Property, intangible

a blog about ownership of intellectual property rights and its licensing

  • Meet the Bloggers

    First Meet the Bloggers

    It’s time again for Meet the Bloggers on Monday, May 4th, at 8 PM, recreating the first historic gathering that John Welch and Marty Schwimmer put together at Henry’s Pub and Restaurant, 618 Fifth Avenue, in San Diego. (I was there!, I really was!, but I must have been in the bathroom or something when they took the official photo. So I fixed it.)

    Food, drinks and fun, and if you get there early enough you can get some cool swag.

    bag clip

    For details, directions, a look at the sponsoring bloggers, and the RSVP link, go here.

  • The Drifters, Yet Again

    One thing that’s sure to make my eyes roll back into my head is the word “Drifters” in a case caption. Westlaw has 13 cases listed, 8 federal, 3 state and 2 TTAB. Now the TTAB has had another crack at it, including looking at evidence that goes all the way back to the very first case, filed in 1958 or so.

    In today’s case we have a registration for BILL PINKNEY’S ORIGINAL DRIFTERS owned by Original Drifters, Inc., against which a petition to cancel was filed based on senior use of, and an application for, THE DRIFTERS owned by Treadwell Original Drifters, LLC. The parties are in TTAB circular hell, that is, an application for THE DRIFTERS was filed first, in 1989, by Treadwell Drifters, Inc. (presumably a predecessor to the petitioner here), the application was suspended for 12 years, BILL PINKEY’S ORIGINAL DRIFTERS successfully opposed it when it ultimately published, BILL PINKEY’S ORIGINAL DRIFTERS was then registered, and now Treadwell Original Drifters has opposed BILL PINKEY’S ORIGINAL DRIFTERS after having filed another application for THE DRIFTERS, which stands refused because of a likelihood of confusion with BILL PINKEY’S ORIGINAL DRIFTERS. (Got all that?)

    The type of proceeding is important: because it’s a cancellation, the registrant, Original Drifters, is entitled to the prima facie presumption that the mark is valid, that it owns the mark, and that it has exclusive use of the mark for the services identified in the registration. Treadwell Original Drifters has to rebut the presumptions and establish its case, based on priority and likelihood of confusion, by a preponderance of the evidence. If Treadwell Original Drifters successfully does so, then the burden of proof shifts back to the Original Drifters. But the decades that this dispute has been going on is essentially the death knell for Treadwell Original Drifter’s case.

    The parties agree that the original musical group “The Drifters” was formed in 1953 by singers Clyde McPhatter, Bill Pinkney, Andrew Thrasher and Gerhart Thrasher. The first of petitioner’s theories was that George Treadwell, who was a manager of the group, co-founded the group in 1953 with the then-president of Atlantic Records and singer Clyde McPhatter. Tina Treadwell is George Treadwell’s daughter and the president of the petitioner. She testified that

    The Drifters wasn’t a group that started in terms of four guys getting together and saying we are going to be The Drifters. It was a corporate entity that was begun by Clyde and my father, they chose the employees that came to be, you know, that sang with him. And it was always a group around the lead singer.

    Although “oral testimony, even of a single witness, if sufficiently probative, may suffice to prove priority,” “we also bear in mind that, as one who was born in 1958, Tina Treadwell has no personal knowledge of events that occurred before then.” A website that related the story of the The Drifters was equally unreliable, “we cannot logically view these web pages as corroborating or otherwise reinforcing the testimony of Tina Treadwell, because she testified that she manages and controls the content of the website.”

    And Team Pickney had first person testimony, from Pickney himself in the earlier opposition and from an agent for the band, that Treadwell had no part in the 1953 Drifters, as well as testimony from the 1958 dispute that the original members considered the name theirs. So the theory that Treadwell was part of the original group, and therefore had an interest in the name, failed

    [W]e find that Petitioner failed to demonstrate, by a preponderance of the evidence, that George Treadwell acquired trademark rights in the mark THE DRIFTERS through the formation of the Group in 1953. Rather, the evidence suggests that Respondent’s predecessor, Bill Pinkney, and the other singers who were members of the Group in 1953, shared in trademark rights that arose when the Group began to perform in 1953. Although the form of their ownership is unclear (e.g., partnership, joint ownership, unincorporated association), it is clear that trademark rights would have arisen upon the first performance of services under the mark, under common law principles, and Petitioner has not presented any evidence or argument to persuade us otherwise.

