Trademark & Copyright Law Blog : Intellectual Property Lawyers & Attorneys : Foley Hoag Law Firm : Washington D.C., Boston

 Along with January’s hot activity in the race for the Republican Presidential nomination, we also saw the emergence of two more stories about the intersection of intellectual property and political ads.

One issue is “déjà vu all over again”: political fair use. We are once again confronted with the question of to what extent the fair use doctrine (http://www.copyright.gov/fls/fl102.html) allows for the use of copyrighted news clips in political advertisements. We’ve previously written about this issue here, here, and here.

This time, it’s Mitt v. NBC. On-again off-again front runner Mitt Romney has issued an attack ad against latest rival Newt Gingrich. The ad, entitled “History Lesson”, is little more than a short clip of a 1997 episode of NBC’s Nightly News, reporting that Gingrich was found guilty of ethics violations. Along the bottom, just under Tom Brokaw’s tie, are the words “Paid for by Romney for President, Inc. Approved by Mitt Romney.”

Upon seeing the ad, NBC’s vice president of media law, David N. Sternlicht, shot off a missive to the Romney campaign, demanding that NBC’s copyrighted material be taken out of the ad. The Romney campaign says that it intends to keep running the ad (unlike the last time, when it backed down after a similar demand from CNN of an anti-Perry ad).

This time, the story also has a twist. NBC is claiming that, in addition to the copyright violations, the ad falsely implies that NBC or Tom Brokaw have endorsed its content. Mr. Sternlicht wrote that “[a]side from the obvious copyright issues, this use of the voice of Mr. Brokaw and the NBC News name exploits him and the journalistic credibility of NBC News.” Tom Brokaw issued a similar statement, reported in the Washington Post: “I am extremely uncomfortable with the extended use of my personal image in this political ad.” In other words, NBC and Brokaw are asserting that, in addition to infringing on their copyright, the ad is also a violation of their “Right of Publicity” or perhaps a False Designation of Origin under the Lanham Act.

Neither NBC nor Brokaw have filed suit yet but, in a similar case, candidate Ron Paul has done just that. On January 4, 2012, an anonymous YouTube user named “NHLiberty4Paul” uploaded a vicious advertisement, subtitled “The Manchurian Candidate,” which alleged that then-candidate John Huntsman was beholden to Chinese interests. The ad ends with the text “VOTE RON PAUL.”

Within less than 10 days, Paul initiated a lawsuit in the Northern District of California against the anonymous makers of the ad. Paul claims include False Designation of Origin under the Lanham act and common law defamation.

So far, things haven’t been going well for the Paul lawsuit. Paul sought immediate discovery from YouTube in order to discover the identity of NHLiberty4Paul, but Magistrate Judge Maria-Elena James denied the request without prejudice on the grounds that Paul’s motion had failed to address the legal standard for expedited discovery. Otherwise, the case appears to be proceeding in the normal course. We’ll keep you posted.

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In the wake of last week’s web protests and media attention around pending anti-piracy legislation, leaders in both houses of Congress announced on Friday that they would indefinitely postpone further consideration of the Stop Online Piracy Act (“SOPA”) and the PROTECT IP Act (“PIPA”). Senate Majority Leader Harry Reid (D-NV) cancelled the cloture “test” vote to reopen debate on PIPA that had been scheduled for tomorrow, January 24, citing “legitimate issues raised by many” while expressing optimism “that we can reach a compromise in the coming weeks.” In response, SOPA sponsor Rep. Lamar Smith (R-TX) announced that the House Judiciary Committee would postpone consideration of SOPA, which it had intended to take up in February, “until there is wider agreement on a solution.” Sen. Patrick Leahy (D-VT), lead sponsor of PIPA, expressed disappointment at the delay of the Senate vote, calling it a “knee-jerk reaction” and reaffirming his commitment to see a version of the bill passed this year.

The stalling of SOPA and PIPA may make room for alternative anti-piracy legislation being advanced by Rep. Darrell Issa (R-CA) and Sen. Ron Wyden (D-OR). Dubbed the Online Protection and Enforcement of Digital Trade (“OPEN”) Act, the Issa/Wyden proposal omits some of the more controversial measures of SOPA and PIPA and concentrates enforcement powers in the International Trade Commission. Sen. Wyden introduced the OPEN Act as S. 2029 on December 17, 2011, and Rep. Issa officially introduced it as H.R. 3782 on January 18, during last Wednesday’s web blackout protests.

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The tide may be changing in the controversy over SOPA and PROTECT IP (or “PIPA”), the anti-piracy bills that have been making their way through, respectively, the House and the Senate in recent months. Yesterday’s unprecedented 24-hour global blackout of the English Wikipedia site in protest of the legislation and the new enforcement powers it would create has acted as a lightning rod for public attention. In concert with Wikipedia, Google ran a “censored” version of its logo on its home page yesterday, with a plea to users to contact their legislators, and many other popular sites displayed blacked-out screens together with information about the bills. Wikipedia reports today that SOPA was featured in a quarter-million Tweets per hour during the blackout.

Yesterday’s high-profile online activism follows months of public debate about SOPA and PIPA, which critics fear could chill online speech and destabilize the architecture of the Internet. While the legislation still has many vocal supporters – the Motion Picture Association of America’s chairman, former senator Chris Dodd, called the blackouts “stunts that punish users” – the ranks of opponents seem to be growing, and now include such strange bedfellows as the ACLU and the Tea Party. Ars Technica reports that 18 senators, seven of whom are former co-sponsors of PIPA, announced their opposition to the bill yesterday.

The White House Speaks

The White House has also expressed reservations about the bills in the past week, explaining in a statement released January 14 that, “While we believe that online piracy by foreign websites is a serious problem that requires a serious legislative response, we will not support legislation that reduces freedom of expression, increases cybersecurity risk, or undermines the dynamic, innovative global internet.”

Sponsors Tone Down Enforcement Powers to Move Bills Forward

Nevertheless, the bills’ lead sponsors are pressing on, albeit with some concessions to their critics. On January 13, House Judiciary Committee Chairman Lamar Smith (R-TX), a sponsor of SOPA, announced that he would remove the bill’s provisions requiring ISPs to block domain names of offending sites, which had been criticized as a threat to Internet stability and security. This week, he stated that markup hearings on the amended SOPA would continue in February.

In the Senate, PIPA’s lead sponsor, Sen. Patrick Leahy (D-VT) announced on January 12 that he was preparing an amendment to require that domain-name-blocking provisions be subjected to further study following passage of the bill, before they could take effect. Action on PIPA is likely to resume on January 24, when the Senate will hold a “test vote” on a motion for cloture, to lift a hold placed by Sen. Ron Wyden (D-OR) and begin debate on the bill.

Alternatives and Workarounds Spring Up

Rep. Darrell Issa (R-CA) and Sen. Wyden, the leading opponents of SOPA and PIPA, have introduced their own alternative legislation in both houses of Congress. The Online Protection & Enforcement of Digital Trade Act (or the “OPEN Act”) would give the International Trade Commission jurisdiction over challenges to allegedly infringing websites, and would target only payment processors and advertisers that support offending sites, not search results or domain name lookups.

And in another form of tech activism, the anonymous coders behind MAFIAA Fire, who originally created a browser plug-in to circumvent domain name seizures by the Department of Homeland Security, have come up with a new plug-in to address the domain-blocking measures of SOPA/PIPA. (As the MAFIAA Fire FAQs point out, such circumvention is legal at least until SOPA passes.) The MAFIAA Fire team also claims to have technical responses in the works to counteract other measures proposed in SOPA/PIPA.
 

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As the old adage goes, ask a simple question and you’ll get a simple answer. So one might think a question like “how long does a copyright last” would merit an equally concise answer like “the life of the author plus 70 years.” Of course, nothing in life is as simple as it seems and anyone even casually familiar with U.S. copyright law knows that how long a copyright lasts may depend on several factors such as when the work was written, whether it was registered or published in the United States, and whether it was the result of individual or corporate authorship. Generally, how long a copyright lasts depends upon what was provided by law at the time the work was created, so a work created in 1925 is treated differently than one created in 1965.

Complication of U.S. copyright law aside, determining when a copyright was applicable has not been a complicated matter for those who wished to reproduce or perform works they did not create. Either the work was under copyright and you paid for the privilege (or otherwise got permission) or it had lapsed into the public domain and could be freely reproduced without cost or consent. Works that were in the public domain yesterday, or last year, or ten years ago, would stay in the public domain because they either never attained copyright protection or the protection had lapsed. That was, until the Supreme Court rendered its very recent decision in the case of Golan v. Holder. Things have now gotten a little more complicated.

For most of the history of U.S. copyright law, works of foreign authorship have been given substantially less protection than works created in the United States or, in many cases, no protection at all. The United States was a relative late-comer in joining the 1886 Berne Convention for the Protection of Literary and Artistic Works (Berne), having become a member only as recently as 1989. Then, in 1994, Congress enacted Section 514 of the Uruguay Round Agreement Act (URAA), which had the effect of granting U.S. copyright protection to previously unprotected works provided that they were also protected in their country of origin under Berne. This meant that great works of music by the likes of Prokofiev or Shostakovich, paintings by Picasso, and films by Hitchcock previously unavailing of U.S. copyright protection would suddenly be snatched back from the elysian fields of the public domain and reproducing or performing them was going to start costing.

Sensing the far reaching cultural implications of the URAA, Lawrence Golan, a professional conductor, challenged the legislation in court, claiming that it ran afoul of Article I, Section 8, Clause 8 of the Constitution, the so-called Copyright Clause, which empowers Congress “[t]o promote the progress of science and useful arts, by securing for limited times to authors . . . the exclusive rights to their respective writings.” Golan argued that granting sudden copyright protection to works already in the public domain did nothing to promote the creation of new works, but rather only granted a benefit for works already created. Additionally, Golan argued that the URAA contravened the principles of free speech and freedom of expression. Now, nearly two decades after the URAA was enacted, the Supreme Court has issued an opinion in the matter and, in a 6 to 2 decision written by Justice Ginsburg, does not agree with Golan -- the URAA passes constitutional muster, in respect to both the First Amendment and the Copyright Clause.

The Court’s decision applies principally to works first published outside the U.S. in Berne member countries between 1923 and 1989 and has a seemingly dramatic effect. It is estimated that millions of works are implicated. Sheet music publishers who could once freely publish certain master works of the 20th century will now require permission. Orchestras which once performed works such as Peter and the Wolf by Prokofiev without having to acquire or pay for a license will now have to do so. In regard to older more obscure works, the mere act of finding an author or his or her successor in interest to request copyright permission might prove to be a monumental or even impossible task. Electronic online databases containing volumes upon volumes of formerly public domain books now have to determine the effect of the URAA. Yet, despite these dramatic results, the High Court’s opinion is a mostly staid affair.

Drawing heavily from and building upon the Supreme Court’s decision in Eldred v. Ashcroft, 537 U.S. 186 (2003), which upheld Congress’s authority to extend then current copyright terms by 20 years, the Golan opinion takes an historical survey of Congress’s actions vis-à-vis copyright and finds no historical precedent, either congressional or judicial, which stands for the principle that Congress may not restore or grant for the first time copyright protection to works which were once in the public domain. Justice Ginsburg, additionally, is cognizant that there is another side to the URAA coin, the fact that U.S. authors benefit by reciprocal copyright treatment in Berne countries. She writes, “Congress determined that U.S. interests were best served by our full participation in the dominant system of international copyright protection.” Ultimately, the Court reasons, each act of Congress related to copyright need not in and of itself serve to promote creativity, but rather, need only contribute holistically to a copyright regime which, overall, has inspirational effect.

In a dissenting opinion joined by Justice Alito, Justice Breyer sides firmly and resolutely with Golan and others who challenged the URAA. He unequivocally believes that the principal purpose of the Copyright Clause is to encourage new authorship. Likewise, he views the removal of works from the public domain as interfering with freedom of speech. Justice Kagan, who presumably had contact with the URAA in her former capacity as U.S. Solicitor General, recused herself.

For the average person this decision won’t have direct implications, although indirect effects may start to appear. Perhaps that book of French poetry you thought you once found online won’t be available the next time you check. Maybe the concert tickets for your local symphony orchestra will be just a bit more expensive next season, or maybe they won’t be putting on that evening of great works by Russian masters after all. However, for people who have been actively engaged in exploiting twentieth century works of foreign origin, it is always better to be safe than sorry - you should verify whether or not a valid copyright now applies.  

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Political primary season is upon us and, just like a bad hangover, one particular political speech question just keeps creating headaches. To what extent is the unauthorized use of copyrighted material in political campaign advertisements protected by the fair use doctrine? Can political ads borrow a clip from a presidential debate? From a televised sporting event? How about a photograph created by an opponent’s campaign?

We previously reported on copyright dustups over the “Miracle On Ice” ads by former U.S. Presidential candidate Tim Pawlenty, and attack ads against Canadian Liberal Party leader Michael Ignatieff. In both of these instances, political campaigns ads used copyrighted material from major news organizations. In each case, the news organizations made some noise about copyright infringement and then backed down before things got litigious.

Then, in October, as reported by Talking Points Memo’s Benjy Sarlin, Presidential candidate Mitt Romney’s campaign released the “Ready to Lead?” internet attack ad against Texas Governor Rick Perry. The ad questioned Perry’s general competence with clips of “brutal” reviews of his debate performances by television commentators from CNN, FOX and elsewhere. (In one clip, Fox News’ Britt Hume announces: “Perry really did throw up all over himself in the debate.”). CNN, claiming copyright infringement, demanded that Romney remove the video from the internet. This time, it was the candidate that backed down. Romney’s campaign vigorously claimed that it was protected by the fair use doctrine . . . but nonetheless took the video down only a few hours after it was posted.

So is anybody going to hang in there, to sue or be sued, so we can develop some modern case law on this issue?

The latest candidate for political fair use torch-bearer is Los Angeles County Deputy District Attorney Alan Jackson. In his bid to knock City Attorney Carmen Trutanich out of the race for Los Angeles District Attorney in 2012, Jackson released an attack ad inspired by “The Hangover” movie franchise, featuring various photographs of Trutanich instead of the movie characters.

So, who’s complaining? The producers of the “The Hangover”? Nope. The Trutanich campaign? Well, maybe. The Contra Costa times has reported that the photographs of Trutanich which were used in the ad were actually taken by a Trutanich campaign photographer in 2009. The photographer has retained counsel and sent a demand letter threatening a copyright infringement claim. Jackson’s campaign, for its part, has invoked the First Amendment, presaging a fair use defense.

Is this one going to go the distance? Will the photographer really bring suit and force Jackson to defend on the basis of fair use, perhaps resulting in a big fat juicy Ninth Circuit opinion? Or, as the Jackson campaign has implied, is the threatened lawsuit nothing more than a concoction of the Trutanich campaign, designed to evaporate once the requisite political points are scored? If history is any judge, it will probably be the latter, and we’ll be left to nurse our political fair use headaches once again.

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Here’s something you probably don’t want fixed in a tangible medium of expression: revenge porn. 

Twenty-five-year-old Hunter Moore (pictured, above right) is the creator of the website Is Anyone Up (www.isanyoneup.com). In essence, here’s how revenge porn works: Remember those naked pictures you took of yourself and sent to a very close friend with the explicit instruction or implicit assumption that the images would remain private? Well, just make sure you don’t give your friend cause to become a former friend. If you did, your former friend may already have sent those pictures anonymously to Mr. Moore. Upon receipt, Mr. Moore will post them on his increasingly popular website, along with a helpful link to your actual Facebook page, just in case there was any doubt the pictures were of you.

For Mr. Moore’s troubles, he has received numerous death threats, one actual attempt on his life and, most recently, a very angry letter from Facebook’s lawyers. He has also reaped an estimated $13,000 per month in ad revenue and a great deal of media attention.

Here’s why we’re interested: In a recent episode of NPR’s On the Media, Bob Garfield interviewed Moore, who explained why he believes he is immune to legal action. Part of the conversation went like this:

HUNTER MOORE: . . . And then also with the copyright issue, you know, a lot of people are sending me DMCA requests and –

BOB GARFIELD: They say, I own this photo, you have no right to display it; please take it down.

HUNTER MOORE: Yes, but when you take a picture of yourself in the mirror, it was intended for somebody else, so actually, the person you sent the picture to actually owns that picture because it was intended as a gift. So whatever the - that person does with the picture, you don’t even own the nude picture of yourself anymore.

Is that correct? No way. With a few exceptions with respect to works made for hire, the copyright in a photograph subsists with the person who takes the photograph. Once the photograph is distributed, copyright law makes a distinction between on the one hand the object itself (which the new owner can sell or give away under the first sale doctrine), and on the other hand the rights to further reproduce or publish that image (which rights generally can only be transferred in writing).

So, it is true that you probably can’t use copyright law to stop your former friend from giving, say, a printout of your nude self-portrait away, and as a practical matter it is very difficult to stop your former friend from emailing that picture around. However, you may be able to use copyright law to stop Mr. Moore from publishing that image on-line. At the risk of incurring the wrath of the revenge porn industry, Mr. Moore appears to have learned copyright law from the same place he learned to respect other people’s privacy.

