Ninth Circuit: An Exclusive Licensing Agent Has Standing to Bring an Infringement Action under the Copyright Act

In a recent decision, Minden Pictures, Inc. v. John Wiley & Sons, Inc., D.C. No. 3:12-CV-04601-EMC, 9th Cir. Case No. 14-15267, the Ninth Circuit Court of Appeals held that a licensing agent for several individual photographers has standing to bring an action under the Copyright Act against a textbook publisher for unauthorized use of copyrighted photographs. The Ninth Circuit found that the licensing agent held an “exclusive license” to reproduce and authorize production of the photographs even though the individual photographers retained the right to personal and limited commercial use of the photographs under the Agency Agreements. The Ninth Circuit held that the divisibility principle embodied in the Copyright Act allows for the licensing agent to have an “exclusive license” with respect to certain uses of the photographs and therefore it has standing to sue infringers.

Minden Pictures, Inc. (“Minden”) is a licensing agent for several individual photographers. Minden grants licenses to end-users such as textbook publishers. The Agency Agreements between Minden and the individual photographers provide that Minden is the sole and exclusive agent and representative with respect to licensing any of the subject images, and they grant Minden the unrestricted, exclusive right to distribute, license, and/or exploit the images without seeking special permission to do so. The Agency Agreements, however, allow the individual photographers to make some commercial and personal use of the photographs. The individual photographers are allowed to use the images for personal promotion, advertising, and editorial use in books and magazines. The Agency Agreements prohibit the individual photographers from hiring a licensing agent other than Minden with respect to the subject photographs. The Agency Agreements also provide that “all images shall at all times remain the sole and exclusive property of the photographer, including the copyright.”

Minden discovered that one of the licensees, an educational publisher named John Wiley & Sons (“Wiley”), was substantially exceeding the scope of the license with respect to the photographs by printing hundreds of thousands of textbooks in violation of the license agreement, which limits printing to only 20,000 copies. Minden filed a copyright infringement action in the U.S. District Court for the Northern District of California. Wiley moved for summary judgment on the grounds that Minden lack standing to sue under the Copyright Act, and the District Court agreed. Minden appealed to the Ninth Circuit.

The Ninth Circuit reversed, holding that the Agency Agreements conveyed a sufficient property interest in the photographs to permit it to bring an infringement action under the Copyright Act. First, the Court identified the relevant statutory language in the Copyright Act respect to standing: “[t]he legal or beneficial owner of an exclusive right under a copyright is entitled…to institute an action for judgment of that particular right committed while he or she is the owner of it.” These exclusive rights include the right to reproduce, distribute, or display the work, prepare derivative works, perform the work in public, and record and perform the work by means of an audio transmission. The Court noted that current Ninth Circuit case law holds that a party granted an assignment or an exclusive license with respect to these exclusive rights has statutory standing to sue for copyright infringement, but a party granted a mere “non[-]exclusive license” does not have standing.

The Court then identified several of the exclusive rights that were conveyed to Minden under the Agency Agreements: Minden received the right to authorize third parties to reproduce, distribute, and display the photographs. Of course, Wiley’s argument is that these rights were not exclusive because the individual photographers also retained similar rights to the photographs. The Court then explained the divisibility principle inherent in the Copyright Act, which permits an owner to transfer a right or a subdivision of a right—for example, if an author wished to sell publication rights of the hardcover edition to one person and publication rights to create a movie based on the novel to another person. The Court reasoned that the divisibility principle permits the individual photographers to divide the exclusive rights between themselves and Minden as their exclusive licensing agent. The rights have been divided in such a way that the individual photographers retain the right to issue licenses of the photographs, but that Minden receives the exclusive right to act as a licensing agent for licensing the photographs. The Court held that Minden’s exclusive right to act as a licensing agent constitutes an exclusive license and therefore entitles it to sue infringers under the Copyright Act.

Doctrinally, the Court relied on the divisibility principle, but it also articulated several practicality arguments in support of its holding. First, the Court noted that it would be inconsistent with common sense to hold that Minden did not have standing as the individual photographers’ exclusive licensing agent. If the individual photographers never hired a licensing agent and instead handled the licensing on their own, they would have standing to sue for infringement—thus, there should be no reason why having hired Minden to manage licensing of the photographs they would not be allowed to also have Minden protect and defend the licensed photographs.