    The second theory was that a predecessor corporation, The Drifters, Inc., acquired the trademark rights, but that theory had a chain of title problem—from whom would they have been acquired? George Treadwell bought into the original corporation, but there was no evidence that the company owned the name and, to the contrary, evidence that the original members disputed having given the original corporation the name:

    The evidence shows that the Group was performing and recording under the name THE DRIFTERS in 1953, and the corporation was not formed until 1954. The formation of a corporation in 1954 could not create trademark rights in the name THE DRIFTERS when the Group had performed and recorded under that name in 1953, and there is no reliable evidence or testimony that anyone transferred ownership of that name to the corporation. Accordingly, we find that Petitioner has failed to demonstrate by a preponderance of the evidence that any incidents connected with the incorporation of The Drifters, Inc. resulted in ownership of the mark THE DRIFTERS by George Treadwell or any other predecessor of Petitioner.

    Third, Treadwell Original Drifters claimed that Pickney assigned his rights in the name after he became an employee of the original corporation. But even assuming Pickney signed an employment agreement, in contrast to later versions, his agreement didn’t assign anything.

    And finally we have the classic ownership theory for band names, that the trademark owner of the band name doesn’t have to be a performer but can be the one who exercises control over the group. But there was no evidence that Treadwell actually exercised any control, much less enough to have appropriated the trademark away from Pinkney given his prior ownership rights.

    All told, we have a lot of different theories, and evidence on both sides, but given the presumption in favor of BILL PICKNEY’S ORIGINAL DRIFTERS it wasn’t enough to cancel the registration. Bets on the next round?

    “Property, Intangible®, reading too many cases so you don’t have to.℠”

    Treadwell Original Drifters, LLC v. Original Drifters, Inc., Cancellation No. 92052155 (TTAB March 5, 2015).

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  • Who Owns a Community Trademark?

    I’ve written a lot about trademark ownership disputes under US law, where trademark rights arise through use. The question comes up when two or more formerly cooperating parties have a falling out and each claim to own the same trademark. But the issue can’t arise just in the US, certainly there are failed business relationships in all countries. I’ve wondered how these disputes are resolved and I now have one view, for a Community Trademark. The case provides a helpful legal framework, but the facts make it an unsatisfying analysis.

    In Pangyrus Ltd v OHIM, RSVP Design Ltd, we have competing claims to the mark COLOURBLIND for an “experimental learning toolbox” (intervener-registrant’s website). The decision starts with “In 1991, Mr. Cx invented a product consisting of an ‘”experimental learning” toolbox’ and the word sign COLOURBLIND.” Mr. Cx and his wife then formed Pangyrus Ltd. in 1993, and thereafter there was a complicated set of additional companies, an acquisition, a falling out, the dissolution of Pangyrus, Mr. Cx’s formation of RSVP Design, his assignment of the COLOURBLIND to RSVP Design, the mark’s subsequent registration, and the re-formation of Pangyrus by a former partner. The decision is on the new Pangyrus’ effort to invalidate the COLOURBLIND registration.

    Pangyrus had two bases for invalidation. First is the predecessor to what is now Article 52(1)(b) of Regulation No 207/2009, “where the applicant was acting in bad faith when he filed the application for the trade mark.” Second is under what is now Article 53(1)(c), read in conjunction with Article 8(4), which allows the proprietor of senior unregistered rights to bring an invalidity action on any basis that a registrant could have raised, which in this case is likelihood of confusion.

    Taking the second basis first, as the court did, we have an analysis that is commonly applied in the U.S. too, treating it as a situation where there are two separate proprietors and trying to decide who is the senior. It’s not the greatest fit for the problem though:

    [W]e find that traditional concepts of priority and likelihood of confusion … are ill-suited in resolving this type of internecine dispute. As this Board has done in resolving trademark ownership disputes in previous fact patterns involving splintered family businesses, overlapping circles of not-for-profit companies, fifth-generation band members and past managers, divided auto clubs in neighboring towns, etc., we are wont to turn to an analytical framework drawing on evidentiary factors identified in Wrist-Rocket Manufacturing Co. v. Saunders, 379 F. Supp. 902 (D. Neb. 1974), aff’d in part and rev’d in part, 516 F.2d 846, 186 USPQ 5, 9 (8th Cir. 1975), cert. denied, 423 U.S. 870 (1975)….

    However, the factual record in this case does not provide the evidentiary heft necessary to pursue this type of analysis, so we resort to our traditional analysis of priority and likelihood of confusion.

