For nearly 70 years, U.S. law viewed copyright owners as having an indivisible bundle of property rights that could not be assigned piecemeal. This changed with the Copyright Act of 1976, when Congres
For nearly 70 years, U.S. law viewed copyright owners as having an indivisible bundle of property rights that could not be assigned piecemeal. This changed with the Copyright Act of 1976, when Congress largely dispensed with this doctrine and allowed for divisibility of ownership interests, allowing an owner to assign separate interests in a single copyright.
Does this mean that a copyright owner may assign to a third party the right to sue for copyright infringement without assigning any other rights?
In the case of Silvers v. Sony Pictures Entertainment, three judges with the Ninth Circuit Court of Appeals in San Francisco said "yes" on June 3, 2003, but a majority of 11 different Ninth Circuit judges sitting en banc said "no" on March 25, 2005. The court held that the "bare assignment of an accrued cause of action is impermissible."
The following is a summary of the two opinions, which resulted in what copyright attorneys call a "very significant decision."
FACTUAL BACKGROUND: Writer/producer Nancey Silvers began writing a script in 1991 about the relationship between a mother, who discovers she has cancer, and her ex-husband's new wife, who is to raise the children when the natural mother dies. It was made into a CBS television movie in 1995 called "The Other Woman."
Silvers completed the script as a work-for-hire for producer Frank and Bob Films II a/k/a Von Zerneck/Sertner Films. The producer owned copyright to the movie and was not a party to the action.
After Sony Pictures Entertainment released the motion picture "Stepmom" in 1998 with the a similar story, Von Zerneck executed an "Assignment of Claims and Causes of Action," selling to Silvers "all right, title and interest in and to any claims and causes of action against Sony... with respect to the screenplay 'The Other Woman' ... and the motion picture 'Stepmom.'" The producer retained all rights under the copyright.
Silvers filed suit in the U.S. District Court in Los Angeles against Sony in June 2000 for copyright infringement and unfair competition. Sony filed a motion to dismiss, claiming that Silvers lacked standing to sue. The District Court denied the motion. Sony sought an interlocutory appeal.
THE FIRST NINTH CIRCUIT OPINION: The question before the Ninth Circuit Court of Appeals was whether an accrued cause of action for copyright infringement may be assigned to a third party without any other copyright rights accompanying the assignment.
The court noted that while other federal circuit courts addressed similar questions, no court squarely resolved the issue.
Accrued vs. Prospective Cause of Action: The court noted that a prevision case held that the creator of a work for hire does not retain a beneficial interest under which the creator may sue for infringement unless there is an express contractual provision to the contrary.
Holding that the legal or beneficial owner of a copyright may transfer the right to accrued causes of action for infringement to the creator or any other third party, the court adopted the rationale of Prather v. Neva Paperbacks Inc. (410 F.2d 698, 5th Cir. 1969).
In Prather, an author's publisher assigned both the copyright to the author's works and the accrued causes of action related to those works to the plaintiff-author. After the author sued a publisher, the court held that the assignor clearly transferred the right to sue, stating that the case involved a "simple assignment of a chose in action." The assignment specified in clear, precise terms that the assignor transferred past, prior accrued choses in action. Such an assignment was not against public policy.
The Ninth Circuit Court also quoted "Nimmer on Copyright," interpreting the treatise to indicate that accrued causes of action may be assigned without transferring any other copyright right to the assignee.
Sony urged the court to adopt the rationale of Eden Toys Inc. v. Florelee Undergarment Co. Inc. (697 F.2d 27, 2d Cir. 1982). In that case, Eden Toys was granted an exclusive license to use licensor Paddington's copyright and characters, and Paddington retained their right to sue for copyright infringement on Eden Toys' license. Eden Toys was granted the right to sue only if Paddington refrained from instituting legal action against infringers.
The Eden Toys court held that the Copyright Act does not permit holders of rights under copyrights to choose third parties to bring suits on their behalf -- the right to sue could not be assigned. It based its conclusion on the specifics of the agreement related to prospective causes of action.
The Ninth Circuit Court distinguished this case because it was not clear that Paddington granted Eden Toys any right to sue on accrued causes of action -- it referred to future causes of action in connection with the license, allowing Eden Toys to sue on future infringements only if Paddington failed to bring suit.
