Cross-posted on the Law Theories blog.

Representing himself before the U.S. Court of Appeals for the Tenth Circuit, Andrew Diversey has managed to set a very interesting precedent (opinion available here or here). Senior Circuit Judge Terrence L. O’Brien, writing for a unanimous panel, held that when a library adds a work to its collection, indexes it, and makes it available to library patrons, a distribution is deemed to have occurred even if there is no evidence that any patron actually accessed the work.

The underlying brouhaha concerned Diversey’s dissertation as a doctoral candidate at the University of New Mexico. Against his express wishes, two copies of his dissertation had been made available to the public in the school’s libraries. Diversey sued the school and several administrators for violation of his exclusive distribution right under Section 106(3).

Diversey’s opening brief before the Tenth Circuit was remarkably well-researched and well-written for a pro se advocate, and he cited the Nimmer copyright treatise at length in arguing that merely making a work available constitutes distribution. I wrote about the fact that the Nimmer treatise has changed its tune on the making available issue in a previous post, and I predicted that, given how influential Nimmer is in the copyright realm, others would follow. 1For the argument that Nimmer was wrong to change its tune on the making available issue, see Rick Sanders, Will Professor Nimmer’s Change of Heart on File Sharing Matter?, 15 Vand. J. Ent. & Tech. L. 857 (2013).

And follow they did. Relying on the Fourth Circuit’s holding in Hotaling and the Nimmer treatise, the Court of Appeals reasoned:

As Diversey points out, § 106(3) explicitly protects the copyright owner’s exclusive right to distribute copies by lending. See Hotaling, 118 F.3d at 203 (“When a public library adds a work to its collection, lists the work in its index or catalog system, and makes the work available to the borrowing or browsing public, it has completed all the steps necessary for distribution to the public.”); 2 Melville Nimmer & David Nimmer, Nimmer on Copyright § 8.11[B][4][d] at 8–154.10 (2013) (“No consummated act of actual distribution need be demonstrated … to implicate the copyright owner’s distribution right.”). . . . The essence of distribution in the library lending context is the work’s availability “to the borrowing or browsing public.” See Hotaling, 118 F.3d at 203. 2Diversey v. Schmidly, 2013 WL 6727517 at *4-5 (10th Cir. Dec. 23, 2013).

The Tenth Circuit rejected the appellees’ argument that Diversey had to prove actual dissemination to the public:

The appellees argue [that] merely listing the work in the libraries’ catalog information system does not violate Diversey’s distribution right. They say Diversey must (but has failed to) allege the libraries actually distributed an unauthorized copy to a member of the public. They cite Atlantic Recording Corp. v. Howell, 554 F.Supp.2d 976 (D. Ariz. 2008) to suggest “‘§ 106(3) is not violated unless the defendant has actually distributed an unauthorized copy of the work to a member of the public.’” (Appellee’s Br. 14 (quoting Howell, 554 F.Supp.2d at 883).)

Howell does reflect some dissensus, particularly among district courts, about the applicability of Hotaling’s holding to cases of Internet file-sharing. We need not delve into the file-sharing issue today. Hotaling, like this case, involves a public library making “the work available to the borrowing or browsing public.” Hotaling, 118 F.3d at 203. A patron could “visit the library and use the work.” See id. This is the essence of a violation of the copyright owner’s exclusive right to distribute his work via lending. See 17 U.S.C. § 106(3); Peter S. Menell, In Search of Copyright’s Lost Ark: Interpreting the Right to Distribute in the Internet Age, 59 J. Copyright Soc’y U.S.A. 1, 52–66 (2011) (analyzing the legislative history regarding the distribution right and concluding the requirement of actual distribution of an unauthorized copy is unwarranted). 3Id. at *4 n.7 (citation omitted).

The applicability of the Hotaling holding to this case was pretty straightforward since both cases involved libraries lending out works to the general public. In Hotaling, the Fourth Circuit stated that distribution normally requires a showing that the work was actually disseminated to the public, but in the case of a library that keeps no records of public access to its works, it would unfairly prejudice the plaintiff to require any such proof of access. 4See Hotaling v. Church of Jesus Christ of Latter-Day Saints, 118 F.3d 199, 203 (4th Cir. 1997). Thus, the evidentiary issue was central to the Fourth Circuit’s holding.

Interestingly, for the argument that distribution requires actual dissemination, the Hotaling court cited the Eighth Circuit’s opinion in National Car 5See Nat’l Car Rental Sys., Inc. v. Computer Associates Int’l, Inc., 991 F.2d 426, 433-34 (8th Cir. 1993). and the Nimmer treatise. National Car, in turn, cited only the Nimmer treatise for that proposition. So the notion in the Fourth and Eighth Circuits that distribution typically requires actual dissemination can be traced back to earlier versions of the Nimmer treatise. As I said in that previous post, it really is hard to exaggerate just how influential Nimmer is in copyright law.

Now we have the Tenth Circuit relying on the Nimmer treatise as well as the journal article by Professor Peter S. Menell, which was the impetus for the about-face on the making available issue in the Nimmer treatise. 6See Peter S. Menell, In Search of Copyright’s Lost Ark: Interpreting the Right to Distribute in the Internet Age, 59 J. Copyright Soc’y U.S.A. 1 (2011). The Tenth Circuit here explicitly declined to discuss the applicability of its holding to the file-sharing context, but I think the answer there is fairly clear. Several district courts have declined to extend the holding of Hotaling to file-sharing cases, citing the general rule that actual dissemination is required and reasoning that the same evidentiary problem found in the library context may not obtain when it’s file-sharing. 7See Atl. Recording Corp. v. Howell, 554 F.Supp.2d 976, 981-85 (D. Ariz. 2008) (gathering cases).

But the Tenth Circuit here has unequivocally adopted Nimmer’s new tune, which states that merely making the work available to the public is sufficient to constitute distribution. And it approvingly cited Professor Menell’s article, which reaches the same conclusion. Moreover, the Tenth Circuit adopted Hotaling’s holding without mentioning the underlying evidentiary rationale applicable in the library context that led other courts to distinguish its holding in the file-sharing context. While the Tenth Circuit did not address whether its holding would apply to file-sharing, it’s really difficult to see how it would not.

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References   [ + ]

1. For the argument that Nimmer was wrong to change its tune on the making available issue, see Rick Sanders, Will Professor Nimmer’s Change of Heart on File Sharing Matter?, 15 Vand. J. Ent. & Tech. L. 857 (2013).
2. Diversey v. Schmidly, 2013 WL 6727517 at *4-5 (10th Cir. Dec. 23, 2013).
3. Id. at *4 n.7 (citation omitted).
4. See Hotaling v. Church of Jesus Christ of Latter-Day Saints, 118 F.3d 199, 203 (4th Cir. 1997).
5. See Nat’l Car Rental Sys., Inc. v. Computer Associates Int’l, Inc., 991 F.2d 426, 433-34 (8th Cir. 1993).
6. See Peter S. Menell, In Search of Copyright’s Lost Ark: Interpreting the Right to Distribute in the Internet Age, 59 J. Copyright Soc’y U.S.A. 1 (2011).
7. See Atl. Recording Corp. v. Howell, 554 F.Supp.2d 976, 981-85 (D. Ariz. 2008) (gathering cases).

VMG Salsoul v. Madonna — No details here other than the fact that the appeal has been docketed by the Ninth Circuit, but I include it because I think this will become one of the more closely watched copyright cases of 2014. Last month, a district court held that Madonna’s use of a digital sample without permission in her song Vogue was not infringing. The court held that the sample lacked originality, and even if it were protected by copyright, the use was de minimis. The appeal marks the first time that a Circuit Court will be looking at the same issue as Bridgeport, (although at least one other federal district court and a state court have) a 2005 decision from the 6th Circuit that attracted considerable attention for its holding that digital samples are not analyzed under the substantial similarity test like other copyrighted subject matter.

Shady Toymaker Attempts to Run and Hide from Beastie Boys LawsuitSPIN magazine has the latest from the GoldieBlox saga. On Tuesday, the Silicon Valley startup dismissed all the corporate defendants from its lawsuit, so it now only targets artists and producers.

Art and Music are Professions worth Fighting for — Musician Blake Morgan has an excellent essay on the importance of art and music as professions. “Every profession has daunting risks. And yet I’ve never heard of anyone who’s been successful in any profession who went for it half way. We artists and musicians have the right to expect from our profession what others expect from their professions. That through hard work and determination, perspiration and inspiration, we’ll have the same fair shot to realize our dreams, answer our callings, support our families.”

Appeals Court Won’t Penalize NFL Network for use of Artist’s Logo — The Fourth Circuit released a fair use decision this week, holding that the appearance of a copyrighted Baltimore Ravens logo in historical photos and videos is not infringing. At one point, the court cited to a brief filed by the MPAA and International Documentary Association to support its statement, “For creation itself is a cumulative process; those who come after will inevitably make some modest use of the good labors of those who came before.”

Sovereign Immunity and Copyright Law — Jonathan Bailey discusses a topic that I know everyone is excited to learn about more. But seriously, the issue of sovereign immunity may not pop up all that often, but it is worth knowing, especially for creators who work with state institutions like universities.

In Memoriam: Remembering the Photographers we Lost in 2013 — Time pays tribute to those photographers who passed away this year. “For photographers, the camera is a tool of existential negotiation. Regardless of the genre in which they work, they use the camera to mediate what is before them with what lies within. The best pictures are not a statement of fact, but a fully formed and articulated opinion.”

For over six years, the Electronic Frontier Foundation (EFF) has been doggedly pursuing Universal Music for a DMCA takedown notice that removed a 29 second clip of a dancing baby from YouTube for approximately six weeks. The case is currently in front of the Ninth Circuit on appeal. The EFF has soldiered on for so long in order to create a precedent that copyright owners should be punished if they make one wrong step protecting their works in order to stop what some call “rampant abuse” of the Digital Millennium Copyright Act (DMCA) notice-and-takedown provisions. Yet if the EFF is successful, it will create a much bigger burden to creators who are already overburdened keeping their works from being exploited by illegitimate sites.

The story is probably familiar to most readers. In 2007, mother Stephanie Lenz filmed her toddler dancing in the kitchen while Prince’s “Let’s Go Crazy” played on a radio in the background. Lenz uploaded the half a minute clip to YouTube. Universal Music, the administrator of Prince’s musical composition copyrights, regularly monitored YouTube for infringement of Prince works. After a brief review of Lenz’s clip, Universal sent a takedown notice to YouTube, which YouTube complied with. The EFF soon came calling, and helped Lenz submit a counternotice to YouTube to restore the clip online. Lenz then filed suit claiming that Universal knowingly made a material misrepresentation that Lenz’s video was infringing in its takedown notice, a claim that is actionable under 17 USC § 512(f).

Years of discovery followed. This past January, the district court denied both parties’ summary judgment motions on Lenz’s. Few would argue that sending a takedown notice because a poor quality version of a portion of a song appears in the background of a home video is a smart thing to do. The question is whether it gives rise to legal liability.

The court said that the DMCA’s requirement of a good faith representation that a use of a work is not authorized by law demands, at a minimum, an initial assessment of whether the fair use doctrine applies. But it rejected the EFF’s argument that failure to consider fair use by itself is sufficient to establish liability under § 512(f). The court relied on the Ninth Circuit’s earlier decision in Rossi v. MPAA, which held that the “good faith belief” requirement in the DMCA encompasses a subjective standard (that is, whether it is reasonable from the perspective of the actual individual), not an objective standard (that is, whether it is reasonable from the perspective of a hypothetical “reasonable” observer), and “[a] copyright owner cannot be liable simply because an unknowing mistake is made, even if the copyright owner acted unreasonably in making the mistake.” 1391 F. 3d 1000 (2004). Thus, the statute requires actual knowledge that a material misrepresentation had been made.

The EFF also argued that Universal’s failure to thoroughly consider fair use amounted to willful blindness – a form of actual knowledge under the law. As the court notes, the Supreme Court recently defined willful blindness as a subjective belief that there is a high probability that a fact exists combined with deliberate actions to avoid learning of that fact. 2Global Tech. Appliances, Inc. v. SEB SA, 131 S.Ct. 2060, 2070 (2011). The court rejected the EFF’s contention that the Prince song playing in her video was “self-evident” fair use, saying, “A legal conclusion that fair use was ‘self-evident’ necessarily would rest upon an objective measure rather than the subjective standard required by Rossi.” Ultimately, however, the court did not see enough evidence from either side to make a ruling as a matter of law at this stage in the proceedings. Both sides appealed.