    Lundin v. Svoboda, Cancellation No. 92054040 (TTAB Feb. 28, 2015).*

    Pangyrus claimed to be senior, but didn’t have the documents to prove it. The main problem was that the COLOURBLIND goods were largely sold through another related company, Future Factory. There were only two invoices from 1998 that showed Pangyrus as the seller and the remaining invoices were from Future Factory. Although the court entertained the theory that Future Factory’s use would inure to the benefit of Pangyrus if Pangyrus had granted an implied license to Future Factory, Pangyrus had no evidence of the existence of a license. Pagyrus therefore had not proved it was the senior user of the mark.

    As to the bad faith basis, Pangyrus’ theory was that Mr. Cx and Pangyrus had a common understanding that Pangyrus owned the rights in the mark, so it was bad faith on the part of Mr. Cx to register it. But that wasn’t good enough; Mr. Cx had invented the sign and there were no documents showing, expressly or by inference, that Mr. Cx had transferred his rights to Pangyrus. The trademark was therefore not registered in bad faith.

    So we have some bad facts, a loose arrangement between Pangyrus and Future Factory, making it impossible for Pangyrus to prove seniority. Another piece of circularity also bothers me, which is the court’s assumption that Mr. Cx was the original owner of the mark. The court says  that he “invented” both the product and the trademark in 1991, but “inventing” a name doesn’t tell us anything about when the sign first served as a source identifier or for who. When discussing priority, the court acknowledged that proving an earlier right requires demonstrating commercial trading above a de minimis threshold, but in the bad faith portion of the decision the court assumed that Mr. Cx had rights that preceded the formation of Pangyrus without any proof of use. Mr. Cx and his wife formed Pangyrus in 1993, so it’s not inconceivable that there was no sale of product before he formed the company and the trademark was therefore first used by the company.

    Nevertheless we have two theories for deciding ownership of a Community Trademark, priority (as if there are two properties, not one) and bad faith. Not unlike how it can be decided in the US.

    Pangyrus Ltd v OHIM, RSVP Design Ltd, Case T-257/11

    * Shameless plug; the Board was kind enough to suggest an article I wrote is helpful in deciding these matters.

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  • Attention Sharks

    I like to watch Shark Tank. If you haven’t seen it, entrepreneurs come pitch a panel of notable business people asking for an investment in their nascent companies. Often the topic of intangible assets—generally patents and trademarks—comes up, which presumably the sharks are taking into account when valuing a company. The entrepreneurs make representations about the assets (“I have a utility patent pending”) and sometimes, but not regularly, the deal is contingent on the shark’s verification of the validity of an asset or some other part of the business. So I’ve always wondered what kind of due diligence goes on before the entrepreneurs appear on the show or the deal is signed.

    Lemonis v. A. Stein Meat Products, Inc. wasn’t a Shark Tank pitch, but gives us a little insight into a show called The Profit, where Marcus Lemonis turns around failing companies.

    Lemonis did an episode on wholesale meat business A. Stein Meat Products. In addition to the wholesale meat business, A. Stein Meat “trademarked” BROOKLYN BURGER for burgers, which were the official burgers of the Mets, the Nets and the Yankees. After an agreement on partial ownership of the business fell apart, Lemonis instead offered to buy the Brooklyn Burger trademark:

    If you can’t see it, there is this exchange:

    Mora (co-owner): We need money to make the payroll and for our working capital. That’s very important at this point because we want to be here tomorrow.
    Lemonis: How much do you need?
    Mora: About $200,000.
    Lemonis: You know I can’t just give you the money. I can’t just write you a check and give you a gift, as much as I like you guys. I’m not a consultant. I do things to save jobs and to make money. I don’t just hand money out. And so in order for me to give you that money I’m gonna need to get a return on my money. And the only thing that I can think of is that I buy Brooklyn Burgers from you. And I’ll repackage it and I’ll get it back on its feet.
    Mora: We’re willing to do whatever it takes.

    They agreed off-camera to $190,000, which Lemonis made in two payments, but the owners reneged on assigning the trademark so Lemonis sued for breach of contract. Lemonis lost for the simple reason that there was no writing, required by both the statute of frauds and to effect the transfer of a registered trademark. The argument that the video recording is a writing didn’t fly:

    Contrary to Lemonis’s argument, the videotaped recording does not satisfy the Lanham Act’s writing requirement. An electronic signature to a written agreement will satisfy the Lanham Act’s writing requirement, see 15 U.S.C. § 7001(a); however, this exception for electronic signatures does not negate the underlying requirement that the parties execute a contract “in writing.” Lemonis provided no authority for such an assertion, nor has the Court located any.