Who May Sue?: The court disagreed with the Eden Toys court to the extent that it suggested the Copyright Act permits only the legal or beneficial owner of a copyright to bring an infringement action.
Section 501(b) of the 1976 Copyright Act states that "the legal or beneficial owner 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."
The court wrote that this section merely states that these two classes are "entitled" to institute actions. The last phrase, "while he or she is the owner of it," indicates that the right accrues. Nothing prohibits the owner from assigning an accrued cause of action -- it is like an assignment of any other chose in action permitted under contract theory.
Sony argued that Congress did not intend for the right to sue to be a separate right because it was not included as a divisible right in section 106 of the Act. That section lists the exclusive rights under copyright to be the right: (1) to reproduce the work in copies or phonorecords; (2) to prepare derivative works based on the work; (3) to distribute copies or phonorecords of the work to the public by sale or other transfer of ownership, or by rental, lease or lending; (4) for certain works, to perform the work publicly; (5) for certain works, to display the work publicly; (6) for sound recordings, to perform the work publicly by means of a digital audio transmission.
The court responded by stating that it did not believe this list to present all the rights of a copyright owner.
THE SECOND NINTH CIRCUIT OPINION: The Ninth Circuit Court of Appeals, sitting en banc, reversed the earlier decision.
Statutory Interpretation: First, the court noted that the U.S. Constitution grants no substantive protection to authors; rather, Congress is empowered to provide copyright protection. Only rights that exist under copyright law are those granted by statute -- copyright does not exist at common law. (ELW Note: The New York State Court of Appeals on April 5 recognized common-law copyright protection for pre-1972 sound recordings under New York law in Capitol Records Inc. v. Naxos of America
Next, it noted that section 501(b) of the 1976 Copyright Act establishes who is legally authorized to sue for infringement. The plaintiff must be the legal or beneficial owner of an exclusive right.
Section 106 defines these exclusive rights. While these rights may be transferred and owned separately, the Act creates no exclusive rights other than those listed and does not create an exception to who may sue under section 501(b) -- the legal or beneficial owner.
Third, the court wrote that when a copyright interest is transferred, it must be recorded to protect the holder's right to bring an infringement suit. This recording statute does not contemplate a transfer of anything other than an ownership interest along with the concomitant exclusive rights.
Although the Act does not expressly state that only a legal or beneficial owner may sue, under traditional principles of statutory interpretation, the explicit listing of who may sue should be understood as an exclusion of others from suing for infringement.
The court stated that it applied this presumption for two reasons: (1) since copyright is a creature of statute, the court would not lightly insert common law principles that Congress left out; and (2) the durational limitation on section 501(b) shows that Congress carefully circumscribed the right by restricting even the legal or beneficial owners to those who owned the right at the time of the infringement.
The court supported this interpretation by examining legislative history, concluding that the history made it clear that the list of exclusive rights in section 106 is exhaustive.
Also, the court noted that the Patent Act of 1952 does not explicitly forbid an assignment of causes of action separate from one of substantive rights in the work. Nonetheless, the Supreme Court interpreted the Patent Act to provide that only a holder of patent rights may sue.
The court wrote that it should interpret the Copyright Act consistently with the requirement of the Patent Act.
Prior Case Law: The court found the Prather decision, which the earlier decision relied on, to be unhelpful for two reasons.
First, it was decided before the 1976 Copyright Act, when the 1909 Act simply afforded the "proprietor" of a copyright the right to sue from infringement, without defining proprietor or exclusive rights.
Second, the assignment in Prather involved both accrued causes of action and some of what we now call exclusive rights. Therefore, that court was faced with a different situation.
In reviewing the Eden Toys decision, the Ninth Circuit Court noted that it was not entirely clear whether the copyright holder had granted to Eden the right to sue on accrued causes of action or only the right to sue prospectively. Regardless, the Ninth Circuit Court wrote, the Eden court made plain the basic principle -- which the Ninth Circuit agreed with -- that only the owner of an exclusive right is entitled to sue for infringement.
The court also considered ABKCO Music Inc. v. Harrisons Music Ltd. (944 F.2d 971, 2d Cir. 1991). In that case, the plaintiff bought both the copyright to a song and "any and all rights assertable under copyright against the infringing composition in any part of the world which may have heretofore arisen or which may hereafter arise."
