Gardner v. Nike, Inc., 00-56404.

• Decision Date: 31 January 2002
• Docket Number: No. 00-56404.,00-56404.
• Citation: 279 F.3d 774
• Parties: Michael GARDNER and Bien Licensing Agency, Inc., Plaintiffs-Appellants, v. NIKE, INC., Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

279 F.3d 774

Michael GARDNER and Bien Licensing Agency, Inc., Plaintiffs-Appellants, v. NIKE, INC., Defendant-Appellee.

No. 00-56404.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted December 11, 2001.

Filed January 31, 2002.

COPYRIGHT MATERIAL OMITTED

Herbert Hafif, Larry Sackey and Michael G. Dawson, Law Office of Herbert Hafif, Claremont, CA, for the plaintiffs-appellants.

C. Dennis Loomis, Los Angeles, CA, for the defendants-appellees.

Appeal from the United States District Court for the Central District of California; Lourdes G. Baird, District Judge, Presiding. D.C. No. 99-12700 LGB (Ex).

Before: FERGUSON, T.G. NELSON, and W. FLETCHER, Circuit Judges.

OPINION

FERGUSON, Circuit Judge.

Appellants Michael Gardner ("Gardner") and Bien Licensing Agency, Inc. ("Bien") (collectively referred to as "Appellants") appeal the District Court's grant of summary judgment to Appellee Nike, Inc. ("Nike"). The District Court held that Appellants lacked standing because the licensee, Sony Music Entertainment Corporation ("Sony"), did not have the right to transfer its rights to Gardner under the exclusive license with the licensor, Nike, under the Copyright Act of 1976. Although we have previously addressed this issue under the Copyright Act of 1909, this is a case of first impression under the Copyright Act of 1976.¹ We have jurisdiction pursuant to 28 U.S.C. § 1291, and we AFFIRM.

BACKGROUND

A. Factual History

In 1992, Nike and Sony entered into a licensing agreement involving a Nike-created cartoon character called MC Teach. In exchange for fifteen percent (15%) of profits earned from any use of MC Teach in merchandise other than records,² Nike transferred the exclusive, perpetual, worldwide right to Sony to use MC Teach:

on and in the packaging of phonograph records (the `Records'), in publicity, advertising and allied exploitation of the Records, in television programs or motion pictures embodying the musical compositions embodied on the records, on educational materials and on clothing....

The agreement also stated that Nike "shall own the copyright in the Material and any published copy of the Material ... shall bear the following notice: 1992 Nike, Inc." It is undisputed that the agreement contemplated an exclusive license. Gardner v. Nike, Inc., 110 F.Supp.2d 1282, 1283 (C.D.Cal.2000). The agreement was silent as to Sony's right to assign its rights under the exclusive license.

In June 1996, Sony assigned all its rights in the exclusive license to Gardner, on a quitclaim basis, in exchange for a share of the proceeds derived from MC Teach. As a result of Appellants' use of MC Teach,³ Nike threatened legal action against Sony, Appellants, and Appellants' licensees. In response to these threats, Appellants filed suit in state court seeking declaratory relief.

B. Procedural History

Appellants originally filed suit in state court for declaratory relief, alleging slander of title and intentional interference with economic relations. Appellants voluntarily agreed to dismiss both tort causes of action, leaving only the request for declaratory relief. Appellants filed a motion for summary judgment, asserting that under either New York or California law, Sony was permitted to transfer its rights to use the MC Teach character. The state court denied Appellants' motion for summary judgment. Nike then filed a motion to dismiss for lack of subject matter jurisdiction, contending that the Copyright Act of 1976 governed the transfer of rights under the licensing agreement. After both parties had filed trial briefs in the state court, Nike removed the action to District Court. The District Court remanded the action to state court because Nike's removal petition was untimely. On November 29, 1999, the state court dismissed the action without prejudice for lack of subject matter jurisdiction.

On December 3, 1999, Appellants filed the present action in District Court against Nike and Sony, seeking declaratory relief that the transfer of rights from Sony to Gardner was valid. On February 29, 2000, Sony was deemed an involuntary plaintiff, and it consented to be bound by any decisions by the court, subject to its opportunity to be noticed and heard. On June 5, 2000, Nike filed a motion for summary judgment, claiming that the Appellants lacked standing to sue. On the same day, Appellants filed a motion for summary adjudication.

