by Lee Gesmer | Sep 16, 2015 | Copyright, DMCA/CDA
It’s not often that a case involving a 29 second video of toddlers cycling around on a kitchen floor goes to a federal court of appeals, much less results in an important, precedent-setting copyright decision. But that is exactly what happened in Lenz v. Universal Music Corp.
The cases arises from an issue inherent in the Digital Millennium Copyright Act. The DMCA allows copyright owners to request the “takedown” of a post that uses infringing content.
But, what does the copyright owner have to do to determine, first, whether fair use applies? Does it need to do anything at all?
This question has finally been decided by the Ninth Circuit in a much-anticipated decision issued on September 14, 2015.
The case had inauspicious beginnings. In 2007 Stephanie Lenz posted to YouTube a 29 second video of her toddler son cycling around the kitchen, with Prince’s song “Let’s Go Crazy” playing in the background. Universal sent a DMCA takedown notice to YouTube, but Ms. Lenz contended her use of the song was fair use, and therefore was non-infringing. Eventually the dispute made its way to federal court in California, with Ms. Lenz asserting that her use of the song was protected by fair use, and that Universal had failed to take fair use into consideration before requesting takedown of her video.
The issue before the court was whether, before sending a DMCA takedown notice, copyright holders must first evaluate whether the offending content qualifies as fair use. The court held that the copyright statute does require such an evaluation, but that the copyright holder need only form a “subjective good faith belief” that fair use does not apply. And, the copyright holder may not engage in “willful blindness” to avoid learning of fair use.
In this case Universal arguably failed to consider fair use at all.
The court does not answer the practical question now faced by Universal and others: what, exactly must a copyright holder do to show subjective good faith under the DMCA? Noting that it was “mindful of the pressing crush of voluminous infringing content that copyright holders face in a digital age,” the court described generally what appears to be a low standard to satisfy the “good faith” test. The court opined that subjective good faith belief does not require investigation of the allegedly infringing content. And, “without passing judgment,” that the use of computer algorithms appeared to be a “valid … middle ground” for processing content. However, the court failed to provide a standard for an computerized algorithmic test that might apply in the notoriously uncertain legal context of copyright fair use.
It seems difficult to conclude other than that this decision will increase the cost burden on the part of content holders who wish to use the DMCA to force the takedown of copyright-infringing content on the Internet. While the court provides little guidance as to what a copyright content owner will have to do to show that it exercised “subjective good faith” before sending a takedown notification, it seems likely that the ruling will involve increased human involvement, and perhaps even legal consultation in “close cases.”
This case was originally filed by Ms. Lenz in 2007, eight years ago, however it is far from concluded. The Ninth Circuit’s decision only sends the case back to the trial court for a trial under the legal standard enunciated by the Ninth Circuit. And, even that determination can only be reached after the court (or a jury) concludes that the 29 second video was fair use of the Prince song in the first place, an issue that has yet to be taken up by the court.
What, one might ask, can Ms. Lenz expect to receive in the event she prevails at trial? First, The Ninth Circuit decision explicitly allows her to recover “nominal damages” — in other words, damages as low as $1. However, even if she prevails and recovers only one dollar, she would be entitled to her costs and attorney’s fees, which could be a substantial amount, notwithstanding the fact that Ms. Lenz is represented by counsel pro bono.
Of course, given the economics of this type of case, its unlikely we’ll see too many similar cases of this sort in the future. Clearly, this was a “test case,” in which the principle, not monetary compensation, was the motivation. Not many recipients of DMCA takedown notices will bring suit when at best they can hope to recover nominal damages plus attorney’s fees.
For an earlier post discussing a decision on this issue by Judge Stearns in the District of Massachusetts, see Judge Stearns Weighs in on Legal Standard for Copyright Takedown Notices (Sept. 30, 2013).
Lenz v. Universal Music Corp. (9th Cir. Sept. 14, 2015).
by Lee Gesmer | Sep 1, 2015 | Copyright
One of the hoariest chestnuts of copyright law is that a recipe is not copyrightable.
Seemingly unaware of this – or in outright defiance of the law – the plaintiffs in Lorenzana v. South American Restaurants Corp. argued to the contrary. Specifically, the plaintiffs claimed copyright in a “Pechu Sandwich” recipe consisting of”fried chicken breast patty, lettuce, tomato, American cheese, and garlic mayonnaise on a bun.”
The complaint contained no allegation that the “recipe” for the sandwich was in a form of expression beyond that of a list of ingredients.
The district court dismissed the copyright claim, and the First Circuit made short work of affirming:
Contrary to [plaintiff’s] protests on appeal, the district court properly determined that a chicken sandwich is not eligible for copyright protection. This makes good sense; . . .. A recipe — or any instructions — listing the combination of chicken, lettuce, tomato, cheese, and mayonnaise on a bun to create a sandwich is quite plainly not a copyrightable work.
The only surprise in this decision is that the First Circuit did not award the defendants costs or attorney’s fees incurred in defending this appeal.
by Lee Gesmer | Jan 14, 2015 | Copyright
The fact that the Supreme Court has asked the Obama Administration (via the Office of the Solicitor General) to comment on Google’s application for certiorari in Oracle v. Google* has focused renewed interest on this case – not that it needs it. The case, if the Supreme Court accepts it, could be a replay of Lotus v. Borland, an important software copyright case the Supreme Court tried but failed to decide in 1996, when the Court deadlocked 4-4 (one justice abstaining).
*Note: For detailed procedural and substantive back ground on this case see these earlier posts: How Google Could Lose on Appeal; Oral Argument in Oracle v. Google: A Setback for Google?; CAFC Reverses Judge Alsup – Java API Declaring Code Held Copyrightable; Google Rolls the Dice, Files Cert Petition in Oracle Copyright Case. I also made a presentation to the Boston Bar Association on this case before the CAFC decision, slides here.
