Category: Copyright

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Expressly State the Right to Recover for Past Infringements in a Copyright Assignment

Like with patents, in order for a copyright assignee to recover damages for infringement occurring before the assignee obtained ownership of the copyright, the general rule is that the assignment must expressly so state. The Nimmer on Copyright treatise provides that a “grant of copyright—even if it purports to convey ‘all right, title and interest’—is generally construed not to assign existing causes of action, unless expressly included.”

This is illustrated in the case of Oskar Sys., LLC v. Club Speed, Inc., 745 F. Supp. 2d 1155 (C.D. Cal. 2010). There Oskar sued a number of defendants for allegedly infringing Oskar’s copyright in source code for a computer program used in the operation of go-kart tracks. Contemporary Systems, Inc. (CSI) developed in 2001-2002 a computer software program (Oskar Software) to be used in connection with certain go-karting facilities. In 2005, CSI licensed the Oskar Software to and installed it on the premises of Pole Position Raceway. In 2006, certain defendants hired a programmer to design and develop a replacement software to operate Pole Position’s track, and that replacement software called Speed Sheet is developed. Pole Position declines to renew its license for the Oskar Software in August 2006.

On October 1, 2007, CSI transfers “all of its business assets related to the ‘Oskar’ business operations” to Plaintiff OSKAR Systems, LLC. Oskar later sued a number of defendants including Pole Position alleging infringement of Oskar’s copyright in source code for Oskar Software in connection with the Speed Sheet replacement program.

But one of the reasons that the copyright infringement claim failed was because the assignment transferring “all of its business assets related to the ‘Oskar’ business operations” to Plaintiff OSKAR Systems failed to expressly include causes of action for past copyright infringement. The allegedly infringing Speed Sheet software was developed in 2006 before Oskar Software became owner of the copyright via the October 1, 2007 assignment. And since there was no explicit assignment of claims for past copyright infringement, Oskar Software had no rights in copyright claims occurring before October 1, 2007.

There might be an exception to the general rule that assignment of claims for past infringement must be explicit. That exception might apply, for example, when “all assets of a business are sold in addition to and in connection with the sale of the copyright.” See SAPC, Inc. v. Lotus Dev. Corp., 699 F. Supp. 1009, 1012 (D. Mass. 1988), aff’d, 921 F.2d 360 (1st. Cir. 1990) (appeals court finding the contract “unambiguously transferred accrued claims for infringement” but did not explicitly mention them). Even if there is an exception, its better not to rely on it and instead explicitly include claims for past infringement.

If a copyright assignee desires to pursue claims for past infringement occurring before the date of the copyright assignment, the copyright assignment should include expressly the right to sue and recover for past infringements and damages.

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Owning and Assigning Copyright in Software Developed by Employees and Contractors

Owning a copyright in software, like other copyrightable works, developed by another usually arises by an employment relationship or by a written agreement.

If the software is developed by someone other than an employee acting within the scope of his/her employment, then the contracting party needs a written agreement with the software developer. And needs to decide whether to characterize the work as a work made for hire or not in that written agreement. Below are some factors to consider in making that decision.

Work Prepared by an Employee Within the Scope of Employment

A party that is not the creator may be considered the author, and therefore the initial owner, of the work if the work is considered a work made for hire under the Copyright Act. A work made for hire arises in two contexts: (1) when an employee creates the work within the scope of their employment, and (2) under a written agreement where the work falls into at least one of nine statutory categories and the parties agree in writing that the work is a work made for hire. 17 USC 101.

In the first case, the employer will be considered the author of the work made for hire and will own the work created by an employee when the work is prepared by an employee within the scope of his or her employment. 17 USC 201(b) provides, “In the case of a work made for hire, the employer or other person for whom the work was prepared is considered the author for purposes of this title, and, unless the parties have expressly agreed otherwise in a written instrument signed by them, owns all of the rights comprised in the copyright.”

Work For Hire or Assignment?

If the software is not created by an employee within the scope of his/her employment, then the question is whether to structure the arrangement as a work made for hire or an assignment under a written contract.

When the work is a work made for hire, the hiring/contracting party is considered the author of the work rather than the creator. This avoids the statutory right of an author to terminate an assignment or transfer rights under 17 USC 203. That section provides that for works other than works made for hire, the exclusive or nonexclusive grant of a transfer or license of copyright or of any right under a copyright can be terminated 35 or 40 years after the date of execution if certain conditions are met. This right of termination cannot be waived by contract. Therefore, since works made for hire are excluded from rights termination under section 203, they may be preferred, if available. However, software often changes quickly. Therefore, 35 years later, the software may no longer be commercially valuable or may have been completely changed. As a result, the risk of termination under section 203 might be low for software.

