Cross-posted on the Law Theories blog.
They say that bad facts make bad law, and that was proven yet again earlier this year with Righthaven’s resounding defeat on the standing issue in the Ninth Circuit. I have uploaded a copy of the Ninth Circuit’s opinion to Scribd. I wrote about the Righthaven standing issue this past March, and I explained why it is I think that Righthaven does indeed have standing to sue for past infringements. While the result reached by the Ninth Circuit is probably a surprise to no one, myself included, I am troubled at the court’s dubious reasoning in arriving at its conclusion. To me, the opinion reflects results-oriented jurisprudence rather than an accurate application of existing law.
Lest the point get lost (and I receive more “fan mail”), I should point out that my concern is only with the question of law that the Righthaven standing issue presents. I do not personally care for Righthaven or its methods, and I find the practice of instituting copyright actions for sport to be distasteful. But at the same time, I think it must be conceded that the vast majority of the defendants had likely committed a tort. Righting a wrong is not itself evil, of course, but turning it into a profit-making scheme crosses the line with many people—and rightfully so. My focus solely is on whether the court’s reasoning was a proper application the relevant doctrine. Whether the opinion reaches a result that corresponds to one’s particular normative views does not concern me.
This opinion should be worrisome to copyright owners because it tramples over well-established law in holding: (1) that unless a party has the present ability to exploit a copyright, it has no ownership interest therein, and (2) that an assignment and an exclusive license are the exact same thing such that a licensor has no ownership interest in that which he exclusively licenses. Neither of these holdings has ever been the law, whether copyright, patent, or trademark. There are in fact intellectual property owners who cannot exploit the very exclusive rights that they own, and assignments and exclusive licenses are and have always been two distinct types of ownership interests in all branches of intellectual property law. In this post, I’ll explain why I think the Ninth Circuit got it wrong with these particular two holdings.
Not All Copyright Owners Can Exploit The Copyright
By way of context, the Ninth Circuit’s en banc majority opinion in Silvers v. Sony controls the standing analysis. In that case, the question arose whether the plaintiff, who had been granted by the copyright owner only the right to sue for past infringements, had standing to sue for past infringements despite not having any other ownership interest in the copyright. The majority held that “an assignee who holds an accrued claim for copyright infringement, but who has no legal or beneficial interest in the copyright itself,” has no standing to “institute an action for infringement.” This “legal or beneficial” language, in turn, derives from Section 501(b) of the Copyright Act, which provides that the “legal or beneficial owner of an exclusive right under a copyright is entitled . . . to institute an action for any infringement . . . .”
Thus, the rule from Silvers is that the assignee of only the accrued causes of action does not have standing to institute an action for copyright infringement for past infringements unless that assignee is also a legal or beneficial owner of the underlying exclusive right that is alleged to have been infringed. That rule is directly on point here where Righthaven and Stephens Media entered into two complementary agreements, the Copyright Assignment and the Strategic Alliance Agreement (“SAA”). The Copyright Assignment assigned to Righthaven ownership of the copyrights plus the accrued causes of action, and the SAA then granted back to Stephens Media an exclusive license to exploit the copyrights. The issue, then, is whether the combined effect of the Copyright Assignment and the SAA left Righthaven with any legal or beneficial ownership interest in the copyright, in addition to the accrued causes of action, such that it would have standing to sue under Silvers.
The Ninth Circuit held that Righthaven had no other such ownership interest, “for all it was really assigned was a bare right to sue for infringement.” The court reasoned that since Righthaven could not exploit the copyrights, it was not a legal or beneficial owner under the Copyright Act:
The SAA provided that Stephens Media automatically received an exclusive license in any copyrighted work it assigned to Righthaven, so that Stephens Media retained “the unfettered and exclusive ability” to exploit the copyrights. . . . The contracts left Righthaven without any ability to reproduce the works, distribute them, or exploit any other exclusive right under the Copyright Act. See 17 U.S.C. § 106. Without any of those rights, Righthaven was left only with the bare right to sue, which is insufficient for standing under the Copyright Act and Silvers.
Note the sleight of hand. The rule from Silvers is that the assignee of an accrued cause of action must also be a legal or beneficial owner of the copyright—this in turn was based on the language in Section 501(b). The Ninth Circuit here mistakenly transforms that into a rule that the assignee of an accrued cause of action must also be able to exploit the copyright. This is based on the erroneous assumption that legal or beneficial ownership under Section 501(b) necessarily implies the ability to exploit the copyright. But that is not the law, and the doctrine is clear that not all legal or beneficial owners who have standing to sue can actually exploit the copyright. Noticeably, the court did not cite any case law to back up its claim that legal or beneficial owners must necessarily have the ability to exploit the copyright that they hold an ownership interest in.
