Court Opinion

ID: 867049
Source: CourtListenerOpinion
Date Created: 2013-05-09 17:27:07.96018+00
Date Added: 2024-06-11T15:10:08.572196
License: Public Domain

FOR PUBLICATION

  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

RIGHTHAVEN LLC,                          No. 11-16751
              Plaintiff-Appellant,
                                           D.C. No.
                v.                      2:11-cv-00050-
                                           PMP-RJJ
WAYNE HOEHN ,
                Defendant-Appellee.

     Appeal from the United States District Court
              for the District of Nevada
       Philip M. Pro, District Judge, Presiding

RIGHTHAVEN LLC,                          No. 11-16776
              Plaintiff-Appellant,
                                           D.C. No.
                v.                      2:10-cv-01343-
                                          RLH-PAL
THOMAS A. DIBIASE,
              Defendant-Appellee.          OPINION

     Appeal from the United States District Court
              for the District of Nevada
    Roger L. Hunt, Senior District Judge, Presiding

                Argued and Submitted
        February 5, 2013—Pasadena, California
2                 RIGHTHAVEN LLC V . HOEHN

                         Filed May 9, 2013

    Before: Diarmuid F. O’Scannlain, Stephen S. Trott, and
              Richard R. Clifton, Circuit Judges.

                    Opinion by Judge Clifton

                           SUMMARY*

                             Copyright

    The panel affirmed the dismissal for lack of standing of
two copyright infringement suits and vacated the portion of
the district court’s order granting summary judgment on fair
use in one of the suits.

    The panel held that agreements assigning plaintiff
Righthaven LLC the bare right to sue for infringement of
newspaper articles, without the transfer of any associated
exclusive rights in the articles, did not confer standing to sue.
The panel held that the district court therefore lacked
jurisdiction to rule in the alternative on the fair use defense.

  *
    This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
                   RIGHTHAVEN LLC V . HOEHN                     3

                             COUNSEL

Erik S. Syverson (argued), Miller Barondess, LLP, Los
Angeles, California, and Shawn A. Mangano, Las Vegas,
Nevada, for Plaintiff-Appellant.

Kurt Opsahl (argued) and Corynne McSherry, Electronic
Frontier Foundation, San Francisco, California; Colleen Bal
and Caroline E. Wilson, Wilson Sonsini Goodrich & Rosati,
Palo Alto, California, for Defendant-Appellee Thomas A.
DiBiase.

Marc J. Randazza (argued), J. Malcolm DeVoy IV, and Jason
A. Fischer, Randazza Legal Group, Las Vegas, Nevada, for
Defendant-Appellee Wayne Hoehn.

Steven J. Metalitz and J. Matthew Williams, Mitchell
Silberberg & Knupp LLP, Washington, D.C., for amici curiae
The Association of American Publishers and The Recording
Industry Association of America.

                             OPINION

CLIFTON, Circuit Judge:

    Abraham Lincoln told a story about a lawyer who tried to
establish that a calf had five legs by calling its tail a leg. But
the calf had only four legs, Lincoln observed, because calling
a tail a leg does not make it so.1 Before us is a case about a
lawyer who tried to establish that a company owned a

 1
     See David Herbert Donald, Lincoln 396 (1995).
4               RIGHTHAVEN LLC V . HOEHN

copyright by drafting a contract calling the company the
copyright owner, even though the company lacked the rights
associated with copyright ownership. Heeding Lincoln’s
wisdom, and the requirements of the Copyright Act, we
conclude that merely calling someone a copyright owner does
not make it so.

    Plaintiff Righthaven LLC filed separate copyright
infringement suits against defendants Wayne Hoehn and
Thomas DiBiase for posting articles from the Las Vegas
Review-Journal online without authorization. The two cases
have been consolidated on appeal. In each of the cases, the
district court concluded that Righthaven lacked standing to
sue for infringement because it was not the owner of any of
the exclusive rights in the news articles required for standing
under the Copyright Act and our decision in Silvers v. Sony
Pictures Entertainment, Inc., 402 F.3d 881, 890 (9th Cir.
2005) (en banc). In Hoehn, the district court also held in the
alternative that the defendant was covered by a fair use
defense, and it granted summary judgment on that ground.

