that (in Arista’s words) “the Cisco CLI is a lawyer created construct that simply mirrors Cisco’s copyright infringement allegations against Arista and has no life outside this litigation.” The court then proceeded to, of all things, stumble around compilation copyright, deciding that the Cisco CLI was a compiliation composed of pieces of the various registrations:

    For purposes of this motion, Cisco asks the Court to determine that Cisco owns a valid copyright in “Cisco CLI.” But Cisco has failed to demonstrate that “Cisco CLI” is a compilation that its author(s) put together rather than a creature of its litigation strategy. In Feist Publ’ns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 111 S. Ct. 1282, 113 L. Ed. 2d 358 (1991), the Supreme Court addressed the issue of the copyrightability of compilations. The Court explained that to qualify for copyright protection, “a work must be original[.]” Id. at 345. “[O]riginality requires independent creation plus a modicum of creativity.” Id. at 346. Factual compilations can even possess originality when the author makes “choices as to selection and arrangement, so long as they are made independently by the compiler and entail a minimal degree of creativity[.]” Id. at 349. But the Court emphasized that copyright “protection is subject to an important limitation. The mere fact that a work is copyrighted does not mean that every element of the work may be protected. Originality remains the sine qua non of copyright; accordingly, copyright protection may extend only to those components of a work that are original to the author.” Id. at 348 (emphasis added). In this case, Cisco has not presented evidence of where Cisco CLI comes from or how and when it was compiled. Although Cisco has copyrights covering its IOS, Cisco does not have a single copyright registration covering the compilation it calls the Cisco CLI.

    Perhaps not, but that’s because, presumably like any software, the IOS software and its CLI component evolved over time and features and functionality were added, updated and removed. But it’s still all one work, just different versions. That’s clear from the applications, which state that the reason for the new registrations is “changed version.”

    Rather, the Cisco CLI is composed of pieces drawn from 26 different copyright registrations covering Cisco’s IOS. This may not have been an issue if Cisco had presented evidence about how the Cisco CLI compilation was created but it did not. See, e.g., Transcript 12:5-21 (disagreeing that the Cisco CLI is an attorney construct but not indicating how the Cisco CLI was compiled). In opposition, Arista argues that the Cisco CLI is a lawyer created construct that simply mirrors Cisco’s copyright infringement allegations against Arista and has no life outside this litigation.

    Well of course Cisco wouldn’t have come up with evidence about its compilation because the Cisco CLI isn’t a “compilation” in the way the court is thinking of it. A “compilation” is “a work formed by the collection and assembling of preexisting materials or of data that are selected, coordinated, or arranged in such a way that the resulting work as a whole constitutes an original work of authorship.” Like an encyclopedia, anthology or database. A software program can indeed be a “compilation” and probably most are; they are complicated and consist of many components. But the Cisco CLI does not appear to be what the court is describing as the “compilation,” a random set of components pulled together piecemeal from 26 different registrations in order to gin up an infringement claim. It is rather simply an evolving part of the larger IOS work, with the changes to the CLI reflected in different registrations because they were introduced over the 12 year period of development that the certificates cover.

    Luckily, though, all that happened is Cisco didn’t get summary judgment on copyrightability, but it hasn’t lost either.

    To the extent that IOS, IOS XR and IOS XE do not share the same command line interface, then it is a valid infringement question whether one work that combines pieces of three works has copied enough of each to infringe one or all of them. But that’s an infringement question, not a scope of copyright question. Arista has also raised a number of challenges, like whether the copying was de minimis, whether elements of the CLI were scenes a faire, whether the content copied was copyrightable, and whether the copying was a fair use. All of that is well and good, all fair game for litigation over software. But throwing copyright registrations into the mix just further complicates what already is about the most complicated infringement analysis we ask anyone to perform, infringement of the copyright in software.

    The irony is that had Cisco provided only one registration, the last one for IOS 15.4, it probably could have relied on the effective registration doctrine for its infringement claim. But courts have screwed up that theory too, so in an abundance of caution, and persuasive value, Cisco provided a slew of registrations. You just can’t win.

    And for those of you unhappy with the Federal Circuit opinion in Oracle v. Google, this is going to be the Ninth Circuit’s bite at the apple. We may find out what the Ninth Circuit REALLY thinks about the copyrightability of “SSO” in software.

    Update: Sharp reader Engel Nyst has pointed out that the case has a patent infringement claim to, so it too will go to the Federal Circuit.

