Download the pdf file

A quick update on Capitol Records v. Redigi.

The SDNY federal court entered summary judgment against Redigi on liability in March 2013.

The last two years have been spent preparing for trial on damages.

However, on Monday of this week, on the eve of trial, the parties reported the case settled.  Very likely, this settlement (which is confidential), was engineered to allow the decision on liability to be appealed to the Second Circuit. The way this works is that if the appeal is unsuccessful, the defendants will owe a certain amount of money (stipulated in the settlement agreement, which is confidential/non-public).  If Redigi wins on appeal, it will not owe that money (and, presumably, it will be able to resume offering its service, which appears to be inactive at present).  The settlement agreement likely provides for either outcome.

It has always been the expectation that Redigi wanted to get this case to the Second Circuit, so I believe this is likely to be the scenario that is in progress, particularly since there is no permanent injunction issued pursuant to the settlement.  However, without seeing the settlement agreement (or seeing a Notice of Appeal filed by Redigi), we can’t be 100% certain that the case will go to the Second Circuit.

Stay tuned ….

Several of the CopyrightX teaching fellows used the 1990s Lotus v. Borland copyright case in their classes last week. In an excellent Case Study, Professor Fisher and TF/Berkman Center intern Ben Sobel dissected the background and holdings in this complex case.

An interesting aspect of the case study was the use of documents that came to light during Elena Kagan’s Supreme Court nomination process. In 1995 now-Justice Kagan was Associate White House Counsel, and was involved in the administration’s debate of whether to support Lotus (which had prevailed before Massachusetts U.S. District Court Judge Robert Keeton), or Borland (which won before the First Circuit). Judge Keeton had held the Lotus 1-2-3 menu hierarchy copyrightable, and the First Circuit had reversed, holding it to be an uncopyrightable method of operation under 17 U.S.C. sec. 102(b).

Lotus appealed to the Supreme Court, which granted cert. The question the Solicitor General’s office faced in December 1995 was whether to support Borland or Lotus, and on what grounds. The policy issues were impacted by the fact that by 1995 Microsoft’s Excel spreadsheet program had an 80% market share, leaving Borland’s Quattro Pro and Lotus 1-2-3 in the dust.

Kagan’s files show the extent to which the administration was internally divided over this issue.

The DOJ Antitrust Division (headed by Joel Klein, who led the DOJ’s antitrust suit against Microsoft a few years later), supported Borland, and wanted to argue for affirmance. However, it disagreed with the First Circuit’s holding that the Lotus 1-2-3 commands were a method of operation, arguing instead that the First Circuit should be upheld on the ground that the commands were an uncopyrightable computer language. In fact, it appears that all of the agencies, even those that sided with Borland and wanted the First Circuit upheld, believed the First Circuit’s reasoning to have been flawed.

The Department of Commerce and the Copyright Office argued that the administration should take no position either way on the appeal, stating: ”

We all agree that the First Circuit’s reasoning was contrary to the copyright law, and that the Supreme Court should be apprised of the First Circuit’s legal errors. Professional organizations representing intellectual property experts, such as the American Intellectual Property Law Association, have already well-briefed the Supreme Court on these legal errors. . . .  Thus, the Supreme Court should be fully informed on all issues in the case, obviating the filing of
a government brief.

We vehemently oppose the filing of this or any amicus brief on behalf of Borland. The filing of such a brief would seriously jeopardize copyright protection for computer programs.

Commerce’s position ruled the day, and the government took no position on the case. The Supreme Court heard argument in early 1996 and tied 4-4 (Justice Stevens did not vote), affirming the First Circuit decision, but limiting it’s holding to that circuit. Since then no other circuit has adopted Lotus, and the First Circuit has not had occasion to revisit the case.