Ironically, the majority opinion in Silvers, which the court here relies on heavily, cites to the House Report on the 1976 Copyright Act that demonstrates the existence of a party with an ownership interest in a copyright that has standing to sue for its infringement despite not being able to exploit the copyright:
The first sentence of subsection (b) [of Section 501] empowers the “legal or beneficial owner of an exclusive right” to bring suit for “any infringement of that particular right committed while he or she is the owner of it.” A “beneficial owner” for this purpose would include, for example, an author who had parted with legal title to the copyright in exchange for percentage royalties based on sales or license fees.
Thus, an author who parts with legal title to his copyright while retaining the right to receive royalties from its exploitation by another is a “beneficial owner” under Section 501(b) who has standing to sue for its infringement—even though this royalty recipient cannot himself exploit the copyright and would be an infringer if he did. This shows that the test for standing to sue is not, as the Righthaven court seems to think, whether the plaintiff has the present ability to exploit the copyright. To make sense of what the test for standing really is—as well as to make sense of why it is that Righthaven has standing to sue for past infringements despite not having a present ability to exploit the copyright—we have to take a step back to discuss how copyright ownership works generally.
A Primer on Copyright Ownership
Over seventeen decades ago, Justice Joseph Story, riding circuit, famously quipped:
[C]opyrights approach, nearer than any other class of cases belonging to forensic discussions, to what may be called the metaphysics of the law, where the distinctions are, or at least may be, very subtile and refined, and, sometimes, almost evanescent.
Those words are as true today as they were then, and like many, I find copyright fun and interesting precisely because of its metaphysical nature. Perhaps one of the more metaphysical aspects of copyright law can be found in the various doctrinal crevices of copyright ownership. I’ve been diving into these chasms as part of my dissertation work, and I can tell you honestly that they are, at times, arid and conceptual. But as one of my current professors, the brilliant Stephen Griffin, has been teaching me, the real question is whether it has “cash value.” Theories are fine and dandy, but what makes one useful is whether I can “cash it out.” I think that taking the time to understand copyright ownership at an abstract and theoretical level does indeed have real cash value. In fact, I think the reason we get doctrine-jumbling opinions like Silvers and Righthaven is precisely because many lawyers and judges fail to approach copyright ownership at a more abstract level.
What follows is the way to think about copyright ownership that I find most helpful. My account is in part descriptive, in that it reflects the way the concept of copyright ownership has developed in the case law, especially early on, and it’s in part normative, in that I argue that jurists should be thinking of copyright ownership in this way. The starting point is Professor W.N. Hohfeld, whose fundamental jural relations I discussed in my previous post on why copyright is a right. Hohfeld identified eight jural relations that can be used to describe precisely various legal relations: right, privilege, power, immunity, duty, no-right, liability, and disability. As I mentioned in that previous post, these can be paired off into jural correlatives. For example, the correlative of a right is a duty, and if X holds a right against Y, it necessarily follows that Y then owes X a duty. Likewise, the correlative of a privilege is a no-right, and if X holds a privilege against Y, it necessarily follows that Y then has no legally enforceable claim against X should he exercise his privilege.
What I didn’t discuss in that previous post, and what’s important here, is that these jural relations such as rights and duties can operate in two different spheres: contract law and property law. One can have a contractual interest that involves a copyright, and one can have a proprietary interest in the copyright, but these are not the same thing. Contractual interests are different in kind than proprietary interests. Recall from my previous post that a right is a legally enforceable claim against another that he shall do or not do a given act, and the person against whom the right exists has the correlative duty to do or not do the given act. The primary difference between a contractual right and a proprietary right lies in the identity of this correlative dutyholder. With a contractual right, the dutyholder is the other party or parties to the contract, but with a proprietary right, the dutyholders are everyone else. The lawyerly way of saying this is that contractual rights operate in personam, only binding those who are in privity, while proprietary rights operate in rem, thus good against the world.
