Star Athletica v. Varsity Brands – Supreme Court Ruling’s Impact

By Michael Small

 

In a recent Supreme Court case regarding the compatibility between clothes and copyright, Star Athletica v. Varsity Brands, the justices ruled in favor of Varsity Brands in a 6-2 decision, holding that the Defendant’s cheerleading uniform designs are protectable under copyright because they were deemed conceptually separable[1] from the uniform.  This decision answered the question brought to them by Star Athletica’s petition,[2] to which they state the following regarding the compatibility of copyright on clothes using the conceptual separability test:

A feature incorporated into the design of a useful article is eligible for copyright protection only if the feature (1) can be perceived as a two- or three-dimensional work of art separate from the useful article, and (2) would qualify as a protectable pictorial, graphic, or sculptural work—either on its own or fixed in some other tangible medium of expression—if it were imagined separately from the useful article into which it is incorporated.[3]

When placed into the context of the cheerleading uniforms, the justices noted that the surface decoration of the cheerleading uniforms are separable and when alone, allows them to appear as a pictorial, graphic, or sculptural work.  When the separated decorations are applied to any other medium, they would be considered a two-dimensional work of art.  Therefore, Varsity’s designs on their cheerleader uniform are protectable under copyright.

The initial case began in 2015 when Varsity Brands sued Star Athletica under copyright infringement of their cheerleader uniform designs, which are registered in the Copyright Office from the drawings and photographs taken of the outfits.  The district court ruled in favor of Star Athletica, agreeing with their argument that copyright could not be applied to the utilitarian nature of the uniform, regardless of how unique the patterns are on the uniform.  Varsity Brands successfully filed for appeal in the Sixth Circuit and the lower court’s decision was reversed.  The Sixth Circuit ruled in favor of Varsity Brands, holding that the design patterns are copyrightable as the photography made the designs into “pictorial, graphic, or sculptural works,”[4] which is protectable under the Copyright Act.  Star filed for a writ of certiorari in 2016, arguing that the Sixth Circuit’s decision “allows roundabout copyrighting of garment designs masquerading as separable decorative features, preventing competition and inviting new copyright claims for all manner of garments … based solely on the arrangement of stripes and color blocks.”[5]  Ultimately Star Athletica’s argument aimed to dismiss Varsity Brand’s copyright hold on their outfits.  The writ was approved and the case ascended to the U.S. Supreme Court.  The final decision was made in March 2017, in which the U.S. Supreme Court ruled in favor of Varsity Brands, thus concluding the issue.

Prior to the U.S. Supreme Court’s ruling, clothing design is not protectable by copyright law because clothes serve a utilitarian purpose and are identified as useful articles;[6] they keep the customer warm, covered, and protected from the elements.  The functionality of clothing outweighed the creative intent of any design added to the garment, and are therefore not applicable for copyright.  This is the same reason why most clothes cannot be protected by utility patents, although design patents and trademarks may apply on a case-by-case basis (e.g., purses and shoes, large logo T-shirts).  This lack of intellectual property (IP) protection meant that new, creative designs for clothes released in businesses such as the fashion industry, are prone to receiving knockoff versions being sold afterwards, often flooding the market with multiple copies of similar, but lower quality goods.  These knockoffs enter the market after or even before the original design is ready for sale, stealing profits from the original designer.

The U.S. Supreme Court’s ruling on this case will likely have a major impact on the fashion industry.  Fashion designers have been given a tool supported by the U.S. Supreme Court that can be used to argue that the conceptual nature of a design in their product can be protected under copyright by using the conceptual separability test.  This logic can give fashion designers an incentive to clamp down on the copycat/knockoff industry that manifested in the fashion industry due to being a copyright-free environment.  This would make it more difficult for copycat/knockoff designers to make and sell products in a market where copyright is enforced, thus returning profits to the original designers.  Although there is no bill that guarantees protection of clothing design, the conceptual separability test approved by the U.S. Supreme Court could be used to help grant designers the copyright protection they want for their works.  If the design concept can be separated from the clothing design and appear as a two-dimensional work, a copyright can be applied to a clothing design.

While the ruling may provide copyright benefits for the fashion industry, not all are in support of the potential impact.  Up until this ruling, the fashion industry maintained itself somewhat efficiently without the protection required from copyright.  In fact, there are arguments that support the lack thereof for copyright, stating that such an implementation would damage innovation for designers.  Previous attempts to make fashion design copyrightable through legislative bills such as the Innovative Design Protection Act (2012) and the Design Piracy Prohibition Act (2007) have been met with opposition from independent fashion designers and businesses alike, making them fail to pass in Congress.  Some argue that it would be impossible to make an original design from scratch because designers learn and become influenced from other creations.  Therefore, copying is essential in fashion design to promote innovation and new takes on fashion under Raustiala and Sprigman’s Piracy Paradox argument.[7]  Others are more concerned that designers would focus more on the risk of copyright litigation rather than making interesting designs, reducing innovation and creativity in the fashion design industry.  In addition, legal costs for fashion designers can rise should they consult with a lawyer regarding fashion design and copyright, which could indirectly lead to a rise in prices of clothes and designs for the consumer overall.  Finally, enforcement of copyright protection may not be a viable option due to the fast-paced nature of fashion design, where the ‘next big thing’ is only from months to less than a year away, as opposed to the length and complexity of filing a copyright litigation and going to court.  With an industry that has adapted to having limited IP protection since the Copyright Act’s implementation, arguments against copyright in the fashion industry center around the problem that its incorporation could severely damage the industry’s economic and creative value now and in the future.