The issue is this: computer software — both source code and object code — is protected by copyright law so long as it meets copyright’s statutory requirements, the most important of which, for purposes of the case discussed in this post, is originality. At issue are the 7,000 lines of “declaring code” of Oracle’s Java API software. This software was copied by Google when it implemented the Android smartphone operating system. The Java API declaring code clearly satisfies copyright law’s requirement of “originality.” The issue, therefore, is why this code should not be protected by copyright.
*Note: APIs are specifications that allow programs to communicate with each other. A computer program designed to be compatible with another program must conform to the API of the first program, which establishes rules about how other programs must communicate information so that the two programs can work together to execute specific tasks.
The argument Google has made to the Supreme Court is that the software a “method of operation”* that should be denied copyright protection?
*Note: The Copyright Act states that “[i]n no case does copyright protection for an original work of authorship extend to any idea, procedure, process, system, method of operation, concept, principle, or discovery, regardless of the form in which it is described, explained, illustrated, or embodied in such work.” 17 U.S.C. § 102(b)
This issue has bedeviled the courts in this case. A federal district court judge in California held that Oracle’s Java API was an unprotectible method of operation. The Court of Appeals for the Federal Circuit reversed, holding that copyright protects the expression of a method of operation, and therefore the Java API is protected by copyright.
Now the software industry and copyright lawyers are eager to learn whether the Supreme Court is likely to accept review of this case, and the Court’s request that the Obama Administration weigh in thickens the plot by suggesting that the Court is giving Google’s appeal serious consideration.
The Supreme Court takes about 1% of the petitions filed with it, and despite its request to the Office of the Solicitor General I don’t think this case is likely to make the cut. Why is that so?
Setting aside the question of copyright fair use (which remains pending and will be retried on remand if the Supreme Court denies cert.), the core question is whether the Java API — 7,000 lines of programming code — is protected by copyright law.
The question is, why would the 7,000 lines Google copied from the Java API not be copyrightable? Google argues that the API code is not copyrightable because it is a “method of operation,” a category the Copyright Act expressly excludes from copyright protection. Google is inviting the Court to pick up, once again, an issue it proved unable to decide in 1996. In that case, Lotus v. Borland, decided by the First Circuit Court of Appeals based in Boston, the First Circuit held that a menu command hierarchy in a user interface (“File,” “Print,” “Copy” ….) was a “method of operation,” and therefore excluded from copyright protection, regardless of whether it is original. The menu commands were the “means by which a person operates something” — in that case a computerized spreadsheet — and therefore the commands were not protected by copyright.
The Supreme Court accepted review of that case, but one justice recused himself, and the remaining eight judges voted 4-4, leaving the case undecided at the Supreme Court and affirming (by default) the decision of the First Circuit, where it has stood as controlling law ever since (but only in the First Circuit).
No other federal circuit court has adopted Lotus v. Borland wholesale, and several courts have finessed the issue. In addition to the Federal Circuit’s decision in the current case, at least one circuit court has expressed disagreement, but that was in 1997, eighteen years ago. In other words, this is not an issue that has been burning up the federal courts since 1996. Google does its best to elevate this to a clear circuit split (one sure way to attract the attention of the Supreme Court is to present a circuit split), but frankly its effort is not entirely convincing given the infrequency with which the the issue has reached the appeals courts.
The amicus brief filed by the Electronic Frontier Foundation and a host of computer scientists (77 scientists) is no more convincing. The scientists based their argument on the need for compatibility. They argue that “copyrightable APIs would discourage innovation by creating potential liability for the mere act of writing a compatible program.” The problem with the scientists’ “compatibility/interoperability” argument is that it goes to fair use, an issue that neither the district court nor the Federal Circuit decided. At the trial of this case the jury deadlocked on the issue, and therefore absent intervention by the Supreme Court the case will be remanded for a retrial on this defense. While the scientists argue that the need for compatibility should lead the court to take the case and hold that APIs are uncopyrightable, their argument does not clearly address the “method of operation” argument made by Google.
Moreover, the scientists ignore the fact that the Google Android-Java API is not compatible with the Oracle API, a fact that Google has conceded.
If the Supreme Court is looking for the Office of the Solicitor General to help them decide whether this case is review-worthy, Google is likely to be disappointed. First, there is no reason to believe this is an issue of interest to the Obama administration – it hardly falls within any of the social action categories the administration is focused on. Second, the case can be appealed to the Court in the future by whichever party loses the retrial on fair use. Perhaps the case will settle, or the losing party will not appeal, saving the Court (and the Solicitor General) the effort. Lastly, as noted, while there may be a split of opinion among the federal circuit courts, the decisions that create the split are spread out over two decades. This hardly amounts to a cry for help from divided federal courts. Rather, this seems to be an obscure issue which could lie dormant for another ten or twenty years. If events prove otherwise, the Supreme Court will have another opportunity to take up the issue in a future case.
_______________
The parties’ briefs filed with the Supreme Court:
Google Petition for Certiorari
Computer Scientists’ Amicus Filing in Support of Google
Oracle Opposition to Google’s petition
Update: The Supreme Court did not accept this case for review
Second Update: On re-appeal, following a trial and second appeal on fair use, the Supreme Court accepted Google’s appeal of this case. See my Oracle v. Google Resource Page here.
by Lee Gesmer | Nov 19, 2014 | Copyright
On October 22nd I wrote a detailed post discussing Flo & Eddie’s (owner of the Turtles’ pre-1972 sound recordings) suit against Sirius XM, and specifically the holding of a California federal district court that Sirius’s satellite radio broadcast and webcasting of these recordings was subject to a claim under California state law. (See The Kerfuffle Over Copyrights in Pre-1972 Sound Recordings). As I noted in that post, when sound recordings were added to the federal Copyright Act in 1972 pre-1972 sound recordings were not included – these works were not preempted by the federal copyright statute, and were left to be regulated under state law until (drum roll ….) 2067.