As the name suggests, an in rem proprietary right is a right against a thing, i.e., the res, but the reality is that all of Hohfeld’s jural relations apply to persons, whether in personam or in rem. Saying that an in rem proprietary right operates against a given thing is just a shorthand way of saying that it operates against a person with respect to the given thing—the res. In other words, an in rem proprietary right creates a duty in the dutyholder, not because of his relationship with the rightholder, but because of his relationship to the thing. As Hohfeld pointed out, with respect to that res, the rightholder has an in rem proprietary right that is good against the world, i.e., that creates the correlative in rem proprietary duty in everyone else. The concept of a res is easy to grasp when it’s a tangible object, like a screwdriver. If I own a screwdriver, I then have an in rem proprietary right to exclude you and everyone else from possessing it. You and everyone else, in turn, owe me the correlative in rem proprietary duty not to possess my screwdriver.
When nonlawyers think about property, they tend to focus on the thing itself, but lawyers think more abstractly, focusing instead on the various legal relations that exist between persons with respect to that thing. Whether the thing itself is tangible or intangible doesn’t matter; what matters is the intangible bundle of in rem proprietary interests that go with it, consisting of some combination of Hohfeld’s eight fundamental jural relations. Some of these bundles we call “ownership,” and I submit that the sine qua non of ownership is an in rem proprietary right. To “own” property is to have a right in it, and to have a right in it is to have a legally enforceable claim against others vis-à-vis the thing. But owners can and do have other proprietary interests as well. If I own a screwdriver, I have the right to exclude you from using it, the privilege to use it myself, the power to grant you the privilege of using it, and an immunity from you changing my jural relations with respect to it. To say that I have all of these proprietary interests in my bundle is to say that I own and hold title to the res. I can divest myself in various ways of these interests, exercising my in rem proprietary power to alter the jural relations with respect to the thing, but so long as this bundle contains an in rem proprietary right, I am an owner.
Contrasted with this, an in personam contractual right, as the name suggests, is a right against a person, i.e., the persona. It is not a right that one person has against another person because of his relationship to a given thing, but rather it’s a right that one person has against another person because of their direct relationship to each other. Contractual rights have to be bargained for between the rightholder and the dutyholder, and this allows the parties to create elaborate schemes of rights and duties between them since only those parties are bound by them. For example, we can enter into a contract where we agree that I’ll scratch your back and you’ll scratch mine. If I scratch your back but you then refuse to scratch mine, you are liable to me for the breach since I have an in personam contractual right against you, that is, a legally enforceable claim against you should you violate your in personam contractual duty to me. My claim is only good against you, and not the world, because you were the only one with the in personam contractual duty to scratch my back.
Contract law can only create in personam contractual interests, and in rem proprietary interests can only be created through property law. An in rem proprietary interest can be the consideration that makes a contract binding, but a contract is not needed to transfer an in rem proprietary interest. Property law allows for such interests to be transferred unilaterally, without the need of a contract or consideration. This distinction isn’t just theoretical. It has real cash value—especially in the context of nonexclusive licenses such as with Creative Commons and the like. In Hohfeldian terms, a nonexclusive licensee holds an in rem proprietary privilege that negates the in rem proprietary duty he would otherwise have not to do the licensed act. This necessarily implies the correlative in rem proprietary no-right on the part of the licensor to hold the nonexclusive licensee liable for doing the licensed act. No contract is needed for the licensor to alter the in rem proprietary interests that others have with respect to the thing. Property law gives him the in rem proprietary power to do so unilaterally.
Copyright owners have innumerable possible ways they can divvy up their in rem proprietary interests in their copyrights, but only certain combinations are recognized by law. Before the 1976 Copyright Act, copyright ownership was subject to the doctrine of indivisibility, which provided:
With respect to a particular work embodied in concrete form, or separable part of such work, there is, at any one time, in any particular jurisdiction, only a single incorporeal legal title or property known as the copyright, which encompasses all of the authorial rights recognized by the law of the particular jurisdiction with respect thereto.
Under the indivisibility doctrine, the various in rem proprietary rights held by the copyright owner could not be separated. For example, he couldn’t assign his in rem proprietary right to vend to one party while assigning his in rem proprietary right to publish to another. He could assign his ownership of the various in rem proprietary rights to another, but such an assignment had to include his entire bundle of in rem proprietary rights. But the doctrine of indivisibility did not stop copyright owners from granting others exclusive rights, i.e., in rem proprietary rights good against the world. This is because copyright rights, like intellectual property rights generally, are capable of being divided into legal interests and equitable interests. The doctrine of indivisibility only prevented the legal in rem proprietary rights from being owned by more than one person; equitable in rem proprietary rights could still be divided up separately.
