by Lee Gesmer | May 10, 2018 | Copyright
It’s rare to see a court conclude that a copyright owner has engaged in copyright misuse, but that’s the position in which Disney Enterprises, Inc. finds itself in its copyright case against Redbox Automated Retail, Inc.
The case is convoluted, since it involves both contract and unusual copyright law issues.
Disney sells “combo packs,” which include video disks containing Disney movies and a piece of paper containing an alphanumeric download code. The download code can be used to stream the movies online. The cover of the combo pack boxes state that the “codes are not for sale or transfer.”
Redbox began purchasing Disney combo packs and, disregarding the warning on the boxes, disassembled the packages and sold the download codes in its kiosks.
Disney filed suit and asked the court for a preliminary injunction ordering Redbox to cease reselling the download codes. The court denied Disney’s motion (link to February 2018 opinion).
There were a number of issues the court needed to parse to decide Disney’s motion. The first was whether Redbox violated a contract based on the warning on the exterior of the boxes. Based on Ninth Circuit and California law the court concluded that the warning did not constitute a “shrink-wrap license,” since it failed to warn purchasers that by opening the box they would be bound to a contract: “Disney’s phrase does not identify the existence of a license offer in the first instance, let alone identify the nature of any consideration, specify any means of acceptance, or indicate that the consumer’s decision to open the box will constitute assent.”
Thus far this is classic shrink-wrap law. The legal consequence is that purchasers were entitled to transfer (sell, give away) the disks and the download code under the copyright “first sale” doctrine.* Bottom line, Disney did not prevail on its argument that Redbox violated a license when it purchased the combo packs and sold the download codes.
*Likely, in the future Disney will correct its “box-top license” to make it legally enforceable, but it didn’t help it in this case.
There was, however, a second license that Disney could point to. The online terms of use between Disney and combo pack purchasers (an entirely independent online license) permitted consumers to download movies only if they still owned the physical disks from the combo pack sold with the download code. In other words, the online license purported to penalize consumers for exercising their first sale rights in the contents of the combo packs by denying them the right to use the download code.
Disney argued that Redbox was encouraging end users who purchased download codes from Redbox to download movies in violation of this online agreement. Disney argued that the end users were direct infringers (since, if they no longer had the disks, they had no right to download movies), and Redbox was a contributory infringer, since it enabled them to do so by selling them the codes.
This would have been a winning argument, except that Redbox asserted that by imposing this requirement Disney was engaging in “copyright misuse.” Specifically, Disney was using its copyright in the movies (its right to control downloads) to prevent consumers from exercising their first sale rights in the media contained in the combo packs.
The court bought this argument, reasoning as follows:
- Under U.S. copyright law, purchasers of the combo packs were free to resell (or give away) the contents of the packs under the “first sale” doctrine.
- Disney’s download services license agreement with purchasers wrongly attempted to prevent this legal conduct. In other words, it forced them to agree that they would not exercise their rights under the first sale doctrine, rights they held as owners of the combo packs.
- The court concluded that “this improper leveraging of Disney’s copyright in the digital content to restrict secondary transfers of physical copies directly implicates and conflicts with public policy enshrined in the Copyright Act, and constitutes copyright misuse.”
The court rejected Disney’s argument that the doctrine of copyright misuse is limited to situations in which a copyright holder attempts to use its copyright to to obtain some power over other, non-copyrighted goods or services.
There is another twist to this case. Most of the discussion leading up to this decision (both in court filings and in the copyright community), centered around the question of whether the download codes are subject to the first sale doctrine in the first instance. Is an alphanumeric download code a “copy” subject to first sale? Redbox argued that it was, and that this was yet another reason that Disney could not control the transfer or sale of the code once it had been purchased.
The court sided with Disney on this issue, holding that the sale of a download code was not the sale of a copy that would be subject to first sale: “Disney appears to have sold something akin to an option to create a physical copy at some point in the future. Because no particular, fixed copy of a copyrighted work yet existed at the time Redbox purchased, or sold, a digital download code, the first sale doctrine is inapplicable to this case.” However, this conclusion was trumped by the court’s ruling that Disney had engaged in copyright misuse.
This case is ongoing, and I expect that the district court’s preliminary injunction ruling will be the subject of an eventual appeal by Disney.
Update: As I noted above, one option open to Disney was to revise its “box-top license” to make it legally enforceable. Disney did just this when it released Black Panther, and it brought a new motion for preliminary injunction with respect to sales of this movie. This time it prevailed. The district court issued a new decision on August 29, 2018, holding that Redbox may not sell or transfer the combo pack codes for Black Panther.
by Lee Gesmer | May 3, 2018 | Copyright
The Court of Appeals for the Federal Circuit’s second decision in the long-running Oracle v. Google copyright case is astonishing, since it is the first time a federal appeals court has reversed a jury verdict on copyright fair use. But, it’s not surprising – the CAFC telegraphed its views on Google’s fair use defense in its first decision, which held that Oracle’s Java declaring code was copyright-protected (“Google overstates what activities can be deemed transformative under a correct application of the law”).
