Ripoff Report Has a Fight on Its Hands In Massachusetts

Can a state court order assignment of a defamatory posting on Ripoff Report to a prevailing plaintiff?

That may be the central question in Small Justice LLC, et al. v. Xcentric Ventures LLC, pending the U.S. District Court for the District of Massachusetts.

Here are the basic facts.

A Boston attorney* was defamed by a litigation adversary on the Ripoff Report (a website owned by Xcentric Ventures). The former adversary party, Richard Dupont, claimed that the lawyer was a perjurer with “a history of persecuting the elderly, especially, wealthy elderly women.” The lawyer was accused of filing “baseless lawsuits in order to seize assets from clients, from adversaries and even from his own family.” The posting urged readers to contact the FBI and the Securities and Exchange Commission with similar complaints, and claimed that the attorney had “a history of child abuse, domestic violence and bi-sexuality,” as well as an “addiction to illicit substances.” None of this is true.

*[note] The lawyer is not named in this post, to minimize further negative publicity.

The lawyer brought suit against Dupont in Massachusetts state court, where he obtained a default judgment. However, this did him no good as far as the defamatory post was concerned. Ripoff Report is infamous for refusing to remove third-party postings, and the Communications Decency Act  (“CDA”) (47 USC § 230) renders it almost impervious to suit by victims of third-party defamation, such as the lawyer victimized in this case.

The lawyer, however, attempted a clever work-around to avoid what he knew would be Ripoff Report’s CDA defense. As part of the remedy in state court the judge assigned to an LLC created by the lawyer — Small Justice LLC — the copyright in the defamatory posting. Small Justice, the copyright owner,  then demanded that Ripoff Report take down the copyrighted material. Ripoff Report refused, and Small Justice sued Ripoff Report in federal court in Boston for copyright infringement (and libel, interference with contract, and violations of Massachusetts’ unfair competition statute).

Ripoff Report moved to dismiss (memo in support here), and Judge Denise Casper issued a decision on the motion on March 24, 2014 (Order here).

As the decision implies, however, Ripoff Report may have anticipated Small Justice’s copyright strategy. Ripoff Report’s terms of service required Dupont to check a box before posting his report, granting Ripoff Report an irrevocable license to display the post, as follows:

By posting information or content to any public area of www.RipoffReport.com, you automatically grant, and you represent and warrant that you have the right to grant, to Xcentric an irrevocable, perpetual, fully-paid, worldwide exclusive license to use, copy, perform, display and distribute such information and content and to prepare derivative works of, or incorporate into other works, such information and content, and to grant and authorize sublicenses of the foregoing.

Relying on this license, Ripoff Report argued that whatever rights Small Justice acquired from Dupont by reason of the state court transfer of ownership were subject to the license Dupont granted to Ripoff Report.

Judge Casper did not totally buy this argument, at least at the motion to dismiss stage.  Relying on Specht v. Netscape Comm’ns Corp., 306 F.3d 17 (2d Cir. 2002) and Craigslist Inc. v. 3Taps Inc., 942 F. Supp. 2d 962 (N.D. Cal. 2013), Judge Casper held that:

Whether [the quoted paragraph]  . . . was sufficient to transfer the copyrights in the Reports from Dupont to Xcentric depends on whether it was reasonable to expect that Dupont would have understood he was conveying those rights to Xcentric. … the Court cannot resolve the issue of the ownership of the copyrights on the present record. Although the process by which users posted to the Ripoff Report appears to be similar to the … context in Specht, the Court cannot say, on this record now before it, what a reasonably prudent offeree in Dupont’s position would have concluded about license.

Accordingly, the motion to dismiss the copyright claim was denied.

Admittedly, the outcome in this case is offensive.* The fact that a person can be defamed in this manner, and that Ripoff Report can use the CDA and contract law to render itself immune from suit, is appalling, at least on first impression (whether the defamed attorney would want to represent anyone naive enough to believe Dupont’s obviously bogus post might be a question worth asking).

*[note] An editorial in Massachusetts Lawyers Weekly opined, “[the lawyer] is unquestionably pushing the envelope, but the Ripoff Report’s response to his libel suit makes clear that it’s time for a fresh approach to the growing problem of gratuitous attacks in online reviews. Casper should reject the defense’s motion to dismiss and allow his suit to go forward.”