Second, if Minden were to be precluded from suing, the individual photographers would be significantly disadvantaged by having to file individual actions or joined actions under Rule 20. In the former case, the potential recovery would not justify the litigation expense; and in the latter case, the complexities of coordinating all of the individual named plaintiffs would make litigation burdensome.

Therefore, the Court held that Minden, as the exclusive licensing agent, has standing to sue for infringement under the Copyright Act.

Beastie Boys’ Attorney’s Fee Award Will Likely Prompt Copyright Owners to Bring Their Copyright Claims to Court

On June 15, 2015, a New York federal court ordered Monster Energy to pay the Beastie Boys $667,849.14 in attorney’s fees. This award comes after the Beastie Boys obtained a $1.7 million damages award in 2014 after Monster Energy ran a promotional video on its website that incorporated portions of five Beastie Boys songs without the Beastie Boys’ permission. Monster Energy unsuccessfully argued that they had obtained a license from DJ Z-Trip to use the Beastie Boys remix. Z-Trip had previously entered into an agreement with the Beastie Boys to create a remix of some of their songs to promote the group’s then-upcoming album. However, the court found that Monster Energy never obtained authorization from the actual rights holders to the musical compositions or the sound recordings. The jury found Monster Energy’s actions to be willful copyright infringement as well as false endorsement under the Lanham Act and awarded $1.7 million in damages. On the heels of this damage award, the Beastie Boys petitioned the court for $2,385,175.50 in attorney’s fees. Though the attorney’s fee award was eventually whittled down to $667,849.14, due in part to the fact that (1) fees were not recoverable on the Lanham Act claims, (2) certain legal work on certain issues were not recoverable by Monster, and (3) the Beastie Boys’ bills were abnormally high since the case was primarily staffed using senior attorneys, the court noted that the fee award was still substantial and when coupled with the damages award, properly compensated the Beastie Boys under the Copyright Act.

As a result of this substantial attorney’s fee award, it is likely that other copyright owners may seek damages and attorney’s fees in court for the appropriation of their work. Rather than try to procure a monetary settlement or seek redress through ADR procedures, copyright owners may opt to pursue their claims in court in order to obtain an appropriate damage award and a substantial fee award. Thus, this decision may motivate copyright owners to seek redress under the Copyright Act in court since they have some assurances that their attorney’s fees or a substantial portion of those fees are recoverable.

Not Licensed To Ill: Why Your Corporate Marketing Employees Need Training on IP Licensing

The case, Beastie Boys et al v. Monster Energy Co, U.S. District Court, Southern District of New York, No. 12-06065 addressed the circumstances under which a corporate defendant can be held liable for acts of willful copyright infringement committed by its employees within the scope of their employment or for its benefit. In a Dec. 4 decision, U.S. District Judge Paul Engelmayer refused to throw out Beastie Boys’ $1.7 million jury verdict against Monster Beverage Corp over the energy drink company’s use of the hip-hop group’s music in a promotional video without permission.

IP BLOG_monster energyThat decision noted that the jury listened to testimony from the employee of Monster who prepared the offending video, where he admitted that he lacked any training in music licensing. Nevertheless, the Monster employee also testified he previously produced a dozen similar “recap” videos for Monster. In those earlier videos, the employee testified that he did contact the artists to seek permission to use the respective artists’ music. The Monster employee was therefore familiar with the process of seeking authorization. Notwithstanding this awareness, the Monster employee did not seek permission from the Beastie Boys or their manager to use their music, nor did he believe that anyone else at Monster had done so. Judge Englemayer held that the jury could thereby determine that the Monster employee acted in reckless disregard of the Beastie Boys rights when using the Beastie Boys’ music without authorization in the promotional video.

Judge Engelmayer’s decision concludes with the observation that “[a]s the Beastie Boys’ counsel noted in closing argument, Monster, at the time, did not perform any training of employees related to the use of copyrighted or trademarked content; it therefore left [the Monster employee] to his own devices in producing the video.” One must ask how Monster’s absence of music licensing training to its employees would have made any difference in this case, given the employee’s prior experience with, and habit of obtaining required authorization from the artists. The answer is simple: A corporate training program must implement compliance policies and procedures for requesting and securing material subject to license, with a direct report to corporate officers tasked with compliance.

