Raising a License Defense In a Copyright Infringement Action

The 9th Circuit noted that the plaintiff had created the work at issue at the defendant's request and had intended that the defendant copy and distribute it. The appeals court further noted that to hold that the plaintiff did not convey a license to use the footage in the film would render the plaintiff's footage 'of minimal value,' a conclusion that could not be squared with the defendant's agreement to pay a substantial sum of money for the footage. The appeals court concluded that the plaintiff had impliedly granted a nonexclusive license to the defendant that allowed the defendant to incorporate the special effects footage into the film.

In reaching its conclusion, the 9th Circuit set forth a three-part standard pursuant to which an implied nonexclusive license will be found where:

• A licensee requests the creation of a work;
• The licensor makes the work and delivers it to the licensee; and
• The licensor intends that the licensee/requestor copy and distribute the work.

Subsequent decisions from a variety of federal courts have followed the reasoning of the Effects Assoc. ruling and found that a defendant's use of a copyrighted work was permissible pursuant to an oral or implied license. Following the criteria established in the Effects Assoc. case, courts typically find such licenses where one party 'created a work at [the other's] request and handed it over, intending that [the other] copy and distribute it.' For example, in Holtzbrinck Publishing v. Vyne Communications, 2000 WL 502860 (S.D.N.Y. 2000), the court found an implied license in Internet website programs, in Jacob Maxwell Inc. v. Veeck, 110 F.3d 749 (11th Cir. 1997, the court ruled that there was an implied license in a team song composed and recorded for a minor league baseball team, and in Irwin v. American Interactive Media Inc., 1994 WL 394979 (C.D.Cal. 1994), the court held that there was an implied license in the musical underscore for a promotional videotape.

Whether or not an implied license exists will be determined based on the individual facts and circumstances of a case, subject to evidentiary proof that follows the guidelines discussed above. Implied licenses are generally found in situations where copyrighted works are created at the request of the licensee, delivered to the licensee for the clear purpose of reproduction and distribution, and the licensee has paid for the material in question. (See Viacom v. Fanzine, 2000 WL 1854903 (S.D.N.Y. 2000)). Nevertheless, while the implied license doctrine does not support a defendant's use of a work without compensation, payment in full is not a condition precedent to an implied license. In Effects Assoc. for example, the appeals court explicitly rejected the special effects company's argument that the defendant didn't qualify for an implied license because he did not pay the full agreed-upon price for the footage at issue. In addition, the Irwin court concluded that, '[e]ven though no money ever changed hands between the parties, a license may nonetheless be implied.'

Of course, courts typically reject an implied license argument where they find no meeting of the minds between the parties regarding use of the copyrighted work at issue. For example, in SHL Imaging Inc. v. Artisan House Inc., 117 F. Supp.2d 301 (S.D.N.Y. 2000), the court found that the absence of a meeting of the minds precluded a finding of an implied license. There the defendants hired the plaintiff to photograph the defendants' mirrored picture frames. The plaintiff photographed the frames and understood that the photographs would be used as color slides by the defendants' sales force. But the defendants used the photographs in a catalogue, thousands of brochures and various publicity releases. The court held that 'an implied license to use a copyrighted work 'cannot arise out of the unilateral expectations of one party.' There must be objective conduct that would permit a reasonable person to conclude that 'an agreement had been reached.” And in the Viacom case, the court held that an implied license protects the licensee only to the extent that 'the copyright owners intended that their copyrighted works be used in the manner in which they were eventually used' and that therefore no license had been granted for the use of animated characters.

As with any license, infringement defendants will frequently face arguments from plaintiffs that, even if an implied license is found, the defendants exceeded the scope of that license. But this argument was rejected in the Irwin case.

Finally, successful use of an implied license defense may leave a defendant to fight battles regarding the amount of money owed pursuant to the implied license or regarding the scope and terms of that license. Also, courts have been willing to imply only nonexclusive, as opposed to exclusive, licenses. But a defendant may invoke the doctrine to avoid infringement liability and demonstrate that it did not act unlawfully in using or exploiting a plaintiff's work.

Christine Lepera is an intellectual property and entertainment law litigator and partner with the New York office of Sonnenschein, Nath & Rosenthal. She also served as counsel to Scott Storch in the Brought to Life case, highlighted in Cameo Clips. Christopher T. Bavitz, formerly with Sonnenschein, is now in-house counsel with Capitol Records.

The Copyright Act (17 U.S.C. Sec. 204) provides that '[a] transfer of copyright ownership, other than by operation of law, is not valid unless an instrument of conveyance, or a note or memorandum of the transfer, is in writing and signed by the owner of the rights conveyed or such owner's duly authorized agent.' A copyright infringement defendant may argue that it made use of a plaintiff's work pursuant to a grant of rights or license from the plaintiff. Where a license is written, the consent defense is relatively straightforward, and frequently turns on whether or not the defendant acted in accordance with the terms and scope of the license at issue. Where no writing exists, however, a plaintiff can more readily challenge such consent and force the defendant to face the writing hurdle imposed by Sec. 204.