    Bonus feature from the court—Stein Meat had already given a security interest in the trademark “long before ‘The Profit’ featured A. Stein Meat.” A. Stein Meat had agreed it would not “assign, transfer, encumber, or otherwise dispose” of its Brooklyn Burger trademarks, “or any interest therein,” without the lender’s “prior written consent.” During the lawsuit the lender foreclosed and sold the trademarks to Hercules Food Corporation, a subsidiary of co-defendant King Solomon Foods Inc. The theory against King Solomon was interference with contract, but you can’t interfere if there’s no contract, so the court dismissed King Solomon from the suit.

    And a marketing lesson: you need to make sure that when you have an exclusive sponsorship agreement that you really are the exclusive sponsor:

    But Lemonis gets a parting shot in the below video, explaining his view on why he only requires a handshake, and, saying over a clip of the A. Stein Meat episode, “But at the end of the day, you ultimately meet people who don’t honor their word—and that’s where I get burned”:

    Lemonis v. A. Stein Meat Products Inc., No. 14-CV-3073 (DLI)(RLM) (E.D.N.Y. March 6, 2015).

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  • Two for One

    I like the cross-over of different legal disciplines. Ownership issues arise as part of an infringement claim, but also come up in trusts and estates, mergers and acquisitions, taxation, and bankruptcy. These cases can end in an unexpected way, sometimes happening because there is a failure to understand exactly how the various trademark, copyright and patent rights work.

    To distill it down to its essential elements, we have a case where a company, defendant Priva Security Corp., had granted to co-defendant Pro-Marketing Sales (PMS) a security interest which included an interest in “Copyrights”:

    all copyrights arising under the laws of the United States, … whether registered or unregistered, published or unpublished, now or hereafter in effect and all registrations and recordings thereof …

    The  agreement also gave a security interest in “Copyright Licenses,” defined as:

    all agreements providing for the granting of any right in or to any Copyright (whether the Company is licensee or licensor thereunder) and the granting of any right in any derivative work based upon any copyright….

    Priva, in financial distress and as part of a Chapter 11 reorganization, granted plaintiff Cyber Solutions International, LLC (CSI) a license to its “technology,” which for our purposes was the copyright to a functionality called “SKSIC.”  PMS didn’t object to the license and its senior interest was acknowledged in the license agreement.

    The license to CSI was very generous; it gave CSI a worldwide, perpetual license to the copyright and allowed CSI to “pursue” it’s own improvements, although Priva would be the exclusive provider of services for engineering, design and customization. In both cases, whether developed by CSI or Priva, CSI ended up the owner of the copyright.

    And there were improvements; a new product, “TRSS,” was developed. Although the court doesn’t describe it using the legal term of art, it appears that TRSS was a derivative work of SKSIC.

    Priva didn’t recover from its financial distress so PMS elected to exercise its right to own the technology pursuant to the security agreement. Which is what creates the legal question—who owns the copyright in TRSS? Does PMS, by virtue of its security agreement in the copyrights and/or copyright licenses, or does CSI, by virtue of the express grant of ownership in the license agreement?

    The court holds that PMS owns the improvements:

    Although the License Agreement purports to grant CSI ownership over improvements to the SKSIC, Priva did not have authority to grant such ownership to CSI in light of the terms of Pro Marketing’s security interest. CSI itself has acknowledged that the TRSS technology is a “derivative product” that is “based upon the SKSIC Technology.” Indeed, as Judge Dales noted, because the Security Agreement defines “Copyright Licenses” to mean “all agreements providing for the granting of any right in or to any Copyright (whether the Company is licensee or licensor thereunder) and the granting of any right in any derivative work based upon any copyright,” Priva’s (or the Trustee’s) authority to grant CSI any interest in the TRSS is itself subject to Pro Marketing’s security interest.

    Ok, so we have a bit of apples and oranges here. What the court has done is hold that the derivative work, TRSS, is part and parcel of the original work, SKSIC, when as a matter of copyright law that isn’t the case. According to § 103 of the Copyright Act, “the copyright in a … derivative work … is independent of, and does not affect or enlarge the scope, duration, ownership, or subsistence of, any copyright protection in the preexisting material.” The copyrights in SKSIC and in TRSS are two different properties, so the fact that the security interest agreement limits what can be done with the original work doesn’t necessarily answer the question for derivative works. What matters is who the first owner of the copyright in the derivative work was, Priva (since it was the exclusive service provider) or CSI (because it had the right to develop improvements too and could have done so independently). If the copyright in the derivative work was all CSI’s, then it was never Priva’s property to which a security interest could attach.

