I have a few observations on the Ninth Circuit September 23, 2019 en banc hearing in Skidmore v. Led Zeppelin. Video of the oral argument is embedded at the bottom of this post, and the transcriptions below are mine – I’ve left out a few words here and there to make this easier to read, but I didn’t leave out anything material.
Did Skidmore’s Attorney Give Away the Case?
Quite possibly.
Here are the key excerpts from the oral argument. (I’m labeling all of the judges’ questions as simply “judge,” but the questions were posed by different judges):
Judge: Are you conceding today that if you are confined to the deposit copy your copyright claims are not viable?
Skidmore Counsel: I think that it is very difficult for plaintiff to win based on the deposit copy since it’s such an inaccurate transcription of the composition ….
Judge: Is that a “yes”? …
Skidmore Counsel: Yes, I think that is the reality of the situation.
Judge: When you listen to these two recordings, the deposit copy and the performed copy by Led Zeppelin, I don’t see how any juror could find they’re substantially similar, even with expert testimony. So you’ve got to get your sound recording in to win this case, don’t you? . . .
Judge: If the law is that the deposit copy is the four corners of the copyright deposit there’s nothing else to retry, correct?
Skidmore Counsel: If that’s the law ….
Judge: And you lose the case unless [the jury hears the sound recording]; a hundred times out of a hundred, right? You’ve gotta get your sound recording in in order to win this case, don’t you?
Skidmore Counsel: I think so.
Later in the hearing, when Led Zeppelin’s attorney was arguing:
Judge: It seems to me that assuming the copyright analysis is limited to the deposit copy any error [in the jury instructions] is harmless because no reasonable juror could find that the alleged copying was unlawful appropriation of the deposit copy, so why could we assume that instructional error occurred and find any error harmless?
Counsel for Led Zeppelin: I agree wholeheartedly.
The problem here, from Skidmore’s perspective, is that the judges appeared unconvinced that the sound recording of Taurus should be admissible.
This sets up the scenario (referenced by the judge in the quote above) where the en banc court would not need to address the jury instruction issue that was grounds for reversal by the Ninth Circuit panel, and which at least one judge indicated was problematic. The court can bypass that as “harmless error.”
Whether the Ninth Circuit will take this easy way out remains to be seen, but it seems like a significant risk for Skidmore.
By the way, I’m being facetious when I ask whether Skidmore’s attorney “gave away the case.” As a strategic matter he may have had no choice. He may have concluded that he cannot win a retrial on the deposit copy (he lost the first trial when limited to that evidence), and he doesn’t want a remand on a technicality such as deficient jury instructions if he will be limited to that evidence.
The “Inverse Ratio” Rule
The inverse ratio rule provides that if the plaintiff establishes a high degree of access to its work by the defendant, a finding of copyright infringement may be based upon a lesser degree of similarity. This controversial doctrine exists only in the Ninth Circuit. The trial judge refused to give the jury an inverse ratio instruction, an issue Skidmore raised on appeal.
This doctrine may already be dead as a practical matter. In the 2018 Blurred Lines case (Gaye v. Williams) the original opinion suggested that there was some validity to this doctrine, and asked the trial court to reevaluate it on remand.1 But the Ninth Circuit issued an amended opinion deleting all references to the rule, arguably implying that it did not endorse it.
At the en banc hearing, one of the judges asked Led Zeppelin’s lawyer to address this doctrine, and the lawyer briefly explained why it was bad copyright law (a view widely shared in the copyright community). Quite possibly, this case will allow the Ninth Circuit to put this much-criticized doctrine to bed, once and for all.
The “Thin Copyright” Issue
As I discussed in some detail recently (Copyright Office Backs Led Zeppelin In Ninth Circuit En Banc Appeal), the United States filed an amicus brief urging the court to adopt a “virtually identical” test for musical works that contain only “a small number of standard elements” (as is the case with Taurus, they argued).
An attorney from the Department of Justice argued for the United States at the hearing, and frankly he didn’t push this issue as hard as he might have. He certainly didn’t propose a rule that the Ninth Circuit could adopt, and the judges appeared unreceptive to this argument. I’d be surprised if a new copyright rule establishing a thin copyright for some musical works came out of this case.
Conclusion
Courts are notorious for creating the wrong impression during oral argument. Many a lawyer has walked out of a hearing after getting knocked around by a judge thinking that she had lost, only to win when the ruling arrives. And vice versa.
With that caveat, I will venture a prediction that the Ninth Circuit will hold that (a) the copyright in pre-1978 works is limited to the deposit copy, and (b) Skidmore can’t prevail on the deposit copy. Accordingly, any errors in the jury instructions were harmless and the jury verdict of non-infringement is affirmed.
Update (9/25/19): A Few Observations From the Ninth Circuit En Banc Argument in Skidmore v. Led Zeppelin (link)
The appeal in Skidmore v. Led Zeppelin is scheduled to be reargued before an en banc Ninth Circuit appeals court panel on September 23, 2019 (watch it live online here), and the U.S. Copyright Office has taken the unusual step of submittingan amicus brief in support of Led Zeppelin.2
This important copyright case is discussed in my October 2018 post, Led Zeppelin, Spirit and a Bustle at the Ninth Circuit, so I won’t review the background in detail here. The works at issue are Spirit’s 1968 song Taurus3 and the opening section of Led Zeppelin’s Stairway to Heaven. A Ninth Circuit panel reversed the jury’s verdict (verdict here) in favor of Led Zeppelin and sent the case back for retrial based on errors in the jury instructions. Led Zeppelin petitioned the Ninth Circuit to hear the case en banc, and the court granted this request. This means that the appeal will be reheard by the chief judge and ten other Ninth Circuit judges.4
The Ninth Circuit grants only about 1% of en banc petitions, and the Copyright Office rarely files an amicus brief in cases that have not reached the Supreme Court.5 The fact that both events have converged in this case underscores its importance. The music and copyright communities are watching closely.
The Copyright Office amicus brief makes two arguments.
TAURUS DEPOSIT COPY
Pre-1978 Unpublished Musical Works – Is the Sound Recording Covered By the Copyright? This has been an issue in several recent music copyright cases, and I’ve written about it in connection with theBlurred Lines andEd Sherran cases, as well as the first Led Zeppelin appeal, decided by a3-judge Ninth Circuit panel. The panel held that the copyright in unpublished works under the 1909 Act were defined by and limited to the deposit copy, not the sound recording. The Copyright Office urges the en banc court to reach the same conclusion.
This argument is based on an arcane copyright law technicality. However, the Copyright Office’s position is strong, and I expect the en banc court to reach the same conclusion that the panel reached.