I also mentioned that Flo & Eddie had a separate case pending in federal court in New York, claiming copyright infringement of their pre-1972 recordings under New York common law.
On November 14, 2014, the federal judge handling the New York case issued a decision similar to that reached by the court in California. Although, unlike California, New York does not have a specific statute that protects the public performance right in pre-1972 sound recordings, the court upheld Flo & Eddie’s suit under pre-1972 New York state copyright common law, which protects “any original material product of intellectual labor” in which the artist invests “time, effort, money, and great skill.” Clearly, a great deal of pre-1972 music satisfies that test.
The court rejected Sirius XM’s arguments that (i) the owners of pre-1972 sound recordings lacked an exclusive right to the public performance of those works, (ii) Sirius’s broadcast of the recordings is protected by fair use, (iii) upholding Flo & Eddie’s claims would violate the Commerce Clause, and (iv) Flo & Eddie’s claims were barred by laches.
This is very bad news for Sirius XM. One decision against Sirius on this issue is bad; two may prove catastrophic.
After the California decision was issued commentators asked why the court’s ruling wouldn’t apply with equal force to analog broadcasters (radio and TV stations) and retail businesses that play music, such as bars, restaurants and stores. This decision makes that question even more pressing – not only does a second federal court decision upholding pre-1972 state law copyright rights validate the first case (making it less likely to be an outlier), but it forces legal advisors to ask how non-digital businesses are any different than satellite radio or webcasting for purposes of analyzing this legal issue. Why would the logic of the two Sirius XM cases not apply to them as well?
It’s the case that these decisions create more questions than answers. For example, assuming the decisions survive appeal, the courts may have a difficult time arriving at a measure of damages. Since the recordings are not covered by the Copyright Act, statutory damages are not available, and “actual” damages are an open question. Flo & Eddie may have a difficult time proving it lost any sales as a result of the infringements (in fact, it may have gained sales from the exposure). And, it will be difficult to determine the extent to which Sirius XM profited by playing them, or how to determine a “reasonable royalty” for a license to play them that’s any different from the compulsory license established by the Copyright Royalty Board for post-1972 sound recordings. Things are further complicated by the fact that both the New York and California cases are styled as class actions, and are seeking damages on behalf of all owners of pre-1972 sound recordings that have been broadcast by Sirius.
In the meantime, this decision should add to the pressure on Congress to clean up this mess by amending the copyright statute on pre-1972 sound recordings. Leaving them to be regulated by state law for another 53 years, until 2067, may have made sense in the early ’70s’s but it makes no sense now, especially in light of these cases. As the district court judge in the New York case stated, the enforcement of common law copyrights by the states raises “the specter of administrative difficulties in the imposition and collection of royalties,” and could “possibly make broadcasts of pre-1972 recordings altogether unavailable.” In other words, broadcasts of music by The Beatles, The Doors, Jimi Hendrix and Janis Joplin (to name just a few) could disappear altogether from satellite broadcasters and webcasters like Sirius and Pandora, as well as from traditional radio stations.
Legislation like the RESPECT bill that was introduced in the House in May, and which was referred to the House Judiciary Subcommittee on Courts, Intellectual Property and the Internet in July, could resolve this issue, at least moving forward.
If these cases are not reversed or a law like RESPECT is not enacted, we are likely to hear a lot less pre-1972 music for the next five decades. And that would be everyone’s loss.
by Lee Gesmer | Nov 7, 2014 | Copyright
Over the last 100 years the musical licensing business has evolved into a complicated system! This is a consequence of the evolution of technology, business practices and copyright laws. A picture is worth a thousand words, and I’ve been meaning to post this attempt by the U.S. Copyright Office to create a graphic that illustrates how music licensing operates. The copyright office published this graphic earlier this year, as part of its Musical Licensing Study – one of three active policy studies in progress at the Copyright Office. Click on the image to expand it.
Here is Professor Fisher’s attempt to illustrate some of this in his 2014 CopyrightX course. This is a screenshot at approximately 11:00 in this CopyrightX video.
by Lee Gesmer | Nov 6, 2014 | Copyright
One of the thorniest issues under the present U.S. copyright system is the law’s failure to accommodate the problem of “orphan works” – works whose owners can’t be identified or located. In many cases copyright holders have died, gone out of business or simply stopped caring. This makes it difficult or impossible to obtain terms for the use of works that likely represent the majority of 20th century cultural artifacts, including songs, pictures, films, books, magazines and newspapers.
Mass digitization technologies and the Internet have created opportunities to make these works widely accessible, but they have also created risks for copyright owners – for example, many digital photos that should be protected have had their metadata stripped before being posted on the Internet, creating a risk that protected works may be mistakenly misclassified as orphans.
No one knows for sure how many bona fide orphan works there are, but estimates range between 25% and 40% of all books eligible for copyright. The number seems to be particularly high in library and archive collections.
However, because copyright protection has become “automatic” (no notice or registration required) and the term more difficult to ascertain (life-of-the-author-plus-70-years – when did the author die?), the user of an orphan work risks an infringement action. This is the risk that Google Books encountered in its attempt at mass digitization of books. Google had hoped it had found a solution to this problem when, in the context of a class-action copyright infringement suit, it proposed a settlement that would have allowed Google to provide digital access to entire books (including orphan works), subject to the right of a copyright owner to “opt out.” However, the court rejected a settlement that was based on an opt-out system, and as a result Google currently restricts orphan works to “snippet views”.
