by Lee Gesmer | Nov 28, 2018 | General, Trademark
The U.S. Supreme Court decides very few intellectual property cases. And, it accepts review of few cases from the First Circuit Court of Appeals in Boston (my circuit). So, when the Supreme Court accepts an IP case appealing a decision from the First Circuit, as it has now, I pay attention.
The case under appeal involves a narrow but important legal issue that is of interest to both the intellectual property licensing and bankruptcy communities. Here is a brief summary of what’s at issue.
The decision on appeal is Mission Product Holdings Inc. v. Tempnology LLC (1st Cir. January 12, 2018), and the issue is a mashup of trademark and bankruptcy law.
When a company files for protection under Chapter 11 of the Bankruptcy Code, the trustee or the debtor-in-possession (the “debtor”) may secure court approval to “reject” any executory contracts to which the debtor is a party. An example would be a distribution agreement for a specific term (say five years) that has not run its course. If the distributor goes into bankruptcy two years into the five year term it can “reject” the contract – it is no longer obligated to perform during the remaining years.
The debtor doesn’t get off completely free – it is left with a liability for a pre-petition breach of the contract. 11 U.S.C. § 365(g) (“[T]he rejection of an executory contract or unexpired lease of the debtor constitutes a breach of such contract or lease … immediately before the date of the filing of the petition….”). However, the other party to the contract has nothing more than an unsecured claim, and these are often worth little in bankruptcy proceedings.
There is an important exception to this rule, which leads to the issue in this case. When the rejected contract is one “under which the debtor is a licensor of a right to intellectual property,” the licensee may elect to “retain its rights … to such intellectual property,” in effect forcing the continuation of the license. 11 U.S.C. § 365(n)(1).
However, the exception presents a potential problem for licensees in one respect – the definition of “intellectual property” includes patents, trade secrets and copyrights, but does not mention trademarks, a form of intellectual property that is often the subject of license agreements. 11 USC § 101(35)(A)
The First Circuit case involved an ongoing (“executory”) trademark license, and the debtor took the position that because trademarks are not included in the list of exceptions, it was entitled to reject (terminate) a trademark license. The licensee, the other party in the case, took the opposite position, asserting that the trademark license should continue.
The licensee lost before the bankruptcy court and appealed to the First Circuit. After a review of the statutory history of the law and the policy issues involved, the First Circuit held that Congress meant what it said by omitting trademarks from the list of the kinds of intellectual property that cannot be rejected by a Chapter 11 debtor – executory trademark licenses are an exception to the exception, and they can be rejected by a debtor. Therefore, the licensee lost its ongoing trademark license.
However, this ruling set up a “circuit conflict” with the Court of Appeals for the Seventh Circuit. For reasons too detailed to go into here, in Sunbeam Products, Inc. v. Chicago American Manufacturing, LLC (7th Cir. 2012), the Seventh Circuit held that Chapter 11 bankruptcy does not entitle the debtor to terminate a trademark license.
This conflict between the First and Seventh Circuits led the Supreme Court to accept an appeal of this case. And, this is clearly a case worthy of Supreme Court review. Prospective licensees should know whether or not they will be able to continue to use a trademark if the licensor files for bankruptcy, not that it depends on where in the country the bankruptcy is filed and therefore which circuit’s law is controlling. A decision by the Court will resolve, nationwide, the status of trademark rights when a debtor rejects a license agreement in bankruptcy.
Briefing on this case has not yet begun, but the case is likely to be heard next year, and a decision issued before the Supreme Court 2018-19 term ends next June. I’ll update this post when a decision is issued. In the meantime, here is a link to the Scotusblog page for the case.
Update, May 2019: The Supreme Court ruled that a debtor may not terminate a trademark license. Link to decision.
FOOTNOTES
by Lee Gesmer | Feb 17, 2016 | General
I’m not a constitutional law expert, but I can’t help but picture this scenario.
