Problems with copyright assignments: Righthaven, Tremblay and POPS

May 10th, 2013 by Barry Sookman Leave a reply »

Copyright assignments. There are a myriad of ways for them to be challenged or be ineffective. Three recent cases illustrate their potential frailties; one from the US and two from Canada.

Yesterday’s decision of the Ninth Circuit Court of Appeals in Righthaven LLC v Hoehn 2013 WL 1908876 (9th.Cir.May 9, 2013) spells the end of the copyright troll Righthaven. It gained substantial notoriety by commencing lawsuits alleging copyright infringement in articles published in the Las Vegas Review-Journal reproduced online by websites without permission.

Righthaven was not the original owner of the copyrights in these articles. Stephens Media LLC, the company that owns the Las Vegas Review-Journal, held them. After the alleged infringements occurred, but before Righthaven filed the suits, Stephens Media and Righthaven executed a copyright assignment agreement for each article. Each copyright assignment provided that, “subject to [Stephens Media’s] rights of reversion,” Stephens Media granted to Righthaven “all copyrights requisite to have Righthaven recognized as the copyright owner of the Work for purposes of Righthaven being able to claim ownership as well as the right to seek redress for past, present, and future infringements of the copyright . . .in and to the Work.”

In form, Righthaven was called the copyright owner. However, the agreement also placed sharp limits on what Righthaven could do with any assigned copyright. Righthaven had no right to exploit the copyrights or participate in any royalties. Stephens Media retained “an exclusive license” to exploit the copyrights “for any lawful purpose whatsoever,” and to the extent that Righthaven’s pursuit of infringement would “in any manner” diminish Stephens Media’s right to exploit the assigned copyrights, Righthaven granted a license to Stephens Media “to the greatest extent permitted by law so that Stephens Media shall have unfettered and exclusive ability” to exploit its copyrights. Moreover, by providing Righthaven thirty days prior notice, Stephens Media could revert the ownership of any assigned copyright back to itself.

In substance Righthaven had merely been granted a bare right to sue for infringement. However, merely having a right to sue does not give a person the standing to sue for infringement in the US. The plaintiff must have a legal or beneficial ownership of a copyright to sue for infringement. Righthaven had neither. Calling the agreement an assignment did not change its substance. According to the Court:

Abraham Lincoln told a story about a lawyer who tried to establish that a calf had five legs by calling its tail a leg. But the calf had only four legs, Lincoln observed, because calling a tail a leg does not make it so.1 Before us is a case about a lawyer who tried to establish that a company owned a copyright by drafting a contract calling the company the copyright owner, even though the company lacked the rights associated with copyright ownership. Heeding Lincoln’s wisdom, and the requirements of the Copyright Act, we conclude that merely calling someone a copyright owner does not make it so.

This bring us to the second case, Tremblay v. Orio Canada Inc., 2013 FC 109. It raised a familiar fact pattern. A company hires an independent programmer to develop software. The work is done without a complete agreement dealing with ownership of the program. The parties have a falling out and the commissioning party is sued for copyright infringement  for using, marketing and selling the software, even though those were the expectations of the parties at the time the software was developed.

In this case, however, Tremblay included the following wording in its bids to to the software development work:

 Any development done for Orio Canada Inc. shall become the exclusive property thereof and may not therefore be marketed or reused by Service Informatique Professionnel or any other party.

The trial judge found that Tremblay’s employees had created the software. Therefore, apart from the wording in the bid, Tremblay was the owner of the software.[1] S13(4) of the Copyright Act requires that an assignment of copyright be in writing and signed by the owner of the copyright. The wording in the bid that any developments created would be Orio’s “exclusive property” was assignment language that could have assigned the copyright in the developments to Orio. The bids were also in writing. However, according to the Court they were not “signed” and hence did not satisfy the Act’s signature requirement. According to the Court:

In this case, the Court has no choice but to find that a signature is lacking. Although the parties have confirmed before this Court that the plaintiff submitted other bids to the defendant that include the same clause, there is nothing in the evidence to support a finding that the bids submitted after April 2007 were signed. Furthermore, the defendant has not filed any other evidence before this Court that could stand in for a signature (Milliken & Co v Interface Flooring Systems (Canada) Inc, 1998 CanLII 9044 (FC), [1998] 3 FC 103, 143 FTR 106).

Had it not been for the absence of the plaintiff’s signature, there would have been an assignment of the copyright under the Act, but in the circumstances, the Court can only find that, pursuant to subsection13(4) of the Act, the plaintiff did not assign his copyright in the modified SAM program. Accepting the defendant’s argument and making the opposite finding solely on the basis of the plaintiff’s testimony would render meaningless the requirement imposed by Parliament. This finding may appear rigid, but it complies with the formal requirements of the Act.

There is no discussion as to why the Court was unable to find any signature on the facts of the case. There are numerous cases where non-traditional means of authentication have been found to constitute a signature. It doesn’t take much. All that is needed is a mark adopted by a person with an intention to authenticate a document. The type of signature used is not the determining factor. Answer backs on telexes, names on printed letterhead, and even a person’s email address have been held in some cases to be enough.

