Judge Rules That Righthaven Lawsuit Was A Sham; Threatens Sanctions

from the huge-win dept

In a huge victory against copyright trolls, a judge has thrown out the lawsuit filed by Righthaven against Democratic Underground. This was the key case where (after lots of stalling), Righthaven eventually revealed the strategic agreement between it and Stephens Media, which basically shows the copyright assignment to Righthaven was a fraud. All Stephens really transferred was a "right to sue," and that's not a transferable right under copyright law. As we had expected, the judge relies on the Silvers vs. Sony Pictures case, which notes that you can't assign just the right to sue.
Pursuant to Section 501(b) of the 1976 Copyright Act... only the legal or beneficial owner of an exclusive right under copyright law is entitled, or has standing, to sue for infringement. Silvers v. Sony Pictures Entm't Inc.... In so holding, the Ninth Circuit followed the Second Circuit’s decision in Eden Toys, Inc. v. Florelee Undergarment Co.,... superseded by rule and statute on other grounds.... Section 106 of the Act defines and limits the exclusive rights under copyright law.... While these exclusive rights may be transferred and owned separately, the assignment of a bare right to sue is ineffectual because it is not one of the exclusive rights.... Since the right to sue is not one of the exclusive rights, transfer solely of the right to sue does not confer standing on the assignee.... One can only obtain a right to sue on a copyright if the party also obtains one of the exclusive rights in the copyright... Further, to obtain a right to sue for past infringement, that right must be expressly stated in the assignment.
That's the basics. As the court digs into the details, it becomes clear that the judge is monumentally not impressed by the arguments from Righthaven and Stephens Media. A couple of choice quotes:
This conclusion is flagrantly false—to the point that the claim is disingenuous, if not outright deceitful.

The companies’ current attempt to reinterpret the plain language of their agreement changes nothing. In reality, Righthaven actually left the transaction with nothing more than a fabrication...

Righthaven argues that Section 15.1 of the SAA gives the Court authority to correct any provision of the SAA that is deemed void or unenforceable to approximate the manifest intent of the parties. The problem is that this argument requires a provision of the SAA to be void or unenforceable. However, Righthaven’s problem is not that any provision of the SAA is void or unenforceable but that the SAA simply does not grant Righthaven any of the exclusive rights defined in Section 106 of the Act required for standing. Therefore, the SAA is not void or unenforceable, it merely prevents Righthaven from obtaining standing to sue from the Assignment. Accordingly, the Court need not and shall not amend or reinterpret the SAA to suit Righthaven’s current desires...

Here, Righthaven does not ask the Court to recognize an oral transfer with a late made written memorandum of the deal, but to fundamentally rewrite the agreement between Righthaven and Stephens Media to grant Righthaven rights that it never actually received...
Towards the end, the judge unloads on Righthaven's attempt to claim that because earlier rulings by the same court had been okay with its standing, there was some sort of precedent:
Finally, Righthaven contends that multiple courts within this district have already determined that Righthaven has standing to bring claims for past infringement under the Silver standard based on the plain language of the copyright assignment. At best, this argument is disingenuous. As the undersigned issued one of the orders Righthaven cites for this argument, the undersigned is well aware that Righthaven led the district judges of this district to believe that it was the true owner of the copyright in the relevant news articles. Righthaven did not disclose the true nature of the transaction by disclosing the SAA or Stephens Media’s pecuniary interests. As the SAA makes abundantly clear, Stephens Media retained the exclusive rights, never actually transferring them to Righthaven regardless of Righthaven’s and Stephens Media’s current contentions. Further, Righthaven also failed to disclose Stephens Media in its certificates of interested parties, despite Stephens Media’s right to proceeds from these lawsuits...
As for that last point, it may open up Righthaven to a world of hurt. The judge notes that it appears Righthaven violated the law here and gives the company two weeks to explain why it shouldn't face sanctions not just for the failure to disclose in this case, but in all of its cases:
As shown in the preceding pages, the Court believes that Righthaven has made multiple inaccurate and likely dishonest statements to the Court. Here, however, the Court will only focus on the most factually brazen: Righthaven’s failure to disclose Stephens Media as an interested party in Righthaven’s Certificate of Interested Parties. (Dkt. #5.) Rule 7.1-1 of the Local Rules of Practice for the District of Nevada requires parties to disclose “all persons, associations of persons, firms, partnerships or corporations (including parent corporations) which have a direct, pecuniary interest in the outcome of the case.” This Local Rule requires greater disclosure than Federal Rule 7.1, which only requires non-governmental corporate parties to disclose parent corporations or corporations owning more than 10% of the party’s stock. Frankly, if receiving 50% of litigation proceeds minus costs (Dkt. #79, SAA Section 5) does not create a pecuniary interest under Local Rule 7.1-1, the Court isn’t sure what would.

