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By Joel I. Rosenblatt, Attorney at Law
Mr. Rosenblatt, a Registered Patent Attorney with the U.S. Patent and Trademark Office, practices in the commercial law of technology and the Internet and the law of patents, trademarks, and copyrights. He is a Florida Supreme Court Certified Mediator, a Florida Bar Approved Mediator for Computer Law Disputes, certified as a Mediator and Arbitrator for the U.S. District Court for the Middle District of Florida and is admitted to all U.S. District Courts for Florida. Any questions or comments may be directed to Mr. Rosenblatt at (321) 727-7626; FAX: 727-8209 or by email to jirosenblatt@earthlink.net
Two Interesting Copyright Cases.
The title is a complete misrepresentation. The two cases are not in copyright. I confess; one is a contract case that happens to involve a copyright and the other is a patent case that happens to involve copyrights, in particular, reverse engineering of proprietary software. However, for those who successfully navigate past the false signs and misdirected turns, there awaits a valuable lesson in self assertion when in the negotiation of software contracts.
First, some basic training, As we all know, except for the more recent innovation of the Uniform Commercial Code, contract law existed only in the published record of judicial decisions and in judicially recognized legal commentary. Law schools, recognizing the value of contracts for teaching its incoming students to read cases, scheduled contract law and tort law, as first subjects, as contract law, as for tort law, is taught by reading and discussing milestone decisions, where the student learns how to understand and explain the law of each case, in the same way the student, as a practicing attorney, would be expected to explain the law of the case to a court
Contract law forms a part of our daily transaction experience, and once its core principles are understood, its use becomes instinctive. When viewed through the lense of intellectual property, slight differences arise as adjustments to long standing legal principles, in an attempt to balance an imbalance in the case’s intellectual property equities.
Take the case of a simple transfer of “all of my rights in . . .” As words appearing in a contract for real property, there never is any issue. As long as the property is described with clear boundaries, the buyer takes whatever rights in the property the seller has to give. But what happens if the issue is about rights in the intellectual property of copyright where, instead of a single right, as a right to enter and occupy land, a complicated bundle of separate and divisible rights and royalty streams, as in a musical recording, are in controversy because, while some of the separate rights are properly described, others are not and controversy arises over who owns what rights and who gets the money.
At the root this controversy is an intellectual property variation of a principle of the common law of contract. The variation is usually used for the proposition that only the rights stated in the agreement are transferred and all the rights which are not stated are reserved to the owner. While that may sound like a clear proposition of the common law of contract. it must be understood in its intellectual property context, before it is applied to the division of intellectual property rights.
For those of you who may remember, a popular R&R female singing group of the ‘60's was the Ronetts, who became famous for their recording of “Be My Baby,” revived by the Patrick Swazye movie “Dirty Dancing,” and then sold as part of a compilation album of nostalgia songs. Unfortunately for the Ronetts, no one thought to share the royalties from the movie or the album and the Ronetts cried foul.
While the Ronettes agreed they had signed all of their rights to the Master recording [that is all the songs they recorded on the Master original studio recording], they argued 1963 agreement did not give the buyer a right to license the music on the Master recordings, for synchronization with a motion picture sound track and for domestic redistribution, and demanded royalties therefrom. The buyer’s reply was their agreement granted them absolute ownership rights to the Masters and that unequivocal transfer of ownership permitted the use of the recordings in any format, including then not mentioned synchronization and redistribution rights, subject only to contract specified royalty rights.
The buyers believed themselves to be on solid legal ground. The agreement recited all of the lawyer preferred “magic words”: “All recordings made hereunder and all records and reproductions made therefrom together with the performances embodied therein, shall be entirely [Buyer’s] property, free of any claims whatsoever by [Seller] or any person deriving any rights of interest from Seller]. Without limitation of the foregoing, [Buyer] shall have the right to make phonograph records, tape recordings or other reproductions of the performances embodied in such recordings by any method now or hereafter known, and to sell and deal in the same under any trade mark or trade names or labels designated by us, or we may at our election refrain therefrom.”
However, relying on that intellectual property doctrine, that rights not mentioned in the agreement are retained by the seller, and that the agreement did not mention synchronization or domestic redistribution, the Ronetts demanded royalties and surprisingly were successful in their initial trial court appearance and at the first appellate level. It wasn’t until the case came before the highest court in the state, that the agreement was read as intended by the common law of contract, exclusive of any influence of intellectual property equities in favor of the Ronetts, who happened to be the victims of an unconscionable division of their original creation.
It’s intuitive from basic contract, a court is bound to read a contract for its plain meaning unless ambiguous, whereupon extrinsic evidence outside the bounds of the written agreement may be used to determine the intent of the parties. Allied with that doctrine is the interpretation rule limiting the terms of transfer to those elements recited as examples [in this case “phonographs” and tapes”], unless the intent of the parties is plainly stated not to limit the agreement to the given stated examples.
