Lulirama Ltd. v. Axcess Broadcast Services, Inc.

REVISED
IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

_____________________

No. 96-10892
_____________________

LULIRAMA LTD, INC; SPENCER MICHLIN,

Plaintiffs-Counter Defendants-
Appellants-Cross-Appellees,

v.

AXCESS BROADCAST SERVICES, INC,

Defendant-Counter Claimant-
Appellee-Cross-Appellant.

_________________________________________________________________

Appeals from the United States District Court
for the Northern District of Texas
_________________________________________________________________
November 10, 1997
Before POLITZ, Chief Judge, KING, Circuit Judge, and DUPLANTIER,*
District Judge.

KING, Circuit Judge:
Plaintiffs-Appellants Lulirama Ltd., Inc. and Spencer

Michlin appeal the district court’s denial of their motion for

summary judgment and partial grant of the summary judgment motion

filed by Defendant-Appellee Axcess Broadcast Services, Inc.

Axcess appeals the district court’s refusal to impose sanctions

on Lulirama and Michlin pursuant to Rule 11 of the Federal Rules

*
District Judge of the Eastern District of Louisiana,
sitting by designation.
of Civil Procedure. We affirm in part and vacate and render in

part.

I. FACTUAL AND PROCEDURAL BACKGROUND

In November 1991, Lulirama Ltd., Inc. (“Lulirama”) and

Axcess Broadcasting Services, Inc. (“Axcess”) entered into a one-

year business arrangement (the “Jingle Writing Agreement”) in

which Lulirama’s president Spencer Michlin, through Lulirama, was

to write and provide Axcess with fifty advertising jingles at a

rate of $750 per jingle, for a total of $37,500. One third of

the price was to be paid up front, with the remainder paid in

four installments. Michlin’s services were to be provided on a

confidential basis, and he was not to provide similar services to

any company selling musical advertising through radio and

television stations during the time period covered by the

agreement. The Jingle Writing Agreement is memorialized in a

one-page billing statement signed by both parties. The statement

contains handwritten notations added by Axcess which specify that

the work is “for hire,” that the jingles are to be delivered at a

rate of thirteen per quarter, and that they must be approved by

Otis Conner, the president of Axcess. Axcess timely paid

Lulirama under this agreement, but Lulirama provided only seven

jingles.

In April 1992, Lulirama, Michlin, and Axcess entered a

written license agreement (the “Promotional License Agreement”)

that gave Axcess the right to use any musical works in which

Lulirama or Michlin could “claim ownership or other right, title

2
or interest, whatsoever” for demonstration and promotional

purposes at client meetings for product development. In return,

Axcess was to pay Lulirama $1,000 per month for the first two

years and $1,500 per month thereafter. The term of the

Promotional License Agreement was one year, but it was

automatically renewable for up to four years at the discretion of

Axcess.

In March 1993, the parties orally extended the Jingle

Writing Agreement for an indefinite period of time. Axcess was

to pay Lulirama $50,000 per year in monthly installments of

$4,166, based on a rate of $1,000 per jingle. The parties

terminated the Jingle Writing Agreement as extended in June 1994.

From March 1993 to June 1994, Axcess paid Lulirama

approximately $66,658 in monthly installments of $4,166, but

Lulirama provided only twenty-nine songs. Axcess subsequently

sought to have some of the money it had paid to Lulirama

refunded, or, in the alternative, to have Lulirama provide it

with the jingles that Axcess claimed it was due under the Jingle

Writing Agreement.

Axcess sued Lulirama and Michlin in Texas state court in

December 1994. The state district court granted summary judgment

in favor of Axcess on a breach of contract theory and ordered

Lulirama to refund some of its money to Axcess based on

Lulirama’s failure to provide songs due under the Jingle Writing

Agreement. See Axcess Broadcast Servs. v. Michlin, No. 94-12703

(192d Dist. Ct., Dallas County, Tex. June 9, 1995). Lulirama

3
appealed, and the Dallas court of appeals reversed the state

district court’s entry of summary judgment while the federal case

was pending before this court. See Lulirama Ltd. v. Axcess

Broadcast Servs., No. 05-95-01212-CV, 1996 WL 743774 (Tex. App.--

Dallas Dec. 31, 1996).

On October 31, 1995, Lulirama and Michlin2 filed suit

against Axcess in federal district court, asserting thirty-six

claims of copyright infringement. Lulirama alleged that, without

proper authorization, Axcess reproduced the jingles, prepared

derivative jingles, distributed copies of the jingles, and

authorized others to perform the jingles in violation of

Lulirama’s copyrights. Axcess answered, asserting several

affirmative defenses and alleging that it owned the copyrights to

all of the jingles. Axcess also filed a counterclaim asserting a

fraud claim and a claim for declaratory judgment that Axcess

owned the copyrights to all of the jingles or, in the

alternative, that it had “a continuing, unqualified license for

the unlimited use” of the jingles.

