In my last two blogs I discussed contractual copyright warranties and their impact on everything from posting photos on Facebook to a singer/songwriter’s contract with their label and publisher. Contracts, however, are not the only place to find such dangerous warranty language regarding copyrights.
Article 2, § 312 of the Uniform Commercial Code (UCC), entitled “Warranty of Title and Against Infringement; Buyer’s Obligation Against Infringement”, creates a statutory warranty that “the title conveyed [in copyrighted works] shall be good, and its transfer rightful; and the [copyright] shall be delivered free from any security interest or other lien or encumbrance of which the buyer at the time of contracting has no knowledge.” The legislature of every state has passed a version of this provision. In Tennessee it can be found at T.C.A. § 47-2-312.
My first inclination upon reading this statute was to think that it was preempted by the Federal Copyright Act. But, upon further research I found several cases that state that neither the copyright act nor any other of the federal intellectual property laws preempts such application of state law to the grant of a copyright. See Pure Country Weavers, Inc. v. Bristar, Inc., 410 F.Supp.2d 439 (W.D.N.C.2006). Therefore, even if you are successful in eliminating such contractual language from an agreement, you may still face a state claim for breach of warranty.
Since all such exclusive grants of copyright must be in writing, the way to protect yourself or your clients from such a claim of breach of warranty based on § 312, is to include language in the written instrument that excludes such warranties. Article 2, §312(2) of the UCC allows for such warranties to be “excluded or modified only by specific language or by circumstances which give the buyer reason to know that the person selling does not claim title in himself or that he is purporting to sell only such right or title as he or a third person may have.”
How does the UCC govern intellectual property which are not goods?
ReplyDeleteAnonymous: You are correct that Article 2 of UCC does not apply to intellectual property because Article 2 applies only to the sale of tangible goods. Section 312 of Article 2 is a warranty that the tangible goods that are sold do not contain infringements of intellectual property. This is a nuanced distinction.
DeleteFor example, if I sold you a book, the book contains an intangible copyright and yet is a tangible good in itself. By selling you the book itself, I would not be selling you the copyright. I would simply be selling you the tangible form that the copyright is taking -- the book, which is a good under Article 2 of the UCC. This distinction between the intangible intellectual property and the tangible good is what causes much confusion among the general public when dealing with intellectual property.
The warranty in §312 simply is a warranty that the tangible good does not come with an infringement claim regarding intellectual property. As the court in the Pure Country Weavers v. Bristar, Inc. case that I cite in the post states: "Subsection (1) makes provision for a buyer's basic needs in respect to a title which he in good faith expects to acquire by his purchase, namely, that he receive a good, clean title transferred to him also in a rightful manner so that he will not be exposed to a lawsuit in order to protect it." This warranty simply states that if you are creating or selling a tangible good that has an intellectual property component, upon sale of that good you are subject to the statutory warranty of Article 2, §312. In other words, the sale of the tangible good should come with a clean title that will not expose the buyer to a lawsuit for some infringement of an intangible right.