    Cisco Sys. v. Arista Networks, Inc., No. 14-cv-05344-BLF (N.D. Cal. Aug. 23, 2016).

    1. The entries with two numbers reflect the original registration and a supplemental registration correcting information on the original registration.↩

     

    Creative Commons License
    This work is licensed under a Creative Commons Attribution-NoDerivatives 4.0 International License.

    , ,

  • What Rights are Conveyed? We Have to Wait and See

    I asked in a prior post whether plaintiff Joseph Cooper had the right to publish his videotapes of performances of famous comedian Steve Harvey, taped at Harvey’s Texas club in 1993, based on this invoice:

    Cooper v Harvey Video Invoice

    Click here for larger version

    Unfortunately we don’t know yet, because it’s most certainly a question of fact, not one for summary judgment. But the court noted the following points:

    To Harvey’s claim that an invoice is not a contract: This one only merited a footnote, “As preliminary matter, Harvey alleges that the Video Contract Cooper refers to is just an invoice for taping performances at the Comedy House, not ‘a valid contract to convey performance, derivative, and distribution rights.’ As Cooper correctly notes in his own summary judgment motion, an invoice, depending on the context, may constitute a contract. See One Beacon Ins. Co. v. Crowley Marine Servs., 648 F.3d 258, 264, 271-72 (5th Cir. 2011).”

    To Harvey’s claim that there is no valid contract because he never signed it: “Looking at the Video Contract, the Court sees writing in the upper right hand corner, styled as a signature, appearing to read ‘Steve Harvey.’ Whether that signature belongs to Harvey is an issue of fact for a jury to decide.”

    To Harvey’s claim that the invoice allowed internal use of the content only:1

    As a preliminary matter—and contrary to Cooper’s assertion—the Court finds that the contract is ambiguous. Generally, if a contract can be given a certain or definite legal meaning or interpretation, then it is not ambiguous. Nor is a contract ambiguous merely because the parties disagree on its meaning. Rather, ambiguity exists only if the contract’s ‘meaning is uncertain, or if the language is susceptible to two or more reasonable interpretations.
    Here, that is precisely the case. The handwritten portion of the purported contract, appearing after the words “Services Included,” reads:

    Produce videotapes of promotional material from the facility including interior shots, audience, stage performances, and graphics with official logos. Tape will also include names, dates and music sound tracks. Tapes will be looped for continuous play before, during and after show performances.

    But the circled, written portion in the lower left hand corner reads:

    The studio reserves the right to use the original tape and/or reproductions for display, publication or other purposes. Original videotapes remain the exclusive property of the studio.

    These two provisions raise the question of whether the parties intended for the videos Cooper made to be used as promotional materials for the Comedy House, for Cooper to be able release and sell the tapes himself, or, perhaps both. All three are reasonable interpretations, but Court cannot say which, if any, the parties intended. This makes the contract ambiguous.

    In light of the ambiguity the court then considered parol evidence which, not surprisingly, did not resolve the question of fact as to the meaning. So we’ll have to wait and see what exactly Cooper is licensed to do with the tapes, if anything.

    Cooper v. Harvey. No. 3:14-CV-4152-B (N.D. Tex. Aug. 21, 2016).

    Creative Commons License
    This work is licensed under a Creative Commons Attribution-NoDerivatives 4.0 International License.

    1. The court referred to “ownership rights to the tapes,” but we’ll assume the court meant the copyright of the performance on the tapes, since the rest of the discussion is about ownership of copyright, not the tangible articles. ↩
    , ,

  • What Rights are Conveyed?

    Cooper v Harvey Video Invoice

    Click here for larger version

    Can Cooper, the videographer, put his videos of now-famous comedian Steve Harvey on YouTube?

    Creative Commons License
    This work is licensed under a Creative Commons Attribution-NoDerivatives 4.0 International License.

    , ,

  • And You Wonder Why Litigation Is Expensive

    Golly, the things you have to explain sometimes. Plaintiff Ubu/Elements, Inc. claimed to have purchased all of the assets of Defendant Elements Personal Care, Inc. UBU/Elements accused the defendant of continuing to use the trademark AFTER THE GAME after the purchase.