While the internal government memos and correspondence are fascinating, Kegan’s files also contain draft briefs that reflect the “computer language” argument that the DOJ was urging the SG to adopt. Here is the argument, asserting that the result is correct, but on different grounds than those relied on by the First Circuit:

Although the court of appeals’ reading did not lead it to an erroneous result in this case, we believe that, if left uncorrected, the court of appeals’ interpretation could effectively nullify Congress’ decision to treat computer programs as literary works eligible for protection under the Act. …

We agree with the court of appeals’ conclusion that the command hierarchy used by Lotus 1-2-3 is not subject to copyright protection. The command hierarchy is not, itself, a computer program; rather, it is a type of programming language, analogous to the rules of a game. It constitutes an abstract system of rules that defines permissible sequences of symbols, expressed as keystrokes or otherwise, and assigns meaning to those sequence. The hierarchy itself does not instruct the computer to carry out any function; it is the structure of a language that allows the user and Lotus 1-2-3 to communicate. As such, it facilitates, but is not itself, expression. Therefore, it cannot be afforded copyright protection by Section l02(a) which protects only original expression. …

The court of appeals misconstrued Section l02(b) by failing to interpret that provision in the context of the long-established idea/expression dichotomy that determines what is subject to copyright protection. The court appeared to interpret Section l02(b) as a bar to copyright protection for an expressive work of authorship if the work expresses a method operation. Thus, the court erred in that it interpreted “method of operation” as used in Section 102(b) to reach both idea and expression. But, as demonstrated above, Congress intended through Section l02(b) to exclude from copyright protection ideas and similarly abstract concepts such as methods and processes, but not to preclude copyright for the original expression in which such an idea is presented. …

To the extent the court of appeals’ analysis can be read to be inconsistent with’ the idea/expression dichotomy, it should be rejected. By failing to give effect to Congress’s intent to protect expression while leaving idea [sic] unprotected, it raised unjustified doubts about the copyright status of any work of authorship that could be characterized as “procedure, process, system, [or] method of operation.” …

So understood, the command hierarchy constitutes the structure of a language. The keystroke commands form the language’s vocabulary and the hierarchy defines its syntax and semantics. …
The command hierarchy is not a computer program because the hierarchy, i.e. the rules, do not instruct the computer to perform any operation or “bring about a certain result.” 17 U.S.C. 101. Rather, statements that users write in the language according to those rules i.e., macros — constitute such instructions. …

In sum, the rules that allow communication with a computer in the Lotus 1-2-3 language, like the rules that allow the playing of a particular game or the practice of a particular accounting system, are abstract ideas that may be expressed in copyrightable form, but are not themselves copyrightable expression under Section 102(a). This analysis preserves the public’s right freely to use the rules to create original expression and serves the fundamental policy considerations of the Copyright Act.

Few things anger employers more than learning that an employee who has been terminated has, before leaving, copied confidential documents. Courts often view this as an equitable justification for enforcing a covenant not to compete that might otherwise be “on the line” legally – maybe enforceable, maybe not.

But what if an employee copies confidential documents and does nothing with them? In other words, doesn’t give them to a competitor or use them in a way harmful to the employer?  If the employer discovers this after the employee has left, does it justify declaring that the employee is being terminated “for cause” (retroactively) and denying him the one year of severance his employment agreement had promised him when he was terminated “without cause”?

This was the issue in Eventmonitor v. Leland, which (rather oddly) went all the way to the Massachusetts Supreme Judicial Court. The precise issue was whether the employee had engaged in a “defalcation of company assets.” According to the employment agreement, “defalcation” was a basis for terminating the employee for cause and denying him severance payments. (The court chose not to grapple with the question of whether this could be done retroactively, as Eventmonitor tried to do, since a ruling on that issue was not necessary to decide the case).

However, “defalcation” was not defined in the employment agreement. The court decided that “in ordinary usage defalcation requires at least a temporary misuse or deprivation of the use or value of an asset.”  Mr. Leland had not deprived Eventmonitor of its electronic files (he didn’t delete them, he copied them), and therefore he was not guilty of “defalcation.” Leland won.

One troubling postscript to this case is how long it took to resolve. It took five years for the case to go to trial, and eight years to be resolved completely through the appeals process. One can only hope the Massachusetts courts are able to do better than that. Eight years is a long time to wait to decide a case where only one word needs to be interpreted.

Eventmonitor v. Leland (Feb. 4, 2016 Mass.).

 

Sotomayor, Kagan ….?

by Lee Gesmer on February 17, 2016

Sotomayor, Kagan ....?

I’m not a constitutional law expert, but I can’t help but picture this scenario.