512(f) and the proper standard

The DMCA in part provides a safe harbor from liability for infringing material uploaded to online service providers by third parties for purposes of storage if (among other requirements) those service providers remove the material upon notice by the copyright owner. The statute spells out what information is required on such notices, information that includes “A statement that the complaining party has a good faith belief that use of the material in the manner complained of is not authorized by the copyright owner, its agent, or the law.” 317 USC § 512(c)(3)(A)(v). The statute also creates a cause of action against “Any person who knowingly materially misrepresents under this section … that material or activity is infringing.”

Rossi is the leading case interpreting these provisions. Michael J. Rossi owned the internet site “internetmovies.com” that boasted “Join to download full length movies online now! new movies every month”; “Full Length Downloadable Movies”; and “NOW DOWNLOADABLE” – it also included graphics of a number of MPAA member studio films. Upon discovering the site, the MPAA sent a takedown notice to Rossi’s ISP, which complied. The MPAA hadn’t attempted actually downloading any films from the site before sending the takedown notice, and apparently the site, despite its claims, did not contain any infringing material. Rossi sued for, among other things, misrepresentation under § 512(f), arguing that the MPAA should have known the site did not infringe.

The Ninth Circuit disagreed with Rossi, and held that the DMCA encompassed a subjective standard for two reasons. First, courts have traditionally interpreted the phrase “good faith” in other statutes as indicating a subjective standard. Second, the structure of the DMCA suggests Congress intended a subjective standard.

Juxtaposing the “good faith” proviso of the DMCA with the “knowing misrepresentation” provision of that same statute reveals an apparent statutory structure that predicated the imposition of liability upon copyright owners only for knowing misrepresentations regarding allegedly infringing websites. Measuring compliance with a lesser “objective reasonableness” standard would be inconsistent with Congress’s apparent intent that the statute protect potential violators from subjectively improper actions by copyright owners.

Rossi is on solid grounds, both for legal reasons and for policy reasons. As one recent court said, “The high standard for a § 512(f) claim reflects the reality that copyright owners face an uphill battle to protect their copyrights on the internet. … Without the subjective standard, copyright owners … could face limitless lawsuits just by policing [their] copyrighted material on the internet.” 4Ouellette v. Viacom Int’l, Inc., No. CV 10-133-M-DWM-JCL (D. Montana, April 25, 2012). The EFF’s primary argument for seeking an objective standard is based on a California district court case that was released before Rossi.

The EFF’s argument that copyright owners must consider fair use before sending takedown notices fails for an even more fundamental reason. Fair use is an affirmative defense, meaning the onus is on a defendant to raise it. It would be unusual — not to mention near impossible — to require a plaintiff to anticipate any possible defenses a defendant might decide to raise and then consider them.

An example illustrates the problems that arise from this approach. To bolster its argument that “Based on the facts readily available to it, Universal should have known Ms. Lenz’s video was lawful,” the EFF stitches together case holdings from the Ninth Circuit, the Second Circuit, the Southern District Court of New York, and the Central District Court of California. It also cites to one case that came out five years after Universal sent its takedown notice.

The EFF has inadvertently revealed the fatal flaw in its argument here. Its legal analysis that should make fair use obvious to a reasonable person only works if the analysis takes place in some sort of conglomerate circuit court. But that’s not how things work in the real world. The fact is that fair use is not so much a legal determination as it is an adjudicated determination, one far outside the narrow scope of § 512(f).

DMCA abuse and perspective

That’s not to say there isn’t abuse of DMCA takedown notices, nor that § 512(f) shouldn’t work to prevent such abuse.

There are certainly examples of bad actors sending takedown notices for sites or content that is not infringing or likely not infringing for purposes of harassment, suppressing criticism, or stifling competition. This is obvious abuse, and this abuse reflects poorly on the vast majority of copyright owners who don’t abuse the DMCA process.

(There is also a lot of other stuff that isn’t abuse but categorized as such nevertheless. This may include takedowns that are a result of either overzealous or inexperienced/mistaken creators, or automated processes. Technical processes are constantly improved, and copyright owners have incentives to makes sure they are accurate since they generally don’t want to spend time and resources going after works that don’t harm their own property. As for overzealous enforcement, many copyright owners have found that the bad PR that results from too heavy a hand in sending takedown notices is not worth it.)

Abusive takedown notices receive a lot of attention, amplified by groups like the EFF to be sure, but how big of a problem are they within the larger picture?

A recent paper by Prof. Bruce Boyden provides one data point. In The Failure of the DMCA Notice and Takedown System, Boyden notes that from March to August 2013, the MPAA sent 25.2 million DMCA notices and received a total of eight counternotices claiming the targeted work did not infringe or was fair use or otherwise authorized. Not eight million — just eight.

Google’s own amicus brief in this case states it receives “hundreds of notices” that are not targeted at infringement. That’s a lot to be sure, but Google also receives nearly 24 million notices in total every month.

During last week’s public meeting on the USPTO Green Paper, the EFF’s Corynne McSherry made reference to a story that made waves earlier this year, involving several DMCA takedown notices intended for infringing copies of the television show Homeland targeting copies of Cory Doctorow’s book by the same name. The rhetoric certainly made it sound like a disaster: Doctorow’s book was “shut down” by “overzealous” takedowns, his novel “censored” by a veritable “dragnet.”

But take a closer look at the actual takedown notices that were at issue. Contained on them was not just URLs to copies of Homeland by Cory Doctorow but also URLs to copies of the TV show Homeland, as well as other television shows owned by the same copyright owner. Lots of URLs. One takedown notice has four links to Doctorow’s work out of around ten thousand total links. Another has sixty-two out of over 4,200 total links. A third has three out of around 9,600 total links. The “dragnet” captured a couple dozen copies of Doctorow’s book out of over 20,000 total URLs.

So we can ask two questions. Do we want to see noninfringing content become temporarily inaccessible at certain web sites? 5I’m certain that despite Doctorow’s novel being removed from sites like “http://tpb.5gg.biz”, it was still readily available at other sites, like Doctorow’s own home page. Of course not. But, at the same time, is a greater than 99.8% accuracy rate acceptable, especially when you’re dealing with tens of millions of notices a month?

Abusive takedowns are a problem, certainly, but they are a problem that exists at the far margins of the notice and takedown system. Seeking solutions could be a helpful discussion, but solutions shouldn’t come at the expense of the overwhelming majority of legitimate notices that are sent.

What shape would these solutions take?

Solutions, should they be needed, could come from the private sector. Because of the way courts have interpreted the DMCA, the burden falls almost exclusively on creators to identify infringing works. Service providers have little responsibility in cooperating with copyright owners to detect and deal with online copyright infringement, as Congress intended when it drafted the statute. 6Senate Report 105-190 at 20 (1998). That cooperation could include mitigating abusive notices since both service providers and copyright owners are motivated to prevent them. Unfortunately, many service providers have taken a minimal, hands off approach to the DMCA, doing little more than responding to takedown notices when they arrive. If service providers played a more active role in protecting creative works, perhaps the more egregious abusive takedowns could be prevented. This might be accomplished by incorporating best practices into voluntary initiatives or building more effective technical measures. Increasing transparency and streamlining internal appeals processes.

They might also come from government. The Copyright Office released a report on copyright small claims September 30, 2013. The report examined alternatives to litigation in federal courts that would be more accessible to individual creators with limited resources. The Office recommended a streamlined, voluntary administrative tribunal that would hear infringement claims with amounts at stake under a certain monetary threshold. The goal of such proceedings would be to afford effective remedies when federal litigation is resource prohibitive.

Interestingly, the Copyright Office proposes that the tribunal hear not only infringement claims, but also claims of misrepresentation in DMCA takedown notices or counter notifications under section 512(f). 7It’s unclear to me what remedies would be available under the draft legislation provided in the report. § 1403(c)(3) limits remedies in proceedings involving 512(f) claims, which I presume are not “infringement” claims, to “those available under this chapter.” But §1404(d)(1)(C), which sets remedies for claims other than copyright infringement, says damages “shall be awarded in accordance with applicable law.” The challenge with implementing the small claims court would be providing a process that is accessible to the general public without opening the door to a flood of frivolous or vexatious claims, but if that balance can be struck, the availability of hearing 512(f) claims may help address those rare cases of abuse that currently go unaddressed and relieve some tension in copyright debates.

Conclusion

The EFF spends much of its brief appealing to free speech values. 8Though it oversteps when it says that private actors can violate the First Amendment. Pg. 58. But courts should also be mindful of the free speech values that meaningful copyright protection promotes, and the chilling effect that the tidal wave of online infringement has on creators. As Susan Cleary of the Independent Film & Television Alliance said at a panel last week on creating a multistakeholder process to identify ways to improve the notice-and-takedown process, the game of whack-a-mole itself may be fun, but playing whack-a-mole with online infringement is not so much fun when it prevents your ability to finance your next film. Throwing up barriers against speech being made in the first place — especially speech from independent and niche voices — is a far graver threat to free speech then the temporary inaccessibility of already existing speech on a single website.

References   [ + ]

1. 391 F. 3d 1000 (2004).
2. Global Tech. Appliances, Inc. v. SEB SA, 131 S.Ct. 2060, 2070 (2011).
3. 17 USC § 512(c)(3)(A)(v).
4. Ouellette v. Viacom Int’l, Inc., No. CV 10-133-M-DWM-JCL (D. Montana, April 25, 2012).
5. I’m certain that despite Doctorow’s novel being removed from sites like “http://tpb.5gg.biz”, it was still readily available at other sites, like Doctorow’s own home page.
6. Senate Report 105-190 at 20 (1998).
7. It’s unclear to me what remedies would be available under the draft legislation provided in the report. § 1403(c)(3) limits remedies in proceedings involving 512(f) claims, which I presume are not “infringement” claims, to “those available under this chapter.” But §1404(d)(1)(C), which sets remedies for claims other than copyright infringement, says damages “shall be awarded in accordance with applicable law.”
8. Though it oversteps when it says that private actors can violate the First Amendment. Pg. 58.

Starting the Conversation on Copyright Issues in a Digital Age — Yesterday, the Department of Commerce held a public meeting to discuss issues it raised in last July’s green paper on Copyright Policy, Creativity, and Innovation in the Digital Economy. I have a full write up on the panels at the Copyright Alliance site with links to archived video of the event and additional background materials.

Hurd at Content Protection Summit: Google, Corporations Can Help Stop PiracyWalking Dead Executive Producer Gale Anne Hurd said Google and major brands could do more to minimize filesharing and ad-sponsored piracy at a recent event. Said Hurd, “I don’t buy into the philosophy that piracy helps [the business] … It creates a habit and I don’t think it’s something we should encourage.”

Oral Argument in Oracle v. Google: A Setback for Google? — Lee Gessmer has another excellent post covering the appeal in Oracle v. Google. Though it’s rarely wise to predict case outcomes from oral arguments, the judge’s questions did suggest vulnerabilities in Google’s arguments.

MPAA Studios Sent 25 Million DMCAs in Six Months, Only Eight Were Contested — Torrentfreak picks up on a interesting statistic from Bruce Boyden’s recent DMCA paper released by the Center for Protection of Intellectual Property: the Motion Picture Association of America only received 8 counter-notices from the 25 million takedown notices it sent in the past six months. This suggests a nearly 100% accuracy rate.

Review of streaming TV issue urged — SCOTUSBlog reports on Aereo’s rebuttal to the broadcaster’s cert petition, which somewhat unusually urges the Court to review the case even though Aereo won at the Second Circuit. Broadcasters have 10 days to file a reply brief, at which point the Court will consider the petition at its next conference, though that is not likely to be until January due to the holidays.

Silicon Valley Kings Write Half-Assed Outrage Letter to NSA — “It only took half a year for the un-beating heart of America’s tech sector to show any unified opposition to NSA dragnet techniques: ReformGovernmentSurveillance.com is a lazy piece of PR dreck—and about as transparently self-serving as it gets. Of course, companies like Google and AOL—which stay in existence by trading in private information—don’t want competition.”

Legal Theory Lexicon: Consent — A longer version of “permission is a foundation of a free civilization.”

Any given Sunday: inside the chaos and spectacle of the NFL on Fox — Read this amazing behind-the-scenes look from the Verge about what goes into a typical TV broadcast of a professional football game: the investment in technology, the employees who can only pull it off after developing their skills and talents. To wit: “Kevin Callahan, Fox’s director of technical operations, estimates Fox credentialed between 150 and 200 people for the weekend, from Troy Aikman and director Rich Russo to runners and microphone holders. The network brings in about $25 million worth of equipment, with thousands of individual parts.”