Hopefully, Judge Casper’s decision will lead to a settlement in which the offending post is removed. However, Xcentric may feel it needs to litigate this case to conclusion to maintain the integrity of the (thus far successful) legal barrier it has created against liability. If that proves to be the case, the law and the facts in this case seem, unfortunately, to favor Xcentric.

Small Justice LLC, et al. v. Xcentric Ventures LLC, 2014 WL 1214828 (D. Mass. Mar. 24, 2014).

Jarndyce and Jarndyce drones on. This scarecrow of a suit has, in course of time, become so complicated, that no man alive knows what it means. The parties to it understand it least; but it has been observed that no two Chancery lawyers can talk about it for five minutes, without coming to a total disagreement as to all the premises. Innumerable children have been born into the cause; innumerable young people have married into it; innumerable old people have died out of it.  . . . Bleak House, Charles Dickens

We were writing about Lexmark v. Static Control 9 years ago. (2005 article). The case itself dates back to 2002. And, after the Supreme Court decision on March 25, 2014, it is not yet over. Lovers of Bleak House may want to shift their gaze in the direction of this case.

At its outset this case involved allegations of copyright infringement and violation of the DMCA’s anti-circumvention provisions. Those issues were resolved by court decisions, but one issue lingered on: whether Static Control could proceed with its false advertising counterclaim against Lexmark under Section 43(a) of the Lanham Act, even though the parties are not direct competitors.  The Sixth Circuit held it could not, but the Supreme Court reversed, holding that it could. The Court ruled that a plaintiff who alleges injury to a commercial interest in reputation or sales flowing directly from the defendant’s actions in violation of the statute falls within the “zone of interests” Section 43(a) was designed to protect, even if the plaintiff and defendant are not direct competitors.

The short background on this case is as follows. Lexmark , a producer of toner cartridges for its laser printers, developed microchips for it toner cartridges and printers so that Lexmark printers would reject toner cartridges not containing a matching microchip. The goal, of course, was to frustrate remanufacturers of Lexmark printer cartridges, who had created a secondary market for used cartridges. Static Control replicated the cartridge microchips and sold them to the remanufacturers to enable the resale of Lexmark toner cartridges. Lexmark sued Static Control for copyright violations related to its source code in making the duplicate microchips, but Static Control won against that charge, leaving in place Static Control’s counterclaim that Lexmark had engaged in false advertising when it told remanufacturers that using Static Control’s products would constitute intellectual property infringement.*

*[note] This summary is oversimplified.  See the Sixth Circuit’s decision for full details.

The Sixth Circuit held that Static Control could not maintain its false advertising claim since, technically speaking, Static Control and Lexmark are not actual competitors – Static Control sells microchips, while Lexmark sells toner cartridges.

In the view of the Sixth Circuit, this distinction was fatal to Static Control’s false advertising counterclaim. However, the Supreme Court rejected a potpourri of different legal tests applied by the various federal circuit courts (including the Sixth Circuit), concluding that the issue was whether a false advertising plaintiff such as Static Control falls within the class of plaintiffs whom Congress has authorized to sue under the federal false advertsing statute, Section 43(a) of the Lanham Act. Using this approach, the Court created a two-part test: (1) whether the claim is within the “zone of interests” protected by the Lanham Act and (2) whether the alleged conduct proximately caused the alleged injury. The Court held that to meet part one of this test a plaintiff must plead “an injury to a commercial interest in reputation or sales.” To meet the second part a plaintiff must plead “economic or reputational injury flowing directly from the deception wrought by the defendant’s advertising” and that the deception causes consumers to withhold business from the plaintiff.

The Court found that Static Control’s allegations satisfied both components of this test. Having liberalized the test for standing in Lanham Act Section 43(a) false advertising cases, the Court sent the case back to the federal district court for the Eastern District of Kentucky, where Static Control will have an opportunity to attempt to prove that it suffered injury proximately caused by Lexmark’s alleged misrepresentations and where the case will resume, perhaps to someday challenge the longevity of Jarndyce v. Jarndyce.