Also, characterizing the work as a work made for hire, may have employment implications. For example the California Labor Code § 3351.5 provides an employee includes “…(c) Any person while engaged by contract for the creation of a specially ordered or commissioned work of authorship in which the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire, as defined in Section 101 of Title 17 of the United States Code, and the ordering or commissioning party obtains ownership of all the rights comprised in the copyright in the work.”

Therefore, characterizing a work as a work made for hire in connection with California may have the consequence of making the software contractor an employee under California labor code, with its attendant obligations.

Does the Work Qualify as a Work Made For Hire?

Outside of employment, for a non-authoring party to be considered the author of the work as a work made for hire, the work must be specially ordered or commissioned for use as at least one of nine categories of works and the parties must expressly agree in a written instrument signed by them that the work shall be considered a work made for hire. The nine categories are:

  1. as a contribution to a collective work,
  2. as a part of a motion picture or other audiovisual work,
  3. as a translation,
  4. as a supplementary work,
  5. as a compilation,
  6. as an instructional text,
  7. as a test,
  8. as answer material for a test, or
  9. as an atlas

Software is not a listed category. However, software development might fall in to one of the categories, such as a contribution to a collective work or a compilation or a part of other audiovisual work, depending on the nature and circumstances of the particular software development.

Further, it may be difficult to determine at the beginning of a project whether the software development will fall into one of the categories. Yet, it may not be necessary to make such a determination. Instead, alternative language can be used capturing subject matter that is eligible to be a work made for hire and capturing ineligible subject matter via an assignment.

Alternative Language Seeking Work Made for Hire with Fall Back to Assignment

When the parties desire the software development by non-employees to be a work made for hire, alternative language may be used in the applicable written agreement. The agreement will provide that the work is a work made for hire, but if the work does not qualify as a work made for hire, the creator/party hereby assigns the copyright in the work. Therefore, the agreement provides work made for hire language and present assignment language should the work not qualify as a work made for hire (because the work does not fall into one of the nine categories). In that way, the work will be considered a work made for hire if eligible under the statute, but if not, then ownership of the copyright is transferred by assignment.

Using work made for hire language only in an agreement without alternative assignment language may be risky. If the software development does not fall into one of the nine categories, then it will not be a work made for hire, notwithstanding what the agreement says. A parties’ agreement that the work is a work made for hire, does not make it so if the work does not fall into one of the nine categories. And without fall back assignment language, ownership may not vest in the contracting party for such non-qualifying work.

A Writing is Needed

Regardless of whether software qualifies as a work made for hire, a written agreement is generally needed to own software developed by someone other than an employee within the scope of their employment. If the software falls into one of the nine categories, the Copyright Act requires the parties to expressly agree in a written instrument signed by them that the work shall be considered a work made for hire. If the software does not fall into one of the nine categories, then ownership of the copyright from the authoring programmers or party must be transferred by a signed writing. This is required by 17 USC 204(a), which provides that “A transfer of copyright ownership, other than by operation of law, is not valid unless an instrument of conveyance, or a note or memorandum of the transfer, is in writing and signed by the owner of the rights conveyed or such owner’s duly authorized agent.” Therefore, even if the work is not a work made for hire, a signed writing transferring ownership is generally needed.

Conclusion

When software is to be developed by another, other than by an employee within the scope of their employment, a written agreement is needed to own the copyright in the software. Decide whether to structure the agreement as a work made for hire considering at least employment implications (such as in California) and termination rights under 17 USC 203. If it is desired to structure as a work made for hire, consider using fall back assignment language in case the work does not fall into one of the nine categories and therefore does not qualify to be a work made for hire.

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Registration or Refusal by Copyright Office Required to Sue for Copyright Infringement

On March 4, 2019, the U.S. Supreme Court decided that one portion of section 411(a) of the Copyright Act requires a copyright registration in order to file suit for copyright infringement and that a registration occurs when the Copyright Office registers a copyright. The court found that simply filing an application for copyright registration was not enough to meet the statutory requirement that a “registration . . . has been made” under 17 USC 411(a) prior to filing suit. Instead action by the Copyright Office on the application was necessary.

According the the Copyright Office, the average processing time for a copyright application is about six months. Therefore, this decision will delay the time until an owner of an unregistered copyright can file suit. Further, this decision may lead some plaintiffs to forgo ancillary copyright claims in suits where other claims predominate or are otherwise available.

Copyright owners should consider promptly registering their copyrights so they can take quick action to stop infringement when necessary and avoid a six month (or whatever is the then existing Copyright Office processing time) delay in filing suit while waiting for the Copyright Office to take action.

