You are in negotiations with a copyright owner to obtain a license to her work, which you want to publish, distribute, and/or license yourself. You want to ensure that you have the right to enforce the copyright against third parties. She tells you that this won’t be a problem; she will agree to assign the legal title to the work to you, but she will retain the ability to grant other parties the right to license the work.
You believe this is sufficient. After all, the Copyright Act explicitly states that an exclusive license or an assignment qualifies as a “transfer” of a right in copyright. 17 U.S.C. § 101. And Section 501(b) of the Act addresses who has standing to sue for infringement: “[t]he legal or beneficial owner of an exclusive right under a copyright.” The transfer of the legal title to the copyrighted work through assignment would give you standing to sue for infringement, right? Wrong.
DRK Photo v. McGraw Hill
Last week, the Ninth Circuit in DRK Photo v. McGraw-Hill, __ F.3d __, 2017 WL 3996797 (9th Cir. Sept. 12, 2017) confirmed that holders of non-exclusive copyright licenses lack standing to sue for infringement regardless of whether the licensee was also nominally assigned the legal title to the work.
DRK Photo, a stock photo licensing agency, had entered into “representation agreements” with photographers that granted DRK the non-exclusive right to license their photos, as well as “assignment agreements” with those photographers that purported to pass legal title to each photograph and copyright along with all accrued claims to DRK. On the basis of these agreements, DRK sued McGraw-Hill for copyright infringement, claiming that McGraw Hill exceeded the scope of its licenses with DRK by printing and distributing more textbooks containing licensed stock photo images than authorized by their license agreement.
The Ninth Circuit held that DRK did not have standing to sue for infringement pursuant to the representation agreements because it had been granted only a non-exclusive license to the photographs at issue. The court distinguished its decision in Minden Pictures, Inc. v. John Wiley & Sons, Inc., 795 F.3d 997 (9th Cir. 2015), in which it held that Minden, another stock photo agency, did have standing to sue a publisher for infringement because in its licensing agreements, the photographers had agreed to appoint Minden the exclusive licensing agent, even though the photographers retained the ability to make use of the photographs themselves. That Minden was the sole licensing agent meant that both Minden and the photographers could enforce the copyrights.
In light of the non-exclusive nature of DRK’s licenses, the Ninth Circuit found that its assignment agreements with photographers were invalid. The court noted that the assignment agreements’ use of “language purporting to transfer ownership…is not conclusive.” Rather, courts must “consider the substance of the transaction.” The representation agreements that gave DRK non-exclusive licenses also effectively controlled the rights associated with the photographs such that the substance and effect of the assignment agreements was merely the transfer of the right to sue on accrued claims. The court held this was insufficient to transfer legal ownership of the copyrights and thus confer standing on DRK to sue for infringement.