Copyright not lost in the contractual sauce

Originally posted 2007-07-26 21:00:00. Republished by Blog Post Promoter

Forum selection clauses are taking a beating these days. Now comes the Second Circuit to answer a question that comes up a lot, at least in theory: When you have claims arising a situation involving both a contract and a copyright — and the copyright is the subject matter of the contract — does a forum selection clause govern? Or does the copyright claim stand on its own?

Answer: The copyright, cheese-like, stands alone under the rule of Phillips v. Audio Active Limited, just decided. Stacia Lay explains (emphasis added):

The Second Circuit readily concluded, albeit with extensive discussion, that the forum selection clause was mandatory and that Phillips’ breach of contract claim fell squarely within the clause. The same was not true, however, for Phillips’ copyright and related state law claims.

The question facing the Second Circuit was whether these claims “arise out of” the recording contract. The Second Circuit was not persuaded by Phillips’ argument that because his claims arise under the Copyright Act, they could not also arise out of the contract, stating that it must examine the substance of the claims “shorn of their labels.” Ultimately, the Second Circuit concluded that because Phillips’ rights, which were predicated on ownership of the copyrights to the additional tracks released by the defendants without his permission, did not originate from the recording contract, his copyright (and related state law) claims did not “arise out of” the contract. Rather, Phillips’ claim of ownership of the copyrights was based on his authorship of the works. Although it did not discount the likely possibility that the recording contract would be raised in connection with Phillips’ copyright claims, the Second Circuit found that because Phillips denied that the contract had any relevance to his copyright claims, the contract “is only relevant as a defense” in the suit and therefore could not say “that the origins of the proceedings were in the recording contract.”

Query: Could you still contract around this, and have the contract — or even a separate contract — explicitly state that the author covenants to bring “all claims, including any claim based on copyright in the work governed by this contract,” in Forum X? Why not?

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Author:Ron Coleman

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