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The Death of Divisibility

By William Patry

Karaoke cases continue to flood the courts of appeals, much like plonk (in the sense of bad wine, not in the sense of female police officers or of adding posters to one?s kill file in UseNet-speak; see here). The most recent addition to the back shelves of copyright case law is Sybersound Records, Inc.. v. UAV Corp., 2008 WL 509245 (9th Cir. February 27, 2008)(Docket No. 06-55221), but it deals not with warbling by amateurs, but instead amateur hour in statutory interpretation of one of the fundamental principles of ownership under the 1976 Act, divisibility.

Divisibility was intended to encourage the easy licensing and assignment of rights in copyright works, by permitting less than the whole of the work to be conveyed. Where there are multiple authors, Congress intended that one co-owner could offer non-exclusive licenses in the whole, but could not offer an exclusive license/assignment/conveyance in the whole without all co-owners' permission, since a sale of all interests in the work would take place: as Chief Joseph of the Nez Perce Indians once said: "Suppose a white man should come to me and say, Joseph, I like your horses. I want to buy them. I say to him, No, my horses suit me; I will not sell them. Then he goes to my neighbor and says, Pay me money, and I will sell you Joseph?s horses. The white man returns to me and says, Joseph, I have bought your horses and you must let me have them. If we sold our lands to the government, this is the way they bought them. "

At the same time, Congress permitted one co-owner to convey his or her proportional share in the whole, regardless of whether that conveyance was called an assignment or a license. This follows from the plain language of the statute and from the lack of any process for resolving disputes among co-owners: what if one co-owner wants to sell his or her interest, but the other doesn't want him or her to? Are co-owners stuck together in a marriage that isn't working? Long after non-fault divorces became common, Congress provided for them through divisibility. all was fine for a long time, until a spate of bad decisions. Sybersound is the most recent.

The parties are competitors in the production and sale of karaoke records. There was a Lanham Act and a RICO claim, but since my knowledge base is sadly limited to copyright, that?s what I will focus on. Plaintiff obtained its rights from TVT Music Publishing, and it is the nature of the rights obtained that sparked the dispute. Here is the court?s description:

Sybersound also claims that UAV, Madacy, Audio Stream, Top Tunes, and BCI are infringing Sybersound's copyrights in several songs by producing karaoke records of these songs without obtaining a license from Sybersound or its copyright assignor, TVT Music Publishing (TVT). Sybersound claims to have acquired an ownership interest in these songs by entering into a written agreement with TVT, an original co-claimant to the copyright of these songs. This written agreement allegedly made Sybersound an ?exclusive assignee and licensee of TVT's copyrighted interests for purposes of karaoke use, and also the exclusive assignee of the right to sue to enforce the assigned copyright interest.? According to Sybersound, the copyright holders of these songs had an understanding that each could license only his or her respective shares and that a duly authorized karaoke recording would require a written license from each.

Sybersound bases its copyright infringement claim on the following reasoning: TVT is an original co-claimant or joint copyright holder (co-owner) in nine songs. Such co-owners are like tenants in common, each owning a share of the undivided whole. ? Sybersound contends that it stepped into TVT's shoes and became a co-owner in the karaoke-use interest of the copyright when it became the ?exclusive assignee and licensee of TVT Music Publishing's copyrighted interests for purposes of karaoke use, and also exclusive assignee of the right to sue to enforce the assigned copyright interests, for both present and past infringements in karaoke exploitation? pursuant to an assignment agreement with TVT. Citing 17 U.S.C. § 201(d)(1), Sybersound asserts standing to sue, as a co-owner, for copyright infringement against the Corporation Defendants that use any of the nine referenced copyrighted songs for karaoke purposes without having obtained a license from Sybersound or TVT?

The court of appeals was having none of this, evidencing once again its failure to grasp an essential element of the 1976 Act, divisibility:

Sybersound's analysis is flawed because, as a co-owner of the copyright, TVT could not grant an exclusive right in the karaoke-use interest of the nine referenced copyrights.

If TVT were the sole copyright owner of the nine referenced songs and had transferred an exclusive karaoke-use interest to Sybersound (assuming such a divisible interest exists), Sybersound would have had standing as the exclusive licensee to sue the Corporation Defendants for infringement. However, even if a karaoke-use is a properly divisible interest in a copyright, TVT is not the exclusive owner of the karaoke-use interest in the copyright. In its Request for Judicial Notice filed concurrently with its motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), Madacy attached copies of copyright registration records from the United States Copyright Office showing that EMI Music Publishing, Ltd., Beyonce Publishing, Scott Storch Music, Careers-BMG Music Publishing, Inc., Xtina Music, Logrhythm Music, and others, are all co-owners of the copyrights in one or more of the nine assigned songs. Thus, unless all the other co-owners of the copyright joined in granting an exclusive right to Sybersound, TVT, acting solely as a co-owner of the copyright, could grant only a nonexclusive license to Sybersound because TVT may not limit the other co-owners' independent rights to exploit the copyright. ? Sybersound does not allege that it has received the consent of the other co-owners to become the exclusive licensee for the karaoke-use interest.

Sybersound assumes that because its assignment agreement with TVT says that TVT is transferring all its karaoke-use interests in the copyrights to Sybersound, and says that Sybersound became exclusive assignee of TVT's copyrighted interest in karaoke use and of TVT's right to sue, Sybersound became a co-owner upon execution of the agreement. Sybersound is mistaken. Although the 1976 Copyright Act permits exclusive rights to be chopped up and owned separately, to be effective, the assignment or other type of alienation permitted by 17 U.S.C. §§ 101 and 201(d)(2) must be exclusive. Since TVT's assignment was admittedly non-exclusive, TVT succeeded only in transferring what it could under 17 U.S.C. § 201(d), a non-exclusive license, which gives Sybersound no standing to sue for copyright infringement.

We hold that because Sybersound is neither an exclusive licensee nor a co-owner in the nine copyrights, it lacks standing to bring the copyright infringement claims alleged in the FAC, and, thus, its copyright infringement claims fail.

The Sybersound court, like Gardner v. Nike, and the Second Circuit?s Davis v. Blige, have made co-owners agunot, to each other until a Get, is obtained or a Bet Din, steps in and settles the matter. This isn?t what Congress intended: it intended that co-owners be able to grant non-exclusive licenses without the others? permission and that they be able to transfer their proportional share in the whole without the others? permission, in which case the transferee would indeed stand in the shoes of the transferor. It is truly remarkable that such simple, but commercially important points have been destroyed. Our only hope lies with Congress.

Full post as published by The Patry Copyright Blog on February 29, 2008 (boomark / email).