Lexmark Int’l v. Static Components, Inc. (U.S. Supreme Court, March 25, 2014)

Mass Law Blog, Update Week Ending March 21, 2014

by Lee Gesmer on March 21, 2014

  • 9th Circuit holds copyright registration of a collective work registers the component works within it. Alaska Stock v. Houghton Mifflin (link)
  • The PTO held its first Public Meeting on the Establishment of a Multistakeholder Forum on Improving the Operation of the Notice and Takedown System Under the DMCA (link)
  • Long-running DMCA copyright suit settles. Viacom v. Youtube (press release) (blog post)
  • Parties settle remaining issues in Prince v. Cariou copyright fair use case (blog post)
  • Columbia Law Prof. Jane Ginsburg’s article on EU linking decision, Hyperlinking and Infringement: The CJEU Decides (sort of) (link)
  • Prof. Eric Goldman’s post on Gardner v. CafePress (copyright/DMCA case; link to case in post) (link)
  • Sup. Ct. Cal., County of San Francisco, holds that Instagram’s unilateral change of terms of service is enforceable (link)
  • Michael Robertson, founder of MP3Tunes, found liable for copyright infringement in SDNY trial (link)

According to my count, I’ve written seven posts on the Viacom v. Youtube DMCA copyright case. The first time I mentioned Youtube and the DMCA was in October 2006, over 7 years ago. Referencing Mark Cuban’s comment that Youtube would be “sued into oblivion” I stated:

Surprisingly few observers have asked the pertinent question here: do the Supreme Court’s 1995 Grokster decision and the DMCA (the Digital Millennium Copyright Act) protect YouTube from liability for copyright-protected works posted by third parties . . ..?

In fact, Youtube was acquired by Google for $1.65 billion. It was then sued by a group of media companies, resulting in a marathon lawsuit that never went to trial, but yielded two district court decisions and one Second Circuit decision on the issues I identifed in 2006. As I described in a two-part post in December 2013/January 2014, the second appeal to the Second Circuit had been fully briefed and was awaiting oral argument. Now the case has settled, on confidential terms of course. However, demonstrating the extent to which the interests of the media companies and Youtube have converged, the joint press release contained the unusual statement that the “settlement reflects the growing collaborative dialogue between our two companies on important opportunities, and we look forward to working more closely together.”

We may never know the terms of the settlement, but rumor has it that the plaintiffs received no money in this settlement. My guess is they recovered a  token amount, if anything. All three decisions favored Youtube, and Viacom’s case had been whittled down to next to nothing, even if it had been able to persuade the Second Circuit to crack the door a bit and remand the case a second time for damages on a limited number of video clips.

However, the settlement leaves some important questions unanswered:

  • Viacom’s argument that web sites don’t have to take any actions to “induce infringement” – that this basis for liability can be found based on the owner’s intent or state of mind alone – remains unresolved. This is the Grokster issue I identified in 2006. While I think Viacom’s argument was weak, it would have been helpful to have the Second Circuit resolve it.
  • Since the Second Circuit’s first ruling in April 2012 the courts have read the decision to reduce protection for web sites. Courts in New York applying the Second Circuit decision have held that a website can lose DMCA protection if it becomes aware of a specific infringement, or if it is aware of facts that would make it “obvious to a reasonable person” that a specific clip is infringing. Because the case has settled, the Second Circuit will have no opportunity to clarify this standard, at least in this case.
  • The Second Circuit will have no opportunity to clarify the  ”actual knowledge”/”facts or circumstances” sections of the DMCA. The distinction between these two provisions remains confusing to the lower courts and to lawyers who must advise their clients under this law.
  • The Second Circuit will have no opportunity to clarify its controversial comments (in its first decision) on “willful blindness,” and help the courts reconcile this concept with the DMCA’s notice-and-takedown procedure. As noted above, the settlement leaves in place the Second Circuit’s implication that awareness of specific infringement may result in infringement liability even in the absence of a take-down notice.

It’s likely that other cases presenting these issues will make their way to the Second Circuit (arguably the nation’s most influential copyright court), but it could be years before that happens. The industry could have used additional guidance in the meantime, and one consequence of this settlement is that it will  get it later rather than sooner, if at all.

