In order to prevail in a slander of title action, SCO must establish:
(1) there was a publication of a
slanderous statement disparaging claimant's title,
First Sec. Bank of Utah v. Banberry
(2) the statement was false,
(3) the statement was made with malice, and
(4) the statement caused actual or special damages.
780 P.2d 1253, 1256-67 (Utah 1989). SCO's
Complaint fails on two grounds.
First, SCO has not pled sufficient facts demonstrating falsity. Indeed,
the very documents SCO relies upon fail to meet the requirements of
the Copyright Act for a valid transfer of copyright ownership. In
the absence of such a transfer, SCO cannot show that it is the owner of
the copyrights at issue and cannot show Novell's statements to be false.
Second, SCO has not adequetely pled special damages. SCO is required
to plead with specificity its alleged realized or liquidated pecuniary
damages, and instead has pled speculative damages of a general nature.
SCO's alleged damages, as pled, cannot sustain its slander of title
SCO HAS NOT SHOWN A VALID TRANSFER OF COPYRIGHT OWNERSHIP UNDER THE
COPYRIGHT ACT, AND THEREFORE IT HAS NOT PROPERLY PLED THAT NOVELL'S
STATEMENTS ARE FALSE.
SCO's Complaint is premised on the theory that the Asset Purchase
Agreement and Amendment No. 2 transferred ownership of the copyrights
in UNIX and UnixWare to its alleged predecessor, Santa Cruz (Compl. ¶¶
1, 14, 15, 17.) Therefore, SCO claims, Novell's statements that Novell
still owns the copyrights are false.
The Copyright Act, however, imposes very strict requirements on
purported transfers of copyright ownership. Under section 204(a) of the
Act, "[a] transfer of copyright ownership, other than by operation of
the law, is not valid unless an instument of conveyance, or a note or
memorandum of the transfer, is in writing and signed by the owner of
the rights conveyed or such owner's duly authorized agent." 17 U.S.C.
§ 204(a); Radio Television Espanola
S.A. v. New World Entm't, Ltd
., 183 F.3d 922, 926 (9th Cir.
1999). 1 Here, the documents relied upon by SCO do not
constitute such an instrument of conveyance.
Indeed, SCO admits in its own Complaint that it does not own the
copyrights at issue, and that it remains for Novell to transfer them.
(See Compl. p. 10, ¶ 3) (SCO requests the Court issue an injunction
"requiring Novell to assign to SCO any and all copyrights Novell has
registered in UNIX and UnixWare.")
Because the Complaint fails to establish the falsity of Novell's
purportedly slanderous statements, it should be dismissed.
The Asset Purchase Agreement and Amendment No. 2 Are Merely a Promise to
Assign and Therefore Do Not Evidence a Valid Transfer of Copyright
Ownership Under the Copyright Act.
The Asset Purchase Agreement, standing alone, does not constitute a
written instrument of conveyance under the Copyright Act sufficient to
transfer copyright ownership. SCO alleges that Schedule 1.1(a) of the
APA sets forth the assets transferred from Novell to Santa Cruz.
(Compl. ¶ 14.) The operative portion of the agreement, however, is
Section 1.1(a), not Schedule 1.1(a). Section 1.1(a) is merely a promise to transfer, upon closing, all of the assets listed in Schedule 1.1(a), and also states:
Notwithstanding the foregoing, the
Assets so purchased shall not include those assets (the "Excluded
Assets") set forth on Schedule 1.1(b).
(APA Section 1.1(a), attached at Compl. Ex. A.) Schedule 1.1(b) lists
"all copyrights" as being excluded. (APA Schedule 1.1(b) §V.A.,
attached at Compl. Ex. A.) Thus, on it's face, the Asset Purchase
Agreement did not transfer any copyrights to Santa Cruz.
Likewise, APA Amendment No. 2, standing alone, does not constitute a
written instrument of conveyance under the Copyright Act sufficent to
transfer copyright ownership.
Where a document makes no mention of a grant, transfer, or assignment
of copyrights, it is not an instrument of conveyance under the Copyright
Act. Radio TV
, 183 F.3d at 927. In Radio
one of the documents claimed to constitute a section 204(a) instrument
referred to the delivery of certain television episodes but did not
mention a grant of an exclusive license or other assignment. Id.
at 927-28. The court found that this document did not, therefore,
constitute a written instrument of conveyance under section 204(a). Id.
APA Amendment No. 2 similarly does not purport to transfer anything in
and of itself; it merely amends a section of the "Excluded Assets"
section of the Asset Purchase Agreement.
Finally, read together, the Asset Purchase Agreement and Amendment No.
2 do not constitute an instrument that transfers copyright ownership.
Instead, the two documents at most constitute a mere promise to assign
certain unidentified copyrights if those copyrights are "required." A
review of the first substantive clause of the Asset Purchase Agreement
makes this fact clear:
On the terms and subject to the
conditions set forth in this Agreement,
Seller will sell, convey, transfer, assign and
deliver to Buyer and
purchase and acquire from Seller on the Closing Date (as
defined in Section 1.7), all of Seller's right, title and interest in
and to the assets and properties of Seller relating to the Business
(collectively the "Assets") identified on Schedule 1.1(a) hereto.