Despite the opposition against implementing copyright into the fashion industry, the U.S. government has shown interest in the past to make such an introduction.  It could be argued that the Star Athletica v. Varsity Brands U.S. Supreme Court ruling is a representation of this interest, giving designers a tool to use should they feel that their design is being infringed.  The effort to include fashion design for copyright protection would also strengthen the U.S.’s global market to attract foreign direct investment, as several countries in Europe have their own copyright laws for fashion design, such as France and Germany.  This is further reinforced by the presence of the European Union (EU), which grants 25 years of design copyright protection for all its 28 member states.  The protection granted by the EU makes it viable for fashion design companies concerned about copycat/knockoff designs to doing business overseas in the EU’s member states than in the U.S.  The outcome of Star Athletica v. Varsity Brands could garner interest from politicians and businesses to try and compile another bill to include fashion as copyrightable, allowing the U.S. to garner interest in some fashion designers that were wary of the previous copyright-free area of clothing design.  At the same time, however, companies that relied on the copyright free environment for designing outfits, such as certain sports teams or other artists, would have to put resources into redesigning the product so that their goods do not infringe on the original copyright.  An introduction of a bill that would enforce an immediate change without a smooth transition could have a drastic effect on the fashion design industry, for better or worse.  The impact of the Star Athletica v. Varsity Brands ruling has yet to be fully measured as the decision was just made and there are not many cases that have tested the U.S. Supreme Court’s conceptual separability test.   It is very likely that a rise of copyright litigations will occur that will test the extent of the copyright protection granted to clothes by the conceptual separability test from both individual fashion designers and businesses.  Once its protection range has been analyzed, it will become easier to analyze the aftermath of the Star Athletica v. Varsity Brands ruling.

[1] “In its statutory form, the separability inquiry asks whether the aesthetic features of a useful article can be identified separately from, and can exist independently.”  See Barton Keyes, Alive and Well: The (Still) Ongoing Debate Surrounding Conceptual Separability in American Copyright Law, Ohio State Law Journal, 69 (109), (2012), http://moritzlaw.osu.edu/students/groups/oslj/files/2012/04/69.1.keyes_.pdf.

[2] “What is the appropriate test to determine when a feature of the design of a useful article is protectable under § 101 of the Copyright Act?”  See Star Athletica, L.L.C., v. Varsity Brands, Inc., Varsity Spirit Corporation, and Varsity Spirit Fashions & Supplies, Inc., On Petition for a Writ of Certiorari to the United States Court of Appeals for the Sixth Circuit, (2016).

[3] See Star Athletica, L.L.C. v. Varsity Brands, Inc., et al., 580 (U. S. Supreme Court, 2017), https://www.supremecourt.gov/opinions/16pdf/15-866_0971.pdf.

[4] See Varsity Brands, Inc. v. Star Athletica, LLC, 799 F.3d 468, 471 (6th Cir. 2015).

[5] See Petition for a Writ of Certiorari at 31, Star Athletica, LLC v. Varsity Brands, Inc. (Jan. 5, 2016) (No. 15-866), http://www.scotusblog.com/wp-content/uploads/2016/05/SACP.pdf.

[6] “A ‘useful article’ is an article having an intrinsic utilitarian function that is not merely to portray the appearance of the article or to convey information. An article that is normally a part of a useful article is considered a ‘useful article’.”  See 17 U.S.C. § 101.

[7] The Piracy Paradox argument revolves around the idea that the nonstop changing trends of fashion in the fashion industry is made aware of by the consumer, such as not wearing what everyone else is wearing, or the constant demand for new products even after acquiring new products.  This awareness makes copying a viable option that helps drive faster innovation in design, sales, and competition more than enforcing copyright or other forms of IP protection. See Kal Raustiala and Christopher Sprigman, The Piracy Paradox: Innovation and Intellectual Property in Fashion Design., Virginia Law Review, 92, (Nov. 13 2006), p. 1687-1777.

Fair Use Doctrine

By Michael Small

 

The Copyright Office defines Copyright as the exclusive right for a person (mainly the author) to reproduce, publish, sell, or claim ownership of his or her original works of creation under Section 106 of the Copyright Act of 1976.[1]  The copyright symbol (©) identifies the work as protected to the copyright owner and the audience.  This intellectual property right grants protection to the author’s creative works such as literature, music, drama, arts, or architecture upon the creation of his or her product in a fixed media.  This protection remains valid until the owner’s death plus 70 years.  Afterwards, the work becomes public domain, which allows for anyone to use the work for any purpose.  However, to prevent potential conflict with the First Amendment’s grant of freedom of speech, religion, and the press, the court created the fair use doctrine as a check and balance to copyright’s power.

The Fair Use Doctrine is a declaration that allows the usage of copyrighted works without permission from the author under certain conditions.  If the court determines fair use, then a court will void a copyright infringement and dismiss the case.  The fair use doctrine applies mainly to transformative works, which either comment upon, criticize or make a parody out of the existing work.  It also provides protection for limited usage of copyrighted works, such as using the material with intent for educating, broadcasting in news, or for researching purposes. The court weighs four factors in a fair use determination/assessment:

  1. The purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;
  2. The nature of the copyrighted work;
  3. The amount and substantiality of the portion used in relation to the copyrighted work as a whole; and
  4. The effect of the use upon the potential market for or value of the copyrighted work.[2]

 

Another set of guidelines monitor the usage of copyright material in education.[3]  For fair use to apply in an educational setting, the usage must take place in a classroom setting or similar area of instruction, occur face-to-face with the instructor in person, and take place in a non-profit educational institute.  Therefore, the fair use defense protects copyrighted works displayed or performed in a classroom setting.  However, it is prohibited to distribute copyrighted work unless the first sale took place between the teacher and publisher/owner of the copyrighted good.[4]

Purpose and character of the use

The intent to use a copyrighted work by anyone other than the owner is the first determinant.  This factor takes into consideration several aspects: whether the user of the work intended to receive a profit; if it was distributed for free or sold in commerce; if it was derived/transformed by changing the meaning of the original work; or if value was changed by adding in different information, aesthetics, and point of view.  The more a work comments/critiques or radically transforms and differentiates itself from the original work, the more viable the fair use defense.  For example, in Campbell v. Acuff-Rose Music, Inc., Campbell sued the 2 Live Crew over unauthorized usage of Roy Orbison’s “Oh, Pretty Woman,” in the defendant’s song, “Pretty Woman.”  Although the Defendant frequently used the ‘heart’ of the song “pretty woman,” the court ruled in favor of Acuff-Rose Music Inc.[5]  The court classified the Defendant’s song as a parody of “Oh, Pretty Woman.”  Specifically, the court found that 2 Live Crew took a more comical, raunchier approach to the song, changing lyrics beyond the first few lines, and mocking the original version in its context.  Therefore, the court found the work protectable under the fair use defense as a parody, despite its commercial nature.