David Lowery: Silicon Valley must be stopped, or creativity will be destroyed — Love or hate the idea of an artist actually speaking out, David Lowery has provide much food for thought over the past year. He is in top form in this interview with Spin, particularly here where he is talking about resistance to making the internet more ethical: “That would be like in the Industrial Revolution saying, ‘You can’t have a non-polluting factory; you can’t have a factory that doesn’t have child labor; you can’t have a factory that’s safe to work in.’ Of course you can! We’re the fucking masters of our own destiny, we pass the laws for this country, we create this country, we decide what kind of a society we’re going to have — not the Internet.”

Silicon Chasm — How bad is Silicon Valley? The extreme economic inequality present there shocks even Laissez-faire conservatives.

Best photos of the year 2013 — Beauty, tragedy, hope, sorrow: the range of human experience is captured by photographers. I couldn’t get through all these in one setting because of how powerful they are, but it is worth it — not just to see the images but also to read the observations from the photographers themselves.

The Failure of the DMCA Notice and Takedown System — Bruce Boyden has released a new paper with the Center for Protection of Intellectual Property that details the Digital Millennium Copyright Act after fifteen years. “A tool that was originally designed as an emergency stopgap measure, to be used in isolated instances, is now expected to manage infringement on a persistent, ubiquitous, and gargantuan scale.”

Thom Yorke Calls Himself a ‘Luddite and Proud of It’ in Spotify Debate — The only people who think “Luddite” is an insult are people whose exploitative machines are being smashed. As Spin points out, the Luddites “weren’t anti-machine — they were against low-paying bosses, against being put out of a job in the name of efficiency, you name it.”

This morning, the Federal Circuit dove into the wild and wooly world of software copyright, hearing oral arguments in Oracle v. Google. The case between the two juggernauts could have enormous implications for the software industry, which contributes more than $260 billion to the U.S. GDP each year and employs 2 million U.S. workers.

Oracle licenses the programming language Java. 1Which it acquired after purchasing the original creator of Java, Sun Microsystems, in 2010. To keep things simple, I’ll use “Oracle” throughout this article to refer to Oracle or Sun. One of the key features of Java is the Java Virtual Machine, which enables Java programs to run on any platform – a software developer can “write once, run anywhere” using Java.

To facilitate development of Java applications, Oracle also created a set of packages, or APIs. Each package is made up of multiple classes, and each class consists of a set of methods, each of which performs a specific function. Rather than writing a specific function from scratch, a Java developer can simply drop in a reference to the API.

While Google had become dominant in the desktop world by the mid 00’s, it was facing a lot of competition in the quickly growing mobile space. It acquired Android, Inc., in 2005 for the mobile software platform the company was developing, and began discussions with Oracle to license the Java operating system in order to quickly tap into a community of developers to build up a universe of apps.

But after five years, negotiations fell apart. Undeterred, Google created its own virtual machine and packages, but also copied verbatim the declaring code of 37 of the most popular Java packages. Oracle sued for copyright and patent infringement.

The procedural history of the case so far is a bit complicated because of the complexity of the issues. The trial was broken up into phases to address the patent and copyright issues separately. During the copyright phase, the jury was told to assume that the code was copyrightable to determine whether Google infringed the API packages, whether the infringement was fair use, and whether any copying of other snippets of code was de minimis. The trial court would later determine whether, as a legal matter, the code actually was copyrightable – the thinking was that this sequence would avoid a retrial if the judge found the code was not copyrightable and an appeals court reversed; the appeals court could then simply reinstate the jury’s verdict.

The jury found that (assuming the code was copyrightable) Google had infringed the 37 Java API packages but deadlocked on the fair use question. It also found that all snippet copying was de minimis except for one, a snippet named “range-Check.”

However, when the court then looked at copyrightability in the first instance, it held that Google had not copied anything protected by copyright. It based its holding first on the fact that Google had not copied the code that implemented methods from Java. Second, the “structure, sequence and organization” of the 37 packages that Google did copy from Java – amounting to over 7,000 lines of code – was not copyrightable because the court considered it a “system” or “method of operation,” both of which are not copyrightable under Section 102(b) of the Copyright Act.

Oracle appealed the decision to the Federal Circuit, which must determine whether the statutory copyright protection for software extends to source code and the structure, sequence and organization of the Java packages that Google admits to copying and whether that copying qualifies as fair use. Affirmation would endorse the type of free-riding Google engaged in here and erode the ability of software creators to invest in the constant innovation that drives this vibrant sector.

When does copyright protect software?

Software is protected under the Copyright Act as a “literary work.” Figuring out what exactly is protected and is not protected, however, can quickly become complicated, as application of copyright’s doctrines occur at a much more conceptual level than other subject matter. For example, copyright protects form, not function 2Mazer v. Stein, 347 US 201 (1954). – but how is that applied to software code, all of which performs some sort of function?

The district court’s holding that Google only copied nonprotected “methods of operation” seems most vulnerable on appeal. The court itself even admitted that “nothing in the rules of the Java language . . . required that Google replicate the same groupings.” Any concerns that protecting Oracle’s expression in its Java packages would prevent other developers from the underlying functional ideas are overstated. Indeed, Google was here able to deliver the same functionality without copying the Java implementations.

It’s difficult also to see how the interoperability argument holds up: Java and Android are not interoperable. Oracle’s appellate brief points out that this, in fact, is one of the primary reasons the two parties failed to reach a licensing agreement: “Google wanted to be the only company ever allowed to use the Java packages commercially without making its implementation compatible with the Java virtual machine and therefore interoperable with other Java programs.” The reason Google copied the 37 packages was to attract app developers more easily, not to create a compatible product. At the very least, the question of interoperability should be addressed as part of the larger fair use inquiry, not under the threshold question of copyrightability.

Last week, IP attorney Lee Gesmer discussed some further legal nuances in the case that are well worth a read.

In the end, a win for Google at the Federal Circuit would not, as some have said, be a win for innovation and interoperability – just the opposite, in fact. A win would create a preference for copying and free-riding over innovation. And, as stated above, the copying here created less interoperability rather than more.

This is especially concerning because of how Google increasingly operates. Some have suggested that Google uses open source as a “Trojan Horse” for locking users into its own closed ecosystem. That is, it creates an open space that is freely available to jump start its marketshare, than slowly creeps toward closed systems as it increases dominance. Last month, Rom Amadeo discussed this in an Ars Technica article, Google’s iron grip on Android: Controlling open source by any means necessary. Amadeo said:

While Android is open, it’s more of a “look but don’t touch” kind of open. You’re allowed to contribute to Android and allowed to use it for little hobbies, but in nearly every area, the deck is stacked against anyone trying to use Android without Google’s blessing. The second you try to take Android and do something that Google doesn’t approve of, it will bring the world crashing down upon you.

Judges seemed skeptical of Google’s argument this morning, but a ruling is not expected for several months.

References   [ + ]

1. Which it acquired after purchasing the original creator of Java, Sun Microsystems, in 2010. To keep things simple, I’ll use “Oracle” throughout this article to refer to Oracle or Sun.
2. Mazer v. Stein, 347 US 201 (1954).

On November 19, the International Intellectual Property Alliance (IIPA), released its latest report that shows the value added by copyright industries each year to the US economy. This was the 14th such report IIPA has released since 1990, and for the first time, core copyright industries 1Defined in the report as it is defined by WIPO in its Guide to the copyright and related rights treaties administered by WIPO and glossary of copyright and related rights terms: “The core copyright industries are those industries whose primary purpose is to create, produce, distribute or exhibit copyright materials. These industries include computer software, videogames, books, newspapers, periodicals and journals, motion pictures, recorded music, and radio and television broadcasting.” contributed over one trillion dollars.

Among the marquee findings, the report concludes that copyright industries:

  • Employed nearly 5.4 million U.S. workers – nearly 5% of the total private employment sector – with jobs paying an average of 33% more than the rest of the workforce.
  • Grew at an aggregate annual rate of 4.7%, more than twice the rate of growth for the U.S. economy.
  • Accounted for $142 billion in foreign sales and exports, far more than sectors such as aerospace, agriculture, food, and pharmaceuticals and medicines.

The reaction from copyright skeptics about the report’s conclusions that copyright contributes significantly to the US economy was, essentially: “Does not.”

The spin seems to be that, yes, industries that create and disseminate copyrighted works may make substantial contributions to the US economy, but that does not necessarily mean that the success is a result of copyright itself. Jonathan Band, writing at the CCIA’s Project DisCo, says, “The report itself does not in any way attribute the success of these industries to copyright protection.”

It’s an odd argument — that the fundamental building block of a market for expressive works doesn’t play a role in the success of that market. How sound is it?

One way to test the argument would be to take a comparative look at the economic contributions of copyright industries between jurisdictions with different levels of copyright protection. If copyright protection is related to the economic contributions of copyright industries, then we would expect countries with stronger copyright protections to have a higher economic contribution from copyright industries compared to countries with weaker copyright protections.

And that, in fact, is exactly what happens.

Since 2002, WIPO has supported and collected reports on the economic contributions of copyright industries in nearly forty countries around the world. Last year, it released a report, WIPO Studies on the Economic Contribution of the Copyright Industries, that analyzed and compared the data from these reports.

One of the things WIPO looked at was how the economic contributions of copyright industries in countries related to those countries rankings on the International Intellectual Property Index, a study prepared by the Property Rights Alliance (PRA) that looks at data from 129 countries. The study “measures the significance of both physical and intellectual property rights and their protection for economic well-being. The Index focuses on three areas: legal and political environment, physical property rights, intellectual property rights.” Among the metrics the PRA looks at is the strength of IP law and how well it is enforced.

WIPO’s conclusion: “The analysis suggests a strong and positive relationship that exists between the contribution of copyright industries to GDP and the IPR Index.” That is, copyright industries contribute more to a country’s GDP when they are better protected. 2It’s worth noting the other conclusions from the report. WIPO also found the following: “There is a positive relation between the contribution of copyright industries to GDP and the GDP per Capita”; “Contribution to Copyright industries to GDP exhibits strong and positive relationship with the Index of Economic Freedom”, which measures “economic openness, competitiveness and the rule of law, such as business freedom, trade freedom, fiscal freedom, property rights, freedom from corruption, etc.” — WIPO explains, “Countries that score well demonstrate a commitment to individual empowerment, non-discrimination and the promotion of competition. Their economies tend to perform better, and their populations tend to enjoy more prosperity, better health care and more positive measures on a variety of quality-of-life indices”; “Contribution of Copyright industries to GDP exhibits strong and positive relationship with the Freedom from Corruption indicator,” an index prepared by Transparency International; “The analysis suggests that there is a strong and positive relationship between the contribution of copyright industries to GDP and the Global Competitiveness Index,” an index prepared by the World Economic Forum; and INSEAD’s Global Innovation Index “has a positive and highly significant relation with performance of the creative industries.”

Okay, that’s settled. But the question remains: why is it that copyright skeptics have such a knack for making obvious points like “incentives do more when they work better” sound counterintuitive?

Fundamental economic logic of property systems

Earlier this month, influential and distinguished legal scholar Richard Epstein spoke at a Federalist Society event titled “Intellectual Property, Free Markets, and Competition Policy.” Though his talk focused primarily on patents, his concluding remarks are just as applicable to copyright. Said Epstein:

One of the great tragedies of modern time is we have too much scholarship with respect to intellectual property. And the problem about this scholarship is it becomes deeply introspective, and what it does is it takes a perfectly beautiful structure, puts it under a microscope and sees every pore and deformity in the system at this minor level and then blows them up out of all proportion. What people need to do is take a tranquilizer to relax … That’s because they’re overstating difficulties, and they overstate difficulties because they do not understand the fundamental economic logic of all property systems, and therefore they don’t understand it with respect to intellectual property. So count me as a dissenter from the modern establishment on this area.

Copyright, like any other form of property, is an economic asset. For many creators, it is often the only economic asset they bring to the table, whether they are negotiating with a “traditional” entity like a film studio or record label or a newer distributor like YouTube. It also serves a building block for an entire marketplace for cultural, educational, and scientific works. All the features of a free market are present: property, private ordering, and nondestructive competition. The result is that the value of these works is maximized, and their creation and dissemination are promoted.

