Argued and Submitted December 8, 1999 — Pasadena, California.
Opinion by Judge B. FLETCHER; Concurrence by Judge KOZINSKI.
BETTY B. FLETCHER, Circuit Judge:
In this copyright case, we must decide an issue unaddressed by our prior decisions:
In August 1995, GenCom, Inc., hired the engineering firm Foad Consulting Group, Inc. to create a "preliminary Concept Development Plan" for a 45.5 acre shopping center project (the project) that GenCom intended to build in Arroyo Grande, California (the city). Pursuant to a contract dated August 18, 1995, Foad prepared a preliminary plot plan that showed the "location of the proposed buildings, parking lots, [and] landscape areas." GenCom submitted this plan to the city on January 3, 1996, as part of its application to build the shopping center. GenCom and Foad entered into a second contract, dated February 12, 1996, under which Foad agreed to create "final engineering drawings" for the project, including a revised plot plan, and to "process the [various] plans through the offices of the city of Arroyo Grande." The revised plot plan was subsequently submitted to the city,
After it obtained the city's approval, GenCom transferred its rights to develop the project to Claire Enterprises, LLC.
Concerned that its copyright was being infringed, Foad sent a letter of admonition to MGA, dated February 3, 1997, informing
JURISDICTION AND STANDARD OF REVIEW
The district court had jurisdiction under 28 U.S.C. § 1338(a). We have jurisdiction over Foad's appeal pursuant to 28 U.S.C. § 1291. We review de novo a district court's determination of pure questions of law at summary judgment. Royal Foods Co., Inc. v. RJR Holdings, Inc., 252 F.3d 1102, 1106 (9th Cir.2001).
One who owns a copyright in a work has the exclusive right to reproduce, adapt, publish, perform, and display the work. 17 U.S.C. § 106. A copyright holder may transfer any or all of these rights, id. § 201(d)(2), but in order for the transfer to be valid it must be in writing, id. § 204(a).
Foad argues that defendants infringed its copyright in the revised plot plan by copying and modifying it and by publishing the resulting work.
We have recognized, however, that § 204(a)'s writing requirement applies only to the transfer of exclusive rights; grants of nonexclusive copyright licenses need not be in writing.
Foad asks us to consider certain extrinsic evidence in interpreting the contract.
We must now determine whether the February 1996 contract between Foad and GenCom granted GenCom an implied copyright license. In this analysis, we consider whether Foad's extrinsic evidence discloses any ambiguities in the contract.
a. License to Reproduce
Foad claims that defendants infringed its reproduction rights to build the project by using the revised plot plan without its permission. We conclude from the terms of the contract that Foad granted GenCom an implied license to do just that. The central purpose of the contract was the production of a set of engineering documents "for `The Grande Plaza' Commercial Center in the city of Arroyo Grande." Under the contract, Foad agreed to create multiple maps, drawings, and plans for the project and to "process" these documents with the city. For this service, GenCom agreed to pay Foad a fee of $175,000. Given the amount of money GenCom paid for Foad's services and because part of the agreement was for Foad to help GenCom with its application to the city, it would be surprising if the parties had intended for GenCom to seek Foad's permission before using the plans to build the project. Had that been the parties' intention, one would
As evidence that the contract indicates the parties' intent to restrict GenCom's ability to use the revised plot plan without Foad's approval, Foad asks us to consider a legend that appears on the plan. The legend reads:
This legend does not divulge a latent ambiguity in the contract, much less show that under the contract Foad's permission was required before GenCom could start work. It is patent that the plans were developed for use on the specific project that was built. Although the legend states that no "plans shall be used without written permission of Foad," it appears on a document that was created after the agreement was made, and presumably was written by Foad or its agent. What's more, the legend would apply, if at all, to projects other than the specified project. Foad offers no explanation of how such a statement calls into question the parties' intent, as manifested by the contract, that GenCom would pay Foad for plans that it could use to develop its property.