On August 1, 2000, the District Court entered an order granting Nike's motion for summary judgment and denying Appellant's motion for summary adjudication. The District Court determined that both motions hinged on the issue of whether the Copyright Act of 1976 allowed Sony to transfer its rights under the exclusive license, absent the original licensor's consent. In particular, if the transfer was not valid, Appellants lacked standing to bring the action. The District Court found that the Copyright Act of 1976 did not allow Sony to transfer its rights under the exclusive license without Nike's consent. Thus, the District Court held that the Appellants lacked standing to bring the action because they had no legally cognizable interest in the suit. Appellants filed their timely notice of appeal on August 21, 2000.

ANALYSIS

The District Court's grant of summary judgment is reviewed de novo. Delta Sav. Bank v. United States, 265 F.3d 1017, 1021 (9th Cir.2001) (citations omitted). We are governed by the same standard used by the District Court under Rule 56(c) of the Federal Rules of Civil Procedure. Id. (citation omitted). Thus, we must determine, viewing the evidence in the light most favorable to the nonmoving party, whether there are any genuine issues of material fact and whether the District Court correctly applied the relevant substantive law. Id. (citation omitted).

In the present appeal, Appellants argue that the District Court erred in holding that the Copyright Act of 1976 ("1976 Act") does not permit an exclusive licensee to transfer its rights without the original licensor's consent, absent contractual provisions to the contrary. Because the transferability of an exclusive license under the 1976 Act is a question of first impression, the state of the law prior to 1976 is pertinent to our inquiry.

A. Copyright Act of 1909

Under the Copyright Act of 1909 ("1909 Act"), copyright licenses (whether exclusive or not) were "not transferable as a matter of law." Harris v. Emus Records Corp., 734 F.2d 1329, 1333 (9th Cir. 1984). Unlike an assignee, a licensee "had no right to resell or sublicense the rights acquired unless he had been expressly authorized so to do." 3 Melville B. Nimmer & David Nimmer, Nimmer on Copyright § 10.01[C][4] (2001). The distinction between licenses and assignments was based on both the doctrine of indivisibility and the policy concerns underlying the 1909 Act.

Under the doctrine of indivisibility, a copyright owner possessed an indivisible "bundle of rights," which were "incapable of assignment in parts." Id. § 10.01[A]. Thus, an assignment included "the totality of rights commanded by copyright." Id. Anything less than an assignment was considered a license. Id. The purpose of the doctrine was "to protect alleged infringers from the harassment of successive law suits. This result was achieved because only the copyright proprietor (which would include an assignee but not a licensee) had standing to bring an infringement action." Id. As discussed in Nimmer on Copyright and reiterated by the District Court, the doctrine of indivisibility created many problems for copyright licensees, including the licensee's lack of standing to bring an infringement action and the exclusive licensee's inability to register his license. Id. § 10.01[C]; see Gardner, 110 F.Supp.2d at 1285.

In addition, the distinction between assignments and licenses as to transferability under the 1909 Act was also based on policy considerations. In particular, the licensee's inability to resell or sublicense the rights acquired without the express consent of the original licensor struck a balance between two competing interests — "[the] strong reluctance to allow a monopolization of works or compositions" and "the necessity of preserving the rights of authors and composers in order to stimulate creativity." Harris, 734 F.2d at 1334.

In Harris, we addressed the question of whether a copyright license was transferable under the 1909 Act. Id. at 1333. We held that a copyright license was not transferable, relying on the legislative history, underlying policy concerns, and analogous rules in patent law. Id. at 1333-34 ("Where precedent in copyright cases is lacking, it is appropriate to look for guidance to patent law `because of the historic kinship between patent law and copyright law.'") (citation omitted). We emphasized that, "[b]y licensing rather than assigning his interest in the copyright, the owner reserves certain rights, including that of collecting royalties. His ability to monitor use would be jeopardized by allowing sublicensing without notice." Id. at 1334.

B. Copyright Act of 1976

The 1976 Act eradicated much of the doctrine of indivisibility as it applied to exclusive licenses. Nimmer, supra, § 10.02[A]. First, § 101 defines the "transfer of copyright ownership" as "an assignment, mortgage, exclusive license, or any other conveyance, alienation, or hypothecation of a copyright or of any of the exclusive rights comprised in a copyright, whether or not it is limited in time or place of effect, but not including a nonexclusive license." 17 U.S.C. § 101 (emphasis added). This definition calls into question the distinctions that were previously drawn between an assignment and an exclusive license under the indivisibility doctrine. Nimmer, supra, § 10.02[A] ("An exclusive license ... is equated with an assignment...."). Second, § 201(d)(2) provides that "[a]ny of the exclusive rights comprised in a copyright, including any subdivision of any of the rights...