Limit on Assigning Right to Pursue Online Copyright Infringement

Can a business model be sustained for procuring the right from copyright owners to pursue alleged copyright infringements in the online world? Content companies may seek the services of such a company. But the U.S. Court of Appeals for the Ninth Circuit decided in 2005 that a party who obtained the right to sue over infringement of a copyright ' but didn't also obtain legal or beneficial ownership in the work ' couldn't file an infringement action. See, Silvers v. Sony Pictures Entertainment Inc., 402 F.3d 881 (9th Cir. 2005). And though the Fifth Circuit has a more liberal view of who can file infringement claims (see, Prather v. Neva Paperbacks Inc., 410 F.2d 698 (5th Cir. 1969)), the Second Circuit follows a more restrictive rule: Only owners of exclusive rights in copyrights may pursue infringement claims. See, Eden Toys Inc. v. Florelee Undergarment Co., 697 F.2d 27 (2d Cir. 1982).

In recent months, there has been a flurry of infringement litigation involving copyright troller Righthaven, which procured the right from publishers such as The Denver Post and Las Vegas Review-Journal to file infringement suits over unauthorized online reproductions of the publishers' content. In several cases, the U.S. District Court for the District of Nevada, which is within the Ninth Circuit, has cited the Silvers decision to block Righthaven's claims. Now the U.S. District Court for the District of Colorado, which is within the Tenth Circuit, has raised a Silvers-type bar against Righthaven. Righthaven LLC v. Wolf, 1:11-cv-00830.

The Silvers Case

Section 501(b) of the Copyright Act of 1976 states that “the legal or beneficial owner [the latter, for example, being a party with a right to a share of income] of an exclusive right under a copyright is entitled ' to institute an action for any infringement of that particular right committed while he or she is the owner of it.” At the same time, the Copyright Act allows the owner of a work to divide rights for separate exploitations, such as issuing independent licenses for uses of music with visual images and for greeting cards.

In Silvers, Nancey Silvers, who wrote the script for the TV movie The Other Woman as a work for hire, obtained the right from the movie's producer to file an infringement suit against Sony Pictures Entertainment over the movie Stepmom. Citing '501(b), the Ninth Circuit noted that: “[U]nder traditional principles of statutory interpretation, Congress' explicit listing of who may sue for copyright infringement should be understood as an exclusion of others from suing for infringement.” The court added: “Although Congress allowed for divisibility of ownership interests under a copyright, it did not alter the requirement that only owners of an exclusive right in the copyright could bring suit.”

Tenth Circuit Weighs In

In Righthaven LLC v. Wolf, one of several dozen infringement actions Righthaven filed in Colorado, the copyright troll sued Leland Wolf, a blogger who had included a Denver Post photograph on his website, itmakessenseblog.com. Senior U.S. District Judge John L. Kane noted: “The issue presented in this case, whether a party with a bare right to sue has standing to institute an action for infringement under federal copyright law, is one of first impression in the Tenth Circuit.” (Kane had stayed the Righthaven suits in his district until he ruled on this issue.)

In Wolf, Judge Kane found: “A third-party who has been assigned the bare right to sue for infringement has no interest in the legal dissemination of the copyrighted material. On the contrary, that party derives its sole economic benefit by instituting claims of infringement, a course of action that necessarily limits public access to the copyrighted work. This prioritizes economic benefit over public access, in direct contradiction to the constitutionally mandated equilibrium upon which copyright law is based. The legislative history relating to the Copyright Act of 1976 supports this interpretation.”

In a footnote, Judge Kane cautioned: “[I]n light of the severe statutory damages for copyright infringement and the burdensome costs of litigation, a party sued for infringement, even a party with a meritorious defense will often agree to a settlement. Thus, a party with a bare right to sue may file numerous infringement actions of questionable merit with the intention of extorting settlement agreements from innocent users. This possibility becomes even more likely when the financial viability of the entity filing suit depends upon the proceeds from settlement agreements and infringement suits.”