 

 

According to Massachusetts U.S. District Court Judge O’Toole the defendants in Moving and Storage, Inc. v. Payanatov are in the moving business and operate a web site at MyMovingReviews.com which, they claim, reflects neutral consumer reviews of moving companies.

Not true, assert some of their competitors and the plaintiffs in this case. The plaintiffs allege that MyMovingReviews manipulates the reviews, deleting positive reviews of the plaintiffs and deleting negative reviews of their own company.

Web sites that allow consumer reviews are protected from copyright infringement under the DMCA, and from tort (e.g. defamation) claims under the Communications Decency Act (CDA) assuming, in each instance, that they meet the often strict requirements of the statutes. The defendants claimed the protection of the CDA, and moved to dismiss under that law. Not so, held Judge O’Toole -

The plaintiffs’ claims do not arise from the content of the reviews, whether they be disparaging, laudatory, or neither, but instead, the defendants’ alleged ill-intentioned deletion of positive reviews of the plaintiffs’ moving companies and deletion of negative reviews of their own company, coupled with various representations – that the website offers “accurate” data, that it is “serious about reviews quality,” and that readers “see the most accurate and up to date rating information to base your decision on.” The manner in which the information is presented, or withheld, is the conduct at issue, as well as the allegedly misleading ratings which result from such alleged manipulations. Such conduct provides substantial basis to find that the defendants were developers of the alleged misinformation.

The defendants argued that they were allowed to delete reviews under Section 230(c)(2) of the CDA, which provides that no operator of a website shall be liable for restricting access to material it deems (among other things) objectionable. However, the CDA requires that the website owner show good faith, and the plaintiffs had alleged bad faith.

The court also refused to dismiss a claim of copyright infringement based on the allegation that MyMovingReviews had copied text from a website belonging to one of the plaintiffs.

The court did, however, dismiss claims based on false advertising, unfair competition, tortious interference and trademark infringement. As to the last of these claims, the court rejected an argument in support of trademark infringement based on the controversial (and largely discredited) “initial interest confusion” doctrine, finding that plaintiffs had failed to adequately allege “confusion.”

Mass Law Blog Update – Week Ending March 14, 2014

by Lee Gesmer on March 14, 2014

  • First Circuit holds that failure to register copyrights in underlying musical compositions dooms copyright infringement claims. Alecia v. Machete Music (link)
  • N. Dist. Cal. court holds that websites copy of photo of politician is protected by copyright fair use doctrine. Dhillon v. Does 1-10 (link)
  • The 9th Circuit has declared open season on the petition for rehearing or hear en banc in its decision in Garcia v. Google - anyone can file an amicus brief (link). This case has been the subject of massive criticism by the copyright community, and it seems likely that it is headed for en banc review.
  • Techdirt: Google Points Out That Even the Copyright Office Thinks Judge Kozinski’s ‘Innocence of Muslims’ Rule is Wrong. Techdirt sums up recent developments in Garcia v. Google, including the fact that the plaintiff has been unable to obtain a copyright registration (see first bullet above). (link)
  • Hearings of House Subcommittee on Courts, Intellectual Property and the Internet on March 13, 2014.  Topic this week was the DMCA (link)
  • Atlantic article, Our Best Weapon Against Revenge Porn: Copyright Law? (link)
  • Columbia Law Professor Jane Ginsburg (daughter of Supreme Court Justice Ginsburg), Aereo in International Perspective: Individualized Access and U.S. Treaty Obligations (link)

  • David Nimmer (Nimmer on Copyright) says Second Circuit got it wrong in Aereo case. Responds Aereo: “ouch” (link)
  • The courts are unable to agree on when an idea is “abstract,” and therefore ineligible for patent protection under the non-statutory “abstract idea” test. The Supreme Court will take up this issue again in Alice Corporation Pty. Ltd. v. CLS Bank Internationalwhich is scheduled for oral argument on March 31st.  But, briefing is complete and Dennis Crouch summarizes the arguments on Patently-O. (link)
  • D. Mass. judge denied motion to dismiss claim against company hosting third-party web site reviews (mymovingreviews.com) under Communications Decency Act (CDA), on grounds that there is substantial basis to conclude that the defendants (not third parties) were the developers of the information at issue.  Moving and Storage, Inc. v. Panayotov (link)
  • E.D. Mich. judge struggles with copyright and trademark claims against a variety of high profile defendants (Sports Illustrated, Walmart, Getty Images) arising out of 1991 still photo of a moment in a football game between the U. of Michigan Wolverines and the Ohio State Buckeyes.  (link)
  • Week 7 CopyrightX – The Rights to Reproduce and Modify (link to Lecture 7.1)