The senate refuses to schedule confirmation hearings for an Obama Supreme Court nominee. Obama does the natural thing – he sues the Senate Republican leader, Mitch McConnell, to compel him to hold hearings. The case quickly reaches the U.S. Court of Appeals for the District of Columbia, which rules one way or the other. The case is appealed to the Supreme Court, which ties 4-4 along conservative/liberal lines. As a result of the 4-4 tie, the D.C. circuit’s ruling stands.
You never know ….
by Lee Gesmer | Sep 21, 2015 | General
Lawyers can cross examine experts by questioning them with a “learned treatise” – what a non-lawyer might describe as an authoritative book or article written by an expert in the field. For example, if a doctor is testifying at trial in a medical malpractice case, her opinion on the proper standard of medical care can be challenged, on cross examination, by showing her a “learned treatise” that conflicts with her testimony. The jury hears the quote from the book, and can take it into consideration in evaluating the weight it may give to the expert’s testimony.
This is what happened in Kace v. Liang, a wrongful death medical malpractice case. In this case the doctor-defendant was testifying. He was shown pages from the web sites of Johns Hopkins University School of Medicine and Mayo Clinic that impeached his testimony, and at the request of the attorney questioning him, he read them to the jury.
On appeal the defendant argued that the web pages did not satisfy the strict requirements associated with learned treatises under Massachusetts law, and the Massachusetts Supreme Judicial Court agreed, stating that
The content of the web pages indicates that they are not medical ‘treatises’ of any sort intended to be read and used by physicians, but rather are directed at laypersons. . . . To establish the admissibility of the statements taken from the Johns Hopkins and Mayo Clinic Web sites, the plaintiff’s counsel was obligated to show that the author or authors of the web pages was or were “a reliable authority.” . . . The credibility of Johns Hopkins and Mayo Clinic as highly respected medical institutions or facilities is not enough to demonstrate the reliability of statements on individual pages of each institution’s Web site. There is nothing to say who wrote each Web page, or whether the author of each Web page was an appropriate source of information … .
This is not to say that material on a website may never be used as a learned treatise on cross examination. As the Court noted, it is up to the party seeking to use the material to establish that it was authored by a “reliable authority,” something the plaintiff had been unable to do in this case.
Despite this holding, the Court upheld a 2.9 million dollar jury verdict in favor of the plaintiff, holding that this, and several other errors, did not result in undue prejudice to the defendant.
Kace v. Liang (Mass. Supreme Judicial Court, Sept. 10, 2015)
by Lee Gesmer | Mar 18, 2015 | General
Stephen Lyons, a friend and attorney at Klieman & Lyons, asked me to guest-lecture the Law & Technology class he is teaching at MIT this semester. I only had one class period, so I decided to focus on the 2014 Supreme Court Aereo case. Although the slides are not “stand-alone” they are somewhat self-explanatory. I am sharing them below.
MIT Copyright Seminar 3-13-2015 (Reduced File Size) by gesmer
by Lee Gesmer | Mar 21, 2014 | General
- 9th Circuit holds copyright registration of a collective work registers the component works within it. Alaska Stock v. Houghton Mifflin (link)
- The PTO held its first Public Meeting on the Establishment of a Multistakeholder Forum on Improving the Operation of the Notice and Takedown System Under the DMCA (link)
- Long-running DMCA copyright suit settles. Viacom v. Youtube (press release) (blog post)
- Parties settle remaining issues in Prince v. Cariou copyright fair use case (blog post)
- Columbia Law Prof. Jane Ginsburg’s article on EU linking decision, Hyperlinking and Infringement: The CJEU Decides (sort of) (link)
- Prof. Eric Goldman’s post on Gardner v. CafePress (copyright/DMCA case; link to case in post) (link)
- Sup. Ct. Cal., County of San Francisco, holds that Instagram’s unilateral change of terms of service is enforceable (link)
- Michael Robertson, founder of MP3Tunes, found liable for copyright infringement in SDNY trial (link)
by Lee Gesmer | Jan 17, 2014 | General, Weekly Updates
- Massachusetts district court judge O’Toole denied a motion to dismiss copyright claims based in part on foreign publication, where plaintiff asserts that the foreign conduct stems from a domestic infringement (the “predicate act doctrine“). Palmer/Kane LLC v. Houghton Mifflin Harcourt Publishing LLC
- D.C. Circuit opinion in Verizon v. Federal Communications Commission, holding that the FCC doesn’t have the authority to impose net neutrality laws on companies
- An interesting article in PetaPixel, discussing Getty Images and Agence France Presse’s motion to set aside a $1.2 million verdict obtained by Haitian photographer Daniel Morel for copyright infringement of Morel’s images of the aftermath of Haiti’s 2010 earthquake
- Dow Jones has filed a “hot news” lawsuit against Ransquawk. Techdirt has the cease and desist letter and complaint here
- The House Committee on the Judiciary continues its hearings on possible copyright reform, based on technological developments. The focus this week was on the “making available” right. Video available here. David Nimmer written statement here. A full witness list (and access to all written statements), here. For an overview on these hearings see this Techdirt article, written last May.