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As most readers know, the Supreme Court held in the 2006 eBay decision that injunctions were no longer to be the norm in patent cases, and irreparable harm was not to be presumed. Instead, injunctions are within the equitable discretion of the district court, and are to be granted only if the plaintiff has shown entitlement under the traditional multi-factor test.

It’s been clear for some time that the same principles now apply in copyright and trademark cases as well. The First Circuit, for instance, addressed eBay in the context of a trademark cases in the Voice of the Arab World decision, and several courts have applied the holding to copyright cases, such as the Second Circuit in the J.D. Salinger case.

What does this mean for plaintiffs in trademark and copyright cases? This is still unclear, and the question will be very case specific. In October, the Federal Circuit reversed a lower court’s denial of a permanent injunction in a patent case, implying that eBay shouldn’t be read too broadly. The court wrote this interesting summary:

Although eBay abolishes our general rule that an injunction normally will issue when a patent is found to have been valid and infringed, it does not swing the pendulum in the opposite direction. In other words, even though a successful patent infringement plaintiff can no longer rely on presumptions or other shortcuts . . . it does not follow that courts should entirely ignore the fundamental nature of patents as property rights granting the owner the right to exclude.

Some courts, though, appear not to share the Federal Circuit’s view that the "pendulum" is now neutral. Last month, a district court in Maryland, citing eBay, denied post-trial injunctive relief to a prevailing plaintiff in a copyright case. In that case, the plaintiff showed that the Baltimore Ravens NFL franchise had copied his drawing of a “Flying B Logo” without authority, and the Fourth Circuit had held that use of a similar logo (see below) in films and video clips was not fair use.

But on remand, the district court compelled the defendant Baltimore Ravens to pay “reasonable compensation,” which seems to constitute something other than statutory damages or wrongful profits, and then cited the adequacy of that compensation as a reason for denying the requested injunction. The eBay decision appears to have spawned at least one judicially created compulsory licensing scheme.

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Back in May, we wrote about MAFIAA Fire, a browser plug-in created by anonymous coders to counteract the government’s efforts to shut down copyright-infringing web sites by seizing the domain names. 

As we mentioned at the time, the PROTECT IP Act currently pending in the Senate would give the government (and private parties, for that matter) enhanced tools to bring down foreign-hosted rogue sites. 

Now the House has its own version of the legislation, dubbed the Stop Online Piracy Act (SOPA), and it has a provision that appears to be directed squarely at MAFIAA Fire. The bill would empower the Attorney General to seek an injunction against anyone who provides a service or product designed to circumvent the government’s enforcement efforts, including domain name blocks. This, of course, is exactly what MAFIAA Fire does.

The most notable other change in the House bill is the addition of a notice-and-takedown procedure that would allow private plaintiffs to instruct payment processors and advertising services to cut off the revenue to alleged rogue sites without having to go to court first. This robust new tool is backed by a broad coalition of industries.

For further information about both bills, see http://www.fightonlinetheft.com/, a web site set up by supporters. For an opposing view, check out the Electronic Frontier Foundation’s comments on SOPA. The House Judiciary Committee has scheduled a hearing on the bill for Wednesday, November 16. Check back soon for more updates on the bills’ progress. 

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We previously posted about Massachusetts District Court Judge Young’s order allowing copyright infringement plaintiff Liberty Media to discover (and thereby potentially reveal to the public!) the identity of 38 “John Doe” downloaders of “Amateur College Men Down on the Farm,” a pornographic film. But perhaps the most far-reaching implication of Judge Young’s opinion was a footnote. Judge Young noted that copyright protection was effectively unavailable anywhere for “obscene” material until the 1970s, and that it wasn’t entirely clear “whether pornography is in fact entitled to protection against copyright infringement” at all in the First Circuit.

Wow. Could it really be the case that a $97 billion dollar-a-year industry is essentially unprotected from copyright infringement by competitors, pirates or at least by 38 soon-to-be-no-longer “John Does” in Massachusetts? Or put another way, is there an obscenity defense to copyright infringement?

To get to the bottom of this, we travel 150 years back in time to the premiere of Broadway’s very first musical, The Black Crook, the story of an evil German Count who employs black magic to tear a village girl from her starving-artist boyfriend, only to be foiled by the Fairy Queen of the Golden Realm. The play features songs such as “You Naughty Naughty Men” and “Dare I Tell,” and is apparently riddled with serendipitous opportunities for the removal of clothing by village girls and fairy queens alike. The Black Crook opened on Broadway in 1866 and ran for a record-breaking 474 performances, followed by a national tour which ended up at one of San Francisco’s two major theaters, Thomas Maguire’s Opera House.

You may be asking, “What would I do if I owned San Francisco’s other major theater?” Here is a suggestion: Open a play opposite The Black Crook called The Black Rook, which features the identical lines, songs and, of course, opportunities for disrobing. That is exactly what the Metropolitan Theater did. Clear-cut copyright infringement, right?

Nope. Unfortunately for The Black Crook¸ Federal Judge Matthew Deady was not a fan. In Martinetti v. Maguire, 16 F. Cas. 920 (C.C. Cal 1867), Judge Deady recognized that the elements of copyright infringement were essentially met, but nevertheless refused to extend protection to the play. Deady criticized the “scant and meaningless dialogue” as a mere excuse for “the exhibition of women in novel dress or no dress.” In Judge Deady’s view, the “exhibition of women ‘lying about loose’ or otherwise, is not a dramatic composition, and, therefore,” no-doubt to the delight of the Metropolitan Theater, “not entitled to the protection of the copyright act.” Alternatively, Judge Deady held that since he had no use for the play, extending copyright protection would not “promote the progress of science and useful arts.”

The tables finally turned about a hundred years later in Mitchell Bros. Film Group v. Cinema Adult Theater, 604 F. 2d 852 (5th Cir. 1979), a case involving the public exhibition of pirated prints of Behind the Green Door. The pirates followed the example of the Metropolitan Theater and asserted “obscenity” as an affirmative defense. But this time it didn’t work. The Fifth Circuit pointed out that while the Copyright Act is silent as to the issue of obscenity, the best way to promote the “useful arts” was to protect all works “regardless of subject matter or content, trusting to the public taste to reward creators of useful works and to deny creators of useless works any reward.” This was particularly important when it came to works labeled pornographic, because society’s view of morality was continually changing, rendering obscenity an unreliable barometer for copyright protection.

While a few courts have followed the Fifth Circuit’s lead, elsewhere the case law on this issue is surprisingly scant or non-existent. But that doesn’t mean we can assume that the modern view has prevailed. As recently as 1998, a Judge in the Southern District of New York refused to issue injunctive relief to a copyright plaintiff after determining that the materials in question were “hard core pornography bereft of any plot and with very little dialogue.” So, is there an obscenity defense to copyright infringement in the First Circuit today? Probably not. But Judge Young has given 38 “John Does” the opportunity to give it the old “amateur college” try.

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The recent case of Edgenet, Inc. v. Home Depot U.S.A., Inc. (7th Cir., No. 10-1335, 9/2/11) illustrates the principle that a copyright license without restrictions will be broadly construed to encompass all rights. The facts of the case were that Home Depot had contracted in 2004 with Edgenet for Edgenet to develop a classification system (called a “taxonomy”) that was to be used to organize Home Depot’s product database. For example, as the Seventh Circuit Court of Appeals suggested, a particular screwdriver part might be classified under “tools/manual/screwdriver/Phillips/bits/metal”, and that classification would form part of the taxonomy. Under the contract, Edgenet retained ownership of the taxonomy but granted Home Depot a license to use it for so long as Edgenet remained Home Depot’s data-pool vendor. On termination of the contract, the license terminated, and Home Depot was required at that time immediately to stop using the taxonomy unless it exercised an option to purchase a perpetual license for $100,000.

Home Depot ultimately decided to build its own in-house database, instead of having the database hosted by Edgenet, and so in 2009 Home Depot gave notice that its contract with Edgenet would end shortly and exercised its option to acquire the perpetual license by sending Edgenet a check for $100,000. Edgenet disputed Home Depot’s right to acquire the perpetual license, and so returned the check and filed suit against Home Depot, alleging that Home Depot was infringing Edgenet’s copyrights in the taxonomy. The District Court dismissed Edgenet’s copyright infringement claim, and the Seventh Circuit affirmed that decision.

Edgenet had alleged that Home Depot had infringed Edgenet’s copyrights in the taxonomy because Home Depot had started developing its own database based on the taxonomy before exercising the option, and that the infringement invalidated the option. However, the court ruled that Home Depot had obtained a license to use the taxonomy in any way it pleased. The license that allowed Home Depot to use the taxonomy during the term of the Edgenet contract was broad and did not include any restrictions other than reverse engineering restrictions (which were not violated). It may have been Edgenet’s intention that Home Depot only use the taxonomy in order to receive the benefit of Edgenet’s provision to Home Depot of a database based on the taxonomy, but the license was not drafted to express that limitation. As such, there was nothing to prevent Home Depot exercising its license rights to incorporate the taxonomy into a new database. Edgenet also argued that Home Depot had lost the right to acquire a perpetual license because Home Depot’s Canadian affiliate had dropped Edgenet as a supplier. However, as the court pointed out, the option continued until the contract between the parties was terminated. Because the contract had remained in place and the license continued, Home Depot’s option survived and Home Depot’s exercise of the option was valid.

This decision is not surprising, but it is a useful reminder that, if acting for a copyright licensor, any license should be narrowly tailored to the licensor’s purposes, with the licensee receiving only the rights it needs for the purpose of the Agreement.

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BitTorrent users now have even more reason to be concerned if they are targeted in “John Doe” lawsuits for copyright infringement. In a recent case, 38 BitTorrent users, known only by their IP addresses and identified as John Does, were sued as a group. Three of the John Does sought to quash the subpoenas issued to their ISPs seeking the names and contact information of the BitTorrent users. A Boston federal court judge denied the motions, ruling that BitTorrent users do not have a reasonable expectation of privacy in the contact information that they give to their ISPs. The judge also allowed the case to proceed against all 38 John Does, finding that the claims arose out of the same transaction or occurrence (or series of transactions or occurrences), and that there are questions of law or fact common to all defendants.

Finally, in perhaps the most interesting part of the opinion, the judge denied the BitTorrent users’ request to remain anonymous even in light of the controversial and potentially embarrassing nature of the copyright infringement allegations.

Interested? Read on…

Allegations of Infringement

Liberty Media Holdings, LLC sued the colorfully named “Swarm Sharing Hash File AE340D0560129AFEE8D78CE07F2394C7B5BC9C05” and John Does 1 through 38, alleging infringement of the copyrighted motion picture “Corbin Fisher Amateur College Men Down on the Farm.” In case you are wondering, yes, the movie is reported to contain “hardcore” "homosexual pornography."  The plaintiff alleged that the 38 John Does acted collectively to reproduce and distribute the movie over the internet using BitTorrent file transfer protocol. The case was assigned to Judge William G. Young in Boston.

What is BitTorrent?

In a nutshell, BitTorrent technology allows users to download large files (such as movies) in small pieces over the internet by obtaining the pieces from multiple sources. An excellent technical description appears in Wikipedia, and Judge Young’s opinion provides a good overview. The 38 John Does were alleged to have participated in a BitTorrent “swarm” that engaged in the illegal uploading and downloading of the plaintiff’s motion picture over the internet using the BitTorrent protocol.

The Plaintiff's Subpoenas to the ISPs

Immediately after filing the complaint, the plaintiff sought and obtained an order ex parte – that is, an order obtained from the judge without giving advance notice to the defendants – allowing the plaintiff to serve subpoenas on three ISPs that were servicing the allegedly infringing IP addresses. The subpoenas sought to require the ISPs to reveal the names and subscriber information of the 38 John Does who were known to the plaintiff only by their IP addresses. Notably, none of the three ISPs objected to the subpoenas, and indeed one of them (RCN) had complied with the subpoena by the time the objections of the John Does were decided by Judge Young. The ISPs gave the John Does notice of the subpoena, and the John Does had 21 days to object or else have their names and subscriber information turned over to the plaintiff.

Three of the 38 John Does, while still remaining anonymous, hired attorneys to file motions to quash the subpoenas to the ISPs. The motions alleged various deficiencies in the subpoenas and in manner in which all 38 John Does were sued together in the same action. Judge Young denied the motions across the board.

Plaintiff Established a Prima Facie Case of Copyright Infringement

First, the judge ruled that the plaintiffs had stated a prima facie claim for copyright infringement, despite the fact that little was known about the specific actions taken by any particular defendant, because the plaintiff’s investigator had uncovered proof that the unique IP addresses of the 38 John Does were engaged in the unauthorized downloading and distribution of the AE3 Hash associated with the plaintiff’s motion picture file.

No Expectation of Privacy in Subscriber Data Given to ISPs

Second, the judge found that the 38 John Does did not have standing to raise procedural objections to the plaintiff’s subpoenas to the ISPs, and moreover that they did not have any reasonable expectation of privacy in the identifying information that they had provided to their ISPs. Citing to other cases, Judge Young explained that “[i]nternet subscribers do not have a reasonable expectation of privacy in their subscriber information - including name, address, phone number, and email address – as they have already conveyed such information to theirs ISPs.” Stated another way, because “[i]nternet subscribers share their information to set up their internet accounts,” the subscribers “cannot proceed to assert a privacy interest over the same information they chose to disclose.”

Mass Lawsuits Against BitTorrent Swarms are Okay

Third, the judge rejected the argument that it was improper for the plaintiff to sue all 38 John Does in a single lawsuit. The court found that joinder of the parties was proper, as the right to relief asserted against the defendants arose out of the same transaction, occurrence, or series of transactions or occurrences (i.e., the collective downloading and distribution of the plaintiff’s copyrighted motion picture), and that there are questions of law or fact common to all defendants.

BitTorrent Users May Not Proceed Anonymously – Unless They Are Homosexual, and Then Only Maybe

Lastly, and perhaps most devastatingly to the BitTorrent users, Judge Young ordered that the 38 John Does would be prohibited from proceeding further in the lawsuit on an anonymous basis and could no longer use pseudonyms in their court filings. Two of the John Does argued that their public identification in connection with the downloading of homosexual pornography would subject them to reputational harm, intrusion of privacy, and intrusive public scorn, and would coerce them to pay money to the plaintiff pursuant to private settlement agreements so as to avoid being publicly named. Judge Young rejected these arguments, stating, “The potential embarrassment to Does 1-38 of being associated with allegations of infringing hardcore pornography does not constitute an exceptional circumstance that would warrant allowing the defendants to proceed anonymously.”

However, in an interesting twist, Judge Young went on to recognize that some courts have allowed homosexual parties to maintain anonymity in litigation, presumably due to the historical stigma associated with homosexuality. The judge indicated that he would entertain motions by individual defendants to proceed anonymously on this ground, with the caution that “The Court presently expresses no opinion on whether homosexuality continues to be a protected privacy interest warranting anonymity. If such a privacy interest exists, the Court will be careful to draw a line between the ‘mere embarrassment’ of being publicly named in a lawsuit involving hardcore pornography, which does not provide a basis for anonymity, and concern over the exposure of one’s sexual orientation. The Court presently declines, however, to grant anonymity to all of the defendants based on the generalized concerns of public scorn expressed by
only two of the thirty-eight defendants.” This is a fascinating issue with obvious public policy implications, and it will be interesting to see how it unfolds.

The upshot is that the unauthorized downloading of movies and other files through BitTorrent protocol is an extremely risky business, and your ISP may not be willing or able to help you if you do it.

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So, I hear you are selling Halloween costumes, the designs for which you copied from another manufacturer. Well, gather around the fire, because I have a very scary story to tell you.

Chosun International was the manufacturer of impossibly cute animal costumes for children, featuring plush sculpted hoods and sleeves shaped like various animals’ heads and paws. In 2002, Chosun sued one of its competitors for copying these designs. In a very eerie opinion, the District Court dismissed the complaint for failure to state a claim, holding that Halloween costumes were not entitled to copyright protection as a matter of law!

In coming to this conclusion, the District Court cited the Copyright Act’s “useful article” doctrine, which denies copyright protection for the merely utilitarian aspects of a design. Under this doctrine, for example, the two-dimensional pattern on a dress may be copyrightable, but the actual three-dimensional cut of the dress (which serves the utilitarian purpose of fitting the human body) is generally not protected by copyright. In the Chosun case, the District Court held that each entire costume served the useful purpose of “masquerading,” and therefore they were not protectable.

If that has you scratching your pumpkin, you are not alone. The Second Circuit, in Chosun International, Inc. v. Chrisha Creations, Ltd., 413 F. 3d 324 (2005), vacated this decision. The Court noted that, notwithstanding the useful article doctrine, individual design elements on a utilitarian item, which are physically or conceptually separable from the underlying product, may be protected by copyright. In the case of the costumes, the District Court had erred in holding that the plush sculpted hoods, and maybe the paws, were not conceptually separable from the costume’s “clothing function.” In other words, the addition of the head and paws was not motivated by a desire merely to enhance costume’s functionality as clothing. The Second Circuit remanded the matter, and the case later settled.

So watch out this Halloween, costume copycats! The useful article doctrine may be less useful than you thought.

