In the

United States Court of Appeals

For the Seventh Circuit ____________

No. 02-1069

ITOFCA, INC.,

Plaintiff-Appellant,

v.

MEGATRANS LOGISTICS, INC.,

Defendant-Appellee.

____________

Appeal from the United States District Court

for the Northern District of Illinois, Eastern Division.

No. 99 C 2087—Ruben Castillo, Judge.

____________

ARGUED OCTOBER 15, 2002—DECIDED MARCH 7, 2003

____________

Before POSNER, RIPPLE, and KANNE, Circuit Judges.

POSNER, Circuit Judge. The plaintiff, ITOFCA, appeals

from the grant of summary judgment to the defendant,

MegaTrans, in a suit for copyright infringement. ITOFCA

claims to be the owner of the copyright on a computer

software program. MegaTrans owns the program itself,

claims to have obtained the copyright in a bankruptcy

sale, and is making and selling copies of a modified version of the program. The modified program is a derivative work, and so if ITOFCA owns the copyright on the

original, MegaTrans cannot sell its version without a license, 17 U.S.C. § 106(2), which it does not have, from

ITOFCA.
2 No. 02-1069

ITOFCA was in 1986 a cooperative corporation owned

by Ford, Walgreen, and other large corporations to which

it provided rail and truck freight consolidation and forwarding services. It had developed a computer program

called the “Comprehensive Intermodal Program” to help

its member-owners with their shipping. It undoubtedly

owned the copyright on the program, though it hadn’t

registered the copyright; registration is no longer required for a valid copyright. In 1986 it transferred most

of its assets to a new entity, ITOFCA Consolidators, Inc.

(ICI). The asset agreement recites that “the membership

of ITOFCA desires to divest ITOFCA of all assets and

operations involving freight forwarding services” and

specifically “desires to transfer all of its assets, except a

building at [address] and cash assets of ITOFCA to ICI.”

Among the “assets” transferred to ICI (which despite its

name was not owned by or otherwise affiliated with

ITOFCA) was the employee of ITOFCA, a man named

Fowler, who had developed the Comprehensive Intermodal Program.

Five years later, ICI found itself in Chapter 11. The

bankruptcy court, with no opposition from ITOFCA (which

participated in the Chapter 11 proceeding), approved the

sale to a company called Amerifreight of ICI’s “right,

title and interest in all patent, copyright and trade secret

rights in and to all computer software and corresponding documentation developed or acquired by [ICI] . . . .

Amerifreight expressly acknowledges that [ICI] may sell

additional copies of the Software to other parties and that

by virtue of the proposed assignment it has only a nonexclusive right to the Software.” Amerifreight turned

around and assigned all the rights it had acquired from

ICI to MegaTrans. Fowler, now employed by MegaTrans,

modified the software program, which MegaTrans then

licensed to others. That was in 1991. Eight years later,
No. 02-1069 3

ITOFCA, dormant since the transfer of its operating

assets to ICI, woke up and registered copyright on what

it described as a “comprehensive intermodal program”

that had been developed in 1989. Later it filed a supplemental registration stating that the program had been

created in 1991 and listing ICI as a co-author and hence

as a copyright owner, but asserting that ITOFCA was

the owner of the original program, which had been developed in 1986. ITOFCA was thus conceding that ICI was

authorized to modify the original program, see 17 U.S.C.

§ 117(a)(1), but only, as the statute makes clear, for ICI’s

own use, and not to sell copies of the modified work. 17

U.S.C. § 117(b); Aymes v. Bonelli, 47 F.3d 23, 25-27 (2d Cir.

1995); Foresight Resources Corp. v. Pfortmiller, 719 F. Supp.

1006, 1009-10 (D. Kan. 1989). The distinction is consistent with the general principle of copyright law that a

license to prepare a derivative work does not authorize

the preparer to sell copies of it. Making and selling

are distinct rights, 17 U.S.C. §§ 106(1), (2), and you can

assign one without the other. See Gracen v. Bradford Exchange, 698 F.2d 300, 302-03 (7th Cir. 1983).

When a bankruptcy court approves the sale of an asset

of the debtor, a person who has notice of the sale cannot

later void it on the ground that he is the asset’s real owner.

La Preferida, Inc. v. Cerveceria Modelo, S.A. de C.V., 914

F.2d 900, 908 (7th Cir. 1990); In re Met-L-Wood Corp., 861

F.2d 1012, 1016 (7th Cir. 1988); Veltman v. Whetzal, 93 F.3d

517, 520-21 (8th Cir. 1996); see also In re Edwards, 962

F.2d 641, 643-44 (7th Cir. 1992). That was the ground on

which the district judge rejected ITOFCA’s claim of copyright infringement. ITOFCA argues that all the sale did

was transfer whatever copyright interest ICI had, and the

only interest it had was a license to use the copyrighted

program that had been transferred to it by ITOFCA when

ICI was created. The terms of the bankruptcy court’s
4 No. 02-1069

order approving the sale refute this interpretation. The

order states that ICI is free to sell additional copies of

the software; this implies, since ICI was conveying its

rights to Amerifreight, that Amerifreight too, and hence

its transferee, MegaTrans, was free to sell copies. So ICI

and its transferees must have had more than a license to

use the software, since a copyright licensee has no right

to make further copies (except a single, back-up copy for

his own use): the purchaser of a book does not obtain

the right to make copies of the book.

In the same order, ICI conveyed its software rights to

a second company as well as to Amerifreight (namely

Southern Pacific), which it could not do without making

a copy; to repeat, a mere copyright licensee is permitted

only to make a single copy, and that for his own use only,

not for sale to another. There is a further significance to

this second sale; it helps explain why the grant to

Amerifreight was described as a “nonexclusive” license. It

was nonexclusive because another corporation (Southern

Pacific) was also sold rights to the software and because

ICI retained a right to sell more copies; Amerifreight was

not receiving an exclusive right to the software. “Nonexclusive” does not as ITOFCA believes equate to “a copy;”

the bankruptcy court would have had no occasion to

mention the nonexclusivity of the grant if all that was

being conveyed was a copy of the software, since everyone knows that the sale of a copy of a copyrighted work

does not convey an exclusive right to the work; the

owner of the copyright retains his right to make and sell

additional copies to others.