Notwithstanding the foregoing, the Assets to be purchased shall not
include those assets (the "Excluded Assets") set forth on Schedule
(APA § 1.1(a), attached at Compl. Ex. A (emphasis added).) Neither
this clause nor any other clause in the Agreement states that the
Seller "hereby" assigns, or that the buyer "hereby" acquires.
The Asset Purchase Agreement and Amendment No. 2 therefore constitute
solely a promise to assign in the future. A mere promise to assign in
the future, however, is not an actual assignment. This sharp
distinction between a promise to assign and an actual assignment is
well-recognized. See, e.g., Monarch
Licensing, Ltd., v. Ritam Intn'l, Ltd
24 U.S.P.Q.2d (BNA) 1456, 1459 (S.D.N.Y. 1992) (distinguishing between
promise to assign trademarks and copyrights and actual execution of
assignment of trademarks and copyrights); Arachnid, Inc. v. Merit Indus., Inc
939 F.2d 1574, 1580-1581 (Fed. Cir. 1991) (distinguishing between
agreement to assign patents and actual assignment of patents); Li'l Red Barn, Inc., v. The Red Barn Sys.,
, 322 F. Supp. 98, 107 (N.D. Ind. 1970), aff'd
at 174 U.S.P.Q. (BNA) 193 (7th Cir. 1972) (distinguishing between
agreement to assign trademarks and actual assignment of trademarks).
In the absence of an actual assignment, a promise to assign is
insufficient to satisfy the requirements of a written instrument of
conveyance established by section 204(a). Therefore, the Asset Purchase
Agreement and Amendment No. 2, even when read together, do not
constitute an instrument under the Copyright Act sufficient to transfer
copyright ownership. Absent an actual transfer of copyright
ownership, Novell continues to be the owner of copyrights at issue,
and SCO has accordingly failed to properly allege the falsity of
Novell's ownership assertions.2
Assuming Arguendo that the Asset Purchase Agreement and Amendment No. 2
Purport to Transfer Copyright Ownership, They Fail to Meet the
Copyright Act Requirement That Purported Transfers Specify What
Copyrights Are Being Transferred.
Even if the documents SCO cited facially purported to constitute an
actual transfer rather than merely a promise to transfer, the
agreements would still fail to satisfy the Copyright Act's conveyance
requirements. In order to suffice as a written instrument of
conveyance under the Copyright Act, the purported assignment must state
"precisely what rights are being transferred." Effects Assoc., Inc. v. Cohen
F.2d 555, 557 (9th Cir. 1990); Konigsberg
Int'l, Inc. v. Rice
16 F.3d 355, 357 (9th Cir. 1994). The terms of the transfer must be
clear and definite in order to fulfill the purposes of the statute, to
"enhance predictability" in copyright ownership and to make
intellectual property "readily marketable." Effects Assoc.
, 908 F.2d at 557; Konigsberg
, 16 F.3d at 357. See also Community for Creative Non-Violence v. Reid
490 U.S. 730, 749-50 (1989) ("Congress' paramount goal in revising the
1976 [Copyright] Act [was that of] enhancing predictability and
certainty of copyright ownership."); Schiller
& Schmidt, Inc. v. Nordisco Corp
969 F.2d 410, 412 (7th Cir. 1992) (explaining that the purpose of the
analogous writing requirement in § 101(2) of the act was "to make the
ownership of property rights in intellectual property clear and
Particularly when a purported assignment seeks to transfer something
less than "all the rights," definiteness is required. Here, there are
multiple works potentially at issue, as UNIX and UnixWare had many
versions and releases. Moreover, as to any particular work, copyright
ownership is comprised of a bundle of rights, which can be transferred
in whole or in part. Effects Assoc.
908 F.2d at 559. Without specificity as to which particular
copyrighted works and which rights within each copyrighted work's
bundle of rights were purportedly transferred, the purported assignment
Amendment No. 2's vagueness as to which copyrights are at issue is
glaring. It merely amends the schedule of excluded assets as follows:
All copyrights and trademarks, except
for the copyrights and trademarks owned by Novell as of the date of the
[Asset Purchase Agreement] required for [Santa Cruz] to exercise its rights with
respect to the acquisition of UNIX and UnixWare Technologies.
(APA Amendment No. 2, attached at Compl. Ex. A.) Amendment No. 2 does
not identify which, if any particular rights associated with which, if
any, copyrighted works are "required." It thus fails as a written
instrument of conveyance due to its vagueness, and it is insufficient
to satisfy section 204(a) of the Copyright Act.3
Contrary to SCO's assertions, Amendment No. 2 does not purport to
concern "all copyrights pertaining to the UNIX and UnixWare
technologies." Instead, it concerns only the unidentified rights that
make up copyrights required for Santa Cruz to exercise its rights with
respect to the acquisition of UNIX and UnixWare technologies. Not only
are those rights not identified, but SCO's "rights with respect to the
acquisition of UNIX and UnixWare technologies" are identified. In the
face of such vague and ambiguous language, the governing authority is
clear: the purported assignment must be construed in favor of the
copyright holder and against a transfer of any copyrights. Bieg v. Hovnanian Entes., Inc.