The senate refuses to schedule confirmation hearings for an Obama Supreme Court nominee. Obama does the natural thing – he sues the Senate Republican leader, Mitch McConnell, to compel him to hold hearings. The case quickly reaches the U.S. Court of Appeals for the District of Columbia, which rules one way or the other. The case is appealed to the Supreme Court, which ties 4-4 along conservative/liberal lines. As a result of the 4-4 tie, the D.C. circuit’s ruling stands.

You never know ….

CopyrightX Meets Sony, DMCA

by Lee Gesmer on February 16, 2016

CopyrightX Meets Sony, DMCA

I’m privileged to be a CopyrightX teaching fellow this year, and this week CopyrightX met the real world – in the form of an encounter with Sony Music and the DMCA. Professor William Fisher’s CopyrightX lecture 3.3, The Subject Matter of Copyright: Music, contains audio clips of Bob Dylan’s All Along the Watchtower played by Dylan, Hendrix and Stevie Ray Vaughn. The course is making the point, with musical illustrations, that U.S. copyright law allows cover versions, so long as the artist making the cover pays the required compulsory license, and, that the cover version can depart quite significantly from the fundamental character” of the original.

Unsurprisingly, Youtube’s automated ContentID system, cannot distinguish fair use from illegal use. Presumably, a “put back” notice will resolve this little contretemps.

Techdirt’s Mike Masnick discusses the whole episode in more detail, here.

This is not the first time a Harvard law professor has been the subject of a DMCA takedown of an educational fair use.  See my August 2013 post, Liberation Music Throws Lessig a Meatball Pitch in “Lisztomania” DMCA Takedown Suit.

Update: On February 17, 2016 Youtube restored the video.

If  a patent lawyer represents separate clients applying for patents involving the same subject matter, has she violated her ethical responsibility to either client?

On December 23, 2015, the Massachusetts Supreme Judicial Court became one of the first state courts to address this issue. Maling v. Finnegan Henderson, Farabow, Garrett & Dunner, LLP.

The central issue in this case was whether the simultaneous representation of clients competing for patents in the same technology area — a so-called “subject matter conflict” — was a conflict of interest.  The court found no conflict, stating, “we conclude that although subject matter conflicts in patent prosecutions often may present a number of potential legal, ethical, and practical problems for lawyers and their clients, they do not, standing alone, constitute an actionable conflict of interest that violates [Mass. R. Prof. C.] rule 1.7.”

However, the court suggested a few ways in such “potential” problems might give rise to an actionable conflict of interest.

First, it would be improper, without disclosure and consent, for a lawyer to represent two clients where the claims are identical or obvious variants of each other and a reasonable patent lawyer should reasonably foresee that an interference proceeding (or, under the American Invents Act, a derivation proceeding) was likely.

Second, the patent lawyer must be careful to avoid a directly adverse conflict. Finnegan avoided such a conflict in this case when the plaintiff sought a legal opinion from Finnegan regarding the likelihood that he might be exposed to claims by the second client. Finnegan declined to provide this opinion. The court suggested that had Finnegan provided such an opinion the interests of Finnegan’s two clients would then have been “directly adverse,” and therefore a violation of the rules of professional conduct in Massachusetts. Importantly, there was no allegation that Finnegan had agreed to provide such an opinion in its engagement letter with the plaintiff. Moreover, the plaintiff did not allege that Finnegan should have reasonably anticipated that the plaintiff would need such an opinion.

Third, a patent lawyer may not engage in “claim shaving”-  altering the claims in one client’s application because of information contained in a different client’s application.

Fourth, the plaintiff in this case did not allege that the representation of two patent prosecution clients in the same subject matter area led to the disclosure of client confidences, or was used to one client’s advantage over the other client. For example, there was no allegation that Finnegan delayed filing the plaintiff’s patent application to ensure the success of the second client’s application. This likely would have been a violation of the rules of professional conduct.