 

Prepared by Kim Meyer, my CopyrightX Teaching Fellow for class #6 in this 12 week MOOC.  @Kmeyer2015

Link to slides …..

Boston Bar Association Interview/Profile

by Lee Gesmer on March 6, 2014

The Boston Bar Association has done a nice interview and profile of me on its blog, “Tipping the Scales.”

Lee Gesmer is a founder and partner of Gesmer Updegrove LLP, a Boston-based firm formed in 1986 that focuses on the representation of technology companies and emerging businesses. Lee’s practice focuses on litigation in the areas of business and intellectual property law. He is a former Council member and former Co-Chair of the BBA Intellectual Property Section, as well as the Computer and Internet Law and Business Litigation Committees.

1. What inspired you to take the leap and start your own firm?

My father owned his own business, and I worked for him summers in my teens. He taught me how important it is to work for yourself. He really believed America was the land of opportunity for people willing to take the risk of starting their own businesses. He embedded that idea in me at an impressionable age. When I graduated from law school, my plan was to work for a couple of good firms and get enough experience that I could start my own firm.

Continue reading . . ..

The week ending February 21, 2014 was a light week, so this week’s Update covers the two weeks ending February 28, 2014

  • 9th Circuit holds actress owns copyright in her individual performance, reverses lower court’s denial of preliminary injunction. Garcia v. Google (link). See blog post on this case here.
  • Utah federal district court issues preliminary injunction order against Aereo, limited to Tenth Circuit. Aereo’s first loss in court, although courts in California and the District of Columbia had enjoined FilmOn X, which provides retransmission of over-the-air broadcasting using the same technology. Communityy Television of Utah v. Aereo.
  • Southern District of Florida grants motion to dismiss in case alleging copyright infringement of architectural worksSieger Suarez v Arquitectonica
  • The USPTO has published more material relating to the Green Paper on Copyright Policy, Creativity and Innovation in the Digital Economy (link). A transcript of the December 12, 2013 public hearing is available here.  Post-hearing public comments are available here.
  • The Copyright Office’s announcement requesting comments and announcing a roundtable on the “making available” right for copyright holders has been published in Federal Register (link)
  • The U.S. District Court for the District of Minnesota has issued an injunction, under the authority of the Computer Fraud and Abuse Act (CFAA), against a defendant that allegedly broke into a company’s computer system and took confidential information. Reliable Property Services v. Capital Growth Partners.
  • The broadcasters have filed their initial Supreme Court brief in American Broadcasting v. Aereo (link)
  • Motion to dismiss action based on a DMCA takedown notice targeting a trademark (as opposed to a copyright, which is the only appropriate subject of a DMCA takedown notice), denied by N.D. Cal. court.  Crossfit v. Alvies (link)
  • Ninth Circuit finds no trademark infringement based on “trademark fair use.” Webceleb v. Proctor & Gamble (link).
  • Billboard reports on “Songwriter Equity Act,” which would update the factors considered by the Copyright Royalty Board when determining compulsory licenses for songwriters, composers and publishers (link)
 Film Actress Uses Copyright in Her Performance to Force Youtube to Take Down a Movie

An old legal saw warns that “hard cases make bad law.” The Ninth Circuit Court of Appeals decision in Garcia v. Google may be a good example of this maxim.

The issue facing the Ninth Circuit was whether an actress can claim a copyright interest in her performance in a film and, if so, under the unusual circumstances in this case, whether the actress could use that copyright to compel Google to remove the film from Youtube.