    We agree that Righthaven lacks standing in both cases.
Because Righthaven lacks standing, we also conclude that we
lack jurisdiction to rule on the merits of the fair use claim.
Therefore, we affirm the motions to dismiss in both cases, but
vacate the portion of the district court order in Hoehn
granting summary judgment on fair use.

I. Background

    Plaintiff Righthaven LLC was founded, according to its
charter, to identify copyright infringements on behalf of third
parties, receive “limited, revocable assignment[s]” of those
copyrights, and then sue the infringers. Righthaven filed
                RIGHTHAVEN LLC V . HOEHN                       5

separate suits against defendants Hoehn and DiBiase for
displaying copyrighted Las Vegas Review-Journal articles
without authorization on different websites. Hoehn, who
frequently commented in discussion boards at
MadJackSports.com, had pasted an opinion piece about
public pensions into one of his comments on the site.
DiBiase, a former Assistant United States Attorney who
maintained a blog about murder cases in which the victim’s
body was never found, reproduced an article about one of
these “no body” cases on his blog.

    Righthaven was not the original owner of the copyrights
in these articles. Stephens Media LLC, the company that
owns the Las Vegas Review-Journal, held them at the time
defendants posted the articles. After the alleged infringements
occurred, but before Righthaven filed these suits, Stephens
Media and Righthaven executed a copyright assignment
agreement for each article. Each copyright assignment
provided that, “subject to [Stephens Media’s] rights of
reversion,” Stephens Media granted to Righthaven “all
copyrights requisite to have Righthaven recognized as the
copyright owner of the Work for purposes of Righthaven
being able to claim ownership as well as the right to seek
redress for past, present, and future infringements of the
copyright . . .in and to the Work.”

    Righthaven and Stephens Media had previously entered
into a Strategic Alliance Agreement (“SAA”), however, that
controlled what Righthaven could do with any copyrights
assigned to it. After assignment of a copyright, Righthaven
was to search for instances of infringement. When
Righthaven found an infringement, it could pursue the
infringer, but that right was subject to Stephens Media’s veto.
If Righthaven did not obtain a settlement or initiate litigation,
6               RIGHTHAVEN LLC V . HOEHN

it had to reassign the copyright to Stephens Media.
Righthaven was required to split any recovery it received
with Stephens Media.

    The SAA also placed sharp limits on what Righthaven
could do with any assigned copyright. Righthaven had no
right to exploit the copyrights or participate in any royalties.
Stephens Media retained “an exclusive license” to exploit the
copyrights “for any lawful purpose whatsoever,” and to the
extent that Righthaven’s pursuit of infringement would “in
any manner” diminish Stephens Media’s right to exploit the
assigned copyrights, Righthaven granted a license to Stephens
Media “to the greatest extent permitted by law so that
Stephens Media shall have unfettered and exclusive ability”
to exploit its copyrights. Moreover, by providing Righthaven
thirty days prior notice, Stephens Media could revert the
ownership of any assigned copyright back to itself.

    After Righthaven filed suit against Hoehn and DiBiase,
each defendant filed a motion to dismiss for lack of standing.
Righthaven and Stephens Media subsequently executed a
“Clarification and Amendment to Strategic Alliance
Agreement.” The agreement purported to clarify that the
parties’ intent in entering the SAA was to “convey all
ownership rights in and to any identified Work to Righthaven
through a Copyright Assignment so that Righthaven would be
the rightful owner of the identified Work.”

    The district court in each case granted defendant’s motion
to dismiss based on Righthaven’s lack of standing. In
addition, in the Hoehn case, after granting defendant’s motion
to dismiss, the district court went on to grant defendant’s
motion for summary judgment on fair use as an alternative
basis of decision. Righthaven timely appealed in both cases.
                RIGHTHAVEN LLC V . HOEHN                     7

II. Standing

   In each of the decisions below, the district court held that
Righthaven lacked standing to sue for copyright infringement.
Reviewing de novo, see Preminger v. Peake, 552 F.3d 757,
762 n.3 (9th Cir. 2008), we reach the same conclusion.