Section 411(a) also permits a lawsuit to be filed if the Copyright Office refuses registration. Therefore, some action by the Copyright Office on an application is usually necessary, subject to some exceptions, in order to file suit.

Case: Fourth Estate Public Benefit Corporation v. Wall-Street.com, No. 17-571 (2019).

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Register Copyright Early to Ensure Right to Timely Enforce: 11th Circuit Requires Copyright Registration Before Infringement Suit Is Filed

The Copyright Act requires the “registration” of a copyright with the Register of Copyrights before a copyright infringement suit can be filed. 17 USC 411(a). Despite the presence of the word “registration” in the statute, courts are divided on whether registration occurs when an owner (1) files an application to register the copyright or (2) only when the Register of Copyrights registers the copyright. The 11th Circuit followed the “registration approach” and held a registration occurs when the Register of Copyrights registers the copyright claim, in the case of Fourth Estate Pub. Ben. Corp. v. Wall-Street.com, LLC, 2017 U.S. App. LEXIS 8766, No. 16-13726 (11th Cir. May 18, 2017).

This matters, under the registration approach, because if a copyright owner does not have a registration at the time infringement occurs, the owner will not only need to file an application, but will need to wait for the Register of Copyrights to act on the application before the owner can sue for copyright infringement under the registration approach. The Copyright Office’s website currently provides that it could take 6 to 8 months for the office to act on a new electronically filed copyright application. That’s a long time to wait to file suit in the face of ongoing copyright infringement.

Therefore, unregistered copyright plaintiffs clearly prefer the “application approach,” which allows a copyright owner to file suit a soon as they file an application to register the copyright.

The statute at issue, 17 USC 411(a), provides, in part, “[N]o civil action for infringement of the copyright in any United States work shall be instituted until … registration of the copyright claim has been made in accordance with this title.”

As explained in the Fourth Estate case, the Fifth and Ninth Circuit follow the application approach. The Eighth Circuit likely also follows the application approach. The Tenth, and now, the Eleventh Circuits follow the registration approach. The First and Second Circuits acknowledge the split on the issue but have not adopted either approach.

The caselaw of the Seventh Circuit includes conflicting dicta on which approach it follows, or whether the question is decided, Gaiman v. McFarlane, 360 F.3d 644, 655 (7th Cir. 2004) (“[A]n application to register must be filed, and either granted or refused, before suit can be brought.”), Chi. Bd. of Educ. v. Substance, Inc., 354 F.3d 624, 631 (7th Cir. 2003) (“[A]n application for registration must be filed before the copyright can be sued upon.”), Ngwenya v. Indianapolis Pub. Sch., 564 F.3d 804, 806 (7th Cir. 2009).

As recently as 2016, the District Court for the Western District of Wisconsin noted that district courts within the Seventh Circuit (which covers Illinois, Wisconsin, and Indiana [PDF Map]) are also split, some following the registration approach and some following the application approach. See Robbins v. Svehla, 2016 U.S. Dist. LEXIS 162064, 4-5 (W.D. Wis. Nov. 22, 2016).

Even if the copyright owner is located in a circuit that follows the application approach, a circumstance could arise where the owner needs to file suit in a circuit that follows the registration approach. Therefore, the safest approach is to file an application to register a copyright early before infringement occurs, so that the copyright right can be enforced when the need/desire arises.

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Copy Protected General Assembly Transcripts?

Here you can access transcripts of the Illinois House and Senate floor debates going back to 1997 1971 (change noted here). The transcripts are in PDF format. On occasion I include an excerpt from a transcript in my work. But I can’t copy and paste from the PDFs because they are set to prohibit copying. Check it out for yourself. Why is the copy function blocked on the PDF transcript files?

NoCopy_GenAssmTrans2

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Jobs Says Apple Supports DRM-Free World

Wired reports on Steve Jobs’ Open Letter where he announces Apple supports a DRM-free music distribution model. Many, including Bill Gates, have stated that DRM does not stop piracy. And some have argued that Apple benefits from DRM because it locks users into only using iPods and iTune.

Jobs acknowledged “DRMs haven’t worked, and may never work, to halt music piracy.” But he does not believe users are locked into using music players from one company when they buy DRM music from that company’s online music store. He stated:

Today’s most popular iPod holds 1000 songs, and research tells us that the average iPod is nearly full. This means that only 22 out of 1000 songs, or under 3% of the music on the average iPod, is purchased from the iTunes store and protected with a DRM. The remaining 97% of the music is unprotected and playable on any player that can play the open formats. Its hard to believe that just 3% of the music on the average iPod is enough to lock users into buying only iPods in the future. And since 97% of the music on the average iPod was not purchased from the iTunes store, iPod users are clearly not locked into the iTunes store to acquire their music.

