Unsealed Document Reveals 'Sham' Copyright Assignments To Righthaven

from the there-go-a-bunch-of-cases... dept

In our last post, we discussed the District Court's ruling to unseal a key document in one of the Righthaven cases, in which the court slammed Righthaven's tactics. But what was in the actual document. Well, it's quite a doozy. While Righthaven and Stephens Media resisted handing it over, the EFF was finally able to get a copy of the initial agreement between Righthaven and Stephens Media. One of the key claims that some defendants had made was that Stephens was not really assigning the copyright to Righthaven, and thus the lawsuits were a sham.

The details of the agreement certainly suggest that's the case. Despite the claims that Stephens was assigning the copyrights to Righthaven and that Righthaven had full control over the copyrights and the decisions concerning who to sue, the actual agreement between the two companies tells a very, very, very different story. Stephens only assigned the rights to sue. The agreement is pretty explicit on this point:
Righhaven shall have no right or license to Exploit or participate in the receipt of royalties from the Exploitation of the Stephens Media Assigned Copyrights other than the right to proceeds in association with a Recovery.
On top of that, it is revealed that Stephens Media gets 50% of all the money that Righthaven makes from these lawsuits, showing that it still has a substantial interest. Digging deeper, we learn that Righthaven doesn't even have the ability to decide who to sue without Stephens' approval:
Should Righthaven desire to sue, however, Stephens Media still controls whether suit will be brought through its right to send a "Declination Notice," upon receipt of which "Righthaven shall not take any Infringement Action with respect to the particular putative infringer set forth in any Declination Notice."... The bases upon which Stephens Media may stop a suit -- even after it has "assigned" the purported right to sue -- include whenever the person targeted "is a present or likely future valued business relationship of Stephens Media or otherwise would ... result in an adverse result to Stephens Media."
On top of that, even if it gives the okay to sue, it can later changes its mind. Stephens gets a "Right of Reversion," that lets it take back the copyright assignment "at any time." That doesn't look like a real copyright assignment at all. Oh, and if Righthaven decides on its own not to sue someone... Stephens Media gets the "copyright" back.

Keep digging: the idea that Righthaven and Stephens are two separate companies is called into question. As part of the investment, "one of the owners of Righthaven must be a 'Stephens Media Affiliate'."

This is effectively death for Righthaven's business model in these cases. Why? Because under Silvers vs. Sony Pictures, you can only assign one of the specific rights designated in Section 106 of the Copyright Act. You cannot simply assign "the right to sue," because that's a form of "selling lawsuits." Righthaven and Stevens had been insisting that there was a full copyright assignment here. But the agreement between the two companies makes it pretty clear that this is not at all true. I have to admit I'm curious to find out how the main Righthaven defender in our comments -- who argued that this whole line of legal attack was "intellectually dishonest" -- has to say about this now...

Effectively, this may end most, if not all, of Righthaven's current lawsuits on behalf of the LVRJ/Stephens Media. I feel bad for all the sites that already settled and paid up, because it appears that they probably didn't need to do so. It's not clear how this revelation may impact the suits on behalf of MediaNews and the Denver Post... but our next post will deal with some issues related to those cases.

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  1. icon
    Karl (profile), 27 Apr 2011 @ 10:34am

    Re:

    First of all, that's not the difference between a licensee and an assignee.

    This is the definition as it applies in the real world.

    I should probably be clear here. There are different types of licenses, and there are even different types of exclusive licenses.

    First, there's a non-exclusive license. I think we both agree that this type of licensee is not an "owner" in any sense of the word, so we'll drop it from the discussion.

    Then there are exclusive licenses. In this case, the licensee has the right to exclude anyone, including the licensor, from exercising any of the rights granted. These licensees are considered owners of the rights that they were licensed.

    But are they the sole owners? Not necessarily. Exclusive licenses may be granted with conditions; for instance, regional restrictions (the most common). In this case, the licensor still controls the rights granted, as long as they are outside of those restrictions (e.g. if you grant an exclusive license in the U.S., you still control the rights anywhere outside of the U.S.).

    From what I can tell, this is the type of exclusive license Nimmer is talking about. The licensee in the U.S. is the copyright owner, but the licensor has not transferred the title, since the licensor still holds some of the rights licensed to the licensee (albeit restricted). Incidentally, according to Eden v. Florelee, the licensor in this case does not have standing to sue for infringement in the U.S.

    There is, however, a different sort of "exclusive license." In this case, the licensor grants an exclusive license, in perpetuity, and worldwide. In this case, the "licensor" has transferred all the rights to the "licensee." With regards to those rights, the "licensee" is the title owner. (If the licensor still has a financial interest in the rights, he or she is the "beneficial owner," but does not own the title.)

    This is possible because each of the rights in 106 (including the "title") can be transferred separately. (This is not true in patent law, from what I understand, which is why a patent licensee is never considered a patent owner. It's also not true of copyrights prior to 1973.)

    The term "assignment," in the context of copyright law, is synonymous with "an exclusive, worldwide, perpetual license to all rights in 106." Assignment transfers the entire bundle of rights in 106.

    This is why this statement is slightly misleading:

    He didn't just grant an exclusive license--he granted title ownership.

    You're right that he didn't grant just any exclusive license. Instead, he granted a perpetual, worldwide, exclusive license, to all the rights in 106. That's how the title was transferred from him to Fantasy. In general, it's how copyright titles are transferred.

    Leaving aside the difference between exclusive licenses and title transfers, there is one other thing to recognize. A "title" is not a piece of paper somewhere that claims you're the owner. In copyright, a transfer of "title" is a transfer of one or more of the rights in 106. That is, the title owner must be granted the exclusive use of those rights (which can later be licensed or transferred again). If you never transfer the exclusive use of any of those rights, you haven't transferred the title.

    This is why the judge declared that Righthaven was not the title holder of the rights in this case. They never held the exclusive use of any of the rights in 106, at any time, in any region.

    The contract attempts to get around this, by saying that Righthaven was assigned the title, but not any of the rights. But you simply can't do this. A transfer of the title just is a transfer of the rights; they are not separable entities. Once you've lost interest in the rights, you have "no interest in the copyright itself."

    In fact, that's the entire intent of copyright transfer. The assignor tranfers the title to the assignee, with the intent that the assignee exploit the rights. That it wasn't the intent here is the first clue that this "transfer of title" is a sham.

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