by Lee Gesmer | Mar 14, 2013 | Copyright
Last week’s New York Times article on digital resales, Imagining a Swap Meet for E-Books and Music, is a reminder that U.S. District Court Judge Richard Sullivan’s decision on the pending cross-motions for summary judgment in Capitol v. Redigi can be expected quite soon. The motions were argued on October 5, 2012 (transcript), and six months is a fairly long time for a judge to decide motions of this sort. (For my earlier blog post on this case see Redigi Case Poses A Novel Copyright Question on the Resale of Digital Audio Files – Is “Digital First Sale” Legal?)
Ever since copyright protection began to be applied to software in the early 1980s the industry has complained that the law lags behind the technology. The Redigi case is another example of this lag. The hearing transcript illustrates the difficulty of applying copyright law to new digital technologies, as the lawyers and the judge stuggle to find an analogy that will help them apply the copyright “first sale” doctrine to the Redigi “forward and delete” system.
The Redigi System. To briefly recap, Redigi can be used to copy (reproduce, migrate, transport, all verbs used by the parties) an iTunes file from a consumer’s computer to a Redigi server (aka the “cloud”), during which process it deletes the file from the owner’s computer. The file, although located on Redigi’s servers, remains accessible only by the original owner until it is purchased by a customer of Redigi, at which point it can be accessed only by the purchaser, who may stream it from the Redigi server or download it to the purchaser’s computer. Either way, the original owner (or more precisely Apple licensee) loses all rights to the file.
The “First Sale” Doctrine. The legality or illegality of this system rests on the court’s interpretation of the copyright statute’s “first sale” doctrine, which states as follows:
Notwithstanding the provisions of section 106 (3), the owner of a particular copy or phonorecord lawfully made under this title, or any person authorized by such owner, is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy or phonorecord. 17 U.S.C. 109(a).
“Phonrecords,” in turn, are defined as:
material objects in which sounds . . . are fixed by any method now known or later developed, and from which the sounds can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device.
It is the “first sale” that allows the purchaser of a copyrighted work—such as a book, record, tape, CD or DVD—to resell that physical copy without violating the rights of the copyright owner. Hence, the existence of (for example) used bookstores, whether brick-and-mortar or online. However, Capitol argues that the first sale doctrine is limited to copyrighted works embodied in physical objects (paper, records, tapes, CDs, DVDs). It does not, Capitol claims, apply to digital files. In the case of Redigi the sale of a digital copy, Capitol argues, involves not the transfer of a “particular copy,” but rather the “reproduction” of the electronic file on the Redigi cloud. And reproduction, Capitol rightly argues, is an exclusive right of the copyright holder which is not protected by the first sale doctrine. By reproducing a copyrighted file on a Redigi server Redigi violates that right.
Redigi responds that the transmission of a digital work that is simultaneously deleted from the sender’s computer is the digital equivalent of giving, lending, or selling a book, consistent with long-standing copyright law under the first sale doctrine. The key factor, it argues, is that the original owner has no further rights (and no access) to the file once it has been sold.
The Summary Judgment Hearing (and the Star Trek Transporter). Judge Sullivan will have to decide which side is correct, and the summary judgment transcript shows how the judge and the parties have struggeled to fit Redigi’s system under the Copyright Act’s first sale doctrine:
Judge Sullivan: I guess [Redigi is] saying it’s not a copy, right? They’re saying that [the actual file] it’s transported from one place to another, . . . I’m not a Trekkie, but I kept thinking it’s the difference from Captain Kirk going from the Enterprise to the planet through that transporter thing, where he’s not duplicated, to the cloning where there’s a good and a bad Captain Kirk where they’re both running around. I think one is a copy and the other is — the other was transported and it’s only one Captain Kirk. (Transcript pp. 9-10).
Redigi’s lawyer (possibly in jest, it’s hard to tell): one of the examples I was thinking of was Willy Wonka. Remember when they put Tommy on the stage. They beamed him, and you saw the particles go across the top and, boom, there he was, miniaturized, but still him in that TV. What’s so hard to believe?*
*Redigi’s lawyer also described the process as “like a train. . . . Redigi grabs the file on the [customer’s local] hard drive and . . . pulls it in a matter of seconds to the cloud hard drive”
Perhaps the best analogy came from Judge Sullivan, where he described Redigi’s process as “if I combined my photocopier and my shredder so that I made a photocopy and the original, instead of coming out of the bin where I can pick it up, goes straight to the shredder. The two don’t exist at the same time, but it seems to me the other one is still a copy.” Redigi objected to this analogy, which is harmful to its position, but was challenged to distinguish it.
Judge Sullivan knows this is an important case: it is the first of its kind, and many eyes are watching. He also knows there is a good chance the losing party will appeal his decision to the Second Circuit Court of Appeals. He made it clear that his job is to apply the copyright statute, not make copyright policy—that would be up to Congress. At the same time, he is obviously struggling with the implications of Capitol’s position. The first sale doctrine has been a mainstay of U.S. copyright law since it was first established by the Supreme Court in 1908, and it seems intuitively unfair that it should not be expanded to encompass digital works.*
*In fact, a recent court ruling on this issue by the Court of Justice of the European Union held that held that a licensor of software made available for download over the Internet may not prevent the resale of perpetual licenses by its licensees. (UsedSoft GmbH v. Oracle International Corp., July 12, 2012), setting up the possibility that U.S. and E.U. law will differ on this issue. Unfortunately, Redigi and other potential resellers do not have the option of escaping more restrictive U.S. laws by moving their businesses to Europe, since the Court of Justice held that the first sale must occur within the European Union.