In other words, there is a huge volume of published and unpublished material, some of it dating back as far as 1923, which may technically be subject to copyright protection in the U.S., but which is unavailable to the public, despite the fact that copyright owners would have no objection to it being used.*
*note:Before the 1976 Copyright Act, when the law required copyright owners to renew their their copyright registrations after 28 years to obtain a second 28 year term, only 15% of registrations were renewed. The unrenewed 85% entered the public domain. (Copyright Law Revision, Studies 29-31, p. 221)
The U.S. Copyright Office has recognized that there is tremendous social value in making orphan works available to the public, even on a restricted basis. In 2006 the Copyright Office issued a “Report on Orphan Works,” in which it explored the issue in depth and proposed that Congress enact legislation that would reduce the risk of digitizing orphan works by limiting the remedies available against good faith users. (See also Marybeth Peters, The Importance of Orphan Works Legislation (2008)).
Legislation that would have made orphan works more accessible under U.S. copyright law was proposed in 2006 and 2008 (1, 2), but was not enacted.*
*note: In 2012 the Copyright Office continued to focus on orphan works, issuing a Notice of Inquiry requesting public comments. The Internet Policy Task Force urged reexamination of this issue in the July 2013 “Green Paper.”
However, each country has its own copyright laws, and the situation in some countries is not as grim as it is here. In addition to several non-EU individual country solutions, in October 2012 the EU adopted an Orphan Works Directive, to be implemented by the 28 member states by October 29, 2014 (although that implementation seems to be behind schedule in many countries). The Directive allows public interest entities* to make limited use of specified categories of orphan works “only in order to achieve aims related to their public-interest missions, in particular the preservation of, the restoration of, and the provision of cultural and educational access to, work and phonograms contained in their collection.”
*note: “Public interest entities” are publicly accessible libraries, educational establishments and museums, as well as . . . archives, film or audio heritage institutions and public-service broadcasting organizations.”
The Directive still requires a search to identify the copyright owner of each work, and therefore is not friendly to mass digitization of orphan works. However, once a work is deemed orphaned in one country, it will be treated as orphaned throughout the EU, and a list of orphan works will be maintained in a single registry.
The UK, while a member of the EU and participating under the EU Directive, has gone a big step beyond the relatively narrow Directive. Effective October 29, 2014 (the same date the EU Directive took effect) it made all types of orphan works available for commercial, as well as cultural, bodies. The system will be administered by the UK Intellectual Property Office,* which will maintain a searchable electronic registry.
*note: See: “How to Apply for a License to Use an Orphan Work” on gov.uk. A more detailed “Orphan Works Licensing Scheme Overview,” is also available. As of the date of this post, it appears that the online electronic registry has yet to process any orphan work applications.
Both systems — the EU Directive and the more permissive UK licensing system — are highly controversial. How the systems will work in practice remains to be seen. Questions remain about many aspects of the systems, including how rigorous a “diligent search” will have to be before a work can be deemed “orphan,” whether works have had copyright identifying information stripped away, thereby incorrectly moving them into orphan status, and whether escrowed royalties (to be claimed by owners who show up later) will be set at adequate levels.
The United States — which has hung at the back of the pack — will be watching and, perhaps, picking up the know-how necessary to loosen the law on orphan works here.
by Lee Gesmer | Oct 28, 2014 | Copyright
Academia is abuzz with reactions to the Eleventh Circuit’s copyright fair use decision in Cambridge University Press v. Patton. This is, as one blogger described it, “the most important copyright and educational fair use case in recent memory.”
The decision highlights, yet again, the truth behind Professor Nimmer’s observations that fair use is said to be “the most troublesome [area] in the whole of copyright law” and has been called “so flexible as virtually to defy definition.”
At issue is Georgia State University’s right to scan and distribute to students, without payment, digital course packs comprised of excerpts from scholarly books and journals. The plaintiffs — several publishing houses — alleged 74 specific instances of infringement. In a 350 page ruling issued in May 2012 the district court court found infringement in only 5 of these cases, handing the university a significant victory and awarding it several million dollars in attorney’s fees.
The U.S. Court of Appeals for the Eleventh Circuit (which covers federal appeals in Alabama, Florida and Georgia) reversed the district court, issuing its own mammoth opinion on October 17, 2014, (129 pages including the 16 pages of concurring opinion by one of the three judges on the panel).
Needless to say, this case is of great importance to colleges and universities that want to provide their students with course packs without having to 
purchase “permissions” from publishers. It is, in effect, a test case based on 74 individual claims of infringement. The district court evaluated each work individually, taking into consideration factors such as the amount of copying (a finding that the school copied less than 10% or one chapter or less favored fair use) and whether the work was available for digital licensing (licensing unavailability favored fair use). At the end of the day, the district court found that all but five of the 74 items were protected by fair use.
The Eleventh Circuit agree with many conclusions reached by the district court –
- It agreed that the works should be evaluated individually, rather together as a “nebulous cloud of infringements.”
- It agreed that Georgia State’s use of the works was of a nonprofit, educational nature, a conclusion that heavily favored fair use.
- It agreed that license availability should be taken into account in evaluating the effect of the use on the market for or value of the excerpts. (Although it found that the district court did not give this factor proper weight).
However, it disagreed in some important respects:
- The Eleventh Circuit disagreed that the “educational and informational” nature of the excerpts favored fair use, concluding that in some instances this factor was neutral, or weighed against fair use.