“Substantially Similar” or “Virtually Identical”? Copyright protection for pre-1978 sound recordings may be an important issue for Skidmore and Led Zeppelin, but the vast majority of musical works that are the focus of infringement claims involve current/post-1978 works. Therefore, the second issue addressed by the Copyright Office — whether the legal standard for infringement should be “substantially similar” or “virtually identical” — is far more important to the music community.
At the trial of this case the presiding judge instructed the jury to determine whether there was copyright infringement based on the “substantial similarity” test. At trial, and in the first appeal of this case, Led Zeppelin’s lawyers argued that the musical elements from Taurus that were at issue should be protected by only a “thin” copyright, and therefore the test for infringement should be “virtually identical copying.” The premise underlying this argument is that Taurus is little more than a “selection and arrangement” of unprotectable musical elements, an argument that Skidmore vehemently disputes.
The Ninth Circuit panel did not address this argument in the Led Zeppelin appeal. However, it subsequently rejected it inWilliams v. Gaye (the Blurred Lines case), stating:
We reject the Thicke Parties’ argument that the Gayes’ copyright enjoys only thin protection. Musical compositions are not confined to a narrow range of expression . . . [A]s we have observed previously, music … is not capable of ready classification into only five or six constituent elements, but is instead comprised of a large array of elements, some combination of which is protectable by copyright . . . We have applied the substantial similarity standard to musical infringement suits before, . . . and see no reason to deviate from that standard now. Therefore, the Gayes’ copyright is not limited to only thin copyright protection, and the Gayes need not prove virtual identity to substantiate their infringement action.
The Copyright Office attempts to distinguish Taurus, urging the Ninth Circuit to give Taurus only thin protection, apply the “virtually identical” test, and affirm the jury verdict:
[Williams v. Gaye] did not involve an allegation that the infringing work copied only an arrangement of a small number of standard elements . . . the court did not consider the scope of protection for a single phrase comprising a small number of basic musical elements. The opinion should not be read as requiring more than thin protection for a portion of a musical work with such limited originality . . ..
Fundamentally, then, the allegedly copied material, as embodied in the deposit copy of Taurus, consists of the use and placement of a combination of basic and not copyrightable elements: the A-minor chord and the descending chromatic scale. While these elements have been selected and arranged to create the bass line pattern at issue, this particular combination, employing simple rhythm and the standard technique of arpeggiation, is itself relatively simple. Such a combination is subject, at most, to a thin copyright; there are not many ways to express this type of chromatically descending arpeggiated bass line and have it still be recognizable as such. Providing broad protection would effectively result in the protection of a musical idea, granting a monopoly on a common musical convention. Infringement should therefore occur only if the allegedly copied portion appears virtually identically in the two works.6
Not surprisingly, Skidmore takes a contrary view. He has filed asupplemental brief, responding to the Copyright Office’s amicus brief, arguing that “‘thin copyright ‘applies not to the ‘broader protection accorded artistic works,’ but instead to functional, fact-driven, or scenes a faire copyrights where there are a limited number of ways to express the ideas contained in the work.” In anotherfiling (responding to the amicus briefs filed by intellectual property professors and musicologists), Skidmore asserts that “nowhere has this Circuit, or any Circuit, ever applied ‘thin’ copyright or virtual identity to music copyright cases, and have in fact at all points specifically warned against applying the concept to such artistic works.”
How the Ninth Circuit will handle this dispute is important to the future of music copyright law. However, the most immediate problem with the Copyright Office’s argument is that it is asks the appeals court to make a finding that the trial judge declined to make. The trial judge’s jury instructions make clear that while the jury could consider Taurus’s non-original or public domain elements in its deliberations, the judge did not conclude that Taurus was limited to those elements. Accordingly, the jury instructions use the “substantial similarity” test. Although its possible, it seems unlikely that the appeals court will make a ruling that the trial judge declined to make following courtroom testimony by experts on both sides of the case.
However, the issue raised by the Copyright Office needs to be viewed in a broader perspective. It is beyond dispute that copyright law struggles with music infringement. The broad application of copyright principles to works of varying types is one of copyright’s strengths, and has given copyright the ability to adapt to new forms of expression, from photography in the late 19th century to software today. However, these principles face a challenge when it comes to music, where copying and borrowing between musicians is an accepted part of musical practice and the venerable copyright law “idea/expression” distinction has little or no meaning.
The Ninth Circuit could resolve the two extremes presented by the Copyright Office and the parties in this case (“substantial similarity” vs. “virtual identity”) with a more flexible legal test that (except in the most extreme cases), leaves the decision up to the jury. Under this test the judge would instruct the jury that to the extent the jury finds the plaintiff’s music to be comprised of basic, common or public domain elements the jury should give it “weaker” protection. At the other extreme protection should be stronger. However, it would not be a judge-determined either/or test (as is the law today), but a flexible test where the jury would apply the standard on a continuum between these two poles.
For example, Rick Beato makes a convincing casethat Taurus uses a musical phrase contained in many pre-Taurus popular and classical pieces of music. If the jury is persuaded by an expert presenting this evidence, it would be free to conclude that the copyright in Taurus is thin, and judge Stairway To Heaven based on the “virtually identical” standard, or toward that end of the continuum. If Skidmore’s expert had persuasive evidence and opinion to the contrary, the jury might apply a standard more in the direction of “substantially similar.” However, in all but the most obvious cases that would be a decision for the jury, not a judge.
Beyond this, it would be welcomed if the Ninth Circuit took this opportunity to clarify or simplify music copyright law, which must be incomprehensible to most jurors. A glance at the jury instructions in Skidmore v. Led Zeppelin illustrates this (see, in particular instruction 21, which asks the jury to apply the dreaded Ninth Circuit “extrinsic/intrinsic similarities” test).7It’s indisputable that the jury instructions in copyright cases are head-scratchingly complex to jurors (and to many lawyers). It’s not fair to musicians or jurors to require them to apply a body of law that has devolved to this level of complexity.
Sadly, the Ninth Circuit is known for moving in the direction of greater complexity, not less. Regardless of the outcome of this particular case, the odds are that the en banc decision in Skidmore v. Led Zeppelin will leave music copyright law in an even worse state than it is today.
Can a trade association negotiate sales or licenses on behalf of its members? Can it tell members, “don’t negotiate individually with a specific purchaser, and if you are already in negotiations with that purchaser cut them off and let us negotiate on behalf of you and other members”? At what point does this conduct become an antitrust violation?
These are the issues raised in a lawsuit between Peloton Interactive, Inc. on the one hand, and a group of music publishers and the National Music Publishers Association, Inc. (NMPA) on the other.