    Maybe a correct outcome, maybe not. But if it’s right it got there the wrong way, all for lack of awareness of one very short statutory section,  17 U.S.C. § 103.

    Cyber Solutions Int’l, LLC v. Priva Security Corp., No. 1:13-CV-867 (W.D. Mich. Feb. 26, 2015).

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  • No, It Doesn’t

    I previously asked whether the below check transferred copyright ownership:

    Check to GuzmanIt doesn’t, at least not on a motion for summary judgment.

    If you can’t read it, on the memo line the check says “For rights to song ‘Dos Horas De Vida.” The check was written by defendant Hacienda Records to Jose Guzman, the songwriter of “Dos Horas de Vida.’ ” Guzman doesn’t read English and thought the check was reimbursement for his travel to the studio.

    A check can transfer ownership, but it won’t always: “Review of the case law leads this Court to conclude that there is  no disagreement with the general proposition that language on a check may transfer a copyright; as with most legal issues, different facts lead to different results.” The court then reviews many different cases involving transfer of rights via a check and finds that it is not a question suitable for disposition on summary judgment:

    Looking at the check in this case on its own without extrinsic evidence (as Hacienda’s summary judgment motion presents the issue), the Court concludes that this case has more in common with the cases rejecting assignment. Most notably, the only cases finding an assignment as a matter of law at summary judgment did so when separate contracts made that assignment clear. Even Rico, the case quoted above for the general proposition that language on a check may amount to a transfer, looked at extrinsic evidence to interpret the intent of the endorsement language in the context of the parties’ course of dealings. The Rico court did so because the check endorsements “Purchase of rights of EGC catalogue” and “Bonus on L.P. recording agreement” were “not sufficiently clear as to unambiguously evidence copyright transfer, [though] they are susceptible to such an interpretation.” The separate contracts in Johnson and Dean provided answers to important questions that the “for rights to song” language in this case does not answer: Did the parties intend a right to license or an outright assignment of the copyright? And for how long? To the lyrics and/or the music?

    Because the four words on the check do not evince a copyright transfer with the clarity that section 204(a) requires, Hacienda is not entitled to summary judgment on this issue. Extrinsic evidence that demonstrates the parties’ intentions may help resolve this issue at trial.

    And a bonus issue: The court also held that Guzman stated a claim for violation of the DMCA by falsely identifying the president of Hacienda, Garcia, as the author of the song on the album:

    Horas de Vida creditsIt appears that the DMCA offers a back door into a moral rights attribution claim, at least if the wrong name is given (versus no name at all).  The court cites to the famous Haiti earthquake case of Agence France Press v. Morel, 769 F. Supp.2d 295, 304-06 (S.D.N.Y. 2011) for the proposition. Here, the relevance of the name in the album credits is ambiguous and so the claim survives.

    Guzman v. Hacienda Records, L.P., No. 6:13-Cv-41 (S.D. Tex. Feb. 24, 2015

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  • Today’s Quiz

    Does this check transfer copyright ownership?

    Check to GuzmanIf you can’t see the image, the check (which was cashed) is for $75.00 and on the memo line says “For rights to song ‘Dos Horas De Vida.” What do you think? Leave your comments below.

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  • Challenging the Sublicense to Your License

    Hang in with me, we have a bit of a licensing chain to follow here. The lawsuit is about whether a Russian performer, Sergey Lazarev, had a license to record and perform the song “Almost Sorry”:

    The song was written by Taryn Murphy and Chris Landon. They pitched Lazarev’s manager in 2006 and we have this series of agreements:

    • April 14, 2005: Lazarev entered into an exclusive producer’s agreement with Style Records with a four-year term. Style Records was to obtain the rights for music that Lazarev would perform.
    • January 1, 2007: Murphy and Landon enter into a “sub-publishing agreement” with a Russian law firm, per the instructions of Lazarev’s then-manager, granting rights to the song for the period January 1, 2007 to December 31, 2010. Murphy and Landon understood that the agreement was so Lazarev could perform the song.
    • Late 2006 or early 2007: Lazarev recorded the song for the first time.
    • Early 2008: Style Records contacted the songwriters and explained that Lazarev’s manager, acting out of spite because the she knew her engagement with Style Records was going to be terminated, induced authors to sign contracts with the law firm rather than with Style Records directly.
    • February, 2008: Murphy and Landon entered into a license agreement directly with Style Records. It was backdated to November 1, 2006. Murphy and Landon were told it was backdated so it would show Style Records had rights to the song pre-dating the agent’s rights. The agreement mentioned and gave permission for acts already performed. Murphy and Landon were given a flat fee of $3000 and there was no time limitation in the agreement.
    • April, 2008: the parties executed a second license agreement, backdated to November 20, 2006, that changed the territory of exploitation, allowed other artists to record it, and allowed Style Records to sublicense. It had a five-year term. Murphy and Landon were paid an additional $4000 and they were to also receive royalties.
    • September 7, 2009: the producer’s agreement between Style Records and Lazarev expired and they entered into a supplemental producer’s agreement that allowed Lazarev to continue to use recordings and perform songs for which Style had been granted rights during the term of the original agreement.