- It rejected the district court’s mechanistic use of a “blanket 10 percent-or-one-chapter benchmark” as a “substantive safe harbor.” The district court “should have analyzed each instance of alleged copying individually, considering the quantity and quality of the material taken – including whether the material taken constituted the heart of the work – and whether that taking was excessive in light of the educational purpose of the use and the threat of market substitution.”
- It disagreed with the fact that the district court gave each of the four statutory fair use factors equal weight – the court should have used a “holistic analysis which carefully balanced the four factors.”
After this detailed critique of the district court’s decision, the Eleventh Circuit sent the case back for “further proceedings consistent with this opinion.” In other words, the district court must now evaluate each of the 74 excerpts again, applying the criteria and methodology described in the Eleventh Circuit’s opinion.
To complicate things further, one of the three judges on the 3-judge appellate panel wrote an opinion which, while technically concurring (since it agreed to remand the case to the district court), is for all practical purposes a dissent. In the view of this judge (a district court judge sitting by designation) the case involved “extensive verbatim copying in undisputed non-transformative format, resulting in complete market substitution”. The “concurring” judge noted that Georgia State had paid permission fees when distributing the articles in paper format, and argued that the “use” of the copyrighted works did not suddenly become fair use “just because the work is distributed via a hyperlink instead of a printing press.” He concluded his opinion with the statement that Georgia State’s use of the publishers’ copyrighted works “without compensation was, in a word, unfair.”
What are some takeaways from this decision?
First and foremost, the case illustrates, yet again, how difficult it is to apply the fair use doctrine in practice. The four judges who wrote on the case represent three different views on the application of fair use to these facts. Georgia State could have lost the case outright if one of the two judges who backed the Eleventh Circuit “majority” opinion had agreed with the “concurring” (actually dissenting) judge. That is a thin margin of victory.
Second, as a “test case” the outcome of the appeal is not a clear winner for either side. Not only is the outcome on remand unclear (the district court must re-examine and reach a decision as to each of the 74 excerpts), but going forward the Eleventh Circuit’s “holistic” balancing approach makes it difficult for publishers and non-profit academic creators of course packs to predict whether a fair use defense will succeed or fail as to a specific excerpt. Certainly, non-profit educators would prefer a predictable, mechanical test (such as a 10% rule or the 1976 “Classroom Guidelines”*), rather than the uncertainty and expense of a holistic test.
*note: The Eleventh Circuit gave little weight to the Classroom Guidelines, noting that they are not controlling on the court, and that they contain hard evidentiary guidelines, an approach that is inconsistent with subsequent guidance from the Supreme Court.
Setting aside the test case aspect of this lawsuit, the Eleventh Circuit’s decision must be discouraging to the parties that have had to pay for this slow and frustrating process. Before this appeal, Georgia State alone had incurred attorney’s fees and costs exceeding $3 million. Both parties can expect to spend hundreds of thousands of dollars more when the case goes back to the district court and, absent a settlement, nothing will prevent the losing party there from filing a second appeal to the Eleventh Circuit. There is no small chance that the case will eventually be appealed to the Supreme Court, which hasn’t decided a straightforward copyright fair use case in 20 years.
Cambridge University Press v. Patton (11th Cir. Oct. 17, 2014)
Update: Subsequent decisions in this case:
Cambridge Univ. Press v. Becker (N.D. Ga. Mar. 31, 2016)
Cambridge University Press v. J.L. Albert (11th Circ. Oct. 19, 2018)
by Lee Gesmer | Oct 22, 2014 | Copyright
If you are confused by the news that a California federal court has ruled that satellite broadcaster Sirius XM is liable under California state law for streaming pre-1972 sound recordings by The Turtles,* you are not alone. The issues in this case prove, once again, Mark Twain’s complaint that “only one thing is impossible for God: To find any sense in any copyright law on the planet.”
To appreciate this bizarre situation you may need to be reminded of a few basic principles of our arcane copyright laws:
- The copyright in a musical work (aka a musical composition) and a “sound recording” of that work may be separately owned. John Lennon’s estate may own the copyright to the musical work Imagine, but Ray Charles, Elton John and Queen (or their record labels) own the copyrights in their sound recordings of the song. Thus, a sound recording may give rise to legal rights under two separate copyrights with two different owners.
- When Congress passed the 1976 Copyright Act, the new federal law preempted most, but not all, state copyright laws. One area Congress expressly left untouched was copyright rights in the public performance of sound recordings made before February 15, 1972. The public performance right for sound recordings will not become subject to federal law until February 15, 2067 (go figure).
- The federal vacuum for pre-1972 sound recordings left by the 1976 Act gives rise to an argument that state copyright laws may be asserted by the owners of pre-1972 sound recordings.
- Lastly, in 1995 and 1998 Congress passed laws which have the effect of requiring noninteractive digital streaming services (such as Sirius XM and Pandora) to pay a compulsory license set by the Copyright Royalty Board and administered by SoundExchange, for post-1972 sound recordings. This compulsory licensing system does not cover analog transmissions (AM/FM radio). Nor, importantly, does it cover pre-1972 sound recordings.
Here is the rub: the owners of pre-1972 sound recordings claim that if the public performances of their sound recordings are not covered by the federal 
copyright act then they must, of necessity, be protected under state copyright laws.* Congress said nothing to the contrary when it passed the 1976 Act, and in fact expressly left pre-1972 sound recordings governed by state law. Flo & Eddie, which owns the Turtles’ pre-1972 sound recordings, has filed suits against Sirius XM and Pandora, as have several record companies. To date, the cases are centered in California and New York.