Nature of the copyrighted work

The court also considers the type of information that the individual copies for fair use.  In this context, a court will likely find that information that is factual in nature, such as biographies, scientific information, and research is less likely to be infringing compared to more creative, original works like art, music, and entertainment.  In addition, whether the author publicized the work or not is also added in as a weighing factor, with the usage of unpublished work being a higher risk of copyright infringement due to the author’s right for first to publicize.[6]

Amount and sustainability of work taken

The amount of the copyrighted work that one takes from the creator also plays a factor in determining fair use.  Small portions of a work, such as a quote or a few seconds of a video, are generally considered fair use, unless argued otherwise.  The larger the proportions of the taken work, the more likely a court will find that someone infringed a work.  The type of media (music, painting, etc.) in which infringement took place all have different limits of toleration for used content, most of which can be argued for or against proof of infringement, depending on the case.  If the portion of a taken work is minimal in comparison to the overall work, a copyright case could be dismissed as de minimis.  For example, a developer copying 30 characters from a work that contains 70 pages worth of code would be de minimis.  However, if the portion used is from the ‘heart’ of the work, such as a major passage in the book or the chorus of music, it will be more likely that the material is infringing a copyright, regardless of the quantity taken.

Impact on the market for the owner

Similar to a trademark, judging how much of an impact a good produced outside of the owner’s jurisdiction may have an effect on the market the owner does business in.  This is the last major factor that contributes to judging whether infringement took place.  If the reproduced good is sold outside of the owner’s knowledge for profit, it is very likely that infringement took place because the owner is deprived of the profit earned from the sale outside his jurisdiction.  This infringement remains consistent even if the copyright owner had not considered making the good in a different media and market of the original work.[7]  For example, a painting based off a photograph may be at risk for infringing the photographer’s rights because the photograph’s existence revealed a potential market for future painters.

Other factors

A judge or jury’s opinion will vary from case to case because the determination for copyright infringement is based off subjective analysis of the four factors.   The most common factor for this judgement is whether the infringer takes the copyrighted material in good or bad faith.  Courts consider whether the individual takes a work with the knowledge that someone else created it or uses a work when the copyright holder directly denied the individual permission to use the work.  In the above scenarios, the court would likely find infringement in bad faith.

In contrast, when an individual acknowledges the source material (citations, references, etc.) or provides a visible disclaimer to the ownership of the copyrighted work that he/she uses, a court will likely find infringement in good faith, which may positively impact the jury’s determination of fair use.  However, the judgment between the value of faith is subject to change depending on the context of the lawsuit and the morality of the judge and jury.

Fair use outside of copyright

Fair use is not exclusive to copyright.  In commerce, a company can use another trademark without permission from the owner under the Lanham Act.  The Lanham Act outlines the following conditions for fair use:

  1. Any fair use, including a nominative[8] or descriptive fair use, or facilitation of such fair use, of a famous mark by another person other than as a designation of source for the person’s own goods or services, including use in connection with—
    1. advertising or promotion that permits consumers to compare goods or services; or
    2. identifying and parodying, criticizing, or commenting upon the famous mark owner or the goods or services of the famous mark owner.
  2. All forms of news reporting and news commentary.
  3. Any noncommercial use of a mark.[9]

 

Therefore, a company using another company’s mark is fair use if the infringer uses the taken mark for comparative advertising with their own mark, commentary, news reporting, or parody, similar to the fair use doctrine in copyright.

For patents, a limited fair use is applicable only for pharmaceutical patents under the Hatch-Waxman exemption.[10]  Originally known as the Drug Price Competition and Patent Term Restoration Act of 1984, this Act proclaims that there is no infringement for patents that are government regulated generic drugs.  The court ruling of Merck KGaA v. Integra Lifesciences I, Ltd[11] further extends this protection to preclinical studies such as pharmaceutical research and experimentation using said drugs.  A court will likely find that usage of pharmaceutical patents in these conditions by inventors or companies are fair use and thus exempt from patent litigation.

Degradation of fair use concern

There is concern that the term and usage of fair use is misrepresented from its original use as free speech to an excuse for infringement, especially in the court system.  For example, in Cariou v. Prince,[12] the district court found that the defendant’s artwork infringed on the plaintiff’s copyright because the work did not comment upon the Plaintiff’s book of photographs,[13] causing a major backlash in the art community regarding transformed works.  The major concern found in the backlash focused on arguing what degree an artist’s work would have to be modified to comment upon the original copyrighted material.  The Second Circuit eventually repealed the decision, holding in favor of Prince because the initial reading neglected measuring the transformative degree the defendant’s work went through in comparison to the plaintiff’s photographs.[14]  Despite the reversal of the initial court’s decision, it did not change the fact that the district court ignored the transformative nature of Prince’s work when considering the fair use defense, exposing evidence of the fair use defense’s degradation in the court system.