Axcess filed a motion for summary judgment, and Lulirama

filed a motion for partial summary judgment. Axcess also filed a

motion for Rule 11 sanctions on the grounds that Lulirama’s

2
Lulirama and Michlin concede that any copyrights that
Michlin would otherwise own as creator of the jingles are owned
by Lulirama pursuant to the work for hire doctrine because
Michlin wrote the jingles in the course and scope of his
employment as president of Lulirama. See 17 U.S.C. § 101, 201.
Because Michlin has no claim to any of the copyrights at issue in
this case, the remainder of this opinion refers only to Lulirama
in discussing the legal positions of Lulirama and Michlin.

4
complaint lacked a legal basis and was filed for improper

purposes. The court granted in part and denied in part Axcess’s

motion, dismissed its fraud claim, and denied Lulirama’s motion

for partial summary judgment. Specifically, the district court

held that Lulirama’s copyright infringement claims were barred by

res judicata,3 that Axcess owned the copyrights in the first

seven jingles, and that Lulirama owned the copyrights in the

subsequent twenty-nine jingles. The district court held,

however, that Axcess had an oral or implied license to use the

twenty-nine songs4 and that Axcess had not exceeded the scope of

the license.5 The district court also denied Axcess’s motion for

3
Following the district court’s entry of final judgment in
this case, the Dallas Court of Appeals reversed the state
district court’s judgment rendering summary judgment in favor of
Axcess. Accordingly, Lulirama’s copyright infringement claims
cannot be precluded by res judicata. See Savidge v. Fincannon,
836 F.2d 898, 906 (5th Cir. 1988) (“A decree that has been
vacated or nullified by an appellate court cannot be given res
judicata effect.”); 18 CHARLES ALAN WRIGHT ET AL., FEDERAL PRACTICE AND
PROCEDURE § 4432, 302 (1981) (“Reversal and remand for further
proceedings on the entire case defeats preclusion entirely until
a new final judgment is entered by the trial court or the initial
judgment is restored by further appellate proceedings. The fact
that an appeal is pending in a higher appellate court does not
restore the preclusive effects of the reversed judgment.”).
4
The district court did not specify whether it construed
the license to be exclusive or nonexclusive. However, as
explained in Part II.A.2.b, infra, the license is necessarily
nonexclusive because it is not reflected in a written instrument.
5
This holding is not reflected in the district court’s
final judgment even though Axcess requested declaratory judgment
to this effect as an alternative to a declaratory judgment that
it owned the copyrights to all thirty-six jingles. Presumably,
the district court intended its holding that Axcess had a license
to use the last twenty-nine jingles as an alternative basis for
the court’s disposition of Lulirama’s copyright infringement
claims.

5
Rule 11 sanctions. Lulirama timely appealed and Axcess cross-

appealed.

II. DISCUSSION

Lulirama challenges the district court’s conclusions (1)

that Axcess owns the copyrights to the seven jingles that

Lulirama provided to Axcess during the first year of the Jingle

Writing Agreement and (2) that Axcess has an implied or oral

license to use the twenty-nine jingles that Lulirama provided to

Axcess after the first year of the Jingle Writing Agreement.

Axcess appeals the district court’s denial of its motion for Rule

11 sanctions against Lulirama for filing a meritless lawsuit for

improper purposes. We address each of these issues in turn.

A. Summary Judgment

1. Standard of Review

“We review a grant of summary judgment de novo, applying the

same criteria used by the district court in the first instance.”

Texas Manufactured Housing Ass’n v. City of Nederland, 101 F.3d

1095, 1099 (5th Cir. 1996), cert. denied, 117 S. Ct. 2497 (1997).

Summary judgment is proper “if the pleadings, depositions,

answers to interrogatories, and admissions on file, together with

the affidavits, if any, show that there is no genuine issue as to

any material fact and that the moving party is entitled to

judgment as a matter of law.” FED. R. CIV. P. 56(c); see also

Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986).

6
 2. Analysis

a. Copyright ownership of the first seven jingles

The district court concluded that Axcess owned the

copyrights to the first seven jingles that Lulirama produced

under the Jingle Writing Agreement on the ground that these

jingles were works for hire within the meaning of the Copyright

Act of 1976, Pub. L. No. 94-553, 90 Stat. 2541 (1976) (codified

as amended in scattered sections of 17 U.S.C.).

Under the Copyright Act, copyright ownership “vests

initially in the author or authors of the work.” 17 U.S.C.

§ 201(a). “As a general rule, the author is the party who

actually creates the work, that is, the person who translates an

idea into a fixed, tangible expression entitled to copyright

protection.” Community for Creative Non-Violence v. Reid, 490

U.S. 730, 737 (1989). However, the Act creates an exception to

this general rule that authorship vests in the creator for “works

made for hire.” See 17 U.S.C. § 201(b). Section 201(b) of the

Act provides:

In the case of a work made for hire, the employer or
other person for whom the work was prepared is
considered the author for purposes of this title, and,
unless the parties have expressly agreed otherwise in a
written instrument signed by them, owns all of the
rights comprised in the copyright.

