A copyright license can be very valuable. It may enable you to generate lucrative revenue streams and allow you to reproduce, distribute, perform, display creative works or prepare derivative works, depending on the scope of the license. However, if someone infringes the copyright in such a work, you may be left without recourse if the copyright license agreement does not specifically grant you an exclusive copyright right. Even though your revenues are hurt, you wouldn’t be able to sue infringers without an exclusive right. This little-known copyright law can have devastating consequences, especially because contract drafters tend to focus their energy on immediate business concerns at the expense of long-term ramifications, such as the right to sue infringers down the road.
The Importance of Exclusive Right to Copyright Licensee
A non-exclusive license does not give you standing i.e. a right to sue. This may seem harsh but it is the law under the Copyright Act (( Section 501(b) of the Copyright Act states: “The legal or beneficial owner of an exclusive right under a copyright is entitled, subject to the requirements of section 411, to institute an action for any infringement of that particular right committed while he or she is the owner of it.” 17 U.S.C. § 501)), which provides that only (1) owners of copyrights and (2) persons who have been granted exclusive licenses by owners of copyrights can sue ((“The Copyright Act authorizes only two types of claimants to sue for copyright infringement: (1) owners of copyrights, and (2) persons who have been granted exclusive licenses by owners of copyrights.” Eden Toys, Inc. v. Florelee Undergarment Co., Inc., 697 F.2d 27, 32 (2d Cir.1982) )). The exclusive rights at play here are the rights to (1) reproduce, (2) distribute, (3) perform, (4) display creative works or (5) prepare derivative works. To illustrate, if you possess an image’s exclusive reproduction license, you could sue infringers reproducing it. But, if your reproduction license is non-exclusive – as is often the case – you would have no standing to sue.
An Express Right to Sue Does Not Confer Standing
The freedom of contract is such that a person assigning to someone else her right to sue is usually valid, provided that the assignment is well-drafted and unambiguous. However, an exception to that rule applies in copyright law. Some have attempted to go around the exclusive right requirement by coupling a non-exclusive copyright license with a contractual right to sue. However, federal courts have squarely rejected this approach holding that “the bare assignment of the right to sue cannot confer standing”((John Wiley & Sons, Inc. v. DRK Photo, 998 F.Supp.2d 262, 277 (S.D.N.Y. 2014) )). Simply put, there is no way around the requirement to possess an exclusive right in copyright infringement cases.
Points to Ponder
A non-exclusive licensee could ask the licensor ((The owner of the relevant exclusive right could be the licensor but it may well be a separate entity )) to sue, who may be so inclined. After all, the licensor’s copyright is at stake. However, this is not a great option because the interests of licensors and licensees are not always aligned – although bringing a lawsuit may make perfect business sense to the licensee, it may not be worth the licensor’s time and money. A better solution would be to contractually require the licensor to sue for violations of the exclusive rights. Naturally, burdening the licensor with such hefty duty would come at a price.
Obtaining an exclusive copyright license of at least one of the 5 copyright rights (outlined above) is highly valuable. An exclusive license is valuable in its own right because exclusivity means you have a monopoly within the scope of the assigned rights. But it’s value also derives from its ability to confer standing to sue copyright infringers. Conversely, although a non-exclusive license may be very profitable, all your hard work may be jeopardized if you cannot sue and stop infringers. Exclusive licenses should be sought because of their dual value. When they are not an option, the price of the non-exclusive license should reflect your inability to get redress for infringements. And, when feasible, your lawyer should negotiate on your behalf to require the licensor to sue potential infringers.