Part of the misunderstanding of the logic of copyright may come from the focus of skeptics on only the incentive to create, to the exclusion of the incentive to disseminate. 3See, e.g., Rob van der Noll & Joost Poort, Assessing the Economic Contribution of the Copyright-Based Industries, CCIA (2011): “From an economic perspective, the incentives for creative production are the main rationale for the existence of copyright.” The Supreme Court has been clear this is not the case:

Nothing in the text of the Copyright Clause confines the “Progress of Science” exclusively to “incentives for creation.” Evidence from the founding, moreover, suggests that inducing dissemination—as opposed to creation—was viewed as an appropriate means to promote science. Until 1976, in fact, Congress made “federal copyright contingent on publication[,] [thereby] providing incentives not primarily for creation,” but for dissemination. Our decisions correspondingly recognize that “copyright supplies the economic incentive to create and disseminate ideas.” 4Golan v. Holder, 132 S. Ct. 873, 888-889 (2012); see also Adam Mossoff, How Copyright Drives Innovation in Scholarly Publishing, forthcoming (2013).

Copyright’s contribution to the public benefit

Another big reason for misunderstanding the fundamental economic logic of copyright is a myopic look at the public benefit of copyright. All property rights serve the public benefit. 5See, e.g., State v. Shack, 58 N.J. 297, 303 (NJ 1971), “Property rights serve human values”; Armen A. Alchian, Property Rights, The Concise Encyclopedia of Economics (Library of Economics and Liberty) “Private property rights do not conflict with human rights. They are human rights.” James Madison, who proposed and drafted the Copyright Clause of the US Constitution explicitly recognized this same principle in copyright law. Writing in the Federalist Papers, Madison said of the Clause, “The utility of this power will scarcely be questioned. The copyright of authors has been solemnly adjudged in Great Britain, to be a right of common law. … The public good fully coincides…with the claims of individuals.” Copyright skeptics often see only the exceptions and limitations on copyright as the parts that benefit the public while ignoring the inherent public benefit of recognizing individual, exclusive rights in creative works.

This leads to the oft-quoted fallacy that copyright law only “makes reward to the owner a secondary consideration.” That this quote is the result of a misreading of case law should be enough to put it to bed. However, one commentator has explained why, accepting it on its face, it is premised on faulty logic:

It would be similarly fallacious to say that in a real estate transaction, the money paid to the seller is only a secondary consideration, with the primary value of the transaction consisting of the conveyance of the parcel to the buyer. Both the money and the land in such a transaction are consideration; neither is more important to the public, although at the time of the transaction the money is more important to the seller and the land is more important to the buyer. The value to society consists merely in the existence of a market for the land so that property may be obtained by those who are likely to put it to better use. Likewise, for intellectual property; the value to society consists in the existence of a market for the authors’ writings. The money paid to the author is by no means secondary. Rather, it is the unavoidable result of the creation of a market because a market cannot exist without the promise of reward to owners of property who choose to place that property on the market. 6David A. Householder, The Progress of Knowledge: A Reexamination of the Fundamental Principles of American Copyright Law, 14 Loyola L.A. Entertainment Law Review 1, 35-36 (1993).

More recently, the Supreme Court has explicitly rejected this erroneous secondary consideration reasoning, reiterating the basic economic logic of copyright in Eldred v. Ashcroft:

JUSTICE STEVENS’ characterization of reward to the author as “a secondary consideration” of copyright law understates the relationship between such rewards and the “Progress of Science.” As we have explained, “[t]he economic philosophy behind the [Copyright] [C]lause … is the conviction that encouragement of individual effort by personal gain is the best way to advance public welfare through the talents of authors and inventors. Accordingly, “copyright law celebrates the profit motive, recognizing that the incentive to profit from the exploitation of copyrights will redound to the public benefit by resulting in the proliferation of knowledge…. The profit motive is the engine that ensures the progress of science.” Rewarding authors for their creative labor and “promot[ing] … Progress” are thus complementary; as James Madison observed, in copyright “[t]he public good fully coincides . . . with the claims of individuals.” JUSTICE BREYER’s assertion that “copyright statutes must serve public, not private, ends,” similarly misses the mark. The two ends are not mutually exclusive; copyright law serves public ends by providing individuals with an incentive to pursue private ones.

So, yes, it is accurate to say that meaningful and effective copyright protection plays a critical role in the success of creative industries that produce and disseminate works protected by copyright. And with one trillion dollars in value added to the US GDP and employment of over five million workers at above-average wages, that success is no small feat.

References   [ + ]

1. Defined in the report as it is defined by WIPO in its Guide to the copyright and related rights treaties administered by WIPO and glossary of copyright and related rights terms: “The core copyright industries are those industries whose primary purpose is to create, produce, distribute or exhibit copyright materials. These industries include computer software, videogames, books, newspapers, periodicals and journals, motion pictures, recorded music, and radio and television broadcasting.”
2. It’s worth noting the other conclusions from the report. WIPO also found the following: “There is a positive relation between the contribution of copyright industries to GDP and the GDP per Capita”; “Contribution to Copyright industries to GDP exhibits strong and positive relationship with the Index of Economic Freedom”, which measures “economic openness, competitiveness and the rule of law, such as business freedom, trade freedom, fiscal freedom, property rights, freedom from corruption, etc.” — WIPO explains, “Countries that score well demonstrate a commitment to individual empowerment, non-discrimination and the promotion of competition. Their economies tend to perform better, and their populations tend to enjoy more prosperity, better health care and more positive measures on a variety of quality-of-life indices”; “Contribution of Copyright industries to GDP exhibits strong and positive relationship with the Freedom from Corruption indicator,” an index prepared by Transparency International; “The analysis suggests that there is a strong and positive relationship between the contribution of copyright industries to GDP and the Global Competitiveness Index,” an index prepared by the World Economic Forum; and INSEAD’s Global Innovation Index “has a positive and highly significant relation with performance of the creative industries.”
3. See, e.g., Rob van der Noll & Joost Poort, Assessing the Economic Contribution of the Copyright-Based Industries, CCIA (2011): “From an economic perspective, the incentives for creative production are the main rationale for the existence of copyright.”
4. Golan v. Holder, 132 S. Ct. 873, 888-889 (2012); see also Adam Mossoff, How Copyright Drives Innovation in Scholarly Publishing, forthcoming (2013).
5. See, e.g., State v. Shack, 58 N.J. 297, 303 (NJ 1971), “Property rights serve human values”; Armen A. Alchian, Property Rights, The Concise Encyclopedia of Economics (Library of Economics and Liberty) “Private property rights do not conflict with human rights. They are human rights.”
6. David A. Householder, The Progress of Knowledge: A Reexamination of the Fundamental Principles of American Copyright Law, 14 Loyola L.A. Entertainment Law Review 1, 35-36 (1993).

… And we’re back. Unfortunately, the site has been suffering some technical difficulties over the past couple of weeks, preventing any updates. But things seem to be running smoothly once again.

That there is property in the ideas which pass in a man’s mind is consistent with all the authorities in English law. Incidental to that right is the right of deciding when and how they shall first be made known to the public. Privacy is a part, and an essential part, of this species of property.

— Prince Albert v. Strange, 1 McN. & G. (1849).

The Internet Does Not Reset the Copyright-Free Speech Balance — Law prof Sean O’Connor takes on the meme that “free speech trumps all other legal rights in cyberspace — including copyright.” Says O’Connor, “Commercial websites that play on this invalid meme are doing a disservice to their users and to copyright owners. In their rush to attract ever more users, and pump ever more commoditized content through their sites, these firms are inducing or contributing to widespread infringement under the guise of ‘free speech.'”

Should Wikipedia be allowed to ban paid advocacy editors? — Over at the Copyright Alliance blog, I write about the news this week that the non-profit that runs Wikipedia has taken a strong stance against a firm alleged to write positive articles on behalf of paying clients, sending a cease and desist letter that warns of future legal action. It’s not a copyright issue per se, but it shares similar underlying principles. “Wikimedia wants to maintain some right and ability to control its content, even as it makes it freely and publicly accessible. That control serves as a basis for the innovative service they provide and the community that has been built up around it. We as a society should recognize that ability to control.”

Spin This: Copyright Industries Grow at Twice the Rate of US Economy — David Newhoff looks at a report from the International Intellectual Property Alliance that shows the tremendous contribution of copyright industries to the US economy, industries that directly employ over 5.6 million workers, with above-average wages. Newhoff says, “here’s the bottom line I think we should take away from this report and any pollyanna attempts to rebut or redirect its relevance: copyright works, don’t break it.”

Copyright is still essential to a free market in creative works — Just in time for this week’s IIPA report revealing that core copyright industries’ contribution the US economy have for the first time topped $1 trillion comes this article from Matt Barblan, who writes, “even in today’s digital age, strong property-based copyright protection remains an essential component of our creative economy. It is the bedrock supporting the free market for creative works, and it is vital to maintaining the market mechanisms that promote the creation, commercialization, and distribution of creative works. Repeated calls to weaken copyright (and accompanying suggestions of alternative legal or business models) routinely ignore copyright’s fundamental economic importance.”

Internet myths, part 1 — Some great background and information on the genesis and development of the internet from tech expert Richard Bennett.

Film Industry In Developing Countries Needs To Implement Copyright, Speakers Say — A reminder of the fact that, among other things, copyright plays an important role as an economic asset — sometimes the only economic asset — that creators have to enter into negotiations in the marketplace. “An event held today alongside the World Intellectual Property Organization committee on development gathered several cinema professionals working in emerging or developing countries and said that film makers in those countries need to better understand the functioning of the intellectual property system to be able to be part of the global film industry.”

Notes on the Revolutionary Expansion in Digital Content Availability — This week the ITIF hosted a panel discussion on the evolution of digital content, with panelists from Google, the NMPA, DiMA, and MPAA. John McCoskey of the MPAA shares some post-panel thoughts here. “One thing that’s clear is that quality content has never been more influential to the growth of the Internet than it is today.  If you want to attract visitors to your website, subscribers to your service, or eyeballs to your advertisements, your content needs to be compelling. That’s why players like Amazon and Netflix have begun producing their own original programming, and that is just as true for Hollywood studios who continue to be on the cutting-edge of the digital content revolution.”

Why Buy the Cow? — Writer Alex Epstein reflects on last Sunday’s article by Tim Krieder in the NY Times, Slaves of the Internet, Unite! He offers the observation that the internet has decimated the middle-class of creative professionals. “But it does feel like what used to be a pyramid has shrunk its middle, so its base is impossibly wide, and the top quite pointy. The middle seems to be disappearing. There’s room for star journalists, and free Huffington post contributors, but no room for journeymen…Before recorded music, if you were semi-good, you could become a traveling musician. You could make a living, of a sorts, playing to crowds of 40. Or, at least, you could eat. That living hasn’t existed for a long time. Instead you play to crowds of 40 to get exposure (and learn your chops) so you can play to crowds of 10,000 for money.”

The Echo Nest And Getty Images Upgrade Stale Album Art — Photo licensing service Getty Images has partnered with innovative music service Echo Nest to make thousands of high quality images available to developers through the Echo Nest API. Pretty cool.

Is this really what Congress had in mind when it created the DMCA? — Ellen Seidler presents evidence that suggests the answer to that question should be “no.” “Not only does sending out DMCA notices required a great deal of time–time that most indie content creators do not have–but often times it’s ignored entirely by pirate sites that feign compliance.”

Woody Allen Pens Rare Open Letter to Hollywood (Guest Column) — A lot of people in the creative industries work behind the scenes. They are just as creative and essential to the success of a work, but too often don’t get recognized for their contributions. In this open letter, filmmaker Woody Allen calls attention to the contributions of casting directors to the success of films. “In my case certainly, the casting director plays a vital part in the making of the movie. My history shows that my films are full of wonderful performances by actors and actresses I had never heard of and were not only introduced to me by my casting director, Juliet Taylor, but, in any number of cases, pushed on me against my own resistance.”

I’ve Spent Two Years Making a Documentary About What Really Happened to Musicians… — Producer Count debuted this extended trailer of the in-progress doc “Unsound” at the Future of Music Coalition Summit this week. Essential viewing, and currently raising funds on Indiegogo to get it ready for film festivals.

The $4 Billion Secret: Don’t Bother Making Any Money — Tech startups can raise millions without even having a plan to make money in place. Perhaps that’s why so many think creators can just give their work away for free and be successful?

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. 1See Righthaven LLC v. Hoehn, 716 F.3d 1166 (9th Cir. 2013). 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 2See Silvers v. Sony Pictures Entm’t, Inc., 402 F.3d 881 (9th Cir. 2005) (en banc). 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.” 3Id. at 883. 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 . . . .” 417 U.S.C.A. § 501(b) (West 2013) (“The legal or beneficial owner of an exclusive right under a copyright is entitled, subject to the requirements of section 411, to institute an action for any infringement of that particular right committed while he or she is the owner of it. The court may require such owner to serve written notice of the action with a copy of the complaint upon any person shown, by the records of the Copyright Office or otherwise, to have or claim an interest in the copyright, and shall require that such notice be served upon any person whose interest is likely to be affected by a decision in the case. The court may require the joinder, and shall permit the intervention, of any person having or claiming an interest in the copyright.”).