More generally, the court discussed what constitutes an adequate conflict check in an environment where law firms have offices in multiple states (Finnegan has five offices in the U.S., and this case involved lawyers in different offices). That fact is no excuse for the failure to implement what the court characterized as “robust processes” — a phrase never before used by any U.S. court in the context of conflict checks or professional conduct generally — to detect potential conflicts. The court noted that it has not defined a minimum protocol for carrying out a conflict check in the area of patent practice, or any other area of law, and it declined to do so in this case, leaving this to be developed on a case-by-case basis.

While patent lawyers may be breathing a sigh of relief at this decision, the court’s list of horribles leaves them with a lot to think about, particularly in the areas of engagement letters and effective conflict checks. And, it may prompt clients to ask some tough questions when engaging patent counsel – “hey, by the way, are you providing patent services to anyone else in my subject matter area? Can you tell me about that so I can be sure there’s no direct conflict? Could that possibly create a problem for me down the road?”

It’s safe to say that in-house ethics counsel in law firms with large patent prosecution practices and multiple locations will have something to keep them busy on January 4th.

Maling v. Finnegan Henderson, Farabow, Garrett & Dunner, LLP (December 23, 2015).

Federal Circuit: Disparagement Provision of Trademark Statute is Unconstitutional

The Court of Appeals for the Federal Circuit (“Federal Circuit”) has issued a typically fractured en banc decision (12 judges, 5 opinions) holding that the 70 year old disparagement provision of § 2(a) of the Lanham Act (the federal trademark statute) is unconstitutional under the First Amendment.

This law states, in relevant part:

No trademark by which the goods of the applicant may be distinguished from the goods of others shall be refused registration on the principal register on account of its nature unless it—

(a) Consists of or comprises immoral, deceptive, or scandalous matter; or matter which may disparage or falsely suggest a connection with persons, living or dead, institutions, beliefs, or national symbols, or bring them into contempt, or disrepute …. (emphasis added)

The background of this decision is straightforward.  Simon Shiao Tam named his band, “The Slants”, and attempted to register it as a trademark.  Tam asserted that he had chosen this name to make a statement about racial and cultural issues in the United States, and by chosing this name his band sought to “reclaim” or “take ownership” of Asian stereotypes.

The Patent and Trademark Office denied registration, finding the name disparaging to persons of Asian descent. After the usual appeals, during the course of which the trademark office’s denial of registration was affirmed, the Federal Circuit took the case “en banc” (meaning all judges in the circuit would rule on the case, not merely a panel of three judges).

The Federal Circuit reversed, stating:

Courts have been slow to appreciate the expressive power of trademarks. Words—even a single word—can be powerful. Mr. Simon Shiao Tam named his band THE SLANTS to make a statement about racial and cultural issues in this country. With his band name, Mr. Tam conveys more about our society than many volumes of undisputedly protected speech. Another rejected mark, STOP THE ISLAMISATION OF AMERICA, proclaims that Islamisation is undesirable and should be stopped. Many of the marks rejected as disparaging convey hurtful speech that harms members of oft-stigmatized communities. But the First Amendment protects even hurtful speech.

The government cannot refuse to register disparaging marks because it disapproves of the expressive messages conveyed by the marks. It cannot refuse to register marks because it concludes that such marks will be disparaging to others. The government regulation at issue amounts to viewpoint discrimination, and under the strict scrutiny review appropriate for government regulation of message or viewpoint, we conclude that the disparagement proscription of § 2(a) is unconstitutional.

It now falls to the Department of Justice, which defended the PTO in this case, to decide whether it will seek an appeal to the Supreme Court.  It also remains to be seen what implications this decision will have in the Washington Redskins litigation, where the PTO was ordered to cancel several “Redskins” trademarks on the ground that they were disparaging to Native Americans.  That case was recently decided by a federal district court in the Fourth Circuit (which encompasses Maryland, North and South Carolina, Virginia and West Virginia). Pro-Football, Inc. (owner of the Redskins marks) has filed an appeal to the Court of Appeals for the Fourth Circuit, which may or may not find the Federal Circuit’s decision persuasive. If it rules differently, the chances of a successful Supreme Court appeal in the Redskins case is great.

In re Tam (CAFC, December 22, 2015)

I’ve often written about how easy it can be for an employer to lose the ability to enforce an employee noncompete provision.  In recent years the courts have come down hard on employers who materially change an employee’s job responsibilities but fail to require the employee to enter into a new contract, holding in many cases that a noncompete provision in the old contract does not survive the job change.  (For example, see Rent-A-PC Fails to Enforce Restrictive Covenants Against Former Employees).

