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Assignment Of Right To Sue For Past Infringement

I’ve written before about a bunch of copyright infringement lawsuits brought by numerous photo agencies claiming that book publishers exceeded the scope of licenses granted, either by publishing in unlicensed territories or printing more copies than permitted by the license. The photo agency business model presents litigation challenges, though: only the legal or beneficial owner of an exclusive right has standing for the claim, but a licensing agent may not have exclusive rights to the photos.

In Alaska Stock, LLC v. Pearson Education, Inc., Alaska Stock tried to solve the problem by having the photographers assign their copyrights to it so that it could bring the infringement suit:

Alaska Stock v. Pearson Education Inc. Copyright Assignments

If you can’t read the embedded document, it is a number of assignments from various photographers that all say:

The undersigned photographer, the sole owner of the copyrights in the undersigned’s images (“the Images”) … hereby grants to Alaska Stock all copyrights and complete legal title in the Images. Alaska Stock agrees to reassign all copyrights and complete legal title back to the undersigned immediately upon resolution of infringement claims brought by Alaska Stock relating to the Images.

The undersigned agrees and fully transfers all right, title, and interest in any accrued or later accrued claims … brought to enforce copyrights in the Images, appointing and permitting Alaska Stock to prosecute said accrued or later accrued claims … as if it were the undersigned.

Any proceeds obtained by settlement or judgment for said claims shall, after deducting all costs, expenses and attorney’s fees, be divided and paid as per the photographer contract of 40% for the undersigned and 60% for Alaska Stock.

Defendant Pearson Education challenged the assignments, claiming they were of only “the bare right to sue.” The problem here was not so much the scope of rights granted—in a grant of “all copyrights and legal title in the Images” the photographer has clearly retained no ownership interest—but that the assignments were for the purpose of facilitating litigation and only temporary.

But the court didn’t buy that was a problem that affected the validity of the assignment:

[T]he “substance and effect” of the written assignments in this case reflect a true, albeit temporary, transfer of ownership interest. Indeed, even the copyright certificates themselves list Alaska Stock as the registered owner. Although Pearson points to evidence that the assignments were made for the purpose of facilitating litigation, including the fact that Alaska Stock has agreed to reassign ownership upon completion of the litigation, the photographers’ reasons for assigning ownership does not make the transfer of ownership any less effective. Property rights are transferred every day for any number of reasons and for varying periods of time; copyrights are no different. The Ninth Circuit has never suggested that the reason an assignment is made—even if that reason is simply to facilitate litigation—or an assignment’s temporary nature will transform an otherwise effective assignment of ownership into an assignment of the bare right to sue. Rather, the problem arises where the assignor labels an assignment a transfer of ownership, but expressly reserves the exclusive rights in the copyright to itself. Those are not the facts presented here.

Pearson’s challenge to Alaska Stock’s standing was therefore unsuccessful.

Alaska Stock, LLC v. Pearson Education, Inc., No. 3:11-cv-00162-TMB (D. Alaska Sept. 11, 2013).


The text of this work is licensed under a Creative Commons Attribution-No Derivative Works 3.0 United States License.

Tags: assignment, Righthaven, standing, stock photography suits

Abstract

The U.S. District Court for the Central District of California recently held that a plaintiff had standing to sue for patent infringement even though it had agreed to pay 100% of the proceeds of the infringement suit to a prior owner of the patent. 


To determine whether a plaintiff has standing to sue on its own for patent infringement, courts start by examining whether the plaintiff has title to the patents or received an assignment or exclusive license that conveys "all substantial rights." In Agarwal v. Buchanan, a California court ruled that the plaintiff, who had acquired rights in the asserted patents in exchange for "100 percent of any gross proceeds obtained from monetization efforts," had standing to sue for patent infringement.

Background

The patents in suit issued to two inventors who conveyed "all substantial rights, title and interests in all inventions, improvements, and obvious variants" to Bayshore Patent LLC ("Bayshore") in exchange for "50 percent of any gross proceeds" obtained through monetization, including "licensing and litigation." The inventors retained a reversionary interest in the event that "Bayshore was unable or unwilling to pursue monetization efforts."

Bayshore later conveyed "all substantial rights, title and interests in all inventions, improvements, and obvious variants thereof, disclosed, described, and/or claimed" to the CEO of Bayshore, Amit Agarwal, in exchange for "'100 percent of any gross proceeds' obtained from monetization efforts." Bayshore also retained a reversionary interest if Agarwal was "unable or unwilling to pursue monetization efforts."

Agarwal filed a patent infringement suit against Jeff Buchanan and his businesses, and in response, Buchanan filed a motion to dismiss the lawsuit for lack of standing.

The Agarwal v. Buchanan Decision

In reviewing the transfer from the inventors to Bayshore, the court considered the "intentions of the parties" as well as the "substance of what was granted" by looking to the terms of the agreement to determine if the transfer was an assignment. Specifically, the court considered whether the agreement transferred the "exclusive right to make, use, and sell patented products/services and the right to sue alleged infringers."

The court noted that the parties demonstrated an intent to create an assignment because the agreement referred to the parties as assignor and assignee and it also stated that "all substantial rights" were assigned.

The agreement also allowed Bayshore to sue for past infringement, which Buchanan argued was more specific than "all substantial rights" and therefore, excludes the rights necessary to create an assignment.  The court disagreed, noting that the right to sue for past infringement is not automatically transferred and that the parties included the provision to manifest an intent to transfer the right.  The court found that this was further proof of intent to create an assignment because rather than narrowing the scope of the rights, the parties included additional rights not automatically included in an assignment.

Finally, the court found that the inventors who made the transfer to Bayshore retained minimal control over the patents: the agreement to pay 50 percent of monetization was merely "consideration for the transfer" and the reversionary interest was "entirely consistent with an assignment" because it did not indicate an intent to transfer less than "all substantial rights."

Having determined that the first agreement assigned the necessary rights to confer standing to Bayshore, the court next considered the subsequent transfer from Bayshore to Agarwal, which was almost identical to the first agreement except that it required Agarwal to pay 100 percent of the monetization proceeds, rather than 50 percent.

Buchanan argued that because 100 percent of the monetization proceeds were retained by Bayshore, Agarwal did not have an economic interest in the patents and therefore did not have standing to sue under the patents.  The court rejected this argument, explaining that the provision did not diminish Agarwal’s rights to the patents for the purpose of standing.  Infringement of the patents would still injure Agarwal’s "exclusive right to make and sell" patented products, regardless of damages.  The court contrasted this situation with another case where the transferor retained a substantial amount of future proceeds in addition to substantial control as evidenced by maintaining the rights to make patented products, influence licensing and litigation, and limit sale or assignment of the patents.  The court ultimately concluded that the agreements did not restrict Agarwal’s rights as an assignee, and therefore he had standing to sue for patent infringement.  The court again concluded that this is merely "compensation for the transfer" that did not reserve control over the patents to Bayshore. 

In conclusion, the court found that both agreements transferred the necessary rights to the patents to confer standing to sue.

Strategy and Conclusion

Paying all the proceeds of litigation or licensing to a transferor does not necessarily deprive the transferee of standing to sue. Courts consider the overall agreement between the parties to determine their intent to create an assignment, and particularly whether the agreement transferred the exclusive right to make, use, and sell patented products/services and the right to sue infringers.

The Agarwal decision can be found here.

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