License for Entire Term of Helga Hat Copyright Enforceable, For Now

This case involves the enforceability of a settlement agreement in a copyright infringement lawsuit.  David John registered a copyright for a Viking hat, aka a Helga hat.  MainGate, Inc. sold Minnesota Vikings wear, including Viking hats.  John sued MainGate, alleging that MainGate’s Viking hats infringed his Helga hat copyright.  MainGate received a license from John in exchange for a lump sum payment and royalties on future sales.  One of the terms of the settlement agreement provided that “the term of this royalty obligation is for the life of the copyright and it shall end when the copyright ends. During that time, neither side can withdraw from this agreement for the life of the copyright.”  (Opinion pdf p. 8).

John grew dissatisfied with MainGate’s refusals to John’s requests for inventory audits that John believed he was entitled to under the settlement agreement.  John again sued MainGate for copyright infringement.  The district court ruled that MainGate did not breach the settlement agreement, that John could not terminate the settlement agreement and that MainGate’s license continues until John’s copyright expires.  Given an author’s copyright grant termination rights, the enforceability of the license for the entire length of the copyright remains to be seen.

The terms of the settlement agreement allowed MainGate to sell its existing inventory before the royalty provisions kicked in.  The settlement agreement also allowed John to audit MainGate’s Helga hat sales once a year to determine whether MainGate was paying the proper royalty amount.  Royalty bearing sales would not arise until MainGate depleted its existing inventory.  The district court ruled that because John’s audit requests covered non-royalty bearing hat sales, MainGate did not breach the settlement agreement by refusing to allow John to audit MainGate’s Helga hat sales.

Accordingly, the Court concludes that MainGate did not breach the Settlement Agreement when it refused John’s request to audit sales of its existing inventory of non-royalty bearing hats; that John’s attempt to terminate the Settlement Agreement was without effect; and that MainGate’s license to sell Helga hats continues until John’s copyright expires.

(Opinion pdf page 8).

Although the district court ruled that MainGate’s license continues until John’s copyright expires, the license may not be enforceable the entire term of the copyright after all.  Section 203 of the Copyright Act of 1976 allows authors to terminate grants under certain circumstances. The termination provisions apply only to authors and not copyright owners in general.  If John is not an author, the grant termination provisions do not apply to him.  If John is the author and complies with the statute’s requirements, he may terminate his grant 35 years from the date the grant was executed. 

The right to terminate under the Copyright Act of 1976 is inalienable.  That means that the grant termination right cannot be taken away, even if the author has made an agreement to the contrary.  Read more about copyright grant termination rights in my post, Village People Cop Morphs into Copyright Grant Terminator.

This case is John v. MainGate, Inc., No. 13-cv-01875 (SRN/JJK), U.S. District Court, District of Minnesota.

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