However, there is an even more fundamental mistake employers can make, as illustrated in the decision in Meschino v. Frazier Industrial Co. (D. Mass. November 18, 2015). In this case the employee entered into an agreement in 2005 which contained a covenant not to compete and a confidentiality provision.  The employee then signed a new employment agreement in 2012, but the 2012 agreement did not include these terms or refer back to the 2005 agreement. As the court noted, the 2012 agreement “states on its face that it contains ‘the terms of [the employee’s] employment’ without any reservation or reference to any other document or agreement.”

That, so far as Massachusetts Federal District Court Judge Stearns was concerned, was the end of the matter.  The employer may have intended to preserve the 2005 noncompete provision in the 2012 contract (as it claimed), but the 2012 agreement contained not even the hint of such an intention.

Employers and employees have a lot at stake when it comes to noncompete and confidentiality agreements, and failing to consult a qualified lawyer to make sure that these terms remain in effect (or, in the case of an employee, to know when they may not be enforceable) can be a costly mistake, as Frazier learned in this case.

Meschino v. Frazier Industrial Co. (D. Mass. November 18, 2015).

Lawyers can cross examine experts by questioning them with a “learned treatise” – what a non-lawyer might describe as an authoritative book or article written by an expert in the field. For example, if a doctor is testifying at trial in a medical malpractice case, her opinion on the proper standard of medical care can be challenged, on cross examination, by showing her a “learned treatise” that conflicts with her testimony. The jury hears the quote from the book, and can take it into consideration in evaluating the weight it may give to the expert’s testimony.

This is what happened in Kace v. Liang, a wrongful death medical malpractice case. In this case the doctor-defendant was testifying.  He was shown pages from the web sites of Johns Hopkins University School of Medicine and Mayo Clinic that impeached his testimony, and at the request of the attorney questioning him, he read them to the jury.

On appeal the defendant argued that the web pages did not satisfy the strict requirements associated with learned treatises under Massachusetts law, and the Massachusetts Supreme Judicial Court agreed, stating that

The content of the web pages indicates that they are not medical ‘treatises’ of any sort intended to be read and used by physicians, but rather are directed at laypersons. . . . To establish the admissibility of the statements taken from the Johns Hopkins and Mayo Clinic Web sites, the plaintiff’s counsel was obligated to show that the author or authors of the web pages was or were “a reliable authority.” . . . The credibility of Johns Hopkins and Mayo Clinic as highly respected medical institutions or facilities is not enough to demonstrate the reliability of statements on individual pages of each institution’s Web site. There is nothing to say who wrote each Web page, or whether the author of each Web page was an appropriate source of information … .

This is not to say that material on a website may never be used as a learned treatise on cross examination. As the Court noted, it is up to the party seeking to use the material to establish that it was authored by a “reliable authority,” something the plaintiff had been unable to do in this case.

Despite this holding, the Court upheld a 2.9 million dollar jury verdict in favor of the plaintiff, holding that this, and several other errors, did not result in undue prejudice to the defendant.

Kace v. Liang (Mass. Supreme Judicial Court, Sept. 10, 2015)

Lets Go Crazy! The Dancing Baby, the DMCA  and Copyright Fair Use

It’s not often that a case involving a 29 second video of toddlers cycling around on a kitchen floor goes to a federal court of appeals, much less results in an important,  precedent-setting copyright decision. But that is exactly what happened in Lenz v. Universal Music Corp.

The cases arises from an issue inherent in the Digital Millennium Copyright Act. The DMCA allows copyright owners to request the “takedown” of a post that uses infringing content.

But, what does the copyright owner have to do to determine, first, whether fair use applies? Does it need to do anything at all?

This question has finally been decided by the Ninth Circuit in a much-anticipated decision issued on September 14, 2015.