Nevertheless, under the current statute the Redigi case requires the court to identify the “phonorecord” in which the iTunes files are fixed, and determine whether Redigi is enabling the sale of that phonorecord. Capitol argues that the phonorecord is the hard drive, just as the material object in which the letters of a book are fixed is the printed page.
At the heart of Redigi’s response lies its assumption that the bits themselves are the phonorecord, and that its technology enables the transfer to the Redigi cloud of the specific bits the user downloaded from iTunes. However, although neither party seems to have argued the point,* as a technical matter Redigi seems to have the losing end of this argument. A digital file (such as an MP3 of AAC file) is nothing more than the alteration of the polarities of a magnetic medium (in the case of a hard drive) and the storage of electrons in the case of flash drives. In the case of a hard drive the only thing that is transfered is the set of instructions that set the magnetic polarities; in the case of a flash drive the electrons in the first user’s drive are not physically transferred to the Redigi cloud. Thus, Redigi’s argument that it “migrates” the file seems to have missed the mark as a technical matter. The most reasonable interpretation of the statute leads to the conclusion that the hard drive or flash drive is the “phonorecord” or “material object” in which “sounds are fixed,” and Redigi’s system does not involve the resale of the drives.
*The parties submitted expert affidavits, but they are so heavily redacted that it is impossible to know whether this argument was made. However, during oral argument Capitol’s lawyer stated that he did not “think it’s necessary to delve into the technology.”
While this conclusion will almost certainly leave many people deeply dissatisfied, Judge Sullivan is likely to conclude that a clear application of the law extending the first sale doctrine to digital files must come from Congress, not from the courts. Of course, Congress may take no action on this issue for years (if ever), leaving the legality of resales of digital works in limbo or, if Capitol’s position becomes case law, illegal.
An exchange between the judge and Capitol’s lawyer shows that the first sale doctrine is not a complete dead letter in the context of digital files, at least in theory. During the preliminary injunction hearing a year ago the judge asked Capitol’s lawyer whether the first sale doctrine would permit him to sell his iPod to his law clerk. Capitol responded that this would be permissible. (I discussed this exchange toward the end of my first post on this case). The judge raised this hypothetical again in October, and this time Capitol’s lawyer backed away from it:
Judge Sullivan: . . . last time we were here . . . I asked you if I could sell my iPod to somebody and you said I could.
Capitol’s Lawyer: Yes, and you know, it’s interesting you say that because I would actually have to say that I think that answer probably was not a correct one.
Clearly, Capitol’s lawyer did answer this question incorrectly the first time, at least from the perspective of his client. One can imagine someone who repeatedly copies his 10,000 song iTunes music collection to an iPod or a very inexpensive portable player, and sells the player and the entire collection for 10 cents on the dollar, hypothetically depriving the record industry of $10,000 in revenues with each sale. However, this begs the question of whether the original purchaser could use the first sale doctrine to justify the sale of the original device to which he downloaded these files (perhaps an inexpensive computer). It seems likely that he could under the first sale doctrine, but no court has ruled directly on this issue.
Fair Use Confusion. A surprising amount of the argument in this case seems to have confused principles of fair use with issues associated with first sale. For example, at one point Capitol’s lawyer was asked whether cloud storage alone (without an associated sale) violated the Copyright Act. Capitol’s lawyer, more cautious this time, answered that Capitol didn’t challenge cloud storage in this case. The correct answer seems to be that cloud storage alone (without resale, and without allowing third-party access) is protected by fair use, and Capitol seemed to acknowledge this (describing it as “pure storage”).
Redigi’s lawyer, for his part, improperly interjected issues of fair use when he argued that since a downloaded music file can be moved around on the users hard drive (from one directory to another, for example), it must be permissible for the user to upload the file to the Redigi cloud drive: “why is it okay to move files on my own hard drive and that doesn’t violate the [reproduction right], but to move my file to a cloud does violate reproduction? It doesn’t seem to make sense to me.” However, this argument ignores a basic principle of fair use, specifically that the use be non-commercial. The Redigi system moves the file not for the convenience of the person that downloaded the file from iTunes, but for the commercial purpose of selling it.
A Tactical Error By Redigi Early in the Case. As an aside, it seems unfortunate that Redigi dug itself into a legal hole by admitting, earlier in the case, that the customer’s local file is deleted. If “File A” is deleted, then “File B” must, by logic, be something other than File A (a copy or reproduction), and not the result of a “migration” from the Redigi customer’s hard drive to the Redigi cloud. Capitol argued that this judicial admission was fatal to Redigi’s attempts to describe its process differently at this point in the case, and the judge seemed receptive to Capitol’s argument that this was a binding admission, stating that Redigi “admitted certain acts that are going to be fatal.”
As I noted at the beginning of this post, it’s been six months since summary judgment was argued, and that’s a long time. It’s dangerous to try to interpret a judge’s comments during oral argument, and judges are known to disfavor, during oral argument, the side they ultimately rule for. However, I think that the judge in this case is likely to feel bound by a strict reading of the statute, and to rule in favor of Capitol. We shall know soon.
October 5, 2012 Transcript of Summary Judgment Hearing
by Lee Gesmer | Nov 8, 2012 | Copyright
Before the Internet made file sharing ubiquitous, liability for “indirect” copyright infringement was something of a legal backwater.* Massive file sharing of audio, image and video files has changed that. Where a website actually hosts a copyrighted file uploaded by a user, the legal rights of the parties are relatively clear: the uploader (and subsequent downloaders) are liable for “direct” infringement. The legal rights of the website owner are governed by the Digital Millennium Copyright Act (DMCA).**
*A notable exception being the Supreme Court’s pre-Internet decision in Sony Corp. of America v. Universal City Studios, Inc., which rejected a claim of contributory infringement directed at the VCR, since Sony did not encourage copyright infringement, and the VCR was capable of commercially significant noninfringing uses.
