Case Summary: Estate of Hevia v. Portrio Corp., 602 F.3d 34, 41 (1st Cir. P.R. 2010)

Category : Case Summaries, Implied License

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.

One project, a residential community known as Rio Grande Village (RGV), became the focus of the litigation. RGV was owned by one of the joint partnerships between Hevia and Valcarce, RG Development. Hevia had been in charge of the architectural plans for this project while Valcarce was in charge of the business and financial side of things.

Two days before Hevia passed away he placed all of his stock related to each of the partnerships, and the architectural plans for RGV into a Trust. Thereafter, the Trust sold Hevia’s stock to Valcarce through a Purchase-and-Sale-Agreement. The Agreement conveyed “every interest” that Hevia may have had in their partnerships to Valcarce, though did not specifically note the RGV architectural plans. Subsequently, Valcarce used the plans formed by Hevia to complete the RGV project. Hevia’s estate sued Valcarce, alleging copyright infringement.

STANDARD OF REVIEW: The grant or denial of summary judgment is reviewed de novo.

ANALYSIS: The Court found compelling evidence that Hevia had granted RG Development an implied, nonexclusive license to use the architectural plans for RVG. The Court looked to the decedent’s course of conduct prior to his expiration and found he intended the plans to be used for the RGV development. The Court found no evidence that the implied license had been revoked and further noted that copyright ownership may be transferred by operation of law or by a writing signed by the copyright owner. While implied copyright licenses are found only in “narrow circumstances… the touchstone for finding an implied license… is intent.” (citations omitted). The Court quoted Nelson-Salabes, 284 F.3d at 516 for the main three factors to be considered when determining whether an implied license has been granted:

1. Whether the parties were engaged in a short-term discrete transaction as opposed to an ongoing relationship

2. Whether the creator utilized written contracts… providing that copyrighted materials could only be used with the creator’s future involvement or express permission; and

3. Whether the creator’s conduct during the creation or delivery of the copyrighted material indicated that use of the material without the creator’s involvement or consent was permissible.

The Court found all three factors were sufficiently met by defendant. Specifically, evidence showed that Hevia and Valcarce intended the architectural plans in question to be used for the development. Hevia contributed his architectural talents while Valcarce contributed his financial and managerial expertise. Finally, Hevia’s intentions must be viewed “against this entrepreneurial backdrop.” Namely, Hevia’s ongoing relationship with Valcarce and RG Development “was founded on successful consummation of the project.” That relationship favors a finding of intent on Hevia’s part to grant a license for use of the architectural design for RGV to RG Development.

Plaintiffs also contended that when Valcarce enlisted a third party to complete the actual work, it committed copyright infringement. However, the Court noted that “when, as in this case, there is no indication that a license-granting copyright owner has restricted the licensee’s ability to use third parties in implementing the license, the license is generally construed to allow such delegation.” Moreover, in the Court’s view, enlistment of third parties does not transmogrify a non-infringing use into an infringing use.

Finally, plaintiffs asserted that Valcarce had no right to transfer its nonexclusive license to third parties. However, the Court found no evidence to support the contention that defendants transferred the nonexclusive license when they sold the land upon which the project was to be built. There was no indication that the sale of the land included a transfer of the license.

HOLDING: Judgment of the District Court was affirmed.

By: Olivia J. Fines, Esq.

Comments are closed.