The take away here is that the preparation of the offending video fell within the employee’s scope of work, for which no training was received, and his misdeeds were imputed to his employer. As noted in the decision, where the defendant is a corporation, it can be held liable for acts of willful infringement committed by its employees within the scope of their employment or for its benefit. See Sygma Photo News, Inc. v. High Soc. Magazine, Inc., 778 F.2d 89, 92 (2d Cir. 1985) (citing Shapiro, Bernstein & Co. v. H.L. Green Co., 316 F.2d 304, 308–09 (2d Cir. 1963)) (“All persons and corporations who participate in, exercise control over, or benefit from the infringement are jointly and severally liable as copyright infringers.”); Arista Records LLC v. Lime Grp. LLC, 784 F. Supp. 2d 398, 437 (S.D.N.Y. 2011) (same). “[A]n employer is responsible for copyright infringement committed by an employee in the course of employment, under the normal agency rule of respondeat superior.” U.S. Media Corp. v. Edde Enter., Inc., No. 94 Civ. 4849 (MBM)

Image courtesy of Flickr by Mike Mozart

Does Your Business Need a Copyright Audit?

A copyright audit evaluates and reports on the status of your business’ copyrightable works of art.  An audit outlines considerations relevant to your ability to secure, protect and enforce your rights and, if desired, provides an appraisal of the dollar value of these rights.

To know if you need a copyright audit, consider:

  • Does your business rely on copyrightable works of art (writings, images, drawings, computer programs, photographs) and do you have certificates of copyright registration for these works?
  • Does your business use copyrightable works of art for ancillary business activities (marketing, advertising, website images, product descriptions, product manuals) and do you have certificates of copyright registration for these work?
  • Does your business use works of art from others and do you have copies of these written authorizations?
  • Does your business have the right to enforce the copyright rights you are authorized to use?
  • Does your business authorize others to use works of art and do you have copies of these authorizations?

Your answers to these questions will indicate if it is time to contact an IP audit specialist to discuss a copyright audit.

On the Metaphysics of Intellectual Property Law

How many angels can dance on the head of a pin?  What is the meaning of life?  When might Godot finally show up?  Questions like this can elicit many answers, and they won’t be wrong.

Is intellectual property law the same way?  A recent 2-1 decision by the quixotic Ninth U.S. Circuit Court of Appeals so indicates.  In Garcia v. Google, Inc., a Feb. 26 decision, the appeals court reversed the district court’s denial of a preliminary injunction in a copyright case that would have ordered the removal from YouTube of an anti-Muslim film that included a performance by the plaintiff actress.  Chief Judge Alex Kozinski, writing for the majority, found that the plaintiff had a copyright in her own artistic performance, and that the implied license she would normally have been deemed to have granted to the filmmaker was exceeded when he used it for a polemical movie entirely unlike the “action” film that had been described to her.  Judge Randy Smith dissented, applying a strict legal analysis of the appropriate standard of review.

It seems pretty clear on reading these opinions that this was a case, if not of hard facts making bad law, at least of results-oriented reasoning by the majority, a fact not lost on the dissent.  The defendant filmmaker had lied to the plaintiff and misused her performance, and the result had been that she and everyone else associated with the film had been the subject of an Islamic fatwa and received death threats, and the plaintiff had been forced to move and take other security precautions.  It plainly strained Judge Kozinski’s view of common sense that the plaintiff could not be protected.  And although it would be completely unworkable if every actor and actress in a movie owned a copyright that could be used to hold up publication, the majority was careful to say that normally there would be at least an implied license to use the performance in the finished work.  So all of this may be a distinction without a difference.

Nevertheless it serves as a useful reminder to IP practitioners to never lose sight of the equities.  Judges no less than juries want to feel that they have done the right and moral thing.  How many of us have argued for a defendant that there was no proof of speculative damages, yet have the trier of fact come back with a damages award because they did not like the defendant’s conduct?  At the end of the day — and maybe at the beginning — this is a people business.