**Caveat: the courts are still working at interpreting and applying the DMCA. The most recent appellate decisions are Viacom v. Youtube (2nd. Cir. 2012) and UMG v. VEOH (9th Cir. 2011).
However, there are many situations where the DMCA does not apply because the illegal file is not being hosted by the defendant (that is, the file is not resident on a server owned or controlled by the defendant). In those cases, where there are countless uploaders and downloaders (many of which cannot easily be identified), copyright owners will sometimes sue the website owner. A single case, if successful, has the potential to inhibit access to thousands of illegal files. However, because the defendants in these cases never reproduced or published the works itself, copyright owners must argue “indirect” (as opposed to “direct”) infringement. Indirect infringement is an overlapping and often confusing pastiche of doctrines, which includes “vicarious” and “contributory” copyright infringement, as well as “inducement.”*
*For example, in the Grokster case, where the defendant provided a tool that enabled others to commit direct infringement (peer-to-peer file sharing), the Supreme Court found Grokster liable for inducing infringement—actively encouraging infringement by use of its file sharing program—despite the fact that Grokster did not host the infringing files.
The “first generation” line of cases represented by Grokster was relatively easy for copyright owners, since the defendants naively encouraged users to use their site or product to access or exchange infringing works. However, these “shooting fish in a barrel” lawsuits* are likely coming to an end as people creating these programs get wise to the law and stop sending each other incriminating emails that copyright owners can use to prove illegal motivation. The new, more difficult generation of cases is illustrated by the Seventh Circuit’s recent decision in Flava Works v. myVidster, where the issue was whether embedding a copyrighted video constituted contributory copyright infringement.**
*Napster and Aimster are part of this line of cases. A number of cases where the key evidence is the words of the defendant are still working their way through the courts. A recent example, decided by a California federal district court this summer, is David v. CBS. The court denied CBS’s (actually download.com) motion to dismiss a claim of copyright infringement relating to links to third-party P2P software based on, among other things, download.com’s public statements comparing the P2P software to other P2P programs known for copyright infringement (i.e., Napster and Limewire).
**Another example of the new generation of online copyright cases is Capital Records v. Redigi, discussed here.
myVidster is a “social video bookmarking service”—users of myVidster can embed the thumbnail of a video on myVidster which, when accessed (clicked), plays the video in a “frame” on the myVidster site. However—of critical importance—the video remains on the server to which it was originally uploaded; it is not hosted on the myVidster servers. As the opinion states, “myVidster doesn’t touch the data stream, which flows directly from one computer to another, neither being owned or operated by myVidster.”
As it so happens, some of the videos are copyrighted by Flava. Flava, upset that myVidster was facilitating access to its copyrighted videos, sued Vidster for copyright infringement. However, because myVidster did not host the files (and hence was not a “direct” infringer), Flava was reduced to arguing contributory infringement. This presented a problem for Flava—myVidster must have read a few of the cases cited above, or hired a savvy lawyer, because there was no evidence it was encouraging the use of its site to host copyrighted files. And, the decisions don’t reference any inculpatory internal emails that Flava could use to prove illegal intent. So, Flava did not have as evidence the kind of “illegal talk” that has been key in many earlier contributory infringement cases.
Faced with this situation, Flava played the hand it had been dealt as best it could. It notified myVidster that it was providing links to copyrighted Flava files (in the form of DMCA take down notices), and demanded that myVidster take down links to Flava-owned videos. myVidster declined.
This was enough for the district court, which found MyVidster’s refusal to comply to be “the epitome of willful blindness.” Moreover, the District Court found that MyVidster’s actions (i.e., hosting a site that provided links and embedded videos) materially contributed to the copyright infringement. The district court issued a preliminary injunction, ordering myVidster to take a number of steps intended to exclude Flava videos from myVidster, including honoring DMCA takedown notices and actively filtering to identify and exclude Flava videos.
However, Flava could not hold on to this ruling before a Seventh Circuit panel headed by renowned Judge Richard Posner. As noted, since myVidster did not upload the video to the various sites, the question was not one of “direct” infringement, but rather contributory infringement. Capturing the legal concept of contributory infringement is not a simple matter, as the Seventh Circuit explained in a Posnerian passage:
A typical, and typically unhelpful, definition of “contributory infringer” is “one who, with knowledge of the infringing activity, induces, causes or materially contributes to the infringing conduct of another.” . . . Such a one “may be held liable as a ‘contributory’ infringer.” . . . But does “may be held liable” mean that a person who fits the definition of “contributory infringer” may nevertheless not be a contributory infringer after all? And what exactly does “materially contribute” mean? And how does one materially contribute to something without causing or inducing it? And how does “cause” differ from “induce”?
The opinion proceeds to the conclusion that myVidster is not a contributory infringer (at least on the limited record associated with a preliminary injunction, which was the procedural posture of this case), for several reasons.
First, Judge Posner reasoned that although the initial uploaders are “direct infringers” myVidster is separated from this infringement by the linkers (or “bookmarkers”), and therefore is too remote from the infringement to be a contributory infringer. The bookmarkers are not infringers (only the uploaders are), and “the facilitator of conduct that doesn’t infringe copyright is not a contributory infringer.”