*note: This has implications in more than one area of copyright law. For example, in April 2013 I wrote a post discussing the question whether the Digital Millennium Copyright Act’s “notice and take-down” process provides a safe harbor for publishers of pre-1972 works. (See New York State Court Blows a Hole in the DMCA Safe Harbors for Pre-1972 Sound Recordings).
The first court decision to address this issue was Flo & Eddie, Inc. v. Sirius XM , decided by a California federal judge on September 22, 2014. This case held that because sound recordings fixed before 
February 15, 1972 are not covered under the federal copyright act — and are explicitly left to the control of state statutory and common law — Flo & Eddie’s rights are governed by a California statute which vests “exclusive ownership” in pre-1972 sound recordings in their authors. The California copyright statute states:
The author of an original work of authorship consisting of a sound recording initially fixed prior to February 15, 1972, has an exclusive ownership therein until February 15, 2047, as against all persons except one who independently makes or duplicates another sound recording that does not directly or indirectly recapture the actual sounds fixed in such prior recording, but consists entirely of an independent fixation of other sounds, even though such sounds imitate or simulate the sounds contained in the prior sound recording.
Sirius XM argued that because it was generally assumed at the time the California law was enacted that copyright rights did not exist in pre-1972 sound recordings under state law, the California law was never intended to grant pre-1972 copyright holders this right. The court rejected this reasoning based on the express language in the statute, concluding that “exclusive ownership” encompasses all rights, the only exception being the right to make a “cover” recording (which is expressly carved out in the statute).
Setting aside an almost certain appeal and reversal, what are the implications of this decision? First, there is no reason that the logic in Flo & Eddie does not extend beyond streaming webcasters to analog broadcasters, such as radio and television. It’s not clear why these companies would not now be squarely in the litigation cross-hairs of Flo & Eddie and others (mostly record companies) who own pre-1972 sound recordings.
Second, this decision (if upheld) puts Internet service providers such as Youtube at risk of copyright infringement under state laws. If Youtube is not protected by the DMCA (as one court has already held in a case involving a different music locker), Youtube cannot claim immunity under that section of the federal copyright law, even if pre-1972 sound recordings were uploaded by users of the site. It would be liable for copyright infringement under the same theory used in Flo & Eddie – by streaming these recordings it is publicly performing them.
Despite Flo & Eddie’s win in the federal district court in California, this battle is by no means over. First, there is an argument that Sirius XM can press on appeal, either to the Ninth Circuit or to the California Supreme Court (if certified to that court), that given the fact that public performance rights in sound recordings did not exist as a historical matter before 1972, the California legislature never intended to create them for pre-1972 sound recordings. However, this seems a long-shot given the language of the California statute. If there were any legislative history to support this argument it would have been presented to the federal district court, so apparently there is none.
Second, there are several ways the federal legislature could step in and fix this problem (prospectively, at least) by amending the federal copyright statute. In fact, the Register of Copyrights has recommended exactly that. For example, Congress could bring sound recordings (pre- and post-1972, webcasting and otherwise) under the system of compulsory licensing regulated by the Copyright Royalty Board. Legislation to effect this has already been proposed.
Third, broadcasters could negotiate licenses for these works, either directly or through a new or existing performance rights organization.
Lastly, some commentators have argued that the Flo & Eddie/record company litigation strategy vis-a-vis pre-1972 sound recordings is an attempt to obtain leverage to increase the royalty rates paid under the compulsory license for post-1972 sound recordings, which means that a compromise on post-1972 royalty rates could resolve the dispute.
The final option for streaming companies and their terrestrial counterparts would be to eliminate pre-1972 sound recordings from their broadcasts, which would certainly be the worst outcome for music lovers.
Flo & Eddie v. Sirius XM (C.D. Cal. Sept. 22, 2014)
by Lee Gesmer | Oct 9, 2014 | Copyright
Google has filed a certiorari petition with the Supreme Court, asking it to review and reverse the Federal Circuit’s May 9, 2014 decision holding that the declaring code of Oracle’s Java API software is not copyrightable. I have written about this case on several occasions, most recently on May 10, 2014 (CAFC Reverses Judge Alsup – Java API Declaring Code Held Copyrightable).
Google framed the “question presented” (framing the question in such a way as to catch the interest of the court is an art form in itself) as follows:
Whether copyright protection extends to all elements of an original work of computer software, including a system or method of operation, that an author could have written in more than one way.
The Supreme Court accepts review of approximately 1% of of cases appealed to it, and therefore lawyers spend a great deal of time and effort to make their cases as significant and interesting as possible. Here, Google asks the Court to take the case in order to decide an issue the Court deadlocked on in 1996 in Lotus v. Borland. Google’s brief states:
In 1995, this Court granted certiorari in Lotus Development Corp. v. Borland International, Inc., 516 U.S. 233 (1996), to resolve the question presented here. The First Circuit had held―consistent with the plain language of 17 U.S.C. § 102(b) but in conflict with other courts of appeals―that methods of operation embodied in computer programs are not entitled to copyright protection. This Court deadlocked, affirming by an equally divided court. Two decades later, this oft-acknowledged circuit split has deepened and the question presented has grown even more important as software has become a fixture of modern life.
This case directly implicates the unanswered question in Lotus because the Federal Circuit extended copyright protection to systems and methods of operation, including computer interfaces. That holding would obstruct an enormous amount of innovation in fast-moving, high-technology industries, in part because innovation depends on software developers’ ability to build on what has come before. If the Federal Circuit’s holding had been the law at the inception of the Internet age, early computer companies could have blocked vast amounts of technological development by claiming 95-year copyright monopolies over the basic building blocks of computer design and programming. By the time Google and countless other innovators even came onto the scene, others could have locked up the field for longer than most people will live.