Any doubt about the meaning of “nonexclusive” is

dispelled by the exchange over the term between the

lawyers and the bankruptcy judge, after the critical passage,

elided by ITOFCA in its brief, is restored:
No. 02-1069 5

[ITOFCA attorney]: And the only other concern that

we had is it being a private sale instead of a public

sale. Now, we understand that the software will be held

open to a future sale as well. I just query—

Court: What’s this, a nonexclusive license that’s

being sold?

[ICI attorney]: That’s correct, your Honor.

[ITOFCA attorney]: I just query whether there is

anything unique about the hardware that should be

marketed by a public sale.

The grant was nonexclusive because the software remained salable to others as well as to Amerifreight.

It is true that ICI did not list a copyright among its

assets on the asset schedule that it submitted to the bankruptcy court; true, too, that ordinarily persons who might

have an interest in property being sold at a bankruptcy

auction have a right to rely on the fact that the debtor’s

schedule of assets does not list the property in which

they are interested. But it was apparent on the face of

the bankruptcy judge’s order that it was conveying the

right to sell copies of the modified program—which is

precisely the right that ITOFCA claims to have retained

for itself. Its failure to object to the bankruptcy court’s order is compelling evidence that its claim of right is an

afterthought. It knew it had no basis for objecting to the

sale order.

The question whether the bankruptcy court’s order gave

ICI’s transferee, Amerifreight, and hence Amerifreight’s

transferee, MegaTrans, the defendant, the right to make

and sell copies of the software is distinct from the question whether what ITOFCA had conveyed to ICI in the

asset transfer agreement (which of course preceded the
6 No. 02-1069

bankruptcy) was, in fact, the copyright on the software.

Probably it was, though this we need not decide, since

even if the agreement did not transfer the copyright we

have just determined that it transferred a right to sell a

modified version, which is all that matters so far as this

appeal is concerned.

The copyright on the computer program was an asset

of ITOFCA. ITOFCA sold all its assets to ICI except a

building and some cash. A copyright is neither a building

nor cash. True, the asset transfer agreement also states

that ITOFCA desires to “transfer only those assets used

and necessary in the operations of the transportation

services being transferred,” but the copyright is one of

those assets; it was used in ITOFCA’s “transportation

services”; that was ITOFCA’s business that it exited through

the sale to ICI. A possible reply is that since section 117

of the copyright statute entitled ICI to adapt the program

for its own use, it didn’t need the copyright itself, but

just the right that the statute gave it—the right to modify

the program for its own use. But the parties do not discuss the possible bearing of section 117.

ITOFCA is right of course that a copyright is not transferred automatically with the transfer of the copyrighted

good. When you buy a book, you don’t obtain the right

to make and sell copies of it. The copyright statute is explicit that there must be a memorandum in writing for

the sale of the copyright to be enforceable. 17 U.S.C.

§§ 202, 204(a). But it does not follow as ITOFCA believes

that the agreement must use the word “copyright.” Schiller

& Schmidt, Inc. v. Nordisco Corp., 969 F.2d 410, 413 (7th Cir.

1992); S.O.S., Inc. v. Payday, Inc., 886 F.2d 1081, 1088 (9th

Cir. 1989); Shugrue v. Continental Airlines, Inc., 977 F. Supp.

280, 284-85 (S.D.N.Y. 1997); Bieg v. Hovnanian Enterprises,

Inc., 157 F. Supp. 2d 475, 479-80 (E.D. Pa. 2001); cf. SAPC,
No. 02-1069 7

Inc. v. Lotus Development Corp., 921 F.2d 360, 362-63 (1st

Cir. 1990). It can use terminology such as “all assets”

that clearly includes copyrights. Schiller & Schmidt, Inc. v.

Nordisco Corp., supra, 969 F.2d at 413; Shugrue v. Continental Airlines, Inc., supra, 977 F. Supp. at 284-85; Relational Design & Technology, Inc. v. Brock, No. 91-2452-EEO, 1993 WL

191323, at *6-7 (D. Kan. May 25, 1993).

We don’t want to be literalists, and so are happy to

concede that the circumstances may, as in Playboy Enterprises, Inc. v. Dumas, 53 F.3d 549, 564 (2d Cir. 1995), negate

the inference drawn from an acontextual reading. We

are doubtful that there any such circumstances here;

to repeat an earlier point, the fact that the license

granted to Amerifreight and thus to MegaTrends was

nonexclusive reserved certain rights to ICI but nothing

to ITOFCA. Indeed, as in Schiller & Schmidt, where we

held that a sale of photographic negatives included the

copyright on them, since without it the buyer could not

print positives from them, the circumstances in this

case reinforce more than they undermine the inference

drawn from the language of the transfer agreement. ICI

or a successor could not use the Comprehensive Intermodal Program profitably unless it could adapt it to

changing technology and the needs of particular customers. ITOFCA acknowledges that the sale to ICI carried

with it the right to modify the program; and now suppose that ICI or its successor wanted to license the modified work to a customer. Did it have to get a license from

ITOFCA to be allowed to do this? ITOFCA no longer had

any technical or sales staff. It was a shell. How would

it evaluate such a request? Who would evaluate the request? Would ICI have consented to have such an albatross around its neck?