Peloton and Music Licensing. Peloton sells high-end, in-home stationary bicycles. An important feature of Peloton’s service is music-backed, instructor-led workout classes streamed to users via a built-in video screen. Some of these classes are broadcast live, and many are recorded and accessed on-demand.
Peloton doesn’t own its music, instead Peloton instructors create their playlists using popular recordings drawn from Peloton’s commercial music library.
To do this Peloton needs several music licenses. To play the sound recordings it needs master licenses from record companies. For public performance of the musical works (the compositions) it needs licenses from the performance rights organizations, ASCAP, BMI and SESAC. And, to reproduce the musical works along with videos, it needs synchronization licenses, so-called “sync licenses,” from the owners of the musical works.8
A sync license does not fall under any of the compulsory license provisions of the Copyright Act, and therefore sync licenses must be negotiated directly with the publishing companies that hold the copyrights. Here, it seems, is where Peloton’s attempt to acquire music rights fell short – Peloton was able to purchase blanket or “catalog-wide” sync licenses from what it calls the “major” publishers9 and many (but not all) “independent” publishers.
The Publishers’ Copyright Suit. In March 2019 nine independent publishers filed suit against Peloton, claiming copyright infringement of more than a thousand musical works and seeking total damages as high as $150 million. According to the publishers Peloton transmitted these compositions with exercise videos without a sync license.
Based on the complaint the publishers appear to have a strong case, and it is unlikely that their core allegation – that Peloton was using these songs in videos without sync licenses – was false. If true, Peloton is looking at a significant settlement (or worse, a large court judgment). And, Peloton didn’t assert a credible public defense to the suit – in fact, it reacted by withdrawing the songs at issue from the library of tunes available to its instructors.
But it’s often the case that the best defense is a good offense, and Peloton has attempted to strike back in its countersuit.
Peloton’s Antitrust Counterclaim. In April Peloton filed a counterclaim against the nine publishers and NMPA, which it added as a defendant to its counterclaim. The heart of its claim is that, under the influence and urging of NMPA, the nine publishers refused to negotiate directly and individually with Peloton. Rather, they engaged in price fixing and a group boycott by insisting that Peloton negotiate licenses with NMPA on behalf of all the publishers. Peloton’s counterclaim states:
NMPA has instigated a coordinated effort with the Counterclaim Defendant music publishers to fix prices and to engage in a concerted refusal to deal with Peloton. Through these actions, NMPA has exceeded the bounds of legitimate conduct for a trade association and become the ringleader of concerted activity among would-be competitor music publishers, all in violation of the antitrust laws. . . . NMPA first sought to extract supracompetitive license terms from Peloton by negotiating collectively on behalf of a large (though unidentified) number of member publishers. . . . When NMPA’s collective negotiations with Peloton later stalled (for reasons NMPA never disclosed to Peloton), Peloton pursued direct negotiations with a number of music publishers. After participating in seemingly meaningful negotiations, however, several of the Coordinating Publishers suddenly — and virtually at the same time — cut off their negotiations and collectively refused to deal with Peloton. This refusal to deal with Peloton was at the urging of NMPA …
Does Peloton have a viable antitrust claim? It’s a close call.
Buying Groups and Selling Groups. To understand the antitrust issues here I start with the concept of buying groups, or group purchasing organizations. The courts have recognized that most buying groups are economically efficient and (for example), enable small retailers to compete more effectively with larger retailers. Consequently, buying groups are “not a form of concerted activity characteristically likely to result in predominantly anticompetitive effects.”Northwest Wholesale Stationers v. Pac. Stationery & Printing Co. (USSC 1985). So long as the members of the buying group have a market share of less than 40% of buyers, they are protected by an FTC and court-approved safe harbor from antitrust liability for group negotiation of “input prices.”
However, the same is not true of “selling groups” – competitors who agree to set “output prices” at which they will sell or license their products. Output pricing by members of a trade association can easily cross the line over into price fixing, a per se violation under the antitrust laws.
“Hub-and-Spokes” Conspiracy. And that is what Peloton alleges occurred here. The antitrust theory behind Peloton’s counterclaim appears to be based on a “hub-and-spokes” conspiracy, similar to United States v. Apple (2nd Cir. 2015), where Apple acted as the organizer of an illegal horizontal price-fixing conspiracy among publishers in the e-book market.10Peloton alleges that NMPA has acted as a “ringleader” similar to the role played by Apple in that case.
Twombly “Plausibility.” However, the NMPA and the publishers have already informed the court that they intend to file a motion to dismiss Peloton’s counterclaim. This motion is likely to rely on the argument that the counterclaim fails to allege facts that satisfy the Twombly “plausibility” requirement required for pleading an antitrust conspiracy.11 The publishers are likely to argue that the complaint contains insufficient allegations of concerted action between the publishers to support the inference that the publishers engaged in a horizontal conspiracy. In other words, in the language of the hub-and-spoke metaphor, there is no “rim.”
Indeed, Peloton’s antitrust claim provides no direct evidence of an overarching conspiracy between the publishers. There are no allegations of communications between the publishers from which the court could infer an agreement or conspiracy between them; there are no statements by informants or witnesses that support a horizontal conspiracy; and there are no specific allegations of back-room conspiratorial meetings between the publishers. Peloton alleges that several publishers pulled out of direct negotiations with Peloton at about the same time, but even these allegations of parallel conduct appear lacking: of the nine publishers alleged to be part of the conspiracy, Peloton provides specific allegations of parallel conduct as to only three.12
On this record Peloton may be hard-pressed to meet the “plausibility” standard and persuade the court that the conduct at issue is not the result of independent decision making on the part of the publishers – that is, that they would be better off having NMPA negotiate with Peloton on their behalf then negotiating directly.
Consequences if Peloton Prevails. That said, court rulings on motions to dismiss are unpredictable, and unappealable by a losing defendant. If Peloton’s counterclaim does survive a motion to dismiss its antitrust case represents a real threat to NMPA and the publishers. Any damages Peloton can prove will be subject to trebling, and NMPA and the publishers may be liable for Peloton’s attorney’s fees, which in an antitrust case can be substantial. And, the publishers’ copyrights may be unenforceable against Peloton based on the doctrine of copyright misuse.13
To add to this, there are practical issues that are not immediately apparent from the court filings. Can Peloton’s law firm represent all ten defendants (NMPA and the nine publishers) against this counterclaim? Or, are there sufficiently different interests that will require the publishers to each retain separate counsel, increasing their overall defense costs?
If the publishers’ lawyers are representing the publishers on a contingent fee basis, did they agree that this would include the defense of any counterclaims? If not, are the publishers (many of which are relatively small entities) prepared to incur the substantial cost of defending a complex, multi-party antitrust suit? Are they prepared, on behalf of their artist clients, to risk losing the right to enforce their copyrights against Peloton under the copyright misuse doctrine?