- The Future of Music Coalition has created a timeline of the House Committee copyright reform process through January 14, 2014. Coming up: fair use and DMCA notice and takedown
- On January 17th the American Enterprise Institute Center for Internet Communications and Technology Policy held a program titled “Tech Policy 2014: The Year Ahead.” A video broadcast of the program is available here.
- Copyright and Industrial Design Developments – 2013, by Glen Bloom and Barry Sookman and focusing on Canadian law, is available here.
- Foss Patents predicts outcome in pending CAFC appeal in Oracle v. Google API copyright case (“it’s practically inconceivable that the district court’s non-copyrightability holding will be upheld”).
by Lee Gesmer | Dec 26, 2013 | General
“ In actual life, every great enterprise begins with and takes its first step forward in faith. ” — August Wilhelm von Schlegel
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Now that Christmas is over its time to start thinking about 2014, and that means New Year’s resolutions.
The guest post below was written by my partner Jonathan Draluck and published last month on Gesmer Updegrove LLP’s BostInno channel. Jonathan didn’t write this with New Year’s resolutions in mind, but it struck me as inspirational as we approach 2014. Maybe your New Year’s resolution will be, as he writes below, to conquer your personal fears and — “take the leap.”
* * * *
School is nice. Sometimes necessary. But no education beats the school of hard knocks. All the theory and fancy degrees in the world won’t get you anywhere unless you are willing to take what you have learned and add some elbow grease.
You may not even know what melts your butter unless you’ve had a first-hand glimpse outside the frying pan. Hot in the Boston venture capital scene two decades ago, my colleague Andy Updegrove worked on enough deals to pique his aptitude in technology. He began taking an interest in the computer standards being adopted by the government. He wrote about it and then rallied loyal readers who most assuredly had not given it much thought. He is now an expert on setting standards and represents more consortia than anyone. And my scientist friend Eric Buerger models synaptic transmission at a cutting edge biotech company which studies how alterations influence diseases of the central nervous system. Curious about the business and legal side, he offered up part of his FTE to keep colleagues sitting at the lab bench and allow himself time to consider other angles.
Then there’s the raw desire to enhance your skills. For example, educators have known forever that when you write the report or prepare the presentation, you absorb new material. So when two large pharmaceutical clients wanted to run clinical trials overseas, and medical device companies sought manufacturers, I tossed the readily-available templates and put pen to paper to come up with my own form contract. As I previously wrote, it’s amazing how targeted activities can actually help you gather intelligence.
There is also no substitute for taking on a risk. You show others that you’re hungry and you are. Indeed, “skin in the game” was one of the criteria that fellow MassChallenge judges used to assess the commitment of start-up entrepreneurs. For example, when she created SitterCycle, Helen Adeosun quit her job for the school system and decided to put her master’s degree from Harvard to the test. She kicked off a business to educate and certify nannies. Nick Dougherty, also a finalist, was fed-up with the technology available to patients at hospitals and hospices. Through bootstrapping [that is, self-funding], he developed an interactive platform for patients with aphasia, Verbal App. It puts traditional bedside call buttons to shame. And Sean Kevlahan shunned the cushy job opportunities that came knocking for his Ph.D in chemical engineering. He is now co-founder and CEO of Quad Technologies, whose product can isolate stem cells from blood, economically delivering them to researchers undamaged.