Id. Section 101 defines a “work made for hire” as follows:

(1) a work prepared by an employee within the scope of
his or her employment; or

(2) a work specially ordered or commissioned for use
as a contribution to a collective work, as a part
of a motion picture or other audiovisual work, as
a translation, as a supplementary work, as a

7
 compilation, as an instructional text, as a test,
as answer material for a test, or as an atlas, if
the parties expressly agree in a written
instrument signed by them that the work shall be
considered a work made for hire.

Id. § 101. The two parts of this working definition are mutually

exclusive: the first part applies to works created by employees;

the second applies to works created by independent contractors.

See Reid, 490 U.S. at 742-43. The district court concluded that

Lulirama acted as an independent contractor for Axcess in

providing the jingles pursuant to the Jingle Writing Agreement,

and none of the parties dispute this conclusion.

The district court determined that the jingles written

pursuant to the Jingle Writing Agreement during the first year of

the agreement fit the second prong of the Copyright Act’s

definition of “works made for hire.” In reaching this

conclusion, the court relied on an affidavit that Michlin

executed in conjunction with Axcess’s state court action in which

Michlin expressed the following understanding of the Jingle

Writing Agreement:

Under this arrangement, I was to supply Axcess’
requirements for advertising jingles and provide them
to Axcess through my company Lulirama. Axcess was to
sell these songs to its television and radio station
clients.

The district court concluded that the above statement indicated

that the jingles written pursuant to the first year of the Jingle

Writing Agreement were “works specially ordered or commissioned

for use . . . as a part of a motion picture or other audiovisual

work,” 17 U.S.C. § 101, based on the following rationale:

8
 It is best to interpret the broad term “audiovisual” to
include both purely visual and purely audio works as
well as combined audio and visual works. No purpose of
the Copyright Act would be served by a narrower
definition because there is nothing inherent, from a
copyright policy perspective, in a purely visual,
purely audio, or combination work to merit differential
treatment.

Lulirama contends that the district court improperly

expanded the class of specially commissioned works that can be

works for hire within the meaning of the Copyright Act. We

agree.6

The Supreme Court observed in Reid that the legislative

history of the Copyright Act of 1976 indicates that it is “a

carefully worked out compromise aimed at balancing legitimate

interests” of hiring parties and artists. Reid, 490 U.S. at 748

(internal quotation marks omitted). As such, the Court

admonished that “[s]trict adherence to the language and structure

of the Act is particularly appropriate.” Id. at 748 n.14.

A work created by an independent contractor can constitute a

work for hire only if it fits one of the nine narrowly drawn

6
Lulirama also argues somewhat cursorily that the billing
statement memorializing the first year of the Jingle Writing
Agreement described the jingles in question insufficiently to
establish a valid work for hire agreement. We need not resolve
this issue because we conclude that the district court erred in
holding as a matter of law that Axcess owns the copyrights to the
first seven jingles. As explained in Part II.A.2.b, infra,
Axcess has requested in the alternative declaratory judgments
that it either owns the copyrights to these jingles or has an
unlimited license to use them. Because we conclude as a matter
of law that Axcess has, at a minimum, a nonexclusive license to
use the jingles as it has, remand for determination of copyright
ownership is unnecessary. Accordingly, we need not determine
whether Axcess’s claim to copyright ownership with respect to the
first seven jingles is foreclosed as a matter of law on the
alternative ground advanced by Lulirama.

9
categories of works delineated in the second part of § 101's

definition of “works made for hire.” See id. at 748 (“[T]he

legislative history underscores the clear import of the statutory

language: only enumerated categories of commissioned works may

be accorded work for hire status.”); Easter Seal Soc’y for

Crippled Children and Adults v. Playboy Enters., 815 F.2d 323,

328 n.8 (5th Cir. 1987) (“Only the buyers and sellers of works

falling with[in] § 101(2)’s nine categories can decide who will

be the statutory author; and then only by compliance with the

statute of frauds clause.”). Axcess contends only that the

jingles fit one of the categories listed in § 101: the category

of “work[s] specially ordered or commissioned for use . . . as a

part of a motion picture or other audiovisual work.” 17 U.S.C.

§ 101. Accordingly, this is the only potential avenue to work

for hire status that we address.

Section 101 of the Act defines “audiovisual works” as

works that consist of a series of related images which
are intrinsically intended to be shown by the use of
machines or devices such as projectors, viewers, or
electronic equipment, together with accompanying
sounds, if any, regardless of the nature of the
material objects, such as films or tapes, in which the
works are embodied.

17 U.S.C. § 101. The plain language of this definition indicates

that an audiovisual work must have a visual component. In order

to be classified as an audiovisual work, the work in question

“must consist of (1) ‘images;’ (2) such images must be ‘related’

and presented in a ‘series;’ (3) such images must be capable of

being shown by a machine or device.” 1 MELVILLE B. NIMMER & DAVID

10
NIMMER, NIMMER ON COPYRIGHT § 2.09[A] (1997) [hereinafter NIMMER]

(footnotes omitted). Use of the term “images” in the statutory

definition denotes a visual component because the definition

indicates that an audiovisual work consists of “images . . .

together with accompanying sounds, if any.” 17 U.S.C. § 101

(emphasis added). To conclude that an “image” within the Act’s

definition of “audiovisual works” need not contain a visual

component would render the reference to “accompanying sounds” in

the definition superfluous because “accompanying sounds” would be

subsumed by the term “images.” Such a statutory construction

would violate the long-settled principle that each word in a

statutory scheme must be given meaning. See Bailey v. United

States, 116 S. Ct. 501, 506 (1995) (noting the “assumption that

Congress intended each of its terms [in a statutory scheme] to

have meaning”).