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On October 3, 2011 the U.S. Supreme Court declined a request to grant certiorari in Vernor v. Autodesk. As we reported previously, enterprising vendor Timothy Vernor, who attempted to sell second-hand (but unopened and authentic) copies of Autodesk’s AutoCAD software on eBay, was rebuffed by the Ninth Circuit, which determined that Autodesk’s customers were licensees and not owners. Thus the sale of the AutoCAD software to Vernor -- which was prohibited by the AutoCAD license -- was invalid, and Vernor himself, neither a licensee nor an owner, could not avail himself of the first sale doctrine.

The Supreme Court’s denial of certiorari means that the Ninth Circuit’s three-prong test for determining whether a software user is a licensee or an owner is the law -- in the Ninth Circuit, that is. Will courts in other circuits follow suit? Or will subsequent software cases eventually yield a split, forcing the U.S. Supreme Court to weigh in?

In the meantime, the case is back in the hands of the U.S. District Court for the Western District of Washington, where it will adjudicate Vernor’s original claim for declaratory relief.

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Last week, Miami Herald reporter Carol Rosenberg, perhaps best known for her coverage of government activities at Guantanamo Bay, reported that the U.S. government had violated U.S. Copyright law . . . kind of. In an effort to “rebrand” its military tribunals, the Pentagon spent about $500,000 on a new website, http://www.mc.mil/. After all that effort and expense, it was only natural that some well-intended individual put the following notice at the bottom of the home page: “Copyright © 2011 Office of Military Commissions.” 

Not so fast. Within days of the new site’s launch, Yale Law School professor Eugene R. Fidell noticed the notice and contacted the Pentagon to break the bad news: as an arm of the U.S. government, it couldn’t copyright its own work. In making his argument, Professor Fidell appears to have focused not on any section of the modern copyright statutes, but instead on the Printing Act of 1895, the history of which was documented in 1961 by a U.S. Copyright Office study.

In the early 19th century, there was no clear answer to the question of whether copyright subsisted in works of U.S. government employees acting in their official capacity. Then, in Wheaton v. Peters, 33 U.S. (8 Pet.) 591 (1834), the Supreme Court held that, on grounds of public policy, there could be no copyright in a judicial opinion.

But the scope of the Supreme Court’s public policy exception was tested in 1895 by Tennessee Republican congressman James Daniel Richardson. Richardson was chair of the Joint Committee on printing, which had been preparing a compilation of the “Messages and Papers of the Presidents of the United States.” Richardson appeared to be intent on facilitating the private publication of the work and, in response, Richardson’s opponents included Section 52 in the Printing Act of 1895, which provided that “no Government publications shall be copyrighted.” President Grover Cleveland subsequently signed the Act into law.

This seemed to take care of the problem, and the first few volumes of the “Messages and Papers” were published without incident. However, unbeknownst to his opponents, Richardson had not given up. In 1897, a volume (and then subsequent volumes) of the series was published with a copyright notice claiming ownership not by the U.S. Government, but by congressman Richardson himself!

When the opposition protested, Richardson asserted that he was only claiming copyright as to his own editorial contribution to the work. Nevertheless, the Senate Committee on Printing reviewed the matter in 1900 and declared the copyright invalid based on its understanding of the congressional intent of Section 52 -- not such an interpretive stretch considering that by most accounts Section 52 was passed specifically to curb congressman Richardson’s literary ambitions.

The principal behind Section 52 later migrated to the Copyright Act of 1909 and still survives today in the “Government works” section of the U.S. Code, 17 U.S.C. sec. 105, which provides that “Copyright protection under this title is not available for any work of the United States Government . . .”

But it is not clear that the Senate Committee on Printing had the last word. Congressman Richardson appears to have remained defiant, and in fact is still often listed the “author” of the Messages and Papers series, as a quick peek on Amazon.com will confirm. Meanwhile, in our modern example, the government gave in a bit more quickly: the Pentagon has already surrendered to Professor Fidell and removed the copyright notice from its website.

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Under U.S. law, a copyright holder possesses the exclusive right to copy and distribute the copyrighted work. However, after the copyright owner sells a copy, the First Sale Doctrine permits the subsequent owner to re-distribute the copy without consent or interference from the copyright holder. This is why, once you buy a book or a CD, you can give it away or resell it with no fear of being sued for copyright infringement. This seems a pretty cut and dry proposition if you stop into your local book or record store (if you are lucky enough to find one these days) and pick up a copy of the new best seller or chart topper and then later decide to sell it on eBay - but what if you buy hundreds or even thousands of copies of a book printed and sold in Asia at a much lower price than you can in the U.S. and then sell them to U.S. bargain hunters on eBay for a tidy profit? Will the First Sale Doctrine protect you against being held liable for infringement?

The answer, according to the Second Circuit Court of Appeals, is “no.” In two recent decisions, the Second Circuit first held, and then soon after affirmed, that the First Sale Doctrine as set forth in the U.S. Copyright Act does not apply to copies both lawfully made and first sold outside of the United States. In John Wiley and Sons, Inc. v. Kirtsaeng, the defendant did, in fact, sell textbooks printed and purchased in Asia for a lower price (and according to the plaintiff of a lower quality) on the Internet in the U.S. for a profit. The defendant, apparently emboldened by legal advice solicited on “Google Answers,” believed his actions to be lawful and raised the First Sale Doctrine in his defense. Too bad that Kirtsaeng didn’t know about the Ninth Circuit’s decision in Costco Wholesale Corp. v. Omega, S.A., which we previously wrote about here.  If he had, he might have exercised a little more caution. As it turns out, the U.S. Copyright Act protects copies “lawfully made under” the Act. The Ninth Circuit has already held that copies made and sold outside the U.S. and, therefore, outside the reach of and not “under” the umbrella of U.S. copyright law, don’t qualify for a First Sale Doctrine defense. The Second Circuit reached the same conclusion, which means that Kirtsaeng is on the hook for copyright infringement.

Just in case the Kirtsaeng decision left any doubt in the minds of those who might want to sell textbooks sourced in Asia for profit in the Second Circuit’s back yard, Pearson Education, Inc. v. Kumar should put it to rest. In this case, defendants again were reselling textbooks printed and bought in Asia on the Internet in the U.S. for profit. Perhaps hoping that the Second Circuit was eager to change its recently made up mind, the Pearson defendants argued that Kirtsaeng had been wrongly decided. Unfortunately for them, the Second Circuit didn’t see it that way. In a short, three-page order, the three-judge panel affirmed the precedential weight of Kirtsaeng and upheld the Southern District of New York judgment holding the defendants liable for copyright infringement.

But is this issue settled for good? Not necessarily. The Supreme Court recently reviewed the Ninth Circuit’s Costco decision, but, because Justice Kagan recused herself, the final decision was four in favor and four against -- resulting in no national precedent being set, previously discussed here. So the circuit courts will continue to develop their own jurisprudence as to this issue, at least for now. Perhaps the defendants in Pearson or Kirtsaeng will attempt an appeal to the High Court as well, in hopes of swinging Justice Kagan in their favor. Though it’s probably best if they don’t sell any more text books online to pay for the appeal, just in case.

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The First Circuit has kept alive a dispute, well-publicized in the Boston area and elsewhere, about what statutory damages can properly be assessed against a graduate student who illegally shared files of copyrighted music via file-sharing program Kazaa.  See here for an overview of the case, as well as links to various related content and documents.

Since the defendant, Joel Tenenbaum, eventually admitted his liability for copyright infringement, damages issues predominated in the district court and on appeal. Mr. Tenenbaum was sued for improperly sharing 31 copyrighted songs (although he shared thousands more), which placed the statutory damages between $22,500 and $4.5 million under 17 U.S.C. § 504(c). The jury had awarded the plaintiff record companies $675,000. District court judge Nancy Gertner later held that this amount was arbitrarily high and violated due process under the standard of BMW v. Gore, and ordered the award reduced to $67,500.

On September 16, the First Circuit reversed this holding in an opinion by Chief Justice (and former Foley Hoag partner) Sandra Lynch. The reversal was based on the doctrine of constitutional avoidance: it was not clear that the Gore standard even applied to statutory (as opposed to common law punitive) damage awards, the court held, and Judge Gertner should have avoided this issue by ordering a remittitur – giving the plaintiffs a chance to accept a lower award, failing which there would be a new trial.

Before making this ruling, the court rejected without difficulty a number of Tenenbaum’s challenges to liability. These included his arguments that the Copyright Act was not intended by Congress to apply to “consumer copying,” and that statutory damages were not appropriate where the plaintiff did not prove “actual harm.”

The opinion also included a recitation of the facts “in the light most favorable to the jury’s verdict,” and this was a poor light indeed from Tenenbaum’s perspective. He was faulted for being an aggressive and large-scale infringer, for ignoring repeated warnings that he was breaking the law and could be sued, for initially lying about his file-sharing activities, and for blaming other members of his household (such as his sisters) for using his computer – only to admit later, after they were forced to testify, that they had nothing to do with it.

This saga will continue, and a new district court judge will have to become familiar with it since Judge Gertner recently retired from the federal bench.

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No, monkeys can’t own copyrights. But please read on. This relatively simple answer to a question nobody is seriously asking hasn’t prevented the emergence of a strange copyright controversy over a series of monkey-taken photographs, including the self-portrait on the left.

Wildlife photographer David Slater was visiting a North Sulawesi national park in Indonesia when he left his camera unattended. A crested black macaque grabbed the camera and managed to snap some stunning images. The photographs ended up in the July 5 edition of the UK’s Daily Mail, some of them bearing the copyright notices of the Caters News Agency.

That’s when things started to get weird.

Online magazine Techdirt reprinted the photographs a couple of days later, expressed doubt as to whether Caters could actually own the copyright and queried: “Can a Monkey License its Copyrights to a News Agency?”

The following Monday, Caters sent a ersatz take-down notice to Techdirt, claiming to represent Mr. Slater and asking that the images be removed from Techdirt’s website. Techdirt refused, claiming that the images were in the public domain and that its use of them was fair use. Slater, in a statement reprinted by Techdirt, responded that, contrary to the impression given by the original Daily Mail story, the photograph was not so much an accident as a planned artistic endeavor. “Until I hear from the monkey’s lawyers,” Slater said, “I will stick to the belief that I own the copyright.”

So who’s right? We are unlikely to find out anytime soon, because there is really nothing here to sue over.

First, as noted in another blog entry earlier this year, the republishing of a photograph for the purpose of discussing the copyright issues surrounding that photograph is almost certainly fair use, and it’s doubtful that Caters will bother spending the money to test that theory, at least in the U.S.

At the same time, Techdirt’s tongue-in-cheek suggestion that the monkey owns the copyright is a non-starter. As Techdirt itself notes, Copyright Office Rule 503.03(a) states that

In order to be entitled to copyright registration, a work must be the product of human authorship . . . a work owing its form to the forces of nature and lacking human authorship is not registrable; thus, for example, a piece of driftwood even if polished and mounted is not registrable.

Notwithstanding this rule, neither the Copyright Act nor the Constitution explicitly limits copyright authorship to human beings. However, the few arguments advanced in favor of expanding eligibility for authorship beyond human beings are unconvincing. For one thing, monkeys and other nonhumans don’t need monetary incentives to create, which is arguably the whole point of copyright law in the first place. And who exactly is going to sue on behalf of the monkey anyway?

But even though this controversy remains mostly academic, Techdirt’s provocative position has raised at least one very interesting issue. A monkey can’t own a copyright, but can a monkey or some other non-human agency prevent a human from owning a copyright, thus pushing the work into the public domain? What if, for example, all the creative and copyrightable aspects of a work are attributable to a super-intelligent computer which for one reason or another randomly or arbitrarily created it? Will that prevent the owner or the programmer of the computer from becoming an author under the Copyright Act? As artificial intelligence becomes more sophisticated, these issues are likely to arise again and again with each new generation of computers.

And if they ever invent a super-intelligent monkey robot, hold on to your camera. 

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Several months ago, we highlighted the Canadian Conservative party’s use of the Canadian Broadcasting Company’s copyrighted footage in political attack ads. (Not Quite Fair Use: Canada's Fair Dealing Exception to Copyright Infringement in the Political Spotlight). In defense of its ads, the Conservative party argued by analogy that such use of copyrighted material for political purposes would be “fair use” in the United States.

ABC Sports has a chance to test that theory.

Last Wednesday, former Governor and Republican presidential candidate Tim Pawlenty began running ads comparing his underdog political campaign to the 1980 United States Olympic hockey team and its “Miracle on Ice” win over the Soviet Union. In the ad, Pawlenty freely uses footage and voice-over sound owned by ABC Sports. Pawlenty’s campaign didn’t bother to seek permission from ABC Sports, claiming protection of the fair use doctrine.

The next day, the Des Moines Register reported that ABC Sports was considering issuing a cease and desist order to the Pawlenty campaign. However, the broadcaster later dialed it back, stating that it hadn’t yet decided what to do.

Pawlenty’s campaign is currently attracting only about 3% of likely Republican voters, according to polls. His campaign’s slow fade into obscurity may therefore render ABC Sports’ concerns moot as a practical matter. But what if Pawlenty’s bid to associate himself with bygone sporting glory rallies the voters, and the “Miracle on Ice” footage ends up getting used in thousands of Pawlenty ads across the country, not just a few in Iowa? Will ABC Sports act, or just let it go? Time will tell, but for now it appears that ABC Sports is going to stick to the hockey arena and stay out of the political one. Some full-contact sports are just too rough.

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Just in time for the release of the final installment in the Harry Potter film franchise, a related branch of the Harry Potter empire finds itself involved in a curious copyright dispute. This is not another case of an obscure author claiming that J.K. Rowling stole her billion-dollar story from an earlier work. Instead, an independent font company has asserted, in a lawsuit filed on July 5 in the Eastern District of New York, that merchandise sold at Universal Studios’ “The Wizarding World of Harry Potter” theme park in Orlando makes unauthorized use of one of its typefaces.

P22 Type Foundry creates and distributes computer fonts inspired by art, design, and history, often working with museums and foundations to create authorized versions of historical lettering styles or typefaces based on the handwriting of famous figures. One of P22’s most popular fonts is “Cezanne,” a lyrical, swooping lettering based on the handwriting of artist Paul Cezanne.

P22’s Complaint alleges that its “Cezanne” typeface appears on souvenirs sold at “The Wizarding World of Harry Potter” and through the theme park’s web site, including, for example, the “Hedwig pillow” and the “Ministry of Magic Messenger Bag.” P22 has sued Universal and the manufacturers of the licensed products.

Technically, P22’s suit does not allege infringement of a copyright in the typeface design itself, but rather in the computer software program that creates it. The Copyright Office has determined that “typeface as typeface” is not subject to copyright, and it will not accept applications for registration of copyright in a typeface as such. 37 C.F.R. 202.1 (e). Type designers wishing to protect their fonts register and assert copyright (as P22 has) in the software. (In some instances a design patent may also be an option.) While the defendants are not copying and distributing the software itself as in a traditional infringement case, running the software creates copies in computer memory, not to mention the copies presumably created when they first obtained it.

P22 has also attempted to boost the protection for its font by selling the software with an End User License Agreement that restricts how the program may be used. P22 alleges that one of the manufacturers obtained a license only after it had used the software without authorization, and the other defendants did not obtain licenses at all. Moreover, the basic license states that “A royalty based Commercial license is required when P22 software is used to create a product sold for profit,” so the Complaint also includes a count for breach of contract “to the extent Defendants . . . may have purchased a license.”

P22 seeks actual or statutory damages of at least $1.5 million as well as the destruction of all merchandise created with the Cezanne software. Of course, the products themselves contain copies of the typeface, not of the software. P22 will need to show that the words on the products were created with its software and not, for example, drawn by hand. It will also need to convince the court that it is appropriate to order destruction not only of “copies [of a copyrighted work] . . . made or used in violation of the copyright owner’s exclusive rights” and the means for making copies, 17 U.S.C. § 503(b), but also of items “that bear the result of the unauthorized use of P22’s Copyrighted works” (Complaint, emphasis added).

On the subject of Harry Potter and fonts, it is worth considering two typefaces made famous by the books themselves. First, the covers of the American editions (as well as the movie titles and the web site title for The Wizarding World of Harry Potter) feature the words “Harry Potter” in a distinctive, craggy lettering in which the vertical line of the letter “P” is shaped like a lightning bolt. A second typeface, featuring all capitals, exaggerated serifs, and somewhat irregular letterforms, is used for chapter titles and other text associated with the Harry Potter franchise, including navigation links on the “Wizarding World” web site. Fans can download free software for these fonts, presumably created by other fans: the first has been dubbed “Harry P” and the second, “Lumos.” Since, as noted above, typefaces do not enjoy copyright protection as such, Harry’s typographically inclined fans are free to create software to reproduce his signature fonts. However, one wonders whether at least the “Harry P” typeface, with its distinctive lightning bolt and use on covers and packaging, has become so associated with Harry Potter goods and services as to merit protection as a trademark or service mark. The words “Harry Potter” in the “Harry P” font are registered with the USPTO as a design mark, but what about other words displayed in the same typeface? Likelihood of confusion, or dilution? You be the judge:

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In May 2011, a bench trial commenced in the Federal District Court for Northern Georgia which may change the way college libraries everywhere operate. In 2008, Academic publishers Cambridge University Press, Oxford University Press, and Sage Publications filed a complaint against Georgia State University, alleging copyright infringement on a grand scale by the school’s library system. No doubt with an eye towards public relations, the plaintiffs are not looking for money, but for a systemic change to the University’s copyright policy. Understood broadly, the change the publishers seek, if endorsed by the court, could change the use of electronic reserves at university libraries across the country.