The case had inauspicious beginnings. In 2007 Stephanie Lenz posted to YouTube a 29 second video of her toddler son cycling around the kitchen, with Prince’s song “Let’s Go Crazy” playing in the background. Universal sent a DMCA takedown notice to YouTube, but Ms. Lenz contended her use of the song was fair use, and therefore was non-infringing. Eventually the dispute made its way to federal court in California, with Ms. Lenz asserting that her use of the song was protected by fair use, and that Universal had failed to take fair use into consideration before requesting takedown of her video.

The issue before the court was whether, before sending a DMCA takedown notice, copyright holders must first evaluate whether the offending content qualifies as fair use. The court held that the copyright statute does require such an evaluation, but that the copyright holder need only form a “subjective good faith belief” that fair use does not apply. And, the copyright holder may not engage in “willful blindness” to avoid learning of fair use.

In this case Universal arguably failed to consider fair use at all.

The court does not answer the practical question now faced by Universal and others: what, exactly must a copyright holder do to show subjective good faith under the DMCA? Noting that it was “mindful of the pressing crush of voluminous infringing content that copyright holders face in a digital age,” the court described generally what appears to be a low standard to satisfy the “good faith” test. The court opined that subjective good faith belief does not require investigation of the allegedly infringing content. And, “without passing judgment,” that the use of computer algorithms appeared to be a “valid … middle ground” for processing content. However, the court failed to provide a standard for an computerized algorithmic test that might apply in the notoriously uncertain legal context of copyright fair use.

It seems difficult to conclude other than that this decision will increase the cost burden on the part of content holders who wish to use the DMCA to force the takedown of copyright-infringing content on the Internet. While the court provides little guidance as to what a copyright content owner will have to do to show that it exercised “subjective good faith” before sending a takedown notification, it seems likely that the ruling will involve increased human involvement, and perhaps even legal consultation in “close cases.”

This case was originally filed by Ms. Lenz in 2007, eight years ago, however it is far from concluded. The Ninth Circuit’s decision only sends the case back to the trial court for a trial under the legal standard enunciated by the Ninth Circuit. And, even that determination can only be reached after the court (or a jury) concludes that the 29 second video was fair use of the Prince song in the first place, an issue that has yet to be taken up by the court.

What, one might ask, can Ms. Lenz expect to receive in the event she prevails at trial? First, The Ninth Circuit decision explicitly allows her to recover “nominal damages” — in other words, damages as low as $1. However, even if she prevails and recovers only one dollar, she would be entitled to her costs and attorney’s fees, which could be a substantial amount, notwithstanding the fact that Ms. Lenz is represented by counsel pro bono.

Of course, given the economics of this type of case, its unlikely we’ll see too many similar cases of this sort in the future. Clearly, this was a “test case,” in which the principle, not monetary compensation, was the motivation. Not many recipients of DMCA takedown notices will bring suit when at best they can hope to recover nominal damages plus attorney’s fees.

For an earlier post discussing a decision on this issue by Judge Stearns in the District of Massachusetts, see Judge Stearns Weighs in on Legal Standard for Copyright Takedown Notices (Sept. 30, 2013).

Lenz v. Universal Music Corp. (9th Cir. Sept. 14, 2015).

No, You May Not Copyright a Chicken Sandwich

by Lee Gesmer on September 1, 2015

One of the hoariest chestnuts of copyright law is that a recipe is not copyrightable.

Seemingly unaware of this – or in outright defiance of the law – the plaintiffs in Lorenza v. South American Restaurants Corp. argued to the contrary.  Specifically, the plaintiffs claimed copyright in a “Pechu Sandwich” recipe consisting of”fried chicken breast patty, lettuce, tomato, American cheese, and garlic mayonnaise on a bun.”

The complaint contained no allegation that the “recipe” for the sandwich was in a form of expression beyond that of a list of ingredients.

The district court dismissed the copyright claim, and the First Circuit made short work of affirming:

Contrary to [plaintiff’s] protests on appeal, the district court properly determined that a chicken sandwich is not eligible for copyright protection. This makes good sense; . . .. A recipe — or any instructions — listing the combination of chicken, lettuce, tomato, cheese, and mayonnaise on a bun to create a sandwich is quite plainly not a copyrightable work.

The only surprise in this decision is that the First Circuit did not award the defendants costs or attorney’s fees incurred in defending this appeal.