Conclusion

            Copyright’s main purpose is to promote the progress of science and useful arts through granting owners exclusive control of their works.[15]  The fair use doctrine offers a challenge to copyright’s intent by questioning whether the promotion is best served by allowing the use of copyrighted material rather than preventing it.  The public views both sides with a negative reception.  Some argue that copyright gives too much control to copyright owners, with its creators restricting the usage of their work to avoid criticism or negative reception affecting their productivity.  Others argue that fair use is nothing more than an excuse for infringement, allowing anyone to take credit from the work of others will little to no drawback.  Despite the negative public view on both intellectual property rights, both views share the same purpose of benefitting the public and promoting the arts and sciences.  The dispute between copyright and the fair use doctrine is a reoccurring conflict of check and balances between protection of property and freedom of expression.  By debating these intellectual property rights in the courts, there is both innovation and further amendments to the legal system regarding copyright and fair use, along with an introduction to new creative works that challenge their validity.  Therefore, regardless of the outcome, the fair use defense is key to allow both businesses and the public to benefit from the use of a copyrighted work.

[1] See U.S. Copyright Office, Circular 1, Copyright Basics, 1 (May 2012).

[2] 17 U.S.C. § 107.

[3] See 17 U.S.C. § 110.

[4] Once a copyrighted good is sold to a consumer, the consumer is free to sell, display, perform, or dispose of the copy without the copyright owner’s permission.  See 17 U.S.C. § 109.

[5] See Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 579 (1994).

[6] See Deborah R. Gerhardt and Diane K. Kjervik, Protect Your Right to Write Again: Tips for Assuring that Your Publication Agreement is a Comfortable Fit, 12 J. Nursing L., 124, 124 (2008).

[7] See Rogers v. Koons, 960 F.2d 301 (2d Cir. 1992) (holding that defendant’s sculpture, which was based on plaintiff’s photograph, infringed the plaintiff’s rights, as the photograph’s existence marked a potential market for sculptures, despite the plaintiff’s use of photography).

[8] Nominative fair use is identified as the following: The use must accurately refer to the owner of the trademark or the goods or services sold under the trademark; The use must not imply any endorsement or sponsorship by the trademark owner; There should be no easier way to refer to the owner or its products; and Only so much of the trademark can be used as is needed to identify the trademark owner and no more.  See Chad J. Doellinger, Nominative Fair Use: Jardine and the Demise of a Doctrine, 1 Nw. J. Tech. & Intell. Prop. 66 (2003).

[9] See 15 U.S.C. § 1125.

[10] See 35 U.S.C. § 271 (e)(1) (“It shall not be an act of infringement to make, use, offer to sell, or sell within the United States or import into the United States a patented invention … solely for uses reasonably related to the development and submission of information under a Federal law which regulates the manufacture, use, or sale of drugs or veterinary biological products.”).

[11] See Merck KGaA v. Integra Lifesciences I, Ltd., 125 S. Ct. 2372 (2005) (noting that Section 271(e)(1) does not exclude experimentation on drugs under FDA submission or use of patented compounds for experimenting on drugs).

[12] See Cariou v. Prince, 714 F.3d 694 (2d Cir. 2013).

[13] See Cariou v. Prince, 714 F.3d at 704 (discussing the decision of the lower court).

[14] Id. at 707-08.

[15] U.S. Const. art. 1, § 8, cl. 8.

The Aereo Decision

By Evan Jensen

The Aereo decision gives the impression of the Supreme Court twisting itself into knots to find a reason why Aereo is infringing. And ultimately the Court decided to help broadcasters kill off the competition, rather than push broadcasters to innovate.

On June 25 the Supreme Court’s decision in the ABC v Aereo case came down.[1] The Supreme Court sided with ABC and the other broadcasters against Aereo. In its opinion, the Court held that Aereo’s transmissions are public performances and that therefore Aereo is infringing on copyrights owned by ABC and the other petitioners.

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Introducing Stein McEwen LLP Fall 2012 IP Training Program October 1-19, 2012

 Stein McEwen LLP is pleased to announce that it will be hosting an intellectual property training program from October 1-12 with an add-on session from October 15-19, 2012 in Washington DC.

 The purpose of the Stein McEwen LLP Fall 2012 IP Training Seminar is to provide an overview of U.S. Intellectual Property Law, including patents, trademarks, copyrights, and trade secrets. The lectures will cover fundamentals of patent procurement, with optional sessions extending to the scopes of trademarks and copyrights, IP licensing, and IP litigation. A series of lectures will be presented by Stein McEwen LLP attorneys regarding these subjects, including workshops for the participants to receive hands-on experience.  These workshops will include activities such as reviewing disclosures of an invention and drafting sample claims to cover the subject matter of the invention. Tours of the U.S. Patent and Trademark Office, the U.S. Court of Appeals for the Federal Circuit, and a U.S. District Court will allow the participants an opportunity to understand the complexities of these agencies and courts.  At the U.S. Court of Appeals for the Federal Circuit, the participants will likely have an opportunity to observe a portion of a hearing involving patents. The IP Training Seminar is intended to provide a broad-based understanding of U.S. Intellectual Property Law, with a strong emphasis on patents. The already-implemented and still-to-take-effect provisions of the Smith-Leahy America Invents Act (AIA) will be woven throughout the syllabus.

 

Who Should Attend?

In-house staff members of corporate IP departments, patent attorneys, staff members of overseas law firms, inventors, and members of academia who deal in some aspect of IP.

Basic understanding of patent law for at least one country is recommended. No formal registration of any country’s patent office is required.

More information can be found at www.smiplaw.com/seminar_ipt.cfm.

If you have any questions, please contact Sarah Brogi at sbrogi@smiplaw.com or SM2012training@smiplaw.com.