. . . [By holding that] copyright protection … extend[s] to a system or method of operation so long as there was more than one way to write it the Federal Circuit usurped Congress’s role, deepened a circuit split that this Court previously granted certiorari to resolve, allowed Oracle to use copyright law to evade the limits on patent protection, and thereby blocked developers from building on what has come before. The court did so, moreover, in one of the most important cases of its kind, concerning the widely used Java language and Android platform. This Court’s review is needed now, before tomorrow’s innovation falls victim to the decision below.
Google is correct in arguing that there is a circuit split over the issue presented in Lotus v. Borland. In fact, no federal circuit court has held (as the First Circuit did in Lotus), that methods of operation based in computer software are uncopyrightable, leaving the First Circuit an outlier on this issue.
However, whether this issue will attract the Court’s attention is impossible to know – four justices must vote in favor of review, but that decision is made in the context of all of the competing cases presented to the Court. If the Court does accept review — and if the Supreme Court decides the issue it was unable to resolve close to 20 years ago — this will be an important and interesting copyright case.
The Supreme Court rarely accepts review of copyright cases, but the Court reviewed two copyright cases in its last term, so perhaps momentum will play a role in its decision whether to accept review in this case.
For those interested in how the Supreme Court viewed this issue in 1996 based on oral argument, the transcript of oral argument is linked here.
by Lee Gesmer | Oct 1, 2014 | Copyright
One thing that any online “music locker” company that relies on third-party content and hopes to benefit from the DMCA safe harbor should know is that employees should not upload copyrighted content to the service. Nothing will blow up a DMCA defense faster.
It seems that Grooveshark (legally “Escape Media”), didn’t get this message. As Joshua Greenberg, one of Grooveshark’s co-founders wrote to employees in 2007:
Download as many MP3′s as possible, and add them to the folders you’re sharing on Grooveshark. Some of us are setting up special ‘seed points’ to house tens or even hundreds of thousands of files, but we can’t do this alone… There is no reason why ANYONE in the company should not be able to do this, and I expect everyone to have this done by Monday… IF I DON’T HAVE AN EMAIL FROM YOU IN MY INBOX BY MONDAY, YOU’RE ON MY OFFICIAL SHIT LIST.
Strong stuff, and not the kind of thing you want to have pop up in discovery.
Grooveshark has been the target of multiple industry lawsuits. Two, in particular, are an action in SDNY in which the court, on September 29, 2014, entered summary judgment against Grooveshark, and a New York state action alleging infringement of pre-1972 sounds recordings, which at present are not covered by federal copyright law.
However, it is difficult to see how the September 29th decision doesn’t mark the end of the line for Grooveshark. The decision holds Grooveshark and its two founders (Greenberg and Samuel Tarantino) liable for direct and secondary copyright infringement. A few additional quotes from the 57 page opinion tell the story:
- When it began “Grooveshark did not have a large user base to leverage as a source for content.” Therefore, it told its employees “to create Grooveshark user accounts and to store hundreds of thousands of digital music files on their computers in order to upload or ‘seed’ copies of these files to other Grooveshark users.”
- “Escape’s senior officers searched for infringing songs that had [been] removed in response to DMCA takedown notices and re-uploaded infringing copies of those songs to Grooveshark to ensure that the music catalog remained complete.”
- Grooveshark “was aware that its business model depended on the use of infringing content,” but decided to “bet the company on the fact that it is easier to ask forgiveness than it is to ask permission.”
- After moving from a peer-to-peer to a centralized storage model, Grooveshark “designed its … software so that it would automatically copy every unique music file from each of its users’ computers and upload them to the storage library. … Grooveshark referred to this as a ‘cache everything’ policy.” Grooveshark “instructed its employees to obtain copies of digital music files from any possible source and to upload them to the central music library.”
The court found that the Grooveshark employees uploaded more than 150,000 files, and that Grooveshark’s library of songs hit the company’s goal of 2 million files.
Needless to say, Grooveshark’s activities were blatantly illegal. While the DMCA provides safe harbors for web sites that host copyrighted work uploaded by third parties, it has no relevance to works uploaded by company employees, as was the case here. One can only wonder what Grooveshark’s owners and employees were thinking to participate in what bordered on group insanity.
Whether Grooveshark sought legal advice before embarking on this voyage of folly we may never know.
In any event, it is over now. Grooveshark.com will soon be dark, and the two founders will be stripped of their assets or forced into bankruptcy. Grooveshark’s investors (yes, it appears that “angels” may have invested over $6 million in the company) will (to borrow from Samuel Clemens) not only receive no return on their money, they’ll receive no return of their money.
For some additional thoughtful comments on this case in the broader context of how the courts have come to view music sharing sites, see Jeff John Roberts’ post on GigaOm, here.
UMG Recording v. Escape Media Group, Inc. (S.D.N.Y Sept. 24, 2014)
by Lee Gesmer | Sep 10, 2014 | Copyright
It’s a sad reality that when the record companies want to get serious, they sue not only companies that they claim have infringed their copyrights, but the owners of those companies. Capitol Records pursuit of Michael Robertson, despite the bankruptcy of MP3tunes, is a classic example. MP3tunes declared bankruptcy and shuttered its service, but Capitol Records (part of UMG), pursued Robertson individually, and obtained a $41 million verdict against him personally.
