August 6, 2013

By Oliver Herzfeld

Copyright licensors, through their communications and conduct, sometimes permit their licensees to take actions that exceed the scope of the parties’ license agreements. The question is, are such so-called implied licenses binding and legally enforceable against licensors? The recent case of Davis v. Tampa Bay Arena provides a good review of the enforceability of implied grants in the context of copyright licensing.

Background

Mitchell Davis was the official photographer at Tampa Bay Arena since 1996. Initially, the parties’ agreement was oral, but in 2000, the parties entered into a written agreement in which Davis retained the copyrights to his photographs and granted the Arena nonexclusive and limited use rights, including the “rights to reproduce images for newsletter, advertising, display prints, broadcast, and the [Arena] web site.” Approximately 10 years later, when the Arena created a Facebook page and began to post Davis’ pictures, Davis initially claimed such use violated the parties’ agreement, but quickly reversed course and permitted the Arena to post the images, subject to several conditions. He actually assisted the Arena by creating, and granting Arena personnel online access to, his photo-server. He also exchanged many email messages with the Arena, sometimes complaining about compliance with his conditions, but essentially confirming his consent to the Arena’s Facebook postings. In 2011, the Arena proposed a new agreement on substantially the same terms but with the addition of a provision that explicitly permitted the posting of Davis’ photos on the Arena’s Facebook page. Davis was offended by the addition, rejected the new agreement and commenced a lawsuit alleging copyright infringement, breach of contract and other claims against the Arena. In response, the Arena moved for summary judgment.

The Legal Standard

The court first addressed the legal standard. In particular, according to the U.S. Copyright Act, whereas an exclusive copyright license grant requires a formal writing, a nonexclusive grant (as in this case) may be conveyed orally or implied from the owner’s communications or conduct. The elements of an implied copyright license are:

1. A licensee requests the use of an owner’s work; and
2. The owner delivers the work to the licensee with the understanding and intention that the licensee may copy and distribute the work.

To determine whether an implied license was indeed granted, courts look for objective evidence of the owner’s intent to permit the licensee’s use of a work.

The Decision

In this case, the court held that Davis’ assistance to, and numerous communications with, the Arena clearly confirm that Davis had indeed granted the Arena an implied license to post his images to the Arena’s Facebook page. And any failure on the Arena’s part to comply with Davis’ conditions would not be regarded as a condition precedent breach that could constitute an ab initio (from the inception) rescission of the Arena’s license. Instead, the Arena’s failure to comply would at worst constitute a covenant violation giving rise to a breach of contract claim. This is so because “provisions in a contract are presumed to be covenants rather than conditions precedent” to avoid a party’s forfeiture, and “Davis did not withdraw his permission to allow the Arena to use his images on Facebook even after Davis was placed on notice numerous times during the parties’ relationship that the Arena was not complying with the conditions.” Accordingly, the court granted the Arena summary judgment on Davis’ copyright infringement claim and remanded Davis’ state-law breach of contract claims to state court.

The Lesson For Licensors

In light of the foregoing, licensors would be well advised to (i) avoid engaging in casual communications or conduct that may imply a consent to actions or omissions on the part of licensees that exceed or contradict the terms of the parties’ license agreements, (ii) maintain a disciplined license agreement amendment process to document and memorialize all license agreement changes in signed writings, and (iii) include provisions in all license agreements reserving all rights not expressly granted to the licensees therein and explicitly disclaiming that any course of conduct on the licensor’s part will constitute a consent to, or waiver of, any term or provision of the license agreements. In addition, to be eligible for enhanced copyright infringement remedies including statutory damages up to $150,000 per work, injunctive relief, actual damages and attorneys’ fees, key licensee obligations should be drafted in license agreements not as covenants (e.g., “Licensee agrees to. . .”) but as conditions precedent to the licensor’s grant (e.g., “on the condition that Licensee. . .”) with a close connection to provisions asserting licensor’s exclusive copyright rights to its works.