February 23, 2007
Copyright owner snipes at bankruptcy sale
A recent District Court decision, Bryant v. Gordon, 2007 WL 461326 (N.D. Ill. Feb. 8, 2007), demonstrates the need for specific and detailed language in 363 sale motions. The debtor, Mach 1, Inc., sold "military motivational merchandise." It had obtained from the plaintiff, Bryant, the right to use a photo of Army Ranger snipers in its products. During the bankruptcy, it sold all of its assets to the defendant, Mach 1, LLC, through a 363 sale. The assets sold included its inventory of posters with the Bryant photo.
After the sale, Bryant sued Mach 1, LLC for copyright infringement. Among other things, Bryant claimed that Mach 1, LLC was infringing his copyright in the photo by (a) continuing to sell the existing stock of posters containing the photo and (b) using the photo on Mach 1, LLC's website.
The court looked to the 363 sale process to determine whether Mach 1, LLC was violating Bryant's copyrights. The sale order included all inventory. The bill of sale also included all intangible property. (Whether the sale agreement included intangible property is unclear.) The sale order did, however, provide that the sale was "free and clear of liens, encumbrances and claims of interest, including...claims of photographers and/or artists whose originals were reproduced in connection with the image based portion of the debtor's inventory..." The sale motion had been served on Bryant.
The Court held the buyer could resell the posters with the picture on it. In the summary judgment pleadings, Bryant had conceded that Mach 1, LLC had properly acquired the inventory and the right to resell it. The detailed language in the sale order stood the buyer in good stead.
The Court was unsure about the buyer's continued right to use the image on the website. The Court made a distinction between whether the buyer was using the image just in connection with the sale of the particular inventory of posters, or generally.
Bryant had conceded that Mach 1, LLC acquired a right of display under the Copyright Act's first sale doctrine. The Court stated that if the image was used on the website solely for the purpose of selling the poster (so people shopping on-line could see what the poster looked like), that was consistent with the buyer's rights under the first sale doctrine and, thus, okay. However, the sale order did not contain language sufficient to put Bryant on notice that the buyer would obtain the right to use the image on its website generally. Referencing ITOFCA, Inc. v. Megatrans Logistics, Inc., 322 F.3d 928 (7th Cir. 2003), the Court held that the 363 sale order was insufficient to transfer to Mach 1, LLC the right to use the image on its website generally (it was not entirely clear from the decision whether the debtor had this right in the first place.)
Bryant demonstrates that value of specific attention to detail in 363 sale motions as well as the value of providing notice of the sale to all interested parties.
After the sale, Bryant sued Mach 1, LLC for copyright infringement. Among other things, Bryant claimed that Mach 1, LLC was infringing his copyright in the photo by (a) continuing to sell the existing stock of posters containing the photo and (b) using the photo on Mach 1, LLC's website.
The court looked to the 363 sale process to determine whether Mach 1, LLC was violating Bryant's copyrights. The sale order included all inventory. The bill of sale also included all intangible property. (Whether the sale agreement included intangible property is unclear.) The sale order did, however, provide that the sale was "free and clear of liens, encumbrances and claims of interest, including...claims of photographers and/or artists whose originals were reproduced in connection with the image based portion of the debtor's inventory..." The sale motion had been served on Bryant.
The Court held the buyer could resell the posters with the picture on it. In the summary judgment pleadings, Bryant had conceded that Mach 1, LLC had properly acquired the inventory and the right to resell it. The detailed language in the sale order stood the buyer in good stead.
The Court was unsure about the buyer's continued right to use the image on the website. The Court made a distinction between whether the buyer was using the image just in connection with the sale of the particular inventory of posters, or generally.
Bryant had conceded that Mach 1, LLC acquired a right of display under the Copyright Act's first sale doctrine. The Court stated that if the image was used on the website solely for the purpose of selling the poster (so people shopping on-line could see what the poster looked like), that was consistent with the buyer's rights under the first sale doctrine and, thus, okay. However, the sale order did not contain language sufficient to put Bryant on notice that the buyer would obtain the right to use the image on its website generally. Referencing ITOFCA, Inc. v. Megatrans Logistics, Inc., 322 F.3d 928 (7th Cir. 2003), the Court held that the 363 sale order was insufficient to transfer to Mach 1, LLC the right to use the image on its website generally (it was not entirely clear from the decision whether the debtor had this right in the first place.)
Bryant demonstrates that value of specific attention to detail in 363 sale motions as well as the value of providing notice of the sale to all interested parties.
Labels: 363 sales, copyright, infringement, itofca, snipers
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