If Stephens Media wishes to assert claims against Democratic Underground, it may do so separately.
There it is, in black and white from Judge Roger Hunt in the District of Nevada. The DU is not out of hot water, and the actual question of copyright infringement is far from over, but the Judge decides to hit a reset button instead of advance the case toward the merits. Focusing on these procedural formalities, rather than cutting to the heart of the real issues (i.e. should users pay to license use of Stephens Media’s content, and on what terms) is one of the many reasons why litigation is a such counter-productive forum for IP licensing. Why did he do this?
As I mentioned before, assignment agreements transferring copyright ownership to Righthaven include an exclusive license for Stephens Media to continue to use and exploit the work. While I looked at that fact, and thought, quite logically, that if Righthaven had not obtained ownership of the copyright, there would have been no need to convey an exclusive license, the judge saw it differently. He interpreted the exclusive license as giving all substantial rights back to Stephens Media, leaving the actual copyright owner without standing to file suit. Normally, battles over “standing” go the other way, where a licensee tries to enforce an IP right, and a court saying the IP owner needs to be joined.
Needless to say, I disagree with the outcome here. Intellectual property is meant to be freely alienable and divisible. In the patent context, rights are constantly being divided and subdivided, allowing for multiple parties to benefit from a single source of rights. Further, the reason for the standing requirement is to ensure the party bringing the lawsuit has the power to license the defendant, which was clearly the case here.
For Righthaven’s part, while they could appeal this decision, the smarter play might be to develop a new set of agreements and re-file their cases, and I have some thoughts on how to do that below. Even though I think the judge got it wrong, as a practical matter reversing it could take months, or even years … and time is money. Plus, as Judge Hunt noted, Stephens Media is free to re-file its lawsuit, so really there’s no reason to wait.
Personally, I think it would have been wiser for Stephens Media to file these cases itself, or better yet, create an IP holding company to which it would transfer all of its copyrights. The holding company would generate the veil of protection that Righthaven was supposed to provide, and Righthaven could have still managed the enforcement and litigation processes for its 50% fee. As it turns out, the Righthaven veil wasn’t too useful in the long run since DU’s third-party claim against Stephens is allowed to move forward.
There’s no doubt that yesterday was a bad day for Righthaven and Stephens Media. In addition to this news, the companies, along with co-creator and Dickinson Wright Partner Steve Gibson, were sued in North Carolina for “barratry” and unfair trade practices, among other things. Righthaven is new, different and aggressive, so it is naturally feared by its opponents. As a wise fictional character once said, fear leads to anger, anger leads to hate… Unfortunately, all of this focus on the sideshow has prevented any real substantive advancement on the real issues, which include Stephens Media’s rights to control use of its content. As a purely legal issue, the appeal from Judge Larry Hicks’ “fair use” decision could go a long way toward clarifying how to apply an affirmative defense during the pre-trial stage, and represents probably the single, most important watershed event in determining whether an ex post copyright licensing business model is viable.