    The Asset Purchase Agreement said this about the trademark in dispute:

    APA assignment

    If you can’t read it, it says that at “Closing” Elements Personal Care would “sell, grant, convey, transfer, assign and deliver to the Purchaser … all of the following: … All intellectual property registered or used by the Seller or its principal Warren Chambers, which includes but is not limited to: patents, trademarks, copyrights and formulas for the following items: i) After the Game.” Consideration for the purchase of the assets was that Warren Chambers would become a 26% shareholder in a new entity known as UBU/Elements, Inc., and the other shareholder in Elements Personal Care, Inc., Arthur Sumrall, would become a 5% owner:

    APA snip 2

    There was no separate trademark assignment agreement. The APA was recorded at the PTO after the dispute began.

    So here’s the problem—the APA used language of future assignment, “at the Closing the Seller shall sell ….” There was no closing on the date given for it in the APA, November 8, 2011. But the paragraph continued on “or on such other date and at such other time or place as the parties may agree in writing.” It is apparently undisputed that on November 23, 2011, both the APA and the Shareholder Agreement for the new company were signed, so there was a closing. And the documents they had, although not ideal, were good enough for the court:

    The record is clear that the APA was signed by all of the interested parties, and the Shareholder Agreement was simultaneously signed on that same date. I am persuaded by a preponderance of the evidence that this exchange of promises, and the simultaneous execution of both documents, was sufficient to establish a binding written contract, and that such contract operated to assign the ATG trademark to Plaintiff.

    I conclude that that this is the plain meaning of the documents, and this construction of the two agreements is consistent with and corroborated by other evidence, including the conduct of the parties. Although it would have been preferable and certainly would have added clarity if there were a separate document specifically purporting to transfer the trademark, the agreement itself leaves the form of documentation required to effectuate transfer strictly within the control of the purchaser. Specifically, Section 3.2 entitled “Transfer of Assets” provides that the “Seller shall deliver to the Purchaser … assignments and other good and sufficient instruments of conveyance and transfer, in form and substance reasonably satisfactory to the Purchaser’s counsel.” Alan Blau testified that he, as an officer of UBU/Elements, was satisfied at the time of the closing that the documents executed adequately reflected the assignment of ATG.

    The defendant didn’t really have a leg to stand on here; in fact I believe the argument borders on the frivolous. The defendant didn’t claim that the entire purchase didn’t happen (which is the logical outcome of it’s “closing” theory), just that one trademark out of a list of identically situated ones wasn’t transferred. This is what makes litigation so painful sometimes. The defendant was able to do a lot of hand-waving to apparently convince the court that it should be looking for some document called a “trademark assignment,” absolutely not true, forcing the plaintiff to draw a connect-the-dots for the court. The court cannot be expected to know the intricacies of trademark practice but the parties should, and not make arguments based on unsupportable theories.

    The plaintiff wasn’t without fault either though; it tried to claim that (1) recording the APA was proof of the assignment, clearly contrary to Section 3.54 of the Code of Federal Regulations and Section 503.01(c) of the Trademark Manual of Examining Procedure, which state that the recording is merely ministerial; and (2) the assignment of a registered trademark does not have to be in writing, clearly contrary to what Section 10 of the Lanham Act says.

    Ubu/Elements, Inc. v. Elements Personal Care, Inc., No. 16-2559 (E.D. Pa. Aug 19, 2016).
    Ubu/Elements, Inc. v. Elements Personal Care, Inc., No. 16-2559 (E.D. Pa. June 22, 2016) (denying TRO).

    Creative Commons License
    This work is licensed under a Creative Commons Attribution-NoDerivatives 4.0 International License.

    , , , ,

  • The Contract Without End – What the Parties Did

    I previously described a situation where unhappy licensees refused to acknowledge that there was a new licensor. Bruce Kirby, Inc. was the original licensor of the defendants’ rights to build Kirby Sailboats granted in the “Builder Agreements” and then in 2008 Bruce Kirby sold his business to Global Sailing Limited (GSL). The Builder Agreements didn’t expressly prohibit their transfer, but said that “Neither Bruce Kirby nor Kirby Inc. shall assign any rights in the Licensed Design save to an assignee who shall enter into an agreement with Licensee on terms and conditions identical with the terms and conditions of this Agreement.”

    My first thought was the drafting lesson. This agreement was flawed from the start because it set up the possiblity of an impasse – the agreement said there had to be new agreements, and the licensor had to offer the same terms, but it didn’t say that the licensees had to accept their new agreements even if they got the same terms. I also think its a bit odd to require new agreements with terms and conditions that are “identical” to the original agreements – if they have to be identical, why not just make the original agreements transferable?