    Murphy and Landon received royalty payments, but not as much as they thought they were owed, so they sued Lazarev and Style Records. Murphy and Landon voluntarily dismissed Style Records after they failed to serve the company with the complaint.

    By the time the court had to make a decision, the copyright theory was that Lazarev did not have a license to “Almost Sorry” before 2008, when the license agreements with Style Records were signed, or after 2009, when Lazarev’s original agreement with his producers expired. Any use of the song before or after that was therefore a copyright infringement.

    As to when the license began, the original agreement with the law firm, and subsequent agreements with Style Records, referred to Lazarev’s use expressly and demonstrated that the plaintiffs intended that these licenses be applied retroactively. The licenses therefore included Lazarev’s 2006 and 2007 uses.

    As to when the license terminated, Lazarev and Style Records had an agreement that Lazarev could continue to exploit the works Style Records had licensed, so Lazarev could exploit the license to “Almost Sorry” through the term of the license Murphy and Landon had granted to Style Records, that is through May, 2013. There was no allegation that Lazarev used the song after May, 2013, so no infringement.

    As to any missing royalties—the right party wasn’t in court, royalties were to be paid by Style Records, not Lazarev, but the plaintiffs had dismissed Style Records from the suit.

    It’s an unpublished case that looks pretty easy from a copyright infringement perspective, a bit of grasping at straws trying to claim that Lazarev wasn’t licensed. But the reason I find it interesting is this whole Billy-Bob Teeth defense (recursive link) that aggravates me so much. At its narrowest, Billy-Bob Teeth stands for the proposition that a defendant cannot challenge the validity of an oral copyright assignment that was later ratified in writing when neither party to the assignment disputes it. More broadly, it has been applied to prohibit a challenge altogether to the scope of an earlier written agreement between the plaintiff and a third party through which the copyright might have been assigned away.

    So what happened here is, in my view, inconsistent with Billy-Bob Teeth, which isn’t to say that Billy-Bob Teeth is right but to show how wrong it is. Here, the plaintiffs Murphy and Landon licensed the use of “Almost Sorry” for Lazarev’s use through 2013. What business was it of theirs whether the agreement between Style Records and Lazarev was an effective sublicense if neither Style Records nor Lazarev disputed it? Murphy and Landon gave the rights away, and those rights were exploited in the exactly the way the contract anticipated. Billy-Bob Teeth in application gives a plaintiff an out on an element of proof, ownership of the copyright. Here, the plaintiffs were challenging the very use they had licensed, a challenge that it might make sense to estop in the interest of judicial efficiency. Yet this challenge is permitted but you can’t put a plaintiff to its proof on chain of title.

    Murphy v. Lazarev, No. 15-5028 (6th Cir. Oct. 17, 2104).
    Murphy v. Lazarev, No. 3:10-cv-0530 (M.D. Tenn. Oct. 12, 2013).

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  • Ninth Circuit Walks Back Sybersound Records

    As I’ve written about before, Sybersound is a 2008 Ninth Circuit decision that was not well-received by copyright authorities. We now have a second Ninth Circuit opinion interpreting Sybersound that undoes the original harm.

    The decision is Corbello v. DeVito, the case that just keeps on giving for someone who writes about copyright ownership. It all starts with an unpublished authorized biography of Four Seasons member Tommy DeVito written by Rex Woodard. Rex Woodard passed away, so his wife and heir, plaintiff Donna Corbello, now owns any rights Woodard had in the biography. This long-running lawsuit is the result of the commercial success of the Broadway play Jersey Boys, with Corbello alleging that the play is a derivative work of the book and for which she is therefore entitled to royalties.

    When we first visited the case, there was a dispute over ownership of the copyright in the biography, with both DeVito and Corbello claiming sole ownership. The court held that Woodard and DeVito were joint authors of the work, a decision that does not appear to have been appealed. Now we follow the money.

