Second Circuit holds that stock photograph company aggregating claims for copyright infringement against third-party licensees for exceeding usage limits of licenses does not have standing to bring copyright infringement action where it has been assigned the bare right to sue for infringement of copyrights and has never otherwise held any of the exclusive rights under the Copyright Act.

DRK Photo, a stock photograph company that licenses photographs to third parties for a fee, generally had two agreements with photographers: (1) a representation agreement allowed for DRK to act as the nonexclusive agent of the photographers in order to assist them in licensing their photos and (2) an assignment agreement provided for the transfer of the rights and title to photos so that DRK could register the photos with the Copyright Office, and would thereafter reassign the copyrights in the photos back to the photographers “upon completion of the registration of the Images … and resolution of infringement claims brought by DRK relating to the Images.” The assignment agreement also granted to DRK “all right, title and interest in any accrued or later accrued claims” brought to enforce the copyrights of the photos.

Educational book publisher John Wiley & Sons Inc. filed a declaratory relief action against DRK in August 2011 after DRK threatened to bring a copyright infringement action against Wiley for exceeding the usage limit on photographs licensed to it by DRK. The district court granted summary judgment in favor of Wiley on the grounds that DRK lacked standing to sue for copyright infringement. On appeal, the Second Circuit found that DRK did not have standing to bring infringement claims on the photographs under the Copyright Act because the agreements it had with photographers assigned the mere right to sue for infringement of the photographs in question but otherwise did not grant any of the exclusive rights under copyright.

DRK acquires the rights to include photos in its library and to license those photographs to third parties. In 2008, DRK approached its photographers and asked them to sign a “Copyright Assignment, Registration, and Accrued Causes of Action Agreement,” through which the photographers would grant to DRK “all copyrights and complete legal title” to the photographs so that DRK could register the copyrights with the Copyright Office, and, once that was completed, DRK would reassign the copyrights back to the photographers. In correspondence with its photographers regarding this agreement, DRK claimed it would be in a stronger position to initiate and settle copyright infringement claims regarding the photos. Also included in that agreement was a clause transferring “all right, title and interest in any accrued or later accrued claims” brought to enforce copyrights in the photos. DRK would then split any recovery obtained on these lawsuits evenly with the photographer whose photo was the subject of the claim.

In the declaratory relief action, the district court relied on prior case law in holding that “disguised assignments of the bare right to sue … cannot confer [statutory] standing” to bring a copyright infringement action under the Copyright Act,” and it granted summary judgment in Wiley’s favor. The Second Circuit began its de novo review of this ruling by determining whether the cases relied upon by Wiley and the district court were correctly interpreted to mean that section 501(b) of the Copyright Act precluded copyright infringement suits by “assignees of the bare right to sue that have never held exclusive ownership rights” in the copyrights. The Second Circuit was not convinced that these cases so definitively stood for that principle.

The Second Circuit turned to the text of the Copyright Act itself, specifically section 501(b), which states in part that “[t]he legal or beneficial owner of an exclusive right under a copyright is entitled … to institute an action for any infringement of that particular right committed while he or she is the owner of it.” By expressly providing for infringement actions to be brought by the “legal or beneficial owner[s]” of one of the exclusive rights under a copyright (which the court determined to be those rights enumerated in section 106 of the Copyright Act), the Second Circuit determined that Congress intended to exclude assignees of the bare right to sue from the universe of those who are authorized to bring an infringement action. The court reasoned that, because copyright law is complex and unique, Congress’ careful crafting of the statute should not be disturbed. While the court recognized the argument that the 1976 Copyright Act sought to promote the divisibility of rights under copyright, which might suggest that the bare right to sue on a copyright could be recognized to create standing to bring an infringement action, the Second Circuit ultimately determined that Congress had effectuated the divisibility of copyrights by enumerating the six exclusive rights under section 106, and that the right to sue for infringement was excluded from this list.

DRK argued that the Second Circuit’s interpretation of the Copyright Act ignored common-law principles permitting the assignability of federal claims, citing to the 2008 Supreme Court decision in Sprint Communications Co. v. APCC Services Inc., a case involving an assignee of a claim under the Federal Communications Act, wherein the Supreme Court seemed to approve of the trend toward the assignability of federal causes of action. The Second Circuit, however, did not think that this policy should apply to copyright law, reasoning that the trend toward assignability of claims does not apply in patent law, a body of law seen as closely related to copyright. The court stated that “the right to sue for copyright infringement [is] an incidental privilege of ownership of a right to a copyrightable work” that is “not independently transferable under the current congressionally enacted copyright regime.”

DRK presented a second theory as to why it had a right to sue Wiley for copyright infringement, arguing that it was a legal or beneficial owner of an exclusive right under copyright pursuant to the agreements it had signed with the photographers and therefore had standing to bring suit under section 501(b). The Second Circuit determined that the “Representation Agreement,” establishing DRK as the agent of each of its photographers, was not an exclusive agreement and therefore did not make DRK the legal owner of any exclusive right under copyright. As for the later signed copyright assignment agreements, the Second Circuit reviewed parol evidence in interpreting the contract and determined that the assignment agreement conveyed to DRK an interest in the photos only for the purposes of registering them with the Copyright Office, as well as the bare right to sue for infringement. As neither of these rights is an exclusive right enumerated in section 106, the court concluded that DRK did not become a legal owner of the copyright by means of the assignment agreement.

The second question addressed by the court on this issue was whether DRK was a beneficial owner of the copyrights in the photos. While the Second Circuit was sympathetic to DRK’s position that it played an important role in the protection of the photos and derived an interest from the photos’ use, the court did not think this was enough to make DRK a beneficial owner of the copyrights. Noting that beneficial owners are typically authors who transfer the exclusive rights in their copyrights in exchange for royalties, the Second Circuit found DRK’s situation to be different in that DRK was not the exclusive agent of the photographers or their photos and would benefit only when it was directly responsible for issuing a license of the photos. Therefore, the court determined that DRK was not a beneficial owner of an exclusive right.