    But there GSL was, with problematic agreements and the need for a solution. I asked for comments on what you would do, quite sure no one would come up with this solution: GSL and Bruce Kirby entered into a new agreement (the 2011 Agreement) that granted a license back to Bruce Kirby so that Bruce Kirby could be the one to try to bring the boat builders into line. The following is quoting the court; the agreement itself isn’t available on PACER:

    Plaintiffs and GSL stated in the preambular “Background” section to the 2011 Agreement that the “IP agreement [2008 Agreement] has entirely failed to accomplish the intent of the parties,” because “the failure to obtain all the required consents and approvals to transfer the Contracts and certain of the Kirby Sailboat rights” meant that “certain of the Kirby Sailboat rights … remained and still remain in the possession of Kirby.” The parties thereupon recited their “wish to implement the arrangements contemplated in this agreement, in lieu of Kirby [plaintiffs] immediately repaying the Purchase Price [of $2.6 million from the 2008 Agreement] in full, and in return for which Global Sailing agrees not to pursue Kirby for specific performance of Kirby’s obligation to transfer all of the Contracts and the remaining Kirby Sailboat Rights to Global Sailing.” The 2011 Agreement then went on to provide for plaintiffs to pay $1 million to GSL and also to pay to GSL all or a portion of ongoing license fee payments that plaintiffs might receive. In return for these payments, GSL “grants to Kirby [plaintiffs] an exclusive, non-assignable, non-transferrable, royalty free license to use and sub-license the Kirby Sailboat Rights owned by Global Sailing, solely to the extent necessary or desirable for Kirby to fulfill its obligations under the Contracts.” The Kirby Sailboat Rights are described in the 2011 Agreement and consist of intellectual property rights, while the rights under the contracts with third parties are distinguished in the 2011 Agreement as “Contracts rights.” This is the sole transfer of rights mentioned in the 2011 Agreement from GSL to Kirby.

    (Brackets in original.) Bruce Kirby then sent notice it was terminating the Builder Agreements on the basis of non-payment of royalties. I guess that didn’t work out so well, because Bruce Kirby, Inc. (but not GSL) filed a lawsuit against the builders for the breach by non-payment and for “allegedly infringing on plaintiff’s intellectual property rights by continuing to build sailboats and to place racing hull numbers on them after the Builder agreements had been terminated due to their breach.”

    But here’s the problem with the whole 2008 sale/2011 license-back scheme between GSL and Bruce Kirby—standing. After first losing the argument that the 2008 Agreement was invalid for failure to meet conditions precedent (because the 2008 Agreement didn’t have any conditions precedent), the plaintiffs also lost the argument that it was replaced by the 2011 agreement. And the 2011 didn’t transfer enough rights back to Bruce Kirby for it to have standing:

    It is clear to me that the 2011 Agreement did not rescind or undo the 2008 Agreement. Plaintiffs had received $2.6 million for their sale of interests under the 2008 Agreement, and the 2011 Agreement required plaintiffs to pay back less than half that amount ($1 million). The ownership of rights and interests transferred by the 2008 Agreement remained with GSL, and plaintiffs received no more than a license to a subset of those rights for the purpose of servicing existing contracts. Although this license is described in the 2011 Agreement as “exclusive,” and the general rule is that an exclusive licensee may sue others for infringement, the 2011 Agreement makes clear that the license is for the “Kirby Sailboat Rights” and is further limited “solely to the extent necessary or desirable for Kirby to fulfill its obligations under the Contracts.”

    The 2011 Agreement does not assign GSL’s rights under any contracts to plaintiffs (including the rights assigned to GSL by plaintiffs by means of the 2008 Agreement). Although the 2011 Agreement grants a license to plaintiffs, it stops well short of authorizing plaintiffs as licensees to sue third parties for the infringement of intellectual property rights now owned by GSL. In the absence of a contractual re-assignment and in light of the express limitation on plaintiffs’ license (“to use and sublicense the Kirby Sailboat Rights owned by Global Sailing, solely to the extent necessary or desirable for Kirby to fulfill its obligations under the Contracts”), I conclude that the 2011 Agreement did not confer on plaintiffs the right to sue to enforce the contractual and intellectual property rights now owned by GSL.

    Accordingly, because all of plaintiffs’ claims against defendants rely on a common legal predicate—the right of plaintiffs to assert contract and intellectual property rights that belong to GSL—I conclude that plaintiffs have no standing or right of action as to any of their claims against [defendants].