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.” 5Righthaven, 716 F.3d at 1169. 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. 6Id. at 1170.

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. 7Silvers, 402 F.3d at 886 (quoting H.R.Rep. No. 94-1476, at 159).

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. 8See, e.g., Fantasy, Inc. v. Fogerty, 654 F.Supp. 1129, 1131 (N.D. Cal. 1987) (“Since a beneficial owner has no independent right to use or license the copyright, the beneficial owner can infringe upon the legal owner’s exclusive rights.”). 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. 9Folsom v. Marsh, 9 F.Cas. 342 (C.C.D. Mass. 1841).

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. 10See generally Wesley Newcomb Hohfeld, Some Fundamental Legal Conceptions As Applied in Judicial Reasoning, 23 Yale L.J. 16 (1913); Wesley Newcomb Hohfeld, Fundamental Legal Conceptions as Applied in Judicial Reasoning, 26 Yale L.J. 710 (1917). 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. 11See, e.g., P.S. Atiyah, An Introduction to the Law of Contract 265 (3d ed. 1981) (“It is an elementary principle of English law — known as the doctrine of ‘Privity of Contract’ — that contractual rights and duties only affect the parties to a contract, and this principle is the distinguishing feature between the law of contract and the law of property. True proprietary rights are ‘binding on the world’ in the lawyer’s traditional phrase. Contractual rights, on the other hand, are only binding on, and enforceable by, the immediate parties to the contract. But this distinction, fundamental though it be, wears a little thin at times. On the one hand, there has been a constant tendency for contractual rights to be extended in their scope so as to affect more and more persons who cannot be regarded as parties to the transaction. On the other hand, few proprietary rights are literally ‘binding on 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. 12See, e.g., A. L. C., The Collection of Royalties from the Sub-Assignee of A Copyright, 28 Yale L.J. 259, 262-63 (1919) (“Patents and copyrights are often spoken of as ‘grants’ or ‘franchises’ and are also described as ‘property.’ Analysis shows that they are merely bundles of legal relations between the holder and all other persons; they are innumerable legal relations of right, privilege, power, and immunity. For example, there is a privilege of making and selling, a right that another shall not make or sell, a power to assign or to license others, and immunity from the destruction of these relations by any voluntary act of another. This bundle of relations may properly be described as property, for they are . . . rights in rem. However, they do not necessarily or usually accompany any physical res, and their assignment is not effected, as in the case of chattels or land, by a change in physical possession.”) (footnotes omitted). 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. 13See, e.g., Christopher M. Newman, A License Is Not A “Contract Not to Sue”: Disentangling Property and Contract in the Law of Copyright Licenses, 98 Iowa L. Rev. 1101, 1109 (2013) (“The concept of license . . . belongs fundamentally to property, not contract. Property rights allocate control of resource use to titleholders, while placing all others under in rem duties of noninterference. License is the means by which titleholders relieve selected others of those duties and permit them to participate in (or even delegate to them the power to direct) the use of—and this is the crucial point—resources to which the licensor continues to retain title.”); Niva Elkin-Koren, What Contracts Cannot Do: The Limits of Private Ordering in Facilitating A Creative Commons, 74 Fordham L. Rev. 375, 404-05 (2005) (“A property license is not a contract. It is a unilateral legal action, through which a property owner can exercise her rights, and it defines the boundaries of legitimate use. Its binding force does not derive from exercising autonomous will. The restrictions imposed by the license are enforceable because of property rules, and they do not require voluntary consent.”) (footnote omitted).

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. 14Newman, 98 Iowa L. Rev. at 1144-45 (internal quotations and citations omitted).

Under the indivisibility doctrine, the various in rem proprietary rights held by the copyright owner could not be separated. 15See, e.g., Gardner v. Nike, Inc., 279 F.3d 774, 778 (9th Cir. 2002) (“Under the doctrine of indivisibility, a copyright owner possessed an indivisible bundle of rights, which were incapable of assignment in parts. Thus, an assignment included the totality of rights commanded by copyright. Anything less than an assignment was considered a license.”) (internal quotations and citations omitted); Siegel v. Warner Bros. Entm’t, Inc., 658 F.Supp.2d 1036, 1101 n.14 (C.D. Cal. 2009) (“Absent the complete assignment of rights commanded by the copyright, the transfer was considered to be a license, with the transferor maintaining ownership in all the rights to the copyright in the material.”); M. Witmark & Sons v. Pastime Amusement Co., 298 F. 470, 474 (D.S.C. 1924) (“In relation to the right to sue for an infringement, a copyright is an indivisible thing, and cannot be split up and partially assigned either as to time, place, or particular rights or privileges, less than the sum of all the rights comprehended in the copyright.”); Hirshon v. United Artists Corp., 243 F.2d 640, 643 (D.C. Cir. 1957) (“[T]he copyright proprietor may transfer the legal title to his copyright only in totality; the copyright may not be split up and partially assigned as to the various rights encompassed therein.”) (internal quotations omitted). 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. 16See, e.g., M. Witmark & Sons v. Pastime Amusement Co., 298 F. 470, 475 (D.S.C. 1924) (gathering cases) (“[E]xclusive rights may be granted, limited as to time, place, or extent of privileges which the grantee may enjoy; but the better view is that such limited grants operate merely as licenses, and not as technical assignments, although often spoken of as assignments.”); Black v. Henry G. Allen Co., 42 F. 618, 621 (C.C.S.D.N.Y. 1890) (“[A] license in writing, by instrument duly witnessed, may be given by the proprietor to any other person to the extent described in such license; and there is no restriction upon the power of the proprietor to assign or transfer, in equity, an exclusive right to use the copyrighted book in a particular manner or for particular purposes upon such terms and conditions as may be agreed upon. In such case the legal title remains in the proprietor; and a beneficial interest, to the extent which is agreed upon, vests in the other party, who has acquired an equitable right in the copyright, and who will be properly styled an assignee of an equitable interest.”) (internal quotations omitted); First Financial Marketing Services Group, Inc. v. Field Promotions, Inc., 286 F.Supp. 295, 298 (S.D.N.Y. 1968) (“[L]egal title to copyright may be transferred only in totality. When the rights are split up and partially assigned either as to time, place or particular rights or privileges, the limited grant of exclusive rights operates merely as a license, not an assignment of ownership of a copyright.”). 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.” 17Restatement (Second) of Trusts § 2 (1959); see also Restatement (Third) of Trusts § 2 (2003) (“A trust . . . is a fiduciary relationship with respect to property, arising from a manifestation of intention to create that relationship and subjecting the person who holds title to the property to duties to deal with it for the benefit of charity or for one or more persons, at least one of whom is not the sole trustee.”); George Tucker Bispham, The Principles of Equity 37 (11th ed. 1931). (“A trust, in its technical sense, is the right, enforceable solely in equity, to the beneficial enjoyment of property of which the legal title is in another.”). 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 18See, e.g., Bogert’s Trusts And Trustees § 17 (2013) (“One of the . . . characteristics of a trust is divided ownership of property, the trustee usually having legal title and the beneficiary having 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. 19See 17 U.S.C.A. § 201(d)(2) (West 2013) (“Any of the exclusive rights comprised in a copyright, including any subdivision of any of the rights specified by section 106, may be transferred as provided by clause (1) and owned separately. The owner of any particular exclusive right is entitled, to the extent of that right, to all of the protection and remedies accorded to the copyright owner by this title.”). 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. 2017 U.S.C.A. § 501(b) (West 2013). 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.” 21Manning v. Miller Music Corp., 174 F.Supp. 192, 195 (S.D.N.Y. 1959) (internal citations omitted). 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.” 22Maurel v. Smith, 271 F. 211, 215 (2d Cir. 1921); see also Bisel v. Ladner, 1 F.2d 436 (3d Cir. 1924) (“The legal title to a copyright vests in the person in whose name the copyright is taken out. It may, however, be held by him in trust for the true owner, and the question of true ownership is one of fact, dependent upon the circumstances of the case.”). 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.” 23Ted Browne Music Co. v. Fowler, 290 F. 751, 753 (2d Cir. 1923). 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. 24See 17 U.S.C.A. § 201(a) (West 2013) (“Copyright in a work protected under this title vests initially in the author or authors of the work. The authors of a joint work are coowners of copyright in the work.”). 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. 25See, e.g., Cortner v. Israel, 732 F.2d 267, 271 (2d Cir. 1984) (“When a composer assigns copyright title to a publisher in exchange for the payment of royalties, an equitable trust relationship is established between the two parties which gives the composer standing to sue for infringement of that copyright. Otherwise the beneficial owner’s interest in the copyright could be diluted or lessened by a wrongdoer’s infringement.”) (internal citations omitted).

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 . . . .” 26Schisgall v. Fairchild Publications, 137 N.Y.S.2d 312, 318 (Sup.Ct. 1955). Indeed, “[t]he law has outgrown its primitive stage of formalism when the precise word was the sovereign talisman, and every slip was fatal.” 27Id. 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. 28See, e.g., Manning v. Miller Music Corp., 174 F.Supp. 192, 196 (S.D.N.Y. 1959) (“The law implies a promise on the publisher’s part to endeavor to make the work productive, since that is the very purpose of the assignment of literary rights and the correlative obligation to pay royalties. . . . It is this fiduciary relationship, imposing equitable obligations upon the publisher beyond those ordinarily imposed by law upon those dealing fully at arms’ length which gives the plaintiffs standing to sue here.”) (internal quotations omitted). 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. 29Id. (bracketed text added).

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. 3017 U.S.C.A. § 501(b) (West 2013). 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). 31See id. (“The court may require such owner to serve written notice of the action with a copy of the complaint upon any person shown, by the records of the Copyright Office or otherwise, to have or claim an interest in the copyright, and shall require that such notice be served upon any person whose interest is likely to be affected by a decision in the case. The court may require the joinder, and shall permit the intervention, of any person having or claiming an interest in the copyright.”). 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”). 32Righthaven, 716 F.3d at 1170.

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.” 3317 U.S.C.A. § 101 (West 2013) (“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.”).

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 34See Campbell v. Bd. of Trustees of Leland Stanford Junior Univ., 817 F.2d 499 (9th Cir. 1987). 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. 35Id. at 504.

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. 36Id. at 504 n.2.

