Click-On Terms Of Use (TOS) Creates Valid Assignment For Copyright Infringement

The 4th Circuit held that an agreement to transfer ownership of a copyright in a photograph found in a website’s “click-on approved” Terms of Use (“TOS”, sometimes called Terms of Use “TOU”) was a valid assignment of the copyright.  Metropolitan Regional Information Systems, Inc. v. American Home Realty Network, Inc., Case Nos. 12-2102, 12-2432 (4th Cir. July 17, 2013) (available here).  American Home Realty Network, Inc. (“AHRN”) and Metropolitan Regional Information Systems, Inc. (“MRIS”) compete in the real estate listing business.  MRIS offers a fee-based online listing service to real estate brokers and agents, and AHRN takes listing data from online databases, such as MRIS, and makes the listing data directly available to consumers.  MRIS sued AHRN for copyright infringement for AHRN’s unauthorized use of MRIS’s materials.  The lower court entered an injunction against AHRN, prohibiting AHRN from displaying MRIS’s photographs on AHRN’s website.  AHRN appealed and the Fourth Circuit affirmed.

MRIS offers its service (the “MRIS Database”) to real estate brokers and agents in several states in exchange for a subscription fee.  The subscribers can upload their real estate listings to the MRIS Database.  According to the TOS-TOU, upon uploading the photo, the subscriber assigns the photo copyright to MRIS.  The assignment of the copyrights is included in the TOS-TOU, and the subscriber must accept the TOS-TOU before submitting a photograph.  MRIS affixes the copyright symbol © on all photographs on the MRIS Database, and registers the MRIS Database with the Copyright Office each calendar quarter.  AHRN runs a national real estate search engine and referral business and collects its data from a variety of sources, including the MRIS Database.  AHRN expressly states that it did not create any of the data on its website.

MRIS sent AHRN a cease and desist letter in November 2011.  AHRN offered to enter into a licensing agreement with MRIS, but MRIS rejected the idea.  In March 2012, MRIS filed suit against AHRN.  MRIS then moved for a preliminary injunction to prevent AHRN from using MRIS’s photographs while the lawsuit was pending.  The lower court granted the injunction and AHRN appealed.  While the appeal was pending, the lower court modified the injunction to prevent AHRN from using MRIS’s photographs but not the compilation or textual elements found on the MRIS Database.  AHRN appealed the modification of the injunction.

On appeal, AHRN argued that MRIS failed to show a likelihood of success on its copyright infringement claims because (1) MRIS’s copyright registration for the MRIS Database did not properly register its copyrights for the individual photographs; and (2) MRIS does not have copyright interests in the photographs because the subscribers’ electronic agreement to the TOS-TOU failed to transfer the rights.

A “compilation” is “formed by the collection and assembling of preexisting materials or of data that are selected, coordinated, or arranged in such a way that the resulting work as a whole constitutes an original work of authorship.” 17 U.S.C. § 101.  Under the Copyright Act, a “compilation” can receive copyright protection.  This copyright protection is independent from protection given to the compilation’s individual components.  Here, the MRIS Database is a “collective work” because it is made up of individual copyrightable components (the photographs), and thus, MRIS does not need to own the copyrights in the photographs to register the copyright for the MRIS Database.  AHRN argued that MRIS’s copyright registrations of the MRIS Database do not protect the photographs themselves because MRIS did not identify the names of the creators and titles of the individual photographs.  The Court disagreed, stating that under the Copyright Act, MRIS’s copyright registration of the MRIS Database as an automated database was not required to include such information.  The Court found that MRIS owned the copyrights to the individual photographs before MRIS filed the copyright registration for the MRIS Database.  Requiring a registrant to individually list each author of a preexisting work in a collective work would be inefficient and would impede the registrant’s ability to receive copyright protection.

The Court noted that in August 2012, the Copyright Office promulgated a final rule amending the regulations governing the deposit requirement applicable to databases primarily composed of photographs.  This new rule stated that “when a registration is made for a database consisting predominantly of photographs, and the copyright claim extends to the individual photographs
themselves, each of those photographs must be included as part of the deposit accompanying the application.” Final Rule, Deposit Requirements for Registration of Automated Databases That Predominantly Consist of Photographs, 77 Fed. Reg. 40268, 40270 (July 9, 2012).  However, this was not in effect at the time of MRIS’s registrations at issue in this case and therefore has no effect on the appeal.  Thus, MRIS’s identification of the photographs as preexisting works satisfied the Copyright Act’s requirements, and MRIS was not barred from asserting copyright infringement.

The Court then turned to the merits of MRIS’s copyright infringement claim.  “MRIS must prove two elements to establish copyright infringement: (1) ownership of a valid copyright; and (2) AHRN’s copying of constituent elements of the work that are original.”  Metropolitan Regional Information Systems, Inc., Slip Op. P. 21.  AHRN did not appeal the second element, so the Court only examined whether MRIS owned valid copyrights of the photographs on the MRIS Database.  In order to validly assign the rights of the photograph to MRIS, the assignment had to be in writing and signed by the subscriber assigning the rights to MRIS.  However, this requirement was meant to help resolve ownership disputes between the copyright authors (the subscribers) and the assignee (MRIS), and not between a third party (AHRN) and the assignee (MRIS).

The Court had to determine whether the act of clicking “yes” to MRIS’s TOS-TOU prior to uploading the copyrighted photographs was a signed, written transfer of rights to MRIS.  Congress passed the E-Sign Act, which allows an electronic signature to have legal effect.  An electronic signature is “an electronic sound, symbol, or process, attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record.” 15 U.S.C. § 7006(5).  Further, the E-Sign Act does not limit, alter, or affect requirements imposed by statutes, regulations, or laws “other than a requirement that contracts or other records be written, signed, or in nonelectric form[.]” Id. § 7001(b).  Thus, the E-Sign Act was intended to limit, affect, or alter the written and signed agreement requirements of the Copyright Act.  “To invalidate copyright transfer agreements solely because they were made electronically would thwart the clear congressional intent embodied in the E-Sign Act.”  Metropolitan Regional Information Systems, Inc., Slip Op. P. 28.  As a result, the Court found that the subscribers had validly conveyed their rights in the photographs to MRIS.  As such, MRIS was likely to succeed on its claims of copyright infringement against AHRN.  The Court affirmed the injunction.

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