KEY HOLDINGS: Copyright ownership may be transferred by operation of law or in a writing signed by the owner of the copyright. Short of transferring ownership, a nonexclusive right to use a copyright may occur through a written license or by manifest intent of the owner (implied license). An implied license is limited in scope, permitting use of the copyright only under specific circumstances and within certain guidelines. A party asserting “implied license” as a defense to claims of copyright infringement bears the burden of proving the existence of the implied license. The most important factor in determining whether an implied copyright license exists is intent of the parties.
BACKGROUND: Two individuals (Hevia and Valcarce) owned equal interest in the development of three pieces of real estate. Each partner shared the burden of their enterprise and each contributed equally to the capital required to fund the acquisition of the land.
KEY HOLDINGS: In the absence of direct infringement, one cannot be found liable for contributory or vicarious infringement. Generally, a copyright owner who grants a nonexclusive, limited license waives his right to sue a licensee for infringement, and may sue only for breach of contract. Nevertheless, a licensee may be liable for copyright infringement where the licensee’s action exceeds the scope of the license in a manner that implicates one of the licensor’s exclusive statutory rights (i.e., copying, distributing, making derivative works, etc.). A contractual term that limits a license’s scope is a “condition,” the violation of which constitutes copyright infringement. All other license terms are considered “covenants,” the violation of which give rise to suit for breach of contract. Conditions and covenants are distinguished by state contract law, and to the extent consistent with federal copyright law and policy. Section 1201(a)(2) of the DMCA provides for an anti-circumvention right, distinct from infringement.
MDY Industries, and its sole member, Michael Donnelly (collectively “MDY”), developed and sold Glider, a “bot” that automatically played the first few levels of the 70-level-WoW game for players. Glider did not copy or alter the game client’s software, did not prohibit a player from paying its monthly subscription to WoW, and had no independent use separate from WoW. Continue Reading
Key Holdings: Affirming the U.S. District Court for the Northern District of Indiana, the Seventh Circuit holds that, as stated under 17 U.S.C. §204(a) of the Copyright Act, an exclusive license may be granted only through a written agreement. Conversely, under 17 U.S.C. §101 a non-exclusive license is explicitly exempted from the writing requirement imposed by §204(a). Thus, it is possible for a licensee to obtain an implied, non-exclusive license through either oral statements or the conduct of the copyright holder. Conditions precedent are not favored and will not be read into a license absent plain and unambiguous language.
Background: Shaver, an architect, entered into a letter agreement with I.A.E./BEMI Joint Venture (“Joint Venture”) for Shaver to prepare a series of schematic design drawings for various airport buildings at a total cost of $10,000 plus out-of-pocket expenses. While Shaver’s contract with Joint Venture only concerned the preparation of the building schematics, Shaver expected, as was industry standard, that he and Joint Venture would execute further written contracts for the remaining phases of the architectural work. Thereafter, Shaver prepared and delivered the schematic drawings to the airport, Joint Venture and several other parties involved in the project. When the airport approved one of the schematic drawings, Joint Venture paid Shaver $5,000 of his $10,000 fee. Joint Venture then entered into a contract with a third party to perform the remaining architectural work. Continue Reading
Key Holdings: Ninth Circuit holds that: i) 17 U.S.C. § 204(a) requires that an assignment of a copyright must be in writing to be effective; ii) a non-exclusive license may be granted orally, or may even be implied from conduct; iii) conditions precedent are disfavored and will not be read into a contract unless required by plain, unambiguous language.
Background: Defendant Larry Cohen wrote, directed and produced a “B” horror movie called “The Stuff”. Cohen orally requested that Effects Associates (“Effects”), a small special effects company, create footage for certain sequences in the film. Effects created and delivered the requested footage to Cohen. Cohen paid Effects approximately $56,000 of the original contract price of $62,335. However, Cohen was dissatisfied with one of the scenes and unilaterally decided to pay only half the promised amount for that scene. Continue Reading
Key Holdings: Second Circuit holds that: i) a requirement to pay royalties and include an attribution notice (crediting authorship to author) are to be considered covenants rather than conditions precedent; ii) when the contested issue is the scope of the license rather than its existence, the copyright owner bears the burden of proving that the copying or distribution was unauthorized under the license and the license need not be pleaded as an affirmative defense; iii) even if licensee’s breach entitles licensor to rescind the license, rescission does not occur automatically but requires affirmative steps by licensor.
Background: Graham bundled and marketed various packages of freeware, shareware and public domain software. To further this business Graham orally contracted with James, a software programmer, for the creation of a file-retrieval program. Continue Reading
Key Holding: Ninth Circuit held that Courts will not construe contractual stipulations as conditions precedent unless required to do so by the plain, unambiguous language of the contract.
Background: Bubble Up Delaware, Inc. (‘Bubble Up’) filed for bankruptcy in 1970. The US Dept. of Labor (“DOL”) filed a proof of claim for damages arising from breach of contract in the amount of $700,000. The contract in question required DOL to provide Bubble Up with $1,000,000 in exchange for Bubble Up’s employment of 300 unemployed residents of Los Angeles, CA for a period of nine months. Continue Reading