So you’ve had the exposure and desire and are perhaps ready to sacrifice a salary. But if there weren’t other ingredients, everyone would be doing it! While I don’t have the secret, I’ve witnessed the phenomenon.
You have to take the leap. A year ago, I wrote about unflappable curiosity and persistence among Israeli entrepreneurs who somehow muster the moxie against odds to shake down an industry or find a cure for the uncurable. Spreading your wings could also require chemical intervention. As my law professor warned, you are green until it’s high noon in the courtroom and you’re facing down your opponent. From this I’ve deduced that part of the equation for getting good may be adrenaline. I’ve unwittingly deployed it negotiating for the little guy against Goliath and in answering questions posed by the Syrian police about my Israel affinity. Of course, you may not happen upon it unless you’ve pre-positioned yourself (in my case, objecting to a one-sided contract proposal or being in Damascus in the first place). But each person knows where she might approach her comfort edge. Like the brilliant scientist who gets stage fright when speaking in public. Getting himself ready to compete with a pitch or, more importantly, attract an investor, may constitute the required jump.
I guess this is the long way to confirm what our parents already told us. You can achieve what you set out to do. But you now have tools that you didn’t have growing up – the exposure to figure it out and the maturity and drive to take it to the next level.
by Lee Gesmer | Aug 8, 2013 | General
“The thing to fear is not the law, but the judge.” – Russian Proverb
_____________________________
Viacom has filed its opening brief in its second appeal in Viacom v. Youtube. This long-running copyright case is establishing important precedents in the interpretation of the Digital Millennium Copyright Act (DMCA).*
*See this link for my most recent post on this long-runing case.
In its current appeal Viacom argues that the trial court judge erred in granting Youtube summary judgment following remand from the Second Circuit’s 2012 decision in this case.
The appeal raises many difficult and important issues in applying the DMCA, and it remains to be seen whether the Second Circuit will add clarity or confusion to this complex law. However, one element of Viacom’s argument jumps out instantly. Viacom’s brief includes a section titled “This Court Should Exercise Its Discretion To Remand The Case To A Different District Court Judge.” The text of the argument in support of this request, in its entirety, is as follows:
Given the protracted nature of this litigation (the case is now well into its seventh year) and the evident firmness of the district court’s erroneous views regarding the DMCA, this Court should exercise its discretion to remand the case to a different judge “to preserve the appearance of justice.” E.g., United States v. Robin, 553 F.2d 8, 10 (2d Cir. 1977). Reassignment would “not imply any personal criticism of the . . . judge,” nor would it “create disproportionate waste or duplication of effort,” given that the case has yet to go to trial. Scott v. Perkins, 150 F. App’x 30, 34 (2d Cir. 2005).
Well, that takes chutzpah! If the case is remanded to the district court for further proceedings and the case goes back to U.S. District Court Judge Louis L. Stanton he will be well aware that Viacom tried to have him bounced from the case. While Judge Stanton (who has almost 30 years on the bench and is pictured above) may try not to hold this against Viacom, he’s only human, and there’s no knowing to what extent this will subtly bias him against Viacom. After all, one of the most important rules of good lawyering is try to stay on the right side of the judge.*
*That’s why lawyers invariably laugh at every joke made by a judge in their case, and even (I have seen this) research the judge’s hobbies and make subtle comments about it. If the judge’s hobbies include professional baseball, you can be sure one of the lawyers will comment, “great (tough) game last night, Your Honor.”
Given the low likelihood that the request will succeed, was asking for reassignment a prudent risk for Viacom to take? I think not. For the Second Circuit to reassign a case on remand following summary judgment is rare, so this is a long shot for Viacom. As Justice (then Second Circuit Appeals Court Judge) Sotomayor observed in 2001, reassignment on remand occurs only where there are “unusual circumstances,” such as “substantial difficulty in putting out of his or her mind previously-expressed views or findings determined to be erroneous” or to “preserve the appearance of justice.” (Martens v. Thomann). The two cases cited by Viacom (U.S. v. Robins and Scott v. Perkins) are not to the contrary.