b. License to Adapt
Foad next alleges that defendants infringed its adaptation rights by using much of the revised plot plan in creating the final site plan. But the February 1996 contract contains no language prohibiting others from modifying the revised plot plan. Quite the opposite: The contract contains a clause requiring GenCom to indemnify Foad in the event that others modify the plan and the changes lead to
Foad points to paragraph 12 of the contract in support of its argument that it did not grant GenCom a license to hire another company to complete the project using the revised plot plan. Paragraph 12 states:
The paragraph provides Foad no support. It concerns ownership of the original documents and copies prepared by Foad under the agreement. It also makes plain Foad's intention to retain its right to "use" the documents, presumably by reproduction, adaptation, or publication. However, the paragraph is silent about what GenCom may or may not do with the copies prepared for it.
Foad also asks us to consider extrinsic evidence: a declaration from an alleged architectural expert who asserted that, under the custom and practice in the industry, a plan "may not be used to produce a similar plan, without the permission of the original designer."
c. License to Publish
Finally, Foad contends that defendants infringed its publication rights by filing the final site plan with the city and circulating it among prospective tenants. The conclusion that the February 1996 contract granted GenCom an implied license to file the final site plan with the city and to use the plan to attract potential tenants follows from our previous analysis. The contract granted GenCom a license to reproduce and adapt the revised plot plan for the purpose of developing the project. It would defy common sense to conclude that the contract at the same time withheld permission to publish the resulting work for the same purpose. In the absence of a contractual provision concerning GenCom's right to circulate any derivative works as part of its development of the project, we conclude that GenCom did not infringe Foad's publication rights.
The February 1996 contract contains a clause prohibiting either party from assigning any rights under the contract without the written consent of the other.
The Copyright Act permits copyright holders to grant nonexclusive copyright licenses by implication. But whether a copyright holder has properly granted another
KOZINSKI, Circuit Judge, concurring:
The parties will no doubt be surprised by the majority opinion, as it decides a question they neither briefed nor argued, and that wasn't even raised below. This is a dangerous thing for a court to do, and wholly unnecessary. The case can and should be decided on the issues presented by the parties. Because I cannot join in the court's analysis, I concur only in the result.
A. The majority opens with the following question: "Which law, state or federal, governs the creation of an implied, nonexclusive copyright license?" Maj. Op. at 824. It is an interesting question that deserves exploring in the right case. It is also a difficult question that bears some analysis. Instead, the majority cites Effects Associates, Inc. v. Cohen, 908 F.2d 555 (9th Cir.1990), and then proceeds to apply state law. Given the importance of the question, one might have hoped for some explanation of how the majority got there.
As best I can tell, the majority assumes that anything that is called a contract — including an implied contract — must be governed by state law. But not every implied contract is, in fact, a contract. Certainly, some implied contracts are governed by state law. Those contracts really are contracts; they are actual agreements between parties, albeit imperfectly articulated. The cases on which the majority relies all involve this type of contract. Maj. Op. at 825-26.
But there is another type of implied contract, one that is "created otherwise than by assent and without any words or conduct that are interpreted as promissory." 3 Arthur Linton Corbin, Corbin on Contracts § 561, at 276-77 (1960). Such an implied contract is not a contract at all; it is a legal obligation the law imposes between certain parties where there is no actual agreement between them. Id. If the implied contract that gives rise to the nonexclusive license discussed in Effects Associates is this kind of contract, then it has nothing at all to do with contract law. Rather, it is an incident of the copyright and is therefore governed by federal law.
B. Purporting to apply state law, the majority infers "from the terms of the contract" that Foad and GenCom agreed to a nonexclusive license. Maj. Op. at 828. Yet there is nothing in the written contract between Foad and GenCom that remotely touches upon the plans' copyright. The contract says nothing about whether GenCom had the right to modify or distribute the plans. It says nothing about the circumstances in which GenCom can use the plans to build the project. The parties seem to have negotiated, written and signed the contract without ever discussing (or perhaps being aware of) these copyright issues. The majority acknowledges as much when it concedes that neither contract was sufficient to provide for a written transfer of copyright ownership because "[t]here is nothing in either contract between GenCom and Foad which purports to transfer any of Foad's exclusive rights to GenCom." Maj. Op. at 825.
