IP Law Daily Implied license dooms copyright claim against CareerBuilder
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Thursday, May 10, 2018

Implied license dooms copyright claim against CareerBuilder

By Peter Reap, J.D., LL.M.

Copyright infringement and breach of contract claims brought by the graphic design firm LimeCoral against employment website operator CareerBuilder were properly dismissed by the federal district court in Chicago, the U.S. Court of Appeals for the Seventh Circuit has decided. CareerBuilder had been granted an implied license to use the designs that LimeCoral had created to be used in postings on the website, and that license was neither limited nor revocable, dooming the claims (LimeCoral, Ltd. v. CareerBuilder, LLC, May 8, 2018, Rovner, I.).

CareerBuilder operates the online employment website www.careerbuilder.com, where employers list job openings and job seekers can post their resumes. One option that CareerBuilder offers is a "premium job branding" that incorporates customized HTML and static and animated graphics into a job posting, and it sells job postings for a one-year term. LimeCoral was a small design firm that prepared media files incorporating customized graphic designs for premium job brandings on the CareerBuilder website from 2008 through 2014. Brian Schoenholtz was LimeCoral’s principal.

LimeCoral entered into an independent contractor agreement with CareerBuilder on October 1, 2008, pursuant to which LimeCoral agreed to prepare custom graphic designs on behalf of CareerBuilder’s employer clients and CareerBuilder agreed to pay LimeCoral for those designs pursuant to a schedule of fees. CareerBuilder committed in this agreement to give LimeCoral 50 percent of its orders for online design services. The agreement was for a term of six months. The agreement specified that all graphic designs created for CareerBuilder would constitute the sole and exclusive property of CareerBuilder. The agreement said nothing about LimeCoral’s entitlement to renewal fees when a CareerBuilder client renewed a job posting.

The 2008 agreement expired at the end of six months. Nevertheless, the parties continued doing business with one another, albeit without a written agreement for the next six years, and the relationship between the parties went on largely as before. LimeCoral continued to prepare media files incorporating custom graphic designs (more than 2,000, all told) at the request of CareerBuilder in exchange for a design fee—typically $3,000 for each new design. However, as there was no longer a written agreement transferring ownership of the copyright on the designs to CareerBuilder, LimeCoral retained ownership of the copyright and, as discussed below, implicitly granted CareerBuilder a license to use the designs. The parties disputed whether the license was unconditional and irrevocable, or subject to CareerBuilder’s alleged agreement to pay LimeCoral an annual renewal fee for every design that CareerBuilder continued to use beyond the initial period of one year.

In practice, when an employer renewed a job posting with CareerBuilder, it would pay a $10,000 fee to CareerBuilder. If the employer wanted an entirely new design for its posting, then CareerBuilder would commission LimeCoral or one of its other vendors to prepare the design. Whenever revisions to a LimeCoral design for a renewed job posting were called for, CareerBuilder would pay LimeCoral a flat fee for those modifications (typically $1,500), however large or small the degree of work required.

LimeCoral characterized the revision fee as a practice of CareerBuilder paying it a fee for any renewal, given that it received the same fee even when the revisions involved only an insignificant amount of work. CareerBuilder, on the other hand, insisted that it only paid LimeCoral a fee when revisions were required in connection with a renewal, such that the fees were genuinely tied to the revisions rather than the renewals.

Evidence in the record confirmed CareerBuilder’s understanding of the practice, according to the Seventh Circuit. In his deposition, Schoenholtz said he "believe[d]" it to be the case both that LimeCoral had never sought a renewal fee when revisions to the original design were not called for and that CareerBuilder had never paid it a fee on renewal in the absence of revisions. Additionally, email correspondence between Schoenholtz and CareerBuilder made explicit the connection between fees and revisions to renewed postings.

