by Lee Gesmer | Sep 24, 2013 | Noncompete Agreements
In Corporate Technologies v. Harnett, decided by the First Circuit on August 23, 2013, the court upheld the Massachusetts U.S. District Court’s enforcement of a 12-month employee non-solicitation clause. The court rejected Harnett’s (the former employee) argument that he did not solicit Corporate Technologies’ customers, particularly given evidence that the new employer sent a “blast email” to a group that included many of Corporate Technologies’ customers.
The opinion contains an extensive discussion of the “metaphysical” distinction between “soliciting” and “merely accepting” business, an issue I discussed in another post this summer (Nudge, Nudge, Wink, Wink – Are You “Soliciting” in Violation of an Employee Non-Solicitation Agreement?).
The First Circuit rejected a “bright-line” rule in determining who made initial contact in a non-solicitation case (the former employee or a customer), stating that –
we believe that the better view holds that the identity of the party making initial contact is just one factor among many that the trial court should consider in drawing the line between solicitation and acceptance in a given case. This flexible formulation not only reflects sound policy but also comports with well-reasoned case law from other jurisdictions.
Of interest is the First Circuit’s rejection of Massachusetts Superior Court cases as precedent on this issue: “these trial court decisions have no precedential force … Where, as here, the highest court of a state has not spoken to a question of state law, our precedents teach that we should look, among other things, to ‘persuasive adjudications by courts of sister states’ and ‘public policy considerations.'”
This decision is bad news for employees who hope to do an end-run around a non-solicitation clause, since the absence of a bright-line test makes it more difficult to predict how a court will handle a particular set of facts.
Non-solicitation cases are infrequent visitors to the First Circuit. While federal court cases are not binding on the state courts, they are highly persuasive, and I expect this case to be an important precedent in the law of non-solicitation agreements in Massachusetts.
Corporate Technologies, Inc. v. Harnett (1st Cir., August 23, 2013)
by Lee Gesmer | Aug 29, 2013 | Copyright
Harvard Law School professor Larry Lessig must have fallen off his chair in disbelief when he learned that Liberation Music, copyright owner of the song Lisztomania, recorded by Phoenix, had used the DMCA to force Youtube to remove the video of a lecture by Lessig that included video remix examples of this song. He soon straightened up and filed what could become an interesting test case involving wrongful DMCA takedown notices and copyright fair use.
However, in the process he suffered something of a legal stutter-step that may come back to haunt him in this case. Assuming, that is, that Liberation Music doesn’t come to its senses and settle this case faster than you can say “world-renown copyright lawyer with deep resources handed slam-dunk case by naive copyright holder.”
The original “brooklyn brat pack mashup” video of Lisztomania, an amateur music video which remixes the song and scenes from the 1985 movie The Breakfast Club, has been the subject of countless amateur remixes (the “brat pack videos”) that are easily accessible on the Internet. Incredibly it is this very phenomenon — remixes of videos of this song — that Lessig has used in dozens of presentations* to illustrate the culture of creativity released by the Internet. And, implicit in his use of this example is that it is transformative, and therefore permissible under copyright fair use.
*Here is another one on Youtube that has not been taken down. This lecture contains a 47 second clip of Lisztomania, as long as anything in the video targeted by Liberation Music.
Of course, in considering Liberation Music’s takedown notice to Lessig there is the question why so many full performances of this song remain available on the Internet while Liberation Music decided to 
demand a take-down of Lessig’s keynote address at a conference in South Korea. Lessig only played parts of this song, while many examples of the full performance can easily be found on Youtube, seemingly untouched by a DMCA notice. This leads one to the conclusion that Liberation Music is either completely clueless or extraordinarily devious.
While it’s difficult to speculate about Liberation Music’s legal strategies, it is worth taking a quick look at the merits of Professor Lessig’s suit.
Is His Use Fair Use? I don’t think there can be a serious question that Lessig’s excerpts from several of the brat pack videos, ranging from 10 to 47 seconds of a 4 minute song, qualify as fair use. I’m sure Lessig himself concluded this before he used them in his presentations. The videos themselves are transformative, and Lessig’s use of them in his lectures is educational and noncommercial. It’s difficult to imagine that they interfered with Liberation Music’s right to profit from the song. If anything, the meme that formed around these videos increased the song’s popularity and sales. Lessig’s position on this issue appears very strong.
Did Youtube Properly Remove the Video? The Digital Millennium Copyright Act allows copyright owners to demand that an Internet service provider (such as Youtube) remove unauthorized copies of the owners’ works. Lessig posted the 2010 video on Youtube on June 8, 2013, and Liberation Music served a “take-down” notice on Youtube on June 30, 2013. Youtube took down the video and, as required by the DMCA, Youtube provided Professor Lessig with notification of this action. Lessig then took the next step permitted by the DMCA — he submitted a counter-notice contesting the claim of infringement. Under the DMCA, Liberation Music then had 14 days to file suit against Professor Lessig. If it failed to do so, Youtube was required to restore access to the contested work.
