IP Law Daily, TOP STORY—3rd Cir.: Claim for joint authorship did not accrue until co-author “expressly repudiated” plaintiff’s authorship, (Jan 30, 2014)

By Thomas Long, J.D.

A joint authorship claim by the co-author of an ethnic identification system would not be time-barred unless his co-author “expressly repudiated” the plaintiff’s authorship, thus putting him on inquiry notice of his claim, more than three years before suit was filed, the U.S. Court of Appeals in Philadelphia has held (Brownstein v. Lindsay, January 29, 2014, Greenaway, J.). A district court erred by finding that the complaining co-author’s claim was time-barred and by granting the defendant’s motion for judgment as a matter of law. In addition, the district court lacked the authority to cancel the copyright registrations that Brownstein had received for the system’s computer code.

Background. In 1993, while working for a direct mailing list company, defendant Tina Lindsay began developing an ethnic identification system that ultimately was named the “Lindsay Cultural Identification Determinate” (“LCID”). Lindsay wrote rules for categorizing names by ethnicity (e.g., by looking at first names, last names, suffixes, prefixes, and geographic location). These rules became known as the Ethnic Determinate System (“EDS”). The LCID system used these rules to run a computer program that would predict the ethnicity of a random list of names from a direct mailing list database.

In January 1994, Lindsay enlisted plaintiff Peter Brownstein to turn her rules into computer code. Brownstein coded a number of computer programs in order to effectuate Lindsay’s rules. These programs became known as the ETHN programs. LCID constituted the combination of the ETHN programs and Lindsay’s rules.

Lindsay received a copyright registration for EDS in February 1996. In December 1996, she received a second registration for an improved version of EDS. With the second registration, Lindsay included a “deposit copy” of the ETHN programs.

Lindsay executed a unilateral license agreement in 1997, purportedly granting ownership of the LCID to a company incorporated by Lindsay and Brownstein. Later that year, Lindsay and Brownstein partnered with a former employer and formed co-defendant Ethnic Technologies (“E-Tech”), a joint venture. Lindsay executed an agreement purporting to license the LCID to E-Tech. As an E-Tech executive, Lindsay subsequently executed five licensing agreements with E-Tech customers between 2000 and 2005. Brownstein asserted that he did not become aware of these purported transfers of ownership until 2009. Lindsay also purported to hand over rights to the LCID to third parties in 1998 and 2000, in order to settle a copyright dispute by Lindsay and Brownstein’s former employer.

On March 22, 2010, Brownstein filed a complaint against Lindsay and E-Tech, seeking a declaratory judgment of joint authorship of the LCID and an accounting of profits from his joint authorship of the LCID.

The district court granted judgment as a matter of law in favor of Lindsay and E-Tech on Brownstein’s joint authorship claim, reasoning that the claim was time-barred because Brownstein had adequate notice of his authorship claim more than three years prior to filing suit. Under the “discovery rule,” the district court found that there had been “storm warnings” putting Brownstein on notice that Lindsay was claiming sole authorship of the LCID as far back as 1996. In the district court’s view, Lindsay’s act of registering her copyrights started the statute of limitations running.

In granting Lindsay and E-Tech’s motion for a judgment as a matter of law, the district court decided two factual issues: (1) whether Brownstein was a co-author of the LCID and (2) if so, whether his joint authorship claim was barred by the statute of limitations because he was put on inquiry notice that Lindsay had disclaimed his co-authorship. According to the appellate court, the district court erred in deciding both of these issues because there were factual determinations that should have been left to the jury.

Joint authorship. The question of whether Brownstein was a co-author of the LCID depended on whether the LCID was a joint work. For two or more people to become co-authors of a joint work, each author must contribute some non-trivial amount of creative, original, or intellectual expression to the work. Both co-authors must intend that their contributions be combined. In addition, the components contributed by each must be “inseparable or interdependent” parts of a whole. Each co-author’s contribution need not be equal in order to have an equal stake in the work as a whole.

Lindsay and E-Tech conceded that Brownstein and Lindsay were co-authors of the LCID up until its 1997 iteration. This concession constituted an admission that Brownstein contributed a non-trivial amount of creative expression to the LCID through his work on the ETHN programs and that Lindsay intended for the EDS to be combined with the computer code he drafted to form the LCID. Moreover, this framework conceded that the EDS and the ETHN programs were interdependent works. Lindsay and E-Tech’s concession also constituted an admission that the ETHN programs were not works made for hire, the appellate court said.

Next, the court examined the effect of Lindsay’s and Brownstein’s respective copyright registrations. The court emphasized that there is a distinction between an author’s interest in the copyright to his work and the registration of the work. A copyright in a work vests immediately upon its creation. Registration serves primarily to create a record of the creation of the work and allows the author to bring civil claims under the Copyright Act.

