Vethan Law Firm, P.C wins a Copyright Case In Texas

Vethan Law Firm, P.C wins a Copyright Case in Texas.

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 Billy-Bob Teeth Bites Again

I recently wrote about the difference between standing in patent cases and copyright cases, and the always erudite Ron Coleman over at Likelihood of Confusion
contributed on the topic. There is, in my mind, a flaw in copyright
jurisprudence that essentially bars a defendant from challenging the
chain of title for ownership of a copyright. And it strikes again.

Engenium Solutions, Inc. v. Symphonic Technologies, Inc. is a
software copyright case, so you know it’s complicated on many levels.
The software in question is called “Scheduling Workbench” and is a
customized scheduling and maintenance tool compatible with SAP
software (SAP is not a party). Scheduling Workbench was developed by
the plaintiff Engenium Solutions, but under a Developer’s License
Agreement (“DLA”) with SAP. The DLA allotted copyright ownership for new
software for the SAP platform in different ways, depending on whether
the software was an “Add-on” (for which the developer would own the
copyright), an “Enhancement” or a “Modification” (with the copyright in
the latter two owned by SAP). In this case, SAP certified the Scheduling
Workbench as an Add-on.

Engenium then licensed the Scheduling Workbench to ConocoPhillips in a
Master Software License, Maintenance and Service Agreement (“MLA”). The
MLA had what might be conflicting provisions about the ownership of the
copyright, saying both that ConocoPhillips had only a license to
Scheduling Workbench but also, in boilerplate, that “All copyrights …
developed or created by Licensor [i.e., Engenium] during the course of
performing the work for Licensee [i.e., ConocoPhillips] shall belong
exclusively to Licensee and shall, to the extent possible, be considered
a work made for hire for Licensee ….”

The defendants challenged Engenium’s copyright ownership in several
ways: first, that the Scheduling Workbench software was not an Add-on
but either a “Modification” or “Enhancement” and so the copyright was
owned by SAP; second, that at least some parts of the Scheduling
Workbench software were developed for ConocoPhillips and therefore
ConocoPhillips owned the copyright by the terms of the MLA.

So a very convoluted ownership problem, which the court handled this way:

Plaintiff correctly points out that numerous courts, including this one,
have held that alleged infringers may not avoid liability by arguing
that a plaintiff does not own the copyright at issue due to defects in a
copyright transfer agreement between the plaintiff and a non-party
transferor. Billy-Bob Teeth, Inc. v. Novelty, Inc., 329 F.3d 586, 592-93
(7th Cir. 2005)….

In this case, unlike the above precedents, Defendants argue that the DLA
and the MLA are valid transfer agreements, and Engenium has
successfully transferred ownership to SAP and ConocoPhillips under 17
U.S.C. § 204. However, the precedents cited by Plaintiff are equally
applicable; where there is no dispute between contracting parties as to
the ownership of the copyright, a defendant accused of infringement may
not avoid liability by arguing that the contract actually worked a
transfer of ownership. SAP itself agrees that Scheduling Workbench is
owned by Engenium, as evidenced by the fact that SAP certified
Scheduling Workbench as an add-on. Because SAP agrees that Engenium is
the owner of the copyright at issue, Defendants ought not be permitted
to avoid liability by arguing that SAP actually owns the copyright.
Thus, even if Defendants could produce evidence that would support their
contention that the capacity availability feature of Scheduling
Workbench falls under the definition of an enhancement under the DLA,
such an argument is not an appropriate defense to a copyright
infringement suit.

Okay, well I can see some economy in the use of judicial resources here
by characterizing it as an improper defense, although I’d rather see it
as simply that no reasonable factfinder could find that SAP owns the
copyright. But then we get to the ConocoPhillips MLA:

Defendants’ argument that Engenium transferred
ownership of certain aspects of Scheduling Workbench to ConocoPhillips
under the MLA fails for the same reasons. While it is not entirely clear
from the MLA whether the changes made to Scheduling Workbench at
ConocoPhillips’ request constitute “work product” owned by
ConocoPhillips, or are merely “updates,” “versions,” or “releases” owned
by Engenium, the Court need not resolve the matter. Defendants may not
rely on an agreement transferring copyright ownership to avoid liability
in an infringement suit.

That’s it, baldly, “I don’t know who the heck owns what, but I’m saying you don’t even get to ask.” What?

How did we get here? It started with Imperial Residential Design, Inc. v. Palms Development Group Inc., then was extended by Billy-Bob Teeth, Inc. v. Novelty, Inc., which, for no good reason, made the broad policy statement that

[The defendant] simply does not having standing [to challenge ownership
of the copyright] under § 204. The statute is in the nature of a
statute of frauds and is designed to resolve disputes among copyright
owners and transferees. As the court said in Imperial Residential Design,
“the chief purpose of section 204(a), (like the Statute of Frauds), is
to resolve disputes between copyright owners and transferees and to
protect copyright holders from persons mistakenly or fraudulently
claiming oral licenses or copyright ownership.”

That may have been why there is a writing requirement in the statute,
but that’s a significant amount of judicial activism to turn it into a
basis for denying a defendant the right to challenge the threshold
element of a plaintiff’s claim, ownership of the copyright.

And look how far it’s gone. Both Billy-Bob Teeth and Imperial Residential Design
were cases where there was an oral transfer later memorialized in
writing, with the challenge being whether the oral agreement actually
ever existed. It makes some sense to avoid that challenge; it is going
down a bit of a rabbit hole to question whether there was an oral
agreement when the parties to the agreement don’t challenge it and there
ultimately was a writing confirming the assignment. But how we go from
“you can’t challenge an undisputed oral agreement later memorialized in
writing” to “you may not rely on an agreement transferring copyright
ownership to avoid liability in an infringement suit” is, I repeat
myself, crazy talk. In Engenium, we have no idea what
ConocoPhillips thought about the situation and no reason to think that
ConocoPhillips was in agreement with Engenium about the copyright
ownership. The reasoning in Imperial Residential Design and Billy-Bob Teeth has no place here.

So I’m going to go register me some copyrights, claim I won them in a poker game, and get busy ….

Engenium Solutions, Inc. v. Symphonic Tech., Inc., No. H-10-4412 (S.D. Tex. Feb. 15, 2013).

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