    In my view it’s a little squirrely to base any legal conclusion on generic “intellectual property rights” without evaluating exactly what kind of rights might have been infringed, if any at all. A conclusory statement that the rights weren’t exclusive shouldn’t be good enough for copyright at least: “[T]here would appear to be no limit on how narrow the scope of licensed rights may be and still constitute a ‘transfer’ of ownership, as long as the rights thus licensed are ‘exclusive.’” Hyperquest, Inc. v. N’Site Sols., Inc., 632 F.3d 377, 383 (7th Cir. 2011) (quoting Nimmer). So the court took a bit of a shortcut, although likely a more thorough analysis would have come out the same way.

    But I have no idea how Bruce Kirby and GSL should have repaired the problem. Bruce Kirby and GSL’s first argument was an elide that the requirement in the Builder Agreements, that the underlying rights could only be transferred “to an assignee who shall enter into an agreement with Licensee on terms and conditions identical with the terms and conditions of this Agreement,” was an unsatisfied condition precedent to the 2008 agreement. The court, correctly, rejected the theory because the 2008 agreement wasn’t conditioned on getting the builders’ consent to the transfer. But perhaps it is now the law of the case that GSL owns the rights and, if it does, then there are no rights left to be licensed through the Builder Agreements and the builders are therefore infringing GSL’s rights (whatever they might actually be). I don’t know why GSL isn’t a co-plaintiff; an interesting choice that I have no doubt was made for good reason.

    Bruce Kirby, Inc. v. Laserperformance (Europe) Limited, No. 3:13-cv-00297 (JAM) (D. Conn. Aug. 12, 2016).

    Creative Commons License
    This work is licensed under a Creative Commons Attribution-NoDerivatives 4.0 International License.

    , , ,

  • The Contract Without End

    This case relates to some kind of intellectual property, denominated in the agreement as “copyright” and “industrial design” rights, although the true nature of the rights was not examined by the court. It’s a mess of a problem, with a “solution” that turned out not to work quite as the parties planned. I’ll set out the facts and I’m curious to see how readers would have solved the problem, if it can be solved.

    Bruce Kirby invented the “Kirby Sailboat”:

    boat better

    His company, Bruce Kirby, Inc., owned the rights to the design of the boats. In 1983 it entered into a “Head Agreement” with two international sailing bodies to regulate the manufacture, sale, and registration of the sailboats, sold under the brand name “Laser.” (Bruce Kirby was not the trademark owner, though). In 1983 and 1989 Bruce Kirby licensed the rights to make the boats to two companies (the “Builder Agreements”), the successors of which were defendants LaserPerformance (Europe) Limited and Quarter Moon, Inc. The opinion doesn’t tell us whether there were other companies authorized to make the boats.

    In 2008 Bruce Kirby decided to get out of the business and sold it in its entirety to Global Sailing Limited (GSL). The Builder Agreements had this limitation on Bruce Kirby’s transfer:

    Kirby contract snip

    If you can’t read it, it says “Neither Bruce Kirby nor Kirby Inc. shall assign any rights in the Licensed Design save to an assignee who shall enter into an agreement with Licensee on terms and conditions identical with the terms and conditions of this Agreement.”

    I suppose that GSL never entered into new Builder Agreements—at least the opinion never says that they did and, although the two companies were told to send their royalty payments to GSL, they continued to send the payments to Bruce Kirby. When Bruce Kirby refused the payments, the two boat builders put the payments into escrow. The opinion doesn’t offer any reason for the boat builders’ reluctance to deal with GSL, although their excuse for not paying royalties to GSL was “the lack of documentation to show that plaintiffs had assigned rights to GSL.”

    The agreements could only be terminated for cause (Article 10); there was no termination for convenience and the agreement didn’t have a term. The choice of law is Province of Ontario, Canada.

    So we’ll stop here: if you were counsel for GSL, what would you do? Add your comment.

    Creative Commons License
    This work is licensed under a Creative Commons Attribution-NoDerivatives 4.0 International License.