ITOFCA points out that the asset schedule in the Chapter 11 proceeding did not list any copyrights, but asset
8 No. 02-1069

schedules are far from infallible and we have seen that

ITOFCA was not entitled to rely on the omission from

the agreement of any reference to the copyright. ITOFCA’s

best evidence that the copyright itself was not transferred

is testimony by one of its employees that a lawyer acting

on behalf of Amerifreight (Sullivan, formerly the president of ICI) acknowledged at one point that ITOFCA

retained the copyright, and that Fowler acknowledged

that Amerifreight had entered into negotiations with

ITOFCA for a license to make and sell a modified version

because it was unsure whether ITOFCA had transferred

its copyright to ICI. Even if, as we doubt, this evidence

is enough to create a genuine issue of material fact as to

whether the asset transfer agreement transferred the

copyright, in view of the sheer impracticability of such

divided ownership, the preclusive effect of the bankruptcy court’s order, which clearly authorized ICI and its

transferees to make and sell a modified version of the

software, requires that the judgment be

AFFIRMED.
No. 02-1069 9

RIPPLE, Circuit Judge, concurring. The court affirms the

district court’s grant of summary judgment in this difficult case by holding that ITOFCA’s suit for infringement

is precluded by the doctrine of claim preclusion under

this court’s holding in La Preferida, Inc. v. Cerveceria Modelo,

S.A., 914 F.2d 900, 908 (7th Cir. 1990). I agree. However,

because I believe that this case raises serious concerns about

the proper limitations on the use of claim preclusion, I

write separately in order to set forth those concerns with

some specificity.

A.

In holding that the bankruptcy court’s order bars

ITOFCA’s claim as a matter of claim preclusion under

our holding in La Preferida, 914 F.2d at 908, the court writes,

“[w]hen a bankruptcy court approves the sale of an asset

of the debtor, a person who has notice of the sale cannot

later void it on the ground that he is the asset’s real owner.”

Slip op. at 3. This is a correct statement of the law, and,

as the court notes, ITOFCA, having had notice of the

bankruptcy proceedings is thus bound by the bankruptcy

court’s order. The difficulty in this case lies in the imprecision of the bankruptcy court’s order; it leaves unclear

exactly what “asset” ICI was selling. That ambiguity places

significant strains on the doctrine of claim preclusion,

and we must give serious consideration as to whether

those concerns are so weighty as to preclude using that

doctrine as the supporting beam on which to rest a judgment in this case.

Claim preclusion is a salutary instrument that “relieve[s]

parties of the cost and vexation of multiple lawsuits,

conserve[s] judicial resources, and, by preventing inconsistent decisions, encourage[s] reliance on adjudication.”
10 No. 02-1069

Allen v. McCurry, 449 U.S. 90, 94 (1980). However, these

“values of repose and reliance are gained at the expense

of denying any opportunity to litigate matters that never

have been litigated and that may involve valid rights to

relief. The rules of preclusion inevitably have been affected by the resulting desire to achieve a proper balance

between foreclosure and a fair opportunity to litigate.”

Charles Alan Wright, Arthur R. Miller & Edward H.

Cooper, Federal Practice and Procedure: Jurisdiction

and Related Matters § 4415, at 351 (2002). Indeed, claim

preclusion must “strike a delicate balance between, on the

one hand, the interests of the defendant and of the courts

in bringing litigation to a close and, on the other, the interest of the plaintiff in the vindication of a just claim.” Restatement (Second) of Judgments § 24 cmt. b. We have

stated that “[r]es judicata was not meant to be a trap for the

unwary”; it must “ensure fair notice to litigants and . . .

yield predictable results.” Andersen v. Chrysler Corp., 99

F.3d 846, 852 (7th Cir. 1996).

In order to ensure that the appropriate balance is maintained between these two important policy concerns,

the courts have developed various controls on the use

of claim preclusion to ensure that its use adequately

serves both concerns for judicial efficiency and concerns

for fairness to the litigants. Among those controls is

the rule that res judicata is an affirmative defense;

thus MegaTrans “has the burden of establishing that res

judicata . . . ought to bar” ITOFCA’s infringement action.

Kulavic v. Chi. & Illinois Midland Ry. Co., 1 F.3d 507, 517

(7th Cir. 1993) (noting that “the burden of establishing

preclusion is placed on the party claiming it,” id. at 517

n.6 (internal quotation marks and citations omitted));

Gleash v. Yuswak, 308 F.3d 758, 760 (7th Cir. 2002) (noting

that claim preclusion is an affirmative defense). When,

as here, the issue is decided on summary judgment, the
No. 02-1069 11

1 See also In re Braniff Airways, Inc., 783 F.2d 1283, 1289 (5th

Cir. 1986) (“[I]f reasonable doubt exists as to what was decided in the first action, the doctrine of res judicata should

not be applied.”); Jane Does I through III v. District of Columbia,

No. CIV. A. 01-02398(HHK), 2002 WL 31840633, at *7 (D.D.C.

Dec. 16, 2002) (“The burden of establishing preclusion is

placed on the party claiming it, and reasonable doubts will be

resolved against an asserted preclusion.” (internal quotation

marks and citations omitted)).

party with the burden of proof, here MegaTrans, must

establish each element of claim preclusion as a matter

of law. See Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett,

477 U.S. 317 (1986); Thorsteinsson v. M/V Drangur, 891 F.2d

1547, 1551 (11th Cir. 1990) (“In accordance with Celotex,

then, and to uphold the summary judgment entered by the

district court, the [defendant] needs to have established

as a matter of law that the [prior] judgment bars plaintiffsappellants’ claims . . . .”).

Moreover, as noted by many courts, “[d]oubts are resolved against preclusion.” In re Associated Vintage Group,

Inc., 283 B.R. 549, 562 (B.A.P. 9th Cir. 2002) (citing Harris

v. Jacobs, 621 F.2d 341, 343 (9th Cir. 1980)).1

 As stated

by the Second Circuit, “although the principles of res

judicata should not be frugally applied, a reasonable

doubt as to what was decided in the first action should

preclude the drastic remedy of foreclosing a party from

litigating an essential issue.” McNellis v. First Fed. Sav. &

Loan Ass’n of Rochester, 364 F.2d 251, 257 (2d Cir. 1966)

(internal citations omitted) (finding that lower court’s

disposition concerning a supplemental complaint was

“ambiguous” and thus refusing to apply claim preclusion for action based on same transaction as that in supplemental complaint). The rationale for this rule is evi-
12 No. 02-1069

dent. If it is ambiguous and subject to reasonable doubt

whether or not the plaintiff ever got a first bite (or even

the opportunity to take a first bite) at the apple, to bar

that claim forever would be unfair and would act as “a

trap for the unwary.” Andersen, 99 F.3d at 852. Certainly,

if the party asserting claim preclusion cannot establish

and the reviewing court cannot determine whether the

claim was disposed by or ought to have been brought in

the prior action, there is no guarantee that the party being precluded understood the situation either.