Viacom has made no effort to show that Judge Stanton falls under this narrow exception. The only “appearance of injustice” is that the judge has ruled against Viacom in two summary judgment motions. The majority of the judge’s rulings were upheld in Viacom’s first appeal, showing that the “appearance of injustice” is often in the eye of the person receiving the justice.
If anything, the fact that Viacom v. Youtube is a large, complex and long-lived case with which Judge Stanton is intimately familiar is good reason not to remand the case to a new district court judge.
Clearly, Viacom is fed up with Judge Stanton and wants to get out of his courtroom. However, it has taken a calculated risk with low odds in its favor. By asking that its case be reassigned in the event of a remand Viacom’s lawyers are more likely to have shot their client in the foot than to have advanced its cause.
by Lee Gesmer | Jun 14, 2013 | General
“The FBI is an unindicted coconspirator in the massive racketeering case against Whitey.” – Kevin Cullen, Boston Globe, June 14, 2013
_______________
I wonder if Martin Cruz Smith had Bulger in mind when he wrote this in 1981:
The FBI doesn’t conduct investigations, they pay informers. … Their informers are mental cases and hit men. Where the bureau touches the real world, suddenly you get all these freaks who know how to kill people with piano wire. Say a freak gets caught … he tells the bureau what it wants to hear and makes up what he doesn’t know. See, that’s the basic difference. A cop goes out on the street and digs up information for himself. He’s willing to get dirty because his ambition in life is to be a detective. But a bureau agent is really a lawyer or an accountant; he wants to work in an office and dress nice, maybe go into politics. That son of a bitch will buy a freak a day. … When their freaks are finished testifying, they move them and give them new names. If the freak kills someone else, they move him again. There are psychopaths that have been moved four, five times — totally immune; they’ve got better pardons than Nixon. That’s what happens when you don’t do the job yourself, when you use freaks.
Gorky Park, p. 387-388.
by Lee Gesmer | May 10, 2013 | General
I didn’t think I’d have a chance to write another “what were they thinking” post only two weeks after the last one. But, here goes ….
I’ve written about Bittorrent swarm mass copyright suits in the past, but Monday’s decision by California federal district court judge Otis D. Wright tops everything that has come before. A lot of people have followed this case and similar cases filed by so-called “Prenda Law”—Ingenuity 13 v. John Doe. In other words, the plaintiffs in this case have made a lot of people mad.*
*Techdirt is at or near the top of this lengthy list.
The Ingenuity 13 case has been dismissed, but on Tuesday the judge issued a withering sanctions decision in the case. Here is some of what he had to say.
The opening paragraph of the opinion sets the stage for the indictment that follows:
Plaintiffs have outmaneuvered the legal system. They’ve discovered the nexus of antiquated copyright laws, paralyzing social stigma, and unaffordable defense costs. And they exploit this anomaly by accusing individuals of illegally downloading a single pornographic video. Then they offer to settle—for a sum calculated to be just below the cost of a bare-bones defense. For these individuals, resistance is futile; most reluctantly pay rather than have their names associated with illegally downloading porn. So now, copyright laws originally designed to compensate starving artists allow, starving attorneys in this electronic-media era to plunder the citizenry.