The fair use provision of the Copyright Act, 17 U.S.C. § 107, expressly provides that the copying of a work is more likely to be a “fair use” when it is for a “non-profit educational purpose.” Up through the 1980’s, it was assumed by academics that this provision protected the creation of college “course packets,” that is, anthologies of photocopied textbook chapters or other written materials. However, a series of cases brought by the publishing industry in the 1990’s forever disabused academia of this misconception and made it clear that the creation of course packets, without permission by the authors or publishers, was in most cases infringement and not fair use. Indeed, the educational nature of a use is only one of several fair use factors, and the Supreme Court has held that “the mere fact that a use is educational and not for profit does not insulate it from a finding of infringement.”

Enter the electronic reserve, the publishing industry’s new bogey man. In the traditional paper library reserve, a professor made one or two photocopies of a chapter available for temporary borrowing through the campus library, usually as an optional reading assignment. Such traditional reserves are generally viewed as non-infringing due to fair use principles and the library exemptions to copyright infringement contained in 17 U.S.C § 108. However, digital technology has complicated this analysis. At Georgia State and elsewhere, professors can now make reading material available on-line through the library’s electronic reserve system or on individual class websites. The University allows each professor to determine for herself whether the posting of this material is fair use, based in part on a “Fair Use Checklist”, the utility and legality of which the parties hotly dispute.

What cannot be in serious dispute, however, is that the ability to put documents on electronic reserve is a game changer in the college library context. Now, instead of waiting in line for one or two available photocopies, all students can get a copy at once. Instead of having to return the photocopy to the library, a student can simply retain it forever. And, most galling to the publishing industry, instead of paying for a course packet, students get the same material for free.

So what is an electronic reserve? Is it just like a paper reserve, only in a different format? Or is it more akin (and being used as a substitute for) the course packet? If the former, Georgia State University should not have change its policy and the days of the course packets will be numbered as other institutions follow suit. If the latter, college copyright policies across the country, as well as electronic reserve guidelines issued by such groups as the American Library Association, will likely require radical alteration.

The Georgia case may or may not answer these questions. It is possible that the Court will decide the matter on narrow grounds which do not fully tackle the fair use issue or provide guidance for other institutions. Additionally, Georgia State allegedly engaged in some practices that may not be common to all educational institutions: encouraging professors to use electronic reserves as a substitute for course packets, copying multiple chapters of the same book or excerpts hundreds of pages long, maintaining copies of documents in the electronic reserve system instead of terminating the reserve at the end of the semester, allowing students to download and keep copies, delegating fair use decisions to individual professors with little or no institutional oversight, and in general creating a policy so lax that one commentator described it as “just say yes to everything.” But whether or not this case shows the way for the rest of academia, the electronic reserve genie is now out of the bottle, and this controversy will no doubt spawn additional litigation until the issue is resolved.

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The ongoing conflict between content-industry groups and “open Internet” proponents has been heating up recently in a battle over Internet sites that allegedly allow users to access pirated or counterfeit content. Since last summer, the Department of Homeland Security’s Immigrations and Customs Enforcement (ICE) division has been running a campaign it calls “Operation: In Our Sites” to seize domain names used in alleged criminal copyright infringement activities. Following seizure, visitors to affected web sites, such as www.watchnewfilms.com, see a notice stating that “This domain name has been seized by ICE – Homeland Security Investigations, pursuant to a seizure warrant issued by a United States District Court under the authority of 18 U.S.C. §§ 981 and 2323.” The fourth and latest round of seizures reportedly took place on May 21. Opponents of these measures charge that the seizures amount to censorship, and have questioned their legality as well as their effectiveness.

The seizure orders work by requiring the domain name registry to redirect the URL of an allegedly infringing web site to the warning notice quoted above, instead of the targeted site. The site still remains accessible via its IP address, however, and many owners simply set up new domain names, often registered in foreign countries, to direct users to their sites. Enter the anonymous coder(s) behind MAFIAA Fire, a browser plug-in designed to circumvent ICE’s shut-down efforts. When a user downloads and installs the plug-in and then points his or her browser to a domain name that has been seized, the MAFIAA Fire software consults a list of seized and replacement domain names and automatically redirects the browser to the new URL. The user is taken seamlessly to the requested site, not to the ICE warning at the original URL. (As explained in MAFIAA Fire’s unabashedly partisan FAQ, the name refers to the “Music and Film Industry Association of America,” a spoof “industry group” purportedly created out of the merger of the Recording Industry Association of America and the Motion Picture Association of America, the real organizations that MAFIAA Fire’s creators believe to be behind ICE’s enforcement efforts.) The MAFIAA Fire site claims the plug-in has been downloaded more than 70,000 times since it became available in early April.

MAFIAA Fire obviously stands to put a significant dent in the effectiveness of ICE’s seizure technique. Shortly after the tool became available, the Department of Homeland Security contacted Mozilla, the nonprofit organization behind the popular Firefox browser, and asked it to disable access to the MAFIAA Fire plug-in for Firefox. According to a blog post by Harvey Anderson, Mozilla’s VP of Business Affairs and General Counsel, Mozilla responded by sending back a series of pointed questions about the legal basis for the request. Anderson explained in his blog post that Mozilla’s “approach is to comply with valid court orders, warrants, and legal mandates, but in this case there was no such court order.” As of Anderson’s latest report, Homeland Security had not responded to Mozilla’s queries, and for now, MAFIAA Fire remains available on Mozilla’s Firefox add-on download site.

Meanwhile, Senator Patrick Leahy (D-Vt.) has introduced this month the “Preventing Real Online Threats to Economic Creativity and Theft of Intellectual Property Act of 2011” – a.k.a. the PROTECT IP Act – which would enhance the government’s enforcement options against foreign sites hosting infringing content, and potentially shrink the loophole that MAFIAA Fire exploits. And so, as the content provider/open Internet war rages on in battlegrounds ranging from Congress to courts to activist coders’ individual laptops, MAFIAA Fire is playing its own small part in shaping the evolving legal and technological boundaries of copyright.

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A recent case in the Third Circuit, Barefoot Architect Inc. v. Bunge, Case Nos. 09-4495, 09-4600, (3d. Cir. January 14, 2011) has provided some interesting practice pointers with respect to copyright transfers. The case involved a dispute between an architect (Michael Milne of Barefoot Architects) and his clients Sarah Bunge and Thomas Friedberg. Milne had designed a house for Bunge and Friedberg, but the parties fell out before the house was completed, and Bunge and Friedberg ultimately hired a different architect to finish the project. Milne, through Barefoot Architects, sued Bunge and Friedberg for copyright infringement, amongst other wrongs. The District Court had dismissed Barefoot’s copyright claims on the ground that the copyright in the plans was owned by Milne’s employer at the time the plans were prepared, a different architecture firm called Village Vernacular, Inc., and that therefore Barefoot had no standing to bring the action.

At issue before the Third Circuit was the validity of a written “Memorandum of Transfer”, executed in 2008 after the suit had commenced, that purported to document an oral transfer of copyright from Village Vernacular to Barefoot Architect that the plaintiff had claimed had taken place 9 years previously at the time that Milne moved his practice from Village to Barefoot. The Copyright Act requires a valid transfer of copyright to be in writing. However, the writing does not have to be contemporaneous with the transfer. The court held that “an oral transfer can be given legal effect by a subsequent signed writing”, particularly in situations where there is no dispute between the transferor and transferee about the ownership of the copyright. However, the court held that the oral transfer must actually have taken place, and there must be some evidence of such earlier oral transfer. In this case, Barefoot was unable to convince the court that an oral transfer had actually taken place in 1999.

The case suggests that a written memorandum of copyright assignment that purports to document an earlier oral transfer should recite the circumstances evidencing the oral transfer in sufficient detail to establish that the oral transfer took place. In addition, it may be advisable for the memorandum also to include a present assignment, in case the memorandum of the earlier transfer is held to be defective.
 

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This week a federal court put the brakes on Google’s plans to create a universal digital library by rejecting the company’s proposed settlement of class-action lawsuits filed by authors and publishers challenging the Google Books project. On March 22, 2011, more than a year after conducting a fairness hearing on the parties’ amended settlement agreement, judge Denny Chin rejected the plan that would have permitted Google, in exchange for royalty payments, to distribute copies of the millions of books it has scanned from the collections of some of the world’s largest libraries.

The Court’s decision vindicates arguments voiced by the many opponents of the settlement who submitted objections and testified at the fairness hearing. Indeed, Judge Chin’s 46-page opinion (PDF) cites and quotes from the objections of a variety of players, including the U.S. Department of Justice, several U.S. states and foreign nations, academics, literary agents, and individual authors. While the objectors raised a wide array of concerns, several points seemed to particularly trouble the Court.

Most of the issues highlighted in the Court’s opinion relate to the problem of “orphan works,” books that have not yet passed into the public domain but for which the current copyright holder cannot be identified. The settlement agreement proposed to allow Google to distribute such works and pay royalties into an independent “Book Rights Registry,” which would be tasked with attempting to locate owners to receive the royalties. (Unclaimed funds would be used for further search efforts and eventually donated to literary charities.) Authors who did not wish their works to be included in the Google Books project could opt out.

Judge Chin found this arrangement problematic for a number of reasons. He noted that an opt-out system contravenes the fundamental concept of an author’s exclusive rights under copyright law, which include the right to not distribute a work and merely prevent others from using it. The settlement would allow Google – and only Google – to distribute these works without the owner’s permission, giving the company an effective monopoly as a reward for an act of wholesale unauthorized copying. The existence of orphan works also raised concerns about the representativeness of the named plaintiffs, whose interests could be at odds with those of owners who do not come forward to either opt out or claim payment. The Court also observed that the proposed settlement, which would give Google a future license to sell entire works, went far beyond the scope of the pleadings, which addressed Google’s publication of “snippets” of works in search results; while Google had an arguable fair use defense to the latter activity, its counsel acknowledged that there was no colorable defense to the former. Finally, the Court suggested that the question of how – and whether – to address distribution of orphan works was better left to Congress, which has in fact considered proposed orphan works legislation in several recent sessions.

At the end of his lengthy opinion, Judge Chin observed that many of his concerns “would be ameliorated if the [agreement] were converted from an ‘opt-out’ settlement to an ‘opt-in’ settlement,” and invited the parties to submit a revised proposal. While Google has already secured opt-in agreements with many publishers, an opt-in arrangement would necessarily exclude orphan works, thereby making Google’s digital library far short of “universal.” It remains to be seen whether the project will still seem worth the effort in Google’s eyes. Google counsel, on Google's web page describing the settlement, has remarked that the decision is "disappointing," and that Google will review the decision and consider its options.  We may learn more about where the parties plan to go from here at a status conference the Court has scheduled for April 25.

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In the latest episode of the hit Fox show Glee, entitled “Original Song,” the high school glee club, “New Directions,” prepares to perform the track “Sing” by My Chemical Romance in a regional competition. Out of nowhere, My Chemical Romance sends a cease and desist letter to the kids forbidding them from using the song. Although it later turns out that the letter was forged by the evil Sue Sylvester, the gang is forced to abandon their plans and write an original song to perform at the last minute. They work with diligence and passion, and miraculously and brilliantly compose the perfect song just in time to win the big competition. Phew!

Nice premise. But could My Chemical Romance really prevent a bunch of high school kids from performing “Sing”? Is there no protection for these youngsters?

The most common impulse in these situations is to turn to the fair use doctrine. The performance of “Sing” appears at first glance to be protected by the doctrine, which directs a court to consider “the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes.” However, one can imagine that the other fair use factors of the notoriously fuzzy doctrine (the nature of the copyrighted work, the amount and substantiality of the portion used and the effect on the market) might cut the other way, depending on the circumstances. Also, the copyright office has made it clear that, irrespective of any public perception to the contrary, educational use does not automatically equal fair use, especially where an entire song is used.

But fair use isn’t the only exemption to copyright infringement. The Copyright Act’s “Exemption of certain performances and displays,” 17 USC § 110(4), provides that the live performance of a nondramatic musical work, in which the performers and organizers are not compensated, is not infringement if (a) there is no admission charge or (b) even if there is an admission charge and as long as the copyright holder does not object in writing, the profits from the performance are directed exclusively to educational, religious or charitable purposes.

There is precious little case law concerning 17 USC § 110(4), and no published cases about its application in the educational context. It is therefore not clear whether the New Directions kids would be barred from the protection of this exemption due to the fact that their teacher and other “organizers” of the competition might be compensated for their time. Putting that issue aside, however, if the fictional competition did not charge an entrance fee, it appears that My Chemical Romance would have been totally out of luck even if they objected, and New Directions could have stuck with their original plan. All that work for nothing!

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When the Canadian Conservative Party released a raft of attack ads last month against Liberal Party leader Michael Ignatieff, it was the Canadian Broadcasting Corporation (“CBC”) that led the counterattack. Why? In constructing their ads, the Conservative Party used without permission CBC’s copyrighted file footage of Ignatieff. The CBC claimed that the use of its footage in partisan ads undermined its reputation as an independent news source, and has accused the Conservatives of copyright infringement. The Conservatives responded that the ads were “free speech.” Besides, the Conservatives argued, the use of such clips for political speech purposes is “fair use” under United States copyright law, so it must be protected by the equivalent “fair dealing” provisions of the Canadian Copyright Act.

Are the Conservatives right? Not quite. There are important differences between American “fair use” and Canadian “fair dealing.” Fair use, as set forth in 17 U.S.C. § 107, protects an otherwise infringing use if it is “for purposes such as criticism, comment, news reporting, teaching, scholarship, or research.” It is well recognized that this list is non-exhaustive and flexible, so that virtually any use might be considered fair use if it meets the four-factor balancing test set forth in the statute.

By contrast, Canadian fair dealing, as set forth in Chapter C-42, Section 29 of the Canadian Copyright Act, protects only “research or private study,” “criticism or review” and news reporting. This list is considered to be rigid and exhaustive, so it arguably does not cover non-enumerated uses such as parody, education and time-shift viewing.

Does fair dealing protect political speech? It remains to be seen whether the CBC will sue and whether that suit will be successful. In recent years, some Canadian courts have shown a willingness to give the fair dealing categories a “large and liberal” interpretation, but it is still far from clear that political attack ads will qualify as “criticism.”

In the meantime, the controversial Bill C-32, which includes fair dealing reform legislation drafted by the Conservative Party, is being considered by the Canadian parliament. Some advocates had lobbied for this bill to replace the rigid fair dealing categories with a flexible American-style fair use model. Instead, the Conservative’s bill would maintain the inflexibility of the current system but would add new fair dealing categories protecting parody, satire and education, as well as additional exceptions that may address time-shift viewing. Ironically, the Conservatives decided not to include an exception for political speech.

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The Massachusetts Supreme Judicial Court recently reaffirmed the rule that state law claims based on copyright are preempted by the preemption provisions of the Copyright Act, 17 U.S.C. § 301. In Curtis v. Herb Chambers I-95, Inc., 458 Mass. 674 (2011), Curtis, an individual who had produced advertising materials for car dealerships, filed a complaint against car dealerships and a printing and distribution business to protect his advertisement design. He had never registered a copyright for his design. Curtis based his claims on copying of trade dress under common law, a breach of the implied covenant of good faith and fair dealing, interference with advantageous business relations, and unfair and deceptive trade practices under Massachusetts General Laws chapter 93A.

The court first noted that claims are preempted by the Copyright Act if “the work at issue falls within the type of works protected by the Copyright Act (subject matter requirement)” and “the State law claim asserts a legal or equitable right equivalent to an exclusive right granted” under the Act (equivalency requirement). There was no dispute that the advertisement design satisfied the subject matter requirement, so the court proceeded to analyze whether the claims were qualitatively different from a copyright infringement claim and could survive preemption. “A State law claim is qualitatively different from a copyright infringement claim if the plaintiff can prevail even though the plaintiff holds no copyright or right equivalent to copyright in the advertising materials.”

First, Curtis’s common law trade dress claim could not survive because it alleged “defendants produced materials that imitated his advertisement design and represented it as their own,” i.e., “reserve passing off.” The court concluded Curtis could only succeed on this claim if he held a right equivalent to copyright to prevent the copying. Similarly, the claim based on a breach of the implied covenant of good faith and fair dealing also was preempted. This claim alleged the defendants intentionally interfered with Curtis’s business relationships with other dealerships by copying his design after their contracts with him had terminated. This claim did not survive because the car dealerships had not promised to pay him for the use of his designs and materials following termination of their contracts and, even if such a promise were implied, the claim would be preempted because Curtis “would be claiming under our common law a legal right or entitlement equivalent to copyright.”

Moreover, Curtis’s claim that the defendants tortiously interfered with his business relationships with other dealerships by copying his advertising designs was preempted because the only “improper means” he alleged the defendants engaged in to interfere was the reproduction of his design, “which is improper only if Curtis had a legal right or entitlement equivalent to copyright.” Finally, the Chapter 93A claim was preempted because the defendants’ actions could be unfair only if Curtis had a right or entitlement equivalent to copyright, and the only deception alleged was the “reverse passing off,” which was preempted.