    In 1999 DeVito granted his co-performers, Valli and Gaudio, the right to exploit—something. Both the “something,” that is, whether the rights granted included the copyright in the book, and what the contours of the grant were—assignment, exclusive license or non-exclusive license—were in dispute. The grant was of the “exclusive right to use and incorporate the Materials in one or more theatrical productions,” with a reversion:

    DeVito agreement grant clause

    The “Materials” were defined as “certain aspects of your life related to the Four Seasons including, by way of example, your creative contributions, biographies, events in your life, names and likenesses.”

    Corbello v DeVito clip 3

    One of Corbello’s the appellees’ theories was that, since DeVito was a joint owner and not the sole owner of the book copyright, Sybersound dictates that he could only have granted a non-exclusive license in the biography. Indeed Sybersound says that pretty clearly. In Sybersound, TVT was a joint owner of copyrights and granted its rights exclusively to Sybersound Records. Sybersound Records then sued unlicensed defendants, but its case was dismissed for lack of standing:

    Thus, unless all the other co-owners of the copyright joined in granting an exclusive right to Sybersound, TVT, acting solely as co-owner of the copyright, could grant only a nonexclusive license to Sybersound because TVT may not limit the other co-owners’ independent rights to exploit the copyright.

    Sybersound Records v. UAV Corp., 517 F.3d 1137 (9th Cir. 2008).

    But the Ninth Circuit has now pivoted on Sybersound, as it should have. The district court in Corbello v. DeVito suggested a rethinking of Sybersound might be in order. In holding that what DeVito had granted was a “selectively exclusive license,” not a non-exclusive license, the district court was optimistic about a Ninth Circuit revisit of Sybersound:

    Surely the Ninth Circuit will clarify that it meant something like this if given the chance, and perhaps it will have the chance in the present case. In any case, this Court is confident that the Sybersound court is guilty at most of imprecise syntax or some minor equivocation, as opposed to outright copyright-law heresy.

    And the Ninth Circuit did clarify—sort of:

    Appellees argue that our precedent, Sybersound Records, Inc. v. UAV Corp., 517 F.3d 1137 (9th Cir.2008), prohibits a co-owner of a copyright, such as DeVito, from transferring that right without permission from his co-owner, in this instance, Corbello. But that argument stretches Sybersound’s holding too far.
    …

    [A]n assignment or exclusive license from one joint-owner to a third party cannot bind the other joint-owners or limit their rights in the copyright without their consent. In other words, the third party’s right is “exclusive” as to the assigning or licensing co-owner, but not as to the other co-owners and their assignees or licensees. As such, a third-party assignee or licensee lacks standing to challenge the attempted assignments or licenses of other copyright owners.

    …

    Therefore, Sybersound presents no obstacle to Devito’s exclusive transfer of his derivative-work right to Valli and Gaudio under the 1999 Agreement.

    As I read it, the Court of Appeals is saying that the law does not give a co-owner the right to dictate how the other co-owners may dispose of their copyright interest. That would be a reasonable reading of Sybersound if that’s what the Sybersound case was about, but it wasn’t. There was no discussion whatsoever in Sybersound about what the non-party co-owners had done with their share, it was only about what TVT had granted to Sybersound Records. Nevertheless, we appear to have a course correction on the rights of joint ownership, at least outside of a 12(b)(1) motion for lack of standing.

    But the Court of Appeals differed with the district court on the legal significance of the DeVito-Valli/Gaudio transaction. The district court characterized it as an exclusive license but the Court of Appeals said it was an assignment (as William Patry points out, in copyright an assignment and an exclusive license are the same thing):

    Despite concluding that the Agreement’s inclusion of “biographies” in the definition of “Materials” sufficiently included the Work so as to grant Valli and Gaudio an exclusive license to use it in producing the Play, the district court nevertheless found that the Work fell outside of the Agreement’s use of “biographies” for the purpose of transferring ownership of a copyright interest in the Work. We are not persuaded by the district court’s interpretation.

    …

    Pursuant to the 1999 Agreement, Devito granted Valli and Gaudio the “exclusive right to use” his “biographies,” unambiguously including the Work, to create a play. Such play constitutes a “derivative work,” the right to create which resides in each copyright holder of the underlying work and may be transferred by that holder to a third party. Thus, in granting this exclusive right to create, whether classified as an exclusive license or an assignment, the 1999 Agreement constitutes a transfer of ownership of Devito’s derivative-work right in the Work to Valli and Gaudio.