To show it was paying attention, five days after Lessig sent his counter-notice Liberation Music sent Lessig an email threatening to sue him. Two days later Lessig retracted his counter-designation, in effect folding his hand against what may have been a bluff by Liberation Music. The video remains down, and properly so under the DMCA. Youtube reportedly receives millions of take-down notices a week, and its take-down procedure is largely mechanical. It’s not reasonable to expect Youtube to judge whether or not a work falls within the copyright fair use doctrine.
Why Did Professor Lessig Retract His Counter-Designation? Why indeed? Why didn’t Lessig let Liberation Music sue him under the DMCA, as they threatened to do? Why did he retract his counter-designation and then, almost two months later, file an action for “declaratory relief,” asking the court to “declare” that his use of the brat pack videos was protected by fair use and that Liberation Music had served a wrongful DMCA take down notice?
While we likely will never know the answer to this question, I 
would expect Liberation Music to try to take advantage of this as a procedural matter, and argue that by side-stepping the procedures established in the DMCA, Lessig waived his right to sue Liberation Music. A quick search failed to find any authority either way on this question, but that doesn’t mean it’s a dead issue for Liberation Music. Congress constructed a precise system under the DMCA, the legislative history is extensive (and may address this issue), and Liberation Music may be able to persuade the Massachusetts federal court that Lessig’s retraction was a waiver. After all, Liberation Music may have been bluffing — it could have let the 14 day period expire, and not filed suit, in which case the work would have been restored on Youtube and a lawsuit avoided. By withdrawing his counter-designation Lessig seemingly forced a lawsuit that Liberation Music may never have intended to pursue.
By the way, fans of Phoenix shouldn’t assume that the band is calling the shots on this. Maybe they are, maybe they aren’t. Like many bands, they have assigned the copyright in their songs to their publisher, and they may have no legal right, under their contract, to control their publisher’s enforcement of copyrights in their music. However, they may be really pissed-off, and making Liberation Music well aware of that fact.
Prediction: Liberation Music will settle this case quickly, and the video of Professor Lessig’s lecture will be back on Youtube before you can say “don’t make weak copyright claims against Harvard law professors.”
p.s. – can’t resist sharing this comment from Ars Technica:
“If you’re going to pick someone to try and copyright troll, don’t pick the world’s foremost public intellectual on copyright issues. It’s rather like being a street mugger and picking the 6ft 4 broad-shouldered guy with a Marine tattoo.”
Update, March 2, 2014: According to this article on the Electronic Frontier Foundation web site (the EFF co-represented Prof. Lessig), this case has settled favorably for Prof. Lessig. The EFF states that Liberation Music will pay Lessig unspecified (and confidential) damages “for the harm it caused,” and quotes Liberation Music’s press release as follows:
Liberation Music is pleased to amicably resolve its dispute with Professor Lessig. Liberation Music agrees that Professor Lessig’s use of the Phoenix song ‘Lisztomania’ was both fair use under US law and fair dealing under Australian law. Liberation Music will amend its copyright and YouTube policy to ensure that mistakes like this will not happen again.
This outcome was pre-ordained, but if Liberation Music’s takedown notice was a “mistake,” why did it take over six month to resolve the case?
by Lee Gesmer | Aug 13, 2013 | Copyright
“The phone, the laptop and the tablet have advanced so dramatically. Television has been drastically left behind.” – Tom Rogers, CEO of TiVo, Inc., Wall Street Journal, July 30, 2013
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First music, then books, now television. Music and book publishers have suffered well-publicized headwinds (some would say hurricane gales) at the hands of the Internet economy, and now 2013 is the year the TV and cable industries are beginning to face comparable technology-driven disruptive technologies.
Technical advances now allow people who live in New York, Boston or Atlanta to use Aereo to watch inexpensive over-the-air television on Internet-enabled devices (potentially freeing them from more expensive cable fees), and subscribers to Dish satellite TV to watch primetime network TV ad free
The broadcasters are fighting these developments in the marketplace and the courts, and the court actions have sent sparks flying in the world of copyright law.
I’ve written about the broadcasters’ ongoing legal efforts to shut down Aereo, However, the Ninth Circuit’s July 24, 2013 decision in Fox v. Dish Network adds another dimension to the TV industry’s copyright battles.*
*An important caveat in both cases is that the appellate courts were reviewing preliminary injunction decisions by district courts under a deferential standard of review. There is no certainty that the Second and Ninth Circuits will reach the same conclusion on an appeal of a final judgment in these cases.
Here are the facts in Dish.
Dish records the primetime programming of the four major network TV broadcasters – ABC, CBS, NBC and Fox. It manually inserts electronic bookmarks to mark the beginnings and ends of commercial breaks. Dish then downloads the programming to the hard drives in the set-top DVR boxes of subscribers who have pressed the button that “enables” this service.