This notion of dividing up property into legal and equitable interests comes from trust law. A trust is “a fiduciary relationship with respect to property, subjecting the person by whom the title to the property is held to equitable duties to deal with the property for the benefit of another person, which arises as a result of a manifestation of an intention to create it.” A trust permits one party, called the trustee, to hold the trust property, called the res, in trust for the benefit of another, called the beneficiary. In a trust relationship, the trust property is divided such that the trustee holds the legal title while the beneficiary holds the equitable title This notion of equitable title, as the name suggests, was developed in the courts of equity where the rules were much more flexible than those of the courts of common law. The courts of equity, unshackled to the rigidity of the doctrine of indivisibility, innovated ways to permit those without legal in rem proprietary interests in a copyright to seek judicial relief.
The 1976 Copyright Act explicitly does away with the doctrine of indivisibility. Section 201(d)(2) now permits the various legal in rem proprietary rights in a copyright to be owned separately. But, more importantly for our purposes, the Act does not eradicate the availability to copyright owners of the option to divide their in rem proprietary rights into legal and equitable interests using the mechanism of a trust. In fact, Section 501(b) makes clear that either a “legal or beneficial owner of an exclusive right under a copyright is entitled . . . . to institute an action” for its infringement. In other words, when in rem proprietary rights are held in trust, both trustees and beneficiaries have standing to sue, regardless of the legal or equitable nature of their particular proprietary interest. Moreover, Section 201(d)(2) provides that a legal or beneficial owner “is entitled . . . to all of the protection and remedies accorded to the copyright owner by this title.” This means that whether the ownership interest is legal or equitable in nature, the owner is permitted to seek both legal and equitable remedies—equitable owners are no longer restricted to seeking only equitable remedies.
The Trust Theory Applied
I call this notion that in rem copyright rights can be held in trust the “trust theory” of copyright ownership, and I submit that many of the most important relationships created by copyright owners with respect to their copyrights are in fact ones of trust. I do not refer to the trust law of any one state, but rather to the body of federal law that has been developed by the courts as to, not only copyrights, but intellectual property law in general. And, despite the long-running application of the trust theory of ownership in all branches of intellectual property law, for some reason modern jurists don’t seem to recognize it or to appreciate it.
Trust law is not foreign to copyright law: “[T]he courts recognize that legal title to a copyright may be in one person and equitable title in another. Thus, one may be a ‘proprietor’ of a copyright if he holds legal title, though equitable title may be in another wither expressly or as trustee ex malificio.” For example, under the 1909 Copyright Act, if a coauthor obtained the copyright in his own name only, “the copyright [was] deemed to have been taken out in the name of one as a trustee for all the true owners.” In other words, the coauthor who obtained the copyright, thus holding the legal title to the entire copyright, held it in trust for the “true owners,” that is, the other coauthors, who were beneficiaries holding the equitable title. This “owner of the equitable title is not a mere licensee, and he may sue in equity, particularly where the owner of the legal title is an infringer, or one of the infringers, thus occupying a position hostile to the plaintiff.” Despite not holding the legal title, courts of equity recognized the in rem proprietary rights of these equitable owners and permitted them to seek equitable remedies.
Another common example of a trust relationship in copyright law is the situation mentioned above where an author parts with legal title while retaining the right to receive royalties. It’s simple to analyze this situation when we have the right conceptual tools. By operation of law, an author is vested with legal title to the entire copyright. This title includes the in rem proprietary rights listed in Section 106, as well as various in rem proprietary privileges, powers, and immunities. In addition, the author has other incidental in rem proprietary rights, such as the right to receive royalties from the copyright’s exploitation. Ownership of this in rem proprietary right to receive royalties can be divided such that one party holds legal title to it for the benefit of one holding its equitable title. An author who assigns the legal title to the in rem proprietary right to receive royalties while retaining the equitable title to that right establishes a trust where the author is the beneficiary and the assignee is the trustee.