    So what has seven years of litigation thus far accomplished? To decide that the owners of the copyright in the book are Corbello, Valli and Gaudio. That’s it. The dissent (which would have held DeVito granted a non-exclusive license based on the binding precedent of Sybersound) points out we haven’t even reached the question of whether the stage play used the book, i.e., is a derivative work of the book. It’s by no means a foregone conclusion; the play producers had access to many materials, including the original performers, and proving substantial similarity between the expression of the book and the play, not just the facts, is going to be tough. There was also a failed first effort to mount a show, and a question of fact about whether the copyright reverted to DeVito under the reversionary provisions of the letter agreement. So assuming there is a case to be made that Corbello is entitled to some payment on some theory, figuring out how much will be another decade of litigation.

    Corbello’s original intention, before all of this started, was to published her late-husband’s book and get some bounce from the then-new Broadway show. In the process she learned that the show producers had access to the book when developing the script and a whole new pot of money appeared, over $1.7 billion worldwide by one account—who says Broadway is dead?

    But in the meantime we’re getting all this ownership law goodness out of it.

    Corbello v. DeVito, Nos. 12-16733, 13-15826 (9th Cir. Feb. 10, 2015).

    23 February 2015: Parties corrected.

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  • Consideration Can Be a Failed Expectancy

    I’ve written about MemoryLink Corp. v. Motorola Solutions, Inc. in the past (recursive link). Peter Strandwitz and Bob Kniskern, owners of plaintiff Memorylink, had collaborated with defendant Motorola Solutions on the development of a handheld camera that could wirelessly transmit and receive video signals. Standwitz and Kniskern trusted Motorola Solutions with filing patent applications on the invention, so Motorola Solutions’ attorney sent a letter confirming with the inventors the scope of the invention and that they were co-inventors with two Motorola Solutions employees. All four inventors executed an assignment transferring their rights to both Motorola Solutions and Memorylink.

    Before the patent issued, Memorylink had its own law firm file a divisional of the application listing the same inventors but, a few years later and after investigation by another attorney, decided that the Motorola Solutions employees had not been inventors on the original patent. Memorylink sued Motorola Solutions for patent infringement and in tort, also asking that the assignment be declared void for absence of consideration. All the claims were time-barred except for the contract claim. But the contract claim ultimately was not a successful theory either.

    Illinois contract law applied, under which a court only examines whether there is consideration, not its adequacy, unless the amount is “so grossly inadequate as to shock the conscience.” The assignment recited consideration, specifically:

    clip from Memorylink assignment
    (Highlighting in the court’s documents.) If you can’t see the image, the assignment says “For and in consideration of the sum of One Dollar to us in hand paid, and other good and valuable consideration….” Memorylink asserted this language was “mere boilerplate” for purposes of recording at the Patent Office, and that the intended consideration was a mutual sharing of patent ownership between Memorylink and Motorola Solutions. But, Memorylink argued, that consideration failed since no Motorola Solutions employees were actually inventors.

    Under Illinois law “an agreement, when reduced to writing, must be presumed to speak the intention of the parties who signed it…. It is not to be changed by extrinsic evidence.” So the assignment was valid because it recited consideration: “the use of boilerplate language does not make the stated consideration invalid or nonexistent.” In addition to the recitation there was an actual exchange of consideration too, whatever ownership interest the Motorola Solutions employees had was transferred to Memorylink. That the Motorola Solutions inventors may ultimately have no inventorship interest is not the same as the absence of consideration at the time of the assignment, “a party assigning patent rights before a patent application is filed or during patent prosecution cannot guarantee that a patent will issue or, even once issued, that the patent will not be later invalidated.” Considering extrinsic evidence there was further consideration, namely Motorola’s representation on prosecution of the patent application. As to the value of the consideration, “we do not find the consideration to be so insufficient as to shock the conscience of the court; we thus decline to examine the adequacy of the consideration.”

    The assignment issue is muddied by what appears to be some underhanded maneuvers by Motorola Solutions, but the fundamental principle that there was consideration isn’t remarkable. If you unmuddy it and assume that the Motorola Solutions inventors were true inventors, but only on some claims that were ultimately unpatentable, that was the bargain that Memorylink struck, taking that risk. So the better theory for the alleged wrongdoing is tort, but there is no substantive decision on the possibly tortious behavior because the claims were time-barred. Motorola Solutions may have gotten away with something, but that’s why there is a statute of limitations.

    Memorylink Corp. v. Motorola Solutions, Inc., No. 2014-1186 (Fed. Cir. Dec. 5, 2014).
    Memorylink Corp. v. Motorola Solutions, Inc., No. 08 C 3301 (N.D. Ill. Aug. 15, 2013).

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    The text of this work is licensed under a Creative Commons Attribution-No Derivative Works 3.0 United States License.

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