Is 17 USC 205(e) a Trap for the Unwary? Advice to Puiblishers and Administrators

Not long ago I was involved in what should have been a routine lawsuit over a collection of past-due royalties.  At some point during the litigation the other side brought up 17 USC 205(e) as a possible defense.

            For the unaware this little-discussed section of the Copyright Act states:

A non-exclusive license, whether recorded or not, prevails over a conflicting transfer of copyright ownership if the license is evidenced by a written instrument signed by the owner of the rights licensed…and if

(1)        the license was taken before execution of the transfer; or

(2)        the license was taken in good faith before the recordation of the transfer and without notice of it.

            Section (1) is a no-brainer but Section (2) is a potential landmine as it gives a possible defense of innocent infringement in a case where a licensee claims to have acquired rights without notice of the prior assignment (for example from an artist or a songwriter).

            I researched the statute pretty carefully and could find no reported cases dealing with it specifically although there are plenty of cases that explore similar territory and those cases generally come down on the side of the copyright owner (see for example Douglas v. Hustler Magazine, Inc., 769 F.2d 1128 and Symnatec Corp v. CD Micro, LLC, 286 F. Supp. 2d 1265) which states plainly “failure to record an assignment of copyright is not available as a defense to infringement”.

            Nonetheless despite the comfort these cases offer this odd statute does seem to present some kind of defense in those rare cases where a licensee could actually prove that it  had no knowledge of a prior transfer of copyright ownership.  The lesson here for all publishers and administrators should be to always record copyright assignments and related documents as soon as possible after execution.