President of Restaurant and Lounge Is Found Personally Liable For Unlicensed Public Music Performance

By Evelyn Li

The United States Court of Appeals for the Ninth Circuit affirmed a California district court’s granting of a summary judgment in favor of plaintiff-appellees for a total of $203,728.22. The judgment included a statutory infringement damage of $4,500 for each of the 8 infringements ($36,000), and attorneys’ fees and costs in the amount of $167,728.22. Plaintiff-appellees, Range Road Music, Inc. together with Sony/ATV harmony, Williamson Music Company and several other music companies (“Music Companies”) sued East Coast Foods, Inc.(“East Coast”) and its president Herbert Hudson for copyright infringement after collecting evidence through an independent investigator, Scott Greene, on unlicensed public performances of music owned by the Music Companies. Scott Greene was retained by American Society of Composers, Authors, and Publishers (ASCAP) to visit the restaurant “Long Beach Roscoe’s” owned by East Coast to investigate whether copyright infringement was likely occurring at the venue. Greene’s report identified eight songs, which were later confirmed by ASCAP as owned by the Music Companies, which were publicly performed in the restaurant during his visit. In addition to the report, the Music Companies also showed that ASCAP had repeatedly requested the East Coast to pay licensing fees between 2001 and 2007.

The defendants appealed to the Ninth Circuit after the district court granted summary judgment for the Music Companies and awarded damages as well as attorneys’ fees and costs against East Coast and Hudson. The Ninth circuit then reviewed the district court’s grant of summary judgment de novo both on the issue of the district court’s evidentiary ruling and the award of attorneys’ fees, and it found both judgments to be proper.

The main issues discussed by the Ninth circuit was (1) whether the district court erred in granting summary judgment for the Music Companies on its complaint of vicarious liability for copyright infringement; (2) whether East Coast and Hudson can be held liable for vicarious infringement; and (3) whether the district court’s award of attorney’s fees and costs to the Music Companies was an abuse of discretion.

The court found the Music Companies’ complaint sufficient because, first, they adequately provided specific evidence to raise a plausible inference that East Coast and Hudson exercised control over and financially benefitted from the infringing performance at the Long Beach Roscoe’s; and, second, the Music Companies provided sufficient evidence to establish a prima facie case of copyright infringement with no genuine issue of material facts. To reach the conclusion on whether the Music Company’s complaint was sufficient, the court explored the case law in Metro-Goldwyn-Mayer Studio Inc. v. Grokster, Ltd., 545 U.S. 913 (2005) and Twentieth Century Music Corp v. Aiken, 422 U.S. 151 (1975) to find that a vicarious infringer “profits from direct infringement while declining to exercise a right to stop or limit it” and, “The entrepreneur who sponsors such a public performance for profit is also an infringer—direct or contributory.”  Then, the court went on to discuss whether Scott Greene’s uncontested declaration was sufficient to establish that no genuine issue of material fact existed as to the Music Companies’ claim. East Coast and Hudson argued that Greene’s declaration was inadmissible because it was “expert testimony by a lay witness.” However, the court disagreed by stating that “identifying popular songs does not require ‘science, technical, or other specialized knowledge’ (Fed. R. Evid. 702).” Furthermore, the court mentioned “many of Greene’s identifications did not even require him to tax his memory: the live band announced the titles of several of the compositions they covered, and Greene transcribed other titles directly from a CD jewel case.”

In addition, the court found the argument raised by East Coast and Hudson that the Music Companies’ evidence of copyright infringement was inadequate due to a lack of showing on “substantial similarity” between the compositions performed at Roscoe’s and the copyrighted works to be a red herring. Under Funky Films, 462 F.3d 1072 (9th Cir. 2006), a demonstration of substantial similarity is only necessary to prove infringement “absent evidence of direct copying.” Accordingly, the court found no genuine issue of material fact existed because there were substantial proof of direct copying in this case.

Thus, the court concluded that the district court was correct in granting summary judgment for the Music Companies on the complaint of vicarious liability for copyright infringement.

Turning to the second issue on East Coast and Hudson’s liability for the infringement, the court looked to Perfect 10. Inc. v. Amazon.com, Inc., 487 F. 3d 701 which states that a defendant “exercises control over a infringer when he has both a legal right to stop or limit the directly infringing conduct, as well as the practical ability to do so.” Applying the facts in this case, the court found that East Coast and Hudson not only “exercised control over both the Long Beach Roscoe’s and the Sea Bird Jazz lounge,” but they also have “derived a financial benefit from the musical performances in the lounge.” Therefore, the court concluded that the district court properly held that Hudson and East Coast were jointly and severally liable for copyright infringement. Although Hudson and East Coast demonstrated that they are not proper defendants because Hudson has never owned the Long Beach Roscoe’s, the court found such argument to be “unsubstantiated and self-serving.”

On discussing the third issue on whether the district court’s award of attorney’s fees and costs to the Music Companies was an abuse of discretion, the Ninth Circuit relied on Entm’s Research Grp., Inc. v. Genesis Creative Grp., Inc., 122 F.3d 1211 (9th Cir. 1997) and 17 U.S.C. § 505 to find that the district court “properly applied factors set forth in Entertainment Research Group and articulated a reasoned explanation for its fee award.” Besides, the court also mentioned that such liability could have been avoided if East Coast and Hudson had purchased a license during the seven years in which ASCAP “importuned them to do so.” Also, the court found that the obfuscation of the corporate structure of Roscoe’s caused much of the fees and costs for East Coast and Hudson as well.

In conclusion, the Ninth Circuit affirmed the district court’s decision as to all the above mentioned three issues. East Coast and Hudson will be most likely paying the Music Companies a total of $203,728.22 for the unlicensed music performance in the public.

