American Plastic Equipment, Inc. v. Toytrackerz, LLC, 2009 WL 902422 (D. Kan. 2009)

There was an order last week that illustrates how a plaintiff must provide a written instrument to show chain of title.  Louis Marx & Co. was a toy company that, between 1964 to 1970, sold 1:6 scale action figures that it registered the copyrights for in its name. (A picture of one of the figures, Chief Cherokee, is on the left.) Louis Marx was bought by Quaker Oats; which sold the company to Dunbee-Combex; which reorganized (no one is sure how) as Dubee-Combex-Marx; which went into bankruptcy and had its assets repossessed by Chemical Bank of New York; which sold the copyrights “if any” to American Plastic Equipment, the plaintiff in this action, for ten dollars. Got it? The bill of sale contained the following language:

The Property has been repossessed by the Seller from Louis Marx & Co. or its affiliated companies in the exercise of its rights under a security agreement.

American Plastic brought a copyright infringement action against Toytracerkz, alleging that the company had infringed its copyrights in eleven of the action figures. Magistrate Judge David J. Waxse of the District of Kansas granted Toytrackerz summary judgment finding  that the “chain of title” was unclear:

For the chain of title to be secure, Plaintiff would have to present a written document, signed by the then owner, transferring the copyrights to Chemical Bank. It is not enough that the Bills of Sale indicate that the copyrights were “repossessed by the Seller [Chemical Bank] from Louis Marx & Co. or its affiliated companies in the exercise of its rights under a security agreement.”

The decision had a nice discussion of the differences between 17 U.S.C. 204(a)’s requirement of an executed writing and the statute of frauds:

Under § 204(a) of the Copyright Act, “[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.” While Section 204(a)’s signed writing requirement is sometimes called the “copyright statute of frauds,” it is in fact different from a statute of frauds.  Section 204 “is a prerequisite to a valid transfer of copyright ownership, and not merely an evidentiary rule.” A transfer of copyright is simply not valid without the required written instrument. A mere claim that a written document exists is not enough to cloud the title; the written document transferring the rights and signed by the owner must be submitted into evidence.

The writing in question “doesn’t have to be the Magna Charta; a one-line pro forma statement will do.” Nor does the writing have to contain any particular language.FN42 It must, however, clearly show an agreement to transfer the rights in the copyright.

The writing requirement serves several purposes. First, it ensures that a copyright will not be inadvertently transferred.FN44 Second, it “forces a party who wants to use the copyrighted work to negotiate with the creator to determine precisely what rights are being transferred and at what price.” Third, it provides a guide for resolving disputes; the parties can look to the writing to determine whether a use is improper.FN46 In these ways, the writing requirement “enhances predictability and certainty of copyright ownership-‘Congress’ paramount goal’ when it revised the [Copyright] Act in 1976.” [citation omitted]