Ex©lusive Rights

Conwell v. Gray Loon Outdoor Marketing Group, Inc., 2009 WL 1409477 (Ind. 2009)

The Supreme Court of Indiana addressed a fun little copyright case last Tuesday. The story goes like this: Piece of America sold novelty packages that included one-square-inch parcels of land in each of the fifty states. The company approached Gray Loon to design and host its website.  Gray Loon submitted a proposal that contained language stating that it was its “philosophy that clients have purchased goods and services from us and that inherently means ownership of those goods and services as well.” Grey Loon completed the design at a cost of $8,500, which Piece of America paid in full. The parties never executed a contract.

About a year later, Piece of America requested that Gray Loon make substantial changes.  Gray Loon didn’t submit a proposal for the revisions, but completed the work, which it billed at $5,224. Three months went by without payment or assurances of payment for either the revisions or the hosting fee. Gray Loon informed Piece of America that if it didn’t receive payment, it would take the site offline, and it eventually followed through.

Gray Loon filed suit for non-payment, and Piece of America countersued for conversion, claiming Grey Loon had taken from it the pre-revision version of its website.

Analysis of the conversion claim:

Indiana law states that a person can bring a civil action against a “person who knowingly or intentionally exerts unauthorized control over property of another.” Ind.Code § 35-43-4-3 (2008).

According to the Court,  Gray Loon’s stated philosophy of client ownership didn’t “carry the weight and certainty required by the Copyright Act,” and the “formalities of copyright ownership transfer were clearly not met, inasmuch as the proposal-the only document purporting to grant [Piece of America] any ownership interest in Gray Loon’s intellectual property-was not signed as required by § 204.”

Thus, the Court found that Piece of America’s claim failed because it only owned a non-exclusive license, not a copyright (emphasis mine):

While copyright transfer requires a signed writing, one incidence of ownership that may be transferred without a writing is a “nonexclusive license,” a creation fashioned by courts for situations in which parties intended to transfer a copyright, but failed to do so in writing. Such a license can be granted orally or implied from the conduct of the parties. Effects Assocs., Inc., 908 F.2d at 558; 3 Nimmer on Copyright § 10.03[A], at 10-36. “Nonexclusive licenses do not constitute transfer of ownership rights and do not come within the purview of copyright law. Rather, they simply permit the use of a copyrighted work in a particular manner. An implied nonexclusive license is granted when (i) a person (the licensee) requests the creation of a work; (ii) the creator (the licensor) makes that particular work and delivers it to the licensee; and (iii) the licensor intends that the licensee copy and distribute his work. See Effects, 908 F.2d at 558-59.” Holtzbrinck Publ’g Holdings, L.P. v. Vyne Commc’n, Inc., 2000 WL 502860 *4 (S.D.N.Y.2000).

What POA had was a nonexclusive license. Piece of America, the licensee, requested the creation of a website. Gray Loon, the creator/licensor, made and “delivered” the work to the licensee. As a nonexclusive licensee, POA never had ownership of the site under copyright law. POA purchased a non-exclusive license, which we might read as granting it rights to use the site as its own. This conclusion makes short work of POA’s conversion claim. Because the website actually did not belong to POA, it cannot bring a claim for conversion. Furthermore, even if POA had owned the website, Gray Loon did not commit conversion. It performed the work-including  hosting the site-at POA’s request. When POA did not pay, Gray Loon discontinued its hosting service and refused to hand over a copy of the site. Because this contingency was not addressed by the proposal, the common law of contract applies, not conversion.

Notes:

• [Edit, edit, edit] I usually write these summaries at night.  Sometimes when I look at them in the morning, I get that “What?!” sensation.  This is one of those circumstances.   This case is deserving of more analysis than was located here previously, and I’ll return to the opinion later in the week.