The simple lesson from this case is that if you have a copyrighted work, make sure to register it! State law may not allow you to assert claims against infringers. It is relatively inexpensive to obtain a copyright registration, and ownership of a valid registration is a prerequisite for filing a lawsuit for copyright infringement. Moreover, if you obtain a copyright registration prior to the infringement or within three months of the first publication of your work, you will be entitled to statutory damages in the event of infringement. Statutory damages typically range from $750 to $30,000 per work infringed, and may be increased to $150,000 in the event of willful infringement. The availability of statutory damages is very useful, as actual damages are often difficult to prove.

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While brand owners have taken issue with the vast trademark implications of ICANN's proposed (and at this point, likely) expansion of the domain name space to add countless new generic top-level domains (gTLDs) to the Internet, one organization has raised the specter of increased copyright infringement pursuant to domain name expansion.

The Recording Industry Association of America (RIAA), the trade organization representing the music labels and artists well known for its aggressive tactics designed to counter music piracy, has expressed concern over ICANN's gTLD program, and specifically possible "music themed" gTLDs. In a January 5, 2011 letter to ICANN, the RIAA expressed an "overriding concern to ensure that any music themed gTLD is used productively and responsibly, and not as a means to facilitate copyright or trademark infringement. The RIAA went on to point out several flaws in the latest (and proposed final) Applicant Guidebook, including a unreasonably high standard for community objections, a lack of transparency in the proposed application process, and inadequate safeguards to protect against "malicious conduct."

While these sentiments echo, in part, the sentiments expressed by the various trademark bar associations such the International Trademark Association (INTA), the U.S. government, and ICANN's own Governmental Advisory Committee (GAC), the RIAA's concerns are understandably broader given its anti-piracy mandate. However, while trademark infringement and cybersquatting are logical and predictable consequences of an expanded domain name space (as domain names themselves -- and sub-domains thereof -- are the root of the problem), it does not necessarily follow that the expansion will lead to increased copyright infringement, unless it is the case that an expanded domain name space will catalyze the growth of the Internet, resulting in more websites (and more content) then there would have been otherwise. Further, even if music piracy will be more prominent on websites with "music themed" gTLD's, it is unclear what role ICANN could (or should) have in preventing or curing this problem. Unfortunately, in its letter the RIAA does not provide any basis for its copyright concerns, and does not recommend specific precautions or remedies for ICANN to combat this anticipated problem. It will be interesting to see whether future RIAA communications to ICANN will address these issues in greater detail.

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In what must be one of the nation’s longest-lived Internet copyright wars, Perfect10, Inc. recently opened up a new front, asserting that online publication of its Digital Millenium Copyright Act takedown notices is a copyright violation.

Perfect10, founded by former mathematics professor and professional poker player Norman Zada, is a softporn fee-based Internet site and print magazine that publishes pictures of women in various states of undress. Although Perfect10 tries to reserve these pictures exclusively for its customers, the images have a way of getting around, and are often republished online without authorization.

And how does one find these pirated images? Well, Google, of course! For example, a search for the model Amy Weber (pictured left in a page from the District Court’s opinion) in Google Image Search will retrieve automatically indexed thumbnails of a variety of pictures of Ms. Weber that derive from and link to websites which may or may not have the right to display them.

Beginning in 2001, Perfect10 began sending takedown notices to Google pursuant to the DMCA, insisting that Google cease and desist promoting the pirate sites by indexing and linking to these images. Although Google did remove many infringing images from its search results, Perfect10 was dissatisfied with what it viewed as a less-than-perfect response, and sued Google in the Federal District Court for the Central District of California. Perfect 10 alleged that a variety of activities by Google, including the thumbnail indexes and in-line links to the pirate websites, were both direct and secondary infringements of Perfect10’s display and distribution rights.

After Perfect10 appealed the denial of a preliminary injunction, the Ninth Circuit held that the thumbnails, although otherwise meeting the elements of direct infringement, were nonetheless highly transformative fair use and, because they were small, did not harm Perfect 10’s market for high-resolution images. However, the Court remanded the matter to determine whether Google might be liable for contributory or vicarious infringement. Thus, nearly 10 years and a thousand docket entries after the first takedown notice, the case is still going strong.

Enter Chilling Effects, a non-profit educational project run jointly by the Electronic Frontier Foundation and an impressive collection of law schools. Chilling Effects invites the public to submit takedown notices, after which they are posted, commented upon by the public and studied by legal scholars. Google, being the netizen that it is, had been dutifully forwarding all of Perfect10’s takedown notices to Chilling Effects. Then, in place of the removed images, Google included a link to the takedown notice with a statement that said:

“In response to a complaint we received under the US Digital Millennium Copyright Act, we have removed 1 result(s) from this page. If you wish, you may read the DMCA complaint that caused the removal(s) at ChillingEffects.org.”

So what’s the problem? Well, in an apparent effort to be crystal clear about which pictures it did not want displayed for free, Perfect10’s takedown notices had included copies of those pictures. So, even after Google stopped displaying small thumbnails or linking to possibly low resolution pirated versions of these images, it was still linking directly to those same images on chillingeffects.com. These versions of the images, however, because they were provided directly by Perfect10 itself, were in many cases full-size and in high-resolution. In other words, they were a perfect free replacement for the very pictures Perfect10 had been trying control and sell.

Perfect10 moved once again for a preliminary injunction, this time to prevent further forwarding of its takedown notices, which it argued constituted both direct and contributory infringement. The Central District Court disagreed, and held that the posting of the images in the context of legal study was fair use, and required the full take down notices, pictures and all. Perfect10, which time after time has shown itself to be resilient in the face of defeat, predictably has appealed to the Ninth Circuit. Last month, the Electronic Frontier Foundation submitted an amicus brief, and has also made the all briefs available on its website. Oral argument has yet to be scheduled.

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Most of you serious music fans have at least one. At some point, you were diving through the dollar bins of a used record store and came across an unfamiliar album by your favorite artist, bearing a label such as “Promotional Use Only – Not for Sale.” These Promotional CDs are routinely mailed in advance of their commercial release by record companies to a select group of music critics, disc jockeys and other music industry folks. What a find! But then you notice some fine print:

PROMOTIONAL USE ONLY – NOT FOR SALE. THIS CD IS THE PROPERTY OF THE RECORD COMPANY AND IS LICENSED TO THE INTENDED RECIPIENT FOR PERSONAL USE ONLY. ACCEPTANCE OF THIS CD SHALL CONSTITUTE AN AGREEMENT TO COMPLY WITH THE TERMS OF THE LICENSE. RESALE OR TRANSFER OF POSSESSION IS NOT ALLOWED AND MAY BE PUNISHABLE UNDER FEDERAL AND STATE LAWS.

Standing in the record store, questions flash through your head: Is it legal for the record store to sell it? Is it legal for me to buy it? And most importantly, if I buy it, do I own it? This album is a must-have collector’s item of which no just legal system would deprive me. Right?

Well, right, said the Ninth Circuit on January 4, 2011 in UMG Recordings, Inc. v. Augusto.

While you were thinking about what was and wasn’t legal, that guy thumbing through the next bin over may very well have been Troy Augusto, an entrepreneur specializing in music memorabilia. Augusto scoured used music stores for rare promotional CDs and sold them on Ebay, under the name “Roastbeastmusic."  In May, 2007, music giant UMG sued Augusto for copyright infringement, alleging that he had violated UMG’s exclusive right to distribute its copyrighted work. Augusto countered by arguing that he was protected by the first sale doctrine. The District Court for the Central District of California, and eventually the Ninth Circuit, agreed with Augusto.

The first sale doctrine, as set forth in 17 U.S.C. § 109, allows the owner of a phonorecord to “sell or otherwise dispose” of his or her copy without permission of the copyright owner. In other words, you can resell your CDs after you buy them. UMG argued that since it had given away the CDs in the first place, there was no first “sale” so the doctrine didn’t apply. The Ninth Circuit made short work of this argument, holding that once the CDs were mailed by the record companies, they entered the “stream of commerce” and were subject to the first sale doctrine, even if they were given away for free.

But what about the purported licensing language quoted above, which was printed on many of UMG’s Promotional CDs? As previously reported on this blog, the Ninth Circuit had recently held that "shrink-wrap" language restricting a user’s ability to transfer computer software had the effect of creating a license only and not a transfer of ownership, thus avoiding the first sale doctrine. So how is this different? The Ninth Circuit gave two principal reasons:

1. The circumstances of the distribution. Unlike the software, the CDs were dispatched without any prior arrangement with the original recipients. Thus, there was no real attempt by UMG to track or retain control over them. Without such control, simple unsolicited receipt of the CDs by the original recipient was insufficient evidence of acceptance of the license agreement, and therefore no license was created.

2. The Unordered Merchandize Statute, 39 U.S.C. § 3009, provides that unordered merchandise sent through the mail “may be treated as a gift by the recipient, who shall have the right to retain, use, discard, or dispose of it in any manner he sees fit without any obligation whatsoever to the sender.” Although this statute was intended to protect consumers from unconscionable sales and billing techniques, the Ninth Circuit held that it also allowed the reselling of Promotional CDs.

The full scope of the ruling remains to be seen. The Court seems to have left open the possibility that a record company might come up with a system by which it retains sufficient control over a Promotional CD so that it was creating a license and not a transfer. For example, what if UMG had tracked individual Promotional CDs and somehow recorded the acceptance of recipients on-line? However, such a system might require a quantum shift in the way in which music is promoted and, in any event, it’s still unclear to what extent such a license would restrict the activities of persons like Mr. Augusto, who were not the original recipients.

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The Ninth Circuit's liability determination in MDY Industries v. Blizzard, discussed in my prior post, rested not on copyright infringement, but on a violation of the Digital Millenium Copyright Act (DMCA) provisions regarding circumvention of access controls.

As discussed previously, Section 1201(a)(1) prohibits “circumvent[ing] a technological measure that effectively controls access to a work protected under” Title 17. 17 U.S.C. § 1201(a)(1)(A). Both the Fourth Circuit, in MGE UPS Systems, Inc. v. GE Consumer and Industrial, Inc. et al., and the Federal Circuit, in Chamberlin Group Inc. v. Skylink Technologies, Inc., have held that the "DMCA prohibits only forms of access that would violate or impinge on the protections that the Copyright Act otherwise affords copyright owners.” MGE UPS Systems, Inc. v. GE Consumer and Industrial, Inc. et al., No. 08-10521, 2010 WL 2820006 (5th Cir. July 20, 2010). In other words, circumvention that does not infringe or facilitate the infringement of a copyright is not actionable under Section 1201(a).

The Ninth Circuit took another approach. Looking to both the text of the relevant provisions as well as the legislative history of the DMCA, the court explained that there was no textual support for the requirement of an "infringement nexus" under Section 1201(a), which addresses circumventing controls over access only. In contrast, Section 1201(b) of the DMCA addresses circumvention of protection over copyright. The court, applying this logic, upheld the lower court's DMCA verdict.

The MDY Industries decision and resulting circuit split could have significant implications. Under the Ninth Circuit's approach, owners of copyrights in digital works -- software, video games, movies, and pretty much everything else these days -- can much more easily challenge uses of their products that are deemed harmful for various reasons, but which might not otherwise be infringing uses. On the flip side, the decision could potentially chill uses of copyrighted works that are typically considered "fair" because such uses happen to require circumvention of access controls in the first instance. It will be interesting to see whether MDY petitions the Supreme Court to consider the matter. For now, copyright owners filing in Ninth Circuit courts can consider getting a little more aggressive with regard to DMCA access violations, while users circumventing access controls may wish to tread a bit more lightly.

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As expected, the Ninth Circuit has declared link that Blizzard's World of Warcraft (WoW) software licensees are just that -- licensees, and not owners -- because the WoW Terms of Use sufficiently restrict the transfer and use of the WoW software. MDY Industries, LLC v. Blizzard Entertainment et al., No. 09-15932 (9th Cir. December 14, 2010). This outcome was predictable, and consistent with the court's decision in Vernor v. Autodesk, which outlined a three-part test for determining the owner/licensee status of a software user.

In Vernor, the court determined that Vernor's sale of used copies of AutoCad was outside the scope of the AutoCad license agreement. Further, because it was Autodesk's exclusive right to copy and distribute the AutoCad software, Vernor's sale thereof constituted copyright infringement. The outcome was different in MDY Industries, however, and liability rested on a DMCA violation even though no copyrights were infringed. As explained previously, MDY created a software "bot" that enabled WoW users to play the game on "autopilot." The court explained that, although the use of "bots" was prohibited by the WoW Terms of Use, it did not follow that operating outside of the scope of the license resulted in copyright infringement. For this to happen, the licensee's action must (1) exceed the license's scope, and (2) implicate one of the licensor's exclusive statutory rights. In this case, the anti-bot provisions of the Terms of Use did not implicate copyright law. So, although "a Glider user violates the covenants with Blizzard," it "does not thereby commit copyright infringement because Glider does not infringe any of Blizzard's exclusive rights [such as alter or copy World of Warcraft software]." The court explained further:

Were we to hold otherwise, Blizzard — or any software copyright holder — could designate any disfavored conduct during software use as copyright infringement, by purporting to condition the license on the player’s abstention from the disfavored conduct. The rationale would be that because the conduct occurs while the player’s computer is copying the software code into RAM in order for it to run, the violation is copyright infringement. This would allow software copyright owners far greater rights than Congress has generally conferred on copyright owners.

The MDY Industries decision is more notable, perhaps, for its treatment of the anti-circumvention provisions of the Digitial Millennium Copyright Act (DMCA), discussed in my subsequent post.

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On December 13, 2010, after much anticipation in the case of Costco Wholesale Corporation v. Omega, S.A., No. 08-1423, it was announced that the eight Justices of the high court that considered the merits were evenly split, four to four.

Previously discussed on this blog here and here, the Justices considered whether the first sale doctrine of the Copyright Act, which allows a copyright holder to exclusively control the first sale of an authorized copy, should be interpreted to provide a defense for parallel importers bringing into the U.S. copyrighted material manufactured and first sold abroad. Justice Elena Kagan had recused herself because, in her previous role as Solicitor General, she filed a brief with the Court recommending denial of certiorari of the case, ultimately allowing an equal split among the other Justices.

Because no decision was reached, no national precedent is set and the lower court decision from the Ninth Circuit, holding that the first sale doctrine is not applicable to goods manufacture and first sold abroad, remains in force within the Ninth Circuit’s jurisdiction. The slip opinion, which does not address the merits but merely affirms the lower court decision, is available here.

While this turn of events is, for the time being, good news for the prevailing party, Omega, how this issue will ultimately be decided by the Supreme Court remains an open question. With the ever increasing internationalization of commerce, it is likely only a matter of time before this issue again makes its way before the high court. While it may be tempting to conclude that Justice Kagan’s recommendation to deny certiorari in this case is an indication that she would have sided with those other Justices who voted to affirm, she took that position as an attorney for her client and it may or may not reflect her personal views of the issue. Justice Kagan is a blank slate, judicially speaking, and it is probably not wise to place any bets on how she will operate on the bench at this point. And who is to say just who will be sitting on the Supreme Court when this issue is taken up anew? For now, it remains an unanswered question that will continue to give pause to importers and brand owner alike, at least those outside the Ninth Circuit.

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Last week, a $1.3 billion verdict was handed down against SAP AG, the German software giant, after a lengthy litigation stemming from the acquisition of a company engaged in questionable -- and ultimately infringing -- business practices. The enormous verdict underscores the importance of pre-acquisition due diligence.

A savvy house hunter conducts a thorough inspection to identify potentially costly defects such as a leaky roof or a termite infestation. Likewise, a company seeking to acquire another company takes similar precautions, typically in the form of a lengthy "due diligence" investigation of the target company -- a comprehensive audit of the target's financial health, including exhaustive research related to existing debts, liabilities, labor issues, tax matters, information technology status, commercial situation, insurance and liability coverage, and so forth. By conducting this thorough inspection of a target company, a company is better able to determine whether the acquisition makes goods business sense and, if so, the appropriate valuation of the target company and its assets. It also makes it less likely that any "termites" will reveal themselves and threaten to "bring down the house" post-acquisition.

Sometimes, of course, an apparently minor defect, like a leaky pipe, can explode and flood the entire basement. Enter SAP AG and TomorrowNow Inc., a (now defunct) company providing third-party maintenance and support services to companies licensing enterprise software. SAP acquired TomorrowNow in January of 2005 for $11.1 billion in order to compete with other companies, namely PeopleSoft, Inc. and Oracle Corporation, in the enterprise software third-party maintenance and support service arena. Last week, a federal jury awarded a $1.3 billion verdict against SAP -- reported to be the largest copyright infringement verdict, and one of the largest intellectual property verdicts period, ever recorded -- capping off the damages trial of a lawsuit instituted by Oracle back in 2007 in the U.S. District Court for the Northern District of California.

The copyright infringement claim stemmed from TomorrowNow's provision of support services to Oracle customers, which -- unfortunately for SAP -- included the alleged unauthorized copying and distribution of ordinarily expensive Oracle software and related documentation, all of which was subject to copyright protection. After admitting to (or failing to contest) both vicarious and contributory copyright infringement, the jury returned with the surprising $1.3 billion verdict -- a true outlier, and an amount normally reserved for the most egregious patent infringements. SAP, for its part, had argued for damages in the double-digit millions.

