It is a common story. A struggling songwriter files suit accusing a pop megastar of stealing her song. Rarely do the underdogs emerge victorious in such suits. Sharice Davis might be the exception. In 2003 she sued Mary J. Blige, alleging the famous hip-hop artist infringed two songs she co-wrote with songwriter Bruce Chambliss. Davis recently won a big victory in the 2nd Circuit when the court allowed her infringement suit to proceed. But few are cheering for her. According to many experts the ruling in Davis v. Blige may make life far more difficult for a lot of copyright owners–as well as those who want to license their works.

In a precedent-setting decision, the 2nd Circuit restricted the ability of a co-author to license or assign his or her rights to a work without the consent of the work’s other co-authors. The full scope of these restrictions, however, is far from clear.

“[The ruling] could potentially create barriers to licensing works and make it more difficult to disseminate works,” says Daniel Glazer, counsel at Shearman & Sterling. The decision could create problems in the entertainment, publishing and software industries, he says, “but in theory the effects could extend to any industries where there are jointly owned copyrighted works.”

According to William Patry, Google’s senior copyright counsel, “This is a disaster of major proportions.”

Assigning Rights
The 2nd Circuit’s controversial decision sprang from two love songs: “L.O.V.E.” and “Don’t Trade in My Love,” both of which Davis allegedly co-wrote in 1998. Davis claims Blige and her business associates were aware of these songs and that the two tracks on Blige’s triple platinum 2001 album, “No More Drama,” infringed on her rights in these songs. One of the album’s tracks was allegedly almost identical to “L.O.V.E.” and another was substantially similar to “Don’t Trade in My Love.”

Six months after Davis sued for copyright infringement, however, Chambliss assigned his rights in the songs to Blige’s brother–one of the defendants in the suit. The brother then licensed it to the other defendants. Chambliss’ assignment was retroactive to the dates of the songs’ creation, which made defendants’ use of the songs noninfringing.
That’s because, under the copyright statute, co-authors own equal, undivided interests in a copyrighted work. Each co-author can use or nonexclusively license the work, subject only to an obligation to account to the other co-author for any profits received.

The defendants here, as assignee and legitimate licensees, would thus have the right to use the songs and couldn’t be liable for copyright infringement. If the retroactive assignment were lawful, Davis’ only remedy would be to seek from Blige’s brother an accounting for any profits he made by licensing the songs to Blige and the other defendants.

Unfair System
The 2nd Circuit rejected the retroactive assignment, holding that copyright assignments and licenses can only be prospective. A retroactive license, the court reasoned, would enable one co-author (the licensor) to trample on the accrued rights of the other co-author to prosecute an infringement action, and the copyright statute doesn’t allow co-authors to thus interfere with each other’s rights.

Moreover, the court noted, retroactive licenses would allow infringers to buy their way out of infringement suits on the cheap. If a retroactive license “can be obtained from a co-owner not bringing suit, or one willing to settle for a lower price than the co-owner bringing the action, … [it] is likely to cost much less than the value of the copyright interest,” the court stated. This lowers cost of infringement, and “[t]he result is that infringement is encouraged
and rewarded.”

The court did approve retroactive settlements of copyright suits. But it clarified that when a co-author grants a retroactive license or assignment as part of the settlement, the retroactive portion of the settlement affects only that co-author’s ability to sue. It does not extinguish the ability of any other co-author to sue for past infringements.

The court’s ruling also flies in the face of traditional business practices, according to Barry Slotnick, an IP litigator in the New York office of Loeb & Loeb. “It had always been the presumption and practice that an alleged infringer can seek a license from one of multiple copyright owners,” Slotnick says. “If the alleged infringer couldn’t get a license from one co-owner, he could get it from another.”

usiness Burdens
The decision may have broader effects, however. It may limit retroactive licenses, even before a co-author has sued. That’s because a co-author’s claims accrue as soon as an infringement occurs. “Once a copyright owner has an infringement claim, the only way to resolve it is to get a license from that party,” Glazer says.

Such a ruling would conflict with Congress’ intent in enacting the 1976 Copyright Act, according to some experts. Whereas the previous 1909 copyright statute required the consent of all co-authors for a license or assignment, the 1976 act expressly did away with this requirement, allowing individual co-authors to license, hypothecate and assign their rights. “I find this [ruling] to be a signal failure to … appreciate what Congress intended,” Patry says.

The ruling may go even further. “The court seems to be … saying one co-author can’t grant an exclusive license of that co-author’s interest,” Glazer says.

Moreover, prohibiting exclusive licenses from co-authors could impose significant new burdens on many businesses, particularly those in the publishing, entertainment and software industries, where works are frequently created by multiple authors.

“Media companies and publishing companies rely on exclusive licenses from co-authors,” Glazer says. “If they can’t rely on that, it creates not just uncertainty, but difficulties in licensing works.”

To use a work, a business would need to get approval from all co-authors—and that could be difficult or impossible. “If there are just two co-authors who have a great relationship and agree on how to exploit the work, getting everyone’s approval may be easily done,” Patry says. “But if one co-author has fallen out with the other, which is not uncommon … then there’s no deal.”

The 2nd Circuit’s decision could thus “create barriers to licensing copyrighted works and so make it more difficult to disseminate those works,” Glazer warns. “It depends on how lower courts and other circuits interpret the scope of the holding.”