Which leads to the question: Exactly which terms of the contract give rise to the license? The majority never says, relying instead on what the contract does not say. The majority notes that Foad failed to "spell out explicitly in the agreement" a requirement that "GenCom ... seek Foad's permission before using the plans to build the project." Maj. Op. at 829. In other words, Foad's failure to expressly reserve its rights raises an implication that Foad licensed those rights. This makes intuitive sense but, as we are applying state law, I would have expected to see state caselaw or a state law treatise cited on this point. The majority offers no state law authority to support its conclusion that a court can infer an agreement from the absence of a contrary agreement. Id.
Even more troubling is the majority's reliance on the penumbras emanating from an indemnification clause. The majority says that the written contract's "indemnification clause plus the absence of any prohibition against modification by others indicates that the contract granted GenCom an implied license to hire others to create derivative works using the revised plot plan for the purpose of completing the project." Maj. Op. at 830. The majority cites no state law authority for this point, either, and I doubt it can be found. Indemnification is not authorization. Usually, it's the other way around: A party seeks indemnification against another party's unauthorized actions. For example, rental car companies routinely require customers to indemnify them against harm caused by underage drivers, but this does not mean they authorize their customers to give the car keys to children. The majority's conclusion that an indemnification clause creates a presumption that the indemnified-for act is authorized is almost certainly inconsistent with state law.
C. Part III of the opinion devotes considerable effort to figuring out whether the implied copyright license previously found to exist is nonetheless defeated by parol evidence. This makes about as much sense as calculating how high is up.
Parol evidence consists of words or conduct outside the contract that tends to vary or explain the contract's written terms. The majority correctly recognizes that California has a particularly broad version of the parol evidence rule, which
The implied copyright license here is not a term in the contract; rather, as the name suggests, it's a term that is implied from the relationship of the parties. In such circumstances, it makes no sense at all to talk about parol evidence, or to consider whether California applies a broad or narrow parol evidence rule. There are no words of the contact that the parol evidence here can be used to interpret or clarify.
Evidence extrinsic to the contract is, of course, not irrelevant. Because the implied license is derived from the relationship of the parties — which may well extend beyond the contract — it is entirely appropriate to look at any words or conduct that bear on whether a copyright license should be implied. But that is not a question of parol evidence; rather, it goes to whether such a license exists in the first place.
D. The majority's preemption analysis is incomplete. The Copyright Act has a specific preemption provision, 17 U.S.C. § 301, but the majority does not cite it. Normally, of course, section 301 is the start of any preemption analysis in a copyright case, see, e.g., Kodadek v. MTV Networks, Inc., 152 F.3d 1209, 1212 (9th Cir.1998); Anderson v. Nidorf, 26 F.3d 100, 102 (9th Cir.1994), so the majority's assertion that "[i]n enacting the Copyright Act, Congress did not preempt the field," is at least incomplete. Maj. Op. at 827. Other courts have devoted considerable discussion to section 301 in resolving the tension between state contract law and federal copyright laws. See Wrench LLC v. Taco Bell Corp., 256 F.3d 446, 453-59 (6th Cir.2001) (holding that the Copyright Act does not preempt a state breach of implied-in-fact contract claim); Selby v. New Line Cinema Corp., 96 F.Supp.2d 1053, 1057-62 (C.D.Cal.2000) (holding that the Copyright Act preempts a state breach of contract claim); Endemol Entm't B.V. v. Twentieth Television Inc., 48 U.S.P.Q.2d 1524, 1526-28, 1998 WL 785300 (C.D.Cal.1998) (same).