It doesn’t matter whether the assignment expressly declares a trust: “It is not necessary to use the magic words of ‘fiduciary relationship’, or to hold that a ‘relationship of trust and confidence’ was created by the contract, or to find that defendant became a ‘trustee’ of the copyright for the benefit of the plaintiffs . . . .” Indeed, “[t]he law has outgrown its primitive stage of formalism when the precise word was the sovereign talisman, and every slip was fatal.” When there is a special relationship between the author and his assignee, as when the assignee is a publisher, the law treats that relationship as that of a trustee-beneficiary, imposing fiduciary duties on the publisher-assignee. And, because there is this trust relationship between the author and the publisher, the author, who holds only the equitable in rem proprietary right to receive royalties, is permitted to bring suit in equity:
It is well settled that a fiduciary who refuses to bring suit against a third party for the benefit of his cestui [i.e., the beneficiary] abuses his trust. In such event the cestui may maintain a bill in equity against the trustee in which the third party may be joined as a defendant. The trustee thus is not permitted by inaction or dereliction to bar his cestui from enforcing his rights in that capacity. . . . The principle is not foreign to copyright law. It has long been held that an exclusive licensee can maintain an action against an infringer if he joins the copyright owner as a party.
The point being urged here is that the 1976 Copyright Act incorporated the application of trust law to in rem proprietary rights in a copyright when it provided, as mentioned above, that the “legal or beneficial owner” has standing to sue for infringement. Congress also accounts for the possibility of others with in rem proprietary interests in the copyright in the notice and joinder provisions of Section 501(b). Moreover, one of the quintessential examples of a trust relationship in copyright law is that of an author who assigns his legal title to his publisher while retaining the equitable title to the in rem proprietary right to receive royalties. This author has standing to sue for infringement despite not having the present ability to exploit the copyright. But as the last sentence quoted in the block just above mentions, there’s another common example of a trust relationship recognized in copyright law, that of the licensor-exclusive licensee—and that relationship is important here with Righthaven.
Exclusive Licenses Are Not Assignments
The second way in which the Ninth Circuit reasoned that Righthaven does not have standing to sue for past infringements was to look at the sequence of events with the Copyright Assignment and the SAA. Under the Copyright Assignment, Stephens Media first assigned to Righthaven ownership of the copyright. Then with the SAA, Righthaven granted back to Stephens Media an exclusive license to exploit the copyright. This arrangement, argued Righthaven, demonstrates that it owns the copyright, for only a copyright owner could grant an exclusive license. The Ninth Circuit disagreed:
This argument again emphasizes form over substance. But even analyzing it on its own formalistic terms, the argument still fails because once Righthaven granted Stephens Media an exclusive license, Righthaven was no longer the owner of exclusive rights under the Copyright Act. The Copyright Act does not distinguish between transferring a copyright via an assignment or an exclusive license. Both, unlike an assignment of a non-exclusive license, constitute a “transfer of copyright ownership.” 17 U.S.C. § 101; see also Campbell, 817 F.2d at 504 (relying on this section of the Copyright Act to construe a contract as transferring the ownership of a copyright, even though the contract used the term “exclusive license”).
Thus, the court is saying that even if Stephens Media assigned its ownership interests in the copyright to Righthaven via the Copyright Assignment, Righthaven subsequently assigned back those very same ownership interests when it granted to Stephens Media an exclusive license. In other words, the court is saying that an assignment and an exclusive license are exactly the same thing. The court bases this conclusion on the text of Section 101 of the Copyright Act, which provides that a “transfer of copyright ownership” includes an “assignment” or an “exclusive license.”
I submit that this is an overly facile understanding of Section 101, and that it miscomprehends that while an assignment and an exclusive license are indeed transfers of copyright ownership, the type of ownership interest transferred with each conveyance is significantly different. Properly viewed, the relationship of a licensor-exclusive licensee is that of a trustee-beneficiary, with the licensor holding the legal title to the in rem proprietary rights in trust for the benefit of the exclusive licensee, who holds merely the equitable title. This is a relationship of trust. The difference between an assignment and an exclusive license is that an assignment is the transfer of the legal title to an in rem proprietary right to the assignee, while an exclusive license divides title to the in rem proprietary right between the licensor and the exclusive licensee. Both are a “transfer of copyright ownership,” as Section 101, in codifying the preexisting doctrine, so notes, but whether the ownership interest transferred is legal or equitable in nature depends on the nature of the conveyance used to transfer it. Of course, whether legal or equitable in nature, it’s treated the same under Section 501(b) as having standing to sue for both legal and equitable remedies.