I would venture that the answers to most of these questions is “no.” Quite likely, once the potential impact of Peloton’s counterclaim sinks in, and assuming the counterclaim survives the motion to dismiss, some of the publishers will negotiate directly with Peloton and settle their copyright claims in exchange for a release from Peloton’s antitrust claims, leaving fewer and fewer of the “starting ten” counterclaim defendants to fight with Peloton. As the number of publishers left in the case decreases, the pressure on the remaining publishers will increase, eventually forcing them to the settlement table.14 How NMPA, the alleged “ringleader” – which owns none of the music involved – will navigate this minefield and emerge from this litigation is an open question.
Update: The music publishers have filed a proposed amended complaint greatly increasing the number of compositions at issue – and therefore the damages they are seeking from Peloton. Link here.
Update: This case was settled after the court dismissed Peloton’s antitrust counterclaim. (Link)
It looks like the music copyright world is facing another high-profile infringement trial. This time the songs at issue are Marvin Gaye’s 1973 “Get Lets it On“15 and Ed Sheeran’s 2014 “Thinking Out Loud.” On January 2, 2019, a federal judge denied Sheeran’s motion for summary judgment in this case. Absent a settlement, the case will proceed to trial in federal court in New York.
This case raises some of the same questions that were at issue in the two cases decided recently by the Ninth Circuit – the Blurred Lines case (where the Ninth Circuit upheld a jury finding of infringement of another Marvin Gaye song), and the Led Zeppelin/Spirit Stairway to Heaven case, where the Ninth Circuit reversed a judgment for Led Zeppelin and remanded the case for a second trial. See Blurred Lines At The Ninth Circuit and Led Zeppelin, Spirit and a Bustle at the Ninth Circuit.
I discuss a few of the interesting aspects of the Get It On case below, but the bottom line is that Sheeran should settle rather than take the risk of proceeding to trial.
Admissibility of pre-1978 Sound Recordings. One issue present in the Ninth Circuit cases and here as well is the admissibility of a pre-1978 sound recording, in this case Get It On, which was recorded in 1973. The plaintiffs have rights to the musical work (the composition), but they do not claim a copyright in the sound recording. However, the plaintiffs argue that under the 1909 Copyright Act (in effect in 1973) a musical composition’s copyright extends to it first mechanical reproduction – in other words the 1973 sound recording of Get It On. Sheeran disagrees.
The judge dodged this arcane issue, leaving it for a later stage of the case. He held that his ruling on Sheeran’s summary judgment motion would be the same whether or not the copyright extends to the sound recording. Given the Ninth Circuit’s ruling in the Stairway to Heaven litigation,16 it’s unlikely the plaintiffs will be able to use the 1973 sound recording to prove infringement. This would leave them in the awkward position that faced the plaintiffs in Blurred Lines and Stairway, where the juries did not hear the original recordings of the plaintiffs’ songs, and the plaintiffs were left with no choice but to have a witness perform the sheet music in court. While this is a positive for Sheeran, it’s not enough to overcome the negatives in this case, especially given his live performance of the two songs, as I discuss below.
Commonplace Musical Elements. With respect to the substantive merits of the case, Judge Stanton rightly noted that many elements of Get It On are unprotectable. However, the parties and their musicologist experts disagreed on whether the chord progressions and harmonic rhythms present in the two songs are unprotectable as commonplace musical elements. This, the court held, is a factual question to be determined at trial.
The problem that Sheeran faces is copyright law’s recognition that a musical work may receive copyright protection based on a combination of commonly used and public domain elements. As the Ninth Circuit stated in its Stairway decision, “there can be copyright protection on the basis of a sufficiently original combination of otherwise non-protectable music elements. . . . the selection and arrangement of public domain elements could be considered original.” This is Second Circuit law as well – a work “may be copyrightable even though it is entirely a compilation of unprotectable elements.”(Knitwaves, Inc. v. Lollytogs(2nd Cir. 1995)).
At the heart of the infringement claim is Get It On’s “I-III-IV-V” chord progression and its distinctive harmonic rhythm, where the second and fourth chords are “anticipated” or placed ahead of the beat. Sheeran argued that this progression/rhythm is a common musical technique, but he has been able to point to only one pre-Get It On song that shared this chord progression and rhythm. While it’s unusual for a music copyright case to be based on a chord progression, it’s not unheard of, and the chord progression/rhythm in this case appears to be sufficiently original to avoid disqualification based on the scènes à faire doctrine17 and serve as the basis for a copyright claim.
The Substantial Similarity Test in the Second Circuit. A third factor that is likely to weigh against Sheeran at trial is the Second Circuit’s notoriously confusing test for substantial similarity in cases where the plaintiff’s work has both protectible and unprotectible elements, as is the case here.18.
In cases involving protectible and unprotective elements the court must apply the “more discerning” test and “attempt to extract the unprotectible elements19 from consideration and ask whether the protectible elements, standing alone, are substantially similar.” (Knitwaves, supra). Complicating what can be a challenging task even for trained musicians is the Second Circuit’s seemingly contradictory instruction that “we have disavowed any notion that we are required to dissect the works into their separate components and compare only those which are in themselves copyrightable.” Rather, the court (and presumably the jury) is “principally guided by comparing the contested design’s total concept and overall feel with that of the allegedly infringing work . . . as instructed by our good eyes and common sense.”
In my experience, jurors are easily confused by substantial similarity instructions in copyright cases,20 and the state of the law in the Second Circuit is likely to make that problem even worse than usual. Add to that the risk that some (perhaps all) of the jurors may be musically unsophisticated and the trial of a case like this becomes even more of a coin toss than most jury trials. The case may be vulnerable to the opinion of one or two jurors who have a musical background or be familiar with the musical genres at issue in the case.
The Sheeran Video. The capstone of the plaintiffs’ case against Sheeran is the unusual fact that Sheeran performed Thinking Out Loud in concert, during which he transitioned back and forth between Thinking Out Loud and Get It On (4:30 in the video). This is likely a first in a music copyright case.
While the judge may not permit the jury to listen to the 1973 recording of Get It On, he will be hard-pressed to preclude the plaintiffs from playing this video at trial. The plaintiffs have a near-insurmountable argument that this is an admission that the two songs are substantially similar. In fact, the judge refers to this video in his decision, suggesting that the video will be admitted at trial.21 That may be all the jury needs to conclude that the two works have the same “total concept and feel” or “aesthetic appeal” (another substantial similarity copyright standard in the Second Circuit).