According to the appellate court, the district court incorrectly conflated the EDS and the LCID, which were distinct works with distinct copyrights. Therefore, the district court mistakenly found that Lindsay’s copyright registrations covered the entire LCID, including Brownstein’s ETHN programs. Based on this false premise, the district court erroneously concluded that Lindsay could unilaterally transfer ownership of the LCID. The fact that Lindsay had included Brownstein’s ETHN programs as a “deposit copy” with her second registration did not mean that her registrations covered the entire LCID, the appellate court said. The deposit copy served only an archival function and did not limit the copyrightable work itself. Lindsay’s copyright registrations covered only the EDS and did not extend to the LCID as a whole or to the ETHN programs, the court held.

Brownstein had copyrights exclusively in his ETHN programs as an independent work as non-exclusively in the LCID as a co-author. In addition, he had copyrights to whatever new generations of the programs and LCID that he created as derivative works of the first set of programs and the LCID. The extent of Brownstein’s authorship and ownership of derivative works created after 1997 was a factual question for the jury, the court stated.

Because Brownstein was a co-author of LCID through 1997, Lindsay could not have transferred ownership of the LCID before 1998 without Brownstein’s written consent. Even if Lindsay’s registrations had covered the entire LCID, she did not have the authority to convey an exclusive license to the joint work without Brownstein’s consent. She could transfer only her own ownership interest in the LCID, the court said. Therefore, Lindsay could have conveyed only non-exclusive licenses to the LCID, which would have no effect on Brownstein’s copyrights and ownership interest in his ETHN programs and the LCID.

Statute of limitations. The court next addressed the issue of whether the statute of limitations had run on Brownstein’s authorship claim. In order for his claim not to be time-barred, Brownstein would have to show that his joint authorship claim did not accrue until March 22, 2007, at the latest.

Once Brownstein was on inquiry notice of his claim, his cause of action began to accrue and the statute of limitations began to run, the court said. Whether Brownstein was on inquiry notice depended on two things: (1) when a cause of action first arose and (2) when he should have known that a cause of action had arisen.

According to the court, the “discovery rule” determined the answer to the second question, while the “express repudiation” rule determined the answer to the first question.

The discovery rule provides that a claim accrues when the plaintiff discovers or should have discovered with “due diligence” that his rights had been violated. A plaintiff would be able to discover his injury with due diligence if there were “storm warnings” which gave the plaintiff “sufficient information of possible wrongdoing to place [him] on inquiry notice … of culpable activity.” These storm warnings cannot be experienced, however, the court said, until the plaintiff’s rights have been violated.

Third Circuit precedent did not establish when a cause of action arose for declaration of authorship. Therefore, the court turned to its sister circuits for guidance. The Ninth Circuit, Seventh Circuit, and Second Circuit have adopted an “express repudiation” rule, which states that a joint authorship claim arises and an author is alerted to the potential violation of his rights when his authorship has been expressly repudiated by his co-author. Accordingly, the discovery rule will only apply once a plaintiff’s authorship has been expressly repudiated.

In this case, Brownstein’s injury occurred when Lindsay expressly repudiated Brownstein’s joint authorship of the LCID, the court said. Such repudiation required that Lindsay do something that communicated not only that she was the author, but that she was the sole author or that Brownstein was not a co-author. The district court found that the date of express repudiation was the date on which Lindsay registered her copyrights. This was error, the appellate court held, because the act of registering a copyright did not repudiate co-authorship. Co-authors are not expected to investigate the copyright register for competing registrations.

In addition, blanket statements in the license agreements executed by Lindsay declaring her to be the sole author of the LCID did not expressly repudiate Brownstein’s authorship rights, in the appellate court’s view. The question was whether any statement in the agreements was hostile or adverse to Brownstein’s authorship rights. According to the court, “A copyright holder should not be required to investigate every whisper and rumor that another has declared himself the author of his copyrighted work.”

Whether or not other actions taken by Lindsay—including the license agreements she executed with third parties and the 1998 and 2010 settlement agreements—constituted express repudiation were factual questions that should have been left for a jury and were inappropriate for determination on a motion for judgment as a matter of law, the appellate court concluded.

Cancellation of registrations. In granting summary judgment to Lindsay and E-Tech on their counterclaim, the district court ordered the cancellation of Brownstein’s 2009 copyright registrations. This was error, the appellate court held, because courts have no authority to cancel copyright registrations. There is no statutory indication that courts have such authority, and there is substantial indication that courts do not have such authority.

Nothing in the Copyright Act gives courts the general authority to cancel copyright registrations. Section 701 of the Act explicitly states that all administrative functions under the Act are the responsibility of the Register of Copyrights, except as otherwise specified. Cancellation of a registration is an administrative function, the court said.

In contrast, the Lanham Act explicitly provides courts with the general authority to cancel trademark registrations. If Congress had intended to grant a similar authority to courts with regard to copyright registrations, it could have done so with equally express statutory language, the court said.

Section 1324 of the Copyright Act grants courts cancellation authority with respect to “original designs.” The fact that Congress had carved out a specific power of cancellation suggested that a general authority to cancel copyright registrations did not exist, the court said.

The case is Nos. 12-2506 and 12-4471.

Attorneys: Jay R. McDaniel (McDaniel Law Firm) for Peter Brownstein. Thomas S. Howard (Kirsch, Gartenberg & Howard) for Tina Lindsay.

Companies: Ethnic Technologies

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