The facts in this case were very hard. The plaintiff, Cindy Garcia (pictured on left) was paid $500 to act in an independent film for a few days. She was told she was acting in an adventure film set in ancient Arabia. However, the film turned out to be an anti-Islamic movie, and her voice was overdubbed so that she appeared to be asking, “is your Mohammed a child molester?” The movie, titled “Innocence of Muslims,” let to a fatwa, and Garcia received death threats.

Screen Shot 2014-02-26 at 9.11.15 PMAfter Youtube (owned by Google) refused Garcia’s request to takedown the film (rejecting multiple DMCA notices from Ms. Garia), she brought suit for copyright infringement, make a novel legal argument. Rather than arguing that the film was a joint work under copyright law (which might have entitled her to a share of profits, but wouldn’t have achieved her goal of forcing Youtube to remove the film), she  argued that she retained a copyright interest in her contribution. Calling this “a rarely litigated question,” Chief Judge Alex Kosinski, writing for a divided 3-judge panel, avoided the question whether Garcia qualified as a joint author of the film (it seems clear that, under Ninth Circuit precedent such as the Aalmuhammed case, she would not). Instead, he wrote that “nothing in the Copyright Act suggests that a copyright interest in a creative contribution to a work simply disappears because the contributor doesn’t qualify as a joint author of the entire work.”

The opinion concludes that Ms. Garcia may claim a copyright interest in “the portion of the film that represents her individual creativity.”

The court rejected Google’s argument that Ms. Garcia’s performance was a work made for hire (she was not an employee), or that she had granted the filmmaker an implied license (her participation had been induced by fraud, precluding that argument). And, Ms. Garcia had never assigned her rights to the filmmaker in a written document.

Lastly, the court found that Ms. Garcia had suffered irreparable harm (“death is an irremediable harm, and bodily injury is not far behind”), and that she had satisfied the causation requirement. The court “rejected Google’s preposterous argument that any harm to Garcia is traceable to her filing of this lawsuit.”

The district court had denied an injunction, which the Ninth Circuit reversed, ordering Youtube to take down all copies of “Innocence of Muslims.”

It’s difficult to predict whether this case will be a significant legal precedent. The idiosyncratic facts were sympathetic to Ms. Garcia, who appears to have been the victim of a fraudulent filmmaker, and who suffered unusual harm as a consequence. However, independent of these facts, the Ninth Circuit has held that an actor or actress owns an independent copyright interest in a film performance, reminding every non-fraudulent film producer to obtain a written copyright assignment from every performer.

Garcia v. Google, Inc. (9th Cir., February 26, 2014)

Second Circuit Holds Copy of Swatch Earnings Call Protected by Fair Use, Dodges "Simultaneous Transmission" Issue

[Catch-up Post] In an unusual application of the copyright fair use doctrine, on January 27, 2014, the Second Circuit held that Bloomberg’s copy of an investor conference call by Swatch was protected from copyright infringement under the fair use doctrine.

The facts are unusual. Swatch transmittd, recorded and promptly registered the copyright for a 2011 earnings call. Bloomberg recorded the call separately. Swatch claimed that Bloomberg’s recording infringed Swatch’s recording.

Although, technically speaking, Bloomberg did not copy Swatch’s copy of the call (it recorded it simultaneously, an issue I’ll return to below), the district court judge based his decision of non-infringement on fair use and the Second Circuit affirmed.

Analyzing fair use utilizing the four statutory fair use factors,* the Second Circuit held that Bloomberg’s purpose was to deliver important financial information to investors, and that this was analogous to news reporting, an activity often favored under the fair use doctrine. The fact that Bloomberg’s reproduction was not transformative was not an obstacle to a finding of fair use since, as the Second Circuit said, cases of news reporting favor “faithfully reproduc[ing] an original work rather than transform[ing] it.”

*[note] Abbreviated, the factors are (1) the purpose and character of the use;(2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used; and (4) the effect of the use upon the potential market fo the copyrighted work. 17 U.S.C. 107.

Second, while the work was technically unpublished under the Copyright Act’s definition of “publication,” a fact that usually cuts against fair use, the court held that because the contents of the recording were transmitted during the conference call, “the publication status of the work favors fair use.” Third, although Bloomberg copied the entire recording (again, a factor that typically weighes against fair use), it didn’t help Swatch in this context. The court held that “copying the entirety of a work is sometimes necessary to make a fair use,” and that was the case here.