Their litigation strategy consisted of monitoring BitTorrent download activity of their copyrighted pornographic movies, recording IP addresses of the computers downloading the movies, filing suit in federal court to subpoena Internet Service Providers (“ISPs”) for the identity of the subscribers to these IP addresses, and sending cease-and-desist letters to the subscribers, offering to settle each copyright infringement claim for about $4,000. …
After that dramatic introduction Judge Wright introduces the actors in the “porno-trolling collective,” and introduces their modus operandi:
Steele, Hansmeier, and Duffy (“Principals”) are attorneys with shattered law practices. Seeking easy money, they conspired to operate this enterprise and formed the AF Holdings and Ingenuity 13 entities (among other fungible entities) for the sole purpose of litigating copyright-infringement lawsuits. They created these entities to shield the Principals from potential liability and to give an appearance of legitimacy. … The Principals’ web of disinformation is so vast that the Principals cannot keep track—their explanations of their operations, relationships, and financial interests constantly vary. …
The opinion then presents the following graphic, in an attempt to untangle the “web of disinformation” (an enlarged version of this graphic appears in the opinion):
Incredibly, since 2010 this strategy has resulted in gross settlements approaching $15 million:
This nationwide strategy was highly successful because of statutory copyright damages, the pornographic subject matter, and the high cost of litigation. Most defendants settled with the Principals, resulting in proceeds of millions of dollars due to the numerosity of defendants. …
However, there was one small problem with these cases. It appears that the plaintiff forged the copyright assignment to one of the porn films:
The Principals stole the identity of Alan Cooper (of 2170 Highway 47 North, Isle, MN 56342). The Principals fraudulently signed the copyright assignment for [porn movie] “Popular Demand” using Alan Cooper’s signature without his authorization, holding him out to be an officer of AF Holdings. …
Every conspiracy needs a henchman, and in this story it is attorney Brett Gibbs:
The Principals ordered [attorney] Gibbs to commit the following acts before this Court: file copyright-infringement complaints based on a single snapshot of Internet activity; name individuals as defendants based on a statistical guess; and assert a copyright assignment with a fraudulent signature. The Principals also instructed [attorney] Gibbs to prosecute these lawsuits only if they remained profitable; and to dismiss them otherwise. …
. . . [attorney] Gibbs, even in the face of sanctions, continued to make factual misrepresentions to the Court.
The judge then assesses sanctions, the least of which is the approximately $40,000 in attorney’s fees which he doubled to over $83,000:
The Principals, AF Holdings, Ingenuity 13, Prenda Law, and [attorney] Gibbs are liable for [over $83,000 in attorney’s fees] jointly and severally, and shall pay this sum within 14 days of this order. …
[T]here is little doubt that that [attorneys] Steele, Hansmeier, Duffy, Gibbs suffer from a form of moral turpitude unbecoming of an officer of the court. To this end, the Court will refer them to their respective state and federal bars.
The Court will refer this matter to the United States Attorney for the Central District of California. The will also refer this matter to the Criminal Investigation Division of the Internal Revenue Service and will notify all judges before whom these attorneys have pending cases. For the sake of completeness, the Court requests Pietz to assist by filing a report, within 14 days, containing contact information for: (1) every bar (state and federal) where these attorneys are admitted to practice; and (2) every judge before whom these attorneys have pending cases. …
Ouch! A few weeks ago I posted about at case in which defendants angered a Massachusetts federal district court judge (“What Happens When You Get a Federal District Court Judge Really, Really Mad”). The California judge in the Ingenuity 13 case showed that, by comparison, the Massachusetts judge was throwing cotton balls.
Seriously, theses lawyers are in big trouble with the IRS (apparently they didn’t report their settlements as income), the courts and, worst for them, the U.S. Attorney’s Office. Since lawyers from the U.S. Attorney’s Office are the prosecutors that appear before federal judges, they are unlikely to disregard a federal judge’s request that they conduct an investigation to determine whether there are grounds for criminal prosecution.
What were they thinking?
by Lee Gesmer | Apr 2, 2013 | General
As I reluctantly predicted last week, U.S District Court Judge Richard Sullivan has ruled that Redigi’s digital resale business is not protected by the first sale doctrine. His March 30, 2013 decision falls squarely in line with the arguments made by Capitol Records and rejects all of Redigi’s positions.