In 2014, CareerBuilder reduced the volume of its orders for online design work to LimeCoral. At that point, LimeCoral concluded that it was not being sufficiently compensated to warrant continuation of the license CareerBuilder had been granted in its works. In a letter dated July 17, 2014, LimeCoral notified CareerBuilder that it was revoking the latter’s license to continue using any media file prepared by LimeCoral and used beyond the one-year period for which CareerBuilder had paid a design or revision fee. CareerBuilder declined to comply with LimeCoral’s demand that it remove any such media files from its website, prompting LimeCoral to file suit. LimeCoral charged CareerBuilder with breach of contract, based on its alleged failure to pay renewal fees to LimeCoral, and infringement of copyright on the hundreds of media files that CareerBuilder continued to use for more than one year following their creation (or renewal) and after LimeCoral had declared that it was revoking the license on such files.

The district court reasoned that, upon the expiration of the parties’ original written contract, CareerBuilder had acquired an implied, non-exclusive license to use LimeCoral’s designs, and that, contrary to LimeCoral’s assertions, there was no subsequent oral agreement that imposed any conditions on that license. The absence of proof that CareerBuilder promised to pay LimeCoral renewal fees, and that the license to use LimeCoral’s media files was conditioned on such a promise, was fatal to both the copyright claim and the contract claim.

On appeal, LimeCoral renewed its contention that CareerBuilder agreed to pay it a fee for the renewal of any job posting and that CareerBuilder’s license to use LimeCoral’s copyrighted work was subject to that agreement.

Although the expiration of the 2008 agreement meant that ownership of the copyrights in the job brandings that LimeCoral created now remained with LimeCoral, there was no dispute that CareerBuilder acquired a non-exclusive implied license to use those brandings, the appellate court noted. LimeCoral created the brandings at the request of CareerBuilder and conveyed them to CareerBuilder with the understanding that CareerBuilder would use them on its website. Absent a limitation imposed on the license at the time these works were delivered to CareerBuilder, the license impliedly granted to CareerBuilder would encompass all of the rights of LimeCoral as the copyright holder. In view of CareerBuilder’s payment for the job brandings, its license would also be irrevocable, the Seventh Circuit held.

LimeCoral argued that the license acquired by CareerBuilder was conditioned upon CareerBuilder’s agreement to pay LimeCoral a renewal fee for every branding that was renewed beyond the initial one-year term by CareerBuilder’s customer. However, the record indicated that LimeCoral was never paid renewal fees as such, that LimeCoral knew this, and that the license it conveyed to CareerBuilder was never conditioned on the payment of such fees, the court said.

The 2008 agreement, which by its terms expressly superseded any and all oral agreements preceding it, conveyed complete ownership of the copyright in each job branding to CareerBuilder, with no attendant obligation by CareerBuilder to pay LimeCoral a renewal fee. Thus, LimeCoral’s contention that there was an agreement at the inception of the parties’ relationship to pay renewal fees was without merit, the Seventh Circuit concluded.

There was no evidence that would permit the factfinder to conclude that there was an agreement between LimeCoral and CareerBuilder that LimeCoral would be paid a fee for each renewal, and that the implied license LimeCoral granted to CareerBuilder to use the job brandings was subject to that agreement. The license was, consequently, unconditional and irrevocable, and encompassed the rights to use and distribute the job brandings as CareerBuilder and its customers wished. This doomed LimeCoral’s copyright claim as well as its claim for breach of contract.

Finally, LimeCoral argued that the district court improperly denied as moot its cross-motion for partial summary judgment on the matter of its ownership of the copyright on the job brandings. The district court did not err in ruling the motion moot, the appellate court determined. The copyright claim failed for the reasons discussed above: CareerBuilder had an implied license to use the works that was neither limited nor revocable. And because the claim failed on those grounds, there was no need to grant LimeCoral partial summary judgment on the limited (and uncontroverted) matter of who owned the copyright.

This case is No. 17-1733.

Attorneys: Courtland Collinson Merrill, (Anthony Ostlund Baer & Louwagie P.A.) for LimeCoral, Ltd. Kevin C. May (Neal, Gerber & Eisenberg LLP) for CareerBuilder, LLC.

Companies: LimeCoral, Ltd.; CareerBuilder, LLC

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