IP Law Daily, COPYRIGHT—S.D.N.Y.: AI platform sellers lose copyright suit; royalty dispute heads to arbitration, (Oct 23, 2026)

By Patricia K. Ruiz, J.D.

The court found ownership of the software was transferred in the acquisition agreement.

Software developers who sold an artificial intelligence market-research platform could not pursue copyright and Digital Millennium Copyright Act claims against the purchaser because the acquisition agreement transferred ownership of the software at signing, a federal court in New York held. The court also found that an unjust-enrichment claim was preempted by federal copyright law. However, the court declined to dismiss the developers’ breach-of-contract claim alleging unpaid royalties and accounting failures, ruling that the dispute must be resolved through arbitration pursuant to the parties’ agreement (Larsen v. Ovation-Worldwide Holdings, LLC, No. 1:26-cv-00486-JGK (S.D.N.Y. Oct. 21, 2026)).

Plaintiffs Erik Larsen and Roman Gorin developed Qualibee.AI, a software platform used for qualitative market research. In January 2024, they entered into an agreement under which Ovation-Worldwide Holdings, LLC acquired the platform and related assets. The agreement provided for royalty payments equal to 10 percent of specified sales and included a buy-back provision and an arbitration clause. According to the complaint, Ovation failed to make required royalty payments and did not provide requested accounting records. After attempting to revoke Ovation’s right to use the software, the plaintiffs obtained a copyright registration and brought claims for copyright infringement, violations of the Digital Millennium Copyright Act (DMCA), unjust enrichment, and breach of contract.

Ownership transferred at signing. The plaintiffs argued that Ovation’s payment obligations were conditions precedent to the transfer of ownership and that the company therefore lacked ownership rights after allegedly failing to perform under the agreement. The court rejected that interpretation, finding no clear contractual language making Ovation’s performance a condition precedent to the transfer of ownership. The agreement’s language provided for the acquisition of the software and transfer of all rights, title, and interests, indicating ownership passed when the agreement was executed.

The court pointed to the agreement’s buy-back provision, which contemplated the return of ownership rights to the plaintiffs under certain circumstances. That provision, the court said, would make little sense unless ownership had first transferred to Ovation. Because the plaintiffs had transferred their ownership interests, they could not establish ownership of the copyrighted work during the period of the alleged infringement. The court therefore dismissed the copyright infringement claims against Ovation and the related contributory and vicarious infringement claims asserted against chief executive officer James Whaley.

DMCA claim. The court also dismissed the DMCA claim, which alleged that Ovation falsely represented itself as the software’s copyright owner and removed or altered copyright management information. Since the agreement transferred ownership rights to Ovation, the court found that identifying itself as the copyright owner was not a false representation. The court further concluded that the complaint did not plausibly allege the intent required under the statute.

Unjust-enrichment claim. The court dismissed the unjust enrichment claim as preempted by the Copyright Act. The claim was based on the same alleged unauthorized use and distribution of the software underlying the copyright claims and did not contain an additional element that would make it qualitatively different from a copyright claim.

Royalty dispute. The court reached a different conclusion regarding the breach of contract claim. The plaintiffs alleged that Ovation breached the agreement by failing to pay royalties and provide required accounting information. Finding that the agreement required arbitration of disputes arising out of the contract, the court held that the royalty and accounting allegations fell within the scope of the arbitration provision. The court therefore compelled arbitration of the contract claim and stayed the litigation pending the completion of arbitration proceedings.

The Case is No. 1:26-cv-00486-JGK.

Judge: Koeltl, J.

Attorneys: Lauren Elizabeth Scott (J&G Law, LLP) for Erik Larsen. James Patrick Flynn (Epstein Becker & Green) for Ovation-Worldwide Holdings, LLC.

Companies: Ovation-Worldwide Holdings, LLC

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