Opinion ID: 601565
Heading Depth: 2
Heading Rank: 4

Heading: Allegations of Copyright Infringement.

Text: 17 Rano alleges infringement of two of the rights granted to him, as creator of the photographs, by the Copyright Act: the right to reproduce the copyrighted work in copies and the right to distribute copies of the work to the public by sale or other transfer of ownership. See 17 U.S.C. § 106(1) and (3). Rano concedes that, under normal circumstances, his licensing agreement with Sipa would provide Sipa with a valid defense against his copyright infringement claim. See Effects Assocs., Inc. v. Cohen, 908 F.2d 555, 559 (9th Cir.1990), cert. denied sub nom., Danforth v. Cohen, --- U.S. ----, 111 S.Ct. 1003, 112 L.Ed.2d 1086 (1991) (in granting a copyright license, the licensor gives up its right to sue the licensee for infringement); Oddo v. Ries, 743 F.2d 630 n. 6 (9th Cir.1984) (license is a defense to infringement and must be affirmatively pleaded). Rano argues, however, that although he and Sipa did at one time have a copyright agreement, he terminated the agreement with Sipa. He claims that the termination deprived Sipa of its right to use the negatives Rano already had sent to Sipa, and that Sipa's subsequent use of Rano's negatives constituted copyright infringement. 18 It is undisputed that the licensing agreement did not contain any provision, either express or implied, regarding its duration. Rano relies on two theories to prove that he properly terminated the agreement. First, Rano argues that California law provides for termination at will of a contract of unspecified duration. Thus, when he wrote Sipahioglu on March 12, 1987, and informed him of his intent to use a different photograph distributor, he terminated their licensing agreement. Second, Rano argues that California law provides for the termination of a contract upon the material breach of the contract by the other party, and that Sipa's alleged actions constituted material breaches of the licensing agreement, permitting him to terminate the agreement. 19 Sipa counters that the express provision in the Copyright Act regarding termination rights, 17 U.S.C. § 203, preempts state law and prevents Rano from terminating their license agreement until thirty-five years have elapsed. Thus, Sipa claims, its alleged acts of reproducing and distributing Rano's photographs remained licensed at all times and did not constitute copyright infringement.
20 Under California contract law, agreements of non-specified duration are terminable at the will of either party. Zimco Restaurants, Inc. v. Bartenders and Culinary Workers' Union, Local 340, 165 Cal.App.2d 235, 331 P.2d 789, 792-92 (1958); but cf. Foley v. Interactive Data Corp., 47 Cal.3d 654, 254 Cal.Rptr. 211, 765 P.2d 373, 385-86 (1988) (noting that this general rule increasingly has given way to courts' willingness to gap fill a reasonable duration). Rano argues that the non-exclusive licensing agreement was a contract of non-specified duration, and as such was terminable at will. He further argues that he exercised his right to terminate the contract. 21 However, application of this principle of California contract law here would directly conflict with federal copyright law. Under Section 203 of the Copyright Act, licensing agreements are not terminable at will from the moment of creation; instead, they are terminable at the will of the author only during a five year period beginning at the end of thirty-five years from the date of execution of the license unless they explicitly specify an earlier termination date. 17 U.S.C. § 203(a). Since California law and federal law are in direct conflict, federal law must control. See Fidelity Federal Savings & Loan Ass'n v. de la Cuesta, 458 U.S. 141, 153, 102 S.Ct. 3014, 3022, 73 L.Ed.2d 664 (1982). 22 Section 203 applies to non-exclusive, as well as exclusive, licenses executed by the author on or after January 1, 1978. 17 U.S.C. § 203(a). Rano asserts that Section 203 is inapplicable because the licensing agreement was oral and thus not executed. We disagree. Not only was the agreement evidenced by several letters signed by both parties, but it also was successfully operative for approximately eight years. Thus, the agreement was executed and is within the purview of Section 203 and is not terminable at will. 23 Contrary to Rano's allegation, holding that Section 203 preempts California's termination at will rule of contract construction would not mean that Sipa, and other licensees, would be able to breach the licensing agreement with impunity. Under well-settled copyright law, Rano would be able to claim copyright infringement if Sipa exceeded the scope of the licensing agreement, see, e.g., S.O.S., 886 F.2d at 1087, breached a covenant or condition, see, e.g., Fantastic, 661 F.2d at 483, or breached the agreement in such a substantial and material way as to justify rescission. See e.g., Affiliated Hosp. Prod. Inc. v. Merdel Game Mfg. Co., 513 F.2d 1183, 1186 (2d Cir.1975). Moreover, he could sue in state court under a breach of contract theory. 24
25 Rano argues that Sipa materially breached the licensing agreement and that the breach gave him the right to terminate the agreement. Although licensing agreements are not terminable at will, under federal and state law a material breach of a licensing agreement gives rise to a right of rescission which allows the nonbreaching party to terminate the agreement. Costello Publishing Co. v. Rotelle, 670 F.2d 1035, 1045 (D.C.Cir.1981); 3 Nimmer § 10.15[A] at 112. After the agreement is terminated, any further distribution would constitute copyright infringement. Costello, 670 F.2d at 1045. 26 Here, it is clear that Rano attempted to rescind the agreement. The question is whether he had the right to rescind. A breach will justify rescission of a licensing agreement only when it is of so material and substantial a nature that [it] affect[s] the very essence of the contract and serve[s] to defeat the object of the parties.... [The breach must constitute] a total failure in the performance of the contract. Affiliated Hospital Products, 513 F.2d at 1186; Nolan v. Williamson Music, Inc., 300 F.Supp. 1311, 1317 (S.D.N.Y.1969), aff'd sub. nom. Nolan v. Sam Fox Publishing Co., 499 F.2d 1394 (2d Cir.1974); 3 Nimmer § 10.15[A] at 116-18. 27 Rano has not provided evidence sufficient to withstand summary judgment on this issue. Rano points to a number of acts that he contends constitutes a material breach, but only those acts preceding Rano's purported termination on March 12, 1987 are relevant. These acts include Sipa's alleged failure to pay royalties, failure to return negatives, and failure to credit for the Sara Ferguson photograph. The first two breaches claimed by Rano, upon which he relies most heavily, are not supported by the record. Sipa actually paid Rano 99.99% of the royalties due him up to approximately the time Rano sought to terminate the licensing agreement, excluding royalties due for photos published in the United States from 1985 to 1986. Of the latter, Sipa paid 86.85% of the royalties due. As to the second alleged breach, nothing in the letters evidencing the oral contract between the parties provided for a return of Rano's negatives on demand. Rano merely points to a letter from Sipa stating that the negatives would be filed at its offices and could be returned if necessary, although [Sipa] would want to keep them for a while. Finally, Rano provides no evidence to support his claim that he was due credit for the photograph of Sara Ferguson. Sipa provided evidence that the photograph was taken by another journalist; the duty was on Rano to show there was a genuine issue as to this fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 322-24, 106 S.Ct. 2548, 2552-54, 91 L.Ed.2d 265 (1986). 28 Even if we found Rano's allegations had merit, however, we could not conclude that Sipa materially breached the licensing agreement in light of the fact that the parties enjoyed a harmonious eight-year relationship (in which Rano received royalties and credit for his work). After considerable performance, a slight breach which does not go 'to the root' of the contract will not justify termination. Witkin Summary of California Law § 795 (9th ed. 1987); see Whitney Inv. Co. v. Westview Dev. Co., 273 Cal.App.2d 594, 78 Cal.Rptr. 302, 307 (1969); Restatement (First) of Contracts § 275 (1932). 29