    Under the Copyright Act, only the “legal or beneficial
owner of an exclusive right under a copyright” has standing
to sue for infringement of that right. See 17 U.S.C. § 501(b);
Silvers v. Sony Pictures Entertainment, Inc., 402 F.3d 881,
890 (9th Cir. 2005) (en banc) (holding that, under § 501, only
a party with an ownership interest has standing to sue).
Section 106 of the Copyright Act lists the “exclusive rights”
that can be held. They include the right to reproduce the
copyrighted work, to prepare derivative works based on the
work, and to distribute copies of the work by selling, renting,
leasing, or lending. See 17 U.S.C. § 106. Absent from the list
of exclusive rights is the right to sue for infringement.
Accordingly, we held en banc in Silvers that the assignment
of the bare right to sue for infringement, without the transfer
of an associated exclusive right, is impermissible under the
Copyright Act and does not confer standing to sue. 402 F.3d
at 890. That covers Righthaven, for all it was really assigned
was a bare right to sue for infringement.

    Righthaven contends that it owns one or more “exclusive
rights” under the Copyright Act pursuant to the express
language of the assignment contracts, which stated that
Righthaven received “all copyrights requisite to have
Righthaven recognized as the copyright owner of the Work
for purposes of Righthaven being able to claim ownership as
well as the right to seek redress for past, present, and future
infringements of the copyright . . . in and to the Work.” That
8                RIGHTHAVEN LLC V . HOEHN

some language in the contract described Righthaven as the
owner, however, does not itself prove that Righthaven owned
any exclusive rights.

      When determining whether a contract has transferred
exclusive rights, we look not just at the labels parties use but
also at the substance and effect of the contract. See Campbell
v. Bd. of Trs. of Leland Stanford Junior Univ., 817 F.2d 499,
503–04 (9th Cir. 1987). In Campbell, a contract concerning
a copyright specifically stated that Stanford, the original
owner, remained “the sole and exclusive proprietor” of the
copyright. Id. at 503. The district court relied on this language
to conclude that no copyright interest had been transferred.
Id. at 503–04. We reversed, concluding that even though
Stanford “purport[ed] to retain ‘ownership’ of the copyrights
. . . Stanford clearly transferred part of [its] property interest”
to the other party. Id. at 504; see also Nafal v. Carter,
540 F. Supp. 2d 1128, 1141–43 (C.D. Cal 2007) (looking at
the substance of an assignment contract purporting to give
plaintiff ownership and concluding that the plaintiff had been
assigned only the right to sue), aff’d, 388 F. App’x 721 (9th
Cir. 2010).

    Therefore, that the assignment agreements used language
purporting to transfer ownership to Righthaven is not
conclusive. We must consider the substance of the
transaction. The SAA provided that any copyrights
transferred to Righthaven were subject to the terms of the
SAA, and many of these terms placed limits on what
Righthaven could do with any copyright assigned to it. Those
limits lead us to conclude that Righthaven did not actually
possess any exclusive rights under the Copyright Act.
                RIGHTHAVEN LLC V . HOEHN                     9

    The SAA provided that Stephens Media automatically
received an exclusive license in any copyrighted work it
assigned to Righthaven, so that Stephens Media retained “the
unfettered and exclusive ability” to exploit the copyrights.
Righthaven, on the other hand, had “no right or license” to
exploit the work or participate in any royalties associated
with the exploitation of the work. The contracts left
Righthaven without any ability to reproduce the works,
distribute them, or exploit any other exclusive right under the
Copyright Act. See 17 U.S.C. § 106. Without any of those
rights, Righthaven was left only with the bare right to sue,
which is insufficient for standing under the Copyright Act
and Silvers.

    Righthaven makes a number of arguments to avoid this
result, but none are persuasive. First, Righthaven argues that
the sequence of transactions set forth in the assignment
contract and SAA made it the owner of exclusive rights and
left Stephens Media as a mere licensee. According to this
argument, Righthaven was given full ownership of the
contract under the assignment contract. The SAA, in turn,
required Righthaven to grant an exclusive license in the
copyright to Stephens Media. Righthaven argues that, as a
matter of logic, Righthaven could have granted a license to
Stephens Media only if ownership first vested in Righthaven.

