YOU AND THE LAW
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Transfer of Exclusive License by Licensee Requires Consent
When you, as the owner of copyrighted photographs, grant an exclusive license for the use of these photographs to a licensee, there is an expectation that the licensee will be the only entity that uses the photographs for the intended purpose. There is also an expectation that the licensee will not transfer these rights to someone else without your consent.
The United States Court of Appeals of the Ninth Circuit has confirmed that, in fact, this is the law, and that any such transfer without the consent of the copyright owner may constitute copyright infringement.
The facts in the case, Gardner v. Nike, Inc., are relatively simple. Nike entered into a written license agreement with Sony Music Entertainment Group, which granted to Sony the right to exploit a cartoon character called MC Teach, on and in the packaging of phonograph records and other merchandise, and exploitation of MC Teach in connection therewith, in exchange for a percentage of the profits earned. Nike retained ownership of the copyrights. The agreement was silent as to Sony’s right to assign its rights under the exclusive license.
Thereafter, Sony in fact assigned its rights in this exclusive license to Gardner in exchange for a share of the proceeds derived from use of the MC Teach character. After Nike threatened legal action because of this unauthorized assignment, Gardner commenced litigation seeking a judgment declaring the transfer to be valid. (Sony, which interestingly made no representations to Gardner about its rights, took no position other than to agree to abide by any Court decision.)
After various procedural determinations in both State and Federal Courts, Nike sought to have the case dismissed on the grounds that Gardner lacked standing to sue because it had no rights in the character (since the transfer was invalid in the first place).
The District Court agreed and dismissed the action for a declaratory judgment. It found that the Copyright Act of 1976 did not allow for a transfer of an exclusive license by a licensee without the original licensor’s consent.
Is It Appropriate?
The Circuit Court of Appeals affirmed the decision. Among the reasons given were that the original licensor should be able to monitor use of the copyrighted property and to determine whether the sub-licensee would be an appropriate person or entity. Inappropriateness could occur, the Court pointed out, where the sub-licensee was on the verge of bankruptcy or did not agree on quality issues.
The case points out, once again, the benefits of clarity in written agreements. In this case, thankfully for copyright owners, the absence of clarity did not result in loss of any rights to the original copyright owner.
Attorney Joel L. Hecker lectures and writes extensively on issues of concern to the photography industry. His office is located at Russo & Burke, 600 Third Ave, New York NY 10016. Phone: 1 212 557-9600. E-mail: Heckeresq@aol.com.
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