The Ninth Circuit’s citation in Righthaven to its earlier opinion in Campbell is confused and misplaced. In that case, Campbell had a contract with Stanford wherein the latter promised not transfer its ownership interests in the copyright at issue without the former’s written consent. We can say this in more refined terms as Stanford had an in personam contractual duty not to transfer its in rem proprietary rights to a third party without Campbell’s consent. Without Campbell’s permission, Stanford had granted an exclusive license to CPP, a third-party publisher, and the issue was whether that was a transfer of an ownership interest in the copyright in violation of their contract. The Ninth Circuit held that it was:
Stanford transferred important rights to CPP. Stanford gave CPP an “exclusive license to market, administer, and sell” the [copyrighted work] “throughout the world.” The essence of the property interest created by the Campbell-Stanford contract is a monopoly on the use of the [copyrighted work]. Stanford clearly transferred part of this property interest monopoly to CPP in the form of an exclusive license. *** Section 101 of the Act defines a “transfer of copyright ownership” to include a grant of an exclusive license to any of these enumerated rights, even if the license is limited in time or place of effect.
Unsure whether the 1976 Copyright Act actually governed the issue, the court then hedged its reasoning in a footnote:
Even if the Copyright Act of 1976 does not apply, the parties to the Campbell-Stanford contract must have contemplated that the exclusive license conveyed some “interest” in the copyright to CPP. Under the prior copyright acts, as well as the current Act, an exclusive licensee has standing to sue for infringement, provided he joins the legal owner as a party.
Thus, the court in Campbell held that it matters not whether the issue is analyzed under the 1909 Copyright Act or the 1976 Copyright Act, since under either Act, the grant of an exclusive license is a transfer of an ownership interest in a copyright. The Ninth Circuit in Righthaven misses the nuance that the Campbell court explicitly recognized that an exclusive license is a transfer of only a “part of th[e] property interest” held by the licensor. Moreover, in the footnote, the court in Campbell explicitly stated that under both Copyright Acts, the exclusive licensee is not the legal owner of the right that he holds, for how else could he be required to “join the legal owner as a party”?
The court in Righthaven cites Campbell for the proposition that an exclusive license is the transfer of the legal title to the exclusive licensee of the in rem proprietary rights so licensed, but a closer reading of Campbell shows that the court there actually treated an exclusive licensee as holding only the equitable title. Since an exclusive license is a transfer of copyright ownership, albeit an equitable one, the Campbell court held, Stanford’s exclusive license to CPP without Campbell’s consent violated the in personam contractual duty Stanford owed Campbell not to transfer any of its in rem proprietary rights without Campbell’s consent. Campbell stands for exactly the opposite proposition than the Righthaven court cites it for. For whatever reason, the Ninth Circuit in Righthaven fails to recognize a principle that is well-established in the various branches of intellectual property law, namely, that an exclusive license is not the same thing as an assignment. This is true now as it was under prior Copyright Acts, and it’s also true in the realms of patent and trademark law.
Patents, Trademarks, and Beyond
In patent law, an assignment and an exclusive license have always been distinct, with the difference being that an assignment transfers legal title while an exclusive license does not. The licensor holds the legal title to the in rem proprietary rights so licensed in trust for his exclusive licensee, who has only an equitable ownership interest in the patent. The general rule is that damages for patent infringement are only recoverable in an action at law by the party who “held the legal title to the patent during the time of the infringement.” This follows from the text of the Patent Act, which provides that the “patentee,” or his “successors in title,” may sue for patent infringement. Thus, on its face, the Patent Act would appear to say that only the holder of legal title, i.e., the patentee or one who can trace his legal title back to the patentee, has standing to sue for patent infringement, but the judiciary does not interpret it this way.
Generally, the rule is that the “patentee should be joined, either voluntarily or involuntarily, in any infringement suit brought by an exclusive licensee.” Thus, the presence of the patentee, or his successors-in-title who stand in his shoes, is usually needed for the court to have jurisdiction. The exclusive licensee can gain the benefit of his licensor’s legal title for standing purposes by either suing in the name of his licensor, or if necessary, by joining his licensor to the action. In order to have standing as a coplaintiff, along with the patentee or his successors-in-title, in an action for patent infringement, the “licensee must hold some of the proprietary sticks from the bundle of patent rights, albeit a lesser share of rights in the patent than for an assignment and standing to sue alone.” Both parties have in rem proprietary rights in the patent that are enforceable, though the presence of the legal titleholder in the action is needed to obtain legal remedies. An exclusive license “makes the licensee a beneficial owner of some identifiable part of the patentee’s bundle of rights to exclude others,” and this exclusive licensee “has a right to bring suit on the patent, albeit in the name of the licensor, whether or not the license so provides and regardless of the patentee’s cooperation.” And when the exclusive licensee has all substantial rights in the patent, he is treated as the de facto patentee, despite not being the de jure patentee, who still holds the legal title.