This analysis is also beside the point. The majority purports to hold that application of the parol evidence rule is not preempted by the Copyright Act but, for reasons pointed out above, the parol evidence rule has no relevance to our case, so we have no occasion to speak to the issue. See Part I.C supra. However, the parol evidence rule may well be quite relevant in a case where the contract contains an express copyright license and the parol evidence is being offered to undermine or vary the terms of that license. I am not at all sure whether, in such a case, applying California's broad version of the parol evidence rule is consistent with the federal copyright laws, which are designed to ensure certainty and predictability in the transfer of copyright. It is a question I would leave for a case where it is actually presented, rather than answering it in a case like ours, where no certainty is possible in any event because the written contract does not deal with the issue. I can only hope that future courts will not give undue deference to the majority's answer to a question that was neither posed by the parties nor presented by the facts of the case before us.
For my part, I would answer the question actually presented by the parties, which presupposes that the implied license in Effects Associates is a matter of federal
A. While an exclusive copyright license must be in writing, a nonexclusive license "may be granted orally, or may even be implied from conduct." Effects Assocs., 908 F.2d at 558 (citing 3 Melville B. Nimmer & David Nimmer, Nimmer on Copyright § 10.03[A], at 10-36 (1989)). In Effects Associates, we found that a special effects studio granted a nonexclusive implied license when it handed over film footage to the producer who had commissioned it. See Effects Assocs., 908 F.2d at 558-59. The studio had created and delivered special shots knowing they were to be incorporated into a film, and were of little value for anything else. See id. We held that the transaction had to be understood as contemplating a license to use the footage for the purpose for which it was created; otherwise, the producer's payment of a large sum of money would have been senseless. See id. at 559. Two other circuits have applied the teachings of Effects Associates to situations very similar to the one now before us, each involving the completion of building plans by someone other than the original architect. See Johnson v. Jones, 149 F.3d 494 (6th Cir.1998); I.A.E., Inc. v. Shaver, 74 F.3d 768 (7th Cir.1996).
In Shaver, an architect had created schematic design drawings for an air cargo building. See 74 F.3d at 770. The owners of the project hired another firm to finish the architectural work, and Shaver threatened to sue for copyright infringement. See id. at 771. The owners sought a declaratory judgment that they were not infringing, and won summary judgment. As the district court in that case put it, "Shaver granted the Airport a nonexclusive license to use his drawings as the basis for preparing working drawings and completing the project. Shaver's argument that the Airport can use the drawings only as pieces of paper (wallhangings? placemats?) is untenable." Id. at 772. The Seventh Circuit affirmed.
The architect in Johnson was hired to draw up plans for a client's "dream house." 149 F.3d at 497. After these plans had been submitted to the city for approval, the parties reached an impasse, and the client fired the architect. See id. at 498-99. When successor architects used the drawings to complete the project, Johnson successfully sued for copyright infringement, defeating defendants' claim that they had an implied license to use the drawings. See id. at 499-502.
In each of these cases, the architect, having agreed to provide the basic plans for a project, later asserted that the client had no right to make the derivative works necessary to complete that project without the architect's continued involvement. See Johnson, 149 F.3d at 500; Shaver, 74 F.3d at 778. If accepted, such a claim would allow the architect to hold the entire project hostage, forcing the owner either to continue to employ the architect or to forego the value of all work completed so far and start from scratch. Even assuming the client's willingness to incur this cost, going back to the drawing board may not be an option where necessary government approvals have already been obtained and the approving authority is unwilling to reconsider the issue, as happened here.