An assignment agreement between MediaNews Group, which owns The Denver Post, and Righthaven stated that MediaNews transferred “all rights requisite to have Righthaven recognized as the copyright owner of the Work” ' in this case the Post photo, which Righthaven registered with the Copyright Office. Judge Kane observed: “A clause purporting to transfer 'all rights requisite' merely begs the question. Accordingly, I turn to the language of the [separate] Copyright Assignment Agreement [between MediaNews and Righthaven] to determine the nature of the 'rights requisite' transferred from MediaNews Group, Inc. to Righthaven.”

This copyright assignment agreement specified: “Despite any Copyright Assignment, [MediaNews Group] shall retain (and is hereby granted by Righthaven) an exclusive license to Exploit the Publisher Assigned Copyrights for any lawful purpose whatsoever and Righthaven shall have no right or license to Exploit or participate in the receipt of royalties from the Exploitation of the Publisher Assigned Copyrights other than the right to proceeds in association with a Recovery.”

Granting summary judgment for Wolf ' and awarding him attorney fees ' Judge Kane determined that the latter agreement “indicates that the purported assignment of 'rights requisite' is meaningless. MediaNews Group retained all rights to exploit the Work; no legal interest ever changed hands. The usage of the term 'exclusive license' does not change this analysis.”

“[W]hen read together,” Judge Kane emphasized, “the Assignment and the Copyright Assignment Agreement reveal that MediaNews Group has assigned to Righthaven the bare right to sue for infringement ' no more, no less. ' Accordingly, Righthaven is neither a 'legal owner' or a 'beneficial owner' for purposes of '501(b), and it lacks standing to institute an action for copyright infringement.”

Conclusion

Both Silvers and fair-use defense barriers have been successfully raised against Righthaven in Nevada federal court. That court also sanctioned Righthaven for failing to properly disclose its financial relationship with the Las Vegas Review-Journal's owner. For the motion picture and adult entertainment companies now deeply entrenched in pursuing file-sharing suits, the District of Colorado's recent decision makes the copyright-troll business model an even less likely option for battling Internet piracy.

Can a business model be sustained for procuring the right from copyright owners to pursue alleged copyright infringements in the online world? Content companies may seek the services of such a company. But the U.S. Court of Appeals for the Ninth Circuit decided in 2005 that a party who obtained the right to sue over infringement of a copyright ' but didn't also obtain legal or beneficial ownership in the work ' couldn't file an infringement action. See , Silvers v. Sony Pictures Entertainment Inc. , 402 F.3d 881 (9th Cir. 2005). And though the Fifth Circuit has a more liberal view of who can file infringement claims ( see , Prather v. Neva Paperbacks Inc. , 410 F.2d 698 (5th Cir. 1969)), the Second Circuit follows a more restrictive rule: Only owners of exclusive rights in copyrights may pursue infringement claims. See , Eden Toys Inc. v. Florelee Undergarment Co. , 697 F.2d 27 (2d Cir. 1982).

In recent months, there has been a flurry of infringement litigation involving copyright troller Righthaven, which procured the right from publishers such as The Denver Post and Las Vegas Review-Journal to file infringement suits over unauthorized online reproductions of the publishers' content. In several cases, the U.S. District Court for the District of Nevada, which is within the Ninth Circuit, has cited the Silvers decision to block Righthaven's claims. Now the U.S. District Court for the District of Colorado, which is within the Tenth Circuit, has raised a Silvers-type bar against Righthaven. Righthaven LLC v. Wolf, 1:11-cv-00830.

The Silvers Case

Section 501(b) of the Copyright Act of 1976 states that “the legal or beneficial owner [the latter, for example, being a party with a right to a share of income] of an exclusive right under a copyright is entitled ' to institute an action for any infringement of that particular right committed while he or she is the owner of it.” At the same time, the Copyright Act allows the owner of a work to divide rights for separate exploitations, such as issuing independent licenses for uses of music with visual images and for greeting cards.