Sheeran Should Settle. I’m well aware that many trained musicians (and amateurs) have weighed-in on Sheeran’s side of this case, and they may well be right. However, it’s unlikely Adam Neely or Rick Beato, or any knowledgeable musician, will end up on the jury in this case. Sheeran is more likely to end up with what one online wag described as a tone deaf judge and joe sixpack jury.
Assuming the plaintiffs are not grossly unreasonable, Sheeran would be better off settling this case, rather than risking an unfavorable outcome at trial that is likely to cost him more money than a settlement and damage his reputation.22
Sheeran seems to know he’s in trouble. After the judge denied his motion for summary judgment he took the unusual step of asking the judge to rehear the motion or, alternatively, certify an interlocutory appeal to the Second Circuit, a motion the judge promptly denied. This motion had virtually no chance of success, and served only to signal Sheeran’s desperation as the case proceeds toward trial.
Trial is scheduled for September 11, 2019.
[Update, July 2019]: The judge is delaying the trial of this case pending the Ninth Circuit’s en banc decision in Skidmore v. Led Zeppelin. That decision will probably not arrive until Spring 2020, so the trial is likely delayed by at least a year. Court order here.
[Update: May 2023]: After trial a jury rendered a decision in favor of Sheeran. Here is the Sheeran jury verdict. The jury only had to answer the first question on the verdict form –
I first posted on Capitol Records v. Redigi in March 2012 (Redigi Case Poses A Novel Copyright Question on the Resale of Digital Audio Files – Is “Digital First Sale Legal?Link), and posted a number of follow-up articles on this interesting case.23 Absent an appeal to the Supreme Court this long-running copyright case has finally come to an end with the Second Circuit’s December 12, 2018 decision holding that Redigi infringed the exclusive copyright right of reproduction with respect to the “second-hand” digital music files it sold via the Redigi system.
To understand this case it’s important to appreciate how Redigi’s system works. I explained this in detail in the post linked above, and the Second Circuit opinion describes it quite thoroughly as well. In short, Redigi acts as a broker for music files purchased and downloaded from iTunes. Redigi uploads a seller’s music file to its own server and offers it for sale, deleting it from the seller’s computer, although the seller can continue to stream the file until it is sold. When a buyer selects it for purchase, it is retitled in the name of the buyer, and the seller loses access to it. The buyer may then stream or download the file to her computer or device.24
Redigi’s service irritated the record companies no end, and they sued for copyright infringement, asserting that Redigi was engaging in copyright infringement. Redigi, relying on the “first sale” doctrine, argued it did not.
The copyright first sale doctrine is an important exception to the copyright exclusive right of “distribution.” It allows the owner of a copyrighted work to sell the copy or phonorecord in which the work is fixed. This explains the existence of markets for second-hand books, records and CDs.25
Redigi argued that its service fell within the protection of first sale. The record companies argued that this analogy was inapt, since Redigi was not distributing the original file, but reproducing it on its server and on the buyer’s computer.26
The federal district court ruled in favor of the record companies (decision here27 and the Second Circuit (in an opinion written by Judge Pierre Leval, the Second Circuit’s prolific and influential copyright judge) agreed, reasoning as follows:
In the course of transferring a digital music file from an original purchaser’s computer, through ReDigi, to a new purchaser, the digital file is first received and stored on ReDigi’s server and then, at the new purchaser’s option, may also be subsequently received and stored on the new purchaser’s device. At each of these steps, the digital file is fixed in a new material object . . . The fixing of the digital file in ReDigi’s server, as well as in the new purchaser’s device, creates a new phonorecord, which is a reproduction . . . ReDigi’s server and the resale purchaser’s device on which the digital music files are fixed constitute or contain new phonorecords under the statute. (Emphasis added)
Redigi also argued (half-heartedly, it seems) that its system was protected by fair use, but this was an obvious loser. First, Redigi cannot show that it’s system is transformative. Second, Redigi makes identical copies of the whole copyrighted sound recording, which cuts against fair use. Third, the reproductions created by Redigi are sold in competition with the market for the original sound recordings, another negative factor.28 Each of these factors weighed against fair use, and Redigi lost on its fair use defense as well.
The bottom line: Redigi is enjoined from operating its service, and the company and its founders29 are on the hook for $3.5 million.
In an interesting postscript to this case, Redigi has developed a new methodology (“Redigi 2.0”) which allows a user to place a music file in the Redigi cloud server in the first place (it’s never downloaded to the user’s computer) and then simply transfer ownership to that file. Under this system Redigi never makes a copy (or enables users to make a copy), so it may not infringe the reproduction right. However, as part of a stipulated injunction in the district court Redigi agreed not to implement Redigi 2.0, and therefore its unclear whether the legality of this system will ever be tested in the courts.
Here’s my non-exhaustive take on how digital music files are treated under copyright law post-Redigi:
You purchase a CD that contains a digital music file authorized for sale by the copyright owner. You may sell it under first sale.30
You legally download a copyrighted music file to your computer and you transfer it to your smart phone for your personal use. This form of “space-shifting” is permitted based on fair use. Capital Record’s lawyer conceded this during oral argument before the district court in Redigi, and the Second Circuit commented on it favorably (in dicta) in its decision.31 It’s worth noting that the record companies have never sued a consumer for space-shifting legally acquired music files for personal use.
You legally download a music file to your computer and then upload it to a cloud service so you can stream it on your smart phone or speaker (e.g., an Amazon Echo). This is permitted based on fair use.
You purchase a device preloaded with music files authorized by the copyright owner. You can sell the device based on first sale, since this is a distribution, not a reproduction.
You download music files to your computer and sell your computer with your files on it. This is protected by first sale.
You download copyright-protected music files to your computer, transfer them to a thumb drive and delete them from your computer (i.e. “copy and delete”). You then sell the thumb drive. This is not protected by either first sale or fair use – based on Redigi this is an illegal reproduction.32
You legally download a music file to your computer, upload it to a cloud service, and then give your password to 25 of your closest friends or college dorm-mates so they can stream it. This is a violation of the copyright rights of reproduction, distribution and public performance. You lose.
Every few decades Congress enacts a major amendment to the U.S. Copyright Act. We are at one of those inflection points now. On October 11, 2018 the Orrin G. Hatch–Bob Goodlatte Music Modernization Act (the “MMA”) was signed into law. (click here for full text of the law)
This is a massive, game-changing law for digital music distribution, and it may take years for it to be fully integrated with the complex U.S. music copyright system. But, if you’re at a holiday party this season and someone insists on discussing the MMA with you, this blog post will give you a few talking points.
From a 40,000 foot level the MMA does three things.
