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Lightbulb Moment: It’s Possible to Grant an Implied Copyright Sublicense

Addressing for the first time the issue of implied copyright sublicenses, the US Court of Appeals for the First Circuit held that where a copyright license provides an unrestricted right to grant sublicenses, a copyright licensee may do so impliedly and without express language. Photographic Illustrators Corp. v. Orgill, Case No. 19-1452 (1st Cir. Mar. 13, 2020) (Kayatta, J.).

Photographic Illustrators Corp. (PIC), a commercial photography company, and Osram Sylvania (Sylvania), a lightbulb manufacturer and one of PIC’s customers, had entered into a detailed license granting Sylvania, inter alia, “a non-exclusive, worldwide license in and to all the images and copyrights thereto to freely use, sublicense use, and permit use, in its sole and absolute discretion, in perpetuity, anywhere that was in the world.” Sylvania—and its dealers and distributors—used the licensed images to market Sylvania products. Orgill, one of Sylvania’s distributors, used the licensed images of Sylvania lightbulbs in its electronic and print catalogs. At issue was the fact that Orgill’s use of the images was not pursuant to an express sublicense. Instead, Sylvania would send photographs to Orgill per Orgill’s request or direct Orgill to Sylvania’s website from which Orgill would copy and paste the images. Nor did Sylvania inform Orgill about an “attribution clause” in the PIC-Sylvania license, which stated “to the extent reasonably possible and practical, [Sylvania] shall . . . include a copyright notice indicating PIC as the copyright owner and/or include proper attribution indicating . . .  the photographer.” This omission by Orgill prompted PIC to sue Orgill (and other Sylvania dealers and distributors) for copyright infringement.

The district court granted Orgill’s motion for summary judgment, finding that Orgill had a sublicense from Sylvania to use the photographs. However, the district court left open the issue of whether Orgill exceeded the scope of that sublicense. The district court then granted the parties’ motion to stay pending the outcome of arbitration for the now consolidated cases PIC brought against other dealers and distributors. The arbitrator determined that the attribution clause was a “covenant” rather than a “condition” (thereby limiting the relief to breach of contract as opposed to copyright infringement) and awarded PIC $8.5 million for Sylvania’s breach. The arbitrator did not award PIC any damages from the other parties. Following arbitration, the district court granted Orgill’s renewed motion for summary judgment, finding Sylvania had granted Orgill an implied sublicense, and that because the attribution clause was “merely a covenant, not a condition,” PIC could not recover from Orgill for copyright infringement or breach of contract. PIC appealed.

On appeal, PIC argued that an implied copyright sublicense is a “legal impossibility,” and that even if, on appeal, the First Circuit determined an implied sublicense is acceptable, a jury could still find that Orgill did not obtain a sublicense, express or implied. No other circuit court had considered this issue previously, and finding itself in “unchartered waters,” the First Circuit looked to the Copyright Act, noting that it did not require sublicenses to be express. Additionally, the Court considered the typical test for assessing implied licenses, but rejected PIC’s assertion that a rigid three-part test should also apply when considering implied sublicenses. Lastly, the Court turned to the “practical considerations” that “counsel[ed] against treating the implied sublicenses as legally impossible.” One such practical consideration, the Court noted, is that the copyright owner/licensor has the ability to dictate the parameters of permitted sublicenses where, as here, the license is “in writing, is highly detailed, and expressly contemplates sublicensing.” Had PIC wished to require that sublicenses express, it should have dictated as such in the written license with Sylvania.

In affirming summary judgment for Orgill, the First Circuit likewise dismissed PIC’s second argument and upheld the district court’s finding that no reasonable jury could find that Orgill had not obtained a sublicense where the evidence so clearly demonstrated Sylvania’s intent to grant one.

© 2020 McDermott Will & Emery

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About this Author

Eleanor (Ellie) B. Atkins, Trademark, Copyright Attorney, McDermott Will Law Firm
Associate

Eleanor (Ellie) B. Atkins focuses her practice on trademark, copyright, sweepstakes and promotions, and false advertising matters.

Ellie is experienced in client counsel, strategy and legal research, including portfolio management and the selection, clearance, prosecution, registration and enforcement of trademarks. Additionally, she has assisted with district court litigation as well as actions before the Trademark Trial and Appeal Board, including drafting complaints, discovery requests and briefs in support of various motions.

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