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. 37See, e.g., Waterman v. Mackenzie, 138 U.S. 252, 255 (1891) (“In equity, as at law, when the transfer amounts to a license only, the title remains in the owner of the patent . . . .”); Vaupel Textilmaschinen KG v. Meccanica Euro Italia S.P.A., 944 F.2d 870, 875 (Fed. Cir. 1991) (“[T]he term ‘assignment’ has a particular meaning in patent law, implying formal transfer of title.”); Sicom Sys. v. Agilent Techs., Inc., 427 F.3d 971, 976 (Fed. Cir. 2005) (“An exclusive licensee receives more rights than a nonexclusive licensee, but fewer than an assignee. An example of an exclusive licensee is a licensee who receives the exclusive right to practice an invention but only within a given limited territory.”). 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. 38See, e.g., Independent Wireless Tel. Co. v. Radio Corp. of America, 269 U.S. 459, 469 (1926) ([T]he owner of a patent who grants to another the exclusive right to make, use or vend the invention, which does not constitute a statutory assignment, holds the title to the patent in trust for such a licensee . . . .”). 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.” 39Arachnid, Inc. v. Merit Industries, Inc., 939 F.2d 1574, 1579 (Fed. Cir. 1991) (emphasis in original); see also Crown Die & Tool Co. v. Nye Tool & Machine Works, 261 U.S. 24, 40-41 (1923) (“These owners are the patentee, his assignee, his grantee, or his personal representatives; and none but these are able to maintain an action for infringement in a court of law.”). This follows from the text of the Patent Act, which provides that the “patentee,” or his “successors in title,” may sue for patent infringement. 40See 35 U.S.C.A. § 281 (West 2013) (“A patentee shall have remedy by civil action for infringement of his patent.”); 35 U.S.C.A. § 100(d) (West 2013) (“The word ‘patentee’ includes not only the patentee to whom the patent was issued but also the successors in title to the patentee.”). 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.” 41Prima Tek II, L.L.C. v. A-Roo Co., 222 F.3d 1372, 1377 (Fed. Cir. 2000); see also Abbott Labs. v. Diamedix Corp., 47 F.3d 1128, 1131 (Fed. Cir. 1995) (“The right to sue for infringement is ordinarily an incident of legal title to the patent. A licensee may obtain sufficient rights in the patent to be entitled to seek relief from infringement, but to do so, it ordinarily must join the patent owner.”). 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. 42See, e.g., Independent Wireless Tel. Co. v. Radio Corp. of America, 269 U.S. 459, 468 (1926) (“The presence of the owner of the patent as a party is indispensable not only to give jurisdiction under the patent laws but also, in most cases, to enable the alleged infringer to respond in one action to all claims of infringement for his act, and thus either to defeat all claims in the one action, or by satisfying one adverse decree to bar all subsequent actions.”). 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. 43See, e.g., Waterman v. Mackenzie, 138 U.S. 252, 255 (1891) (“Any rights of the licensee must be enforced through or in the name of the owner of the patent, and perhaps, if necessary to protect the rights of all parties, joining the licensee with him as a plaintiff.”); Ortho Pharmaceutical Corp. v. Genetics Inst., 52 F.3d 1026, 1030 (Fed. Cir. 1995) (“Any other party [than one holding all substantial rights] seeking enforcement of the patent can sue, if at all, only with the patentee or in the name of the patentee.”). 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.” 44Ortho Pharmaceutical Corp. v. Genetics Inst., 52 F.3d 1026, 1031 (Fed. Cir. 1995). 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. 45See, e.g., Weinar v. Rollform, Inc., 744 F.2d 797, 807 (Fed. Cir. 1984) (“[T]wo parties sharing the property rights represented by a patent may have their respective rights protected by injunction and each, when properly joined in a suit, may be entitled to damages.”). 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.” 46Ortho Pharmaceutical Corp. v. Genetics Inst., 52 F.3d 1026, 1032 (Fed. Cir. 1995); see also id. at 1034 (“[A] licensee with sufficient proprietary interest in a patent has standing regardless of whether the licensing agreement so provides.”); Independent Wireless Tel. Co. v. Radio Corp. of America, 269 U.S. 459, 469 (1926) (“[T]he implied obligation of the licensor to allow the use of his name is indispensable to the enjoyment by the licensee of the monopoly which by personal contract the licensor has given.”); Sicom Sys. v. Agilent Techs., Inc., 427 F.3d 971, 976 (Fed. Cir. 2005) (“[I]f the patentee transfers all substantial rights under the patent, it amounts to an assignment and the assignee may be deemed the effective patentee under 35 U.S.C. § 281 for purposes of holding constitutional standing to sue another for patent infringement in its own name. *** While a licensee normally does not have standing to sue without the joinder of the patentee (to prevent multiplicity of litigation), an exclusive license may be treated like an assignment for purposes of creating standing if it conveys to the licensee all substantial rights.”); Textile Prods. v. Mead Corp., 134 F.3d 1481, 1484 (Fed. Cir. 1998) (“A licensee is not entitled to bring suit in its own name as a patentee, unless the licensee holds all substantial rights under the patent.”) (internal quotations omitted); McNeilab, Inc. v. Scandipharm, Inc., 1996 U.S. App. LEXIS 19073, at *3 (Fed. Cir. July 31, 1996) (“Although title to the patent remains in the patentee, the patentee is not a necessary party to suit brought by the exclusive licensee, when the patentee has retained no substantial rights in the licensed subject matter.”) (unpublished opinion). 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. 47See, e.g., McNeilab, Inc. v. Scandipharm, Inc., 95 F.3d 1164, at *5 (Fed. Cir. 1996) (“The courts have recognized that there is no substantive difference between the property interests of the exclusive licensee and the assignee of the patent, and thus have sometimes used the terms interchangeably, subordinating the purity of the distinction to the reality of the legal rights. . . . We agree that there is no substantive difference between the property interests of an assignee and of an exclusive licensee who has been granted all substantial patent rights including the right to exclude the patentee. Although it would be more accurate to preserve the distinction whereby the term “assignment” is reserved for transfers that include nominal title, we agree with precedent that when the transfer includes all substantial patent rights including the right to exclude the transferor, there is no significant difference between the rights transferred by assignment and those transferred by exclusive license.”) (unpublished opinion).

Trademark law similarly treats exclusive licensees as equitable titleholders. Like copyright and patent law, trademark law distinguishes between assignments and exclusive licenses. 48See, e.g., Prince of Peace Enterprises, Inc. v. Top Quality Food Mkt., LLC, 760 F.Supp.2d 384, 391 (S.D.N.Y. 2011) (“[A]ssignment of a trademark under the Lanham Act requires (1) sale or transfer of all rights in the mark, and (2) assignment as well of the business’s goodwill connected with the mark’s use.”) (internal citations omitted) (emphasis in original); Silverstar Enterprises, Inc. v. Aday, 537 F.Supp. 236, 239 (S.D.N.Y. 1982) (“[A]n assignment of a trademark is a transfer of the entire interest while a license . . . confers only the right to use the trademark.”). The Lanham Act provides that the “registrant” or his “successors and assigns” has standing to sue for infringement of a registered mark. 49See 15 U.S.C.A. § 1114(1) (West 2013) (“Any person who shall, without the consent of the registrant . . . use in commerce . . . a registered mark . . . shall be liable in a civil action by the registrant for the remedies hereinafter provided.”); 15 U.S.C.A. § 1127 (West 2013) (“The terms ‘applicant’ and ‘registrant’ embrace the legal representatives, predecessors, successors and assigns of such applicant or registrant.”). 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. 50See, e.g., ICEE Distributors, Inc. v. J&J Snack Foods Corp., 325 F.3d 586, 598-99 (5th Cir. 2003) (holding that exclusive licensee who does not hold all substantial rights in the mark has not standing to sue for trademark infringement). 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. 51See, e.g., Quabaug Rubber Co. v. Fabiano Shoe Co., Inc., 567 F.2d 154, 159 (1st Cir. 1977) (dictum) (gathering cases) (“[C]ourts have followed the approach used in patent infringement cases and permitted trademark infringement suits to be maintained by exclusive distributors and sellers of trademarked goods, i.e., ‘exclusive licensees’ who had a right by agreement with the owner of the trademark to exclude even him from selling in their territory.”); Fin. Inv. Co. (Bermuda) Ltd. v. Geberit AG, 165 F.3d 526, 531-32 (7th Cir. 1998) (“[A] truly exclusive licensee, one who has the right even to exclude his licensor from using the mark is equated with an assignee since no right to use the mark is reserved to the licensor, and the licensee’s standing derives from his presumed status as an assignee.”) (internal citations, brackets, ellipses, and quotations omitted); Calvin Klein Jeanswear Co. v. Tunnel Trading, Case No. 98-cv-05408, 2001 WL 1456577, at *4 (S.D.N.Y. Nov. 16, 2001) (unreported) (gathering cases) (“[S]tanding may exist where the ‘licensing’ agreement grants to an exclusive licensee a property interest in the trademark, or rights that amount to those of an assignee.”); Nestle Prepared Foods Co. v. Pocket Foods Corp., Case No. 04-CV-02533, 2006 WL 2990208, at *6 (D. Colo. Oct. 19, 2006) (“Although this statute does not specifically address the status of a trademark’s exclusive licensee, courts have uniformly concluded that the exclusive licensee of a trademark has the right to enforce the trademark. Courts reach this conclusion when an exclusive licensee is assigned all rights which accompany the trademark.”) (internal citations omitted). 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. 52See, e.g., Nat’l Licensing Ass’n, LLC. v. Inland Joseph Fruit Co., 361 F.Supp.2d 1244, 1254 (E.D. Wash. 2004) (“[T]hose cases finding standing for de facto assignees are the exceptions that prove the rule—namely, that only the registrant of a trademark or its legal representatives, predecessors, successors, and assigns have standing to sue for trademark infringement under § 1114.”); Nova Wines, Inc. v. Adler Fels Winery LLC, 467 F.Supp.2d 965, 974 (N.D. Cal. 2006) (“[A]n exclusive license that amounts to a de facto assignment creates standing in the exclusive licensee.”).

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.” 53Visa, U.S.A., Inc. v. Birmingham Trust Nat. Bank, 696 F.2d 1371, 1377 (Fed. Cir. 1982); see also 3 McCarthy on Trademarks and Unfair Competition § 18:9 (4th ed.) (“An assignment and license-back to the assignor is a useful structure to meet certain commercial needs.”). 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” 54E. & J. Gallo Winery v. Gallo Cattle Co., 967 F.2d 1280, 1290 (9th Cir. 1992). 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. 55See Innovation Ventures, LLC v. Pittsburg Wholesale Grocers, Inc., Case No. 12-cv-05523, 2013 WL 1007666 (N.D. Cal. Mar. 13, 2013). After noting that “the validity of this type of assignment and license-back transaction is well-settled,” 56Id. at *2. 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.” 57Id. at *2-3 (internal citations and quotations omitted). 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.” 58Id. at *5 (emphasis in original). In other words, such an exclusive license is “functionally equivalent” to an assignment, but it’s not the same thing. 59Id. at *4-5. 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.” 60Id. at *6.

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. 6117 U.S.C.A. § 101 (West 2013).

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 . . . .” 6217 U.S.C.A. § 204(a) (West 2013) (“A transfer of copyright ownership, other than by operation of law, is not valid unless an instrument of conveyance, or a note or memorandum of the transfer, is in writing and signed by the owner of the rights conveyed or such owner’s duly authorized agent.”). The phrase occurs twice in Section 205. Section 205(a) provides: “Any transfer of copyright ownership . . . may be recorded in the Copyright Office . . . .” 6317 U.S.C.A. § 205(a) (West 2013) (“Any transfer of copyright ownership or other document pertaining to a copyright may be recorded in the Copyright Office if the document filed for recordation bears the actual signature of the person who executed it, or if it is accompanied by a sworn or official certification that it is a true copy of the original, signed document. A sworn or official certification may be submitted to the Copyright Office electronically, pursuant to regulations established by the Register of Copyrights.”). 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 . . . .” 6417 U.S.C.A. § 205(e) (West 2013) (“A nonexclusive license, whether recorded or not, 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 or such owner’s duly authorized agent, and if– (1) the license was taken before execution of the transfer; or (2) the license was taken in good faith before recordation of the transfer and without notice of it.”). 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. 65See 17 U.S.C.A. § 708(a)(4) (West 2013) (“Fees shall be paid to the Register of Copyrights– for the recordation, as provided by section 205, of a transfer of copyright ownership or other document.”).

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. 66See generally 5-19A Nimmer on Copyright § 19A.04. 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. 67See, e.g., 59 C.J.S. Mortgages § 239 (“A mortgage of real property is personal property, and in jurisdictions in which a mortgage is regarded as a mere lien, the interest of the mortgagee is a mere chattel interest; where legal title passes to the mortgagee, the mortgagee has legal title only as between the mortgagor and itself and only for the purpose of securing the indebtedness. . . . Thus, in title-theory states a mortgagee holds title to the land from the outset of the loan until the debt has been satisfied, while in lien-theory states, the borrower holds title to the land and the mortgagee has a lien on the property.”); In re SeSide Co., Ltd., 152 B.R. 878, 883 (E.D. Pa. 1993) (“In Pennsylvania, a mortgage does not constitute a transference of title from a mortgagor to a mortgagee. A mortgagee only obtains a lien securing the mortgagor’s indebtedness.”); In re Poe, 477 F.3d 1317, 1323 (11th Cir. 2007) (“Alabama is a title theory state, meaning that mortgaging property actually works a conveyance of legal title to the lender.”); Maglione v. BancBoston Mortgage Corp., 29 Mass.App.Ct. 88, 90 (1990). (“Literally, in Massachusetts, the granting of a mortgage vests title in the mortgagee to the land placed as security for the underlying debt. The mortgage splits the title in two parts: the legal title, which becomes the mortgagee’s, and the equitable title, which the mortgagor retains.”). 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. 68H.R. Rep. 94-1476, 123.

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. 69See Aerocon Eng’g, Inc. v. Silicon Valley Bank, 303 F.3d 1120 (9th Cir. 2002). 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.” 70Id. at 1126 (footnotes omitted). 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.” 71Id. 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.” 72U.S. ex rel. Small Bus. Admin. v. Commercial Tech., Inc., 354 F.3d 378, 384 (5th Cir. 2003). 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. 73See Matter of Hill, 981 F.2d 1474, 1475 (5th Cir. 1993); see also Black’s Law Dictionary (9th ed. 2009) (A “pledge” is “[t[he act of providing something as security for a debt or obligation. A bailment or other deposit of personal property to a creditor as security for a debt or obligation.”). 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, 74See Aerocon Eng’g, Inc. v. Silicon Valley Bank, 303 F.3d 1120, 1125 (9th Cir. 2002). 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.