One might wonder whether SAP simply failed to see the risk, whether it identified the risk and factored it into the decision to acquire, or whether (more likely) the truth lies somewhere in between. Oracle maintained that SAP took the easy way out by purchasing and operating TomorrowNow, with knowledge of the copyright infringement, in order to get a leg up on the competition.  Whatever the truth is, there are lessons to be learned, and best practices to keep in mind to ensure that your company or your clients don't end up in a similar position. IP infringement "red flags" should be identified and pursued aggressively, and identification of potential or actual infringement -- and potential damages arising therefrom -- should be evaluated thoroughly. It is also important to realize that traditional IP due diligence -- identification and evaluation of the company's intellectual property assets and the claimed rights therein -- might not uncover potential or actual IP infringement risks, and that these red flags may instead be uncovered during other stages of the due diligence process. For instance, it seems likely that TomorrowNow did not identify the Oracle-owned software and documents as its own assets. For this reason, it is critical to be mindful of intellectual property issues through each phase and each category of the due diligence process.

The SAP debacle is, without a doubt, a cautionary tale. However, it's easy for us to point out, in hindsight, that the SAP's acquisition of TomorrowNow was a terrible move, one that has ended up costing the company billions (TomorrowNow itself was shuttered in 2008), and perhaps $1.3 billion on top of that. It may well be the case that SAP properly identified the infringement risk and factored the potential liability in its offer for and acquisition of TomorrowNow -- indeed, even if evidence of clear infringement was uncovered during due diligence, a copyright infringement verdict of this magnitude may not have been foreseeable.

SAP has vowed to "pursue all available options," including post-trial motions and appeal, in order to reduce the verdict. For now, however, the massive verdict serves as a stark warning to companies, to not only conduct through intellectual property investigations of target companies, but also to take steps to properly understand and quantify any risks that are uncovered.

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The stage has been set for an issue important to brand-owners and importers alike, the importation of parallel imports or “gray market” goods, to be addressed by the Supreme Court early in the high court’s October 2010 Term. Oral argument for Costco Wholesale Corporation v. Omega, S.A., No. 08-1423 has been scheduled for Monday, November 8, 2010.

Case Summary: Omega authorized the foreign manufacture and sale of watches bearing a symbol protected by a U.S. copyright. The watches were subsequently imported into the United States without Omega’s authorization and Costco distributed them for sale. Omega then filed suit for unauthorized distribution of copyrighted goods. Omega persuaded the Ninth Circuit that its watches were not “sold” under the protection of the U.S. Copyright Act and, therefore, Costco could not rely on a first sale doctrine defense.

In this case, previously discussed on this blog here, the justices will consider whether the first sale doctrine of the Copyright Act, which allows a copyright holder to exclusively control the first sale of an authorized copy, should be interpreted to provide a defense for parallel importers bringing into the U.S. copyrighted material manufactured and first sold abroad. Newly confirmed Justice Elena Kagan, however, will not participate in this important decision. She has recused herself because, in her previous role as Solicitor General, she filed a brief with the Court recommending denial of certiorari.

The principal briefs as well as seventeen amicus briefs have been filed, all available online courtesy of the American Bar Association. Petitioner Costco contends that the Ninth Circuit was incorrect in holding that the Copyright Act’s first sale doctrine is not implicated when copies are both made and first sold abroad. The Ninth Circuit reached its decision by reasoning that application of the first sale doctrine in such a case would be an impermissible extraterritorial application of U.S. law. Costco argues that extraterritoriality is not a legitimate concern in this instance and that the first sale doctrine should only apply in a situation where the authorized copyright holder making copies abroad is not also authorized to make and sell copies in the United States.

Respondent Omega conversely argues that the Ninth Circuit framed the issue correctly and encourages the Court to conclude that a copy made abroad for foreign sale, whether under the consent of a U.S. copyright owner or not, has not been “sold” under any provision of the Copyright Act. Therefore, according to Omega, the first sale of such copyrighted goods in the United States remains the exclusive domain of the U.S. copyright holder.

Of the seventeen amicus briefs filed, seven are in support of Costco, nine are in support of Omega, and one, filed by the American Intellectual Property Law Association (AIPLA), is in support of neither party. The amici in support of Costco are a collection of merchants and retailers such as Target Corp., Amazon.com, eBay, and Gamestop Corp., consumer-advocacy organizations such as Public Citizen, and library organizations such as the American Library Association and the Association of College and Research Libraries, among others.

In support of Omega are organizations such as the Intellectual Property Owners Organization, the Association of American Publishers, the Motion Picture Association of America, and the American Bar Association, intellectual property owners such as Fujifilm Corporation and Seiko Epson Corporation among others. The United States, under the authority of Acting Solicitor General Neal Kumar Katyal, also filed a brief in support of Omega and has been granted leave by the high court to participate in the oral arguments.

It was somewhat surprising to see Intel in Costco’s corner, as Intel is an owner of a number of copyrighted computer programs distributed throughout the world. Intel, however, is concerned not only for the copyright implications of the Court’s decision but also the implications with respect to patent law, which contains an analogous first sale doctrine. Regarding the copyright issue, Intel authorizes each year the sale and loading of its copyrighted software onto over one hundred million personal computers, which are built abroad and then shipped for sale to destinations around the world, including the United States. These same computers also contain the copyrighted material of several other intellectual property owners. Intel is concerned that, under the Ninth Circuit’s decision, any one of the intellectual property owners who contributed to the manufacture of these computers could subsequently block the first sale in the United States despite having authorized a first sale abroad. According to Intel, such a “drastic reallocation” of property rights for goods in international trade could have dire consequences.

AIPLA stands alone in filing a brief in support of neither party. Instead, AIPLA advances two separate possible outcomes, both of which avoid the issue of extraterritoriality. In the first alternative, AIPLA acknowledges that the Court may reverse the Ninth Circuit by determining that the first sale doctrine defense applies in Costco v. Omega because copyright owner Omega had exhausted its first sale in placing the copyrighted goods in commerce by having, in fact, sold them. In the alternative, AIPLA suggests that the justices could arrive at substantially the same outcome as the lower court by holding that a copyright holder, even where a first sale has already taken place, can nonetheless prevent importation of unauthorized goods. AIPLA reasons that a brand owner like Omega could still prevent parallel importation, the first sale doctrine defense notwithstanding, because, as AIPLA argues, a separate provision of the Copyright Act not implicated by the first sale doctrine prohibits unauthorized importation.

However the Supreme Court decides this case, the reasoning will likely have an impact on a variety of intellectual property holders, not just copyright owners. As pointed out by Intel in its amicus brief, patent law contains an analogous first sale doctrine as does trademark law. If the Court affirms the Ninth Circuit’s decision, a status quo will be preserved, perhaps across the board for all intellectual property owners empowered to control the first sale of their protected goods. If, however, the Court reverses or affirms on other grounds such as those suggested by AIPLA, copyright owners and possibly patent and trademark owners will have to accept a new interpretation of the first sale doctrine.

How are the amici lining up?

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Autodesk owns your software if you (think you) own a copy of AutoCAD, that is. In a reversal of fortune for enterprising eBay seller Timothy Vernor, the U.S. Court of Appeals for the Ninth Circuit vacated summary judgment of noninfringement, holding that Autodesk's customers were licensees -- not owners -- and thus were not entitled to resell their copies under the first sale doctrine.  Vernor v. Autodesk, Inc., No. 09-35969 (9th Cir. Sept. 10, 2010) (PDF)  Previously discussed here, Vernor, the purchaser of four authentic, used copies of AutoCAD, attempted to sell these copies on eBay. Autodesk objected, claiming that the terms of the software licensee to the original owner prohibit resale of the software, and eventually Vernor filed for declaratory judgment, seeking a declaration that his sales were lawful under the first sale doctrine, 17 U.S.C. Sec. 109. On summary judgment, the U.S. District Court for the Western District of Washington held that the first sale doctrine applied, and that subsequent sales did not contitute copyright violations. Vernor v. Autodesk, Inc., No. C07-1189RAJ (W.D. Wash September 30, 2009) (PDF).

In vacating the lower court's decision, the Ninth Circuit set forth a three-part test for determining whether a software user is a licensee and not an owner, paraphrased as follows:

1. Does the copyright owner specify that the user is granted a license?

2. Does the copyright owner "significantly restrict" the user's ability to transfer the software?

3. Does the copyright owner impose "notable use restrictions"?

Applying this test to the facts, the Ninth Circuit determined that Autodesk's customers were licensees, and not owners. Accordingly, the sale of the software to Vernor by the original licensee -- which was prohibited by the AutoCAD license -- was not valid. Thus, Vernor and Vernor's customers were not owners of their copies of AutoCAD. The court remanded the matter for further proceedings.

This decision suggests significant changes for the current copyright regime, both for copyright owners and their customers. Will software publishers, emboldened by the validation of the AutoCAD license, attempt to exert greater control over physical copies of software, which could spell trouble for the large used software industry? Will "shrink-wrap" licenses spill over into other industries that use physical copies of copyrighted works (e.g., booksellers)? Or will the first sale question soon be a moot point, given our increasing reliance on digital delivery of copyrighted works, where licenses are the norm and copies are "tied" to individual accounts or computers? The court, acknowledging the various policy concerns, explained that "Congress is free, of course, to modify the first sale doctrine...if it deems these [policy considerations] to require a different approach." In the meantime, with the Augusto and MDY opinions pending, the Ninth Circuit has yet to have the last word on the first sale doctrine -- however, we now have a bit of guidance suggesting how those cases will be decided.  

One thing for certain is that many customers -- especially those who are less familiar with the nuances of a licensor/licensee relationship, but are very familiar with the you-buy-it-and-you-own-it rules of traditional purchasing -- simply won't know what they're buying when it comes to software, and that old maxim that so commonly pops up in daily life is especially relevant here: Read the fine print.  If you don't, you might end up like Vernor -- on the wrong end of a copyright suit.

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The anti-circumvention provision of the Digital Millennium Copyright Act, 17 U.S.C. § 1201, continues to challenge courts in the context of computer software. Section 1201(a)(1) prohibits “circumvent[ing] a technological measure that effectively controls access to a work protected under” Title 17. 17 U.S.C. § 1201(a)(1)(A). A recent decision of the Fifth Circuit Court of Appeals, relying on a 2004 Federal Circuit decision, holds that in this provision “access” means more than access.

In MGE UPS Systems, Inc. v. GE Consumer and Industrial, Inc. et al., No. 08-10521, 2010 WL 2820006 (5th Cir. July 20, 2010) (PDF), the court affirmed the district court’s dismissal of MGE’s claim that defendant Power Maintenance International, Inc., acquired by GE in 2001, violated § 1201 by circumventing an external hardware security key (a “dongle”) that enables and limits (with a password, an expiration date, and maximum number of uses) the use of software helpful for servicing MGE’s uninterruptible power supply machines. A group of employees of PMI, which services MGE machines, had acquired the unsecured MGE software from an unknown source after hackers had defeated the security key’s features, permitting unlimited use of the software.

Defendants admitted that the PMI employees had used the software on a number of occasions but argued that the DMCA had not been violated, because the dongle did not prevent copying of MGE’s software but only access to it, and once such access was obtained there was no technological obstacle to copying the software. The PMI employees had therefore not, defendants argued, engaged in the sort of “access” that § 1201 was designed to prevent. The court agreed, holding that “[t][he DMCA prohibits only forms of access that would violate or impinge on the protections that the Copyright Act otherwise affords copyright owners.” In doing so it followed the construction of § 1201(a)(1)(A) adopted in Chamberlin Group Inc. v. Skylink Technologies, Inc., 381 F.3d 1178 (Fed. Cir. 2004).

Under § 1201(a)(3)(A), applicable to § 1201(a), to “circumvent a technological measure” means “to descramble a scrambled work, to decrypt an encrypted work, or otherwise to avoid, bypass, remove, deactivate, or impair a technological measure, without the authority of the copyright owner,” and a technological measure “effectively controls access to a work” if “the measure, in the ordinary course of its operation, requires the application of information, or a process or a treatment, with the authority of the copyright owner, to gain access to the work.” The “antitrafficking provisions” of the DMCA distinguish between gaining access to a work and exercising rights of the copyright owner, for § 1201(a)(2) prohibits trafficking in any technology primarily designed or produced for the purpose of “circumventing a technological measure that effectively controls access to a work protected under” Title 17, whereas § 1201(b)(1) prohibits trafficking in any technology primarily designed or produced for the purpose of “circumventing protection afforded by a technological measure that effectively protects a right of a copyright owner under” Title 17. 17 U.S.C. §§ 1201(a)(2) & (b)(1) (emphases added.).

MGE argued that gaining “access” to a work means being able to view or use the work. The court rejected that meaning as too broad, since it “would permit liability under § 1201(a) for accessing a work simply to view it or use it within the purview of ‘fair use’ permitted under the Copyright Act.” Following the Federal Circuit in Chamberlin, the court concluded that the DMCA did not introduce a new property right (presumably referring to a right not to have a work viewed after circumvention of a technological measure), so there is no violation of § 1201(a) absent a “link between ‘access’ and ‘protection’ of the copyrighted work”: “The owner’s technological measure must protect the copyrighted material against infringement of a right that the Copyright Act protects, not from mere use or viewing.”

The court’s conclusion seems difficult to reconcile with the distinction in § 1201 between technological measures protecting access to a work and those protecting the rights of copyright owners and its prohibition of the circumvention only of technological measures protecting the former – a distinction made, as the Copyright Office’s December 1998 Summary of the DMCA noted, because unauthorized copying of a work may be fair use, but unauthorized access to it is not. Nonetheless, the court found that MGE’s dongle protected only access to its software but gave no further protection once access was obtained, so it did not protect against infringement of any rights of the copyright owner (by, for example, copying the unlicensed software). “Because the dongle does not protect against copyright violations, the mere fact that the dongle itself is circumvented does not give rise to a circumvention violation within the meaning of the DMCA.” (emphasis in original) The court buttressed its conclusion that § 1201(a)(1) had not been violated by noting that the section did not apply after a technological measure had been violated, and there was no evidence that any PMI or GE employee had circumvented the technological measure, as opposed to using the software after the dongle was circumvented by others. Accordingly, the court affirmed the district court’s dismissal of MGE’s DMCA claim.

Defendants were nonetheless liable for copyright infringement of the unlicensed unsecured software, and the jury had rendered an award for infringement as well as for misappropriation of trade secrets and unfair competition. However, the appellate court found that MGE had failed to prove damages from any of those violations and reversed the district court’s denial of defendants’ motion for judgment as a matter of law under Rule 50(a). The court did, however, affirm the district court’s grant of a permanent injunction against use of MGE’s software.

Copyright owners seeking to use technological measures to protect their software from unlicensed access should recognize that, despite the distinction made in Section 1201 between technological measures that protect access and those that protect a right of a copyright owner, courts following MGE UPS Systems and Chamberlin will not find a violation of that section in the circumvention of a technological measure that protects access to software without at the same time protecting the software against being used or copied, although it remains to be seen just how the two must be linked. Of course, a copyright owner may still rely on its remedies under the Copyright Act against unlicensed copying, but, as MGE UPS Systems also demonstrates, care must be taken in pursuing such remedies.

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In a bid to win the hearts and minds of voters, lately political candidates have touted, among other things, their musical predilections. In at least two recent cases, candidates have sanctioned the alteration of the lyrics, but not the tune, of some of their favorite music to shore up political support. The musicians who own the copyrights in those songs weren’t exactly thrilled.

All They Want To Do Is Campaign

In April 2009, various musicians, including Don Henley, sued Charles DeVore, who unsuccessfully sought the Republican nomination for a U.S. Senate seat currently held by Senator Barbara Boxer, for, among other things, infringing the musicians’ copyrights. The musicians alleged (PDF) that DeVore produced videos reworking the lyrics of the musicians’ songs “The Boys of Summer” and “All She Wants to Do Is Dance” into songs titled “The Hope of November” and “All She Wants To Do Is Tax,” which poked fun at President Obama, his supporters, and Senator Boxer. DeVore asserted that “The Hope of November” and “All She Wants To Do Is Tax,” constituted parodies, and were thus protected by the fair use doctrine. Specifically, DeVore maintained that the altered songs commented on political views conveyed in the songs. On cross-motions for summary judgment, the court disagreed (PDF), reasoning in large part that DeVore’s videos did not target Henley’s political views so much as they targeted views that may have been held by Henley (the court noted that Henley disputed DeVore’s assumption that he held liberal-leaning views, but explained that its inquiry focused on whether a work’s parodic character could reasonably be perceived).   DeVore recently apologized for using the musicians’ work without their permission and settled the matter for an undisclosed amount.

