Ex©lusive Rights

Embassy Software Corporation v. Ecopy, Inc., Civil No. 06-cv-00391-JL, 2009 WL 74350 (D. N.H. Jan. 13, 2009).

I’ve been meaning to write about this case from the District of New Hampshire for a little while.  I think the suit would make a good movie if, you know, people who watched movies were copyright and corporations law dorks, and stuff.  The facts are a little tough on the first go through, so hang wif’ ‘em.

Ecopy hired Embassy Software Corporation to build a software program named G1.  Shortly thereafter, unbeknownst to everyone, Embassy was administratively dissolved for failing to file routine paperwork with the New Hampshire Secretary of State’s office.  Three years later, Embassy registered software (called G2) with its principal listed as author, and Embassy listed as the claimant.  The G2 registration  didn’t make Ecopy happy.   They viewed G2 merely as a derivative of G1.  Hullabaloo ensued, and Embassy eventually filed suit. 

Ecopy claimed that Embassy’s registration of G2 was invalid because the corporation was dissolved at the time it filed the registration.  The principal of Embassy tried to reinstate his corporation but was foiled because (oh noes!) Ecopy had filed a counterclaim.  Under the New Hampshire Business Corporation Act, a filing for reinstate must “[c]ontain a statement asserting that no lawsuits are pending against the corporation.” N.H.Rev.Stat. Ann. § 293-A:14.22-a(a)(5).  Oh, what to do?

ECopy moved to dismiss (which the court turned into a motion for summary judgment on this narrow issue under 12(d)) on the grounds that the allegedly defective registration rendered the court without jurisdiction.

As the Court outlined:

The predominant rule is that an invalid registration (involving material errors, fraud, or an incomplete application) nullifies the federal court’s subject matter jurisdiction.” Torres-Negron, 504 F.3d at 160. “[M]ost errors or mistakes in a copyright registration application will be inadvertent or immaterial, and thus will not invalidate the application (or any resulting certificate).” Id. at 162 (citing Data Gen. Corp., 36 F.3d at 1161). “In general, an error is immaterial if its discovery is not likely to have led the Copyright Office to refuse the application.” Data Gen. Corp., 36 F.3d at 1161.

Now’s where the fun begins.

The Court found that Embassy did in fact exist at the time it registered G2, although there were limitations on its conduct.  “A corporation administratively dissolved continues its corporate existence but may not carry on any business except that necessary to wind up and liquidate its business and affairs under [a separate provision] and notify claimants under [other provisions].” N.H.Rev.Stat. Ann. § 293-A:14.21(b) (Supp.2008).

Thus, the question was not so much whether Embassy existed at the time of registration, but whether the fact that Embassy was acting outside of its statutory limitations invalidated the registration.  The Court found that, according to N.H. law, no ultra vires act of a corporation “shall be invalid because the corporation was without capacity or power to do the act . . .”  The Court further found no compelling argument for why the Copyright Office would reject Embassy’s copyright registration, even if the Office was aware that the filing constituted an ultra vires act.

But, alas, there are potentially storm clouds on the horizon for Embassy.   The principal of Embassy claimed that he had assigned the copyright in G2 to his corporation via quitclaim, which he rescinded when he learned of the dissolution.  And that he had later assigned the copyright to a new corporation he founded (also called Embassy), which was the entity that brought suit in this dispute.  The court found that the amended complaint contained “inconclusive and arguably inconsistent factual assertions” about which party actually held the copyright, the first version of Embassy or Embassy 2.0.

Counsel:

• Ecopy, Inc.: Goodwin Procter LLP (Boston, MA); McLane Graf Raulerson & Middleton PA (Manchester, NH).
• Embassy Software Corporation:   Coolidge & Graves PLLC (Keene, NH).

Filings: