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TufAmerica v. Diamond

District court awards summary judgment to defendants, members of the Beastie Boys, holding that plaintiff did not have standing to file suit for copyright infringement based on either license agreement that was signed by only two out of three copyright owners, or agreement granting only right to file suit.

Plaintiff TufAmerica, Inc., filed a copyright infringement action against defendants Michael Diamond, Adam Horovitz and Adam Yauch (the Beastie Boys), as well as Universal-Polygram International Publishing, Inc., and Capital Records, LLC. Defendants moved for summary judgment on TufAmerica’s claims for copyright infringement of pre-1990 sound recordings and compositions for the songs “Let’s Get Small” and “Say What,” asserting that TufAmerica had no standing to maintain the suit. The court agreed and granted the motion for summary judgment.

In 1999, TufAmerica became interested in entering into a deal with the members of Trouble Funk, the copyright owners of the songs at issue, under which TufAmerica would negotiate licenses or bring actions against parties for using Trouble Funk compositions without authorization. Of the three members of Trouble Funk, only two signed the initial agreement. In 2012, TufAmerica entered into an agreement with the third member of Trouble Funk, in which he “exclusively licensed” to TufAmerica the right to sue.

Although there is some dispute as to whether the members of Trouble Funk retained their copyrights in “Say What” and “Let’s Get Small” in the 1999 and 2012 agreements, the court held that, even if that were the case, the agreements did not confer standing on TufAmerica because they were nonexclusive licenses that merely conferred a bare right to sue.

First, the court held that the 1999 TufAmerica agreement did not convey an exclusive license based on the undisputed facts. According to the court, a nonexclusive license conveys no ownership interest, and the holder of a nonexclusive license may not sue others for infringement. Furthermore, a co-owner cannot unilaterally grant an exclusive license. Here, only two of the three co-owners signed the 1999 agreements, which purportedly granted TufAmerica the exclusive right to administer the group’s rights, so TufAmerica did not acquire an exclusive license. The court rejected TufAmerica’s argument that because it received 100 percent of one of the owner’s ownership interest and 100 percent of another owner’s ownership interest that it received an “exclusive” license from each of them, finding that those grantors were co-owners and therefore could not convey an exclusive license in the copyrights without the third owner.

Second, the court rejected TufAmerica’s argument that it obtained an exclusive license from Trouble Funk when it signed its agreement with the third co-owner in 2012. The court held that the 2012 agreement conveyed nothing more than a bare right to sue, and therefore could not be the basis for standing under the Copyright Act. The court rejected TufAmerica’s argument that the agreement was sufficient to convey an exclusive license because it stated that the third co-owner “exclusively licenses” the right to sue, holding that inserting the word “exclusive” into the sentence was not sufficient to create an exclusive license. In determining whether an agreement confers standing, courts look to the substance of the agreement, not to the label it uses.