Conclusion

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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References   [ + ]

1. See Righthaven LLC v. Hoehn, 716 F.3d 1166 (9th Cir. 2013).
2. See Silvers v. Sony Pictures Entm’t, Inc., 402 F.3d 881 (9th Cir. 2005) (en banc).
3. Id. at 883.
4. 17 U.S.C.A. § 501(b) (West 2013) (“The legal or beneficial owner of an exclusive right under a copyright is entitled, subject to the requirements of section 411, to institute an action for any infringement of that particular right committed while he or she is the owner of it. The court may require such owner to serve written notice of the action with a copy of the complaint upon any person shown, by the records of the Copyright Office or otherwise, to have or claim an interest in the copyright, and shall require that such notice be served upon any person whose interest is likely to be affected by a decision in the case. The court may require the joinder, and shall permit the intervention, of any person having or claiming an interest in the copyright.”).
5. Righthaven, 716 F.3d at 1169.
6. Id. at 1170.
7. Silvers, 402 F.3d at 886 (quoting H.R.Rep. No. 94-1476, at 159).
8. See, e.g., Fantasy, Inc. v. Fogerty, 654 F.Supp. 1129, 1131 (N.D. Cal. 1987) (“Since a beneficial owner has no independent right to use or license the copyright, the beneficial owner can infringe upon the legal owner’s exclusive rights.”).
9. Folsom v. Marsh, 9 F.Cas. 342 (C.C.D. Mass. 1841).
10. See generally Wesley Newcomb Hohfeld, Some Fundamental Legal Conceptions As Applied in Judicial Reasoning, 23 Yale L.J. 16 (1913); Wesley Newcomb Hohfeld, Fundamental Legal Conceptions as Applied in Judicial Reasoning, 26 Yale L.J. 710 (1917).
11. See, e.g., P.S. Atiyah, An Introduction to the Law of Contract 265 (3d ed. 1981) (“It is an elementary principle of English law — known as the doctrine of ‘Privity of Contract’ — that contractual rights and duties only affect the parties to a contract, and this principle is the distinguishing feature between the law of contract and the law of property. True proprietary rights are ‘binding on the world’ in the lawyer’s traditional phrase. Contractual rights, on the other hand, are only binding on, and enforceable by, the immediate parties to the contract. But this distinction, fundamental though it be, wears a little thin at times. On the one hand, there has been a constant tendency for contractual rights to be extended in their scope so as to affect more and more persons who cannot be regarded as parties to the transaction. On the other hand, few proprietary rights are literally ‘binding on the world.’”).
12. See, e.g., A. L. C., The Collection of Royalties from the Sub-Assignee of A Copyright, 28 Yale L.J. 259, 262-63 (1919) (“Patents and copyrights are often spoken of as ‘grants’ or ‘franchises’ and are also described as ‘property.’ Analysis shows that they are merely bundles of legal relations between the holder and all other persons; they are innumerable legal relations of right, privilege, power, and immunity. For example, there is a privilege of making and selling, a right that another shall not make or sell, a power to assign or to license others, and immunity from the destruction of these relations by any voluntary act of another. This bundle of relations may properly be described as property, for they are . . . rights in rem. However, they do not necessarily or usually accompany any physical res, and their assignment is not effected, as in the case of chattels or land, by a change in physical possession.”) (footnotes omitted).
13. See, e.g., Christopher M. Newman, A License Is Not A “Contract Not to Sue”: Disentangling Property and Contract in the Law of Copyright Licenses, 98 Iowa L. Rev. 1101, 1109 (2013) (“The concept of license . . . belongs fundamentally to property, not contract. Property rights allocate control of resource use to titleholders, while placing all others under in rem duties of noninterference. License is the means by which titleholders relieve selected others of those duties and permit them to participate in (or even delegate to them the power to direct) the use of—and this is the crucial point—resources to which the licensor continues to retain title.”); Niva Elkin-Koren, What Contracts Cannot Do: The Limits of Private Ordering in Facilitating A Creative Commons, 74 Fordham L. Rev. 375, 404-05 (2005) (“A property license is not a contract. It is a unilateral legal action, through which a property owner can exercise her rights, and it defines the boundaries of legitimate use. Its binding force does not derive from exercising autonomous will. The restrictions imposed by the license are enforceable because of property rules, and they do not require voluntary consent.”) (footnote omitted).
14. Newman, 98 Iowa L. Rev. at 1144-45 (internal quotations and citations omitted).
15. See, e.g., Gardner v. Nike, Inc., 279 F.3d 774, 778 (9th Cir. 2002) (“Under the doctrine of indivisibility, a copyright owner possessed an indivisible bundle of rights, which were incapable of assignment in parts. Thus, an assignment included the totality of rights commanded by copyright. Anything less than an assignment was considered a license.”) (internal quotations and citations omitted); Siegel v. Warner Bros. Entm’t, Inc., 658 F.Supp.2d 1036, 1101 n.14 (C.D. Cal. 2009) (“Absent the complete assignment of rights commanded by the copyright, the transfer was considered to be a license, with the transferor maintaining ownership in all the rights to the copyright in the material.”); M. Witmark & Sons v. Pastime Amusement Co., 298 F. 470, 474 (D.S.C. 1924) (“In relation to the right to sue for an infringement, a copyright is an indivisible thing, and cannot be split up and partially assigned either as to time, place, or particular rights or privileges, less than the sum of all the rights comprehended in the copyright.”); Hirshon v. United Artists Corp., 243 F.2d 640, 643 (D.C. Cir. 1957) (“[T]he copyright proprietor may transfer the legal title to his copyright only in totality; the copyright may not be split up and partially assigned as to the various rights encompassed therein.”) (internal quotations omitted).
16. See, e.g., M. Witmark & Sons v. Pastime Amusement Co., 298 F. 470, 475 (D.S.C. 1924) (gathering cases) (“[E]xclusive rights may be granted, limited as to time, place, or extent of privileges which the grantee may enjoy; but the better view is that such limited grants operate merely as licenses, and not as technical assignments, although often spoken of as assignments.”); Black v. Henry G. Allen Co., 42 F. 618, 621 (C.C.S.D.N.Y. 1890) (“[A] license in writing, by instrument duly witnessed, may be given by the proprietor to any other person to the extent described in such license; and there is no restriction upon the power of the proprietor to assign or transfer, in equity, an exclusive right to use the copyrighted book in a particular manner or for particular purposes upon such terms and conditions as may be agreed upon. In such case the legal title remains in the proprietor; and a beneficial interest, to the extent which is agreed upon, vests in the other party, who has acquired an equitable right in the copyright, and who will be properly styled an assignee of an equitable interest.”) (internal quotations omitted); First Financial Marketing Services Group, Inc. v. Field Promotions, Inc., 286 F.Supp. 295, 298 (S.D.N.Y. 1968) (“[L]egal title to copyright may be transferred only in totality. When the rights are split up and partially assigned either as to time, place or particular rights or privileges, the limited grant of exclusive rights operates merely as a license, not an assignment of ownership of a copyright.”).
17. Restatement (Second) of Trusts § 2 (1959); see also Restatement (Third) of Trusts § 2 (2003) (“A trust . . . is a fiduciary relationship with respect to property, arising from a manifestation of intention to create that relationship and subjecting the person who holds title to the property to duties to deal with it for the benefit of charity or for one or more persons, at least one of whom is not the sole trustee.”); George Tucker Bispham, The Principles of Equity 37 (11th ed. 1931). (“A trust, in its technical sense, is the right, enforceable solely in equity, to the beneficial enjoyment of property of which the legal title is in another.”).
18. See, e.g., Bogert’s Trusts And Trustees § 17 (2013) (“One of the . . . characteristics of a trust is divided ownership of property, the trustee usually having legal title and the beneficiary having equitable title.”).
19. See 17 U.S.C.A. § 201(d)(2) (West 2013) (“Any of the exclusive rights comprised in a copyright, including any subdivision of any of the rights specified by section 106, may be transferred as provided by clause (1) and owned separately. The owner of any particular exclusive right is entitled, to the extent of that right, to all of the protection and remedies accorded to the copyright owner by this title.”).
20. 17 U.S.C.A. § 501(b) (West 2013).
21. Manning v. Miller Music Corp., 174 F.Supp. 192, 195 (S.D.N.Y. 1959) (internal citations omitted).
22. Maurel v. Smith, 271 F. 211, 215 (2d Cir. 1921); see also Bisel v. Ladner, 1 F.2d 436 (3d Cir. 1924) (“The legal title to a copyright vests in the person in whose name the copyright is taken out. It may, however, be held by him in trust for the true owner, and the question of true ownership is one of fact, dependent upon the circumstances of the case.”).
23. Ted Browne Music Co. v. Fowler, 290 F. 751, 753 (2d Cir. 1923).
24. See 17 U.S.C.A. § 201(a) (West 2013) (“Copyright in a work protected under this title vests initially in the author or authors of the work. The authors of a joint work are coowners of copyright in the work.”).
25. See, e.g., Cortner v. Israel, 732 F.2d 267, 271 (2d Cir. 1984) (“When a composer assigns copyright title to a publisher in exchange for the payment of royalties, an equitable trust relationship is established between the two parties which gives the composer standing to sue for infringement of that copyright. Otherwise the beneficial owner’s interest in the copyright could be diluted or lessened by a wrongdoer’s infringement.”) (internal citations omitted).
26. Schisgall v. Fairchild Publications, 137 N.Y.S.2d 312, 318 (Sup.Ct. 1955).
27. Id.
28. See, e.g., Manning v. Miller Music Corp., 174 F.Supp. 192, 196 (S.D.N.Y. 1959) (“The law implies a promise on the publisher’s part to endeavor to make the work productive, since that is the very purpose of the assignment of literary rights and the correlative obligation to pay royalties. . . . It is this fiduciary relationship, imposing equitable obligations upon the publisher beyond those ordinarily imposed by law upon those dealing fully at arms’ length which gives the plaintiffs standing to sue here.”) (internal quotations omitted).
29. Id. (bracketed text added).
30. 17 U.S.C.A. § 501(b) (West 2013).
31. See id. (“The court may require such owner to serve written notice of the action with a copy of the complaint upon any person shown, by the records of the Copyright Office or otherwise, to have or claim an interest in the copyright, and shall require that such notice be served upon any person whose interest is likely to be affected by a decision in the case. The court may require the joinder, and shall permit the intervention, of any person having or claiming an interest in the copyright.”).
32. Righthaven, 716 F.3d at 1170.
33. 17 U.S.C.A. § 101 (West 2013) (“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.”).
34. See Campbell v. Bd. of Trustees of Leland Stanford Junior Univ., 817 F.2d 499 (9th Cir. 1987).
35. Id. at 504.
36. Id. at 504 n.2.
37. See, e.g., Waterman v. Mackenzie, 138 U.S. 252, 255 (1891) (“In equity, as at law, when the transfer amounts to a license only, the title remains in the owner of the patent . . . .”); Vaupel Textilmaschinen KG v. Meccanica Euro Italia S.P.A., 944 F.2d 870, 875 (Fed. Cir. 1991) (“[T]he term ‘assignment’ has a particular meaning in patent law, implying formal transfer of title.”); Sicom Sys. v. Agilent Techs., Inc., 427 F.3d 971, 976 (Fed. Cir. 2005) (“An exclusive licensee receives more rights than a nonexclusive licensee, but fewer than an assignee. An example of an exclusive licensee is a licensee who receives the exclusive right to practice an invention but only within a given limited territory.”).
38. See, e.g., Independent Wireless Tel. Co. v. Radio Corp. of America, 269 U.S. 459, 469 (1926) ([T]he owner of a patent who grants to another the exclusive right to make, use or vend the invention, which does not constitute a statutory assignment, holds the title to the patent in trust for such a licensee . . . .”).