These subscribers now have a box-top recording of the previous eight days of primetime programming, including ads. However, when they watch a show and the system encounters an electronic bookmark marking an ad the service skips to the next bookmark, “hopping” over the ads. Voilà! Dish subscribers have advertisement-free TV, “the feature viewers have been waiting for since the beginning of television.” Dish has given this ad-skipping service the name “AutoHop.”*
*The district court record suggests that an important motivation for Dish to create AutoHop may have been to compete with Internet-based programming from services such as Hulu and Hulu Plus.
Hopper Logo
If Aereo’s service – which feeds over-the-air TV programming to computers, tablets and smart-phones (ads and all) infuriated the network broadcasters, the Dish ad-skipping service – “which could destabilize the entire television eco-system” according to Moody’s – has left broadcast TV executives apoplectic. Fox filed suit for copyright infringement in California, but the district court denied Fox’s motion for a preliminary injunction. In a nightmare scenario following the networks’ thus-far unsuccessful battle with Aereo in the Second Circuit, the Ninth Circuit upheld the district court, relying in significant part on the Second Circuit’s controversial Cablevision decision, the case that was central to the broadcasters’ loss in Aereo.
Based on Cablevision, the Ninth Circuit held that because Dish’s AutoHop system creates copies only in response to the customer command enabling the service, the district court did not err in concluding that Dish is not engaged in direct infringement. Even though Dish provides the service, the customer, not Dish, is “the most significant and important cause of the copy.”
In Cablevision the Second Circuit asked “whether one’s contribution to the creation of an infringing copy may be so great that it warrants holding that party directly liable for the infringement, even though another party has actually made the copy.” However, the Second Circuit never identified that point in Cablevision, and although Fox argued that Dish, as an active participant in the activity of copying, had crossed that line, neither did the Ninth Circuit in Fox v. Dish.
If Dish is not the “direct” infringer (since the subscribers, not Dish engage in the “volitional conduct” that “makes” the copies), isn’t Dish liable under the theory of secondary liability?* After all, Dish puts the DVR devices in the hands of their subscribers, ready to use (with no options or vatiations), and shows them how to push the button that feeds the copies to them.
* One form of secondary liability under copyright law is to intentionally induce or encourage direct infringement. This theory of liability was not asserted in either Cablevision or Aereo. In Cablevision, the cable company “expressly disavowed” secondary liability as a theory of liability.
In response to this argument Dish fell back on the Supreme Court’s famous 1984 decision in Sony v. Universal (better known as the “Betamax case)”, and argued that copying by subscribers was fair use under that case.* However, the most important factor in fair use analysis is the harm to the market value of the copyrighted work, and in this case (unlike Sony) AutoHop clearly has an impact on the value of Fox’s TV shows, since they are supported by advertising revenues which are likely to shrink if people are skipping Fox’s paid advertising.
* Although there was evidence in Sony that 25% of Betamax users fast-forwarded though commercials, the Supreme Court in Sony never squarely decided whether commercial-skipping was fair use (as compared with time-shifting, which the Supreme Court held was fair use).
The Ninth Circuit attempted to side-step this argument by Fox by noting that Fox does not own the copyright to the ads, only the programming. Therefore, the Ninth Circuit concluded, “any analysis of the market harm should exclude consideration of AutoHop because ad-skipping does not implicate Fox’s copyright interests.” However, this conclusion seems to ignore the fact that Dish subscribers are copying Fox’s programming as well as its advertising, and therefore Fox’s copyright interests are implicated. Perhaps a copyright suit by an advertiser would have a better chance of establishing copyright infringement before the Ninth Circuit, and I suspect that Fox (or one of the other broadcasters) is considering the pros and cons of this strategy.
On August 7th Fox filed an impassioned Petition for Rehearing and Rehearing En Banc, pointing out a number of flaws in the Ninth Circuit panel’s reasoning and legal analysis. The Ninth Circuit is more amenable to en banc review than the Second Circuit (where en banc review is rare, and where it was denied in Aereo), and therefore Fox’s quest for a preliminary injunction is not necessarily over in the Ninth Circuit. And, if the panel decision is held to be the law in the Ninth Circuit after final judgment, the issues are so important that the case should be a good candidate for Supreme Court review.
It’s also worth keeping in mind the fact that Dish, like Aereo, is playing with fire. If Dish is found to have infringed Fox’s copyrights after final judgment in district court or on appeal, the damages could be significant, given the large number of copyrighted shows at issue and the potential for statutory damages of as much as $150,000 per infringement.*
*The district court and the Ninth Circuit suggested that Dish may be liable for copies it made for “quality control,” but that seems to be little more than a monetary footnote in the context of this case. And, it appears that Dish has stopped this practice. In addition, Fox has asserted a breach of contract claim against Dish. Based on the Ninth Circuit decision, this may turn out to be a better claim for Dish than its claim of copyright infringement.