Many of the cases relied upon by the court today support the salutary role played by these corollary principles

to ensure that res judicata is reserved for its proper use

and not called upon to perform service for which it was

never intended. Notably, both Veltman v. Whetzal, 93 F.3d

517 (8th Cir. 1996), and In re Edwards, 962 F.2d 641 (7th

Cir. 1992), involved transfers of real estate free and clear

of all liens; there was no question as to what was sold by

the bankruptcy order. Similarly, In re Met-L-Wood Corp.,

861 F.2d 1012 (7th Cir. 1988), involved a liquidation sale

of assets. In all three proceedings, the plaintiffs were

attempting to nullify a sale to which they were party. Both

parties understood that the specific property had been

sold by the bankruptcy sale; and the plaintiffs understood that their only way to proceed would be to nullify

that sale. We determined that such attempts to nullify

the sale were barred by res judicata. Similarly, in La

Preferida, after Corona had declared bankruptcy, the bankruptcy court, “correctly or incorrectly, . . . purported to

sell all of Corona’s trademarks” from Corona itself to

another company, Modelo. La Preferida, 914 F.2d at 908.

The plaintiff, La Preferida, having participated in the

bankruptcy litigation and not prevailed, was bound by

the bankruptcy court’s determination when future litigation arose.
No. 02-1069 13

By contrast, the situation here is far more ambiguous.

The bankruptcy court order does not establish clearly the

nature of ICI’s interest or the nature of the right ICI transferred to Amerifreight, MegaTrans’ predecessor in interest.

In pertinent part, the bankruptcy order reads as follows:

The Debtor is authorized to sell to Amerifreight the

Debtor’s right, title, and interest in all patent, copyright and

trade secret rights in and to all computer software and

corresponding documentation developed or acquired

by the Debtor (the “Software”) in consideration for

$25,000.00. Amerifreight expressly acknowledges that

the Debtor may sell additional copies of the Software

to other parties and that by virtue of the proposed

assignment it has only a non-exclusive right to the Software. The sale of the Software will be “as is” and without warranty of merchantability or fitness for any

purpose. The sale of the Software to Amerifreight

shall be free and clear of all liens, claims and encumbrances, with any liens, claims, and encumbrances

attaching to the proceeds of the sale to Amerifreight.

R.35, Ex.31 at 1-2 (emphasis added).

The result of this ambiguity is evident in the different

characterizations given the order. MegaTrans in its brief

claims that it received “on a non-exclusive basis” ICI’s

right to exercise all of the copyright rights (the rights to

reproduce, prepare derivative works, to distribute, to

perform, and to display, see 17 U.S.C. § 106). Appellee’s

Br. at 14. ITOFCA submits that we should read the order

much more tightly and that the sale only transferred a nonexclusive license to use the program and modify it for

its own use. Consequently, in its view, the bankruptcy

sale only authorized the transfer of “two modified copies

of the 1986 ITOFCA Program—not the 1986 ITOFCA
14 No. 02-1069

2 MegaTrans admitted that ICI began its existence as ITOFCA’s

“wholly-owned subsidiary,” R.41 at 7, ¶ 31 and at 6, ¶ 28, but

MegaTrans stated below in its own statement of facts that

“ITOFCA never owned ICI,” R.33 at 4, ¶ 9, which ITOFCA

disputed by citing to the fact that ICI was ITOFCA’s whollyowned subsidiary. The parties agree that in 1989, ITOFCA

negotiated the sale of ICI to Trade Transportation & Trust.

See R.41 at 20, ¶ 99.

Copyright itself.” Appellant’s Br. at 10. These various

contentions illuminate the problem of employing res

judicata in a case in which the court judgment supporting

the use of that construct is ambiguous. At some point,

whatever judicial efficiencies the doctrine might bring are

outweighed by the need to probe the record in order to

determine what the court meant. As that investigation

becomes more complex and involves investigating at great

lengths the underlying transactions, the risk of unfairly

pretermitting the opportunity of a party to explain the situation also increases. As the following discussion demonstrates, the task placed on this court by the ambiguity of

the underlying order in this case requires significant

hesitation before applying res judicata.

ITOFCA created the original program and thus held

the copyright (the bundle of the exclusive rights to reproduce, prepare derivative works, to distribute, to perform, and to display for the 1986 program, see 17 U.S.C.

§ 106). In the 1986 asset transfer agreement, ITOFCA

transferred many of its assets to its wholly-owned subsidiary,2

 ICI, see R.33 at 3, ¶ 6. Sometime in 1986, ITOFCA

provided ICI with a copy of the computer program, and

ICI used and modified the program from 1987 until its

insolvency in 1991. See R.41 at 7, ¶¶ 31-33. ITOFCA, as

copyright owner could have transferred to ICI (1) by
No. 02-1069 15

3 Copyrights can also be transferred by other methods such

as foreclosures on liens or mortgages, eminent domain, testamentary transfer or intestate succession, etc., but none of those

methods apply in this case. See Paul Goldstein, Copyright

§ 4.4 (2d ed. 2000 & 2002 Supplement).

assignment, one or all or any part of its exclusive rights;

(2) by exclusive license, one or all or any part of its exclusive rights; (3) by nonexclusive license, permission “to

exploit any one or more of [its] rights or any subdivision of them.”3

 Paul Goldstein, Copyright § 4.4.1 (2d ed.

