Electronic Transfer of Copyright Approved by Fourth Circuit

by Fenwick & West LLP
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The Fourth Circuit has confirmed what many copyright holders have long hoped was true: That copyright interests can be validly transferred through electronic means, despite language in the 1976 Copyright Act requiring that the transfer be “in writing and signed by the owner.” Prior to the court’s July 17 ruling, no appellate court had ever squarely addressed the issue.

Both parties to the suit in question, Metropolitan Regional Info. Sys. v. American Home Realty Network, 722 F. 3d 591 (4th Cir. 2013), are operators of real estate listing websites. Metropolitan allowed brokers to list properties for a fee, and American took listings from various listing sites, such as Metropolitan’s, and made them available directly to the public. Metropolitan’s complaint alleged that American had infringed its copyrights by using and reposting the photos from Metropolitan’s site, which copyrights Metropolitan had acquired online from the brokers that photographed the properties.

The appellate court heard argument from the appellant, American, that the infringement claims were invalid because Metropolitan did not own the copyright in the photos because its use of automated, “click-through” agreements was not a valid means of transferring copyright ownership from the original photographers. American sought reversal of the lower court’s injunction against it, on the ground that such transfers do not meet the writing requirement of § 204 of the 1976 Copyright Act, which governs the formalities of copyright assignment.

Section 204 states that 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.”

Metropolitan argued, on the other hand, that despite the language of § 204, such electronic transfers were made valid under a federal law known as the E-Sign Act, which was passed in 2000 to ensure the validity of electronic signatures.

The E-Sign Act, according to the court, was designed to “bring uniformity to patchwork state legislation governing electronic signatures and records,” and to guarantee that no signature could be denied legal effect simply by virtue of being in electronic form. The court noted that the E-Sign Act included various exemptions under which electronic signatures would not suffice as substitutes for written signatures—such as in the case of written wills and testaments—but that copyright transfers were not amongst those exemptions.

For these reasons, the court agreed with Metropolitan, and upheld the lower court’s injunction. The Fourth Circuit wrote that “to invalidate copyright transfer agreements solely because they were made electronically would thwart the clear congressional intent embodied in the E-Sign Act … we therefore hold that an electronic agreement may effect a valid transfer of copyright interests.”

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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