While Shaver and Johnson reach different results, they are not necessarily inconsistent. As I read the cases, the result in each turned on its facts. In Shaver, the court found no evidence that the implied nonexclusive license normally expected in such a situation had been withheld. See 74 F.3d at 776-77. The certificates of registration on Shaver's drawings stated that they were to be used for the airport facility. See id. at 776. The contract Shaver
In Johnson, the parties had never come to agreement on a final contract; that's why the client fired the architect. See 149 F.3d at 499. Johnson, however, had twice presented the client with a contract which expressly provided that the copyrighted drawings "shall not be used by the owner or others on other projects, for additions to this Project or for completion of this Project by others, unless the architect is adjudged to be in default under this agreement, except by agreement in writing with appropriate compensation to the Architect." Id. at 498. While the client never signed this contract, she asked Johnson to continue working after he had given it to her, and she led him to believe that she eventually would sign it. See id. at 498. The client thus had fair notice that the architect intended to retain control over his designs and any derivative works necessary to complete the project. Under these circumstances, the district court had sufficient evidence from which to find that Johnson had never granted an implied license for the client to use the drawings without retaining him on the project.
B. Looking at the relationship between Foad and GenCom, I conclude that this case is cut from the cloth of Shaver, not Johnson. Like Shaver, Foad drafted letter contracts that define a specific scope of work and mention no expectation of a continued role in the project. On each occasion, Foad agreed to generate a particular set of documents in exchange for a lump sum payment. In August 1995, Foad contracted to prepare "a preliminary site grading plan," for which it was paid $11,500. The February 1996 contract is more elaborate, and states that the work is to consist of "the preparation of final engineering drawings (Grading, Improvements, Final Map, Dimension Plot Plan, Site Plan) together with necessary field survey for the proposed ... project." In exchange for all this, GenCom paid Foad a lump sum of $175,000. The overall project obviously was not finished, but for all I can tell from this contract, the relationship between GenCom and Foad was.
Nowhere does the contract contain a clause like those Johnson proposed, forbidding any additions to the project or completion of it by others. Foad asserts that the contract does say this, and points to the following paragraphs:
Neither of these provisions speak to copyright. Paragraph 12 is clearly about the ownership of certain original papers, and is silent about what GenCom may or may not do with copies. Paragraph 13 is a disclaimer and indemnification clause. As I have discussed above, this has no bearing on the copyright issues in this case. See pp. 833-34 supra.
The first problem with this, of course, is that copyright law does not authorize the ownership of ideas. See Harper & Row, Publishers, Inc. v. Nation Enters., 471 U.S. 539, 547, 105 S.Ct. 2218, 85 L.Ed.2d 588 (1985). In any case, this legend is reminiscent of Shaver's registration certificates, which said that the copyrighted designs were to be used for the airport facility in question. See Shaver, 74 F.3d at 776. It is difficult to see how an announcement that the plans were "created, evolved, and developed for use on, and in connection with the specified project" can be read to prohibit their use on and in connection with that very project. This sentence would serve no purpose if the one following it were intended to require written permission even for the very uses Foad intended.
Finally, Foad submitted a declaration from an architectural expert who asserted that, under custom and practice in the industry, a plan "may not be used to produce a similar plan, without the permission of the original designer."
Finding there was an implied license does not end the inquiry, however. We must also ask what the scope of this license was, and whether GenCom exceeded it. See Oddo v. Ries, 743 F.2d 630, 634 (9th Cir.1984) (implied license to use articles in a manuscript did not include license to use them in a book). Here, Foad's own legend announces that the plans were created "for use on, and in connection with the specified project." The project was to build a shopping center on the site depicted in Foad's plan, and the derivative works created by defendants were used solely in furtherance of that purpose.
It is true that the details of this project have evolved since Foad's contribution to it. Any project, however, will undergo modifications along the way — whether because of site conditions that are discovered during construction, because the city planners make unanticipated demands, or because the economics of the situation change. To regard each such modification as resulting in a new project for purposes of the license would be to render the implied license useless, once again giving the plan designer, rather than the owner, total control over the development.
In making those derivative works necessary to complete the shopping center, defendants did not exceed the scope of their license to use Foad's plan in connection with the project for which it was created.
The dissent analogizes to indemnity provisions in car rental agreements, claiming they forbid rather than allow the described conduct. The analogy is not apt — car rental agreements, unlike the agreement here, expressly forbid the conduct for which indemnity is required. Here the implication is the opposite.