I have written quite a bit on this case (here and here), and there is nothing new or surprising in the court’s decision. The court described the issue before it as “the novel question . . . whether a digital music file, lawfully made and purchased, may be resold by its owner through ReDigi under the first sale doctrine.” In answering this question the court emphasized that because it is “a court of law and not a congressional subcommittee or technology blog, the issues are narrow, technical, and purely legal.” Indeed, the court hewed closely to the statute. It noted that “the plain text of the Copyright Act makes clear that reproduction occurs when a copyright work is fixed in a new material object.”* The court states that “put another way, the first sale defense is limited to material items, like records, that the copyright owner put into the stream of commerce. Here, ReDigi is not distributing such material items; rather, it is distributing reproductions of the copyrighted code embedded in new material objects, namely, the ReDigi server in Arizona and its users’ hard drives.”
*This includes phonorecords, which are the “material objects in which sounds . . . are fixed by any method now known or later developed, and from which the sounds can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device.” 17 U.S.C. § 101.
The court rejected Redigi’s claim that files on users’ computers are “migrated” to the Redigi server. It found that when a user downloads a digital music file it is “reproduce[d]” on a new phonorecord within the meaning of the Copyright Act. When that user moves the file to the Redigi server the “file has moved from one material object – the user’s computer – to another – the ReDigi server – [and therefore] an [unauthorized] reproduction has occurred.” The court rejected the argument that Redigi’s system is protected under copyright fair use, noting that Capitol does not (in this case) challenge the use of cloud-based storage lockers for personal use or convenience. “Capitol asserts only that uploading to and downloading from the Cloud Locker incident to sale fall outside the ambit of fair use. The Court agrees.”
The court concluded that Redigi is liable for direct, secondary, contributory and vicarious infringement.
According to Time magazine online, Redigi has a new and different technology that was not at issue in the case (Redigi 2.0) and plans to appeal the March 30th decision. However, here is where Redigi will find itself deep in the weeds of federal civil procedure, which presents a new set of problems. The case is not over, and among other things Redigi faces a trial on damages, which could be as much as $150,000 per infringement. We don’t know what Redigi’s sales volume is, but it’s hard to think that Redigi’s potential liability will not reach millions of dollars. However, unless an injunction is issued (the court’s opinion was not accompanied by an injunction), any appeal may have to await final judgment, which will incude damages (and potentially Capitol’s attorney’s fees). However, Redigi will not be permitted to initiate an appeal unless it firsts posts a bond in the amount of the judgment. Typically, a small start-up like Redigi can obtain a bond only by providing the bonding company a cash amount equal to the bond. It seems unlikely that Redigi has sufficient assets to afford a bond to cover a large judgment.
In addition, 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.
*In the MP3tunes case Capitol insisted on proceeding against Robertson even after Mp3tunes filed for bankruptcy.
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.”
by Lee Gesmer | Mar 16, 2012 | General
You know all those used music stores you used to love to go to back in the day when you bought music on CDs? You could browse through used CDs and buy them for less than retail. Maybe you still do (kudos to Deja Vu Records in Natick, Mass.). Of course, you can do the same thing online.
The founders of Massachsetts-based Redigi figured, why can’t we create a marketplace that will allow people to do the same thing with their digital music files? Or, as Redigi puts it: ” Sell your old songs legally – The world’s first used digital music marketplace – Buy used music insanely cheap”. However, in starting this business Redigi may have run smack into the disconnect between the U.S. copyright statute and digital media. And, it has been forced to defend against a full-on assault by the RIAA (in the form of its apparent designee, Capitol Records).
Redigi’s service launched in October 2011, and by reason of the sheer chutzpah of its business model the copyright industry (the usual ragtag collection of lawyers, industry types, bloggers, reporters and hangers-on) was soon debating the legality or illegality of its service. By early November Redigi was holding a “roll over and die” letter from the RIAA. By early January 2012 Capitol had filed suit against Redigi in the Southern District of New York.
Issue was joined quickly when Capitol filed a motion for preliminary injunction seeking, in effect, to shut Redigi down and end the case with a single, crushing legal blow. The district court denied the motion, so Redigi remains alive for now. However, the case is on a fast track – Capitol and Redigi have waived a jury trial, and the parties will be filing summary judgment motions this summer. The case is likely to be resolved before the end of the year, at least in the trial court.
(more…)