F. Supp. 2d 475, 480 (E.D. Pa. 2001). See
908 F.2d at 557 (stating that the writing requirement voids
inadvertent transfers of copyright ownership by copyright holders).
Because the documents SCO relies upon contradict its allegation that it
owns the copyrights, SCO has failed to adequately plead the element
of falsity in its slander of title cause of action. Without pleading
falsity, there is no theory upon which SCO can recover for slander of
tltle. Accordingly, SCO's Complaint should be dismissed.
SCO HAS MADE ONLY VAGUE ALLEGATIONS OF YET UNREALIZED LOSSES AND
THEREFORE HAS NOT PLED SPECIAL DAMAGES SUFFICENT TO STATE A CLAIM FOR
SLANDER OF TITLE.
In order to state a claim for slander of title, a plaintiff must plead
special damages with particularity. Valley
Colour, Inc. v. Beuchert Builders, Inc.
, 944 P.2d 361, 364 (Utah
1997) ("A slander of title action requires proof of actual or special
damages.") (quoting Banberry Crossing
780 P.2d at 1257); Bass v. Planned
Mgmt. Servs., Inc.
761 P.2d 566, 568 (Utah 1988) ("Slander of title actions are based only on
palpable economic injury and require a plaintiff to prove special
damages...There are no general or presumed damages in slander of title
actions.") Utah Rule of Civil Procedure 9(g) ("When items of special
damage are claimed, they shall be specifically stated.") They must be
pled specifically "so that the opposing party has an adequate
opportunity to defend against the plaintiff's claims." Hodges v. Gibson Prods.,Co
P.2d 151, 162 (Utah 1991); see Cohn
v. J.C. Penny Co., Inc.
537 P.2d 306, 311 (Utah 1975) ("It is a question of whether or not the
pleadings contain such information as will apprise the defendant of
such damages as must of necessity flow from that which is alleged.").
In a slander of title action, the special damages alleged must consist
of a "realized" or "liquidated" pecuniary loss. Valley Colour,
944 P.2d at 364; W.Page Keeton, PROSSER AND KEETON ON THE LAW OF TORTS
971 (1984) ("The special damage rule requires the plaintiff to
establish pecuniary loss that has been realized or liquidated, as in
the case of specific lost sales."); RESTATEMENT (SECOND) OF TORTS §§
624, 633. Merely alleging that the value of the property at issue has
dropped is insuficient to state a claim for slander of title. Valley
, 944 P.2d at 364. Similarly, where a plaintiff has simply
alleged a loss of market capitalization and a negative impact on its
dealings with third parties, it has insufficiently pled special damages
in a slander of title action. Computerized
Thermal Imaging, Inc. v. Bloomberg, L.P.
312 F.3d 1292,1299 (10th Cir. 2002) (applying Utah substantive law
regarding claim of libel per quod
, a claim that requires pleading of
special damages). Finally, the plaintiff must allege that the
specific, realized pecuniary loss alleged is directly caused by the
actions of the defendant. Dowse v.
Doris Trust Co.
208 P.2d 956, 958 (Utah 1949). Where a plaintiff fails to allege "a
pecuniary loss resulting from the act of the defandant" the plaintiff
cannot prevail. Id.
SCO does not meet the pleading standard. The Complaint contains
allegations relating to harm in three paragraphs, but does not set
forth with particularity a realized pecuniary loss. SCO generally
alleges that Novell has caused and is continuing to cause [SCO] to
incur significant irreparable harm to its valuable UNIX and UnixWare
copyrights, to its business, and its reputation." (Compl. ¶ 7.) It also
states that "[a]s a consequence of Novell's conduct alleged
herein, SCO has incurred actual and special damages in an amount to be
proven at trial." (Compl. ¶ 26.) Finally, it provides the following
general description of its alleged injuries:
Novell's wrongful claims of copyrights
and ownership in UNIX and UnixWare have caused, and continue to
cause, irreparable harm to SCO, in the following particulars:
a. Customers and potential customers of SCO are unable to ascertain
the truth of ownership in UNIX and UnixWare, and make decisions
b. SCO's efforts to protect its ownership of UNIX and UnixWare, and
copyrights therein, are subject to a false cloud of ownership created
(Compl. ¶ 21.) This is the sum total of SCO's damages allegations.
SCO's allegations are plainly insufficient. The alleged injuries are
not a "realized" or "liquidated" loss. Instead, they are precisely the
type of general allegations of some speculative injury that the
special damages pleading requirements for a slander of title action are
meant to avoid. Ordinarily, special damages are alleged by "evidence
of a lost sale or the loss of some other pecuniary advantage." Bass
761 P.2d at 568. SCO has not alleged anything of the sort. SCO did
not adequately plead special damages, and thus its claim for slander of
title must be dismissed.
For the foregoing reasons, SCO's Complaint should be dismissed.