Second, Flava provided myVidster with DMCA takedown notices, but since myVidster is not hosting infringing videos, myVidster was justified in disregarding these notices. The DMCA provides a safe harbor to websites that host copyright protected works posted by users (user generated content), but in the words of the Seventh Circuit, “A noninfringer doesn’t need a safe harbor.”
Third, as noted, based on the preliminary injunction record myVidster is not inviting people to post copyrighted videos, and therefore is not inducing infringement, as was the case in the “first generation” file sharing cases referenced above.* This is absolutely essential for defendants in cases of this sort, whether they host the infringing works (as in Viacom v. Youtube), or provide links to infringing works, as myVidster does. In this case Flava argued that myVidster was aware that its site was serving as a clearinghouse for infringing copies, and that its willful blindness to this fact caused it to cross the line. However, the Seventh Circuit declined to hold that willful blindness led to contributory infringement where myVidster did not encourage links to copyrighted works.
*Although, it might be noted, using a “ster” suffix might not be the best choice for an online service of this kind. (Think Grokster, Napster, Aimster . . . .).
Fourth, not only is myVidster not copying the Flava copyright-protected works, but it is not performing them publicly. As noted above, myVidster doesn’t touch the datastream when a video is accessed and therefore, technically speaking (the Seventh Circuit found), myVidster is not “performing” the work. The server hosting the video and the myVidster end-user that initiates display of the video may be publicly performing the video, but myVidster is not. The Seventh Circuit’s analysis on this issue is analgous to the “server test” adopted by the Ninth Circuit in Perfect 10 v. Amazon. That is, that infringement of the public display right can occur only when the copyrighted work resides on the defendant’s own server, not when it resides on another site’s server and is framed or displayed in-line.
An interesting aspect of this decision is the Seventh Circuit’s conclusion that because MyVidster did not host the copyrighted works, it was not subject to DMCA take-down notices. This is a controversial aspect of the decision, since the DMCA could be read to make link sites subject to DMCA notice and takedown, an interpretation of the statute that Judge Posner characterized as “implausible,” given its far-reaching implications. myVidster’s decision to ignore these notices took guts (or was foolhardy) on the part of MyVidster, since a DMCA defense would have allowed it to hedge its bets. However, the Seventh Circuit agreed with MyVidster’s argument that because MyVidster did not host the works, it was not subject to the DMCA.
This case was a close call for myVidster. The decision could easily have gone the other way in another circuit, or even before a different Seventh Circuit panel. See Perfect-10, Inc. v. Amazon.com, Inc. (“Applying our test, Google could be held contributorily liable if it had knowledge that infringing Perfect 10 images were available using its search engine, could take simple measures to prevent further damage to Perfect 10’s copyrighted works, and failed to take such steps”). It rested, in the final analysis, on the fact that myVidster was two steps removed from the infringing acts (uploader – linker – myVidster), and that myVidster did not encourage infringement. However, absent a settlement the case is far from over—this was only a preliminary injunction decision, with full discovery and trial yet to come. Flava may yet develop an evidentiary record sufficient to swing the case in the other direction.
Most importantly, the case shows how finely nuanced the law has become with respect to online contributory infringement. Stay tuned.
Flava Works v. myVidster
by Lee Gesmer | Oct 31, 2012 | Copyright, Litigation
In Third Degree Films v. Does 1-47 (D. Mass. October 2, 2012), Judge William Young took on the “copyright trolls” in the adult film industry as best he could, holding that the plaintiff (a publisher of copyright-protected adult films that are being shared on the Internet) cannot join 47 “John Doe” defendants in a single action — it must instead file 47 individual suits.
The issue here is part of a larger controversy, the “porn film copyright shakedown.” The way this works is as follows. Copyright holders file Doe suits, which identify defendants only by IP address (all the plaintiff knows at that point). They then subpoena the ISPs and identify the owner of the IP address. Having identified the owners, they tell them that, absent a quick settlement (typically under $5,000), they will name them in the suit and serve them. Most people, rather than suffer the embarrassment (or what Judge Young calls the “reputational cost”) of having court records show that they downloaded films with titles like “Big Butt Oil Orgy 2,” settle out-of-court. Judge Young describes this process as “misusing the subpoena powers of the court, seeking the identities of the Doe defendants solely to facilitate demand letters and coerce settlement, rather than ultimately serve process and litigate the claims.”*
*As one court put it, a defendant – “whether guilty of copyright infringement or not — would then have to decide whether to pay money to retain legal assistance to fight the claim that he or she illegally downloaded sexually explicit materials, or pay the money demanded. This creates great potential for a coercive and unjust ‘settlement.'” SBO Pictures, Inc. v. Does 1-3036.
Why do the plaintiffs in these cases name tens, hundreds, sometimes thousands of Doe defendants in one suit? Money, money, money. By filing claims against multiple John Does, as Third Degree tried to do in this case, the plaintiff avoids a separate filing fee for each defendant (currently $350 per complaint). If Third Degree were required to file 47 separate cases, it would cost $16,450. Filing one case — $350. Assuming an average settlement of $2,500, joinder results in a gross of $117,500, while separate suits would yield a gross of only $101,050. Some porn film copyright cases name thousands of defendants. At $350 a pop, this can start to add up and the number of defendants climbs. In one case, for example, the plaintiff sought (unsuccessfully) to join 3,036 separate defendants.