President of Restaurant and Lounge Is Found Personally Liable For Unlicensed Public Music Performance

By Evelyn Li

The United States Court of Appeals for the Ninth Circuit affirmed a California district court’s granting of a summary judgment in favor of plaintiff-appellees for a total of $203,728.22. The judgment included a statutory infringement damage of $4,500 for each of the eight infringements ($36,000), and attorneys’ fees and costs in the amount of $167,728.22. Plaintiff-appellees, Range Road Music, Inc. together with Sony/ATV harmony, Williamson Music Company and several other music companies (“Music Companies”) sued East Coast Foods, Inc.(“East Coast”) and its sole officer and director Herbert Hudson for copyright infringement after a collection of evidence through an independent investigator, Scott Greene, on unlicensed public performance of music owned by the Music Companies. Scott Greene was retained by American Society of Composers, Authors, and Publishers (ASCAP) to visit the restaurant “Long Beach Roscoe’s” owned by East Coast to investigate whether copyright infringement was likely occurring at the venue. Greene’s report identified eight songs, which were later confirmed by ASCAP as owned by the Music Companies, which were publicly performed in the restaurant during his visit. In addition to the report, the Music Companies also showed that ASCAP had repeatedly requested the East Coast to pay licensing fees between 2001 and 2007.

The defendants appealed to the Ninth Circuit after the district court granted summary judgment for the Music Companies and awarded damage as well as attorneys’ fees and costs against East Coast and Hudson. The Ninth circuit then reviewed the district court’s grant of summary judgment de novo both on the issue of the district court’s evidentiary ruling and the award of attorneys’ fees, and found both judgments to be proper.

The main issues discussed by the Ninth circuit was (1) whether the  Music ‘ complaint was sufficient for a granting of summary judgment (2) whether East Coast and Hudson can be held liable for vicarious infringement; and (3) whether the district court’s award of attorney’s fees and costs to the Music Companies was an abuse of discretion.

The court found the Music Companies’ complaint sufficient because first they adequately provided specific evidence to raise a plausible inference that East Coast and Hudson exercised control over and financially benefited from the infringing performance at the Long beach Roscoe’s; and second the Music Companies provided sufficient evidence to establish a prima facie case of copyright infringement with no genuine issue of material facts. To reach this conclusion, the court explored the case law in Metro-Goldwyn-Mayer Studio Inc. v. Grokster, Ltd., 545 U.S. 913 (2005) and Twentieth Century Music Corp v. Aiken, 422 U.S. 151 (1975) to find that a vicarious infringer “profits from direct infringement while declining to exercise a right to stop or limit it” and, “The entrepreneur who sponsors such a public performance for profit is also an infringer—direct or contributory.”  Then, the court went on to discuss whether Scott Greene’s uncontested declaration was sufficient to establish that no genuine issue of material fact existed as to the Music Companies’ claim. East Coast and Hudson argued that Greene’s declaration was inadmissible because it was “expert testimony by a lay witness.” However, the court disagreed by stating that “Identifying popular songs does not require ‘science, technical, or other specialized knowledge’ (Fed. R. Evid. 702).” Furthermore, the court mentioned, “many of Greene’s identifications did not even require him to tax his memory: the live band announced the titles of several of the compositions they covered, and Greene transcribed other titles directly from a CD jewel case.”

In addition, the court found the argument raised by East Coast and Hudson that the Music Companies’ evidence of copyright infringement was inadequate due to a lack of showing on “substantial similarity” between the compositions performed at Roscoe’s and the copyrighted works to be a red herring. Under Funky Films, 462 F.3d 1072 (9th Cir. 2006), a demonstration of substantial similarity is only necessary to prove infringement “absent evidence of direct copying.” Accordingly, the court found no genuine issue of material fact existed because there were substantial prove of direct copying in this case.

Thus, the court concluded that the district court was correct in granting summary judgment for the Music Companies on the complaint for copyright infringement.

Turning to the second issue on East Coast and Hudson’s liability for the infringement, the court looked to Perfect 10. Inc. v. Amazon.com, Inc., 487 F. 3d 701 which states that a defendant “exercises control over a direct  infringer when he has both a legal right to stop or limit the directly infringing conduct, as well as the practical ability to do so.” Applying the facts in this case, the court found that East Coast and Hudson not only “exercised control over both the Long Beach Roscoe’s and the Sea Bird Jazz lounge,” but they also have “derived a financial benefit from the musical performances in the lounge.” Therefore, the court concluded that the district court properly held that Hudson and East Coast were jointly and severally liable for the copyright infringement. Although Hudson and East Coast demonstrated that they are not proper defendants because Hudson has never owned the Long Beach Roscoe’s, the court found such an argument to be “unsubstantiated and self-serving.”

On discussing the third issue on whether the district court’s award of attorneys’ fees and costs to the Music Companies was an abuse of discretion, the Ninth Circuit relied on Entm’s Research Grp., Inc. v. Genesis Creative Grp., Inc., 122 F.3d 1211 (9th Cir. 1997) and 17 U.S.C. § 505 to find that the district court “properly applied factors set forth in Entertainment Research Group and articulated a reasoned explanation for its fee award.” Besides, the court also mentioned that such liability could have been avoided if East Coast and Hudson had purchased a license during the seven years in which ASCAP “importuned them to do so.” Also, the court found that the obfuscation of the corporate structure of Roscoe’s caused much of the fees and costs for East Coast and Hudson as well.

In conclusion, the Ninth Circuit affirmed the district court’s decision as to all the above mentioned issues. East Coast and Hudson will be most likely paying the Music Companies a total of $203,728.22 for the unlicensed music performance in public.

eBay Reseller of OEM Software Denied First Sale Defense

By Zi Wang

In Adobe Sys. v. Hoops Enter. LLC (N.D. Cal. 2012), the court rejected the first sale defense asserted by an eBay reseller of original equipment manufacturer (OEM) copies of software, drawing a distinction between licenses and sales of copyrighted works.

Adobe sued the defendants for copyright infringement, alleging that the defendants sold OEM copies of Adobe software through the use of eBay and other websites.  The defendants countersued Adobe for a declaratory judgment of copyright misuse.  In particular, the defendants contended that Adobe’s assertion of copyright protection contravened the first sale doctrine, as codified in 17 U.S.C. § 109.  The defendants also asserted the first sale doctrine as an affirmative defense.