In another case this past January, Peter Paterno, an attorney for Joe Walsh, a guitarist for the Eagles, wrote to Joe Walsh (PDF), a Republican candidate for Congress, about the unlicensed use of his client’s song, “Walk Away,” in which the narrator ostensibly recounts his unsuccessful efforts to mend his relationship with an uninterested partner, to compose “Lead the Way,” which extolls Joe Walsh’s ability to “lead the way” in battle against Democratic policies and positions.  In the bitingly sarcastic letter, Paterno demanded that the candidate discontinue his unlicensed use of Walsh’s song.  Walsh refused, claiming that “Lead the Way” was a “parody song of the political process.” However, a “parody of the political process” standing by itself is insufficient to demonstrate the parodic nature of the work for purposes of a copyright infringement; rather, Walsh had to show that “Lead the Way” lampooned or commented on “Walk Away.” Perhaps having realized that his song had very little, if anything, to do with trying to fix a broken relationship, Walsh ultimately decided to take “Lead the Way” down from his website.

Fair Use Funny?

For purposes of a copyright infringement action, a work qualifies as a parody if it uses aspects of a copyrighted work to create a new work that comments on the underlying copyrighted work.

Owing to the limitation that a parody comment on an underlying copyrighted work, parodies enjoy a somewhat favored status under the fair use doctrine. This is because the four factors used to determine whether the fair use doctrine protects a putative parody—the purpose and character of the use, the nature of a copyrighted work, the amount copied, and the effect upon the potential market—typically weigh in favor of finding that an alleged parody constitutes a fair use since a parody by its very nature is transformative and expressive, requires significant borrowing from the underlying work, and the author of a copyrighted work will not likely license a work criticizing the author’s own work.

In contrast, satirical works, which use another’s work to comment on something other than the underlying work, do not necessarily fare as well under these factors because satirical works typically require greater justification for appropriating a copyrighted material. For this reason, would-be satirists often try to stretch the meaning or message ascribable to a copyrighted work in order to assert a parody-based fair use defense and avoid the heavier burden typically applied to satires.

Aren’t There Different Rules For Politicians Political Speech?

The fine distinction between satire and parody exists in a certain amount of tension with the relatively strong protections afforded political speech under the First Amendment.   Although copyright law does not proscribe the substance or ideas behind political messages, it does potentially entitle an author to enjoin the form in which a political message may be delivered.

As the DeVore and Walsh cases demonstrate, parody will rarely, if ever, serve as a viable defense in a copyright infringement action where the allegedly infringing work fixates on a political view rather than the underlying work itself. To stave off claims of copyright infringement, political satirists would thus do well to take aim at works with overtly political tones or otherwise limit their commentary to the works from which they borrow.  

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 In the past few years, the Apple iPhone and its "smartphone" brethren have seen widespread adoption throughout the United States. Combining the features of computers and traditional mobile phones, along with additional features like movement detection, GPS capabilities, and over-the-air videoconferencing, smartphones have, for many people, become indispensible tools for both work and pleasure.

Sometimes, however, users find the native functionality of certain smartphones to be limited. Some smartphones incorporate operating systems that restrict or eliminate features otherwise built in to the hardware, provide limited software functionality, or restrict the ability of the end user to use the phone in connection with "unauthorized" programs or media. For instance, among other things, the iPhone is "locked" and will only work with AT&T's wireless network, its operating system requires that "apps" -- which are approved by Apple beforehand -- be downloaded only from the Apple iTunes App Store, and its interface has very limited customizability features. So, while users enjoy the advanced hardware of smartphones, they often find the installed software to be stifling.

Many smartphone users with this problem turn to "jailbreaking" -- removing the software restrictions of the operating software. To jailbreak the iPhone, for instance -- that is, to relieve it of its Apple-imposed limitations -- requires the user to download and run a program or a series of programs that install custom software, and which modify the existing operating software. A jailbroken iPhone can then access unofficial "app stores" such as Cydia and Installer to download non-Apple-sanctioned third-party software and enable previously locked features and functionality.

Because jailbreaking requires users to "hack" their phones, there is a legitimate copyright concern. This is because the Digital Millennium Copy Act (DMCA), 17 U.S.C. sec. 1201 et seq. (PDF), which was designed to address copyright issues in the digital age, prohibits the act of circumventing measures that control access to copyrighted works -- in other words, hacking. Because jailbreaking a smartphone requires users to hack the phone to remove certain software protections, it was likely that -- absent other considerations such as fair use exceptions -- such an action violated the DMCA's anti-circumvention provisions.

The questionable legality of jailbreaking prompted the Electronic Frontier Foundation to seek clarification from the U.S. Copyright Office as part of the Copyright Office's "Triennial Rulemaking" under the DMCA, which requires that every three years the Copyright Office conduct a process for designating exemptions -- that is, certain classes of works that for one reason or another may be "hacked" legally for certain purposes. See 17 U.S.C. Sec. 1201(a)(1)(C) and (D) (PDF).   As part of the rulemaking process, the U.S. Copyright Office questioned Apple on various issues related to jailbreaking. In its response to these questions (PDF), Apple maintained that, among other things, jailbreaking constitutes copyright infringement and the creation of infringing derivative works, violates the software license agreement covering the iPhone software, and diminishes the integrity and security of the iPhone software and the data network infrastructure generally.

In its ruling announced on July 26, 2010 and effective July 27, 2010 (PDF), the Copyright Office adopted six exemptions to the DMCA anticircumvention prohibitions, including:

Computer programs that enable wireless telephone handsets to execute software applications, where circumvention is accomplished for the sole purpose of enabling interoperability of such applications, when they have been lawfully obtained, with computer programs on the telephone handset.

Analogizing jailbreaking to the existing DMCA statutory exemption for reverse engineering for the purpose of making computer programs interoperable, see 17 U.S.C. sec. 1201(f), the Copyright Office explained that:

On balance, the Register concludes that when one jailbreaks a smartphone in
order to make the operating system on that phone interoperable with an independently created application that has not been approved by the maker of the smartphone or the maker of its operating system, the modifications that are made purely for the purpose of such interoperability are fair uses.

And so the jailbreaking exemption was adopted. A separate exemption was adopted for "unlocking" the phone to work with any compatible voice and data carrier.

Of course, as Apple correctly points out, copyright is hardly the only relevant legal issue -- among other things, jailbreaking an iPhone might violate Apple's iPhone license agreement and render void the iPhone warranty. However, because it is a reasonably simple process to reload a clean version of the iPhone operating system -- with nary a trace of the jailbreak -- this is probably not a significant deterrent for would-be escapees. Further, as discussed in my post regarding the first-sale doctrine and enforceability of end-user license agreements, perhaps challenges could be raised to Apple's insistence that its customers are not owners of the operating software, but only licensees (indeed, in its ruling, the Copyright Office noted that it "cannot clearly determine whether the various versions of the iPhone contracts with consumers constituted a sale or license").

Is this the end of the jailbreaking copyright inquiry? Might Apple or other smartphone manufacturers challenge the Copyright Office's exemption determination, or will they more aggressively lock down software to deter potential jailbreakers? We will probably not have to wait too long to find out.

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Almost since the founding of YouTube in 2005, the on-line video service has been labeled by commentators as a top virtual destination for copyright-infringing material. According to a lawsuit brought by Viacom International, Inc., YouTube was aware of this alleged infringement as a general matter, and through advertising revenues profited handsomely from it. Nevertheless, a federal judge has held that YouTube’s general knowledge alone, without information about specific instances of infringement, was not enough to forfeit the protection of the Digital Millennium Copyright Act (“DMCA”).

The DMCA, as codified at 17 U.S.C. § 512(c), provides an internet service provider (“ISP”) with “safe harbor” protection against copyright infringement suits under certain conditions. If somebody uses the ISP’s service to store infringing material, the ISP is protected if it does not have actual or constructive knowledge of the infringement, and if it acts quickly to remove such material once it does have knowledge of it. Also, the ISP must not receive a financial benefit directly attributable to infringing activity that it has the “right and ability to control.”

When YouTube did receive notice of specific infringing material, it acted quickly. In February 2007, Viacom sent a mammoth take-down notice to YouTube, naming about 100,000 specific clips. Those clips were removed nearly overnight. However, Viacom alleged that YouTube did little, if anything, to locate and remove potentially infringing material on its own, even though it generally knew that such material existed. In March 2007, Viacom sued YouTube, claiming that this general knowledge gave rise to liability for copyright infringement. YouTube moved for summary judgment, asserting entitlement to safe harbor under the DMCA.

On June 23, 2010 Judge Louis L. Stanton, federal District Court Judge for the Southern District of New York, issued an opinion and order agreeing with YouTube. It was not enough that YouTube was generally aware of, and even welcomed, copyright-infringing material on its website. Rather, in order to lose safe harbor protection, YouTube had to have had knowledge of specific infringing materials, and sufficient information (such as the URL address) to locate and take down those materials. Additionally, Judge Stanton held that, even if YouTube directly profited, it could not be charged with “the right and ability to control” the infringing activity until it had that specific knowledge.

Consistent with the language of 17 U.S.C. § 512(m), Judge Stanton’s ruling puts the burden of on-line policing squarely, and solely, on the copyright holder. An ISP, by contrast, has essentially no duty to determine the copyright ownership of the material it is storing, no matter how prevalent infringement may be, and no matter how much money is gained from that infringement.

Viacom plans to appeal to the Second Circuit which, interestingly enough, recently encountered similar policing issues, albeit unrelated to the DMCA, in Tiffany (NJ), Inc. v. eBay Inc. In that case, in a decision that may foreshadow an appellate defeat for Viacom, the Court held that even though eBay may have known in a very general sense that its website facilitated sales of counterfeit Tiffany products, such general knowledge alone was not sufficient to establish trademark infringement.

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A pending Supreme Court case may affect prevention of parallel imports, which is an important concern for trademark owners who wish to maintain their right to control the sale of goods developed for use in a particular market. Parallel imports, also known as “gray market” goods, are goods bearing a trademark protected in the United States that have been purchased through legal channels abroad and imported for unauthorized sale into the United States.   These goods often can be sold by the unauthorized importer for a profit and, at times, a lower price than the trademarked goods authorized for sale in the United States because of international pricing differences. 

It is common for trademark owners to manufacture goods differently for the various global markets in which they sell them, often to satisfy local consumer taste or regulatory requirements. For example, a soft drink sold under the same trademark in the United States and Europe may be made with less sweetener for the European Market to satisfy local taste and without high fructose corn syrup because of regulations against its use. The owner of the soft drink trademark in the United States may wish to prevent beverages manufactured for the European consumer from being sold in the U.S. without authorization. 

The good news is that a U.S. trademark owner has tools at their disposal to prevent parallel importation. For example, under U.S. customs regulations, if goods bearing a U.S. registered trademark are brought to the U.S. and are materially different than the U.S. product (such as the less sweet soft drink) the U.S. trademark owner can prevent them from being granted clearance by customs. The bad news, however, is that the unauthorized importer may circumvent the exclusion of the product if they affix a disclaimer to the product warning consumers that their sale is not authorized by the U.S. trademark owner. (See 19 C.F.R. §§ 133.2 to 133.27, available at GPO Access.)

Some trademark owners have found another way to protect themselves from parallel importation – Unites States copyright law. The first sale doctrine of the Copyright Act, 17 U.S.C. §109(a), provides U.S. copyright holders a means to prevent unauthorized sale in the United States of copyrighted material manufactured and first sold abroad. Generally, the owner of a copyright may exercise control over how copies lawfully made under the protection of the Copyright Act may be sold. However, after an authorized sale, the first sale doctrine then allows the subsequent owner of the copyrighted product to sell or dispose of it free from the copyright owner’s control or interference, so long as no unauthorized copies are made. 

But how does the owner of a trademarked good like a soft drink use copyright law to avoid parallel imports? By use of a copyrighted design on their product. The Copyright Act, which we think of as protecting things like books, music recordings, movies and television programs, also can protect original designs.   If an original design protected by copyright, such as a logo, is affixed to a commercial product, then the product bearing the design will receive the same protections under the law as the design itself. Importantly, the first sale doctrine of the Copyright Act does not allow for a parallel importer to use a disclaimer in the manner allowed by customs regulations. If copyrighted goods have been manufactured abroad and heretofore only sold abroad, the first sale doctrine of the Copyright Act acts as an absolute bar to unauthorized, parallel importation, at least for now.    

On April 19, 2010 the Supreme Court granted certiorari in the case of Costco Wholesale Corporation v. Omega, S.A., No. 08-1423. In this case, the justices will consider whether the first sale doctrine of the Copyright Act should be interpreted to provide a defense for parallel importers bringing into the U.S. copyrighted material manufactured and first sold abroad. If the Court rules that such a defense should be allowed, the means by which copyright owners prevent parallel imports would disappear. 

In the lower court case, Omega S.A. v. Costco Wholesale Corp., 541 F.3d 982 (9th Cir. 2008), the Ninth Circuit held that Costco infringed upon Omega’s copyright by selling, without authorization, watches bearing Omega’s copyrighted design which had been manufactured in Switzerland and first sold by authorized distributors outside the United States. The Ninth Circuit ruled that the Copyright Act could not extend beyond United States borders to cover goods manufactured abroad and that a U.S. copyright holder reserved their rights to control the first sale of these goods taking place after domestic importation. 

Costco, citing the Supreme Court case Quality King Distributors, Inc. v. L’anza Research International Inc., 523 U.S. 135 (1998), had argued that recognizing the occurrence of sales abroad for the purposes of addressing copyright disputes does not itself raise the issue of extraterritorial application of U.S. law. In Quality King  the Court determined that hair care products bearing a U.S. copyrighted design manufactured in the U.S. and then first sold abroad had received their “first sale” under copyright law and, therefore, the U.S. copyright owner could not prevent their subsequent parallel importation back into the U.S. The important distinction between these two cases is where the goods were manufactured. In Quality King, manufacture took place in the U.S. and in Costco, manufacture took place in Switzerland. Costco wants this distinction to disappear. 

Costco had argued that the Supreme Court’s Quality King decision stood for the proposition that recognition of first sales abroad does not raise issues of extraterritorial application of U.S. law. The Ninth Circuit disagreed, holding that while recognition of a foreign sale for the purposes of a factual analysis may not raise extraterritorial issues, applying the Copyright Act to goods manufactured outside the U.S., and therefore outside the reach of the statute, does. In essence, it held that the “first sale” which could be governed by U.S. law, and therefore controlled by the copyright holder, was the importation into the U.S.

Justice Ruth Bader Ginsburg, in her concurrence in Quality King, stated that the Court was contemplating “round-trip” importation of goods made in the U.S., sold abroad, and then brought back to the U.S. She specifically stated that the Court was not considering how the first sale doctrine applied to copyrighted goods first manufactured and sold abroad.   The time, however, has come to consider this very question, and copyright holders who use the first sale doctrine to prevent parallel imports have a lot riding on the answer.   

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Many of us have, at one point or another, found ourselves overwhelmed by the amount of stuff lying around our homes, and have taken the opportunity to clean up (and make a bit of spending money in the process) by selling used books, CDs, DVDs, or VHS tapes at a yard sale, or at a pawn shop, or on an Internet site like Ebay or Craigslist. Even though these items are typically subject to copyright protection, we are allowed to sell them -- or otherwise dispose of them as we see fit -- because of the "first sale doctrine," a limitation on copyright articulated by the U.S. Supreme Court in the landmark decision of Bobbs-Merrill Co. v. Straus, 210 U.S. 339 (1908), and subsequently codified in the Copyright Act of 1976, 17 U.S.C. sec. 109. In short, the first sale doctrine allows a purchaser of a lawfully made copy of a work -- for instance, a book -- to sell that book without the permission of the copyright holder -- in other words, the copyright holder's rights to control that particular copy of the book end once that book is first sold. The first sale doctrine applies to all copyrighted works, though certain exclusions have been made for rental, lease and lending of computer software and phonorecords, which require authorization of the copyright owner.

Because the first-sale doctrine essentially creates a secondary market for copyrighted works (arguably resulting in fewer profits for some copyright owners), and because digital works are easily copied and manipulated, certain software and music publishers have attempted to sidestep the doctrine by attempting to control, via contract, the actions of purchasers. For instance, some copies of software contain so-called "shrink wrap" licenses, also called End-User License Agreements (EULAs), which purport to bind the purchaser upon opening the software package or installing the software. EULAs vary, but typically define the relationship between the end-user and the copyrighted work as a "license" arrangement -- that is, the user has not purchased a copy of the software, but only purchased the license to use the software under certain conditions defined by the copyright owner. Of course, many EULAs prohibit the transfer of that "license" to third parties, among other various restrictions.

Three cases pending before the Ninth Circuit promise to shed some light on the enforceability of EULAs and similar contracts purporting to restrict the actions of end-users. The first, Autodesk v. Vernor, stems from a lawsuit by Vernor, a reseller of used copies of Autodesk's Autocad software on Ebay, who sought declaratory relief based on Autodesk's prior interference with his Ebay auctions. The United States District Court for the Western District of Washington held that the first sale doctrine trumped any contractual agreement to not resell the product, and that subsequent sales did not constitute copyright violations. Vernor v. Autodesk, Inc., No. C07-1189RAJ (W.D. Wash September 30, 2009) (PDF).

The second case, UMG v. Augusto, involves Ebay sales of promotional CDs of UMG musicians that were originally handed out to music reviewers and found by Augusto at record stores. The CDs were labeled "PROMOTIONAL USE ONLY -- NOT FOR SALE," which UMG claimed constituted "label licenses." The court below, noting that the "only benefit to a license for UMG is to restrain transfer of its music," held that the "label license" did not create an agreement between UMG and the original recipients of the CDs, and granted Augusto's summary judgment motion as to UMG's copyright claim, holding that Augusto's sales of promotional CDs did not constitute copyright infringement.  UMG Recordings, Inc. v. Troy Augusto et al., No. CV-03106 SJO (AJWx) (C.D. Cal June 10, 2008) (PDF).