Capitol is using the same strategy against Redigi (“the world’s first pre-owned digital marketplace”). I’ve written about Redigi several times (see here, here and here). The last of these, Federal Judge Tells Redigi to Shut it Down, posted April 2, 2013, describes the New York federal court’s decision holding that Redigi’s digital resale business is not protected by the first sale doctrine. In that post I noted that Redigi could face millions of dollars in damages, and that liability might not be limited to the company:
Capitol may seek leave of court to add as defendants the individual owners and employees of Redigi that exercised control over or benefited from the infringement. While Redigi could oppose such as motion as coming too late in the case, a decision would be at the discretion of the judge. As Capitol Records showed in its copyright suit against MP3tunes and Michael Robertson, Capitol is not above suing not only corporate infringers but their founders and owners. (See: The Record Labels Want My Minivan).* The philosophy of the record companies in many copyright cases may best be described as, “never kick a man when he’s down, unless that’s the only way to keep him there.” Capitol may be preparing to put on its steel toe boots in this case.
… According to the court decision Redigi consulted legal counsel before launching Redigi and engaging the recording industry in a test case. One can only hope that the attorneys Redigi consulted reminded Redigi of the Chinese proverb, “A piece of paper, blown by the wind into a law court, may in the end only be drawn out again by two oxen.”
It didn’t take long for Capitol to follow exactly that strategy. Five months later, on August 13, 2013, Capitol filed an amended complaint naming Redigi’s founding co-owners, John Ossenmacher (CEO) and Larry Rudolph (CTO) as individual defendants. Ossenmacher and Rudoph moved to dismiss, and the court denied their motion on September 2, 2014, holding that the amended complaint –
specifically alleges that the Individual Defendants were responsible both for the technology ReDigi used and for employing that technology through ReDigi’s business. It also alleges that each of ReDigi’s key activities was performed either at the behest of, or with the approval of, the two Individual Defendants. These are precisely the sorts of factual allegations that, if true, make a corporate officer personally liable for copyright infringement. … the rule is that a corporate officer is personally liable for the corporation’s infringement if he had the ability to supervise the activity and a financial interest in it, or if he personally engaged in the infringing activity.
This development just serves to thicken the plot in a case that many observers have been hoping will make it to the Second Circuit on appeal.
Will the judge’s refusal to dismiss Ossenmacher and Rudolph as defendants (albeit only on a motion to dismiss, which is by no means a final decision) now be enough to force Redigi to shut its doors? Would closure of Redigi be enough to settle the claims against the two individuals, or is Capitol out to make an example in this this case?
On the other hand, it’s possible that the founders of Redigi were well-advised before starting this company, and that they put their personal assets beyond the reach of creditors. Redigi made much of the fact that its technology was vetted and approved by a legal team before they released their service. Hopefully, this included a strategy to frustrate Capitol’s attempt to reach their personal assets.
Capitol Records v. Redigi – First Amended Complaint
September 2, 2014 Order Denying Motion to Dismiss Ossenmacher and Rudolph
by Lee Gesmer | Sep 6, 2014 | Copyright
Oracle faces a tough call following the Ninth Circuit’s August 29, 2014 decision in Oracle Corp. v. SAP AG. Should Oracle accept the $ 356.7 million in copyright damages the Ninth Circuit authorized on appeal, or roll the dice for a new trial, gambling that it can do better?
I’ve written about this case before (see Oracle and SAP Avoid a Retrial, Go Directly to Appeal, in the Other “Tech Trial of the Century”). As I discussed in that September 2012 post, in 2010 Oracle won a record $1.3 billion copyright infringement jury verdict against SAP. However, the trial judge held that the jury’s “hypothetical-license” damages award was based on undue speculation, and ordered remittitur, reducing the judgment to $272 million, and giving Oracle the choice of accepting that amount or retrying its damages case. Oracle and SAP then entered into a complex stipulation that allowed the parties to avoid an immediate retrial and permitted Oracle to appeal the district court remittitur order. The terms of the stipulation were as follows:
- The district court entered final judgment for $272 million. (This did not include interest or the $120 million in attorney’s fees that Oracle had already been paid by SAP).
- However, Oracle agreed not enforce the judgment until all appeals are concluded.
Now, assuming Oracle does not appeal to the Supreme Court, decision day has arrived for Oracle. The Ninth Circuit rejected Oracle’s appeal that it reinstate the $1.3 billion, but did up the amount the district court had arrived at on remittitur ($272 million) by $84.7 million to $356.7 giving Oracle the choice of accepting that amount to end the case, or proceed with a new damages trial.
The heart of the Ninth Circuit’s decision is its holding that while a plaintiff in a copyright infringement case is not required to show that it would have 
licensed the infringed material to recover on a hypothetical license theory (an argument pressed by SAP, since it was undisputed that Oracle would never have licensed the work at issue to SAP), Oracle had failed to present sufficient non-speculative evidence to support the jury’s award of $1.3 billion. This left Oracle with the maximum amount the evidence established based on an alternative damages theory — Oracle’s lost profits plus SAP’s illegal profits — an amount the Ninth Circuit concluded was not $272 million, but $356.7 million.
My prediction: fast and furious negotiations will commence, and the case will settle. Oracle’s chances of recovering materially more than $356.7 million on retrial, given the Ninth Circuit opinion, are negligible, given that Oracle probably put on the best “lost profits/illegal profits” case it could at the first trial. However, Oracle’s chances on improving on that number are not zero, so Oracle will probably be able to obtain more than $356.7 million in a negotiated settlement, but not a great deal more. The settlement is likely to be private, so we may never know the precise amount.
Caveat: Larry Ellison gets to make the call on this for Oracle, and he might be more likely to roll the dice on a retrial than your average CEO.
Oracle Corp. v. SAP AG (9th Cir. August 29, 2014)
[Update, November 18, 2014. As predicted, the case has settled, reportedly for $359 million, just a hair more than the $356.7 million ordered by the Ninth Circuit].
