RIGHTHAVEN LLC v. Democratic Underground, LLC

Citations: 791 F. Supp. 2d 968; 39 Media L. Rep. (BNA) 1935; 99 U.S.P.Q. 2d (BNA) 1095; 2011 WL 2433815; 2011 U.S. Dist. LEXIS 63133Docket: Case 2:10-cv-01356-RLH-GWF

Court: District Court, D. Nevada; June 14, 2011; Federal District Court

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Righthaven LLC, the plaintiff, initiated a copyright infringement lawsuit against Democratic Underground LLC and David Allen, asserting that a user’s post on Democratic Underground’s website, which included a segment of a Las Vegas Review-Journal article, violated copyright. Righthaven claims it obtained the copyright from Stephens Media, the owner of the article, and subsequently registered it. In response, Democratic Underground filed a counterclaim seeking a declaratory judgment of non-infringement. Righthaven has filed a motion for voluntary dismissal with prejudice, motivated by an unfavorable fair use ruling by a district judge, which is currently under appeal. The court is considering several motions, including those for voluntary dismissal, dismissal or striking of claims, and a motion for summary judgment, along with supplemental briefings that reveal new evidence pertinent to these motions.

Stephens Media has filed a motion to dismiss or strike the counterclaim and joined Righthaven’s motion, while Democratic Underground has moved for summary judgment against Righthaven's claim. Following the briefing of these motions, Stephens Media revealed the Strategic Alliance Agreement (SAA) with Righthaven, dated January 18, 2010, which outlines their relationship and future copyright assignments, including the assignment relevant to this case. After reviewing the SAA, Democratic Underground sought permission to file a supplemental memorandum regarding its implications on the pending motions, which the Court granted, deeming the SAA critical for assessing Righthaven’s standing.

The Court ultimately dismissed Righthaven for lack of standing, rendering both Righthaven's motion and Democratic Underground's motion moot, while also denying Stephens Media's motion. The SAA establishes that Righthaven's rights are limited; it retains only the right to pursue copyright infringement actions and lacks any rights to exploit or receive royalties from the copyrights assigned by Stephens Media. Specifically, Section 7.2 of the SAA clarifies that Stephens Media retains an exclusive license to exploit the assigned copyrights and can prevent Righthaven from initiating lawsuits if such actions could adversely affect its interests. Consequently, the SAA reveals that Righthaven's purported rights to the copyright are significantly constrained, leading to the assertion that it lacks standing in this lawsuit.

Only the legal or beneficial owner of an exclusive right under copyright law has standing to sue for infringement, as established by Section 501(b) of the 1976 Copyright Act and affirmed in Silvers v. Sony Pictures Entertainment, Inc. The Ninth Circuit noted that copyright holders cannot authorize third parties to sue on their behalf. The exclusive rights defined in Section 106 of the Act may be transferred, but the mere assignment of a right to sue is ineffective because it is not included among exclusive rights. To have standing, a party must also receive one of the exclusive rights in the copyright, and any right to sue for past infringement must be explicitly stated in the assignment.

In analyzing the contract between Righthaven and Stephens Media, the assertion that the SAA's provisions do not limit Righthaven's rights is deemed incorrect. The SAA was specifically designed to prevent Righthaven from obtaining any exclusive rights in the copyright. Prior to the Assignment, Stephens Media held all exclusive rights, including the right to sue. The Assignment did not provide Righthaven with any rights beyond the superficial right to sue, which fails to meet the legal standards established in Silvers. Righthaven's interpretation of the SAA as granting it necessary rights for standing is rejected, as the SAA's language clearly intended to restrict Righthaven to only the right to sue and profit from such actions, without granting any other rights. The Court concludes that the SAA is not ambiguous and will not consider Righthaven's argument for a broader interpretation.

Righthaven contends that Section 15.1 of the SAA empowers the Court to amend any void or unenforceable provisions to reflect the parties' intent. However, the Court finds that no provision of the SAA is void or unenforceable; instead, the SAA simply does not provide Righthaven with the exclusive rights necessary for standing under Section 106 of the Act. Consequently, the Court will not amend or reinterpret the SAA to accommodate Righthaven's position.

Righthaven further argues that an amendment executed with Stephens Media on May 9, 2011, retroactively corrects any issues in the original SAA that might impede its standing. However, federal jurisdiction is based on the facts at the time of the complaint's filing, and while amendments to jurisdictional allegations are permissible, altering the underlying facts to create standing is not allowed. Righthaven's attempt to modify the factual basis for standing is impermissible, and the Court will focus on the actual transaction at the time the complaint was filed.

Righthaven also claims that courts commonly permit clarifications or amendments to copyright transfer agreements to reflect the original intent of the parties. While this assertion has some merit, the cited cases are distinguishable as they involved situations where the necessary rights had been transferred prior to the lawsuit, and only the written documentation was lacking. In contrast, Righthaven seeks a substantial rewrite of its agreement with Stephens Media to confer rights it never possessed, which is not permissible. The other cases referenced by Righthaven pertain to different issues and do not support its argument.