Notwithstanding the statutory requirement, in recent years federal courts have demonstrated an increasing willingness to hold parties to the terms of implied or oral license agreements. If a copyright defendant acts pursuant to an oral or implied license, such a license to use a copyrighted work for a particular purpose can preclude a finding of infringement. The oral or implied license doctrine thus provides a powerful defense for a defendant charged with infringement who was granted permission, implicitly or orally, by a plaintiff to use a particular work, but never obtained such consent in writing.

The leading case on implied licenses is Effects Assoc. v. Cohen , 908 F.2d 555 (9th Cir. 1990), cert. denied , sub nom. , Danforth v. Cohen , 498 U.S. 1103 (1991). In that case, the writer/director of a horror movie asked a special effects company to create effects footage for his film. The special effects company offered to prepare seven effects shots, and the writer/director orally agreed to pay a specified sum in exchange for the footage. But the parties did not discuss any license or grant of rights that would permit the writer/director to use the film clips produced by the effects company. After the writer/director released the movie, the special effects company sued for copyright infringement.

The 9th Circuit noted that the plaintiff had created the work at issue at the defendant's request and had intended that the defendant copy and distribute it. The appeals court further noted that to hold that the plaintiff did not convey a license to use the footage in the film would render the plaintiff's footage 'of minimal value,' a conclusion that could not be squared with the defendant's agreement to pay a substantial sum of money for the footage. The appeals court concluded that the plaintiff had impliedly granted a nonexclusive license to the defendant that allowed the defendant to incorporate the special effects footage into the film.

In reaching its conclusion, the 9th Circuit set forth a three-part standard pursuant to which an implied nonexclusive license will be found where:

• A licensee requests the creation of a work;
• The licensor makes the work and delivers it to the licensee; and
• The licensor intends that the licensee/requestor copy and distribute the work.

Subsequent decisions from a variety of federal courts have followed the reasoning of the Effects Assoc. ruling and found that a defendant's use of a copyrighted work was permissible pursuant to an oral or implied license. Following the criteria established in the Effects Assoc. case, courts typically find such licenses where one party 'created a work at [the other's] request and handed it over, intending that [the other] copy and distribute it.' For example, in Holtzbrinck Publishing v. Vyne Communications , 2000 WL 502860 (S.D.N.Y. 2000), the court found an implied license in Internet website programs, in Jacob Maxwell Inc. v. Veeck , 110 F.3d 749 (11th Cir. 1997, the court ruled that there was an implied license in a team song composed and recorded for a minor league baseball team, and in Irwin v. American Interactive Media Inc., 1994 WL 394979 (C.D.Cal. 1994), the court held that there was an implied license in the musical underscore for a promotional videotape.

Whether or not an implied license exists will be determined based on the individual facts and circumstances of a case, subject to evidentiary proof that follows the guidelines discussed above. Implied licenses are generally found in situations where copyrighted works are created at the request of the licensee, delivered to the licensee for the clear purpose of reproduction and distribution, and the licensee has paid for the material in question. (See Viacom v. Fanzine, 2000 WL 1854903 (S.D.N.Y. 2000)). Nevertheless, while the implied license doctrine does not support a defendant's use of a work without compensation, payment in full is not a condition precedent to an implied license. In Effects Assoc. for example, the appeals court explicitly rejected the special effects company's argument that the defendant didn't qualify for an implied license because he did not pay the full agreed-upon price for the footage at issue. In addition, the Irwin court concluded that, '[e]ven though no money ever changed hands between the parties, a license may nonetheless be implied.'

Of course, courts typically reject an implied license argument where they find no meeting of the minds between the parties regarding use of the copyrighted work at issue. For example, in SHL Imaging Inc. v. Artisan House Inc. , 117 F. Supp.2d 301 (S.D.N.Y. 2000), the court found that the absence of a meeting of the minds precluded a finding of an implied license. There the defendants hired the plaintiff to photograph the defendants' mirrored picture frames. The plaintiff photographed the frames and understood that the photographs would be used as color slides by the defendants' sales force. But the defendants used the photographs in a catalogue, thousands of brochures and various publicity releases. The court held that 'an implied license to use a copyrighted work 'cannot arise out of the unilateral expectations of one party.' There must be objective conduct that would permit a reasonable person to conclude that 'an agreement had been reached.” And in the Viacom case, the court held that an implied license protects the licensee only to the extent that 'the copyright owners intended that their copyrighted works be used in the manner in which they were eventually used' and that therefore no license had been granted for the use of animated characters.

As with any license, infringement defendants will frequently face arguments from plaintiffs that, even if an implied license is found, the defendants exceeded the scope of that license. But this argument was rejected in the Irwin case.

Finally, successful use of an implied license defense may leave a defendant to fight battles regarding the amount of money owed pursuant to the implied license or regarding the scope and terms of that license. Also, courts have been willing to imply only nonexclusive, as opposed to exclusive, licenses. But a defendant may invoke the doctrine to avoid infringement liability and demonstrate that it did not act unlawfully in using or exploiting a plaintiff's work.

Christine Lepera is an intellectual property and entertainment law litigator and partner with the New York office of Sonnenschein, Nath & Rosenthal. She also served as counsel to Scott Storch in the Brought to Life case, highlighted in Cameo Clips. Christopher T. Bavitz, formerly with Sonnenschein, is now in-house counsel with Capitol Records.