Polak and Elrod: Joint ownership and implied license disputes in copyrights

December 13, 2017
Polak Polak

By Jonathan Polak and Cassie Elrod

With the increasing complexity between business relationships and joint ventures today, it is difficult for companies to know when they are putting their intellectual property in jeopardy. Copyrighted works of every type — from script and screenplay to software code or even a training manual — may fall victim to legal disputes because of a party’s introduction of their work to another. This is particularly true in cases where another party offers “tweaks” to the material or uses the work without a formal, written licensing agreement. The defenses of joint ownership and implied license may negate the client’s claims of copyright infringement.

Joint ownership

Elrod Elrod

Despite a client’s insistence that it owns the work outright, it may be vulnerable to the defense of joint ownership. If joint ownership is established, then the parties may share an undivided ownership interest in the copyrighted work. Absent agreement to the contrary, joint owners may freely exploit the copyrighted work without the consent of other joint owners, subject to certain requirements. Obviously, this can create many headaches for any client that seeks to monetize the work.

Intent to jointly own

There are two important factors that a court will consider when analyzing joint ownership disputes. First, the Copyright Act states that in general, for a joint work and joint ownership to exist, two or more individuals must intend their contributions to be merged into “inseparable or independent parts of a unitary whole” at the time of creation. 17 U.S.C. § 101. A collaborative process involving individuals contributing to the creation is often sufficient evidence to establish this intent, absent other evidence to the contrary. Control over the final product can be an important consideration in this analysis as well. Two 7th Circuit cases are instructive in this regard.

In Erickson v. Trinity Theatre, Inc., one party contributed detailed suggestions at all stages of development of the work at issue, but full creative control remained with the other party, who was under no obligation to follow those suggestions, and in fact did not follow them in certain instances. As such, joint ownership was not established. 13 F.3d 1061, 1068 (7th Cir. 1994).

In another case, Janky v. Lake County Convention and Visitors Bureau, both parties held control over the final product. 576 F.3d 356, 363 (7th Cir. 2009). The party making suggestions appeared to have the power to insist that they be incorporated into the final product. In contrast to Erickson, this control ultimately led the court to finding an intention to create a joint work and the establishment of joint ownership.

Copyrightable subject matter

The second joint-ownership factor courts will consider is whether each party’s contribution must be independently copyrightable. The majority view, followed by the 7th, 2nd and 9th circuits, requires that each author’s contribution be independently copyrightable — referred to as the “copyrightable subject matter test.” Under this test, each author’s contribution must represent “original expression that could stand on its own as the subject matter of copyright.” Erickson, 13 F.3d at 1068. The 7th Circuit has stated that standalone ideas, refinements, and suggestions are not the subject of copyright, and as such, will not satisfy this test. However, the differences between mere refinements or suggestions and concrete copyrightable changes can be a very close call and legal counsel should be sought prior to these incorporations.

Implied license

Another problem clients should be aware of is the accidental establishment of an implied license. An implied license does not transfer ownership of a copyright. However, once established, an implied license permits the use of a copyrighted work in a particular manner. I.A.E., Inc. v. Shaver, 74 F.3d 768, 775 (7th Cir. 1996). It may be granted verbally or implied by the conduct between the parties. It can arise from the intellectual property owner’s conduct regarding another’s use of the property, even when the owner has not expressly consented to such use. This aspect illustrates why clients must pay attention to both their communications and conduct toward potential business relationships as the existence of an implied license is an affirmative defense to a copyright infringement claim. I.A.E., Inc., 74 F.3d at 775.

The 7th Circuit has stated that an implied license may be granted “when (1) a person (the licensee) requests the creation of a work, (2) the creator (the licensor) makes that particular work and delivers it to the licensee who requests it, and (3) the licensor intends that the licensee-requestor copy and distribute his work.” I.A.E., Inc., 74 F.3d at 776 (citing Effects Associates v. Cohen, 908 F.2d 555, 558-59 (9th Cir. 1990)). In determining whether an implied license exists, courts look at objective factors evidencing the intent between the parties, including but not limited to, the delivery of the copyrighted work without warning that future use would constitute copyright infringement. On the other hand, silence or lack of objection may also amount to an implied license where the property owner knows of the other party’s use of the work and encourages it.

One aspect about an implied license that can be particularly troublesome to clients is the potential for such a license to be deemed irrevocable. When an implied license is supported by consideration, the license is deemed irrevocable. When supported by consideration, the license is considered a contract and a party’s unilateral ability to rescind would be inconsistent with the existence of the contract between the two parties. As such, parties should be particularly careful to keep these considerations in mind when collaborating with other organizations.

Before entering business relationships where intellectual property may be exchanged or created between the parties, clients and legal counsel should proactively address the potential issues of joint ownership and implied licenses. Doing so will not only protect the integrity of a client’s intellectual property, but also keep costly, time-consuming litigation at bay. Such analysis must be highly fact-intensive as no two situations are the same, and rules vary from circuit to circuit. A few dollars spent in advance will avoid countless headaches in the future. The good news for copyright holders is that all of these issues can be easily avoided with properly drafted agreements making ownership rights clear (notwithstanding contributions by others to the work), as well as the non-existence of any unlimited implied license.•

• Jonathan Polak is partner at Taft Stettinius & Hollister and chairs the firm’s Intellectual Property Practice. Cassie Elrod is an associate in the firm’s IP practice group. Reach them at jpolak@taftlaw.com and celrod@taftlaw.com. Opinions expresses are those of the authors.