Making this failure more egregious, not only did Righthaven fail to identify Stephens Media as an interested party in this suit, the Court believes that Righthaven failed to disclose Stephens Media as an interested party in any of its approximately 200 cases filed in this District. Accordingly, the Court orders Righthaven to show cause, in writing, no later than two (2) weeks from the date of this order, why it should not be sanctioned for this flagrant misrepresentation to the Court.
I would suggest that judge Roger Hunt is not particularly pleased with Righthaven. He's also allowing Democratic Underground lawyers to seek attorneys' fees from Righthaven and Stephens Media.

This will likely kill off most of the remaining Righthaven cases in Nevada. While not all are handled by Judge Hunt, you can be quite certain that all the other judges in the court will be aware of this. The impact on the Colorado cases isn't as certain, but all of those cases are under a single judge who is equally upset at Righthaven, and reviewing similar issues. I wouldn't be surprised to see a similar end result.

Righthaven could (and might?) appeal, but it's going to be difficult to reverse this. Furthermore, in theory Righthaven could come up with a new agreement with Stephens Media and continue suing, but the court already expressed its doubts about the weak attempt by the two companies to "amend" the existing agreement, suggesting that it was just "cosmetic adjustments" that the court did not believe would change the outcome.

What may be interesting is to see if any of the dozens of folks who already settled come after Righthaven now and demand their money back... That could make for an interesting followup legal battle. All in all, this is a huge win against copyright trolling.

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  1. identicon
    Anonymous Coward, 15 Jun 2011 @ 9:41pm

    Re: Re: Re: Re:

    The problem is, you can't be granted "ownership" of any of the rights in 106, without being granted either the ability "to do [or] to authorize" those rights (legal ownership), or a "beneficial" (i.e. economic) interest in the exercising of those rights (beneficial ownership). Righthaven had neither. They are not, and were never, an owner of those rights.

    Stephens assigned the copyright rights to Righthaven. That gave Righthaven ownership. That made them the legal owner. Then, acting as owner, Righthaven granted an exclusive license to Stephens. I don't really understand the difficulty with this.

    At the very least, not for the purposes of bringing a lawsuit. Only "the legal or beneficial owner of an exclusive right" is entitled "to institute an action for any infringement of that particular right." That's the exact wording of 17 501(b).

    And the owner of a copyright right is the legal owner. An assignee of a copyright right and the accrued right to sue has standing to bring a suit for infringement. This is settled law. See, e.g., ABKCO Music, Inc. v. Harrisongs Music, Ltd., 944 F.2d 971 (2d Cir.1991) (allowing plaintiff to bring suit for copyright infringement that had occurred prior to plaintiff's owning any copyright interest where plaintiff was assigned the right to accrued causes of action).

    Furthermore, how could this ruling possibly be a bad thing? The purpose of copyright law isn't to fight infringement. Generally, its purpose is the dissemination of expression to the public. One specific purpose is to encourage licensing.

    And the very reason that the accrued right to sue is transferable is because it comports with the policy reasons behind copyrights.

    From the Fifth Circuit:
    By express language the assignments cover the accrued causes of action for prior infringement. As an assignee of the causes of action for infringement damages, past, present and future, Prather has the right to maintain the action under 17 U.S.C.A. § 101 et seq. for infringement. There is no public policy against such assignments and under F.R.Civ.P. 17 such assignee of all choses in action for infringement, whether a ‘proprietor’ or not, has standing to sue and the court has effective power to avoid altogether the risk of double suit or double recovery.
    Prather v. Neva Paperbacks, Inc., 410 F.2d 698, 700 (5th Cir. 1969) (emphasis mine).

    A "chose in action" means the "right to sue."

    Licensing the content from Righthaven was never possible. Why on Earth should they have standing to sue? Granting them that ability goes against the very intent of copyright law. Copyright is supposed to prevent lawsuits like this, not encourage them.

    Not only was it possible, it was the first thing Righthaven did once it had ownership of the rights. Again, the transferability of rights comports with the goals of intellectual property laws. That's why such rights are transferable.

    I don't really understand your arguments. Do you agree that copyright rights, including accrued rights to sue, are transferable?

    Footnote 1 from the Silvers case is helpful:
    This holding makes perfect sense, as it is consistent with the Act and with the constitutional purpose of encouraging authors and inventors by creating a limited monopoly on their works and inventions. When one acquires a copyright that has been infringed, one is acquiring a copyright whose value has been impaired. Consequently, to receive maximum value for the impaired copyright, one must also convey the right to recover the value of the impairment by instituting a copyright action. Of course, in this sort of commercial transaction the ultimate payment would be calculated minus the costs of suit.

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