Moreover, § 102 of the Act lists “motion pictures and other

audiovisual works” and “sound recordings” as distinct categories

of works entitled to copyright protection. See 17 U.S.C. § 102.

That Congress chose to create these separate categories indicates

that it recognized a distinction between audiovisual and purely

audio works. Additionally, Section 101 defines “sound

recordings” as

works that result from the fixation of a series of
musical, spoken, or other sounds, but not including the
sounds accompanying a motion picture or other
audiovisual work, regardless of the nature of the
material objects, such as disks, tapes, or other
phonorecords, in which they are embodied.

11
Id. § 101 (emphasis added). The district court’s conclusion that

“purely audio works” constitute “audiovisual works” would render

the category of “sound recordings” completely empty. Because

works otherwise meeting the definition of “sound recordings” are

purely audio works, under the district court’s statutory

construction, they would all be excluded from the definition

because they would also constitute “other audiovisual work.”

Therefore, we cannot agree with the district court that the term

“audiovisual works” encompasses “purely audio works.”

Axcess argues that Michlin’s statement that he agreed to

provide advertising jingles to Axcess “to sell . . . to its

television and radio station clients” indicates that each of the

jingles was commissioned for use in both the television and radio

mediums. Axcess argues that, to the extent that each jingle was

commissioned for use in television, each jingle is “a work

specially ordered or commissioned for use . . . as a part of a

motion picture or other audiovisual work.” 17 U.S.C. § 101.

However, Michlin’s statement of his understanding of the Jingle

Writing Agreement does not unambiguously indicate that each

jingle that he wrote pursuant to the Jingle Writing Agreement

would potentially be used both for television and radio

advertising. One could read his statement as indicating that

Axcess intended to commission some jingles for use in television

advertisements and other jingles for use in radio advertisements.

Because the summary judgment evidence does not indicate which of

the first seven jingles were commissioned for use as part of a

12
television advertisement, a radio advertisement, or both, a

genuine issue of material fact exists as to whether any or all of

these jingles were “specially ordered or commissioned for use . .

. as a part of a motion picture or other audiovisual work,” 17

U.S.C. § 101, and thus whether they are works made for hire.7

Axcess argues in the alternative, however, that it has a

nonexclusive license to use the first seven jingles, as well as

the twenty-nine jingles produced during the period in which the

parties extended the Jingle Writing Agreement without a written

embodiment of the agreement. We turn now to the issue of

nonexclusive license.

b. Nonexclusive license

The district court concluded that no valid work for hire

agreement existed with respect to the twenty-nine jingles written

after the original Jingle Writing Agreement expired at the end of

one year because the extension of the Jingle Writing Agreement

was not evidenced in a writing signed by the parties.

Accordingly, the court determined that Lulirama, as the employer

of the creator of these works, owned the copyrights to them.

7
Axcess insists that a particular jingle need not have
been commissioned only for use in an audiovisual work in order to
qualify for work for hire status. Assuming that this is true,
it is clear that, in order for a particular jingle to qualify as
a work for hire, Axcess must have commissioned it at least in
part for the purpose of making it a part of an audiovisual work.
The summary judgment evidence in this case does not establish
that at least part of the purpose for Axcess’s commissioning each
of the first seven jingles was for use in television advertising.
Accordingly, summary judgment in favor of Axcess as to its
ownership of the copyrights to the first seven jingles was
inappropriate.

13
Axcess does not dispute this conclusion. The district court went

on to conclude that, while Lulirama owned the copyrights to these

jingles, it had granted Axcess an oral or implied license to sell

the jingles to Axcess’s radio and television customers. Lulirama

contends that the district court erred in this regard. We cannot

agree.

While the Copyright Act requires that exclusive licenses be

evidenced by a writing, no such writing requirement applies to

nonexclusive licenses. Section 204(a) of the Act provides that

“[a] transfer of copyright ownership, other than by operation of

law, is not valid unless an instrument 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). Section 101 of the Act defines

“transfer of copyright ownership” to include exclusive licenses,

but expressly excludes nonexclusive licenses. See id. § 101. As

such, “[u]nder federal law, a nonexclusive license may be granted

orally, or may even be implied from conduct.” 3 NIMMER, supra,

§ 10.03[A], at 10-40 (footnotes omitted); see also I.A.E., Inc.

v. Shaver, 74 F.3d 768, 775 (7th Cir. 1996); Effects Assocs. v.

Cohen, 908 F.2d 555, 558 (9th Cir. 1990).