Fourth, the Second Circuit held that the fact that there is no commercial market for the resale of financial earnings calls favored fair use.

Swatch v. Bloomberg is a significant case in the evolution of fair use case law, which has been quite active as of late (see, for example, Google Books, Cariou v. Prince).  

It’s worth pointing out that the Second Circuit dodged an unusual copyright  issue on this appeal. One of the fundamental precepts of copyright law is that the work for which copyright is claimed must be “fixed in a tangible medium of expression,” such as a book, film or a digital storage device. In this case Swatch’s audio was recorded simultaneously with its transmission, satisfying the all-important “fixation” requirement. However, Bloomberg received the transmission simultaneously with Swatch’s receipt and fixation of the call, and therefore fixation had not taken place at the instant Bloomberg made its recording. Accordingly, Bloomberg argued, no copyright-protected work existed at the moment Bloomberg recorded the transmission.

This issue was addressed in the lower court opinion, decided in April 2011. Swatch’s response, which the federal district court accepted, relied on Section 101 of the Copyright Act, part of which states that ”a work consisting of sounds, images, or both, that are being transmitted, is ‘fixed’ for purposes of this title if a fixation of the work is being made simultaneously with its transmission.” The district court applied this section of the statute, and held that copyright law creates a legal fiction that the simultaneous fixation occurs before the transmission.  This ruling allows the unauthorized recording of sounds that are transmitted live and recorded simultaneously to be the subject of a copyright infringement claim.  

Bloomberg sought to challenge this interpretation of the copyright statute on appeal, but the Second Circuit refused to address the issue based on a procedural defect in Bloomberg’s appeal. This leaves the lower court decision on a rare and obscure issue of copyright law intact.

The Swatch Group Mgt. Services Ltd. v. Bloomberg, L.P.  (2nd Cir. Jan.27, 2014)

 

Utah Court's Aereo Decision: A Preview of Supreme Court Outcome?

It’s difficult to believe that so many judges and lawyers could disagree over what would appear, at first blush, to be a straightforward issue of copyright law. Can a company legally copy over-the-air TV broadcasts and transmit them to subscribers over the Internet, as long as it stores and transmits a separate copy for each customer?

Two companies have adopted this technology,, Aereo and FilmOn X (fka “BarryDriller.com”). Two federal courts have held that this does aereo_2not violate the copyright rights of broadcasters (New York’s Second Circuit and a Massachusetts district court), and three courts have held it does (the California, D.C. and Utah district courts). Thus far, all of the rulings have arisen in the context of preliminary injunction motions, and until the Utah court’s ruling on February 19, 2014, Aereo had survived two challenges (New York and Massachusetts).  FilmOn X had suffered the two losses (California and D.C.). Before the Utah decision, the Supreme Court had accepted review of the New York case, an unusual development given the fact that none of these cases involved a final judgment on the merits.

The Utah decision may prove to have tipped the balance, in more ways than one. Not only is the count now 3-2 in favor of the broadcasters in judging the legality of the “individual copies” technology, but Utah Federal District Court Judge Dale Kimball — a 17 year judicial veteran and former law professor – may have finally cut through the massive volume of verbiage surrounding this issue.

The section of the Copyright Act at issue, the “Transmit Clause,” states:

To perform or display a work “publicly” means—

to transmit or otherwise communicate a performance or display of the workby means of any device or process, whether the members of the public capable of receiving the performance or display receive it in the same place or in separate places and at the same time or at different times.

When confronted with the same issue that had been presented to four federal district courts and the Second Circuit, and which will be decided by the Supreme Court this term, Judge Kimball  made short work of the local broadcaster’s motion for a preliminary injunction:

The plain language of the 1976 Copyright Act support Plaintiffs’ position. The definitions in the Act contain sweepingly broad language and the Transmit Clause easily encompasses Aereo’s process of transmitting copyright-protected material to its paying customers. Aereo uses “any device or process” to transmit a performance or display of Plaintiff’s copyrighted programs to Aereo’s paid subscribers, all of whom are members of the public, who receive it in the same place or separate places and at the same time or separate times.