In Silvers, Nancey Silvers, who wrote the script for the TV movie The Other Woman as a work for hire, obtained the right from the movie's producer to file an infringement suit against Sony Pictures Entertainment over the movie Stepmom. Citing '501(b), the Ninth Circuit noted that: “[U]nder traditional principles of statutory interpretation, Congress' explicit listing of who may sue for copyright infringement should be understood as an exclusion of others from suing for infringement.” The court added: “Although Congress allowed for divisibility of ownership interests under a copyright, it did not alter the requirement that only owners of an exclusive right in the copyright could bring suit.”

Tenth Circuit Weighs In

In Righthaven LLC v. Wolf, one of several dozen infringement actions Righthaven filed in Colorado, the copyright troll sued Leland Wolf, a blogger who had included a Denver Post photograph on his website, itmakessenseblog.com. Senior U.S. District Judge John L. Kane noted: “The issue presented in this case, whether a party with a bare right to sue has standing to institute an action for infringement under federal copyright law, is one of first impression in the Tenth Circuit.” (Kane had stayed the Righthaven suits in his district until he ruled on this issue.)

In Wolf, Judge Kane found: “A third-party who has been assigned the bare right to sue for infringement has no interest in the legal dissemination of the copyrighted material. On the contrary, that party derives its sole economic benefit by instituting claims of infringement, a course of action that necessarily limits public access to the copyrighted work. This prioritizes economic benefit over public access, in direct contradiction to the constitutionally mandated equilibrium upon which copyright law is based. The legislative history relating to the Copyright Act of 1976 supports this interpretation.”

In a footnote, Judge Kane cautioned: “[I]n light of the severe statutory damages for copyright infringement and the burdensome costs of litigation, a party sued for infringement, even a party with a meritorious defense will often agree to a settlement. Thus, a party with a bare right to sue may file numerous infringement actions of questionable merit with the intention of extorting settlement agreements from innocent users. This possibility becomes even more likely when the financial viability of the entity filing suit depends upon the proceeds from settlement agreements and infringement suits.”

An assignment agreement between MediaNews Group, which owns The Denver Post, and Righthaven stated that MediaNews transferred “all rights requisite to have Righthaven recognized as the copyright owner of the Work” ' in this case the Post photo, which Righthaven registered with the Copyright Office. Judge Kane observed: “A clause purporting to transfer 'all rights requisite' merely begs the question. Accordingly, I turn to the language of the [separate] Copyright Assignment Agreement [between MediaNews and Righthaven] to determine the nature of the 'rights requisite' transferred from MediaNews Group, Inc. to Righthaven.”

This copyright assignment agreement specified: “Despite any Copyright Assignment, [MediaNews Group] shall retain (and is hereby granted by Righthaven) an exclusive license to Exploit the Publisher Assigned Copyrights for any lawful purpose whatsoever and Righthaven shall have no right or license to Exploit or participate in the receipt of royalties from the Exploitation of the Publisher Assigned Copyrights other than the right to proceeds in association with a Recovery.”

Granting summary judgment for Wolf ' and awarding him attorney fees ' Judge Kane determined that the latter agreement “indicates that the purported assignment of 'rights requisite' is meaningless. MediaNews Group retained all rights to exploit the Work; no legal interest ever changed hands. The usage of the term 'exclusive license' does not change this analysis.”

“[W]hen read together,” Judge Kane emphasized, “the Assignment and the Copyright Assignment Agreement reveal that MediaNews Group has assigned to Righthaven the bare right to sue for infringement ' no more, no less. ' Accordingly, Righthaven is neither a 'legal owner' or a 'beneficial owner' for purposes of '501(b), and it lacks standing to institute an action for copyright infringement.”

Conclusion

Both Silvers and fair-use defense barriers have been successfully raised against Righthaven in Nevada federal court. That court also sanctioned Righthaven for failing to properly disclose its financial relationship with the Las Vegas Review-Journal's owner. For the motion picture and adult entertainment companies now deeply entrenched in pursuing file-sharing suits, the District of Colorado's recent decision makes the copyright-troll business model an even less likely option for battling Internet piracy.