No doubt, it’s more profitable for a copyright holder to be able to file a single case against multiple defendants and save money on filing costs, but that begs the legal question: why should this be permissible? Why shouldn’t porn film plaintiffs be required to file separate cases, like everyone else? The answer lies in the federal rules of civil procedure, which allow multiple defendants to be joined in a single case where the claims arise “out of the same transaction, occurrence, or series of transactions or occurrences.” (Fed. R. Civ. P. 20(a)(1)). How do the copyright plaintiffs claim the benefit of this rule?
The answer lies in a variation of the BitTorrent peer-to-peer file-sharing technology known as “BitTorrent swarm” or segmented file transfer. Simplified, a BitTorrent swarm distributes parts of a file among mutiple users. The file is downloaded from various sources simultaneously and assembled on the destination computer. Because movie files are very large (as compared with mp3 files, for example), this provides a faster, more efficient way to distribute these files.*
* BitTorrent swarms in the context of mass copyright filings are discussed on Slashdot here. For a semi-technical discussion in a court filing see the John Doe filing in Malibu Media v. John Does 1-5, here.
Although the 47 alleged downloaders in the Third Degree Films case may never have met each other or know each other’s identities, they all downloaded the same adult film and (according to Third Degree) were part of the same swarm. Perhaps any given member of the “swarm” interacts with electronically another participant, perhaps not. The larger the swarm (and a BitTorrent swarm can include thousands of users), the less likely that any one defendant will share part of the file with another. However, unbeknownst to them, using BitTorrent swarm technology made them susceptible to the “swarm joinder theory.”
Whether a plaintiff can name many defendants in a single suit based on swarm joinder is highly controversial. Judge Young issued an opinion on this issue a year ago in Liberty Media Holdings v. Swarm Sharing Hash File. In that case he permitted the “swarm participants” to be joined in one case, concluding that the Doe defendants’ behavior satisfied the “same transaction or occurrence” requirement. In the current case Judge Young stands by his reasoning in Liberty Media. He discusses the technological complexities of this issue, and concludes that even indirect interactions between swarm defendants may constitute “shared, overlapping facts” sufficient to establish a “series of transactions or occurrences.”*
*Judge Young noted it gave him “pause that district courts are so divided over whether file sharing via the BitTorrent protocol constitutes a series of transactions or occurrences . . . The inquiry is so fact intensive, and the BitTorrent protocol so technologically complex, that no principled conclusions have emerged from the abundance of recent case law and this Court is not entirely comfortable hanging its hat on its own understanding of the process.” Indeed, some of the discussion of whether an initial seeder indirectly uploaded pieces of a work to every peer in the swarm is surprisingly abstruse.
However, judges are not always bound by the letter of the law, and when it comes to multi-defendant joinder, Judge Young decided to take full advantage of his discretion. In this case, Judge Young expressed “serious concerns regarding the propriety of joinder of tens, hundreds, or thousands of Doe defendants” in adult film mass copyright infringement cases. He noted that each case would require a mini-trial (for example, one defendant suggested that her tenant, who occupies the other half of her two family house, must be responsible for the download). Combining 47 defendants with different defenses into one case was likely to create a “procedural albatross. Judge Young also took a dim view of the use of joinder to create a “low-cost, low-risk revenue model for the adult film companies.”
There have been many adult film (and conventional film) “copyright troll” cases in the last couple of years, and Judge Young’s decision collects court decisions in many of them. It appears that this phenomenon may be close to running its course. Many courts now see the issue the way Judge Young sees it, and are denying joinder in BitTorrent cases. Some plaintiffs have been sanctioned for abusing the joinder process. Bellwether trials are pending to test the extent to which an IP address can be used as the basis for legal wrongdoing, and whether the plaintiffs in these cases are correctly representing the technological properties of BitTorrent. Class action suits have been filed against Third Degree Films and other adult film companies based on their litigation practices. The easy money has been made, people are getting wise to the risk associated with these downloads and the courts have wised-up. The end may be in sight.
by Lee Gesmer | Sep 12, 2012 | Copyright
In late August Massachusetts U.S. District Court Judge Rya Zobel refused to remit $675,000 in statutory copyright damages that a jury awarded (long ago, pre-appeal) against Joel Tenenbaum, and held that the award did not violate Tenenbaum’s constitutional rights under the Due Process Clause. (Blog post on Tenenbaum here).
Yesterday, in a case involving essentially identical issues, the 8th Circuit affirmed a $220,000 jury verdict against Jamie Thomas-Rasset.
Ms. Thomas-Rasset has had a rough six years since she was first sued for downloading 24 copyrighted songs. She has been through three jury trials, resulting in verdicts of $220,000, $1.92 million and $1.5 million.
The federal district court trial judge in Minneapolis seemed to be sympathetic to her plight, setting-aside or reducing the verdict each time. However, the recording companies persisted, and it appears that her luck may have finally run out. The Eighth Circuit Court of Appeals ordered the trial judge to enter judgment against Ms. Thomas-Rasset in the amount of the original, $220,000 verdict (as requested by the record companies). Importantly, the court rejected Thomas-Rasset’s claim that a statutory damages award of $9,166 per song violated the Due Process Clause.
Just as importantly, the court declined to be the first federal circuit court to rule on whether making sound recordings available for distribution on a peer-to-peer network (as Ms. Thomas-Rasset did) violates a copyright owners’ exclusive “distribution” right under section 106(3) of the Copyright Act, regardless of whether actual distribution (in this case downloading by third parties) has been shown.