2000 & 2002 Supplement); see generally 3 Melville B. Nimmer & David Nimmer, Nimmer on Copyright ch. 10 (2002)

(discussing assignments, licenses, and other transfers of

rights). By “nonexclusive,” what is meant is that the licensee does not have an exclusive right—that is, the licensor may grant to another licensee the exact same right.

See I.A.E., Inc. v. Shaver, 74 F.3d 768, 775 (7th Cir. 1996)

(distinguishing between exclusive and nonexclusive licenses and noting that “[i]n an exclusive license, the copyright holder permits the licensee to use the protected

material for a specific use and further promises that the

same permission will not be given to others,” while for a

nonexclusive license, “[t]he copyright owner simply permits the use of a copyrighted work in a particular manner”); Robert A. Gorman, Copyright Law 53 (1991) (giving

as an example of a nonexclusive license, “separate grants

to several production companies to perform a dramatic

work”).

B.

The bankruptcy court order effected the transfer of ICI’s

“right, title and interest” to Amerifreight and Southern
16 No. 02-1069

Pacific. R.35, Ex.31 at 1-2. In determining what interest

ICI possessed and therefore was able to transfer to

Ameritech and to Southern Pacific, a logical starting point

is to examine what ITOFCA previously had transferred

to ICI by an examination of the 1986 Asset Agreement.

My colleagues suggest that, regardless of the ambiguities in the bankruptcy order, it is extremely likely that

ITOFCA transferred the copyright to ICI without reservation in the 1986 asset transfer agreement between ITOFCA

and ICI (hereinafter “Asset Agreement”). The majority expresses “doubt” that the “evidence is enough to create

a genuine issue of material fact as to whether the asset

transfer agreement transferred the copyright.” Slip op. at 8.

In my view, the record cannot support such a suggestion.

The district court explicitly stated that the record was

unclear as to exactly what property rights ITOFCA conveyed to ICI under the Asset Agreement. In my view,

the district court’s perspective is more firmly grounded

in the record.

The parties’ submissions on the motion for summary

judgment reveal that the issue of whether the Asset Agreement transferred the copyright was vigorously disputed.

Certainly, the Asset Agreement itself is ambiguous. Although two of the “whereas” clauses in the Asset Agreement indicate that ITOFCA was selling all of its assets to

ICI, another “whereas” clause indicates that “ITOFCA

desires to retain substantially all the property and assets

of ITOFCA and transfer only those assets used and necessary in the operations of the transportation services being transferred.” R.35, Ex.16 at 1. The Asset Agreement

does not mention transferring the copyright—nor does
No. 02-1069 17

4 The agreement mentions transferring “software” in Appendix B, but the testimony indicated that the “software” referred

to in Appendix B was entirely purchased software from outside vendors (such as operating systems, etc.) and not the

software developed by ITOFCA and modified by ICI and later

MegaTrans. See R.41 at 10, ¶¶ 49-50. It was an undisputed fact

that “the 1986 ITOFCA Software Programs and 1986 ITOFCA

Copyright were not included in Appendix B.” Id. at ¶ 47.

it mention the software at all.4 There was voluminous conflicting evidence. See, e.g., R.41 at 7-17, ¶¶ 33-73 and exhibits; and R.35 at 4-9, ¶¶ 33-73 and exhibits.

In light of this situation, I cannot join my colleagues’

estimation that, despite the ambiguity in the Asset Agreement itself and despite a disputed and conflicting record,

ITOFCA “[p]robably” transferred the copyright to ICI

through the Asset Agreement. Slip op. at 6.

As correctly explained by the majority, “[t]he copyright

statute is explicit that there must be a memorandum

in writing for the sale of the copyright to be enforceable.

17 U.S.C. §§ 202, 204(a).” Slip op. at 6. In this case there

is no such writing. The Asset Agreement says nothing

about copyrights, intangible assets, or even the computer software itself. The majority suggests that this omission in the agreement is of little consequence because

(1) the Asset Agreement transferred all of ITOFCA’s assets except a building and some cash and a copyright is

neither a building nor cash, slip op. at 6; (2) the Asset

Agreement was not required to use the word “copyright” to

transfer the copyright, and a statement that “all assets” are

transferred is sufficient because it “clearly includes

copyrights,” slip op. at 6-7; and (3) circumstantial evidence

establishes that a copyright was sold, see slip op. at 5-8.

I therefore turn to an examination of each of these areas.
18 No. 02-1069

1.

With respect to the Asset Agreement itself, the majority

explains:

The copyright on the computer program was an

asset of ITOFCA. ITOFCA sold all its assets to ICI

except a building and some cash. A copyright is

neither a building nor cash. True, the asset transfer

agreement also states that ITOFCA desires to “transfer

only those assets used and necessary in the operations of the transportation services being transferred,”

but the copyright is one of those assets; it was used

in ITOFCA’s “transportation services”; that was

ITOFCA’s business that it exited through the sale to ICI.

Slip op. at 6. First, as noted previously, there is internal ambiguity in the agreement: Although one of the

“whereas” clauses of the Asset Agreement essentially states

that ITOFCA was selling to ICI all of its assets “except a

building and some cash,” slip op. at 6, another “whereas”

clause limits this broad statement and reveals that “ITOFCA

desires to retain substantially all the property and assets

of ITOFCA and transfer only those assets used and necessary in the operations of the transportation services being

transferred.” R.35, Ex.16 at 1. It does not follow from

this statement that the right to reproduce and sell copies

of the program to third parties was included in the sale

of assets. The only right that seems “necessary” to the

freight forwarding service (and thus transferred by the

Asset Agreement) is a copy with the right to use and

modify the program, which is what ITOFCA argues was

transferred. MegaTrans is being sued for reproducing

and selling copies to other companies—not for using the

program in its own freighting services. Commercial distribution of software does not appear to be “necessary” to

conducting freight forwarding services and thus, on
No. 02-1069 19

that basis, cannot be said to be within the scope of the

assets transferred by the Asset Agreement.