Like its 2014 decision, the 2018 decision (decided by the same 3-judge panel) rejecting Google’s fair use defense has triggered a flood of articles analyzing, supporting or criticizing the decision.
Rather than rehash what other commentators have said about this case, here are what I see as the practical take-aways.
First, and most importantly: it ain’t over until it’s over. Google is almost certain to seek Supreme Court review (it did, unsuccessfully, after the 2014 decision – all the more reason to try again, now that it’s facing a trial on damages).
While the Supreme Court takes only a small percentage of cases, there’s a reasonable chance it will take this one. A significant factor will be whether the Solicitor General’s office argues in favor of appeal. It didn’t in 2014, arguing that the CAFC’s decision on copyrightability was correct, that the Java “declaring code” fell within the definition of a computer program —“a set of statements or instructions to be used directly or indirectly in a computer in order to bring about a certain result” — and not the exclusion for a “method of operation” or “system.”
However, the Solicitor General was more receptive to Google’s fair use argument: “legitimate concerns with interoperability and lock-in effects are better addressed through the fair use doctrine ….”
What position it will take on fair use on an appeal from the current decision remains to be seen. However, if I were Google I’d rather be seeking the Solicitor General’s support from an Obama Department of Justice than a Trump DOJ.
That said, the Supreme Court hasn’t decided a copyright fair use case in almost 25 years. It has never decided a software copyright case (although it tried in Lotus v. Borland, where it tied 4-4). This case is a good candidate for Supreme Court review, with or without the Solicitor General’s support, either on the copyrightability issue (the 2014 decision), fair use (the 2018 decision) or both. If nothing else, the Supreme Court could reverse the CAFC on the narrow ground that there were facts on which the jury could have found fair use, and therefore the CAFC went too far in usurping the role of the jury.
Second, this case was decided by the Court of Appeals for the Federal Circuit, supposedly applying Ninth Circuit copyright law. The case is not binding on any other circuit, not even the Ninth Circuit, from which it arose. It’s no secret that the CAFC is not viewed as an influential court on matters of copyright law. In fact, it gets very few copyright appeals (it’s primary role is that of an appeals court for patent cases, and even its performance in that context is controversial). Therefore, the case may have less practical impact than would have been the case if it were decided by the Ninth Circuit or the Second Circuit, the two most influential federal appeal courts on copyright matters.
This is not to say it is unimportant – at least for now, it will have persuasive force for courts adjudging the copyrightability of APIs and fair use in the context of API reproduction.
Third, every fair use case stands on its own set of facts, and therefore it’s difficult to apply precedent in this area of copyright law. This is particularly true with respect to software copyright law. This is both a negative and a positive for companies in a position similar to Google – negative in that uncertainty makes it difficult to chart a liability-free course through the shoals of fair use; positive in that future litigants can distinguish this case, which is based on facts that are highly specific. However, few companies can afford the enormous costs that Google has incurred in the defense of this case, so on balance the decision is a negative for companies seeking to copy an API without the copyright holder’s permission.
The bottom line: if a client asked me whether it could use an API such as Java without permission, I would tell them they could not, since they face a double legal hurdle: first, whatever federal court they find themselves in may follow the CAFC’s 2014 decision, and hold that they’ve violated the copyright owner’s exclusive rights of reproduction and distribution, at the very least. Even the First Circuit, which decided Lotus v. Borland in favor of Lotus on the grounds that the user commands in Lotus 1-2-3 were a “method of operation” is not necessarily safe for defendants. It’s been too long (over 25 years) and an API like Java is too different from the command structure in Lotus for a defendant like Google to feel secure in the First Circuit.
Second, the outcome of a fair use defense is always uncertain – that is baked into the very nature of copyright fair use. If the client is copying the API to achieve interoperability or to move an API to a new hardware platform, it may have a better argument than Google had with Java and Android (Google’s defense failed on both of these issues), but fair use is so unpredictable that in most cases it would be borderline negligence for an attorney to tell a client to rely on it as a defense.
