Righthaven LLC’s business model is identifying copyright infringements on behalf of third parties, obtaining limited, revocable copyright assignments from the third parties, and then suing the infringers. Righthaven received such copyright assignments from Stephens Media LLC, the owner of the Las Vegas Review-Journal. Righthaven separately sued Wayne Hoehn and Thomas DiBiase for copyright infringement for posting Las Vegas Review-Journal articles online without authorization. The cases were consolidated for appeal. In both cases, the district court ruled that Righthaven lacked standing to sue for copyright infringement because Righthaven did not own any of the exclusive rights, as required by the Copyright Act.
The Ninth Circuit affirmed the district court’s decisions:
Abraham Lincoln told a story about a lawyer who tried to establish that a calf had five legs by calling its tail a leg. But the calf had only four legs, Lincoln observed, because calling a tail a leg does not make it so. Before us is a case about a lawyer who tried to establish that a company owned a copyright by drafting a contract calling the company the copyright owner, even though the company lacked the rights associated with copyright ownership. Heeding Lincoln’s wisdom, and the requirements of the Copyright Act, we conclude that merely calling someone a copyright owner does not make it so.
(Opinion pdf pages 3-4).
Before the alleged infringements occurred, Righthaven and Stephens Media entered into a Strategic Alliance Agreement (SAA) controlling what Righthaven could do with copyrights that Stephens Media assigned to it.
After assignment of a copyright, Righthaven was to search for instances of infringement. When Righthaven found an infringement, it could pursue the infringer, but that right was subject to Stephens Media’s veto. If Righthaven did not obtain a settlement or initiate litigation, it had to reassign the copyright to Stephens Media. Righthaven was required to split any recovery it received with Stephens Media.
The SAA also placed sharp limits on what Righthaven could do with any assigned copyright. Righthaven had no right to exploit the copyrights or participate in any royalties. Stephens Media retained ‘an exclusive license’ to exploit the copyrights ‘for any lawful purpose whatsoever,’ and to the extent that Righthaven’s pursuit of infringement would ‘in any manner’ diminish Stephens Media’s right to exploit the assigned copyrights, Righthaven granted a license to Stephens Media ‘to the greatest extent permitted by law so that Stephens Media shall have unfettered and exclusive ability’ to exploit its copyrights. Moreover, by providing Righthaven thirty days prior notice, Stephens Media could revert the ownership of any assigned copyright back to itself.
(Opinion pdf pages 5-6).
After the alleged infringements occurred, but before Righthaven filed the suits against Hoehn and DiBiase, Stephens Media and Righthaven executed a copyright assignment for the subject articles.
Each copyright assignment provided that, ‘subject to [Stephens Media’s] rights of reversion,’ Stephens Media granted to Righthaven ‘all copyrights requisite to have Righthaven recognized as the copyright owner of the Work for purposes of Righthaven being able to claim ownership as well as the right to seek redress for past, present, and future infringements of the copyright . . .in and to the Work.’
(Opinion pdf page 5).
After Hoehn and DiBiase each filed a motion to dismiss for lack of standing, Righthaven and Stephens Media executed a “Clarification and Amendment to Strategic Alliance Agreement.”
The agreement purported to clarify that the parties’ intent in entering the SAA was to ‘convey all ownership rights in and to any identified Work to Righthaven through a Copyright Assignment so that Righthaven would be the rightful owner of the identified Work.’
(Opinion pdf page 6).
Only the legal or beneficial owner of an exclusive right under a copyright is entitled to institute an action for any infringement of that particular right committed while he or she is the owner of it. 17 U.S.C. §501(b). Only the legal or beneficial owner of an exclusive copyright right has standing. Standing is the ability of a party to bring a lawsuit in a particular court.
Section 106 of the Copyright Act enumerates the exclusive rights granted to the copyright owner: to reproduce, to prepare derivative works, to distribute copies, to publicly perform, to publicly display and to publicly perform sound recordings by means of digital audio transmission. The right to sue for infringement is not an exclusive copyright right.
The assignment of the bare right to sue for infringement, without the transfer of an associated exclusive right, is impermissible under the Copyright Act and does not confer standing to sue. That covers Righthaven, for all it was really assigned was a bare right to sue for infringement.
(Opinion pdf page 7).
Although some language of the assignment contracts between Righthaven and Stephens Media described Righthaven as the owner, the inclusion of that language does not prove that Righthaven owned any exclusive rights. Courts look beyond the labels applied by the parties to a contract to determine whether exclusive rights have been transferred. The Ninth Circuit ruled that the limits placed on Righthaven by the contracts with Stephens Media prevented Righthaven from acquiring any exclusive copyright rights. For example, Stephens Media retained the unlimited and exclusive ability to exploit the copyrights, while Righthaven had no right or license to exploit the works or to participate in royalties.
Righthaven argued that the contracts made it the owner of exclusive rights and that Stephens Media was a licensee. The Ninth Circuit ruled that Righthaven granted Stephens Media an exclusive license and therefore no longer owned the exclusive rights it claimed. An exclusive license is a transfer of ownership under the Copyright Act to the same extent that an assignment is. Only the exclusive licensee can sue for infringement of the rights granted in the exclusive license.
Righthaven argued that the district court incorrectly construed the contracts.
The problem is not that the district court did not read the contract in accordance with the parties’ intent; the problem is that what the parties intended was invalid under the Copyright Act.
(Opinion pdf page 10).
Righthaven argued that the amendment signed by Righthaven and Stephens Media after Hoehn and DiBiase filed their motions to dismiss for lack of standing retroactively confers standing on Righthaven. The facts existing at the time of filing govern jurisdiction. Permitting standing based on a property interest acquired after the time of filing is not one of the exceptions to this general principle.
However, Righthaven did not possess any exclusive rights, even after the SAA was amended. Under the amended SAA, Righthaven still could not exploit any of the exclusive copyright rights unless Stephens Media permitted it to do so. Stephens Media remained in a position to freely exploit any right it wished.
The Ninth Circuit ruled that Righthaven was not the owner of any exclusive rights under the Copyright Act, under either the original or amended SAA. Righthaven therefore lacked standing to sue for infringement. The motions to dismiss in both Hoehn and DiBiase were properly granted.
The district court in Hoehn ruled in the alternative that Hoehn’s use was a fair use and granted Hoehn’s motion for summary judgment on fair use. The Ninth Circuit agreed with Righthaven that if Righthaven lacks standing to bring this suit, then the district court does not have the power to rule on the merits of the case, including ruling on the fair use defense. When there is no standing, federal courts lack power under Article III of the U.S. Constitution to reach the merits of the suit. The Ninth Circuit vacated the district court’s order analyzing the fair use defense and granting the motion for summary judgment on fair use to Hoehn.