The majority recognizes this problem and states that “[a]

possible reply” is that ICI “didn’t need the copyright itself, but just the right that [17 U.S.C. § 117] gave it—the

right to modify the program for its own use.” Slip op. at 6.

I agree that the right to modify the program is the only

right “necessary” to its freight forwarding service and

thus the only right necessarily conveyed by an asset transfer agreement that only transfers assets “necessary” to the

business. 

2.

Although there is a strict requirement that the transfer of

a copyright interest be in writing, the majority is correct

when it states that “it does not follow as ITOFCA believes

that the agreement must use the word ‘copyright,’ ” slip

op. at 6, and that such a writing “can use terminology

such as ‘all assets’ that clearly includes copyrights,” id. at 7.

The cases cited by the majority indeed stand for the

proposition that use of the word “copyright” is not always necessary, but it is somewhat notable that in none

of the cases did the written agreement merely say “all

assets” without reference to “rights,” “intangible” property,

or the underlying tangible property to which the intangible right attached. In all but one of the cited cases finding a transfer, the written agreement expressly conferred

“all rights” in a specific piece of property, which the

courts construed to include copyrights. See S.O.S., Inc. v.

Payday, Inc., 886 F.2d 1081, 1088 (9th Cir. 1989) (holding

that an agreement in which a company retained “all rights

of ownership” in a specific “series of programs” included

the copyright); Shugrue v. Cont’l Airlines, Inc., 977 F. Supp.
20 No. 02-1069

280, 285 (S.D.N.Y. 1997) (holding that agreement transferring “ ‘all right, title and interest’ to ‘[a]ll of [its] computer programs and software’ ” conveyed the copyright);

Relational Design & Tech., Inc. v. Brock, Civ. A. No. 91-2452-

EEO, 1993 WL 191323, at *6 (D. Kan. May 25, 1993) (holding

that agreement conferring “ ‘all rights to the completed

program with no licensing or royalties fees due’ ” conveyed

the copyright). Even in Schiller & Schmidt, Inc. v. Nordisco

Corp., 969 F.2d 410, 413 (7th Cir. 1992), the one case in

which the agreement did not use the words “all rights”

concerning a specific piece of property, the court stated

that under the agreement “Bertel sold all the assets of

Spotline Studios, tangible and intangible alike.” Id. In

contrast, the Asset Agreement does not specify the sale

of “intangible” assets at all. Moreover, the Asset Agreement does not state that it is selling “all” of ITOFCA’s

assets (either tangible or intangible), but merely all of the

assets “used and necessary” to the freighting business—

which would include the right to use and modify the

program, but not the right to reproduce and sell the program. R.35, Ex.16 at 1.

3.

Finally, the majority also looks to circumstantial evidence. Specifically, the majority notes that: (1) ITOFCA’s

“failure to object to the bankruptcy court’s order is compelling evidence that its claim of right is an afterthought.

It knew it had no basis for objecting to the sale order,”

slip op. at 5; and (2) the “sheer impracticability of such

divided ownership” if ITOFCA retained the copyright

(because “ITOFCA no longer had any technical or sales

staff. It was a shell. How would it evaluate such a request

[for a license]? Who would evaluate the request? Would
No. 02-1069 21

5 Other sections of the Asset Agreement bolster the argument that it was not intended to transfer the copyright of the

computer program. Outside of the “whereas” clauses, which

(continued...)

ICI have consented to have such an albatross around its

neck?”), slip op. at 7-8.

None of these issues was explored in the district court

or during this appeal. To state on summary judgment

that an agreement that says nothing about copyrights or

intellectual property rights—or even mentions the underlying property—probably transferred a copyright conflicts with the purposes of section 204, which is designed

to “ensure[] that the creator of a work will not give away

his copyright inadvertently,” to “enhance[] predictability

and certainty of copyright ownership—‘Congress’ paramount goal’ ” in creating it. Effects Assocs., Inc. v. Cohen,

908 F.2d 555, 557 (9th Cir. 1990) (quoting Community for

Creative Non-Violence v. Reid, 490 U.S. 730, 749 (1989)).

“Rather than look to the courts every time they disagree

as to whether a particular use of the work violates their

mutual understanding, parties need only look to the

writing that sets out their respective rights.” Id.

More fundamentally, even if there is some circumstantial evidence that the agreement conveyed a copyright,

there is also significant evidence that the agreement was

not intended to transfer the copyright, namely: (1) only

assets “used and necessary” to the freighting business

were transferred by the Asset Agreement, and rights of

reproduction and sale of the computer program are arguably not necessary for that purpose; (2) the Asset Agreement does not say anything about copyrights, intangible

property rights (except the ITOFCA trademark), or “rights”

in computer programs5

—in fact, it does not even mention
22 No. 02-1069

5 (...continued)

have been discussed at length, the Asset Agreement expressly

transfers the personal property listed in Appendix B, where

neither the copyright nor the program are listed. Elsewhere

in listing all of the assets to be transferred at closing, the Asset

Agreement accounts for transfers of personal property by title

transfer, leases and subleases, bills of sale for nontitled property,

insurance policies, employee pension and retirement, lines of

credit, operating contracts, and even a license of the ITOFCA

trademark. R.35, Ex.16 at 4. But there is no mention of copyrights or intangible assets outside of the ITOFCA trademark.

MegaTrans argued that the reason why the software did not

appear in the bill of sale or Appendix B to the Asset Agreement

was because it had been expensed in the salaries rather than

capitalized. See R.41 at 29-30. That does not explain why there

was not a document transferring the copyright of the program,

similar to the license of the ITOFCA trademark, which was

contained in the Asset Agreement.

