In Righthaven LLC v. Hoehn and Righthaven, LLC v. DiBiase, Nos. 11-16751, 11-16776, 2013 U.S. App. LEXIS 9413 (9th Cir. May 9, 2013), the Ninth Circuit affirmed the district court’s holding in two consolidated cases that plaintiff-appellant, Righthaven, lacked standing to sue for copyright infringement arising out of republication of journal articles notwithstanding a contractual agreement assigning Righthaven the right to sue. The Ninth Circuit held that the assignment of the right to sue without a transfer of any exclusive rights in the articles was insufficient to confer standing to sue for copyright infringement.
The Contract Assigning the Right to Sue for Infringement
Righthaven’s charter states that the company was founded to “identify copyright infringements on behalf of third parties, receive ‘limited, revocable assignment[s]’ of those copyrights, and then sue the infringers.” To provide these services, Righthaven entered into a contract with Stephens Media, LLC, the company that owned the Las Vegas Review-Journal, in which the allegedly infringing articles at issue were published. Stephens Media was the owner of copyrights in the articles. The contract between Righthaven and Stephens Media effectively made the former a plaintiff-for-hire, vesting in 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.”
Under this arrangement, Righthaven was to search for instances of infringement of the copyrights assigned to it by Stephens Media. When Righthaven found an instance of infringement, it could pursue the infringer subject to Stephens Media’s veto. If Righthaven failed to extract a settlement or initiate litigation against the infringer, Righthaven was required to reassign the copyright back to Stephens Media. Righthaven was to split any recovery obtained for infringement with Stephens Media.
Notably, any rights inuring to Righthaven under the contract were subject to “sharp” restrictions, including the rights of reversion of any assigned copyright back to Stephens Media; no right to participate in any royalties or exploitation of the copyrights; retention of Stephens Media as an exclusive licensee of the assigned copyrights; and a license granting Stephens Media “‘to the greatest extent permitted by law. . . unfettered and exclusive ability’ to exploit its copyrights.”
The Copyright Infringement Suits
Under its contract with Stephens Media, Righthaven brought copyright infringement suits against defendants-appellees Wayne Hoehn and Thomas DiBiase for their unauthorized posting of articles from the Las Vegas Review-Journal. At the time of the allegedly infringing postings, Stephens Media owned the copyrights to the articles.
Hoehn and DiBiase moved for dismissal on the grounds that Righthaven lacked standing. The district court granted the motions, finding that Righthaven “lacked standing to sue for infringement because it was not the owner of any of the exclusive rights in the news articles required for standing under the Copyright Act” and Silvers v. Sony Pictures Entertainment, Inc., 402 F.3d 881, 890 (9th Cir. 2005) (en banc). The Ninth Circuit affirmed and vacated the district court’s order granting summary judgment on the grounds that Hoehn was entitled to a fair use defense because if Righthaven did not have standing to sue, then the court did not have jurisdiction to adjudicate on the issue of fair use.
The Court’s Holding on Appeal
Citing the Copyright Act, 17 U.S.C. § 501(b), the Ninth Circuit noted that “only the ‘legal or beneficial owner of an exclusive right under a copyright’ has standing to sue for infringement” of those exclusive rights. Section 106 of the Copyright Act enumerates those exclusive rights, which include: the right to reproduce the copyrighted work; to prepare derivative works; and to distribute copies of the work by selling, renting, leasing, or lending. The Ninth Circuit stated that “absent from the list of exclusive rights is the right to sue for infringement.” Citing its prior decision in Silvers, the Ninth Circuit explained that “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.”
Applying Silvers, the Ninth Circuit held that Righthaven also merely received a “bare right to sue for infringement,” which, as in Silvers, was insufficient for standing. The Ninth Circuit reasoned that just because “some language in the contract described Righthaven as the [copyright] owner” did “not itself prove that Righthaven owned any exclusive rights.” The court explained its analysis of the contract, stating that “when determining whether a contract has transferred exclusive rights, we look not just at the labels the parties use but also at the substance and effect of the contract.”
The contract between Righthaven and Stephens Media provided that any of the copyrights assigned to Righthaven were subject to contractual restrictions, including an automatic granting of an exclusive license to Stephens Media in any copyrighted work assigned to Righthaven to preserve Stephens Media’s “‘unfettered and exclusive ability’ to exploit the copyrights.”
These limitations in the contract led the court to conclude that Righthaven had no exclusive rights to the copyrights, without which rights Righthaven had no standing to sue. In sum, the court determined that under the Copyright Act, it is invalid and illogical for a contract to assign an exclusive license or rights to one party, yet simultaneously claim the assigning party also retains that exclusive license or right.
Having held that Righthaven had no standing to sue, the Ninth Circuit also determined that the district court did not have jurisdiction to reach the merits of the fair use defense asserted by defendant Hoehn. The court noted that the “doctrine of hypothetical jurisdiction,” in which a “federal court assumes jurisdiction for the purpose of reaching the merits,” was expressly disapproved by the Supreme Court. Accordingly, the Ninth Circuit held that the district court improperly exercised jurisdiction because it lacked Article III jurisdiction due to Righthaven’s lack of standing.
This decision potentially limits the viability of the assignment of infringement claims by copyright holders to other parties, notwithstanding contractual provisions to the contrary unless the copyright holders are willing to dispense with their exclusive rights to the copyright to allow other parties to pursue claims for copyright infringement. As this case demonstrates, even seemingly clear contractual intent and language may be invalidated by a court if the contractual provisions are contrary to law.