DRK Photo v. McGraw-Hill

Takeaway: In the world of intellectual property licensing it is important to obtain the proper intellectual property interest in the works that you are licensing or you may not have standing to sue.

DRK Photo is a stock photography agency that markets and licenses images created by others. One of the entities they licensed images to was McGraw-Hill, the defendant in this action. DRK Photo brought this suit for copyright infringement because McGraw-Hill overprinted the images that were licensed to them by DRK Photo in a book that McGraw-Hill published.

The main issue of this case was whether DRK Photo actually had standing to sue under the Copyright Act of 1976. The court explained that it has been established that either an assignment or an exclusive license will transfer a right in copyright for the purposes of standing to sue. On the other hand, a nonexclusive license does not constitute a transfer of copyright ownership and therefore cannot confer standing to assert an infringement claim.

DRK Photo obtains licenses of the photos on its website through representation agreements which take two forms: (1) agreements appointing DRK Photo as the “sole and exclusive agent” to license and sell the covered photographs, and (2) agreements appointing DRK Photo as a nonexclusive agent to license and sell the covered photographs.

The only type of agreement that is at issue in this case is the second form, which only grants a nonexclusive right to license and sell the images. These nonexclusive representation agreements give the original photographer the ability to have other agents sell and license their photos for them as well.

In addition to the representation agreements, DRK Photo also sought an assignment agreement for the purpose of obtaining copyrights in the photos they sell for the photographers. The intent of this second agreement seemed to be for the sole purpose of obtaining standing to sue for infringement. The court found evidence through the assignment language itself and communications between DRK Photo and the photographers that the intent of this agreement was not for any ownership interest but rather only for the purpose of suing for infringement.

The issue then became whether the assignment of the copyright after the infringement occurred was enough to obtain standing. The court did not believe that it was. They found support for their decision in Silvers v. Sony Pictures Entertainment, 402 F.3d 881 (9th Cir. 2005) (en banc), and later in Righthaven LLC v. Hoehn, 716 F.3d 1166, 1169-70 (9th Cir. 2013). In those decisions, the court found that an assignee who holds an accrued claim for copyright infringement, but who has no legal or beneficial interest in the copyright itself, may not institute an action for infringement. In other words, the purported transfer of legal title coupled with the transfer of accrued claims does not confer standing when the transaction, in substance and effect, merely transfers a right to sue. Therefore, because the overall intent here seemed to be for the purpose of obtaining a right to sue, rather than a legitimate copyright in the images, the court found that DRK Photo still did not have standing to sue.