Unless Ms. Thomas-Rasset can persuade the Supreme Court to take review (or the Eighth Circuit to reconsider it en banc), this case is over. Whether the record companies will recover any part of their judgment is an open question, given that Ms. Thomas-Rasset works as a natural resources coordinator for the Mille Lacs Band of Ojibwe Indians and reportedly has been represented pro bono in this long-running case. Nevertheless, in this case, and in the Tenenbaum case, they have made their point. However, it comes a bit late, given that the record company downloader suits have slowed, if not ceased altogether.
Meanwhile, the decision doesn’t bode well for Joel Tenenbaum, who, presumably, is weighing a Due Process Clause appeal of Judge Rya Zobel’s August decision in his case.
Capitol Records Inc et al v. Thomas-Rasset (8th Cir., September 11, 2012)
by Lee Gesmer | Sep 4, 2012 | Copyright
Now that the patent trial of the century is on pause for a bit (Apple v. Samsung), it’s time to catch up on the other tech trial of the century, Oracle v. SAP. Yes, it’s difficult to keep track of all these tech trials of the century. I hope that 80 years from now the world remembers that we had the tech trials of the century back in 2010 and 2012.*
*Oh, I almost forgot the other (the third) tech trial of the century, the copyright/patent trial between Oracle and Google earlier this year. There may even be other tech trials of the century I have forgotten that were tried back in the early years of the century. My memory for this type of thing cuts out after a few years.
Seriously, for those who may have forgotten, in 2010 Oracle won a $1.3 billion copyright infringement judgment against SAP, reportedly the largest copyright judgment ever. There was much hullaballo over the size of this verdict, until the trial judge threw a wet towel over the case, ordering remittitur, reducing the judgment by over $1 billion, and giving Oracle the choice of accepting a paltry $272 million or retrying its case. Oracle elected to retry the case, and the second trial was scheduled to begin in late August.
However, neither side really wanted to retry the case, and they figured out a way around. In early August Oracle and SAP entered into a stipulation that would allow the parties to avoid a retrial and permit Oracle to appeal the district court remittitur order.
The stipulation (which was accepted by the court, which was probably more eager to avoid another trial of the century than the parties) works like this:
- The district court entered final judgment. This opens the way for Oracle to appeal the court’s remittitur decision (and any other issues that are the proper subject of appeal) to the 9th Circuit. Procedurally, Oracle could not appeal until final judgment was entered.
- Judgment was entered in favor of Oracle in the amount of $306 million. However, Oracle may not enforce the judgment until all appeals are concluded. The $306 million appears to be a negotiated amount, and probably reflects some past and future interest on the $272 million; however, we don’t know exactly where this number comes from.
- This is a pretty good deal for Oracle, which has a floor and upside potential. If a second trial occurs (after remand from the 9th Circuit, for example), and Oracle’s verdict is less than $306 million, SAP will still have to pay $306 million. That’s the floor. If the 9th Circuit reinstates the $1.3 billion Oracle can recover that from SAP. That’s the upside.
- The judgment also includes the $120 million in attorney’s fees that Oracle has already been paid (in other words, it awards these retroactively, and acknowledges that they have been paid).
Why would SAP agree to this deal? Likely, it thinks its chances of obtaining a verdict below $300 million at a second trial are poor. Add to this the costs of that trial (which could include additional attorney’s fees incurred by Oracle), and it’s not worth the risk and uncertainty. SAP is hoping the 9th Circuit will dispose of the case by upholding the trial court’s ruling that Oracle failed to prove damages based on a “hypothetical license fee,” leave the $306 million in place (Oracle’s lost profit damages), and that will be the end of it.
Of course, if the 9th Circuit remands for a retrial, watch out – we may be looking at another “trial of the century.”
Oracle/SAP Stipulation
by Lee Gesmer | Aug 29, 2012 | Copyright
Not surprisingly, Massachusetts District Court Judge Rya Zobel has allowed the $675,000 statutory damages award against Joel Tenenbaum to stand in full. The background of this case is well known to many people, but the nutshell version is as follows.
Joel Tenenbaum was sued by Sony in 2007. Sony alleged copyright infringement with respect to Tenenbaum’s download of 30 digital music files. Harvard Professor Charles Nesson undertook the pro bono defense of Tenenbaum, and the case went to a jury trial, at which the jury awarded $675,000, 15% of the potential statutory maximum. The trial judge, Nancy Gertner (now retired from the bench), reduced this award to $67,500, concluding that it was excessive under the constitutional standard for evaluating punitive damages. The First Circuit reinstated the verdict, and remanded the case to the district court, with instructions to consider the verdict under the principles of common law remittitur before considering a constitutional challenge. Tenenbaum appealed this decision to the Supreme Court, which declined review. On remand the case was assigned to Judge Zobel, who issued her decision on August 23, 2012.
Judge Zobel found that the evidence supported the jury verdict, and therefore declined Tenenbaum’s request that she remit the verdict. Judge Zobel’s decision summarizes the somewhat damning evidence against Tenenbaum, including his disregard of multiple warnings, and that he may have lied during the legal proceedings. Apparently, Tenenbaum blamed the downloads on a foster child living in his family’s home, his sisters, a family house guest, and burglars, before finally admitting responsibility at trial. (Downloading burglars?)
Judge Zobel also rejected Tenenbaum’s challenge to the verdict on grounds of constitutional due process, using the standard set forth in St. Louis, I.M. & S. Ry. Co. v. Williams, as had been suggested by the First Circuit. Under this standard, as described by Judge Zobel –
a statutory damages award comports with due process as long as it “cannot be said to be so severe and oppressive as to be wholly disproportioned to the offense or obviously unreasonable.” The constitutionality of the award must be assessed “with due regard for the interests of the public, the numberless opportunities for committing the offense, and the need for securing uniform adherence to” law.