After recapping the legislative history of the Transmit Clause, Judge Kimball stated:

Aereo’s retransmission of Plaintiffs’ copyrighted programs is indistinguishable from a cable company and falls squarely within the language of the Transmit Clause. It is undisputed that Plaintiffs license its programming to cable and satellite television companies and through services such as Hulu and iTunes. These companies and services are providing paying customers with retransmissions of copyrighted works. Similarly, Aereo uses “any device or process” to transmit a performance or display of Plaintiff’s copyrighted programs to Aereo’s paid subscribers, all of whom are members of the public.

Judge Kimball was not impressed with the reasoning of the Second Circuit in the Cablevision case (Cartoon Network v. CSC Holdings), the 2008 case that created the copyright “loophole” on which Aereo and FilmOn X have built their businesses:

To reach its conclusion that the recorded copies for later playback did not require an additional license as a separate public performance, the Second Circuit proceeded to spin the language of the Transmit Clause, the legislative history, and prior case law into a complicated web. The court focused on discerning who is “capable of receiving” the performance to determine whether a performance is transmitted to the public.  However, such a focus is not supported by the language of the statute. The clause states clearly that it applies to any performance made available to the public. Paying subscribers would certainly fall within the ambit of “a substantial number of persons outside of a normal circle of a family and its social acquaintances” and within a general understanding of the term “public.”

However, the Cablevision court appears to discount the simple use of the phrase “to the public” because it concludes that the final clause within the Transmit Clause – “whether the members of the public capable of receiving the performance or display receive it in the same place or in separate places and at the same time or at different times”– was intended by Congress to distinguish between public and private transmissions. This court disagrees. The entire clause “whether the members of the public capable of receiving the performance or display receive it in the same place or in separate places and at the same time or at different times” appears to actually be Congress’ attempt to broaden scope of the clause, not an effort to distinguish public and private transmissions or otherwise limit the clause’s reach. The term “whether” does not imply that the ensuing clause encompasses a limitation. Rather, the introduction of the clause with the word “whether” implies an intent to explain the broad sweep of the clause and the many different ways it could apply to members of the public. Reading this final clause expansively is consistent with Congress’ intent to have the entire Transmit Clause apply to all technologies developed in the future.

Judge Kimball challenged an interpretation of the law that lies at the very heart of the Cablevision decision:

The Cablevision court’s analysis also appears to have changed the wording of the Transmit Clause from reading “members of the public capable of receiving the performance” to “members of the public capable of receiving the transmission.”  Therefore, instead of examining whether the transmitter is transmitting a performance of the work to the public, the Cablevision court examined who is capable of receiving a particular transmission.  This court agrees with Plaintiffs that the language of the Transmit Clause does not support such a focus.

Judge Kimball concluded that:

Based on the plain language of the 1976 Copyright Act and the clear intent of Congress, this court concludes that Aereo is engaging in copyright infringement of Plaintiffs’ programs. Despite its attempt to design a device or process outside the scope of the 1976 Copyright Act, Aereo’s device or process transmits Plaintiffs’ copyrighted programs to the public.

Based on this analysis the court enjoined Aereo from providing its service in the six states in the Tenth Circuit (Colorado, Kansas, New Aereo-FilmOnX-infographic-Dec-2013-721x1024Mexico, Oklahoma, Utah and Wyoming). He declined to stay the injunction pending the Supreme Court’s review of the issue, ordering that the preliminary injunction go into force at once.

This case, and the fact that it is Aereo’s first courtroom loss, just adds to the drama over the upcoming Supreme Court hearing and decision on this issue. Will the Supreme Court perceive the issue to be a simple as Judge Kimball, or will it, to use Judge Kimball’s phrase, “spin the language” of the Transmit Clause to come out the same way as the Second Circuit ?

And, while this line of cases may be of academic interest to copyright lawyers, it is of immense practical interest to untold numbers of consumers who may want to use the Aereo/FilmOn X services to help them “cut the cord” of the expensive cable services. For this reason, pressure on the Supreme Court from consumer rights advocates in favor of Aereo’s technology is likely to be intense. The extent to which this will influence the Supreme Court may never be known, but few will deny that it will be a factor.