Under §5-903(2) of the New York General Obligations Law, automatic renewal provisions in "contract[s] for service, maintenance or repair to or for any real or personal property" are unenforceable unless the service provider gives prior written notice of automatic renewal.1 According to a recent California decision, Aimee Mann v. MediaNet Digital,2 Inc., this requirement applies to intellectual property service agreements.
In this case, the court found that MediaNet's agreement to use its "digital storage and security, streaming, and download technology to promote and distribute Mann's songs" fell within the statute's scope.3 In the agreement, Mann granted MediaNet a non-exclusive license to use, transmit, perform, reproduce and deliver her songs for a royalty.4 The agreement had a three-year initial term with automatically renewing two-year extensions (unless either party opted out at least ninety days prior to expiration).5 Mann alleged that the agreement terminated at the end of the initial term and that MediaNet infringed her copyrights by continuing to use and distribute her songs.6 As a defense, MediaNet asserted that it had a valid license because the agreement automatically renewed.7
As part of her argument that the agreement did not renew, Mann alleged that MediaNet failed to comply with New York's statutory notice requirement.8 MediaNet countered that the New York statute did not apply for several reasons: (i) it did not cover intellectual property licenses, (ii) it was a consumer protection law and (iii) it only protected paying parties.9 The court was not persuaded. In rejecting MediaNet's arguments, the court noted that intellectual property is "personal property" and, thus, subject to the statute.10 In addition, the court held that MediaNet's consumer protection argument was "meritless", given that the statute did not mention "consumers" and that prior cases applied the statute to non-consumers.11 Furthermore, the court rejected the payment argument, pointing to cases applying the statute to paying service providers.12
The court also noted that New York's "personal services contract" exception did not apply.13 Although not further detailed in the decision, several New York courts have refused to extend §5-903(2) to "personal services contracts" involving administrative or consulting services.14 For example, in a recent decision, Healthcare I.Q., LLC v. Chao, a New York court refused to extend §5-903(2) to "software licensing, clinical and coding guidelines, management of billing to insurance companies and patients, collection support services, denial management, consultative services, and supervision of [the defendant's] medical and administrative staff".15 The court in Healthcare I.Q. found that, even if the defendant's motion for summary judgment were allowed, the services at issue were "business consulting, outsourcing and administrative services", not service, repair or maintenance to real or personal property.16
Aimee Mann signals that courts may construe New York's statutory notice requirement to include services performed to or for a customer's intellectual property. As this case is not binding on New York courts (e.g., for contracts that choose New York law and exclusive venue), it remains to be seen whether New York courts would find similarly. In any event, as suggested by Aimee Mann, the failure to comply with the notice requirement could unknowingly expose companies to damages, especially where licenses (that would otherwise shield providers from infringement claims) are involved.17 Accordingly, service providers should consider whether their existing intellectual property service or licensing arrangements fall within the statute's reach and take appropriate steps to address any issues.