First, and most importantly, it completely revamps the U.S. mechanical licensing33 system for interactive digital streaming services34 and digital downloads by shifting the burden of identifying composers from the services to the composers themselves. This is a huge benefit to the digital music services, who in the pre-MMA era were responsible for locating composers entitled to royalties but often failed to do so, creating an enormous potential liability for copyright infringement.
Second, it requires interactive streaming services to make royalty payments to owners of pre-1972 sound recordings for the first time.35
And third, it authorizes and facilitates payments to non-musicians who contribute to sound recordings, such as producers and sound engineers.
Before proceeding bear in mind that this law is very complex – the MMA itself is 66 pages of dense legal text. Millions of words and thousands of lawyer hours will be spent dissecting, analyzing and litigating this law in the coming years. This post is only a high-level introduction to the MMA – just enough that you can comment semi-intelligently if the topic comes up at a party during the holidays. I’ve put more detail into the footnotes, which you can read if you’re interested in going a bit deeper. And, I’ll delve more deeply into some of the issues raised by the MMA in subsequent posts.
With that warning …
Compulsory Licensing and the Mechanical Licensing Collective
The MMA creates a “blanket license”36 for digital music service providers to sell interactive music streams. It authorizes the creation of a quasi-governmental “Mechanical Licensing Collective” (the “Collective” or “MLC”) to administer this system. The Collective will create and maintain an online, publicly available “musical works database” of all the musical works (notes and lyrics), their owners and the percentage ownership of works co-written by multiple songwriters. The interactive digital streaming services will pay the Collective, and the Collective will pay songwriters.
The licensing system is “compulsory,” in the sense that composers are compelled by operation of law to enter into the licenses, there is no “opt-out,” and the license exists whether or not composers take any action to make sure they are properly registered with the Collective.37
Who will create this massive database and how long it will take to populate it is yet to be determined.38
The Collective is charged with developing and maintaining the database. However, in the end it will be up to composers to get accurate ownership information to the Collective – that’s the only way composers can be sure they’ll get paid.39
Once the database is operational the MMA’s goal is for the database to contain ownership data for every musical work protected by U.S. copyright law. This includes musical works owned by non-U.S. songwriters as well as U.S. composers, if their works are streamed in the U.S. Therefore, songwriters outside the U.S. will have to make sure their works are properly registered with the Collective if they want to be paid.
Spotify Logo
The MMA allows digital streaming companies to pay the proper owners by paying the Collective. This allows interactive streaming companies (for example, Spotify, Apple Music, Amazon Music, Deezer, Tidal) to stop worrying about whether they are paying songwriter royalties to the proper rights holders, a major liability risk pre-MMA. Their obligations to songwriters under copyright law will be satisfied as long as they pay the Collective. It’s up to the Collective to then pay the songwriters. And it’s up to the songwriters to make sure their compositions are correctly registered with the Collective.40
How much will songwriters be paid under this compulsory license? As was the case before the MMA, royalty rates will be set by the Copyright Royalty Board.41
If it strikes you that this law is a mind-blowingly complex and ambitious undertaking, you are right! How long it will take for the Collective to select a developer and get the database established with correct ownership information is anyone’s guess. However, the target date for the cut-over to this system is January 1, 2021.42
So, a few takeaways your holiday party –
“Wow, can they really do this in two years? I’ll bet Congress will have to extend the effective date.”
“Who will get the contract for this project – Microsoft or Oracle? Ha ha …”
“How many songwriters will never hear about this, or won’t bother to register with the MLC? I mean, lots of musicians haven’t heard of SoundExchange43 even today, 17 years after it was created.”
“The MMA prevents songwriters from recovering statutory damages infringements retroactively to January 1, 2018 – is that constitutional? I’ll bet that issue will be litigated.”
Pre-1972 Sound Recordings
People are often surprised to learn that U.S. copyright law did not cover public performances of pre-1972 sound recordings. When you hear Stairway to Heaven (1971) played on the radio or digitally streamed on an interactive service like Spotify, Jimmy Page and Robert Plant (the composers) receive a songwriter royalty. But no one else is paid royalties (the other band members or, more likely, the record company that owns the recording).44
This will change under the MMA, but only for sales by digital streaming services and satellite radio stations, such as Sirius XM. So-called “terrestrial” radio stations (AM/FM radio) can still play pre-1972 sound recordings without paying a royalty to the rights-holders (although they must pay songwriter royalties, as they have in the past, typically through the PROs).
While this seems like a fair start to paying owners of pre-1972 sound recordings, one aspect of the law is particularly controversial – the duration of the new public performance copyright in the sound recordings. I’ll address this issue in a later post. (Hint: the duration is long).
Takeaways for your holiday party:
“So, this is digital only? Why doesn’t AM/FM radio have to pay royalties also? That doesn’t seem fair.”
“So, even though pre-1972 sound recordings have been in the public domain with respect to public performances for more than 45 years, they will now suddenly be protected by copyright law? Is it right for the law to suddenly protect sound recordings that have been in the public domain (for public performances) after such a long time?”
Payments to Producers
This part of the MMA creates a system for SoundExchange to pay royalties directly to producers based on a “letter of direction” SoundExchange receives from recording artists. For sound recordings fixed before November 1, 1995, even in the absence of a letter of direction SoundExchange will allocate 2% of royalties for a sound recording to be paid to producers involved in the making of that sound recording.
Takeaway for your holiday party:
“Music producers contribute a lot to sound recordings. It’s about time the law recognizes this!”
Conclusion
Yes, this is a huge, complicated law, and I’ve barely scraped the surface. It’s going to take a long time for it to percolate fully throughout the music world. And, it’s going to be a challenge for the Copyright Office to implement it under the schedule set by Congress. Whether it turns out to be beneficial for music composers and the copyright system as a whole will not be known for years.
More to come.
Update: On July 5, 2019 the Copyright Office announced that the Mechanical Licensing Collective, Inc. (MLC) has been selected as the entity that would administer the blanket license and distribute collected royalties to songwriters and music publishers. As discussed above, this entity will be responsible for developing and maintaining a comprehensive database of musical works and sound recordings, which will be publicly available. The MLC is led by the National Music Publishers Association (NMPA), the Nashville Songwriters International Association and the Songwriters of North America (AMLC). Ed Christman goes into this decision in detail in his Billboard article, Why The U.S. Copyright Office Chose The Mechanical Licensing Collective.
Update to this post: Copyright Office Backs Led Zeppelin In Ninth Circuit En Banc Appeal (link)
The U.S. copyright community will look back on 2018 as an important year for music copyright law. Appellate decisions in music copyright cases are rare. However, this year we’ve seen two important opinions from the Ninth Circuit. In March the Ninth Circuit upheld a jury verdict that found that Pharrell Williams and Robin Thicke’s 2012 recording of “Blurred Lines” infringes Marvin Gaye’s 1976 composition of “Got To Give It Up” (see my blog post, “Blurred Lines at the Ninth Circuit,” here).