The defendants obtained OEM copies of Adobe software that had been unbundled from the hardware with which they were originally packaged, such as Dell and Hewlett-Packard computers.  The defendants then re-bundled the software with items such as a piece of photo paper, a blank DVD, or a media card reader without Adobe’s authorization, and resold it online.

Adobe stated that it distributes its copyrighted software pursuant to licensing agreements that restrict the use, location of distribution, transfer and sometimes who is qualified to obtain the product, and does not transfer title to the software at any time.  Under Adobe’s licensing agreements applicable to OEM copies, these copies may not be unbundled and sold separately or re-bundled with products not approved by Adobe.

The defendants proffered evidence of Adobe’s licensing agreements with Dell and Hewlett-Packard.  The court included details of the Dell agreement in its opinion as an example.  The agreement contains following provisions and restrictions:

Dell is granted a license.

Dell is required to obtain a similar agreement with any third-parties prior to authorizing or sublicensing the software to them.

Adobe retains ownership of intellectual property rights in the software and places substantial restrictions on Dell’s use of the software.

Dell is prohibited from promulgating the software through specified means and requires that the software be bundled with specified Dell hardware.

Dell is obliged to take steps to prevent resellers from selling the software separately from this hardware.

Dell is required to include Adobe’s end-user license agreement with the hardware in such a way that the user can read it before accessing the software media and must include Adobe’s “copyright and proprietary notices.”

The court followed the Ninth Circuit’s holding in Vernor v. Autodesk, Inc., 621 F.3d 1102 (9th Cir. 2010) that the first sale affirmative defense is unavailable to those who are only licensed to use their copies of copyrighted works.  The court also adopted a three-prong test set out in Vernor:  A software user is a licensee rather than an owner of a copy where the copyright owner (1) specifies that the user is granted a license; (2) significantly restricts the user’s ability to transfer the software; and (3) imposes notable use restrictions.

Accordingly, the court found that the first sale doctrine does not apply to the Adobe OEM software at issue because Adobe licenses, rather than sells, its OEM software.

Take-Away Points:  Copyright owners are well advised to utilize carefully drafted licensing agreements and maintain sufficient control over the copyrighted works in order to maximize their rights under copyright law.  End-users of software products that come with computer hardware should be put on notice that they cannot assume that they “own” their copies of such software and their rights vis-à-vis these copies may be curtailed by licensing agreements between software vendors and hardware manufacturers.

“Sharing the Sandbox”

By Dan McPheeters and Michael D. Stein

In our previous posts, we covered the pitched-battle between content producers on the one hand, and content distributors and access providers on the other. Specifically, we focused on an element in the enforcement provision of the Stop Online Piracy Act that was almost singularly responsible for the outrage among the latter group and spurred the internet blackout on January 18th. Roots of this battle date back to the middle of the last decade, and SOPA itself may have been the direct result of the enormously influential decision from the Southern District of New York in Viacom v. YouTube. In our fourth and final post (for now) on this topic, we look to whether this battle shows any signs of abating, and whether that would be a good thing for consumers.

One of the truly unique features to the outcome of the SOPA debate (at least thus far) has been the identity of the losers: the “Hollywood” lobby is, to put it bluntly, not used to losing. This is an important place to start when evaluating possible “next steps.” SOPA (and PIPA) supporters are a who’s who of D.C.’s powerful lobbies, including the RIAA, MPAA, and the U.S. Chamber of Commerce, to name but a few. A measure of their commitment can been seen not only in their pursuit of this specific goal since at least 2005 (or, according to some, even earlier than that), but in the fact that the U.S. Chamber of Commerce was willing to lose the likes of Yahoo! as a member and square off against another member, Google, in order to support these two bills. Let there be no doubt: supporters of these two bills are not simply going to fold up and walk away from this issue. However, given the sheer muscle displayed by the content distributors, it would seem likely that a détente may be the only option from both perspectives.

There are many ways in which the parties can find a way to coexist in the boundless space of the internet. Whether devising new ways of segmenting content into greater parts (thus creating a windfall for both parties by increasing both the amount of product and the amount of product requiring access), ramping up direct-to-consumer distribution channels, or outright collaboration in a way that exploits the comparative advantages of each group, there is most certainly room for the two parties to work together and generate enormous value.

However, the first step has to be an end to the types of legislative provisions and rhetorical battles that threaten the distributors’ business models, and with it the modern internet itself (see the comments from the President of the RIAA). And it is precisely the magnitude of this threat that may prolong this battle for the foreseeable future, with all the value of harmony lost with it. People locked in a Mexican stand-off on Monday are highly unlikely to play squash together on Tuesday. But is this a bad thing?

The crux of the internet blackout, and the tremendous level of support it received from average users, was not the result of some sinister smear campaign by the Snidely Whiplashes employed by Facebook and Google. The beauty of Web 2.0 centers around the ability of users to participate in the creation of content, whether by creating YouTube videos that fall within fair use, or the ability of talented but disconnected artists to better market their work (Justin Bieber, anyone?). Regulating when a Twilight spoof on YouTube crosses the line from fair use to infringement is a worthy goal, and pursuing clearer lines and easier enforcement rules are goals for which content producers can hardly be begrudged. But SOPA and Viacom went further, and in a way that made it facially apparent that other motives were at play. In overreaching, the high-ground was forfeited and the vox populi responded.

The response by consumers and the parties themselves suggests two positives arising from the aftermath of this issue. First, as with any market, the fact of near- and medium-term competition between producers and distributors will result in innovations by both parties that increase content production and drive down prices. Whether direct-to-consumer marketing that bypasses the overhead of the traditional broadcasters, or a wider variety of producers in general as distributors realize they can exploit their built-in access advantages by financing an increase in the amount of content, consumers will gain from this fight as more content is delivered at reduced costs. Second, and more importantly, the likelihood that Hollywood will try an access-killing approach such as the enforcement provisions of SOPA and the primary argument in Viacom has to be seen as remote, at least in the near-term. What this means is refocusing on the goal of clarifying the lines of copyright infringement itself. Because Web 2.0 is inherently about the democratization of content creation, this focus on clarifying the associated property rights will benefit everyone by reducing the ambiguities and uncertainties in the law, the effect being to strengthen the value of those rights to the creators. The result is an enormous increase in wealth to everyone involved.