Judge Zobel held that the jury’s statutory damages verdict was “neither ‘wholly disproportioned to the offense’ nor ‘obviously unreasonable.’ It does not offend due process.”
Where will this case go from here? Most likely Tenenbaum will re-appeal to the First Circuit, seeking review of Judge Zobel’s due process ruling. From there, it’s on to a second try with the Supreme Court.
Sony v. Tenenbaum (D. Mass. August 23, 2012)
by Lee Gesmer | Aug 7, 2012 | Copyright
Copyright cases involving translations of ancient religious texts are rare, but in its August 2, 2012, 75 page opinion in Society of the Holy Transfiguration Monestary v. Archbishop Gregory of Denver, the First Circuit addresses many issues of modern copyright law in a case involving just that. The issues the First Circuit discusses include the transfer of copyright ownership by operation of law, the consequences of publication without copyright notice prior to March 1, 1989, the requirement of originality in derivative works, substantial similarity analysis (along with its many sub-doctrines), the requirement that the accused infringed have engaged in “volitional conduct,” the DMCA and fair use.
While not making new law in any of these areas, this case is a good round up of copyright law in the First Circuit.
by Lee Gesmer | Aug 1, 2012 | Copyright
One of the thorny issues that comes up in copyright cases is whether a dispute actually falls under federal copyright law. What the plaintiff may claim to be copyright infringement the defendant may argue is a breach of contract, or vice versa. If copyright law does control, any state law claim based on rights that are the equivalent of those protected by the Copyright Act are preempted, and must be dismissed. A common example is breach of contract: if copyright law applies, a claim for breach of contract is likely to be preempted.
The consequences of a ruling one way or the other on this issue can have strategic consequences (whether the case proceeds in federal or state court) or substantive (the standard for liability, or the measure of damages). One context in which this issue arises involves idea submission – where the plaintiff pitches an idea idea hoping to persuade the recipient to purchase the idea for commercial development. When the defendant allegedly uses the idea to create a copyrightable work, is the claim one of copyright infringement or breach of an “implied contract”?
This was the issue in Forest Park Pictures v. Universal Television Network, Inc., decided by the Second Circuit in June. Actor Hayden Christensen had pitched Universal on a TV show about a concierge doctor to the rich and famous. He claimed that Universal breached an “implied contract” when it created the series Royal Pains, and then refused to compensate him. Universal argued that the dispute should be governed by copyright law, and therefore any state law claims (such as Christensen’s claim for breach of implied contract) were preempted. The Second Circuit disagreed with Universal (and the trial court), holding that a breach of implied contract claim concerning an idea was not preempted by copyright law, and therefore the case could proceed on the state law theory of breach of an implied contract.
One strategic consequence, in the context of this case, is that it may be more difficult for a defendant to persuade a court to dismiss an implied contract case case before trial, than a copyright case. In this regard, see my recent post, noting that the courts are receptive to a motion to dismiss a copyright claim if a comparison of the original and alleged infringing works can resolve the question of substantial similarity. Therefore the ruling in this case likely favors the plaintiff’s ability to avoid dismissal before trial.
Forest Park Pictures v. Universal Television Network, Inc.
by Lee Gesmer | Jul 29, 2012 | Copyright
Not long ago the Computer Lawyer published an article that made the case on how rare copyright trials have become. The article had an appendix listing cases that had been dismissed in favor of the defendant either on the pleadings or summary judgment. The bottom line was that judges are inclined to look at the works at issue in a copyright case early on, make a decision on similarity or dissimilarity, and end the case long before it has the chance to get to a jury.
Two cases decided by the Massachusetts federal district court thus far this year show that, for better or worse, this trend in alive and well in Massachusetts. In McGee v. Andre Benjamin Massachusetts U.S. District Court Judge David Woodlock found that Cartoon Network’s Class of 3000 television series did not infringe an animated serial work titled The Music Factory of the 90’s. The Music Factory had been pitched to The Cartoon Network in long-form outline describing the plot and style. Judge Woodlock compared the works at issue and found that the plaintiff failed to establish sufficient similarities to proceed with a copyright claim. No jury, no trial – case dismissed.
In Greenspan v. Random House the plaintiff claimed the book, The Accidental Billionaires: The Founding of Facebook: A Tale of Sex, Money, Genius, and Betrayal, infringed the copyright in his book, Authoritas: One Student’s Harvard Admissions and the Founding of the Facebook Era. U.S. Magistrate Robert Collings found that there was evidence of access and of “probative similarity” (probative similarity being the first part of the two-part test for copyright infringement), but that Greenspan could not prove The Accidental Billionaires was “substantially similar” to Authoritas. No jury, no trial – case dismissed.
You were expecting an actal copyright infringement trial? Fagettabout it!
by Lee Gesmer | Jun 19, 2012 | Copyright
Tetris. Popular? Perhaps the best video game yet created, with over 200 million copies sold. Mysterious? It was developed by a Russian programmer during the cold war. Scientific? Think tetrominos, not MMOGs. If you aren’t familiar with this game you should (a) reexamine your life, and (b) check it out.
But does copyright law protect it against a knock-off that uses not only the same “ideas” (tetromino shaped tiles falling from the top of the screen, that need to be moved/rotated to fit into the openings below) but the exact screen height/width (in tile units)? Shading and gradation of the pieces? Creative aspects of animation (such as shadowing)? Features, like previewing the next piece up?
