Bagdadi v. Jose Nazar, 84 F.3d 1194 (9th Cir. 1996)

TROTT, Circuit Judge:

OVERVIEW

Appellant Henri Bagdadi (Bagdadi) appeals the district court’s grant of summary judgment in favor of Defendants Jose Nazar (Nazar)1 and Linguex2 in his action for copyright infringement. The district court granted Nazar’s motion for summary judgment and sua sponte granted summary judgment for Linguex. The court concluded that Defendants were entitled to an absolute defense as “innocent infringers” pursuant to section 406(a) of the Copyright Act of 1976. We affirm summary judgment as to Defendant Nazar and reverse the sua sponte grant of summary judgment as to Defendant Lin-guex.

FACTS

In 1988, Bagdadi contracted with Linguex to produce a series of language instruction videos. Linguex was opening language instruction schools and wanted Bagdadi to make an audio-visual program for use by instructors. The project included the video “English I,” which is the subject of this dispute. On the “English I” video, Bagdadi placed the Linguex Company logo and a notice reading “Copyright 1984 by Linguex International Limited, All Rights Reserved.” He also included graphics crediting himself as the writer, director, and producer of the video. Neither Bagdadi nor Linguex registered a copyright for the video when it was created.

Bagdadi and Linguex agree that at the time they contracted, they intended that Lin-guex would use the video for classroom use only. The video was formatted for a classroom setting, requiring a teacher. After the video was completed, Linguex sent Bagdadi a copyright release form, but Bagdadi objected to it and sent it back with changes. The copyright matter was never resolved, and no copyright transfer has surfaced.

In the fall of 1988, Linguex sold approximately 400 copies of the “English I” video to a different language instruction school, the Lexicon School, for inclusion in a 12-cassette series known as “Ingles Sin Barreras.” In October 1988, Bagdadi coincidentally visited the Lexicon School. The school was operated by Defendant Jose Nazar, and Bagdadi was considering buying the school. While in the lobby of the school, Bagdadi saw a video monitor playing “English I,” and he told Nazar that he had made the video. Bagdadi claims that no one at Lexicon School told him that “English I” was being offered for sale, and that he did not see any ads or displays indicating that it was for sale. Nazar never asked Bagdadi any questions about the rights to the video. In a letter following his meeting with Nazar, Bagdadi commented on the display of the video, but he did not protest its use. Nazar states that the video was for sale, but Bagdadi claims that he thought the video was being used for classroom use and he did not recognize it as part of a sales display.

In January 1989, Linguex entered into a licensing agreement with Nazar to authorize the reproduction and sale of the “English I” video. In July 1993, Bagdadi saw a television infomercial on “Ingles Sin Barreras” and recognized a clip from “English I.” Bagdadi first notified Nazar of his objection to their use of the video on October 27, 1993. On December 22,1993, Bagdadi obtained a copyright registration for “English I.”

On January 18, 1994, Bagdadi filed this action. Nazar moved for summary judgment, claiming to be an “innocent infringer,” as the term is used in section 406(a) of the Copyright Act. Defendants American Top English, Inc. and National Education Systems joined in Nazar’s motion. The district court granted summary judgment in favor of those Defendants, and then granted summary judgment sua sponte to Defendant Lin-guex.

STANDARD OF REVIEW

A grant of summary judgment is reviewed de novo. Warren v. City of Carlsbad, 58 F.3d 439, 441 (9th Cir.1995), cert. denied, — U.S. -, 116 S.Ct. 1261, 134 L.Ed.2d 209 (1996). The appellate court must determine, viewing the evidence in the light most favorable to the nonmoving party, whether genuine issues of material fact exist and whether the district court correctly applied the relevant substantive law. Id. at 441.

DISCUSSION

This action is governed by the Copyright Act of 1976 because the work in question was created after January 1, 1978, and it involves “an original work[ ] of authorship fixed in [a] tangible medium of expression ... from which [it] can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device.” 17 U.S.C. § 102(a); see 17 U.S.C. § 301(a)(ex-clusive rights within general scope of copyright governed exclusively by this title). Copyright “vests initially in the author or authors of the work.” 17 U.S.C. § 201(a).

For purposes of the motion for summary judgment, this court must assume, as the district court did, that Bagdadi “owned” the copyright and that he did not transfer ownership of the copyright to Linguex. Bagdadi claims that his exclusive license to Linguex granted only the right to use the video for classroom use. It is important to note that the various rights3 included in a copyright are divisible and that “any of the exclusive rights comprised in a copyright ... may be transferred ... and owned separately.” 17 U.S.C. § 201(d)(2). An exclusive licensee owns separately only the “exclusive rights comprised in the copyright” that are the subject of his license. Melville B. Nimmer & David Nimmer, Nimmer on Copyright § 10.02[C] (1995) [Nimmer on Copyright],

Defendants claim that, even assuming Bag-dadi’s ownership of the copyright, they were

entitled to summary judgment based on an absolute defense of innocent infringement under section 406(a) of the Copyright Act. Section 406(a) states:

17 U.S.C. § 406(a).

Bagdadi argues that the innocent infringer defense is not applicable to Defendant Nazar because: 1) the work was not “publicly distributed”; 2) even if the initial distribution of the work was publicly distributed with Bag-dadi’s authority, the copy Nazar relied on was not distributed with Bagdadi’s authority; and 8) Nazar did not act in good faith. Bag-dadi also contends that the district court erred in granting summary judgment sua sponte for Linguex.

