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Click here for the full text of this decision FACTS:Lyrick Studios Inc. claimed that Big Idea Productions, Inc. breached their agreement under which Big Idea provided Lyrick with an exclusive license to distribute children’s cartoon programs. Lyrick sued over this breach, and the jury found in its favor. Big Idea appealed, arguing that Lyrick could not satisfy the requirement that all transfers of copyright (such as exclusive licenses) must be in writing and signed by the transferor. Big Idea was founded to finance and market “VeggieTales,” a computer-animated children’s cartoon. With the cartoon’s increasing success, Big Idea began negotiating a distribution deal with Lyrick, which had experience with its own successful children’s programs. Tim Clott, Lyrick’s CEO, faxed Big Idea a proposal for distribution to the “general marketplace.” It ended with the caveat that “for both of our protection, no contract will exist until both parties have executed a formal agreement.” Big Idea’s vice president of licensing and development, Bill Haljun, sent a responsive fax that listed several issues still to be decided. As a result of the parties’ inability to resolve the issues, several draft contracts (and suggested revisions to the drafts) were sent back and forth over the years. No formal “long-form” contract was ever signed, but Lyrick began distributing Big Idea’s cartoon videocassettes, at a great profit to both parties. Big Idea eventually informed Lyrick that it was going to find a different distributor, and Lyrick brought its suit. During discovery, Big Idea produced an internal memorandum by Bill Haljun in response to a Big Idea employee’s question about the 10-year contract with Lyrick. In his memo, Haljun replied that “[w]e agreed over the phone to his contract . . . . I would say that we have an agreement in force.” Lyrick had not seen this internal memorandum before litigation. HOLDING:Reversed and remanded. Under 204(a) of the Copyright Act, “[a] transfer of copyright ownership, other than by operation of law, is not valid unless an instrument of conveyance, or a note or memorandum of the transfer, is in writing and signed by the owner of the rights conveyed or such owner’s duly authorized agent.” A grant of an exclusive license is considered a “transfer of copyright ownership.” At issue on appeal was whether the parties’ undisputed writings satisfied 204(a). Lyrick contends that 204(a) is satisfied with a series of documents � the faxed letters between Haljun and Clott and the internal Haljun memorandum. Big Idea responds that the letters were just proposals and never showed a final agreement. Big Idea also argues that Haljun’s internal memo is not the kind of writing that can satisfy 204(a). In addressing the parties’ arguments, the court considers two issues. First, whether the first two faxes indicate that they are preliminary in nature or do they contain an actual contract? Second, can Haljun’s internal memorandum constitute a “a note or memorandum of the transfer?” The court holds that the two faxes, standing alone, do not show that the parties entered into a final agreement to provide Lyrick with an exclusive license to distribute VeggieTales programs. The first fax from Lyrick indicates that it is a proposal. More importantly, the court notes, it expressly states, “Of course, for both of our protection, no contract will exist until both parties have executed a formal agreement.” The court points out that 204(a) requires some language of finality. Even after both faxes, the parties continued to debate and negotiate the unresolved terms of their earlier agreements. Lyrick attempts to cure these problems by turning to the internal Haljun memo. The court rejects the cases offered by Lyrick to support its position and, instead, states that the case is similar to Radio Television Espanola S.A. v. New World Entertainment, Ltd., 183 F.3d 922 (9th Cir. 1999). In that case, preliminary faxes indicated that a contract would be entered into but did not provide a final contract; an internal memo, never intended to be given to the other party, described some of the terms. The court holds that, like the memo in Radio Television Espanola, Haljun’s memo is not the kind of memorandum of transfer envisioned by 204(a). The court reasons that satisfying 204(a)’s writing requirement with a purely internal memo that was never intended to be provided to Lyrick would not further the copyright goals of predictability of ownership. Lyrick alternatively argues that the parties acted as if they had a deal for several years, making it unfair for Big Idea to rely on a “hyper-technical” 204(a) argument. But the court against stresses that 204(a) requires a writing. Although Lyrick argues that enforcing this requirement would be unjust, the court declines to add an exception to the statute. OPINION:Prado, J., Smith, Dennis, and Prado, JJ.

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