Desiree Golden may have thought so at first – she asked Tetris Holding Co. for a license, with no success. So Golden’s company, Xio Interactive, went to Plan B, and created what it concluded would be a similar but non-infringing game. According to the court’s decision, “before releasing its product, Xio researched copyright law, both through its own independent studying and based on advice of counsel.”
However, judges have been known to disagree with lawyers, and in this case New Jersey U.S. District Court Judge Freda Wolsfon disagreed emphatically. In her May 30, 2012 opinion she held that the appearance of Tetris was protected under copyright, and that Xio’s version of Tetris infringed Tetris based on the “total concept and feel” of the copyrighted work. The “overall look and feel” was, she held, identical. This, she concluded was a case of “wholesale copying.”
Xiu had argued that anything it copied from Tetris related to rules, functions and expression essential to the game, and therefore Xiu’s program did not copy elements of Tetris that were protected by copyright. This defense may have been correct in theory, but it failed in execution. Yes, the “idea” of a game in which Tetris-shaped pieces can be manipulated to fall into place is not protected by copyright. However, Tetris made many aesthetic decisions that were unnecessary to the rules or functions of the game, yet were copied by Xiu. For example, in Xiu’s game the style of the pieces — their shading and gradation, even the color scheme — were very similar to Tetris. As the judge stated, “the style, design, shape, and mood and movement of the pieces are expression,” not “part of the ideas, rules or functions of the game.”
The protection of video games as audiovisual works under the Copyright Act is nothing new to copyright law. For example, Pac-Man received copyright protection based on the appearance of the characters and their motions and actions. (Atari v. North American Philips). The video game Galaxian received copyright protection based on the “look and feel” of the characters. (Midway v. Arctic Intern.). Like Tetris, these games are non-functional and highly creative. Therefore they receive broad copyright protection.
Could Xio have developed a non-infringing game of Tetris? Absolutely, but it would have required more creativity, and a better understanding of the copyright laws, than was demonstrated in this case.
Tetris v. Zio International
by Lee Gesmer | Jun 8, 2012 | Copyright
It is a well-known principle of copyright law that the Copyright Act has no extraterritorial reach. For example, a U.S. copyright holder cannot bring suit for copyright infringement, in the U.S., against individuals or companies who reproduce and sell, outside the U.S., software, music CDs, DVDs or other copyright-protected works.
What if, however, the initial infringement occurs in the United States, and the infringer distributes infringing copies outside the U.S.? For example, what if an employee illegally copies an employer’s software program in the U.S., transports it to France (either on physical media or electronically), and sells it in Europe? May the U.S. copyright holder recover damages based on lost profits or infringer profits in Europe?
Surprisingly, this “infringe locally/sell abroad” issue has rarely come up under copyright case law in the U.S. Until recently, only two courts have addressed it under the current copyright statute, the Second Circuit in 1988 (Update Art v. Modin) and the Ninth Circuit in 1998 (L.A. News Service v. Reuters). However, in each of those cases the courts did permit recovery of damages arising from overseas infringing uses as long as the “predicate act” of infringement occurred within the United States, enabling further reproduction abroad. By a “predicate act,” these courts meant simply that if the initial infringement took place in the U.S. and the foreign violations were directly linked to that infringement, then damages could be based on foreign sales.
This is what happened in Tire Engineering and Distribution, LLC. v. Shandong Linglong Rubber Co., a case decided by the Fourth Circuit in early June 2012. The facts of this case (somewhat simplified) involved the copying of designs for specialized tires for underground mining vehicles. The designs were copied in the U.S. by former and current employees of the plaintiff and provided to the foreign defendants, who sold infringing products abroad. The case proceeded to a jury trial in Virginia, where the trial court instructed the jury that it could find damages based upon infringement that occurred outside the United States, if those infringing acts “were a consequence or result of predicate infringing acts that occurred inside the United States.” The jury awarded the plaintiff $26 million in damages under this theory.
The Fourth Circuit upheld this verdict, holding that a plaintiff could invoke the predicate act doctrine by showing a domestic violation of the Copyright Act and damages flowing from foreign exploitation of that infringing act. In this case, the reproduction of the plaintiff’s blueprints in the United States constituted the predicate act necessary to satisfy this standard.
While this case involved a somewhat unusual fact pattern, it points out a legal doctrine that few lawyers are aware of, but which may be applicable in an interconnected world where markets for copyrighted works are international. The plaintiff’s lawyers in this case might easily have concluded, mistakenly, that their client would be unable to recover damages based on infringing sales outside the U.S. Instead, they utilized a little-known principle of copyright law, proceeded through trial hoping that it would be applied in their case, and on appeal persuaded the Fourth Circuit (which had never before addressed this issue) to adopt the predicate-act doctrine.
Tire Engineering and Distribution, LLC. v. Shandong Linglong Rubber Co. (4th Cir. June 6, 2012)
by Lee Gesmer | Apr 27, 2012 | CFAA, Copyright, DMCA/CDA, Trademark
I’ve posted the slides from a CLE talk I gave on Wednesday, April 25th. Hopefully, the slides are informative standing alone. They address the very recent DMCA decisions by the 9th Circuit (Veoh) and 2nd Circuit (Youtube), the copyright “first sale” doctrine as applied to digital files in the Redigi case pending in SDNY, and recent trademark “keyword advertising” cases decided in the 4th and 9th Circuits (Rosetta Stone in the 4th Circuit, Network Automation and Louis Vuitton in the 9th). There are also some slides devoted to the CFAA, including the 9th Circuit’s en banc decision in the Nosal case.
If the embedded Scribd document doesn’t appear on your computer directly below, click here to go directly to Scribd
Copyright and Trademark Issues on the Internet