    , , ,

  • When Your Tax Strategy Is Inimical to Your Patent Strategy

    Don’t let the tax department screw up your patent infringement case. Or, when they do, I hope they saved more on taxes than you lost on the patent case.1

    W.L. Gore & Assocs., Inc. v. C.R. Bard, Inc. is an example of what can happen. In 1983, Gore set up a patent holding company, Gore Enterprise Holdings, Inc. (“GEH”). The patent-in-suit, Patent No. 5,735,892, was assigned to GEH and Gore became a non-exclusive licensee. After what, according to a Bard brief, looks like a series of losses in tax court, and after this lawsuit had been filed, Gore voted to dissolve GEH, assigned the patents back to Gore, and amended the complaint to drop GEH as a party. On a motion for summary judgment Bard challenged the sufficiency of the assignment-back, claiming it didn’t give Gore ownership and therefore Gore didn’t have standing, and also challenged Gore’s claim that Gore was entitled to lost profits for any infringement before the assignment-back.

    Gore argued that assignment document was invalid because there was no consideration for GEH. But an assignment is not a contract:

    Bard’s argument is based on the proposition that patent assignments must always be contracts, involving consideration on both sides, rather than gratuitous assignments. This proposition is not supported by the legal authority cited by Bard…. [G]ratuitous assignments are permissible under Delaware law “where there was an intention to make the gift and sufficient delivery.” The Assignment is valid as a gratuitous assignment because it was in writing, signed by GEH, and delivered to Gore.

    Gore therefore had standing, but didn’t do as well on lost profits. In the assignment-back, GEH assigned the right to seek damages for past infringement. Gore claimed that meant it could claim lost profits, but the court thought otherwise:

    “[I]f the patentee is not selling a product, by definition there can be no lost profits.” Rite-Hite, 56 F.3d at 1548. … While conceding that GEH was a non-practicing entity at all relevant times, Gore nevertheless argues that it may recover its own lost profits damages for infringement occurring prior to January 30, 2012, citing numerous cases as support. The cases cited by Gore do not support its claim for pre-Assignment lost profits damages.

    Gore cites [cases] for the proposition that assignees are permitted to recover “all available forms of pre-assignment damages without limitation.” Bard responds that these cases merely stand for the proposition that assignees are generally permitted to recover pre-assignment damages where an assignment of a patent is coupled with an assignment of a right of action for past infringements and that there is no dispute between the parties on this point. The Court agrees with Bard that these cases permit assignees to recover pre-assignment damages as a general matter, but the cases are not relevant to the specific issue of whether Gore can recover its own purported pre-Assignment lost profits damages, apart from any damages that were assignable (and assigned) by GEH.

    …

    GEH described itself to a Maryland court as an independent subsidiary of Gore engaged in transactions with its parent ”at fair market value rates.” GEH’s expert opined in the Maryland tax proceedings that “the business arrangements between Gore, Inc. and GEH were arm’s-length and that the 7.5% royalty rate  provided for in the license agreement between Gore, Inc. and GEH [for a portfolio of patents that included the ‘892 patent] was consistent with an arms-length rate.” GEH received “significant third-party income and expenses” that were not directly connected with sales of Gore’s products embodying technology covered by GEH’s patents. In addition, GEH characterized Gore’s sales as not being “use” of the patents.

    As a non-practicing, independent subsidiary of Gore, GEH had no legal basis to recover lost profits damages arising from Gore’s lost sales. Therefore, GEH could not have assigned to Gore any right to recover such lost profits damages when it assigned GEH’s rights in the ‘892 patent to Gore. While GEH was free to assign all damages claims it had, it could only assign damages claims it did have. Because Gore must stand in GEH’s shoes, Gore may only recover what GEH could have recovered. Therefore, Gore is not entitled to recover pre-Assignment lost profits damages.

    (Emphasis and brackets in original, internal citations omitted.)

    You can see that the arguments GEH used in tax court, to demonstrate that it wasn’t just a sham entity, an exactly contrary to what Gore needed to argue on GEH’s behalf in order to have any opportunity to recover lost profits. From the documents in the case it looks like not only did the tax strategy fail, but it significantly harmed the patent damages claim too.

    W.L. Gore & Assocs., Inc. v. C.R. Bard, Inc., No. 11-515-LPS (D. Del. July 27, 2016).

    Creative Commons License
    This work is licensed under a Creative Commons Attribution-NoDerivatives 4.0 International License.

    1. Shameless plug: I’ll be speaking on this topic at the AIPLA Mid-Winter Institute on February 3 in Ft. Lauderdale. ↩
    , , ,

About Me

Learn more about me at my website, Chestek Legal

Recent Posts

Categories

Newsletter