Hyperquest, Inc. v. N'Site Solutions, Inc.
632 F.3d 377
| 7th Cir. | 2011Background
- Quivox granted N'Site a non-exclusive license to eDoc; Safelite later acquired Quivox assets and retained ownership of the copyright.
- Safelite licensed eDoc to HyperQuest in 2004 with broad rights; HyperQuest could develop/modify for HQ services, and Safelite could license to third parties only for testing/development and not compete with HyperQuest.
- N'Site allegedly engaged in activities (location-specific use, non-ownership of derivative works, and sale/marketing of eDoc derivatives) that HyperQuest claimed violated licenses.
- N'Site sold source code to Unitrin in 2006; HyperQuest sued N'Site and Unitrin for copyright infringement in 2008 after registration and HQ license recording.
- District court dismissed HyperQuest’s suit for lack of standing as an exclusive licensee; court later awarded substantial attorneys’ fees to defendants, which HyperQuest and Unitrin cross-appealed over.
- Seventh Circuit affirmed, holding HyperQuest did not obtain exclusive rights in any divisible category, and fee award was appropriate and properly calculated.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did HyperQuest obtain an exclusive right in divisible copyright rights? | HyperQuest held exclusive rights to reproduce/derivative/distribute. | Safelite/N'Site retained/Open-ended rights; no clear exclusive right to HyperQuest. | No; HyperQuest did not prove exclusive rights in divisible rights. |
| Does the 2004 Safelite-HQ license grant HyperQuest exclusive rights over eDoc? | The 2004 agreement created exclusivity in core rights and HyperQuest’s ability to sue. | The agreement was open-ended and did not assign clear exclusive rights to HyperQuest. | No; terms do not establish clear exclusive rights for HyperQuest. |
| Can HyperQuest sue as a solely exclusive owner under §501(b) standing? | Exclusive license transfers allow HyperQuest standing to sue for infringement. | Licenses did not transfer exclusive rights; standing remains with the copyright owner. | No; standing requires exclusive rights, which were not clearly conveyed. |
| Was the district court’s attorneys’ fees award proper on appeal? | Fees were wrongly calculated and the reasoning insufficient. | Fees were properly awarded; district court exercised discretion under 17 U.S.C. § 505. | Affirmed; fee award upheld and reasonable in amount. |
Key Cases Cited
- Moran v. London Records, Ltd., 827 F.2d 180 (7th Cir.1987) (standing and enforceable rights considerations in copyright context)
- Reed Elsevier, Inc. v. Muchnick, 130 S. Ct. 1237 (2010) (real-party-in-interest approach to standing under copyright)
- Kepner-Tregoe, Inc. v. Vroom, 186 F.3d 283 (2d Cir.1999) (read licenses as a whole; establish exclusive rights boundaries)
- Silvers v. Sony Pictures Entertainment, Inc., 402 F.3d 881 (9th Cir.2005) (subdividing exclusive rights can be valid when clearly defined)
- Krause v. Titleserv, Inc., 402 F.3d 119 (2d Cir.2005) (divisibility of rights and open-ended licenses)
- Fogerty v. Fantasy, Inc., 510 U.S. 517 (1994) (fee-shifting analysis standards for prevailing party claims)
- Riviera Distributors, Inc. v. Jones, 517 F.3d 926 (7th Cir.2008) (presumption in favor of fees for prevailing copyright defendants)