So what went wrong is what may go wrong in any contract dispute. It just happened in this case that the intellectual property equities moved the sympathy of the lower courts to the Ronetts. That was enough to distort the established tenets of contract law. Because this was a transfer of intellectual property where courts are reluctant to separate the creators from their intellectual property rights, a doctrine requiring no rights would be taken from the creator unless the transfer agreement was clear that the particular rights in question are written into the agreement, was hauled out and used to cover over the plain wording of the agreement. While a nice rule for writers and inventors, if it had prevailed, it could have upset an important doctrine of the common law of contract interpretation where this case clearly belongs.
In another case, the question of whether the more sympathetic common law of contract or the harsher statutory copyright law, should apply, arose from a shrink wrap agreement. A shrink wrap agreement [that’s the license in the form of a contract that arrives with the product and is hardly read, if at all], in this instance, strictly prohibited reverse engineering. However, the reverse engineer argued the Copyright Act by statue, preempts the state common law of contract and even if the reverse engineering complained of, violates the plan meaning of the shrink wrap license agreement, an actionable violation could not occur unless or until, the copy made is found to have infringed the software expression protected by the copyright act, which in this case, the reverse engineeer said, it didn’t
However, courts are more comfortable with state contract law than with federal copyright law and will likely substitute the state law, given the opportunity. Here the court, finding the opportunity, easily avoided the federal law, by distinguishing the reverse engineering restraint as a right against a willing party to a contract while copyright was an exclusive right against the world, and was thereby able to conclude copyright as a right against anyone in the world, whether involved in a contract with the copyright owner or not, was a different right from a contact right with a person or persons who voluntarily entered into a contract and the two rights being different, the contract law was not preempted by the Copyright Act.
I’m still upset about that one. Unfortunately the court did not explain how reverse engineering of a software program could lead to any result that was not, at the same time, a copyright infringement and preempted by the federal copyright law.
Now , having finished the reading, as promised, here is the lesson. My advice, which I only give rarely, so take it for what its worth, is do not dwell on this article and consider yourself lucky if you have, up to this point in life, avoided a common law contract dispute. But that may not last forever, so in preparation for what may be the inevitable, make sure your negotiated agreements are simple, clear, straight forward and comprises no phraseology capable of more than one meaning. And above all, if there is anything in the agreement that does not unambiguously express your intent, insist on a rewriting then and there, even if the attorney(s) assures you on a stack of Corpus Juris Secundums, that what you want is already adequately covered by the contract. So, if you didn’t see it to your complete and unmitigated satisfaction upon reading the agreement terms, you know more than the attorneys and it may be time to become your own lawyer, regardless of that admonition about the fool and self representation.
For next month, the article will be a Surprise!
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Joel I. Rosenblatt is state Supreme Court certified and available for mediation and arbitration. He practices as a registered patent attorney in patents, trademarks and copyrights. Specific areas of practice include commercial law related to electronics, computers, data processing, telecommunications, materials and mechanical engineering, the Internet and entertainment and in the development and licensing of technology and creative works. As Intellectual Property and Licensing Counsel for Fortune 200 corporations, he has acquired numerous patents for electronics and computer related inventions, and has prepared and negotiated design, development and distribution agreements for software, telecommunications, electronic technology, and creative works. As a logistics attorney, he has provided counsel and representation in the field of customs, logistics services, and in loss and damage claims.
Mr. Rosenblatt is available for mediation and arbitration in the fields of general law, intellectual property, entertainment, and technology law, and in logistics law and loss and damage claims. Emphasizing technology and the arts, he serves a wide range of intellectual property and commercial needs for individual and business clients. Mr. Rosenblatt, as a senior level attorney can provide clients easy access and quick turnaround.
Education and Professional Affiliations:
Mr. Rosenblatt holds a Bachelor of Electrical Engineering Degree from the New York Polytechnic University, an MBA from the Wharton School of the University of Pennsylvania, and a JD from the Catholic University of America Law School.
Mr. Rosenblatt is a Registered Patent Attorney with the U.S. Patent and Trademark Office and a member of the Florida and New York State Bars. Admitted to practice in the Court of Appeals for the Federal Circuit, the United States Court of Appeals for the 11th Circuit, the United States Court of International Trade and the United States District Courts for the Northern, Southern, and Middle Districts of Florida. Florida Supreme Court Certified for Circuit Court Mediation and approved by the Florida Bar as a Mediator of Computer Law Disputes. Mr. Rosenblatt has completed Florida Supreme Court Certified Arbitration Training and is certified as a Mediator and Arbitrator in the United States District Court for the Middle District of Florida. jirosenblatt@earthlink.net . |
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