6 Sullivan was more than just the former “president of ICI,” as

stated by the majority, slip op. at 8; it was undisputed that he

actually drafted the Asset Agreement in his previous capacity

as ITOFCA’s general counsel. See R.34 at 5, ¶ 35; R.41 at 7, ¶ 35

(MegaTrans’ admission that “[t]he 1986 Asset Agreement

was primarily drafted by Daniel Sullivan”); R.32 at 1. In fact,

it was undisputed that in drafting the Asset Agreement between ITOFCA and ICI, Sullivan “was the only lawyer involved

for either ITOFCA or ICI, and Mr. Sullivan acted as counsel

for both ITOFCA and ICI.” R.41 at 7-8, ¶ 36. Therefore, evidence that Sullivan, when speaking on behalf of Amerifreight,

“acknowledged at one point that ITOFCA retained the copyright” despite the Asset Agreement, slip op. at 8, strongly suggests that the Asset Agreement did not transfer the copyright.

the software at issue; (3) Amerifreight, through its representative Daniel Sullivan,6

 appeared to believe that

ITOFCA owned the copyright; (4) ICI’s statement on its
No. 02-1069 23

bankruptcy schedule that it had no copyright or other

intangible property rights.

Certainly there is evidence sufficient to permit a reasonable finder of fact to find that the Asset Agreement

failed to transfer the copyright. In reviewing a grant of

summary judgment, a court is to “construe all facts in

the light most favorable to the nonmoving party and draw

all reasonable and justifiable inferences in favor of that

party.” Mateu-Anderegg v. Sch. Dist. of Whitefish Bay, 304

F.3d 618, 623 (7th Cir. 2002) (citation omitted). Considering the conflicting evidence and the fact that the Asset

Agreement itself is not only ambiguous but fails to even

purport to convey a copyright interest in the software

a genuine issue of material fact exists as to whether the

Asset Agreement transferred the copyright.

C.

Because the Asset Agreement affords us no solid basis

for determining the nature of the property rights that

ITOFCA transferred to ICI, I must turn to the bankruptcy

order. The bankruptcy order authorizes the sale of rights

in the “Software” to two parties: Southern Pacific and

Amerifreight. See R.35, Ex.31 at 1-2. The “Software” is

defined by the bankruptcy court as “the Debtor’s [ICI’s]

right, title and interest in all patent, copyright and trade

secret rights in and to all computer software and corresponding documentation developed or acquired by the

Debtor (the “Software”).” R.35, Ex.31 at 1. After defining

“Software” in the order’s authorization to sell the Software to Amerifreight, the court authorizes ICI also to sell

its “right, title and interest in the Software to Southern

Pacific.” Id. at 2. Thus both Amerifreight and Southern

Pacific obtained the Debtor’s “right, title and interest” in “all
24 No. 02-1069

patent, copyright and trade secret rights in and to all

computer software.” Id. at 1-2. For both conveyances,

the order gives the same limitation: “the Debtor may sell

additional copies of the Software to other parties and

that by virtue of the proposed assignment [Amerifreight;

Southern Pacific] has only a non-exclusive right to the

Software.” Id.

The bankruptcy’s order makes clear that Amerifreight

was not granted the copyright. Nor was it granted an

exclusive license. The order could not grant either a copyright or an exclusive license to Amerifreight because it

granted to both Southern Pacific and Amerifreight exactly the same rights. There is only one copyright and

only one owner of each piece of an exclusive right.

Goldstein, Copyright § 4.4.1. Therefore, the bankruptcy

order could not have given both Southern Pacific and

Amerifreight the same exclusive rights. Thus, whatever

was transferred had to be a nonexclusive license. 

A nonexclusive license “does not transfer ownership

of the copyright to the licensee. The copyright owner

simply permits the use of a copyrighted work in a particular manner.” I.A.E., Inc. v. Shaver, 74 F.3d 768, 775 (7th Cir.

1996); see also id. at 775 n.7 (“ ‘In its simplest form, a license means only leave to do a thing which the licensor

would otherwise have a right to prevent.’ ” (quoting W.

Elec. Co. v. Pacent Reproducer Corp., 42 F.2d 116, 118 (2d Cir.

1930))).

A nonexclusive license therefore gives a licensee permission to do whatever is within the scope of that license.

See Shaver, 74 F.3d at 774-76 & n.8; Gracen v. Brandford

Exch., 698 F.2d 300, 303-04 (7th Cir. 1983). If one receives

a license to reproduce and sell five copies, then he may

reproduce and sell five copies, but no more. See, e.g.,

Pinkham v. Sara Lee Corp., 983 F.2d 824, 831-33 (8th Cir.
No. 02-1069 25

1992) (finding that promoter was authorized to reproduce

and sell 13,000 copies of book, but not 300,000 additional copies); Kennedy v. Nat’l Juvenile Det. Ass’n, 187 F.3d

690, 694 (7th Cir. 1999) (construing “a nonexclusive license

to reproduce, publish, and use Kennedy’s copyrighted

report”); MacLean Assocs., Inc. v. Wm. M. Mercer-MeidingerHansen, Inc., 952 F.2d 769, 779 (3d Cir. 1991) (finding implied nonexclusive license to develop and use software

for one external account but no others).

A copyright owner can grant a nonexclusive license

“orally, or may even be implied from conduct. . . . In

fact, consent given in the form of mere permission or lack

of objection is also equivalent to a nonexclusive license

and is not required to be in writing.” Shaver, 74 F.3d at

775; see also Jacob Maxwell, Inc. v. Veeck, 110 F.3d 749, 752

(11th Cir. 1997) (holding that nonexclusive license was

created by the copyright owner “giving permission” and

“failing to object despite his knowledge” of the use of

his song).