What is even more problematic is that the Court never considered whether Section 13(4) had to apply at all. There are cases outside of Canada that have held that the writing and signature requirements in copyright legislation only apply to legal assignments. A binding and enforceable agreement to assign a copyright not yet in existence is an equitable assignment. Such assignments may not be caught by the writing and signature requirements in s13(4). There may well be a difference between an equitable assignment of a legal interest in a copyright which does not need to conform to the statutory formalities and a legal assignment of an interest in a copyright which does.[2] There are also cases in which an author is regarded as holding the copyright in trust for the person to whom he engaged himself. This form of equitable interest has also been held not require compliance with the formalities needed for a legal assignment.[3]

Orio did not end up as the owner of the copyright. The case was tried in the Federal Court in Quebec. Perhaps that is why the Court didn’t canvass the common law distinction between legal and equitable assignments. However, it would have been useful for the Court to at least have considered whether the cases on point outside of Canada applied in Quebec or whether there was a comparable argument under Quebec law. In any event, as the parties had clearly intended that Orio have the right to use and exploit the software, the Court unsurprisingly found an implied license in the circumstances.

The third case is Planification-Organisation-Publications Systèmes (POPS) Ltée v. 9054-8181 Québec Inc, 2013 FC 427. The facts of the case are fairly complex. According to the Court, the “proceeding has its roots in an apparent misunderstanding that has had a sad outcome for the three individuals identified above, who were once very dear friends. The manner in which they have chosen to resolve that misunderstanding has also been very costly. It is likely that the legal costs alone that each of them has incurred in connection with this proceeding far exceeds the value of the interests they assert.”

A major issue in the case was whether the plaintiffs were the owners of the copyright in the computer software called Ceres. As with the two previous cases, assignments of copyright were of central importance.

One of the alleged assignments in issue was an agreement referred to as “The 1985 Agreement”. The agreement is described by the trial judge as follows:

Instead, the first paragraph of the agreement states: “The undersigned, co-authors of the business simulation CERES, cede by the present document to the company POPS Ltée, of Sherbrooke, Québec, the rights to promote CERES in all languages and in all countries.” Consistent with POPS’ status under the agreement as a promoter, it is referred to throughout the agreement as “the promoter.” In addition, in addressing the scope of the rights granted under the agreement, Article II(1) states that “the authors expressly and exclusively cede to the promoter the rights to translate in all languages and mall countries, to market, to adapt and to reproduce [Ceres] by all existing and future visual, audio [and] electronic means, without exception or reserve.” There is no language in that article which assigns the copyright in Ceres to POPS.

The trial judge concluded that this language was more consistent with a promotion or distribution agreement than with an assignment of copyright. He held that it was effective “in conferring a very broad and exclusive licence to, among other things, distribute, adapt and sell Ceres.” But it was not an outright assignment of the copyright.

The plaintiffs had relied on the use of the word “cede” in the agreement to support their argument that the document was intended to function as an assignment of the copyright in Ceres. There was some strength to this argument particularly in view of the wording of subsection 13(4) of the Copyright Act.

In English subsection 13(4) is titled “Assignments and licences” and says

“but no assignment or grant is valid unless it is in writing signed by the owner of the right in respect of which the assignment or grant is made, or by the owner’s duly authorized agent”.

In French, the subsection is titled “Cession et licences” and says

“mais la cession ou la concession n’est valable que si elle est rédigée par écrit et signée par le titulaire du droit qui en fait l’objet, ou par son agent dûment autorisé.” (emphasis added)

In view of the language of the assignment, the trial judge might well have concluded that the wording had granted a partial assignment of some of the exclusive rights conferred by copyright.

The judge had little difficulty, however, in finding that the following language in another agreement did assign the copyright in the software:

In return for the Royalty, defined hereunder, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Assignor hereby assigns and transfers in perpetuity to the Assignee the Assignor’s entire right, title and interest, worldwide, in and to all ownership, intellectual property and all other property rights including, without limitation, the copyright, in the Work authored in whole or in part by [Andrew Szendrovits], including all rights of action, powers and benefits relating thereto.

Surprisingly, the trial judge also stated “In passing” that the above “also expressly assigned all of the assignor’s moral rights in Ceres to POPS.” This statement is clearly wrong as moral rights can be waived but cannot be assigned under the copyright Act.

 _______________________

[1] The Judge also said that Tremblay became the author of the software because it was developed by his employees. This is incorrect. He could become the owner, but authorship cannot be assigned under the Copyright Act.

[2] See, Lakeview Computers plc v. Steadman [1999] E.W.J. No. 6192 (Eng.C.A.); Cyprotex Discovery Limited v. The University of sheffield, [2003] E.W.H.C. 760 (TCC), affirmed [2004] EWCA Civ 380 (Eng.C.A.); Acorn Computers Ltd v. MCS Microcomputer Systems Pty Ltd (1984), 57 ALR 389 (Aus. Fed. Ct.); Robin Ray v. Classic FM [1998] FSR 62; . Roban Jig Tool Co Ltd & Elkadort Ltd v. Taylor & Ors, [1979] FSR 130; Telephonic Communicators International Pty. Ltd v. Motor Solutions Australia Pty. Ltd., [2004] F.C.A. 942 (21 July 2004).See, however, Dowling v. General Synod Church of England in Canada, [1943] O.R. 652 (C.A.).

[3] See, John Richardson Computers Ltd. v. Flanders,  [1993] F.S.R. 497 (Ch.D.).

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