Now, in October, the Ninth Circuit has issued an opinion in Randy Wolfe’s copyright case against Led Zeppelin.45 The jury in that case found that Led Zeppelin’s 1971 recording of Stairway to Heaven did not infringe Wolfe’s composition copyright in the 1968 song Taurus (recorded by Spirit).46 However, the appeals court found that the judge made several errors during the trial, requiring that the case be retried.
There is a small measure of irony in the fact that in both cases the Ninth Circuit’s decisions appear to run counter to the opinions of most knowledgeable musicians.
Based on my extensive (but admittedly unscientific) survey of commentary in the music community, most musicians felt that Blurred Lines did not infringe Give It Up – at most, Blurred Lines copied the unprotectable genre of Give It Up. However, the Ninth Circuit found that there was sufficient evidence to support the jury verdict and upheld the finding of infringement on appeal.
Randy Wolfe
The sentiment was the same in the Led Zeppelin case – most musicians I surveyed argued that the introduction to Stairway to Heaven did not infringe the introduction to Taurus. The jury agreed, finding no infringement, but this time the appeals court disagreed, and sent the case back for a retrial, setting the case up for a possible jury verdict in favor of Wolfe’s estate.
Admissibility of Pre-1972 Sound Recordings
The Led Zeppelin appeal involved a number of legal issues, as is true of most appeals. The Ninth Circuit reversed the jury verdict and remanded the case for retrial based on faulty jury instructions on issues of originality and copyright protection of the selection and arrangement of public domain elements of a musical composition.
However, for most legal observers the key legal issue was whether, since pre-1972 copyright law did not recognize a copyright in sound recordings (and then only prospectively), the copyright in Taurus was limited to the simplistic lead sheet deposited with the Copyright Office in 1967. The trial judge in the Led Zeppelin case ruled that the copyright was limited to the Copyright Office deposit, and therefore the jury never heard the sound recording of Taurus. 47
The Ninth Circuit was presented with this issue in the Blurred Lines case, but was able to resolve that appeal without deciding it.
The court was presented with the issue a second time in the Led Zeppelin appeal, and this time the court did take it on. After examining the statute and the legislative history, and reviewing the limited case precedents on the issue (none of which were squarely on point) the court concluded:
“For the benefit of the parties and the district court on remand, we also address whether the scope of copyright protection for an unpublished work under the 1909 Act is defined by the deposit copy. We hold that it is.”
The reference to an “unpublished” work is confusing, since the sound recording of Spirit’s song Taurus was published in 1968. However, before 1978 courts had held that a musical work was “published” only when sheet music was distributed to the public. Under copyright law, distribution of a sound recording of a musical work was not considered a “publication” of the musical work. The lead sheet for Taurus was unpublished, and the court’s many references to the “unpublished work” refer to the lead sheet deposited with the Copyright Office.
Since the Ninth Circuit’s opinion is the first and only federal appellate decision on this issue it directly impacts song writers in the same position as Randy Wolfe: composers who own pre-1972 works and who may be considering a copyright suit against the owners of compositions or sound recordings they believe to be infringing. As was the case in the Led Zeppelin trial, these composers will not be able to play the sound recordings of their compositions for the jury in order to prove copyright infringement. Their evidence at trial will be limited to the sheet music filed with the Copyright Office, although this may be played for the jury by a witness (as was done at the Led Zeppelin trial).
This presents a potentially significant obstacle to proving copyright infringement of pre-1972 works since lead sheets for popular music filed in that era were often incomplete. As Wolfe argued (and as Marvin Gaye argued in the Blurred Lines case), the sound recording is the best evidence of a composition, and may contain compositional elements that have been copied by the defendant but that were not included in the sheet music.48
At Retrial Wolfe May Get The Sound Recording of Taurus into Evidence After All
Despite this ruling, if the case is retried Randy Wolfe may be able to play the sound recording of Taurus for the jury based on a technicality. At trial Jimmy Page denied access to Taurus, and he was cross-examined on this issue by Wolfe’s lawyer. This included requiring Page to listen to Taurus in open court. However, the trial judge viewed the sound recording of Taurus to be outside the scope of Wolfe’s copyright, so he excluded the jury from the courtroom when the sound recording of Taurus was played. The jury was then allowed to reenter the courtroom, and Page was cross-examined on what he had just heard.
This was awkward, to say the least, and the Ninth Circuit ruled that the jury should have been permitted to view Page’s demeanor while he was listening to Taurus. The Ninth Circuit held that on retrial the jurors should be instructed that the sound recording of Taurus is limited to the issue of access, and is not to be used to judge the similarities between Taurus and Stairway to Heaven.
Of course, juries are often unable to understand (or unwilling to follow) “limiting instructions” of this sort, so this is, in effect, a backdoor means by which the jury may be able to hear Taurus if Jimmy Page again denies access (a strategic issue Page and his lawyers will have to deal with on retrial of the case).
What’s at Stake in This Case?
Why is Wolfe’s estate pursuing this case so aggressively? Obviously, the case raises issues of reputation and artistic integrity, particularly for Robert Plant and Jimmy Page, who composed Stairway to Heaven.
Monetarily, if Wolfe’s estate were to win it would be entitled to damages based on a share of profits attributable to Stairway for the three years preceding final judgment, as well as a share of royalties until 2067, 70 years following Wolfe’s death.
In the Blurred Lines case Marvin Gaye’s future damages were decided by the judge, who ruled that Gaye’s estate was entitled to 50% of future songwriter and publication royalties. If Wolfe were to prevail following a retrial it would be up to the judge to decide on the future royalty split for Stairway to Heaven, and this could be less than 50%, given that Wolfe’s claim of infringement is limited to the first two minutes of Stairway (an eight minute song). However, Wolfe is likely to argue that the opening two minutes of the song is the most important and recognizable part of Stairway, and therefore Wolfe is entitled to at least 50% of future royalties. How the court would rule on this issue is anyone’s guess.49
Given Stairway to Heaven’s iconic stature and seemingly perpetual popularity even a decision awarding Wolfe significantly less than 50% of royalties for the next 49 years could be enough to justify the effort and expense Wolfe’s estate has invested in the case, and Led Zeppelin’s obstinacy in defending it.
Can Disney prevent a commercial business – in this case Redbox – from reselling Disney’s movie download codes?
At first the answer was “no.”
My earlier post on this case* highlighted the California federal district court’s February 2018 opinion concluding that the language on Disney’s box-top packages failed to create a contract that would prevent Redbox from purchasing and reselling Disney movie download codes. However, I predicted that “Likely, in the future Disney will correct its ‘box-top license’ to make it legally enforceable . ..”
