Mary J. Blige No More Retroactive Copyright Licensing Drama

By Lynn B. Bayard, Darren W. Johnson, and Avra C. van der Zee

n an important decision interpret- interest in the work without the con- roactive assignment or license of the ing the rights of co-owners under sent of the other co-owners, but may copyright.7 Finding that factual ques- Ithe Copyright Act, the U.S. Court not transfer or assign all interest in tions existed regarding the alleged of Appeals for the Second Circuit the work without the consent of the prior oral agreement, the district recently ruled in Davis v. Blige1 that other co-owners.5 A co-owner by as- court declined to determine whether an action for infringement by one co- signment is immune from an infringe- the written ratification of a prior oral owner of a copyrighted work cannot ment claim by the other co-owner.6 transfer could satisfy the Copyright be defeated by a retroactive transfer Act’s requirement that transfers be of copyright ownership from another The Davis v. Blige Dispute in writing under 17 U.S.C. § 204(a), co-owner to the alleged infringer. In December of 2003, Sharice Davis or whether the transfer agreements Deciding an issue “of first impression brought a copyright infringement ac- effectively ratified a prior oral agree- in the courts of appeals,” Judge José tion against popular recording artist ment between Chambliss and Miller. A. Cabranes, writing for a unanimous Mary J. Blige and others regarding Instead, the district court held that the three-judge panel, concluded that a two songs on Blige’s hit 2001 album later written agreements were suffi- co-owner cannot grant a retroactive No More Drama. Davis alleged that cient to defeat Davis’ claims. license or transfer of copyright to an she co-wrote the disputed composi- In so holding, the district court re- infringer to eliminate accrued causes tions “LOVE” and “Keep It Moving” lied on several district court decisions, of action held by a nonparty co-own- in 1998 with nonparty Bruce Chamb- including Country Road Music, Inc. v. er, because to do so would extinguish liss. The album lists multiple writers MP3.com, Inc.,8 holding that a retroac- the valuable right of the co-owner to for the two songs, including Mary J. tive license barred an infringement sue for infringement. Blige and Chambliss’ son, defendant claim by remaining co-owners and Bruce Miller, but credits neither Davis cured past infringement. Based in part Co-ownership Generally nor Chambliss. on Country Road Music, the Davis court Co-ownership of a copyrighted After Davis filed suit, Chambliss concluded that such retroactive trans- work is common, especially in the case granted his interest, as a co-owner, fers have been “consistently upheld . . . of musical compositions created by in the two songs to Miller. Chambliss even where the plaintiff in the action is multiple authors, including the person claimed that he and Miller had orally the other co-owner of the copyright and who wrote the music (the composer) agreed to a certain transfer of rights the retroactive license or transfer by one and the person who wrote the words sometime in late 1998. Miller, in turn, co-owner serves to bar the infringement (the lyricist). Each is considered a co- licensed the disputed compositions to claim of the other co-owner.”9 owner of the entire work, with an un- the other defendants. One day before Because an author cannot infringe divided interest in the whole.2 Chambliss’ deposition, Chambliss his own copyright, the Davis court The issue of when one co-owner and Miller executed written transfer concluded that Chambliss’ transfer may bind another has been the agreements for both songs, “effective to Miller defeated Davis’ claims not subject of extensive litigation. The as of the date [Chambliss] first cre- only against Miller, but also against general rule is that a co-owner of a ated” the compositions. Defendants Blige and the other defendants who copyrighted work may unilaterally claimed that these agreements ratified were in privity of contract with Mill- grant a nonexclusive license without in writing the prior oral agreement er. Davis appealed and the Second the permission—and even over the between Chambliss and Miller. Circuit reversed. objection—of the other co-owner, as Defendants contended that as a long as he or she accounts to the co- result of the transfer agreements, The Second Circuit’s Decision owner for any profits earned under Miller became a co-owner of the dis- At the outset of its decision, the the license.3 If a co-owner grants an puted compositions. Because one co- Second Circuit reviewed the general individual a license to use the copy- owner cannot sue another co-owner principles of copyright law underly- righted work, that license immu- for infringement, defendants argued ing the dispute. The Second Circuit nizes the person from liability to the that Davis’ suit was barred against then turned to the question “of first other co-owner for future copyright Miller and those to whom Miller had impression” at issue, namely, “wheth- infringement. A co-owner may not, licensed the compositions. er an action for infringement by one however, grant an exclusive license The District Court for the Southern coauthor of a song can be defeated by without consent of all other owners.4 District of New York agreed, hold- a ’retroactive’ transfer of copyright Similarly, a co-owner may transfer ing that “past infringement” could be ownership from another coauthor to or assign all of his or her individual “cure[d]” through the grant of a ret- an alleged infringer.”10 Published in Entertainment and Sports Lawyer, Volume 25, Number 4, Winter 2008. © 2008 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.

