Johnson v. Storix, Inc.

In nonprecedential decision, Ninth Circuit affirms judgment in favor of defendant in copyright infringement action, holding that plaintiffs’ execution of annual report that transferred “all assets” to defendant satisfied the Copyright Act’s requirement that copyright transfers be memorialized in writing.

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laintiff Anthony Johnson, a software developer, sued his former company, Storix Inc., for copyright infringement, contributory copyright infringement and vicarious copyright infringement of a software program. After a five-day jury trial ended in a judgment in favor of Storix, Johnson appealed to the Ninth Circuit, challenging the judgment, the district court’s denials of his motions for summary judgment and a new trial, and the lower court’s award of attorney’s fees to Storix.

One of the issues involved in the trial was whether Johnson had transferred to Storix the copyright to the software at issue. The jury found that Johnson had transferred the copyright when he signed a 2003 annual report that memorialized the transfer of “all assets” to Storix, and that the annual report satisfied Section 204(a) of the Copyright Act, which requires that “a transfer of copyright ownership, other than by operation of law, is not valid unless an instrument of conveyance, or a note or memorandum of the transfer is in writing and signed by the owner of the rights conveyed.”

On appeal, the Ninth Circuit rejected Johnson’s argument and held that the 2003 annual report that was signed by Johnson qualified as a “note or memorandum” under Section 204(a) and memorialized a transfer of assets. The court noted first that Section 204(a) does not require the form of the signature to be in the transferor’s personal capacity. Furthermore, the court reasoned that the purpose of Section 204(a)’s writing requirement — to prevent inadvertent transfers and fraudulent copyright ownership claims — was not a concern in this case, because Johnson himself admitted to writing and signing the report that memorialized a transfer of at least some assets to Storix. The court also rejected Johnson’s argument that the memorandum of transfer must be signed contemporaneously with the copyright transfer itself, citing Ninth Circuit precedent for the proposition that Section 204(a) can be satisfied by an oral assignment that is later confirmed in writing.

Johnson also argued that his motion for a new trial should have been granted because the interpretation of Section 204(a) of the Copyright Act should not have been considered an issue of fact for the jury to decide. The court rejected that contention, noting that both parties had offered extrinsic evidence to prove the meaning of the phrase “all assets” in the 2003 annual report. Since, under Ninth Circuit jurisprudence, extrinsic evidence that is offered to interpret the terms of a writing is for the jury, the court held that the jury was properly tasked with interpreting the phrase. The court analyzed the jury instructions given on the issue and, finding them free from error, held that the lower court did not err in denying Johnson’s motion for a new trial on the basis of an incorrect jury instruction.

Finally, Johnson argued that the district court had abused its discretion in awarding attorney’s fees to Storix following the jury verdict. The Ninth Circuit rejected this argument as well, holding that the district court had appropriately analyzed and weighed the nonexhaustive factors outlined by the Supreme Court in the then-recent Kirtsaeng v. John Wiley & Sons, Inc. decision. According to the Ninth Circuit, although the district court found that Johnson had not made unreasonable arguments or taken frivolous positions — which factors are to be given substantial weight under Kirtsaeng — the district court properly relied on other factors that tilted the balance in favor of awarding attorney’s fees, such as Johnson’s motivation, the degree of Storix’s success, and the need to advance considerations of compensation and deterrence.

The Ninth Circuit panel did overrule the district court in one regard, however. Although the district court did not abuse its discretion in choosing to award fees to Storix, the appellate court held that the amount of the award was unreasonable. The court reaffirmed the general rule that a mechanical or formulaic approach resulting in an unreasonable award constitutes an abuse of discretion, and held that the amount awarded, $543,704, was excessive in light of the fact that Johnson’s claim was neither unreasonable nor frivolous. The court was further swayed by the facts that Johnson was an individual plaintiff, rather than a corporation, and had begun to represent himself pro se. Therefore, while the Ninth Circuit affirmed the remainder of the lower court’s judgment, it reversed the fee award and remanded to the district court to reconsider the amount.

Summary prepared by Tal Dickstein and Jordan Meddy