Fourth Circuit Holds That Clicks May Transfer Copyright: Metropolitan Regional Information Systems, Inc., v. American Home Realty Network, Inc.

On July 19th, 2013, the Fourth Circuit held for the first time that copyright interests can be transferred electronically under Section 204 (a) of the Copyright Act. The Fourth Circuit’s decision adds to a growing body of law suggesting that an electronic “click” or “tap” can constitute a “signed writing” for purposes of transferring copyright interests. In an important ruling for the photo industry, the court also held that registrants of collective work databases are eligible for copyright protection with respect to the individual works contained within such database.

BACKGROUND
Metropolitan Regional Information Systems, Inc. (“MRIS”) operates an online multiple listings service (“MLS”), which aggregates real estate property listings and associated metadata, including photos of each property, for use by real estate professionals. MRIS markets its services to real estate brokers and agents via a subscription model. In order to upload listings to MRIS’s database, subscribers must assent to the MRIS’s Terms of Use Agreement (the “TOU”). The TOU reads in part as follows:
All images submitted to the MRIS Service become the exclusive property of [MRIS]. By submitting an image, you 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 infringements.
In order to agree to the TOA, subscribers must click a button (although the court’s record is unclear as to “the precise manner in which the TOU appears to subscribers”). In exchange for their assent, subscribers are granted access to all the real estate listings in the MRIS database as well as a non-exclusive license to display those listings on their own websites. Each quarter, MRIS registers its newly updated database with the Copyright Office, seeking to protect the “collection and compilation” of the real estate listings in the MRIS Database, as well as the expressive contributions created by or acquired by MRIS, including the subscriber’s uploaded photographs.
American Home Realty Network Inc. (“AHRN”) is a California real estate broker that owns Neighborcity.com, a national real estate search engine and referral business. Neighborcity.com’s tech platform takes listing data from online database compilers such as MRIS (in addition to other sources including public records and real estate brokers) and makes it directly available to consumers. AHRN expressly disclaims any role in the creation of the data that it compiles and makes available. The terms of use for Neighborcity.com provide that the user understands that “all the data on properties available for sale or rent is maintained… by various…. MLSs” and that AHRN “does not alter or add to this information on the properties in any way.”
In November, 2011 MRIS sent AHRN a cease and desist letter. In response, AHRN suggested that the parties develop a “custom license” formalizing and legitimizing AHRN’s use of the data that MRIS claimed to be proprietary. MRIS rejected AHRN’s solution and filed suit in March 2012 against AHRN and its CEO alleging various claims related to copyright infringement. Several days later, MRIS filed for a preliminary injunction under the Copyright Act. The court granted the preliminary injunction in favor of MRIS while denying AHRN’s motion to dismiss. AHRN appealed.
In response to motions from the parties, the court revised its preliminary injunction order to specify that the court was enjoining only AHRN’s use of MRIS’s photographs, not the compilation itself or any accompanying “textual elements.” The court also required that MRIS post security.
ANALYSIS
REGISTRATION OF COLLECTIVE WORKS
The Fourth Circuit first considered whether MRIS had failed to register its interest in the individual photographs with the Copyright Office prior to filing suit for copyright infringement, as required by the Copyright Act. AHRN argued that MRIS’s “failure to identify names of creators and titles of individual works as required by 17 U.S.C. sections 209(2) and (6) limits” limited MRIS registration to its database itself and precluded copyright protection in the “individual elements in the database.”
The Court disagreed, supporting MRIS’s position that no specific statutory requirement compels registrants of automated databases to list the names and authors of component works in order to effectively register copyright ownership in those component works. Examining Section 409 of the Copyright Act as applied to a collective work whose author has also acquired the copyrights in individual component works, the court called the text of Section 409 “ambiguous at best.” Turning to the Register of Copyright’s authority under Section 408(c)(1), the court stated that the Register has issued regulations allowing, in some instances, a single registration for certain categories of collective works, including automated databases like that maintained by MRIS. This allows authors of automated databases like MRIS to file a single application covering up to three months’ worth of updates and revisions, as long as the revisions are (1) owned by the same claimant (i.e. MRIS); (2) have the same general title; (3) have a similar general content, including their subject; and (4) are similar in their organization. Each registration must also comply with applicable notice, publication and deposit formalities.
Nothing in the regulations explicitly require MRIS to list the name and author or every component photograph it wishes to register as part of an automated database registration in order to seek protection for each of the component parts. The regulations seek to make the registration process more efficient for those registering hundreds or thousands of component parts like photographs. Indeed, the court suggested that requiring a list of each author would only serve as an impediment to registration. As MRIS did, in fact, own the copyrights of the individual components because of the express “click-through” transfer made by subscribers, the court held that MRSI complied with the registration process and had the right to bring an infringement action.
ELECTRONIC ASSIGNMENT OF COPYRIGHT
Having determined that MRIS had satisfied its pre-suit registration requirement, the court addressed AHRN’s challenge to the merits of MRIS’s copyright infringement claim. To establish copyright infringement, a claimant must demonstrate: (1) ownership of a valid copyright; and (2) copying of constituent elements of the work that are original. Feist. Since AHRN did not dispute the originality of the elements at issue, the court examined solely the first factor.
AHRN argued that a subscriber’s electronic agreement to MRIS’s TOU does not operate as an assignement of rights under Section 204 of the copyright act (Note: we’ve discussed this issue previously, including with respect to the Padmapper case). MRIS responded that an electronic signature may satisfy Section 204’s writing and signature requirements, particularly in the context of the E-Sign Act. The court agreed with MRIS.
In conducting its analysis of the “click to convey” issue ,the court first noted that Section 204’s signed writing requirement is intended to protect copyright owners from persons mistakenly or fraudulently claiming oral licenses or transfers. It also helps bring predictability and “certainty of ownership” to business transactions involving intellectual property. The court also noted that a qualifying writing need not contain any specific “magic words” but must simply show an agreement to transfer copyright.
The court also observed that the position of the disputing parties is important when analyzing a Section 204 transfer. Decisions including Eden Toys (697 F.2d at 26) and Kindergartners Count (249 F. Supp. 2d 1214) have held that Section 204(a) was “intended to resolve disputes between owners and alleged transferee[s], and was not intended to operate for the benefit of a third-party infringer (e.g. AHRN) when there is no dispute between the owner and transferee. Id. Accordingly, the court noted the “anomaly of allowing AHRN to fabricate for its own benefit a dispute between MRIS and its subscribers over copyright ownership in the photographs.”
While the Copyright Act does not define a “signature,” the court held that the E-Sign Act provides “clear guidance” from Congress, defining a signature as “an electronic sound, symbol, or process, attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record.” 15 U.S.C. Section 7006(5). The E-Sign Act does not “limit, alter or otherwise affect any requirement imposed by a statute, regulation or rule of law… other than a requirement that contracts or other records be written, signed or in nonelectric form.” Because Section 204(a) requires transfers to be “written” and “signed,” the court held that a plain reading of the E-Sign Act indicates that Congress intended it to “limit, alter or otherwise affect” Section 204(a). Although the E-Sign Act provides for several exceptions (e.g. wills and divorce paperwork), the court held that none applied in this case. The court stated that “we decline to read in an invitation to create new exceptions piecemeal.”
Accordingly, the Fourth Circuit held that to invalidate copyright transfer agreements solely because they were made electronically would “thwart the clear congressional intent embodied in the E-Sign Act.” Therefore, it affirmed the district court’s ruling that MRIS is likely to succeed against AHRN in establishing its ownership of copyright interests in the copied photographs.