On many occasions I have said that I would love to hear what Google’s copyright counsel advised Google when Google said it wanted to copy parts of the Java API and include it in Google’s Android smart phone operating system. It would be an understatement to say that this would have been very risky advice. Perhaps Google was advised that this course of action involved a big legal risk, and it concluded that the risk was justified. Regardless, unless Google can persuade the Supreme Court to reverse the CAFC, it faces a jury trial that could exceed $20 billion in damages.
by Lee Gesmer | Apr 2, 2018 | Copyright, Litigation, Trials
You can find plenty of commentary on whether the Ninth Circuit Court of Appeals ruled correctly when it upheld a jury verdict that “Blurred Lines” infringed the copyright in “Got To Give It Up.” But another aspect of this decision has received little attention, and that is a mistake made by trial counsel for the Williams/Thicke defendants in this case.
One of the things that keeps lawyers awake at night (or should) is the risk that they will unknowingly waive a client’s legal rights. I wrote about this in 2008 (Traps for the Unwary – Waiver), and again in 2010 (Mister Softee Bitten By Waiver Under FRCP 50 ). In the 2010 post I observed that Microsoft’s failure to move for judgment as a matter of law (“JMOL” in legal jargon) under Rule 50 may have cost it several hundred million dollars.
The bottom line is that lawyers always need to be alert to the risk of a waiver.
When it comes to waivers during trial, one of the biggest mistakes a lawyer can make is to fail to move for JMOL before jury deliberations, and to then timely renew that motion after trial if the jury verdict makes it necessary. Failure to make these motions puts a losing party at a significant disadvantage on appeal: the party will be precluded from challenging the sufficiency of the evidence supporting the verdict.
This was the error in the Microsoft case, and it occurred once again in Gaye v. Williams. This was a high profile case, and it would be reasonable to expect the lawyers for Williams and Gaye (and their publisher) to avoid this mistake. The Ninth Circuit addressed their failure to file Rule 50 motions as follows:
The Thicke Parties . . . failed to make a Rule 50(a) motion for judgment as a matter of law at trial. Their failure to do so “precludes consideration of a Rule 50(b) motion for judgment as a matter of law.”
This procedural limitation is well worth underscoring. We held, in a case in which a party made an oral Rule 50(a) motion, but failed to renew its motion, that the party “waived its challenge to the sufficiency of the evidence because it did not renew its pre-verdict Rule 50(a) motion by filing a post-verdict Rule 50(b) motion.” . . . We further held that. . . a party’s failure to renew a Rule 50(a) motion “precluded [us] from exercising our discretion to engage in plain error review.” . . . Thus, when we stitch together Rule 50’s requirements with our case law, we are left with this result: Because “a post-verdict motion under Rule 50(b) is an absolute prerequisite to any appeal based on insufficiency of the evidence,” . . . and because a Rule 50(a) motion is, in turn, a prerequisite for a Rule 50(b) motion, . . . an advocate’s failure to comply with Rule 50’s requirements gives us serious pause, and compels us to heighten the level of deference we apply on appeal.
This was an important case, with a lot at stake. After their unsuccessful appeal Thicke and Williams are faced with a $5 million-plus judgment, an ongoing royalty obligation of 50%, and very little chance that they can persuade the Supreme Court to take this case and change the result. Whether the outcome would have been different had their lawyers filed Rule 50 motions is impossible to say. However, in litigation you need every advantage you can get, and waiving your ability to challenge the sufficiency of the evidence on appeal is not a trivial mistake.
To be clear, Federal Rule of Civil Procedure 50 requires that a party move for judgment, with specificity, on every issue before the case goes to the jury (Rule 50(a)), and then again following the verdict if the jury finds against the party (Rule 50(b)). Failing to file either motion will compromise the party’s ability to raise the issue on appeal – in other words, it will result in a waiver.
Why Pharrell Williams and Robin Thicke’s lawyers failed to make these motions will likely never be known. Nor can we know whether, had they done so, the outcome on appeal would have been different. But we, and their clients, can be left to wonder.
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Rule 50(a)(2):
A motion for judgment as a matter of law may be made at any time before the case is submitted to the jury. The motion must specify the judgment sought and the law and facts that entitle the movant to the judgment
Rule 50(b):
If the court does not grant a motion for judgment as a matter of law made under Rule 50(a), the court is considered to have submitted the action to the jury subject to the court’s later deciding the legal questions raised by the motion. No later than 28 days after the entry of judgment . . . the movant may file a renewed motion for judgment as a matter of law.
For a more detailed discussion of this issue see Preserving Sufficiency, Tips for Avoiding Forfeiture of Sufficiency of the Evidence Arguments Under Rule 50.
by Lee Gesmer | Feb 28, 2018 | Copyright
In only three years the “Jumpman” case has become an established teaching tool in CopyrightX. I’ve taught it in the first class for three years running, and I know many other teaching fellows have as well. It’s a great way to get people who are new to copyright law thinking about copyright issues, in this case whether a photograph by Nike infringes a photo of Michael Jordan taken by Jacobus Rentmeester in 1984. The two photos are show below: Rentmeester’s original on the left, Nike’s allegedly infringing photo on the right. Rentmeester also alleged that Nike’s Jumpman logo (above) infringed the copyright in his photo.