I

“Public Distribution” of English I

The first question before this court is whether Bagdadi “publicly distributed” the “English I” video when he provided it to Linguex for use in classrooms. “Publicly distributed” is not defined in the Copyright Act, but the parties agree that its definition is equated with “publication.” Publication is defined as:

17 U.S.C. § 101.

Bagdadi argues that Bagdadi’s initial distribution of “English I” to Linguex was not a public distribution because it was not offered to a “group of persons for purpose of ... public performance.” Bagdadi reasons that his distribution to Linguex was a distribution to a single entity, not to a group. He contends that there is no authority supporting the proposition that employees of a single corporate distributee constitute a “group” within the meaning of the statute. He argues that the fact that the school is comprised of multiple people does not change the fact that the distribution was to a single entity.

Defendants, on the other hand, argue that the Linguex School constituted a “group of persons.” The district court agreed with Defendants, stating:

No courts have decided the issue of whether a single entity comprised of multiple people constitutes a “group of persons” within the meaning of the statute. However, based on our interpretation of the plain statutory language, we agree with the district court that the Linguex School was a “group of persons.” The Linguex School consisted of multiple teachers and students, and it was open to members of the public who wished to

engage in the study of English. This is very different than a distribution to one person in a closed setting. Therefore, we conclude that the school constituted a “group of persons.”

Bagdadi also argues that showing a. work in a private language school is not a “public performance.” To perform or display a work “publicly” means to “perform or display it at a place open to the public or at any place where a substantial number of persons outside of a normal circle of a family and its social acquaintances is gathered.” 17 U.S.C. § 101. “One of the principal purposes of the definition was to make clear that ... performances in ‘semi-public’ places such as clubs, lodges, factories, summer camps, and schools are ‘public performances’ subject to copyright control.” Columbia Pictures Indus., Inc. v. Professional Real Estate Investors, Inc., 866 F.2d 278, 281 (9th Cir.1989); The Linguex School was open to the public. The “English I” video was intended to be performed for students in a classroom setting. Thus, the video was distributed for the purpose of public performance.

Accordingly, we conclude that the copies of “English I” initially distributed by Bagdadi to Linguex were “publicly distributed” within the meaning of the Copyright Act.

II

Application of Innocent Infringer Defense to Nazar

Bagdadi argues that, even if this court finds that the initial sale of “English I” to Linguex was a public distribution, the § 406(a) defense does not apply to Nazar because: 1) the copy of “English I” relied on by Nazar was not an authorized copy; and 2) Nazar did not act in good faith.

Section 406(a) states in relevant part that:

17 U.S.C. § 406(a). Bagdadi contends that the innocent infringer defense would not apply to Nazar because the copy on which Nazar relied, which came from Linguex, was not an “authorized copy.” Bagdadi reasons that he transferred to Linguex only the right to use the video in its classrooms, not to further sell the video to Nazar. As a result of Nazar’s reliance on the erroneous copyright in an un authorized copy of “English I,” Bagdadi asserts .that the § 406(a) defense does not apply.

This argument misses the mark.4 Bagda-di’s interpretation would require that in order for the § 406(a) defense to apply, the purported transfer or license from the person named in the copyright (Linguex) to the person claiming innocent infringement (Na-zar) would have to be authorized by the true copyright owner (Bagdadi). Such a rule-would inappropriately shift the focus of the requirement of owner authorization from the initial public distribution, where it belongs, and render irrelevant the innocence of anyone relying in good faith on a misleading notice.

It is Bagdadi’s authorization of the initial public distribution to Linguex that is the authorization required to constitute a copy “publicly distributed by authority of the copyright owner.” A subsequent distribution to another party, such as that found in this case, is precisely the type of situation for which the innocent infringer defense was created. Thus, Bagdadi’s reading of section 406(a) fails because it is inconsistent with the statute’s plain language and irreconcilable with its manifest purpose.

We next address whether the district court correctly concluded that Nazar was entitled to the innocent infringer defense as a matter of law. Bagdadi asserts that the good faith requirement of the innocent in-fringer defense imposed a burden of inquiry on Nazar because the name of the author of “English I” was different than the person named in its copyright notice. See Quinto v. Legal Times of Wash., Inc., 506 F.Supp. 554, 562-63 (D.D.C.1981); Nimmer on Copyright § 7.14[B][2][b]. Bagdadi argues that, at the very least, issues of fact remain regarding the reasonableness and good faith of Nazar’s reliance on the erroneous copyright notice.