Trademark law similarly treats exclusive licensees as equitable titleholders. Like copyright and patent law, trademark law distinguishes between assignments and exclusive licenses. The Lanham Act provides that the “registrant” or his “successors and assigns” has standing to sue for infringement of a registered mark. Thus, like the Patent Act, the Lanham Act appears to provide that only the original registrant who holds legal title, or one who can trace his legal title back to the original registrant, has standing to sue for trademark infringement. An exclusive licensee typically does not have standing to sue in his own name since he is not the registrant or his successor-in-title, and he thus lacks the legal title to the mark. However, just as with patents, an exclusive licensee who holds all substantial rights in the mark is treated as the registrant for purposes of standing. And as in patent law, such an exclusive licensee is merely a de facto assignee, not a de jure assignee who actually holds legal title, and the exception merely serves to prove the general rule.
An assignment and license-back of a mark, as Stephens Media and Righthaven have done here with a copyright, has been described by the Federal Circuit as a “well-settled commercial practice.” The Ninth Circuit has noted “that a simultaneous assignment and license-back of a mark is valid, where, as in this case, it does not disrupt continuity of the products or services associated with a given mark” An opinion earlier this year out of the Northern District of California, penned by District Judge William Alsup of the “Google Shill List” fame, discusses this common practice of assignment and license-back. After noting that “the validity of this type of assignment and license-back transaction is well-settled,” Judge Alsup explained that an “assignment passes legal and equitable title to the property,” and it “is the transfer of the whole of the interest in the right.” A “truly exclusive license,” on the other hand, “that grants all substantial trademark rights, including the ability to exclude the licensor from using the marks, is tantamount to an assignment for standing purposes.” In other words, such an exclusive license is “functionally equivalent” to an assignment, but it’s not the same thing. Despite the exclusive licensee having significant interests in the mark such that it “controls the exploitation of the intellectual property,” Judge Alsup nevertheless recognized that this did not affect “the legal title retained by the licensor.”
Turning back to copyright law, the modern confusion about the difference between an assignment and an exclusive license stems in part from Section 101, the definitional section of the 1976 Copyright Act, which provides:
A “transfer of copyright ownership” is an assignment, mortgage, exclusive license, or any other conveyance, alienation, or hypothecation of a copyright or of any of the exclusive rights comprised in a copyright, whether or not it is limited in time or place of effect, but not including a nonexclusive license.
The phrase “transfer of copyright ownership” appears only in three other sections of Title 17, and these are illuminating as to why Congress defined the phrase in Section 101. The first appearance is in Section 204(a), which provides: “A transfer of copyright ownership . . . is not valid unless an instrument of conveyance . . . is in writing and signed by the owner of the rights conveyed . . . .” The phrase occurs twice in Section 205. Section 205(a) provides: “Any transfer of copyright ownership . . . may be recorded in the Copyright Office . . . .” And Section 205(e) provides: “A nonexclusive license . . . prevails over a conflicting transfer of copyright ownership if the license is evidenced by a written instrument signed by the owner of the rights licensed . . . .” The final occurrence is found in Section 708(a)(4), which merely provides that the fees for recordation under Section 205 shall be paid to the Register of Copyrights.
Thus, the purpose of lumping together “an assignment, mortgage, exclusive license, or any other conveyance, alienation, or hypothecation of a copyright” in Section 101 was not to suddenly equate these types of conveyances that historically had been disparate things. The purpose of the definition in Section 101 was to list the types of conveyances that: (1) require a signed writing to be effective, (2) may be recorded in the Copyright Office, (3) a nonexclusive license may take priority over, and (4) require recordation fees to be paid to the Register of Copyrights. Just because all of these conveyances are equated for execution, recordation, and prioritization purposes, it does not follow that Congress intended to erase in such a roundabout way almost two centuries of doctrine distinguishing them without any explanation in the congressional record.