912865_reprint.indd 11 4/3/08 2:44:46 PM The Second Circuit began its analy- an unlawful infringement,” thus de- pay statutory damages under the sis by distinguishing the precedents stroying the co-owner’s vested right Copyright Act.21 relied on by the district court as cases to enforce his or her claim.17 The court Accordingly, the Second Circuit involving “retroactive licenses granted further noted that “[a] retroactive li- held that “a license or assignment in pursuant to negotiated settlements of cense or assignment that purports to copyright can only act prospectively.”22 accrued infringement claims.”11 The eliminate the accrued causes of action Finally, the Second Circuit ad- court noted that licenses and assign- for infringement held by a co-owner dressed the issue of whether Chamb- ments function differently from settle- who is not party to the license or liss’ purported oral transfer of rights ments and releases. In particular, the assignment also violates the funda- to Miller before the alleged infringe- court observed that a retroactive license mental principle of contract law pro- ment occurred was effectively “rati- or assignment “purports to authorize a hibiting the parties to a contract from fied” by their later written agreement. past use that was originally unauthor- binding non-parties.”18 Defendants acknowledged that the ized.”12 Thus, the court found that, “[u] The Second Circuit also looked to Copyright Act requires all transfer nlike a settlement, which recognizes an patent law for guidance, noting that agreements, including assignments, unauthorized use but waives a settling “licenses in patent and copyright func- to be in writing but claimed that the owner’s accrued claims of liability, tion similarly” and that the “prospec- earlier oral agreement was valid be- a retroactive license or assignment tive nature of licenses has long been cause it was ratified by the later writ- would, if given legal effect, erase the recognized in the law of patents.”19 ten agreement. The court concluded unauthorized use from history with that “the oral agreement cannot be the result that the nonparty co-owner’s ’ratified’ retroactively by the [later right to sue for infringement, which written] agreements to defeat Davis’ accrues when the infringement first The decision accrued claims.”23 Such ratification, occurs, is extinguished.”13 in the court’s view, would “employ a The Second Circuit hinged its con- appears to preclude legal fiction to . . . obtain a counterin- clusion on its determination that a tuitive and inequitable result.”24 settlement agreement “can only waive retroactive licenses or extinguish claims held by a set- Lessons Learned, Issues Raised tling owner; it can have no effect on or assignments of The Second Circuit’s analysis has co-owners who are not parties to the potentially far-reaching implica- settlement agreement.”14 In support copyright in all tions. By holding that “a license or of that proposition, the court cited to assignment in copyright can only act a “venerable principle of New York circumstances. prospectively,” the decision appears co-tenancy law” that “[o]ne tenant in to preclude retroactive licenses or as- common can settle for or release his signments of copyright in all circum- interest in . . . personal property, but stances, even those where no co-owner he cannot settle for or release the in- In addition, the Second Circuit exists. Under the court’s ruling, such a terest of his co-tenants. If one tenant found that allowing retroactive li- retroactive transfer may only be accom- in common should settle for his por- censes or assignments would contra- plished by means of a settlement, in tion of the damages before action, the dict two important policy concerns: which case its effect may only bind the other may sue without joining him.”15 (1) the need for predictability and parties to the settlement agreement. The Second Circuit further found certainty in copyright ownership and However, retroactive copyright that because the right to sue for in- (2) discouragement of infringement.20 licenses or assignments are commonly fringement is “one of the most valu- If retroactive licenses or assignments granted. After the Second Circuit’s able ’sticks’ of the ’bundle of rights’ were permitted, the court reasoned, holding in Davis II, should those of copyright,” and the right would such a transfer could always undo an transfers now be considered null and be extinguished by a rule permitting infringement by turning an infringer void? Arguably, the court’s ruling retroactive licenses, it was necessary into a potential user or licensor. Ac- should be confined to the facts of Da- to “examine carefully whether retro- cording to the court, one could never vis II—where a retroactive license has active licenses and assignments that definitively determine if and when the potential to cause harm to a non- extinguish a co-owner’s accrued right an infringement occurred or ascer- consenting co-owner. to sue are consistent with the general tain the pool of authorized users at a Moreover, although the Second principles of tort and contract law given time. The court also observed Circuit purported to distinguish the that underlie the accrual and settle- that the availability of retroactive decisions relied on by the district court, ment of infringement claims.”16 The licenses or assignments would lower including Country Road Music, on the court determined that retroactive the cost of infringement, thus mak- basis that they involved retroactive licenses and assignments are contrary ing it more attractive. By being able licenses granted pursuant to negoti- to principles of tort law because they to pay a single co-owner for a license ated settlement agreements, the court extinguish the accrued infringement or assignment, an infringer would did not reconcile its unequivocal state- claims of a nonconsenting co-owner be able to avoid liability for infringe- ment that a settlement agreement “can “by traveling back in time to ’undo’ ment and the potential of having to have no effect on co-owners who are Published in Entertainment and Sports Lawyer, Volume 25, Number 4, Winter 2008. © 2008 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.