The Second Circuit court made it clear that its decision to allow the plaintiff to sue was limited to the situation in which the same entity purchased both the copyright and accrued claims.
The Ninth Circuit chose to follow the ABKCO Music decision for two reasons: (1) the Ninth Circuit court's independent analysis led it to the same conclusion; and (2) the creation of a circuit split would be "particularly troublesome in the realm of copyright. The Supreme Court has noted 'Congress' paramount goal in revising the 1976 Act of enhancing predictability and certainty of copyright ownership.'"
The Ninth Circuit Court of Appeals, sitting en banc, concluded that "the bare assignment of an accrued cause of action is impermissible under 17 U.S.C. section 501(b)."
Dissenting Opinions: Four judges wrote two extensive dissenting opinions.
Judges Berzon and Reinhardt dissented from the majority, stating that they would conclude that Nancy Silvers, "as the original creator of 'The Other Woman,' should be allowed to pursue the accrued causes of action..." Judges Bea and Kleinfeld suggested that there should be an entirely free market to assign accrued causes of action in copyright.
The Berzon opinion states that the majority opinion is "internally inconsistent." The majority acknowledged that after a copyright holder sells a copyright, in whole or in part, the new owner may pursue a cause of action that accrued before purchase as long as it is transferred along with the copyright. The majority claimed that it makes perfect sense because when one acquires a copyright that has been infringed, one is acquiring a copyright whose value has been impaired and , to receive maximum value, one must also convey the right to recover the value by instituting the action for infringement.
While it may be practical, the dissenters wrote, it cannot be squared with a literal reading of section 501(b).
These dissenters would hold that Silvers, given her status as the original creator of the contested "work-for-hire," may pursue the accrued claims while a complete stranger to the creative process could not. (ELW Note: These dissenting judges did not discuss the concept that a work-for-hire copyright owner, unlike an owner by virtue of a copyright assignment, is the "author" rather than the actual creator, who may have effectively given up all rights as a creator.)
The dissenting opinion also included an analysis of the validity of assignments, exploring cases involving rights to enforce claims that arose under the Employee Retirement Income Security Act (ERISA). It also discussed First Amendment rights as raised in the Supreme Court's decision in Eldred v. Ashcroft (537 U.S. 186, 2003).
In the dissent of Judges Bea and Kleinfeld, the opinion explored the history of the 1909 and the 1976 Copyright Acts. These judges believed that Congress intended to enlarge the class of persons who may sue for infringement. Nothing in the current Copyright Act prohibits assigning the right to sue, they argued.
Steven Glaser, counsel for Silvers, tells ELW that he intends to file a petition for review by the U.S. Supreme Court.
The full opinion is available from the Web site of the Ninth Circuit Court of Appeals
CASE: Silvers v. Sony Pictures Entertainment, Appellate Case No. 01-56069
COURT: Ninth Circuit Court of Appeals, March 25, 2005, Chief Judge Mary Schroeder and Circuit Judges Stephen Reinhardt, Pamela Ann Rymer, Andrew Kleinfeld, Susan Graber, Kim Wardlaw, Raymond Fisher, Ronald Gould, Richard Paez, Marsha Berzon and Carlos Bea; Ninth Circuit Court of Appeals, June 3, 2003, Circuit Judges Procter Hug Jr., Melvin Brunetti and Diarmuid O'Scannlain; District Court for the Central District of California, Judge Stephen Wilson
COUNSEL FOR NANCY SILVERS: 2005 -- Steven Glaser with Gelfand Rappaport & Glaser in Los Angeles; 2003 -- Steven Glaser, Marvin Gelfand and Francis Ryu with Gelfand Rappaport & Glaser in Los Angeles
COUNSEL FOR SONY PICTURES ENTERTAINMENT: 2005 -- Ronald Rauchberg with Proskauer Rose in New York, George Schiavelli with Reed Smith Crosby Heafey in San Francisco; 2003 -- George Schiavelli, Michael Eidel and Benjamin Shatz with Crosby Heafey Roach & May in Los Angeles (While this case was pending, George Schiavelli was appointed to the bench and is now serving as a judge with the U.S. District Court for the Central District of California; his name was included in the opinions as one of the original attorneys)
COUNSEL FOR AMICUS CURIAE MOTION PICTURE ASSN. OF AMERICA: 2005 -- Robert Rotstein with McDermott, Will & Emery in Los Angeles