Perhaps the best way to see that “transfer of copyright ownership” under Section 101 does not refer to only transfers of legal title is to look at the rest of the text. Section 101 tells us that a “mortgage” is also a transfer of copyright ownership. A mortgage can be a lien against a copyright whereby a creditor secures an obligation owed by the debtor that is extinguished once the obligation is fulfilled. In a mortgage, the debtor is called the mortgagor and the creditor is called the mortgagee. In lien-theory states, a mortgage is merely a lien held by the creditor-mortgagee with the debtor-mortgagor retaining legal title to the mortgaged property during the existence of the mortgage. In title-theory states, the creditor-mortgagee holds legal title to the mortgaged property while the mortgage is in force. But if the assignment = exclusive license = mortgage theory is correct, and all transactions mentioned as constituting a “transfer of copyright ownership” in Section 101 are transfers of legal title, then the mortgage laws of the states that follow the lien-theory would be preempted by the Copyright Act. There would be no such thing as a lien on a copyright since liens are equitable interests in the mortgaged property. The only way to mortgage a copyright would be to transfer legal title to the mortgagee.
If Congress had intended so drastic a result, it stands to reason that it would have implemented the change in a clearer way than sticking it in the definitional section of the Copyright Act to be implied by jurists. In fact, the House Report reflects instead that Congress did not intend to preempt state law as it applies to mortgages, at least in the context of foreclosures:
Representatives of motion picture producers have argued that foreclosures of copyright mortgages should not be left to varying State laws, and that the statute should establish a Federal foreclosure system. However, the benefits of such a system would be of very limited application, and would not justify the complicated statutory and procedural requirements that would have to be established.
The way that foreclosures operate in a given state turns on whether it’s a title-theory or a lien-theory state. If Congress did not intend to preempt the various ways in which states deal with foreclosures of copyright mortgages, then it makes little sense to say that it intended to change the way that mortgages are created under state law in the first place—but that’s exactly what is implied by those who think that assignment = exclusive license = mortgage.
The better view of Section 101’s provision that a “mortgage” is a “transfer of copyright ownership” is the one taken by the Ninth Circuit in an opinion discussing whether the Copyright Act preempts state law when it comes to recordation of unregistered copyrights. The court noted that the “Copyright Act’s use of the word ‘mortgage’ as one definition of a ‘transfer’ is properly read to include security interests under Article 9 of the Uniform Commercial Code.” Those security interests, in turn, include liens—such as the one at issue in the very case the Ninth Circuit was deciding. Moreover, the court stated that a creditor cannot protect his interest by registering the copyright himself “because the secured party isn’t the owner of the copyright.” Thus, the Ninth Circuit simply read the inclusion of “mortgage” in Section 101 as indicating that security interests can be created in it, not that it means that all such security interests must involve the transfer of legal title to the creditor.
To underscore the point, Section 101 provides that a “transfer of copyright ownership” includes “any . . . hypothecation of a copyright.” In general, a hypothecation is “a pledge, i.e., an encumbrance rather than a deed translative of title or ownership.” In other words, hypothecation refers to a method of creating a security interest in a given piece of property. For example, in my state of Louisiana, a hypothecation can connote either a mortgage, a pledge, or an encumbrance, depending on the context. Those who believe that assignment = exclusive license = mortgage = hypothecation must believe that Congress intended to preempt Louisiana law such that only legal interests, as opposed to equitable interests, can be hypothecated—despite no such indication in the congressional record. This view makes little sense. While the Ninth Circuit has held that the Copyright Act preempts state law as far as recordation of security interests in a registered copyright is concerned, it did not hold that state law as to the creation of those security interests was preempted. States are free to permit the hypothecation of a copyright even if that hypothecation doesn’t transfer legal title to the copyright.
The Righthaven standing issue is simple to analyze. It’s just an assignment and license-back. Stephens Media, the author and legal titleholder of the copyright, assigned to Righthaven the legal title to the copyright plus the accrued causes of action. Righthaven, in turn, granted back to Stephens Media an exclusive license to exploit the copyright. This grant-back of an exclusive license did not divest Righthaven of the legal title to the copyright that it had been granted because an assignment and an exclusive license are not the same thing. A licensor retains the legal title to the in rem proprietary rights that he exclusively licenses to another. He holds that legal title in trust for his exclusive licensee. And, though many don’t seem to recognize this, the existence of trust relationships in copyright law is and has been commonplace. The question of who has standing to sue, I submit, is simply to ask whether the plaintiff, either personally or through assignment from his predecessors-in-title, whether legal or equitable, held an in rem proprietary right in the copyright at the time the cause of action accrued. Since Righthaven has such an interest, it has standing to sue under the existing doctrine.
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