“When the totality of the parties’ conduct indicates an

intent to grant such permission, the result is a legal

nonexclusive license . . . .” 3 NIMMER, supra, § 10.03[A], at 10-

41 (footnotes omitted). Other circuits have held that an implied

nonexclusive license arises when “(1) a person (the licensee)

14
requests the creation of a work, (2) the creator (the licensor)

makes the particular work and delivers it to the licensee who

requested it, and (3) the licensor intends that the licensee-

requestor copy and distribute his work.” I.A.E., 74 F.3d at 776

(citing Effects, 908 F.2d at 558-59).

In this case, the above criteria are plainly satisfied.

First, Axcess requested the creation of the jingles. Second,

Michlin created the jingles as Lulirama’s agent and Lulirama

delivered them to Axcess. Third, Michlin conceded in his

affidavit that he understood that, pursuant to the Jingle Writing

Agreement, Axcess would sell the jingles to its radio and

television customers. Lulirama nevertheless advances a number of

arguments as to why a nonexclusive license did not arise in this

case, all of which we find to be without merit.

Lulirama first argues that a nonexclusive license cannot

exist between the parties because the parties intended that

Axcess would obtain full copyright ownership of the jingles

pursuant to the work for hire doctrine. The Eleventh Circuit

rejected a similar argument in Jacob Maxwell, Inc. v. Veeck, 110

F.3d 749 (11th Cir. 1997). In that case, an artist agreed to

write a song for a baseball team, and the parties agreed orally

that the baseball team would have an exclusive license to use the

song. See id. at 751. Applying Florida contract law, the court

concluded that, although no exclusive license existed because

such a license cannot be created orally, the artist had granted

the baseball team a nonexclusive license to use the jingle

15
because it had acquiesced in the team’s use of the song. See id.

at 752. In so doing, the court rejected the argument that the

parties’ intention to create an exclusive license foreclosed the

recognition of a nonexclusive license. See id. at 752-53. The

court observed:

Like the district court, we conclude that while it
may well be that the parties in their initial
negotiations contemplated an exclusive license, JMI
cannot reasonably deny, given its subsequent conduct
here, that it granted to the Miracle the sort of
lesser, nonexclusive license to play the piece during
the summer of 1993 that federal law recognizes may
result from a purely oral transaction.

Id. at 753.

We agree with the analysis of the Eleventh Circuit. Under

Texas contract law,8 illegal contracts are generally

unenforceable. See Plumlee v. Paddock, 832 S.W.2d 757, 759 (Tex.

App.--Fort Worth 1992, writ denied). However, a court will sever

the illegal portion of the agreement and enforce the remainder if

the parties would have entered the agreement absent the illegal

portion of the original bargain. See Panasonic Co. v. Zinn, 903

F.2d 1039, 1041 (5th Cir. 1990).

Where the subject matter of the contract is legal, but
the contract contains an illegal provision that is not
an essential feature of the agreement, the illegal
provision may be severed and the valid portion of the
contract enforced. . . . In determining whether a
particular provision is severable, “the issue is
whether [the parties] would have entered into the
agreement absent the illegal parts.”

8
To the extent that it is not inconsistent with the
Copyright Act and its policies, Texas law governs our analysis of
whether the parties contractually created a nonexclusive license.
See Fantastic Fakes, Inc. v. Pickwick Int’l, Inc., 661 F.2d 479,
482-83 (5th Cir. Unit B Nov. 1981).

16
Id. (quoting Rogers v. Wolfson, 763 S.W.2d 922, 925 (Tex. App.--

Dallas 1989, writ denied); see also Redgrave v. Wilkinson, 208

S.W.2d 150, 152 (Tex. Civ. App.--Waco 1948, writ ref’d n.r.e.)

(“If, for a legal consideration, a party undertakes to do two or

more acts, and a part of them are unlawful, the contract is good

for so much as is lawful, and void for the residue. Whenever the

unlawful part of a contract can be separated from the rest, it

will be rejected and the remainder established.” (internal

quotation marks omitted)); 6A ARTHUR LINTON CORBIN, CORBIN ON CONTRACTS

§ 1522, at 760-61 (1962) (noting the well-recognized rule that,

“if a lawful consideration is given for two promises, one of

which is lawful and the other unlawful, the lawful promise is

enforceable” and observing that “there is no injustice to the

defendant in permitting the plaintiff to abandon the illegal

promise and to enforce the other one . . . [because] [t]he

defendant receives everything for which he bargained and gives

less in return”).

Lulirama states in its response brief that “[t]he record

here indicates that a work for hire agreement was presumably

intended,” and that “Michlin mistakenly believed that a valid

work for hire agreement had been reached.” It would be quite

anomalous to allow Lulirama, which admittedly intended by the

Jingle Writing Agreement to convey to Axcess a bundle of rights

including all of the exclusive rights of copyright ownership, to

complain that the intent of the parties to the agreement was

frustrated by the district court’s conclusion that Lulirama

17
conveyed by implication a smaller bundle of rights. Because

Lulirama intended to convey to Axcess all of the rights

associated with ownership of the copyrights to the jingles, it of

necessity intended to convey the lesser-included set of rights

associated with a nonexclusive license to use the jingles.