Until now, we’ve only had the 2015 District of Oregon decision available to teach this case. In that decision Oregon District Court Judge Michael Mosman granted Nike’s motion to dismiss, holding as a matter of law that the two images were not substantially similar.
Now, the Ninth Circuit has upheld this ruling. Rentmeester v. Nike (9th Cir. February 27, 2018).
In a lengthy and detailed opinion the court outlined the steps necessary to establish copyright infringement of a photograph, and held that neither Nike’s photo, nor the Jumpman logo (above), infringed Rentmeester’s 1984 photo of Michael Jordan. If anything, this case will now be even more fun to teach to people new to copyright law.
Rentmeester Photo
Nike Photo
by Lee Gesmer | Feb 27, 2018 | Copyright
It’s long been widely assumed that in-line linking is not a basis for copyright infringement. Following a recent decision by a Southern District of New York federal judge, that is no longer true.
Justin Goldman took a photograph of Tom Brady. Under the copyright laws, one of his exclusive rights is the right of public display.
Goldman posted the photo to Snapchat. It went viral and was embedded in a tweet. A number of mainstream media publications posted the tweet by embedding the tweet into articles on their sites. Because the tweet was linked “in-line” (displaying content from one site within another via a link), none of the publications downloaded the image, copied it, or stored it on their own servers.
Is this copyright infringement? Specifically, did the embedded tweet violate Goldman’s right of public display?
SDNY judge Katherine Forrest held that it could, and granted summary judgment to Goldman on this issue, leaving for trial or later motions whether Goldman released his image into the public domain by posting it on Snapchat and whether the defendants have a fair use defense.
In her ruling the judge outright rejected the Ninth Circuit’s so-called “server test,” established in Perfect 10 v. Amazon in 2007. This case held, in the context of a search engine, that whether a website publisher is directly liable for infringement based on the public display right turns on whether an image is hosted on the publisher’s own server, or is embedded or linked from a third-party server. Judge Forrest stated:
The plain language of the Copyright Act, the legislative history undergirding its enactment, and subsequent Supreme Court jurisprudence provide no basis for a rule that allows the physical location or possession of an image to determine who may or may not have “displayed” a work within the meaning of the Copyright Act.
However, the judge took pains to distinguish the in-line linking at issue in this case from the images at issue in Perfect 10:
In Perfect 10, Google’s search engine provided a service whereby the user navigated from webpage to webpage, with Google’s assistance. This is manifestly not the same as opening up a favorite blog or website to find a full color image awaiting the user, whether he or she asked for it, looked for it, clicked on it, or not. Both the nature of Google Search Engine, as compared to the defendant websites, and the volitional act taken by users of the services, provide a sharp contrast to the facts at hand.
This dicta may be of some reassurance to Google and other search engines, but it leaves publications that want to engage in in-line linking with a great deal of uncertainty.
As noted, this case is not over – the defendants can proceed to trial (or seek summary judgment) on defenses such as fair use and waiver. In theory, the case could go to the Second Circuit, and the Second Circuit could either adopt or reject the server test. However, it seems unlikely this will happen. Given the potential damages and the costs of defense, the more likely outcome is that the case will settle, leaving this decision on the books. (See update below). If so, the extent to which it will be persuasive on other courts, or even with other judges within the Southern District, is an open question.
In the meantime, online publications face a tough decision: do they pull back on in-line linking based on this decision, or do they assume this case is an outlier, and the server test remains good law? No lawyer can provide an unequivocal answer to this question, other than to say that the legal risks of in-line linking are now greater than they were before this decision was issued.
Goldman v. Breitbart News (S.D.N.Y February 15, 2018)
[Update]: On March 19, 2018, the federal district court judge certified her decision for immediate appeal to the Second Circuit. The order stated, in relevant part, as follows:
The Court credits the parties’ representations that its February 15, 2018 Opinion, . . . has created tremendous uncertainty for online publishers. In this case, the embedded image was hosted on Twitter; given the frequency with which embedded images are “retweeted,” the resolution of this legal question has an impact beyond this case. . . . Accordingly, in order to bring resolution to an important and controlling question of law and to more efficiently resolve this matter, the Court certifies its February 15, 2018 Opinion for interlocutory appeal. All other proceedings are stayed pending this appeal.
[Update 2 – May 2019]: The Second Circuit denied interlocutory review, and the case settled as to all defendants. Accordingly, this case will not be heard by the Second Circuit, and the District Court’s opinion will stand unreviewed.
