It is a common practice for Web site providers who accept submissions of user-generated content to include a license provision in their “Terms of Use” to obtain rights to use the content. Rather than relying on the uncertain scope of an implied license, the provider can clarify, and hopefully avoid disputes over, the scope of its right to use the user’s work. A typical copyright license conveys to the provider a broad, non-exclusive license to reproduce, edit, modify and otherwise use the user-generated content, while implicitly (and in some cases, explicitly) providing that the ownership of the copyright in such content is retained by the user.  The use of a “clickwrap” agreement to convey a non-exclusive license is generally well-accepted and non-controversial.

However, under Copyright Act Section 501, a non-exclusive licensee may not bring an action for copyright infringement. See, e.g.,  HyperQuest, Inc. v. N’Site Solutions, Inc., 632 F.3d 377 (7th Cir. Jan. 19, 2011). Accordingly, a Web site provider that seeks to litigate based on an improper use of user-generated content may need more. They may in fact need an exclusive license or an actual transfer of ownership in the underlying copyright.  The question is, can one obtain an exclusive license or assignment of copyright through online terms of use?

Precisely this scenario is presented in a current dispute between a real estate multiple listing service and an online real estate information aggregator over the copying of photographs and listing information. The service provider is asserting claims with respect to user-generated content as a copyright owner, based upon an agreement presented by the provider to its users when they upload photographs to the provider’s database.

Metropolitan Regional Information Systems, Inc. (MRIS), the plaintiff, operates a multiple listing service that serves licensed real estate brokers and agents. Brokers and agents who enter into a subscriber agreement with MRIS can upload their listing information, including photographs of properties, to the MRIS site, and then display those and other listings on their own Web sites.

The defendant, American Home Realty, Inc. (AHR), is an online service provider that aggregates real property listing information on its site. According to AHR, the information that it presents comes from a variety of public domain and other sources, including the MRIS online database.

In March 2012, MRIS brought suit against AHR in federal court, asserting that material from its online listings was included on the AHR site without authorization, and, therefore, that AHR infringed MRIS copyright rights in those materials. According to an affidavit submitted in support of its motion for a preliminary injunction, MRIS relies on the following provision in its agreement with its users as the basis for its claim of ownership of the copyright in uploaded photographs:

All images submitted to the MRIS Service become the exclusive property of Metropolitan Regional Information Systems, Inc. (MRIS). By submitting an image, you hereby irrevocably assign (and agree to assign) to MRIS, free and clear of any restrictions or encumbrances, all of your rights, title and interest in and to the image submitted. This assignment includes, without limitation, all worldwide copyrights in and to the image, and the right to sue for past and future infringement.

The court granted a preliminary injunction against AHR in August 2012. Metropolitan Regional Information Systems, Inc. v. American Home Realty Network, Inc., 2012 U.S. Dist. LEXIS 121352 (D. Md. Aug. 24, 2012). In November 2012, the court reiterated its ruling while narrowing the previous scope of the injunction to cover only photographs.

AHR argued before the District Court in August that the MRIS agreement does not comply with Section 204(a) of the Copyright Act, which provides that, except where copyright ownership is transferred by operation of law, the transfer “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.” AHR argued that Section 204(a) has not been satisfied because, among other things, when a user uploads an image to the MRIS database, “no document is signed” and the assignor is not specified. Further, it is not clear whether the purported assignor has any rights to assign, and if so, what the basis is for those rights. See Reply Memorandum of Defendant American Home Realty Network, Inc.’s Rule 12(b) Motion to Dismiss, Metropolitan Regional Information Systems, Inc. v. American Home Realty Network, Inc., No. 12-cv-954(D. Md. filed June 15, 2012), p. 4.

In its August ruling, the district court rejected AHR’s argument, finding that the “MRIS TOU constitutes credible evidence that MRIS’s users intended to assign their copyrights to MRIS through the electronic submissions of photographs, which would satisfy the relevant provisions of” the federal Electronic Signatures in Global and National Commerce Act, 15 U.S.C. §§ 7001 et seq. (“E-SIGN”).

Following the district court’s August ruling granting the preliminary injunction, AHR filed an interlocutory appeal in the Fourth Circuit challenging the order, and that appeal currently is pending in the Fourth Circuit. As part of that challenge, AHR asserts that Copyright Section 204(a) requires “a signed writing on paper for a valid copyright assignment.”  Supplemental Opening Brief of Appellant, Metropolitan Regional Information Systems Inc. v. American Home Realty Network, Inc., No. 12-1202 (4th Cir. Dec. 7, 2012) (emphasis added). The assertion that a signed writing on paper is required is predicated on AHR’s analysis of Copyright Office regulations concerning the recordation of copyright assignments.

AHR further argues that federal E-SIGN does not validate the purportedly defective clickwrap assignments at issue, because the lower court failed to make any factual findings that MRIS’s clickwrap process satisfies E-SIGN’s formal requirements. Specifically, AHR asserts that the district court made no finding that there was any “electronic sound, symbol or process that was “attached to or logically associated with a contract” as required by E-SIGN.

We await the Fourth Circuit’s guidance on this issue.

Why is this an important issue? For many Web site owners, a transfer of copyright ownership is not necessary, as a broad license grant from the user is sufficient to provide the rights needed for business purposes.  However, as illustrated in the MRIS case, business-to-business sites are often engaged in struggles with competitive sites that scrape, spider or otherwise use content (including user-generated content) without permission.  To the extent a business-to-business site uses user-generated content, the assertion of a copyright claim against unauthorized users of that content can be a valuable tool in those struggles, and can be a powerful argument in any legal action that ensures.