MDY v. Blizzard is a bit more complicated in that it doesn't deal with resale of copyrighted goods, but rather the end user's ability to interact with the software (and copy the software to a computer) in a manner ostensibly prohibited by the EULA. Blizzard is the creator of the well-known World of Warcraft computer program, a massively multiplayer online role-playing game (MMORPG) in which players, via player-created avatars, make friends, battle enemies, gain "experience points," and earn in-game money to spend on equipment and items for their avatars. MDY created a software program called Glider that enables users to play World of Warcraft on "autopilot," meaning that players could be away from their computers while their avatars would continue to operate in-game. Because the terms of the World of Warcraft EULA prohibited "bots," as such programs are typically called, Blizzard claimed that MDY was tortiously interfering with the EULA between Blizzard and end users, and that MDY was vicariously liable and otherwise contributing to the copyright infringement (e.g., copying of the game program into computer system memory outside of the scope of the limited license). The U.S. District Court for the District of Arizona granted summary judgment for, among other claims, Blizzard's claims of vicarious and contributory copyright infringement.  See MDY Industries, LLC v. Blizzard Entertainment, Inc. et al., No. CV-06-2555-PHX-DGC (D. Ariz. January 28, 2009) (PDF).

All three cases have been appealed to the Ninth Circuit.

So, who really owns "your" software, and to what extent are you allowed to modify it for personal use? What about "your" music CD? The Ninth Circuit's treatment of these cases promises to provide some clarity on the enforceability of EULAs and shrink wrap licenses on original purchasers, as well as the effect of such contracts on downstream consumers. Both copyright owners and consumers should pay close attention.

Do you own that software?  You'll just have to wait to find out.

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A recent decision from the Southern District of New York should be of interest to anyone responsible for registering the copyright in compilations or collective works. In Muench Photography, Inc. v. Houghton Mifflin, 09-CV-2669 (S.D.N.Y. May 4, 2010) (PDF), the court ruled that the plaintiff, which owned the copyright in certain photographs that defendant Houghton Mifflin had licensed through a stock photo company called Corbis, did not hold valid registrations and therefore had not fulfilled the 17 U.S.C. § 411 prerequisite to suit. Plaintiff MPI claimed that Corbis had registered the copyright in its photographs when it had registered an automated database containing images by many different photographers.

The court held that Corbis’s registration of its automated databases was insufficient to register the copyright in the individual photographs contained therein because it had failed to list the names of the individual authors as required by 17 U.S.C. § 409. Troublingly, however, the opinion also contains some broader statements that make the basis for the court’s holding somewhat unclear. In particular, the court stated that “the registration of a collective work reaches the individual works only when the author of the collective work authored each of the individual works.” Slip Op. at 20. If this statement is true, it would mean that Corbis could not have registered the copyright in the individual photographs even by listing all of their separate authors, since Corbis (the author of the collective work, i.e., the database) was the owner and claimant – but not the author – of the photographs.

The court and the parties looked primarily to two earlier cases as precedent. In Morris v. Business Concepts, Inc., 283 F.3d 502 (2nd Cir. 2002), the Second Circuit held that registration of a magazine issue did not cover an individual article included in the issue because the copyright claimant (publisher of the magazine) had obtained only some, not all, of the rights to the article at the time of registration. Conversely, the court suggested that if the publisher had obtained all rights, its registration would have covered the article. In Bean v. McDougal Littell, No. 07-8063-PCT-JAT (D. Ariz. July 28, 2008), the Arizona district court confronted facts nearly identical to those presented in Muench. Defendants argued that Corbis did not have all rights to the photographs in its database because it had obtained assignment of legal title solely for the purpose of registering the copyrights, and was required to reassign all rights to the original authors after registration. The court disagreed, however; it found the assignment sufficient to transfer all rights to Corbis and, relying on Morris, held that Corbis’s registration therefore covered the individual photographs.

The Muench court distinguished Morris by finding that “automated databases and serials are separate forms of copyrightable works and are thus subject to separate copyright regulations.” Slip Op. at 18. It therefore declined to follow Bean because Bean relied on Morris, and because the defendants Bean had not pursued an argument based on § 409. Interestingly, in Bean the plaintiff’s name had been included in the Corbis registration application, thereby fulfilling the § 409 requirement, but the Muench court did not distinguish the case before it on this fact.

The distinction the Muench court drew between serials and automated databases is somewhat problematic because both types of works are collective works, and both are subject to the requirements of § 409. Although the Muench court looked to Copyright Office Circulars as persuasive authority, it failed to acknowledge or address the fact that Circular 62 (PDF), covering serials and relied on by the Second Circuit in Morris, explicitly states that “it is not necessary to include the names of the contributors” in order to obtain copyright registration for the individual works included in a collective work.

Setting aside this disconnect, the clearest lesson of Muench is that copyright claimants seeking to protect a collective work and the individual works that constitute it should always play it safe by listing all authors of the constituent works on the registration application form. As noted, some language in the opinion suggests that even this will not be enough if the individual works were not authored by the author of the collective work. For this reason, it may be wise for companies commissioning contributions to a project to structure the contributions as works made for hire, so that the company is in fact the author of the entire project. Where this is not possible, Muench does create some uncertainty. However, given the court’s predominant emphasis on § 409, and the stark conflict with Morris (not to mention with longstanding copyright practice) that would be created by a holding that collective work registrations can never cover separately authored contributions, it seems reasonable to conclude that the court’s statement on this point is dicta and unlikely to be followed. In addition, copyright owners facing infringement of an individual work that was registered as part of a collective work might consider, if there is any question about the validity of the registration, taking the extra precaution of applying separately to register the individual work before bringing suit.

Finally, it is worth noting that an affiliate of the plaintiff in Muench had actually written to the Copyright Office and obtained a response blessing Corbis’s registration strategy as sufficient. The court declined to defer to the agency’s interpretation of the Copyright Act contained in that response because, the court concluded, it conflicted with a plain reading of § 409. Slip Op. at 14. At the end of its opinion, the court expressed regret for the harsh result faced by a plaintiff who had made every effort to comply with the Act under specific guidance from the Copyright Office, and noted that “[t]he fault in this case lies solely with the Copyright Office” and the “poor advice” it had offered the plaintiff. Slip Op. at 23-24. Registrants would do well to keep in mind that even specific approval from the Copyright Office itself is no guarantee that a particular approach to registration will ultimately be found sufficient under the statute.

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This week, the Computer & Communications Industry Association (CCIA) released the report Fair Use in the U.S. Economy (.pdf) concluding that industries that rely on the "fair use" exception in copyright law contributed $4.7 trillion or 16% of the  U.S. gross domestic product in 2007, growing faster than the other sectors of the U.S. economy.  The report credits the fair use of copyrighted works for the success of search engines, software developers and a number of other "new economy" industries.

The Fair Use Doctrine is derived from Section 107 of the Copyright Act, which reads:

[T]he fair use of a copyrighted work . . . for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright.

The CCIA Report examines industries that benefit from the Fair Use Doctrine, particularly Internet search engines, software developers and the makers of music and media players, and concludes that "exceptions to copyright protection . . . promote innovation and are a major catalyst of U.S. economic growth."  The report cautions that these findings do not necessarily call for scaling back copyright protections:

Certainly, copyright protection provides an incentive for the production of creative works and these works have a positive impact on the U.S. economy.  The positive aspects of copyright protection should not, however, obscure that fair use is also a vital economic driver.

The CCIA report does not explain in detail what "fair use" helped drive the growth of MP3 players, but everyone should keep in mind that, as far as current caselaw is concerned, we still need to pay for songs downloaded from iTunes. 

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A new wrinkle has recently appeared in the legal landscape surrounding Google’s Google Books project. While the parties to the authors’ and publishers’ lawsuit await a court decision on approval of their proposed settlement, a different group of plaintiffs has filed a new class action lawsuit against Google on behalf of photographers, visual artists, and other copyright owners whose pictorial works appear in the books and periodicals included in the Google Books project.

The named plaintiffs in the new case include the American Society of Media Photographers, the Graphic Artists Guild, the Picture Archive Council of America, the North American Nature Photography Association, and Professional Photographers of America, along with several individual photographers and illustrators whose works are included in books within the university library collections Google has scanned for inclusion in Google Books.

Many of the same plaintiffs previously moved to intervene in the main Google Books lawsuit, but Judge Denny Chin denied the motion as untimely. In an order issued November 4, 2009, denying the would-be intervenors’ motion to reconsider, the Court stated that intervention could upset “thousands of hours of discussion, compromise, and legal draftsmanship” underlying the proposed settlement and concluded that “[f]rom the perspectives of fairness and efficiency, it makes more sense for the movants to file their own lawsuit than to be permitted to delay this lawsuit.”

The visual artists have now done exactly that, filing their complaint in the Southern District of New York on April 7, 2010. The complaint alleges that Google Books represents “the most widespread, well-publicized, and uncompensated infringement of exclusive rights in images in the history of book and periodical publishing” and seeks monetary damages for willful infringement of copyright, a declaratory judgment, and preliminary and permanent injunctions. Google has yet to file an appearance of counsel in the suit.

The filing of a lawsuit relating to copyrights in visual works draws attention to the fact that the long-pending authors’ and publishers’ lawsuit, now apparently close to resolution, applies only to textual materials and excludes pictorial works. In Judge Chin’s view, “in the context of an online database that is searchable using keywords, it makes sense to prioritize the rights to word-based material.” Nevertheless, it now appears that even if the main Google Books settlement is approved, Google may find that it faces further hurdles before the legal status of the Google Books project is fully resolved.

Those interested in further details can read Judge Chin’s order denying intervention (PDF), the full text of the new class action complaint (PDF), and the press releases of the various associational plaintiffs, including the American Society of Media Photographers and the Graphic Artists Guild.

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Cleveland area radio personality and early rap artist Orrin Lynn Tolliver, Jr. is on a roll in the Southern District of New York. After finding out in 2005 that a song he recorded in 1983 had been sampled in the multi-platinum hit “My Humps” by the Black Eyed Peas (iTunes sample available here), Tolliver sued his former collaborator who licensed the composition without his permission, and won on liability at the summary judgment stage (originally in March, 2009 - here). The district court judge later allowed the defendant to add a new affirmative defense (acquiescence), but then a few months ago proceeded to throw out that defense and order that the case proceed to trial on damages only. A copy of the recent ruling is available here. The next status conference in the case is set for June 2, 2010.

Defenses based on laches, estoppel, acquiescence, and related theories are common in copyright and trademark cases. They arise because intellectual property owners often tolerate infringement until real damage occurs. (Here, for example, Tolliver appears to have been aware that the defendant was improperly licensing the composition at issue to parties other than the Black Eyed Peas five years earlier, in 2000.) Defendants cry foul, claiming that the owner could and should have asserted its claims sooner, but the law imposes a fairly high standard for this defense: the defendant must prove actual prejudice caused by the owner’s delay or implied acquiescence.

In this case, the defendant was doomed by his own shifting responses to Tolliver’s claims. None of these were particularly consistent with the defendant’s position that he had licensed the composition in reliance on his understanding that Tolliver had acquiesced. As the Court wrote, "If Defendant believed that Plaintiff assented to his infringing conduct, he would have no reason to contest ownership of the Composition, claim to be in possession of a written assignment granting him ownership rights to the Composition, deny issuing licenses for exploitation of the Composition, accuse Plaintiff of identify theft . . . , claim to have written another song called ‘I Need a Freak’ separate from the Composition at issue, and so on."

In addition to ending the case on liability (at least pending any appeal), the opinion does not bode well for the defendant in terms of damages. Many of the statutorily available damages are discretionary, and a defendant who is seen as having presented contradictory and baseless defenses usually does not receive the benefit of the doubt. (Here in Boston, the IP community is still discussing the case of the graduate student who was ordered by a jury in federal district court to pay $675,000 for improperly downloading 30 songs – which could have been purchased on iTunes for $29.70.)

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The content production and delivery world continues to wait with bated breath for a decision as to the legality of the Google Books project. Several years ago, Google announced that it was partnering with major libraries – including, among many others, the Harvard University Library, the New York Public Library, and Oxford University’s Bodleian Library – to scan the full text of books in their collections. Google’s ultimate aim is to make book text searchable online and, where possible, to allow users to access entire books online.

The library project has raised concern among authors and publishers, however, because it involves scanning – that is, making a copy – of copyright-protected books without permission. Displaying the scanned text online, of course, raises further copyright issues. Some of the books scanned are old enough that their copyright terms have expired; for these public domain works, Google is free to scan and display as much as it desires. For books that are still in copyright and in print, Google has partnered with many publishers to allow users to search their books online, view “snippets” of the text, and access links to buy or borrow the actual books. However, for books that are still in copyright but out of print, the situation is more complex, particularly for “orphan works” for which the copyright owners cannot be identified.

The controversy has led to a class-action lawsuit spearheaded by The Authors’ Guild and the Association of American Publishers. The plaintiffs have claimed that Google’s actions in scanning books and displaying them online constitute massive copyright infringement. Last year, the parties drafted their second settlement agreement in an attempt to put to rest the copyright holders’ claims.  The proposed settlement provides a $125 million settlement fund to be distributed as royalties to copyright holders whose works appear on Google Books. In addition, Google has promised to create a non-profit “Book Rights Registry” that will manage a database matching works to their copyright owners and will handle rights claims, in an attempt to make it easy for owners of “orphan works,” where they exist, to come forward and assert their rights.  Copyright owners would be able to prevent their works from appearing on Google Books by contacting Google to “opt out.” To facilitate opt-out, Google will refrain from posting any book deemed to be out of print until 60 days after such a designation is made; after that window, if there is no opt-out request, Google will make the book’s text available online.

Because the plaintiffs in the lawsuit represent a class of absent copyright owners, the court is required to determine whether the proposed settlement is fair, reasonable, and adequate. The case is pending before Judge Denny Chin in the Southern District of New York.  Judge Chin held a fairness hearing on the settlement proposal on February 18, 2010, during which he heard from about thirty interested parties, in addition to the plaintiffs, defendant Google, and the U.S. Department of Justice, which has raised a number of concerns about the settlement on procedural and antitrust grounds. Judge Chin has yet to issue a ruling, and observers are hopeful that he will be able to resolve the case before the Senate acts on his nomination to sit on the Second Circuit Court of Appeals.

For more on the legal arguments raised by opposers of the settlement, check back for future posts.  In the meantime, see Google’s own description of the project and the settlement agreement and take a look at what's available on the current version of Google Books.

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Last week, lawyers from Microsoft issued a demand under the Digital Millennium Copyright Act (DMCA) seeking the removal of leaked copies of Microsoft's "Global Criminal Compliance Handbook" that pulled website Cryptome.org from the Internet, at least temporarily.  The DMCA provides copyright owners with the ability to request that internet service providers remove infringing materials from websites.  Microsoft's DMCA demand to Cryptome's service provider, Network Solutions, apparently resulted in removing Cryptome from the Web entirely, until Microsoft attorneys sent an email withdrawing the DMCA takedown demand.

Microsoft made this public statement:

Like all service providers, Microsoft must respond to lawful requests from law enforcement agencies to provide information related to criminal investigations. We take our responsibility to protect our customers privacy very seriously, so have specific guidelines that we use when responding to law enforcement requests. In this case, we did not ask that this site be taken down, only that Microsoft copyrighted content be removed. We are requesting to have the site restored and are no longer seeking the document’s removal.

Cryptome advertises itself as a site that "welcomes documents for publication that are prohibited by governments worldwide."  The site also promises that "[d]ocuments are removed from this site only by order served directly by a US court having jurisdiction." 

The Microsoft Compliance Handbook, dated March 2008, is a guide for law enforcement officers seeking to investigate users of Microsoft services such as Hotmail email, IM, Windows Live and other services.  The Handbook outlines the data Microsoft keeps with respect to its users and provides law enforcement with instructions on what legal process is necessary for investigators to gain access to specific information.  In the Handbook, Microsoft offers to provide the following information to investigators in response to a subpoena:

Basic subscriber information includ[ing] name, address, length of service (start date), screen names, other email accounts, IP address/IP logs/Usage logs, billing information, content (other than e-mail, such as in Windows Live Spaces and MSN Groups) and e-mail content more than 180 days old . . . .

This provision contrasts with Microsoft's limits on access to other user data, such as recent email,  "e-mail address book, Messenger contact lists, . . . [and] internet usage logs."  According to the Handbook, Microsoft will release this data in response to a search warrant or court order which, unlike a subpoena, must be approved by a judge after the government presents sufficient evidence.

Posts at Cryptome, as well as CNet, Tom's Hardware, and The Register, describe the Handbook variously as a "spy guide" and "wiretap guide."  Cooperation with government agencies has been a touchy subject for privacy advocates and service providers in the wake of alleged abuses by some that occurred after the 2001 terrorist attacks.  However, the heart of the controversy generally has been the disclosure of customer information without any legal process or court involvement.  In this case, Microsoft's Handbook merely identifies what data is available in response to formal legal process, such as subpoenas, warrants and court orders. 

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