Lulirama also argues that the existence of the Promotional

License Agreement between Lulirama and Axcess, which provided

Axcess with an exclusive license to use all works to which

Lulirama could claim an ownership interest for promotional

purposes, forecloses our finding an implied or oral nonexclusive

license. In support of this contention, Lulirama directs us to

Woodard v. Southwest States, Inc., 384 S.W.2d 674 (Tex. 1964).

In that case, the Texas Supreme Court held that, “[w]here there

exists a valid express contract covering the subject matter,

there can be no implied contract.” Id. at 675.

The flaw in Lulirama’s argument stems from the fact that no

express, written contract exists covering the subject matter of

the nonexclusive license in this case. The owner of a copyright

is free to grant multiple licenses for different uses of the same

material. Buffalo Broad. Co., Inc. v. American Soc’y of

Composers, Authors and Publishers, 744 F.2d 917, 920 (2d Cir.

1984) (“The [Copyright] Act specifically accords the copyright

owner the right to authorize others to use the various rights

recognized by the Act, including the performing right and the

reproduction right and to convey these rights separately.”

(citations omitted)). The Promotional License Agreement provided

18
Axcess with the very limited right to use all works in which

Lulirama could claim an ownership interest for promotional

purposes. The Jingle Writing Agreement provided Axcess with the

right to sell and distribute the jingles created pursuant to the

agreement. To the extent that the agreements involve distinct

rights, the nonexclusive license that the district court

determined to exist does not cover the same subject matter as the

Promotional License Agreement.

This conclusion finds further support in the fact that it is

highly questionable whether the jingles delivered pursuant to the

Jingle Writing Agreement are even subject to the Promotional

License Agreement. Lulirama concedes in its response brief that

“[t]he record here indicates that a work for hire agreement was

presumably intended. Such an agreement, if it were valid, would

have vested original copyright ownership in Axcess.” This

statement makes clear that, at the time the parties entered the

Promotional License Agreement, they did not believe that the

jingles created pursuant to the Jingle Writing Agreement would be

covered by it because they believed that Axcess would possess the

copyrights to the jingles pursuant to the work for hire doctrine.

As such, neither of the parties conceived of the jingles created

pursuant to the Jingle Writing Agreement as musical works in

which Lulirama or Michlin could “claim ownership or other right,

title or interest, whatsoever” for purposes of the Promotional

License Agreement. Lulirama adamantly argues that, in

interpreting contracts, courts must “take the wording of the

19
contract in the light of the surrounding circumstances,” Watkins

v. Petro-Search, Inc., 689 F.2d 537, 538 (5th Cir. 1982), so as

to “carry out the intentions of the parties as of the time the

instrument was executed.” First Nat’l Bank v. Kinabrew, 589

S.W.2d 137, 138 (Tex. Civ. App.--Tyler 1979, writ ref’d n.r.e.).

Applying these precepts to the Promotional License Agreement, we

are skeptical that the agreement even covers the same works as

the Jingle Writing Agreement, much less the same rights to those

works.

Moreover, acceptance of Lulirama’s position that the

existence of the Promotional License Agreement precludes a

finding that Axcess obtained additional rights to the jingles

through an implied license would require acceptance of the absurd

premise that the Jingle Writing Agreement and its oral extension,

pursuant to which Axcess paid Lulirama more than one hundred

thousand dollars from 1991 to 1994, provided Axcess with no more

rights to the jingles than it obtained through the Promotional

License Agreement, pursuant to which Axcess paid Lulirama an

additional $1000 (and later $1500) per month. We decline to

accept this premise, and therefore conclude that the existence of

the Promotional License Agreement in no way precludes the

existence of an oral or implied license.

Lulirama next argues that finding an oral or implied license

in this case would circumvent the statutory embodiment of the

work for hire doctrine by allowing Axcess to obtain the benefits

of noncreator authorship without complying with the statutory

20
requisites for such status. This is simply not true. As a

result of the Jingle Writing Agreement, Axcess obtained a

nonexclusive license to use the jingles created pursuant to the

agreement. If Axcess had acquired the copyrights to the jingles

as a result of the agreement, it would have obtained the

exclusive right to, among other things, (1) reproduce and make

copies of the jingles; (2) prepare derivative works based on the

jingles; (3) distribute copies or phonorecords of the jingles to

the public by sale or other transfer of ownership, or by rental,

lease or lending; and (4) authorize others to perform the jingles

publicly. See 17 U.S.C. § 106. However, because neither the

original Jingle Writing Agreement nor its oral extension

constituted a valid work for hire agreement, Axcess could not

obtain ownership of the copyrights to the jingles via the Jingle

Writing Agreement. As such, it obtained only a nonexclusive

right to engage in the above activities. This conclusion in no

way circumvents the Copyright Act.

