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Seventh Circuit Says Copyright Office Has Mandatory Role When Invalidating Registrations Based Upon Inaccurate Information

A group of businessmen joined together in a business partnership to provide mail-order pharmacy services to Medicaid patients in Illinois. One of the partners in the joint venture, Swift, determined that the company needed a logo for marketing purposes, so he hired an advertising agency to design it. The advertising agency then engaged an independent graphic designer to create the artwork, which the business partnership eventually used to market its services.  No written agreement existed between Swift, the ad agency, or the designer.

Later, when the partners in the joint venture had a falling out, Swift filed an application with the U.S. Copyright Office to protect the logo, intending to sue his former partners for copyright infringement for their continued use of the logo. 

When Swift filed suit against his former partners, they sought to invalidate the copyright registration because its underlying application falsely stated that the head of the advertising agency was the author of the artwork and that she had transferred it to Swift’s company by way of a written agreement.  In reality, the graphic designer was the true author of the work, and it was only after the copyright application was filed that Swift and the ad agency entered into a written transfer agreement.

Their argument was based upon Section 411(b) of the Copyright Act, which provides that a certificate of registration is valid “regardless of whether the certificate contains any inaccurate information, unless: (A) the inaccurate information was included on the application for copyright registration with knowledge that it was inaccurate, and (B) the inaccuracy of the information, if known, would have caused the Register of Copyrights to refuse registration.”

The district court found that Swift knowingly misrepresented the information in the application, and it also determined that, if known, these misrepresentations would have caused the Register of Copyrights to refuse registration of the application.  For those reasons, it invalidated the copyright registration upon which Swift’s infringement claim rested.

On appeal, the Seventh Circuit vacated the district court’s declaratory judgment. The PRO-IP Act of 2008 added Section 411(b)(2) to the Copyright Act, which requires that “[i]n any case in which inaccurate information…is alleged, the court shall request the Register of Copyrights to advise the court whether the inaccurate information, if known, would have caused the Register of Copyrights to refuse registration.” Because the district court failed to consult the Register of Copyrights, it committed a legal error which must be remedied upon remand. 

Although Swift’s copyright application may not ultimately survive, the district court’s failure to follow the specific instructions of the Copyright Act allowed Swift’s infringement claim to survive another day.  Thus, the obvious lesson from this case is for courts to adhere to the statutory requirements. However, as many lawyers know, the more rigid the statutory language, the more likely crafty litigants can use the exact language to their advantage. It will be interesting to see if defendants use this strict construction to delay and lengthen copyright infringement litigation if, as here, the plaintiff and the court are not well-versed in the language of the Copyright Act.

This case also provides a more widely applicable lesson for copyright owners, and that is to document the chain of title for your copyright works.  Under the Copyright Act, the individual author of specific artwork is considered that work’s owner unless: (1) ownership in the work is transferred from the author in writing, or (2) the work is considered a “work made for hire” (requiring specific criteria be met). 

It is very common for businesses to hire ad agencies and artists to create artwork and logos for the company. It is less common, though, for companies to document the relationship of the parties as it relates to ownership of the artwork. After all, the company is paying the ad agency to create something for the company. Nevertheless, without a written agreement outlining the chain of title from the artist to the company, the company runs the risk of not holding proper title to artwork it paid for. Without proper title, the company cannot protect and enforce that valuable intellectual property.  Swift tried to overcome that deficiency by fibbing to the Copyright Office.  For many other businesses, this step of due diligence upfront could save countless hours and many dollars in the end.

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