912865_reprint.indd 12 4/3/08 2:44:47 PM not parties” with the fact that several of those decisions, including Country Road Music, explicitly allowed copy- right co-owners to settle claims of past infringement on behalf of nonconsent- ing co-owners who were not parties to the settlement agreement. Accordingly, it remains unclear whether the Second Circuit intended to nullify the settle- ments in those cases insofar as they purport to bind nonsettling co-owners. The Second Circuit’s decision in Davis II, however, makes one lesson loud and clear: A defendant settling a copyright infringement claim with one co-owner should also settle with any other co-owners in order to ensure fi- nal resolution of any such dispute. v

Lynn B. Bayard is a partner, and Darren W. Johnson and Avra C. van der Zee (not yet admitted) are associates in the litigation de- partment of Paul, Weiss, Rifkind, Wharton & Garrison LLP. Their respective e-mails are [email protected], djohnson@paulweiss. com, and [email protected].

1. 505 F.3d 90 (2d Cir. 2007) (“Davis II”). 2. See Me l v i n B. Ni mm e r & Da v i d Ni m - m e r , 1 Ni mm e r o n Co p y r i g h t §§ 6.03, 6.08. 3. See H.R. Re p . No. 94-1476, at 121 (1976); 1 Ni mm e r & Ni mm e r , supra note 2, §§ 6.10, 6.12. 4. See 1 Ni mm e r & Ni mm e r , supra note 2, § 6.10. 5. See id. § 6.11. 6. See id. § 6.10. 7. Davis v. Blige, 419 F. Supp. 2d 493, 499 (S.D.N.Y. 2005) (“Davis”). 8. 279 F. Supp. 2d 325 (S.D.N.Y. 2003). 9. Davis, 419 F. supra note 7, 499. 10. Davis II, supra note 1, at 93. 11. Id. at 101. 12. Id. at 103. 13. Id. 14. Id. at 102. 15. Id. (quoting Jackson v. Moore, 94 A.D. 504, 87 N.Y.S. 1101, 1103 (1904)). 16. Id. at 103. 17. Id. 18. Id. 19. Id. at 104. 20. See id. at 104–05. 21. 17 U.S.C. § 504. 22. Davis II, supra note 1, at 104-05. 23. Id. at 107. 24. Id. at 108.

Published in Entertainment and Sports Lawyer, Volume 25, Number 4, Winter 2008. © 2008 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.

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