Lulirama next argues that, even if the Jingle Writing

Agreement and its oral extension created a nonexclusive license,

a fact issue exists as to whether Axcess’s use of the jingles

overstepped the boundaries of the implied license. This argument

lacks merit. In conceding that the parties intended by the

Jingle Writing Agreement to vest Axcess with original copyright

ownership to the jingles, Lulirama concedes that the parties

intended to grant Axcess the right to take any action consistent

with copyright ownership. This would include all of the actions

21
that form the basis of Lulirama’s claims of copyright

infringement, i.e., (1) reproducing and making copies of the

jingles; (2) preparing derivative works based on the jingles;

(3) distributing copies or phonorecords of the jingles to the

public by sale or other transfer of ownership, or by rental,

lease or lending; and (4) authorizing others to perform the

jingles publicly. See 17 U.S.C. § 106. Therefore, Axcess has

not overstepped the bounds of its nonexclusive license.

Lulirama finally argues that, even if the Jingle Writing

Agreement created a nonexclusive license, Lulirama revoked the

nonexclusive license by filing this lawsuit. This argument also

lacks merit. A nonexclusive license may be irrevocable if

supported by consideration. See 3 NIMMER, supra, § 10.02[B][5]

(“[N]onexclusive licenses are revocable absent consideration.”);

Avtec Sys., Inc. v. Peiffer, 21 F.3d 568, 574 n.12 (4th Cir.

1994); Keane Dealer Servs., Inc. v. Harts, 968 F. Supp. 944, 947

(S.D.N.Y. 1997); Johnson v. Jones, 885 F. Supp. 1008, 1013 n.6

(E.D. Mich. 1995). This is so because a nonexclusive license

supported by consideration is a contract. See Jacob Maxwell, 110

F.3d at 752-53 (construing an implied nonexclusive license

supported by consideration as an implied contract); I.A.E., 74

F.3d at 776 (“[I]mplied licenses are like implied contracts . . .

. .”); Effects, 908 F.2d at 559 n.7 (noting that an implied

license is "a creature of law much like any other implied-in-fact

contract"); 3 NIMMER, supra, § 10.01[C][5] & n.73.1 (observing

that a license can be a form of contract in the sense that it is,

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“in legal contemplation, merely an agreement not to sue the

licensee for infringement.”).

Lulirama’s argument that it revoked any implied license that

might have arisen by filing the present lawsuit is tantamount to

an argument that it had a unilateral right of rescission without

notice--an argument entirely inconsistent with the existence of a

contract between the parties. If Lulirama had the ability to

terminate the license at will, then no contract could exist

because Lulirama’s obligation under the contract would be

illusory. See RESTATEMENT (SECOND) OF CONTRACTS § 2 cmt. e (1981)

(“Words of promise which by their terms make performance entirely

optional with the ‘promisor’ whatever may happen, or whatever

course of conduct in other respects he may pursue, do not

constitute a promise. Although such words are often referred to

as forming an illusory promise, they do not fall within the

present definition of promise.”); Light v. Centel Cellular Co.,

883 S.W.2d 642, 645 (Tex. 1994) (“When illusory promises are all

that support a purported bilateral contract, there is no

contract.”). A presumption exists that parties to a purported

contract did not intend to make illusory promises. See Holguin

v. Twin Cities Servs., Inc., 750 S.W.2d 817, 819 (Tex. App.--El

Paso 1988, no writ) (“[I]t is presumed that when parties make an

agreement they intend it to be effectual, not nugatory; and the

contract will be construed in favor of mutuality . . . .”).

The record in this case provides no indication that the

parties intended that Axcess’s right to use the jingles was

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terminable at the will of Lulirama. Accordingly, we conclude

that Axcess’s rights under the nonexclusive license created by

the Jingle Writing Agreement did not end upon Lulirama’s filing

the present lawsuit.9

In sum, we conclude that the district court correctly

determined that Axcess has a nonexclusive license to use the last

twenty-nine jingles created pursuant to the Jingle Writing

Agreement. As we noted in Part II.A.2.a, supra, a triable issue

of fact may exist as to whether Axcess owns the copyrights to the

first seven jingles created pursuant to the work for hire

doctrine. However, in its counterclaim, Axcess sought

declaratory judgment that it either (1) owned the copyrights to

these jingles or (2) had a license to use them. It sought

summary judgment on its declaratory judgment claim, thus

indicating that it wished to have summary judgment declaring

either that it owns the copyrights to the jingles or that it has

a license to use them.

Based on the same analysis applied to the last twenty-nine

jingles, we conclude as a matter of law that, at a minimum,

9
Lulirama also contends that summary judgment was improper
because the district court stayed discovery and therefore denied
Lulirama the opportunity to discover evidence that would create
fact issues as to its copyright infringement claims. However,
Lulirama provides no indication of what evidence it hoped to find
had the district court allowed it to continue with discovery.
Accordingly, we find this argument to be without merit. Daboub
v. Gibbons, 42 F.3d 285, 288 (5th Cir. 1995) (“[T]he
[plaintiffs’] silence as far as naming what they are looking for
through discovery is fatal to their argument [that the district
court denied them sufficient discovery], and the district court's
decision to rule on the summary judgment motion was proper.”).