     This argument again emphasizes form over substance. But
even analyzing it on its own formalistic terms, the argument
still fails because once Righthaven granted Stephens Media
an exclusive license, Righthaven was no longer the owner of
exclusive rights under the Copyright Act. The Copyright Act
does not distinguish between transferring a copyright via an
assignment or an exclusive license. Both, unlike an
assignment of a non-exclusive license, constitute a “transfer
10              RIGHTHAVEN LLC V . HOEHN

of copyright ownership.” 17 U.S.C. § 101; see also Campbell,
817 F.2d at 504 (relying on this section of the Copyright Act
to construe a contract as transferring the ownership of a
copyright, even though the contract used the term “exclusive
license”). It follows that if a copyright owner grants an
exclusive license of particular rights, only the exclusive
licensee and not the original owner can sue for infringement
of those rights. 3 M. Nimmer & D. Nimmer, Nimmer on
Copyright § 12.02[C] (2012).

    Righthaven also argues that the district court failed to
construe the contract in accordance with the “parties’ intent
to convey all rights necessary . . . for Righthaven to have
standing.” Under Nevada law, which the SAA provided
should govern its interpretation, courts should effectuate the
intent of the parties when construing ambiguous contracts.
Sheehan & Sheehan v. Nelson Malley & Co., 117 P.3d 219,
223–24 (Nev. 2005). But the contract was not ambiguous.
The SAA clearly delineated the respective rights of
Righthaven and Stephens Media in any assigned works.
Moreover, the contract evinced not just an intent that
Righthaven receive whatever rights were necessary for it to
sue, but also an intent that Stephens Media retained complete
control over all exclusive rights. The problem is not that the
district court did not read the contract in accordance with the
parties’ intent; the problem is that what the parties intended
was invalid under the Copyright Act.

    Righthaven chastises the district court for not correcting
any defect in the agreement, as allowed by the SAA. The
SAA provided: “If any provision of this Agreement should be
held to be void or unenforceable . . . then such court shall
correct the defect . . . to approximate the manifest intent of
the Parties.” But Righthaven cites no authority suggesting
                 RIGHTHAVEN LLC V . HOEHN                      11

that the district court had an obligation to reshape its contract.
And, as explained above, the parties’ intended result was
invalid under the Copyright Act and Silvers, so reshaping the
contract in light of that intent could not have saved it.

    Finally, Righthaven argues that it has standing under the
amended version of the SAA. After the defendants had each
filed a motion to dismiss for lack of standing, Righthaven and
Stephens Media executed a “Clarification and Amendment to
Strategic Alliance Agreement.” The agreement purported to
clarify that the parties’ intent in entering the SAA was to
“convey all ownership rights in and to any identified Work to
Righthaven through a Copyright Assignment so that
Righthaven would be the rightful owner of the identified
Work” and made several substantive amendments to the SAA
that applied retroactively to all copyright assignments
executed under the original SAA.

    In general, jurisdiction is based on facts that exist at the
time of filing. Lujan v. Defenders of Wildlife, 504 U.S. 555,
569 n.4 (1992); see also Keene Corp. v. United States,
508 U.S. 200, 207–08 (1993) (in affirming a motion to
dismiss on jurisdictional grounds, looking at the facts as they
existed at the time the complaint was filed, rather than the
time of the trial court’s ruling on the motion to dismiss as
urged by plaintiff). The Supreme Court has enunciated few
exceptions to this general principle. See, e.g., Newman-
Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826, 837 (1989)
(holding that federal courts can dismiss dispensable
nondiverse parties to cure jurisdictional defects). So far,
permitting standing based on a property interest acquired
after filing is not one of them.
12              RIGHTHAVEN LLC V . HOEHN

    We need not decide whether the circumstances of this
case call for a new exception to the general rule, however,
because Righthaven lacked standing either way. Even under
the amended SAA, Righthaven did not possess any exclusive
rights. At first blush, the amendments to the SAA appear to
have removed the most obvious impediments to Righthaven
having standing. The amendments removed the provision
explicitly prohibiting Righthaven from exploiting assigned
copyrights. In addition, instead of receiving an exclusive
license, Stephens Media received a non-exclusive license. But
these changes made little practical difference to Righthaven’s
ability to exploit the copyrights, however, in light of
limitations added by the amendments.