In the case of Intimo Inc. v. Briefly Stated, Inc., the district court permitted amendments to an assignment agreement to include the right to sue for pre-assignment copyright violations, acknowledging that the plaintiff retained standing on other claims. The court found that the original oversight in the agreement regarding pre-assignment violations did not reflect the parties' intent to transfer those rights. In contrast, Righthaven's agreement with Stephens Media, the SAA, clearly retained control of the work with Stephens Media, limiting Righthaven to a mere right to sue, which rendered any transfer of rights ineffective under Silvers. 

The cases cited by Righthaven were distinguished as not relevant due to their differing fact patterns. Democratic Underground's position is not a challenge to the validity of the SAA; rather, it asserts that the SAA only transferred a specific right, which is inconsistent with Righthaven's claims. This aligns with the Silvers precedent, which allows defendants to question the sufficiency of rights transferred for standing in copyright claims. 

Righthaven's argument that multiple courts have previously affirmed its standing is criticized as misleading, as it failed to disclose the true nature of its transaction with Stephens Media and the latter's financial interests, which are explicitly outlined in the SAA. The SAA clearly shows that Stephens Media retained exclusive rights, undermining Righthaven's claims of ownership and standing.

Righthaven lacks standing to pursue the action due to its failure to disclose the SAA and the true interests of Stephens Media, which undermines previous orders. Consequently, the Court dismisses Righthaven from the case. Righthaven's request to join Stephens Media as a plaintiff is denied, as it would not resolve the jurisdictional defect; only the owner of an exclusive copyright right can initiate a suit. Stephens Media has already been included as a counter-defendant, and it may file separate claims against Democratic Underground if desired. Both Righthaven's motion for voluntary dismissal and Democratic Underground's motion for summary judgment are rendered moot by Righthaven's dismissal, which also leads to the dismissal of its complaint. The dismissal does not affect Democratic Underground's right to seek attorney fees. The Court will now address Stephens Media's motion to dismiss or strike. It highlights that for any federal court decision, establishing jurisdiction is essential, and the plaintiff bears the burden to prove proper jurisdiction under Rule 12(b)(1) of the Federal Rules of Civil Procedure. Jurisdictional challenges can be either facial, based on the complaint's allegations, or factual, allowing examination beyond the complaint.

In *Safe Air for Everyone v. Meyer*, the Ninth Circuit affirmed that a factual attack under Rule 12(b)(1) can include extrinsic evidence, and dismissal for lack of subject matter jurisdiction occurs when the complaint fails to allege sufficient facts. Under Rule 12(f), courts may strike redundant, immaterial, impertinent, or scandalous material, with immateriality defined as lacking relevance to the case and impertinence as being unresponsive to issues at hand. Courts can act sua sponte to strike such material.

Stephens Media argued there was no justiciable case or controversy with Democratic Underground, based on an assignment of rights to Righthaven, claiming this negated any conflict. The court rejected this argument, noting that Stephens Media had retained certain rights by modifying future assignments in the SAA. Additionally, Stephens Media's assertion that Democratic Underground's counterclaim was moot due to the dismissal of Righthaven's complaint was also dismissed, with the court stating that the counterclaim must be litigated independently.

The court further discussed the requirement for a declaratory judgment, affirming that such claims must stem from definite disputes with real and substantial adverse interests. It noted that Stephens Media had indeed threatened litigation against Democratic Underground, as indicated in the SAA, and that the former CEO had made threats about pursuing legal action through Righthaven. Democratic Underground expressed an intention to re-post allegedly infringing material to maintain its archive, establishing the relevance of the dispute.

New copyright infringement litigation may arise against Democratic Underground if the Court does not rule that the post in question did not infringe copyright. This potential lawsuit constitutes a real and substantial case and controversy warranting a declaratory judgment suit. The Court dismissed Righthaven and its complaint, resulting in the denial of Stephens Media's motion. 

The Court identified Righthaven's failure to disclose Stephens Media as an interested party in its Certificate of Interested Parties, which violates Rule 7.1-1 of the Local Rules of Practice for the District of Nevada. This rule mandates disclosure of all entities with a direct pecuniary interest in the case, which Righthaven ignored, raising concerns about misrepresentation in approximately 200 cases filed in the District. The Court has ordered Righthaven to provide a written explanation within two weeks as to why it should not face sanctions for this misrepresentation.

The Court concluded that Righthaven lacks standing and dismissed its complaint entirely. It denied Righthaven's Motion for Voluntary Dismissal with Prejudice as moot, and similarly denied Stephens Media's Motion to Dismiss or Strike. Additionally, Democratic Underground's Motion for Summary Judgment was denied as moot. The Court indicated uncertainty whether the amended SAA would confer sufficient rights to Righthaven for standing in future cases but did not need to make a determination on that matter for the current motions.