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Axcess has a nonexclusive license to use the first seven jingles

created pursuant to the Jingle Writing Agreement. Put another

way, as a matter of law, Lulirama cannot state a claim of

copyright infringement against Axcess based upon Axcess’s past or

future use of the first seven jingles. See NIMMER, supra, §

10.01[C][5] n.73.1 (“A license is, in legal contemplation, merely

an agreement not to sue the licensee for infringement.”). This

conclusion should not be construed as disposing of the issue of

who actually owns the copyrights to the first seven jingles.

None of the claims presented by the parties mandates resolution

of this issue. Lulirama’s copyright infringement claims are

foreclosed regardless of who owns the copyrights, and Axcess has

requested alternative declarations of its rights with respect to

these jingles that obviate the need for a determination of

copyright ownership.

B. Sanctions

Axcess contends that the district court committed reversible

error in denying its motion for sanctions against Lulirama

pursuant to Rule 11 of the Federal Rules of Civil Procedure. We

disagree.

Rule 11 imposes the following duties on parties making

representations to a federal court:

By presenting to the court (whether by signing, filing,
submitting, or later advocating) a pleading, written
motion, or other paper, an attorney or unrepresented
party is certifying that to the best of the person's
knowledge, information, and belief, formed after an
inquiry reasonable under the circumstances,--

25
 (1) it is not being presented for any improper
purpose, such as to harass or to cause unnecessary
delay or needless increase in the cost of litigation;

(2) the claims, defenses, and other legal
contentions therein are warranted by existing law or by
a nonfrivolous argument for the extension,
modification, or reversal of existing law or the
establishment of new law;

(3) the allegations and other factual contentions
have evidentiary support or, if specifically so
identified, are likely to have evidentiary support
after a reasonable opportunity for further
investigation or discovery; and

(4) the denials of factual contentions are warranted
on the evidence or, if specifically so identified, are
reasonably based on a lack of information or belief.

FED. R. CIV. P. 11. The rule provides that, if the court

determines that an attorney has violated the above provisions,

“the court may . . . impose an appropriate sanction upon the

attorneys, law firms, or parties that have violated [the above

provisions] or are responsible for the violation.” Id. (emphasis

added).

“We review all aspects of a district court's decision to

invoke Rule 11 and accompanying sanctions under an abuse of

discretion standard.” Childs v. State Farm Mut. Auto. Ins. Co.,

29 F.3d 1018, 1023 (5th Cir. 1994). This standard is necessarily

deferential because, based on its “[f]amiliar[ity] with the

issues and litigants, the district court is better situated than

the court of appeals to marshal the pertinent facts and apply the

fact-dependent legal standard mandated by Rule 11." Cooter &

Gell v. Hartmarx Corp., 496 U.S. 384, 402 (1990).

26
 Axcess contends that the district court abused its

discretion in declining to impose Rule 11 sanctions for two

reasons: (1) because the record contains no evidence indicating

that Lulirama did not authorize Axcess’s use of the jingles, and

(2) because Axcess took inconsistent legal positions in the state

and federal court actions as to the legal effect of the

Promotional License Agreement. We reject both of these

contentions.

As to the first, a prima facie claim of copyright

infringement requires proof of two elements: “(1) ownership of a

valid copyright, and (2) copying of constituent elements of the

work that are original.” Feist Publications, Inc. v. Rural Tel.

Serv. Co., 499 U.S. 340, 361 (1991). The existence of a license

authorizing use of copyrighted material is an affirmative

defense, and Axcess therefore bears the burden of proving the

existence of a license. See CMS Software Design Sys., Inc. v.

Info Designs, Inc., 785 F.2d 1246, 1248 (5th Cir. 1986). Thus,

the absence of evidence in the record indicating that Lulirama

did not authorize Axcess’s use of the jingles does not indicate

that Lulirama’s claims of copyright infringement lack any basis

in law or fact because establishing the absence of a license is

not an element of proof required to state a prima facie claim of

copyright infringement.

As to Axcess’s second argument, the district court concluded

that the doctrine of judicial estoppel was a sufficient deterrent

to Lulirama’s taking inconsistent legal positions. In light of

27
its unique “[f]amiliar[ity] with the issues and litigants,” we

cannot say that the district court abused its discretion in

making this determination. Cooter & Gell, 496 U.S. at 402; see

also Ergo Science, Inc. v. Martin, 73 F.3d 595, 598 (5th Cir.

1996) (“The doctrine of judicial estoppel prevents a party from

asserting a position in a legal proceeding that is contrary to a

position previously taken in the same or some earlier

proceeding.”).

III. CONCLUSION

For the foregoing reasons, we AFFIRM those portions of the

district court’s judgment (1) dismissing Lulirama’s copyright

infringement claims with prejudice and (2) declaring that

Lulirama owns the copyrights to the last twenty-nine jingles

created pursuant to the Jingle Writing Agreement. We VACATE that

portion of the district court’s judgment declaring that Axcess

owns the copyrights to the first seven jingles and RENDER

declaratory judgment that Axcess has a nonexclusive license to

reproduce these jingles, create derivative works from them,

distribute and sell them to its radio and television customers,

and authorize public performances of them. We AFFIRM the

district court’s order denying sanctions against Lulirama. Costs

shall be borne by Lulirama.

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