39. Arachnid, Inc. v. Merit Industries, Inc., 939 F.2d 1574, 1579 (Fed. Cir. 1991) (emphasis in original); see also Crown Die & Tool Co. v. Nye Tool & Machine Works, 261 U.S. 24, 40-41 (1923) (“These owners are the patentee, his assignee, his grantee, or his personal representatives; and none but these are able to maintain an action for infringement in a court of law.”).
40. See 35 U.S.C.A. § 281 (West 2013) (“A patentee shall have remedy by civil action for infringement of his patent.”); 35 U.S.C.A. § 100(d) (West 2013) (“The word ‘patentee’ includes not only the patentee to whom the patent was issued but also the successors in title to the patentee.”).
41. Prima Tek II, L.L.C. v. A-Roo Co., 222 F.3d 1372, 1377 (Fed. Cir. 2000); see also Abbott Labs. v. Diamedix Corp., 47 F.3d 1128, 1131 (Fed. Cir. 1995) (“The right to sue for infringement is ordinarily an incident of legal title to the patent. A licensee may obtain sufficient rights in the patent to be entitled to seek relief from infringement, but to do so, it ordinarily must join the patent owner.”).
42. See, e.g., Independent Wireless Tel. Co. v. Radio Corp. of America, 269 U.S. 459, 468 (1926) (“The presence of the owner of the patent as a party is indispensable not only to give jurisdiction under the patent laws but also, in most cases, to enable the alleged infringer to respond in one action to all claims of infringement for his act, and thus either to defeat all claims in the one action, or by satisfying one adverse decree to bar all subsequent actions.”).
43. See, e.g., Waterman v. Mackenzie, 138 U.S. 252, 255 (1891) (“Any rights of the licensee must be enforced through or in the name of the owner of the patent, and perhaps, if necessary to protect the rights of all parties, joining the licensee with him as a plaintiff.”); Ortho Pharmaceutical Corp. v. Genetics Inst., 52 F.3d 1026, 1030 (Fed. Cir. 1995) (“Any other party [than one holding all substantial rights] seeking enforcement of the patent can sue, if at all, only with the patentee or in the name of the patentee.”).
44. Ortho Pharmaceutical Corp. v. Genetics Inst., 52 F.3d 1026, 1031 (Fed. Cir. 1995).
45. See, e.g., Weinar v. Rollform, Inc., 744 F.2d 797, 807 (Fed. Cir. 1984) (“[T]wo parties sharing the property rights represented by a patent may have their respective rights protected by injunction and each, when properly joined in a suit, may be entitled to damages.”).
46. Ortho Pharmaceutical Corp. v. Genetics Inst., 52 F.3d 1026, 1032 (Fed. Cir. 1995); see also id. at 1034 (“[A] licensee with sufficient proprietary interest in a patent has standing regardless of whether the licensing agreement so provides.”); Independent Wireless Tel. Co. v. Radio Corp. of America, 269 U.S. 459, 469 (1926) (“[T]he implied obligation of the licensor to allow the use of his name is indispensable to the enjoyment by the licensee of the monopoly which by personal contract the licensor has given.”); Sicom Sys. v. Agilent Techs., Inc., 427 F.3d 971, 976 (Fed. Cir. 2005) (“[I]f the patentee transfers all substantial rights under the patent, it amounts to an assignment and the assignee may be deemed the effective patentee under 35 U.S.C. § 281 for purposes of holding constitutional standing to sue another for patent infringement in its own name. *** While a licensee normally does not have standing to sue without the joinder of the patentee (to prevent multiplicity of litigation), an exclusive license may be treated like an assignment for purposes of creating standing if it conveys to the licensee all substantial rights.”); Textile Prods. v. Mead Corp., 134 F.3d 1481, 1484 (Fed. Cir. 1998) (“A licensee is not entitled to bring suit in its own name as a patentee, unless the licensee holds all substantial rights under the patent.”) (internal quotations omitted); McNeilab, Inc. v. Scandipharm, Inc., 1996 U.S. App. LEXIS 19073, at *3 (Fed. Cir. July 31, 1996) (“Although title to the patent remains in the patentee, the patentee is not a necessary party to suit brought by the exclusive licensee, when the patentee has retained no substantial rights in the licensed subject matter.”) (unpublished opinion).
47. See, e.g., McNeilab, Inc. v. Scandipharm, Inc., 95 F.3d 1164, at *5 (Fed. Cir. 1996) (“The courts have recognized that there is no substantive difference between the property interests of the exclusive licensee and the assignee of the patent, and thus have sometimes used the terms interchangeably, subordinating the purity of the distinction to the reality of the legal rights. . . . We agree that there is no substantive difference between the property interests of an assignee and of an exclusive licensee who has been granted all substantial patent rights including the right to exclude the patentee. Although it would be more accurate to preserve the distinction whereby the term “assignment” is reserved for transfers that include nominal title, we agree with precedent that when the transfer includes all substantial patent rights including the right to exclude the transferor, there is no significant difference between the rights transferred by assignment and those transferred by exclusive license.”) (unpublished opinion).
48. See, e.g., Prince of Peace Enterprises, Inc. v. Top Quality Food Mkt., LLC, 760 F.Supp.2d 384, 391 (S.D.N.Y. 2011) (“[A]ssignment of a trademark under the Lanham Act requires (1) sale or transfer of all rights in the mark, and (2) assignment as well of the business’s goodwill connected with the mark’s use.”) (internal citations omitted) (emphasis in original); Silverstar Enterprises, Inc. v. Aday, 537 F.Supp. 236, 239 (S.D.N.Y. 1982) (“[A]n assignment of a trademark is a transfer of the entire interest while a license . . . confers only the right to use the trademark.”).
49. See 15 U.S.C.A. § 1114(1) (West 2013) (“Any person who shall, without the consent of the registrant . . . use in commerce . . . a registered mark . . . shall be liable in a civil action by the registrant for the remedies hereinafter provided.”); 15 U.S.C.A. § 1127 (West 2013) (“The terms ‘applicant’ and ‘registrant’ embrace the legal representatives, predecessors, successors and assigns of such applicant or registrant.”).
50. See, e.g., ICEE Distributors, Inc. v. J&J Snack Foods Corp., 325 F.3d 586, 598-99 (5th Cir. 2003) (holding that exclusive licensee who does not hold all substantial rights in the mark has not standing to sue for trademark infringement).
51. See, e.g., Quabaug Rubber Co. v. Fabiano Shoe Co., Inc., 567 F.2d 154, 159 (1st Cir. 1977) (dictum) (gathering cases) (“[C]ourts have followed the approach used in patent infringement cases and permitted trademark infringement suits to be maintained by exclusive distributors and sellers of trademarked goods, i.e., ‘exclusive licensees’ who had a right by agreement with the owner of the trademark to exclude even him from selling in their territory.”); Fin. Inv. Co. (Bermuda) Ltd. v. Geberit AG, 165 F.3d 526, 531-32 (7th Cir. 1998) (“[A] truly exclusive licensee, one who has the right even to exclude his licensor from using the mark is equated with an assignee since no right to use the mark is reserved to the licensor, and the licensee’s standing derives from his presumed status as an assignee.”) (internal citations, brackets, ellipses, and quotations omitted); Calvin Klein Jeanswear Co. v. Tunnel Trading, Case No. 98-cv-05408, 2001 WL 1456577, at *4 (S.D.N.Y. Nov. 16, 2001) (unreported) (gathering cases) (“[S]tanding may exist where the ‘licensing’ agreement grants to an exclusive licensee a property interest in the trademark, or rights that amount to those of an assignee.”); Nestle Prepared Foods Co. v. Pocket Foods Corp., Case No. 04-CV-02533, 2006 WL 2990208, at *6 (D. Colo. Oct. 19, 2006) (“Although this statute does not specifically address the status of a trademark’s exclusive licensee, courts have uniformly concluded that the exclusive licensee of a trademark has the right to enforce the trademark. Courts reach this conclusion when an exclusive licensee is assigned all rights which accompany the trademark.”) (internal citations omitted).
52. See, e.g., Nat’l Licensing Ass’n, LLC. v. Inland Joseph Fruit Co., 361 F.Supp.2d 1244, 1254 (E.D. Wash. 2004) (“[T]hose cases finding standing for de facto assignees are the exceptions that prove the rule—namely, that only the registrant of a trademark or its legal representatives, predecessors, successors, and assigns have standing to sue for trademark infringement under § 1114.”); Nova Wines, Inc. v. Adler Fels Winery LLC, 467 F.Supp.2d 965, 974 (N.D. Cal. 2006) (“[A]n exclusive license that amounts to a de facto assignment creates standing in the exclusive licensee.”).
53. Visa, U.S.A., Inc. v. Birmingham Trust Nat. Bank, 696 F.2d 1371, 1377 (Fed. Cir. 1982); see also 3 McCarthy on Trademarks and Unfair Competition § 18:9 (4th ed.) (“An assignment and license-back to the assignor is a useful structure to meet certain commercial needs.”).
54. E. & J. Gallo Winery v. Gallo Cattle Co., 967 F.2d 1280, 1290 (9th Cir. 1992).
55. See Innovation Ventures, LLC v. Pittsburg Wholesale Grocers, Inc., Case No. 12-cv-05523, 2013 WL 1007666 (N.D. Cal. Mar. 13, 2013).
56. Id. at *2.
57. Id. at *2-3 (internal citations and quotations omitted).
58. Id. at *5 (emphasis in original).
59. Id. at *4-5.
60. Id. at *6.
61. 17 U.S.C.A. § 101 (West 2013).
62. 17 U.S.C.A. § 204(a) (West 2013) (“A transfer of copyright ownership, other than by operation of law, is not valid unless an instrument of conveyance, or a note or memorandum of the transfer, is in writing and signed by the owner of the rights conveyed or such owner’s duly authorized agent.”).
63. 17 U.S.C.A. § 205(a) (West 2013) (“Any transfer of copyright ownership or other document pertaining to a copyright may be recorded in the Copyright Office if the document filed for recordation bears the actual signature of the person who executed it, or if it is accompanied by a sworn or official certification that it is a true copy of the original, signed document. A sworn or official certification may be submitted to the Copyright Office electronically, pursuant to regulations established by the Register of Copyrights.”).
64. 17 U.S.C.A. § 205(e) (West 2013) (“A nonexclusive license, whether recorded or not, 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 or such owner’s duly authorized agent, and if– (1) the license was taken before execution of the transfer; or (2) the license was taken in good faith before recordation of the transfer and without notice of it.”).
65. See 17 U.S.C.A. § 708(a)(4) (West 2013) (“Fees shall be paid to the Register of Copyrights– for the recordation, as provided by section 205, of a transfer of copyright ownership or other document.”).
66. See generally 5-19A Nimmer on Copyright § 19A.04.
67. See, e.g., 59 C.J.S. Mortgages § 239 (“A mortgage of real property is personal property, and in jurisdictions in which a mortgage is regarded as a mere lien, the interest of the mortgagee is a mere chattel interest; where legal title passes to the mortgagee, the mortgagee has legal title only as between the mortgagor and itself and only for the purpose of securing the indebtedness. . . . Thus, in title-theory states a mortgagee holds title to the land from the outset of the loan until the debt has been satisfied, while in lien-theory states, the borrower holds title to the land and the mortgagee has a lien on the property.”); In re SeSide Co., Ltd., 152 B.R. 878, 883 (E.D. Pa. 1993) (“In Pennsylvania, a mortgage does not constitute a transference of title from a mortgagor to a mortgagee. A mortgagee only obtains a lien securing the mortgagor’s indebtedness.”); In re Poe, 477 F.3d 1317, 1323 (11th Cir. 2007) (“Alabama is a title theory state, meaning that mortgaging property actually works a conveyance of legal title to the lender.”); Maglione v. BancBoston Mortgage Corp., 29 Mass.App.Ct. 88, 90 (1990). (“Literally, in Massachusetts, the granting of a mortgage vests title in the mortgagee to the land placed as security for the underlying debt. The mortgage splits the title in two parts: the legal title, which becomes the mortgagee’s, and the equitable title, which the mortgagor retains.”).
68. H.R. Rep. 94-1476, 123.
69. See Aerocon Eng’g, Inc. v. Silicon Valley Bank, 303 F.3d 1120 (9th Cir. 2002).
70. Id. at 1126 (footnotes omitted).
71. Id.
72. U.S. ex rel. Small Bus. Admin. v. Commercial Tech., Inc., 354 F.3d 378, 384 (5th Cir. 2003).
73. See Matter of Hill, 981 F.2d 1474, 1475 (5th Cir. 1993); see also Black’s Law Dictionary (9th ed. 2009) (A “pledge” is “[t[he act of providing something as security for a debt or obligation. A bailment or other deposit of personal property to a creditor as security for a debt or obligation.”).
74. See Aerocon Eng’g, Inc. v. Silicon Valley Bank, 303 F.3d 1120, 1125 (9th Cir. 2002).