In Quinto, the Legal Times of Washington (Legal Times) had reprinted an article from the Harvard Law Record that was written by Quinto. More than nine months before reprinting the Quinto article, a previous editor of the Harvard Law Record had given the Legal Times oral permission to reprint materials. When Quinto’s article was published, the Harvard Law Record’s masthead had a general copyright notice. Quinto’s article did not have an individual copyright, but it stated his name as the author.

When Quinto sued for copyright infringement, the Legal Times claimed to be an “innocent infringer.” In ruling against the Legal Times ’ innocence, the court observed:

506 F.Supp. at 563. The court concluded as a matter of law that the Legal Times had breached its duty of inquiry and had not acted in good faith. The court in Quinto acknowledged that “good faith” is generally a question of fact, but decided that the facts weighed so heavily in Quinto’s favor, and against the Legal Times ’ good faith or innocent infringement, that Quinto was entitled to summary judgment.

Bagdadi contends that the “English I” video presented a similarly ambiguous copyright because the copyright notice was in Lin-guex’s name, but the credits listed Bagdadi as writer, producer, and director. Bagdadi argues that, based on Quinto, Nazar had a duty to inquire about the copyright’s ownership in order to claim he was misled and acted in good faith.

Quinto, however, depends heavily on its facts and is distinguishable. Quinto involved a copyright notice on a newspaper, which compiled a collection of works by different authors. The nature of such a joint collection communicates the possibility, or even the likelihood, that copyright ownership of the separate works may vary. The masthead copyright notice protects the collection of articles from violation by outsiders, but does not indicate the copyright ownership rights between the authors and the newspaper.

Here, in contrast, the work at issue was a single instruction video with one copyright notice and one author. The copyright notice clearly identified Linguex as the owner, stating “Copyright 1984 by Linguex International Limited, All Rights Reserved.” The notice could not have been more unambiguous, regardless of its accuracy. Therefore, an outside party reasonably could have been misled to believe that Linguex did in fact own the copyright and all of the rights thereunder.

We axe not willing to extend Quinto to impose a duty of inquiry anytime the copyright notice is in the name of someone different than the named author in order for an infringer to claim good faith reliance on the copyright. Here, although the copyright owner and the author were different, copyright ownership was not unclear as it was in Quinto. Instead, the copyright notice was specific and unambiguous, stating that Lin-guex reserved all of the rights under the copyright. Thus, Nazar had no reason to believe that Bagdadi, as the author, had licensed only the right to perform the work in the Linguex School and had reserved to himself the right to sell the work. Therefore, Nazar acted reasonably when he was misled by the unambiguous copyright notice and when he contracted with Linguex to sell the “English I” video.

As such, the facts of this case do not raise a genuine issue of material fact as to Nazar’s good faith. Nazar relied on the unambiguous copyright notice, and Bagdadi has not brought forward sufficient evidence to present a question of fact as to the reasonableness or good faith of that reliance. Therefore, we affirm the district court’s grant of summary judgment in Nazar’s favor based on the innocent infringer defense.5

Ill

Sua Sponte Dismissal of Linguex

Linguex did not join in Nazar’s motion for summary judgment. However, in granting summary judgment for the other defendants, the district court sua sponte granted summary judgment to Linguex. The court stated, without explanation, that:

We disagree and .find that the district court erred in granting sua sponte summary judgment for Linguex.

Defendants Nazar and Linguex were not similarly situated. Linguex directly contracted with Bagdadi for the “English I” video, Nazar did not. Bagdadi alleges different infringements by separate parties: 1) Linguex’s infringement when it sold copies of the “English I” video to Nazar and, later, when Linguex collected royalties based on Nazar’s sales; and 2) Nazar’s infringement when it sold copies of “English I” to the general public and showed portions of it in infomercials. These were distinct infringements, and the parties relationships with Bagdadi were very different.

As a direct party to the licensing agreement with Bagdadi, Linguex was in a much better position than Nazar to know the nature of the rights that had been transferred and to know whether it had the right to sell the video to Nazar. For purposes of the motion for summary judgment, this court has assumed that Bagdadi is the owner of the copyright, that Bagdadi’s agreement with Linguex was a limited license to utilize the work in a classroom context only, and that Linguex had no authority to sell copies of the work. Bagdadi pointed out that Linguex sent Bagdadi a copyright release form, to which Bagdadi objected and which he sent back with changes. The copyright matter apparently was never resolved, and no copyright transfer formally took place. Thus, based on these facts, it appears that Linguex had some knowledge that it was not the owner of all of the divisible rights under the copyright.

In conclusion, we hold that the district court erred in finding the Defendants “similarly situated” for purposes of the innocent

infringer defense and in sua sponte granting summary judgment to Linguex. Material issues of fact remain about Bagdadi’s and Lin-guex’s rights under their initial agreement, and about whether Linguex acted in good faith reliance on the copyright notice. Therefore, we remand to the district court for further proceedings on Bagdadi’s asserted claims of copyright infringement against Linguex.6

Affirmed in part; reversed in part.

The parties shall bear their own costs of this appeal.