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IP/Entertainment Case Law Updates

Righthaven LLC v. Hoehn

Ninth Circuit affirms district courts’ dismissals of copyright infringement actions holding that entity created solely for purpose of pursuing copyright infringers lacked standing to sue because agreement with copyright holder conveyed only bare right to sue and none of exclusive rights necessary for standing under Copyright Act.

Plaintiff Righthaven LLC brought suit against defendants in separate actions against defendants Wayne Hoehn and Thomas DiBiase for displaying copyrighted Las Vegas Review-Journal articles on the Internet without authorization. Both defendants moved to dismiss based on Righthaven’s lack of standing to sue for copyright infringement, and both district courts granted the motions. The Ninth Circuit, in a consolidated appeal, affirmed the lower courts’ dismissals of both cases for lack of standing.

According to its charter, Righthaven was founded to identify copyright infringements on behalf of third parties, to obtain limited, revocable assignments of those copyrights, and to sue the infringers. At the time defendants posted the articles, Stephens Media LLC, owner of the Las Vegas Review-Journal, owned the copyrights to the articles. After the alleged infringements occurred, but before Righthaven filed the suits, Stephens Media assigned to Righthaven, for both articles, “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.”

These copyright assignments were made pursuant to a Strategic Alliance Agreement between Righthaven and Stephens Media under which Righthaven was to search for instances of copyright infringement and to pursue the infringer, subject to the veto of Stephens Media. Righthaven was required to split any recovery it received with Stephens Media. If Righthaven did not obtain a settlement or initiate litigation, the Strategic Alliance Agreement required Righthaven to reassign the copyright back to Stephens Media. Under the agreement, Righthaven had no right to exploit the copyrights or to participate in any royalties, and only Stephens Media had the “unfettered and exclusive ability” to exploit the copyrights.

In affirming the lower courts’ dismissals, the Ninth Circuit made a colorful comparison with a story Abraham Lincoln once told about a lawyer who tried to establish that a calf had five legs by calling its tail a leg. As Lincoln observed, calling a tail a leg does not make it a leg. The Ninth Circuit observed that in the Righthaven case, “a lawyer … 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.”

Under the Copyright Act, only the “legal or beneficial owner of an exclusive right under a copyright” has standing to sue for infringement of that right. The right to sue for infringement is not one of those exclusive rights. Because the Strategic Alliance Agreement only assigned to Righthaven the bare right to sue for infringement, the Ninth Circuit held that Righthaven had no standing to sue.

According to the court, to determine whether a contract transfers exclusive rights from one party to another, the court looks not only at the labels the parties use but also at the substance and effect of the contract. The Strategic Alliance Agreement expressly provided that Stephens Media retained the exclusive right to exploit the copyrights and that Righthaven had only the bare right to sue and no right to exploit the copyright or participate in any royalties, which was insufficient for standing.

The court rejected all arguments by Righthaven to the contrary, including the argument that the district court failed to construe the contract in accordance with the parties’ intent to convey all rights necessary for Righthaven to have standing. The appellate concluded that the problem was not that the district court failed to read the contract in accordance with the parties’ intent, but rather that the parties’ intention was invalid under the Copyright Act.

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