“ ‘A licensee infringes the owner’s copyright if its use

exceeds the scope of its license.’ ” Shaver, 74 F.3d at 775

n.8 (quoting S.O.S., 886 F.2d at 1087); see also S.O.S., 886

F.2d at 1087-88 (“The critical question is not the existence

but the scope of the license.”); Gillam v. Am. Broad. Cos.,

Inc., 538 F.2d 14, 20-21 (2d Cir. 1976) (noting that “[o]ne

who obtains permission to use a copyrighted” work “may

not exceed the specific purpose for which permission

was granted” and concluding that “unauthorized editing

of the underlying work, if proven, would constitute an

infringement of the copyright in that work similar to any

other use of a work that exceeded the license granted by the

proprietor of the copyright” (emphasis added)); WGN

Cont’l Broad. Co. v. United Video, Inc., 693 F.2d 622, 625

(7th Cir. 1982) (same); Glovaroma, Inc. v. Maljack Prods., Inc.,

71 F. Supp. 2d 846, 855-56 (N.D. Ill. 1999) (holding that
26 No. 02-1069

7 Transfers of nonexclusive licenses generally require permission from the copyright owner. The bankruptcy transfer from

ICI to Amerifreight was not problematic. If all ICI owned was

(continued...)

summary judgment dismissing infringement claim was

inappropriate where scope of license was unclear). Also,

it has been held by several courts and noted by commentators that a nonexclusive license cannot be transferred

without permission of the copyright owner. See Gadner

v. Nike, Inc., 279 F.3d 774 (9th Cir. 2002) (holding that

neither exclusive nor nonexclusive licenses can be transferred absent copyright owner’s authorization); In re

Golden Books Family Entm’t, Inc., 269 B.R. 311, 314-19

(Bankr. D. Del. 2001) (holding that nonexclusive licensees

cannot transfer their licenses without prior authorization

from copyright owner, but that exclusive licensees can

transfer licenses without authorization); In re Patient Educ.

Media, Inc., 210 B.R. 237, 242-43 (Bankr. S.D.N.Y. 1997)

(holding that nonexclusive license is not transferable

without copyright owner authorization); Nimmer &

Nimmer, 3 Nimmer on Copyright § 10.02[B][4]; Goldstein,

Copyright § 4.4.1.

Because the bankruptcy order gave two parties exactly

the same rights (all the rights held by ICI, except ICI’s

right to sell to others), the only interest that the bankruptcy order could have transferred was a nonexclusive

license. The fact that ICI sold two copies of the software

is not troublesome. ICI made the second copy with the

permission, or, at the very least, with the lack of objection, of ITOFCA at the time of the bankruptcy order.

“[C]onsent given in the form of mere permission or lack

of objection is also equivalent to a nonexclusive license.”

Shaver, 74 F.3d at 775. Thus ICI was authorized to make

a copy for Southern Pacific.7
No. 02-1069 27

7 (...continued)

a nonexclusive license and ITOFCA owned the copyright,

ITOFCA, by failing to interpose an objection at the bankruptcy

proceeding, gave its permission or failed to make a proper

objection. It therefore authorized the transfer of the nonexclusive license to Amerifreight. The record does not address

Amerifreight’s further transfer to MegaTrans. ITOFCA has

never suggested, on this record, that Amerifreight failed to obtain its permission with respect to this transfer. My examination of the record reveals that, although MegaTrans was not

incorporated until after the hearing on this matter before

the bankruptcy court, ITOFCA apparently had some knowledge that the plan was for Amerifreight to give the program

to another entity.

There is significant force therefore in the majority’s view

that, although we may not be able to determine exactly

the contours of ICI’s right, ICI must at least have had the

right to sell because the order reserved ICI’s right to

sell additional copies to others.

This view is compatible with MegaTrans’ position. It

does not argue that the bankruptcy order transferred the

copyright itself. See Appellee’s Br. at 14. Rather, MegaTrans

submits that the order transferred to itself (and, I add,

consequently, to Southern Pacific) the ability to exercise

the rights of a copyright owner, minus the right to exclusivity (in other words, a nonexclusive license to prepare derivative works, reproduce, distribute, etc.). In

MegaTrans’ view, ICI conveyed its “full right to exercise

all copyright rights”—not own them. Appellee’s Br. at 14

(emphasis added; internal quotations and ellipses omitted). In short, it would exercise those rights on a nonexclusive basis. As stated by the district court, ITOFCA

“relinquished any claim to exclusive ownership of the

copyright,” arguably because it authorized Amerifreight
28 No. 02-1069

and Southern Pacific to exercise simultaneously all ownership rights. Appellee’s Br. at 13-14; R.42 at 7. This view is

strongly supported by the wording of the actual assignment to Amerifreight (as opposed to the bankruptcy order

authorizing the assignment), which assigns “on a nonexclusive basis, the full right to exercise all patent, copyright,

and trade secret rights in and to all computer software.”

R.35, Ex.32 (underlining in original; italics added). It further recites that “Amerifreight expressly acknowledges

that, while it may exercise all rights of patent, copyright,

or trade secret owner, it has only a non-exclusive right to

the foregoing Intellectual Property Rights to the ICI software and documentation, and that ICI is free to sell additional copies of the ICI software and documentation to

other third parties.” Id. (underlining in original; italics

added).

Under this view, the language in the bankruptcy order

concerning “all . . . rights” and yet “non-exclusiv[ity]” also

makes sense. R.35, Ex.31 at 1. Additionally, this view is

consistent with the dialogue in the bankruptcy court

about whether ICI was transferring a nonexclusive license.

D.

Although the question is a close one, I believe that the

terms of the bankruptcy sale are sufficiently clear to permit us to hold that the judgment of that court ought to

preclude the relitigation of ITOFCA’s claim that ICI

could not transfer to Amerifreight the right to transfer

further to MegaTrans the right to sell the program. Although the ambiguity created by the order, as well as by

the parties’ failure to deal clearly with the issues, have

diluted substantially the usual benefits of judicial economy that accompany the use of the doctrine of res judicata,
No. 02-1069 29

the possibilities of inaccuracy are not so increased by

those lapses as to preclude application of that doctrine.

On this basis, I concur in the decision of the court to

affirm the judgment of the district court.

A true Copy:

Teste:

 _____________________________

Clerk of the United States Court of 

Appeals for the Seventh Circuit 

USCA-02-C-0072—3-7-03