*To get the background facts of this case please read the initial post
Disney did just that when it released its Black Panther combo packs. Disney’s new packaging states that “Digital code redemption requires prior acceptance of licence terms and conditions. Codes only for personal use by recipient of this combination package or family member.” A warning elsewhere on the package states that “The digital code contained in this package may not be sold separately and may be redeemed only by the recipient of this combination package or a family member. Visit [various Disney websites listed] for code redemption and other applicable terms and conditions.” A paper insert states that “This digital code is part of a combination package and may not be sold separately,” and “Digital code redemption is subject to prior acceptance of license terms and conditions.”
However, purchasers of Disney combo packs now get a double-barreled contract – when they go to one of the Disney websites to download Black Panther, they are subject to an online agreement as well. Here, they must agree to Disney’s warning that “Digital codes originally packaged in a combination disc + code packages (sic) may not be sold separately and may be redeemed only by an individual who obtains the code in the original combination disc + code package ….”
All of this legal verbiage — both the box-top license and the online license — confronts consumers purchasing the Black Panther combo packs and using the download codes online, but it is aimed squarely at Redbox or anyone else that may have the temerity to purchase and resell Disney download codes.
Based on this onslaught of contractual terms the district court concluded that Disney has successfully entered into a restrictive contract with purchasers of the Black Panther combo packs. That is, when consumers (or Redbox) buy the Black Panther combo pack containing a disk and download code they are buying a restricted license to the code, and one of the terms of that license is that they may not resell it. By reselling the codes and encouraging purchasers to use codes violative of this contract, Redbox engaged in contributory copyright infringement.
Consistent with its February 2008 opinion, the court rejected Redbox’s first sale defense on the grounds that the case does not present a “single, discrete, particular copy to which the first sale doctrine could apply.” And, an enforceable license trumps first sale in any event, although the court did not rely on this.
Although the court had applied the copyright misuse doctrine in its earlier decision, it now rejected copyright misuse based on the changes to Disney’s contract terms. Under Disney’s “old” box-top license there was no Disney-purchaser contract, and Disney’s attempt to use its online contract to restrict resale of the contents of the combo packs constituted copyright misuse. However, Disney’s new box-top agreement cured this defect, since purchasers of the combo packs were now subject to a restricted license at the point of sale.
The outcome of this case is not surprising. The district court’s earlier decision gave Disney a roadmap to what it needed to do to correct the deficiencies that caused it to lose the first time. It was a simple matter for Disney to correct its packaging and online terms to make it clear that purchasers were buying the download codes subject to a restricted license, thus blocking Redbox’s resale strategy.
The court’s ruling applies only to Black Panther, not earlier movies distributed by Disney in the old packages – those products remain subject to the court’s earlier ruling. However, if this decision stands (I doubt Redbox will appeal) Redbox’s future distributing Disney download codes appears limited. Going forward Disney will, no doubt, use the same Black Panther contract language on all of its disk/download code combo packs, and Redbox’s sale of Disney download codes will eventually dry up as new movies replace older ones in Redbox’s kiosks.
The Supreme Court accepts appeals of very few copyright cases. In the last 20 years it has decided only 14 copyright cases, and most of those involved narrow, highly technical issues of copyright law.
One of these technicalities arises out of the fact that copyright registration is a precondition to filing a copyright infringement suit. However, the Copyright Act is not entirely clear on what this means: must a copyright plaintiff obtain registration from the Copyright Office (or, in rare cases, a denial, but in any case a decision on its application) before it may file suit for copyright infringement? Or, is it enough that the plaintiff has filed an application for infringement, permitting the suit to proceed while the application waits to be acted on by the Copyright Office, a process that typically takes about eight months?
The federal circuit courts have been divided on this issue. Some circuits hold that it is sufficient to have simply filed a registration application as a precondition to filing suit; other courts have held that a would-be copyright plaintiff must wait until the Copyright Office has acted on the registration request, the so-called “registration approach.”
Why does this matter? One reason is the statute of limitations – copyright owners face a three year statute of limitations, and an owner who files an application late in this three year period risks losing the right to enforce the copyright in an infringement action because of the time needed to review an application.
Another reason may be if the copyright plaintiff is seeking a preliminary injunction and can’t wait eight months for a standard registration to be issued.
While the Copyright Office does allow expedited applications (or “special handling”), the fee for this is $800 per application (versus $35 for a normal registration, so long as the applicant can wait eight months), an expense and delay most copyright plaintiffs are reluctant to incur, particularly when many copyright suits involve more than just one work, in which case the $800/work cost can become exorbitant.
The Court of Appeals for the Eleventh Circuit had this issue presented to it in Fourth Estate Public Benefit Corp. v. Wall-Street.com, LLC. In a decision issued in May 2017 the court highlighted the circuit split over this issue, noting that the Tenth Circuit requires that the registration be acted upon, while the Fifth and Ninth Circuits require only that the application have been filed. The remaining circuits either have not opined on this issue or have given unclear (and in the case of the Seventh Circuit conflicting) guidance.
In Fourth Estate the Eleventh Circuit sided with the Tenth Circuit, holding that the law requires that the Register of Copyrights have acted on the application before a copyright owner can file an infringement action.
The copyright holder appealed to the Supreme Court, and on June 28, 2018, the Supreme Court accepted certiorari in this case. Therefore, it will likely decide this issue during the 2018-2019 Term.
The issue is not one of constitutional magnitude — rather, it is a question of reading and interpreting the Copyright Act as written and enacted by Congress, along with whatever legislative history the parties can locate that bears on Congress’ intent. The law is sufficiently ambiguous (as reflected in the circuit split) that the Supreme Court could come out either way.
It will be helpful to have this issue resolved either way, since it is common for copyright plaintiffs to have not registered their works when they first consult an attorney. The attorney is then forced to determine whether a case can be filed in their circuit while registration is pending (as noted, most circuits haven’t decided this issue, making the decision more difficult), or whether the case cannot be filed until registration is completed. The attorney must then factor in the urgency of the legal claim and decide whether to advise the client to pay the additional expense required to expedite the registration. All-in-all, an unnecessarily complicated set of decisions.
If you’re interested in following this case as briefs are filed with the Supreme Court you can do so on the SCOTUSblog page dedicated to this case. The parties’ petitions for certiorari, as well as the Solicitor General’s brief on behalf of the United States urging the Court to accept review of this case and expressing its support for the holding of the Eleventh Circuit, are already available on SCOTUSblog.
Update: The Supreme Court ruled that registration is a prerequisite to filing a copyright case. Decision here.
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.
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.
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.
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