THE RIGHT TO TRANSFER COPYRIGHT LICENSES
IVAN HOFFMAN, B.A., J.D.
If you are one of those parties that relies on “form” contracts copied from books or passed around by colleagues, then you should pay very careful attention to a case coming out of the United States Court of Appeals for the Ninth Circuit (Gardner etc. al vs. Nike, Inc.). In that case, the Court ruled that licensees of exclusive rights in copyright cannot themselves further transfer any of their rights in that copyright to any other party without the express consent of the owner of the underlying copyright.
This has implications for publishers, authors, web site owners, web site designers, cover artists, illustrators, recording artists, songwriters, record and music publishing companies and any other parties that deal in and with copyrights of any sort.
The Gardner Case
In this case, Nike had granted Sony an exclusive license to utilize a Nike copyrighted cartoon character called MC Teach in certain merchandise. The exclusive license, while in writing, was absolutely silent on whether or not Sony had the right to transfer its said rights to any other party. Notwithstanding this, Sony transferred its rights to Gardner. The issue in the case was joined as to whether or not Sony had that right. The Court held that since the license between Sony and Nike did not specifically grant the right to Sony to further sublicense, that under the provisions of Section 201 (d) (2) of the United States Copyright Act, such assignment was not permitted.
The Court stated that the only rights a licensee has under any sort of exclusive license was the “protection and remedies accorded to the copyright owner….” These “protection and remedies” did not include the right to transfer their rights absent an express agreement from the copyright owner allowing them to do so.
What Does This Mean For You?
Here are some specifics. If you are a publisher and you acquire some but not all rights in a book from an author, it is, generally speaking, via an exclusive license of those right in copyright, such as the right to print, translate etc. If the author retains certain rights, what you have obtained, in the eyes of the law, is a license that can be exclusive or non-exclusive in regard to the rights you have obtained. Unless the author has specifically granted you the right to further transfer the rights the author has transferred to you, under the ruling of this case, you cannot do so. This means that you and only you, as the publisher, can exploit the rights the author has granted to you and you cannot license your rights to the work. This means you cannot grant any other party the right to translate the book into another language, make merchandising deals, grant book club rights etc. It means that the book is essentially unmarketable.
The same is true, as another example, if you are a publisher or author acquiring some but not all rights from a cover artist or illustrator and your contract does not expressly grant you the right to further transfer that party’s work. Frankly, the failure of publishers to obtain a valid, written agreement from cover artists or illustrators is the single biggest (and often most costly) error publishers generally make. This case makes that failure even more potentially disastrous for it means that the publisher is very limited in what rights it has acquired from that artist. You should also read about other legal issues in “The Cover Artist/Illustrator Contract.”
The same is true, as yet another example, if you have been granted the right to use third party materials such as quotes, photographs etc. “in your book” and your contract does not expressly grant you the right to further transfer that party’s work. It may mean that if your book is successful and you wish to make other deals, you cannot do so. Read “The Permission Form” as well.
The same is true, as yet another example, if you are a web site owner taking some but not all rights from a web designer or developer or if you are a web designer or developer taking some but not all rights from a subcontractor and your contract does not expressly grant you the right to further transfer that party’s work.
The same is true, as yet another example, if you are a recording or music publishing company taking some but not all rights from a recording artist or song writer and your contract does not expressly grant you the right to further transfer that party’s work.
The above examples are not intended to be exhaustive of the many ways this problem can arise. All the above examples and others presume that the relationship is not a valid work made for hire relationship as specifically defined in the United States copyright law.
In sum, if you are a party taking some but not all rights from a copyright owner, if the transfer is to be exclusive then it must be in writing. (Read “A Legal Nightmare: The Unwritten License”). But whether you are taking these rights exclusively or non-exclusively, if your agreement is deficient in regards to the right to further transfer, your rights to fully exploit what you believe you have been granted may be clouded at best. And if you are the copyright owner in such an arrangement, you may find your rights in copyright also clouded by claims on the part of your licensee and takers from your licensee. Under the best of circumstances, cloudy rights are a legal and marketing nightmare and not in any party’s best interest…except for lawyers. Without a clear set of rights and limits on those rights, set forth in a thorough and valid agreement, you may find that instead of making money you are spending it like it was going out of style. You may find yourself embroiled in costly and stressful litigation. You may find, thus, that your initial attempt to “save” money by using such form contracts or no contracts has turned out to be a very expensive “savings.”
So it appears, no matter which role in these transactions you may occupy, that you are setting yourself up in a lose-lose situation. If your project fails, you lose. If your project wins, you also lose because the other party makes money and you do not and/or you spend many, many times more money in legal fees and costs and maybe damages than you might have had you done it “right” in the first place. If the project is a stiff, maybe it will not matter (although people sue in these instances as well). But if your project is the one in a hundred that is a “hit” and you have not put your legal foundation together properly, you cannot count the number of claims that are going to come out of the woodwork. My experience is that if there is more than $1.82 on the table, people run to lawyers. :-). And if you miss out on your one chance for success and others make money and not you or you spend it all in the courtroom, then how much have you “saved” by copying from forms?
Is this any way to do business?
And how do you deal with the regret when you lose and someone else wins when you could have very likely prevented such an outcome?
I have written many times: “Help me is almost always cheaper than fix me.”
Whether or not you agree with the Court’s decision, it is currently the law in the Ninth Circuit and thus has possibilities of influencing other courts elsewhere in the country. Thus, you must take heed. Taking heed means reviewing all of your acquisition agreements with authors, publishers, web designers, cover artists, editors etc. to make certain that they fully and adequately give you the legal rights you believe you bargained for. And the same holds true for the artists, creators, authors etc. who have licensed certain rights.
We are in the “day of the deal” and that means that you have to look within the 4 corners of your agreements since the law may not help and may indeed restrict your rights.
Read “Private Laws,” “The Need for Vision,” “Set to Fail” and “What Business Are You In?”
Copyright © 2002 Ivan Hoffman. All Rights Reserved.
This article is not legal advice and is not intended as legal advice. This article is intended to provide only general, non-specific legal information. This article is not intended to cover all the issues related to the topic discussed. You should not rely on this article in any manner whatsoever and you should not draw any conclusions of any sort from this article. The specific facts that apply to your matter may make the outcome different than would be anticipated by you. This article is based on United States laws but the laws of other countries may be different. You should consult with an attorney familiar with the issues and the laws of your country. This article does not create any attorney client relationship and is not a solicitation.
No portion of this article may be copied, retransmitted, reposted, duplicated or otherwise used without the express written approval of the author.