     For example, under the amended SAA, Righthaven could
only exploit a work if it gave Stephens Media thirty days
prior notice. And Stephens Media could ensure that
Righthaven never actually exploited any assigned copyright,
because it retained the unilateral right to repurchase all rights
and title back from Righthaven after giving fourteen days
notice and paying a nominal sum of ten dollars.
Consequently, Righthaven was still unable to exploit any
exclusive rights unless Stephens Media permitted it to.
Meanwhile, Stephens Media was free to exploit the works to
the full extent it wished, and it presumably would with any
article that it perceived to have additional value. A
hypothetical possibility that Righthaven might be able to
exercise exclusive rights if Stephens Media decided to allow
it at the time is not sufficient for standing.

   Under either the original or amended SAA, Righthaven
was not the owner of any exclusive rights under the
Copyright Act. It therefore lacked standing to sue for
                RIGHTHAVEN LLC V . HOEHN                      13

infringement. The motions to dismiss in both Hoehn and
DiBiase were properly granted.

III.    Fair Use

    In Hoehn, after the district court granted defendant’s
motion to dismiss for lack of subject matter jurisdiction on
the ground that Righthaven lacked standing, it went on to
grant defendant’s motion for summary judgment on fair use,
thus providing an alternative basis for decision in favor of
defendant. Righthaven argues that, if it lacks standing, then
the court has no power to reach the merits of the fair use
defense. In that position it is joined by amici curiae The
Association of American Publishers and The Recording
Industry Association of America. We agree.

     The Supreme Court has rejected the “doctrine of
hypothetical jurisdiction,” in which a federal court assumes
jurisdiction for the purpose of reaching the merits, as the
practice “carries the courts beyond the bounds of authorized
judicial action.” Steel Co. v. Citizens for a Better Env’t,
523 U.S. 83, 94 (1998). In Steel Co., after the Court
determined that the respondent lacked standing to maintain
the suit, it held that the Court and lower courts lacked Article
III jurisdiction to reach the merits question and vacated the
judgment below. Id. at 110.

    Hoehn argues that subject matter jurisdiction and standing
are separate concepts, and that even if Righthaven lacked
standing to sue, the district court still had subject matter
jurisdiction over the dispute. The holding in Steel Co.,
however, pertained to reaching the merits when a court lacked
Article III jurisdiction on account of standing, which is
precisely the situation in this case. In the absence of standing,
14              RIGHTHAVEN LLC V . HOEHN

a federal court “lacks subject matter jurisdiction over the
suit.” Cetacean Cmty. v. Bush, 386 F.3d 1169, 1174 (9th Cir.
2004) (citing Steel Co., 523 U.S. at 101). Therefore, absent an
exception to the rule in Steel Co., we must vacate the grant of
summary judgment below.

    We have recognized that “jurisdiction [can be] so
intertwined with the merits that its resolution depends on the
resolution of the merits.” Orff v. United States, 358 F.3d
1137, 1150 (9th Cir. 2004) (internal quotation marks
omitted), aff’d, 545 U.S. 596 (2005). This is not one of those
cases. The analysis the district court performed in analyzing
the fair use defense—which focused on Hoehn’s use of the
article, the nature of the article itself, and the market impact
of the use—is distinct from the analysis of the assignment
contracts that was necessary for determining standing.

    We understand why the district court reached the fair use
issue. By providing an alternative basis for decision, the court
sought to deal with this case in a more efficient manner. If we
disagreed with the district court and concluded that
Righthaven had standing to bring this copyright infringement
action, we could have proceeded directly to the next issue,
fair use, without requiring a remand and a further appeal.

    Nonetheless, because we agree that Righthaven did not
have standing, it is not appropriate for us to go further or for
the district court’s alternative ruling to stand. We therefore
vacate the portion of the district court’s order that analyzed
the merits of the fair use defense and granted the motion for
summary judgment.
                RIGHTHAVEN LLC V . HOEHN                    15

IV.     Conclusion

    We affirm the dismissal for lack of standing in both cases.
In Hoehn, we vacate the portion of the district court’s order
granting the motion for summary judgment on fair use
grounds. Costs are awarded to defendants-appellees.

      AFFIRMED IN PART; VACATED IN PART.