He points out that 90 percent of songs are sold on CDs that are not DRM protected. After asserting that DRM does not appear to be good for much. Jobs states:

If anything, the technical expertise and overhead required to create, operate and update a DRM system has limited the number of participants selling DRM protected music. If such requirements were removed, the music industry might experience an influx of new companies willing to invest in innovative new stores and players. This can only be seen as a positive by the music companies.

He concludes by asking those against DRM to focus on the convincing Universal, Sony BMG, Warner and EMI to license music without DRM.

Will this announcement move the marketplace towards a DRM-free model? Bill Gates criticized DRM, yet Microsoft’s new music player the Zune and the Zune Marketplace operate as a closed DRM protected system much like Apple’s iPod/iTunes combination.

The governments of Norway, Denmark, Sweden, France, Germany, Finland, and the Netherlands have “rebelled” in some form against Apple’s DRM system that prohibits users from playing a song downloaded from iTunes on a music player other than an iPod. It will be interesting to see if European authorities take Job’s invitation to “redirect their energies towards persuading the music companies to sell their music DRM-free.”

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The Sealand Fantasy

Pirate Bay SealandA number of sites reported [Gizmodo, Slashdot, Glading, Techbuzz, Wired, Ars Technica] Pirate Bay’s announcement that it wants to buy its own island nation to avoid those pesky copyright laws. Pirate Bay started a donation drive to purchase the man-made island called Sealand. Ars Technica‘s article provides the most detailed coverage of the situation. The island is a “World War II-era British naval platform sitting in the sea off the coast of Harwich in southern England.” Sealand has a website explaining its history. The site states:

Sealand was founded on the principle that any group of people dissatisfied with the oppressive laws and restrictions of existing nation states may declare independence in any place not claimed to be under the jurisdiction of another sovereign entity. The location chosen was Roughs Tower, an island fortress created in World War II by Britain and subsequently abandoned to the jurisdiction of the High Seas. The independence of Sealand was upheld in a 1968 British court decision where the judge held that Roughs Tower stood in international waters and did not fall under the legal jurisdiction of the United Kingdom.

Torrent Freak provides a list of alternative island nations that might work if the deal with Sealand doesn’t fly.

It seems that a company called Havenco is already (or has in the past) providing webhosting from Sealand. Havenco states “HavenCo provides a place for secure e-Commerce, privacy-protected Internet services and uncensorable free speech.” Uncensorable free speech? This is the same type of argument that Yahoo made in 2000 to a French Court. There, the French court ordered Yahoo to block Nazi goods from appearing for sale on web pages in France. Yahoo’s servers were not in France. But as Tim Wu explained in a Legal Affairs article, the plaintiff showed that Yahoo could identify and screen users by geography. Yahoo eventually complied because it had assets in France that were at risk of seizure.

Whether its HavenCo or Pirate Bay operating on Sealand or some other micronation, it is doubtful that a rouge company can escape influence of “U.S. content owners.” Pirate Bay needs internet access, right? Otherwise only those people that fly in and live on the island can partake of the content on Pirate Bay’s servers. Looking at the Sealand platform, I’m not sure people will be beating down their door to live there. Plus the platform’s size means only a limited number of people could fit on it. So, Pirate Bay will need a company in some other nation to provide a connection to the internet. The connection could possibly come from England because England is close to Sealand.

Yesterday, Market Watch reported the International Federation of the Phonographic Industries (IFPI) — which represents the recording industry worldwide — “threatened to take legal action against Internet Service Providers if they failed to take action against users who illegally upload and download music.” The IFPI Chairman John Kennedy said:

That job (of prosecuting file-sharers) shouldn’t be ours – it should be done by the gatekeepers of the Web, the Internet Service Providers, who unquestionably have the technical means to deal with copyright infringement if only they would take responsibility for doing so.

Here, if Pirate Bay comes up with the funds to purchase an island nation, the IFPI is going to sue whoever is providing Pirate Bay with internet access. If the ISP is in the UK, the IFPI might sue them in the UK courts. The IFPI might bring a claim before the WTO. The IFPI might employ diplomatic pressure of other nations to force the nation where the ISP is located to shut down the connection.

According to HavenCo “Sealand currently has no specific regulations regarding patents, libel, restrictions on political speech, cryptography, restrictions on maintaining customer records, DMCA or music sharing services.” But as the Yahoo case shows, that may not matter. Even Bill Gates criticized DRM, but unless you want to live on Pirate Bay’s island, the pirate’s treasure is probably not going to be accessible to you via the internet from treasure island for long.