TAKEAWAY
The Fourth Circuit’s opinion is important because no appeals court had previously ruled on the applicability of the E-Sign Act to electronic copyright transfers. As more transactions become entirely electronic in nature, it is likely that more courts will join the Fourth Circuit in holding that clicks and taps can constitute signed writings in general business as well as specifically in the copyright context. However, as we pointed out in our analysis of the Padmapper case, there are practical hurdles to overcome as users still typically “click through” online agreements without giving them the weight that they may accord to a written contract. Accordingly, it is possible that more specific standards with respect to online signatures may be required to ensure users do not unknowingly transfer copyrights through language buried deep within clickwrap agreements and terms of use.
In addition to affirming that “click assignments” are valid, this decision is also significant for the stock photo industry, which has historically used database registration to acquire copyrights in photographs initially published in print catalogs (and subsequently in online web databases as technology advanced). Stock photo companies relied on the Copyright Office’s instructions for automated database in order to register individual works as well as collections, permitting the registration of large collections of photos that would otherwise be financially prohibitive to register separately. The Fourth Circuit’s decision here is reassuring to stock photo owners, as it is in direct conflict with holdings in other cases, including Meunch Photography, Inc. Houghton Mifflin Harcourt Publ’g Co. in the Southern District of New York. As it is difficult for photo libraries to register multiple works by multiple creators without acquiring rights and subsequently registering them under a database like process, the stock photo industry is hoping that the Fourth Circuit’s decision is the first of many similar holdings.