The modern internet saved itself by defeating SOPA, but content producers have no shortage of Megaupload-type cases to bandy about as examples in the next round. Meanwhile, the public appears unwilling to sacrifice the greater access that Web 2.0 provides them; whether the reasons are economic or expressive, it seems unlikely that content distributors will have imposed on them the type of contributory infringement liability argued for in Viacom. All of which is to say that consolidation may be the next and best step to take for both parties. Clearly, distributors like Google need to demonstrate that the notice and takedown feature of the DMCA works as an effective means to police piracy, if for no other reason than winning the political debate over whether “enough” is done to protect IP. Producers likewise need to regroup and abandon the contradictory argument that vigorous ownership rights should be supported by collective enforcement duties. Instead, producers should focus on developing better means of preemptive protection and engage in a concerted effort to clarify the rules surrounding property rights, especially rights concerning active distribution and derivative works.

Royalty Fee? Wasn’t Peter and the Wolf Free?

By Rob Lower and Michael Stein

Summary

In Golan v. Holder (Decided 18 January 2012) the Supreme Court upheld the constitutionality of amendments to US copyright law made in 1994. The practical effect of the holding is that the authors of foreign works may receive copyright protection for works in the public domain.

In 1994, Congress amended 17 U.S.C. §104A to bring the US into compliance with the Berne Convention for the Protection of Literary and Artistic Works, an international treaty joined by the US in 1989. Under Berne, member countries must provide all other member countries with the same level of copyright protection available to their own citizens.

While there is little opposition to providing foreign authors with US copyright protection, the decision to provide such protection for works in the public domain has been the subject of much criticism.

Affected Foreign Works

There are three circumstances under which US authors could have received copyright protection in the US, while foreign authors could not. The Court stated this could have occurred if the “United States did not protect works from the country of origin at the time of publication; the United States did not protect sound recordings fixed before 1972; or the author had failed to comply with U.S. statutory formalities . . . “

 Who Sued?

This lawsuit was brought by a group of orchestra conductors, musicians, publishers, and others (Petitioners) who may now be forced to pay royalties before performing foreign works such as Prokofiev’s Peter and the Wolf.

Petitioners argued that removal of works from the public domain would unduly interfere with Petitioners’ First Amendment free speech rights, and that removal of the works from the public domain would exceed the authority given to Congress in the Copyright Clause of the Constitution. The Court dismissed both of these arguments, citing the Court’s own precedent and past grants of retroactive copyright protection by Congress.

Supreme Court Precedent — Eldred v. Ashcroft

The Court leaned heavily on its own 2003 Ashcroft decision in dismissing Petitioners’ arguments. In Ashcroft, the Court upheld the constitutionality of a 20 year extension of copyright protection for works that had never reached the public domain. While Ashcroft clearly supports extending the time remaining before works enter the public domain, the Court had to reach beyond Ashcroft to find support the extension of copyright protection to work already in the public domain.

Petitioner’s First Amendment Free Speech Rights

Petitioners maintained that the First Amendment’s freedom of expression guarantee would be offended by retroactive grants of copyright protection. Specifically, Petitioners argued that Ashcroft did not support interference with Petitioners’ “vested rights” in works in the public domain.

The Court acknowledged that “some restriction on  expression is  the  inherent  and  intended effect of every grant of copyright,” before concluding that “built-in First Amendment accommodations” such as the “idea/expression dichotomy” and “fair use” defense adequately protected Petitioners’ free speech rights. Golan, p23–24.

The Copyright Clause

Petitioners also argued that Congress had exceeded both the authority delegated to them in the Copyright Clause, and the scope of the copyright term extension approved in Ashcroft.

The Court cited the Copyright Act of 1790 as a past grant of “protection to many works previously in the public domain.” Prior to the 1790 Act, copyright regulation was a matter of state law, and because three states provided no copyright protection in 1790, the 1790 Act allowed authors in those states to remove their works from the public domain.

The Copyright Clause empowers Congress “[t]o promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.”  Art. I, §8, cl. 8.

Petitioners argued that because the works being removed from the public domain have, by definition, already been created, an unanticipated windfall for foreign authors cannot promote the progress of science. Petitioners also argued that removal of works from the public domain would likely result, effectively slowing the progress of science.

Although the creation of existing works cannot be inspired by a post-creation windfall, Petitioners’ focus on this narrow class of works seems too constricted to address the panoply of ways the progress of science can be promoted.

For example, providing a foreign author copyright protection for his or her past writings could incentivize investment in the dissemination of works presently unavailable in the US. By the same token, retroactive copyright protection could incentivize dissemination of previously created works in new languages and formats (e.g., Kindle). This conclusion is fortified by the United States’ stature as the world’s largest economy, likely able to incentivize the creation of new works along with further dissemination of past works in more consumable formats.

Finally, the progress of science can also be advanced by providing US authors with reciprocal intellectual property rights in Berne countries that have previously disregarded US intellectual property rights, citing the United States’ noncompliance with Berne as a reason.[1] 

Conclusion

Providing foreign authors with the level of copyright protection that has been available to domestic authors seems to be a rational means of “promot[ing] the Progress of Science“ here in the US.


[1] “Thailand and Russia balked at protecting U. S. works, copyrighted here but in those countries’ public domains, until the United States reciprocated with respect to their authors’ works.” Golan, p6.

“It’s Like Déjà Vu All Over Again”

By Dan McPheeters and Michael Stein

Yesterday (presuming you read serials in order), we looked at the lines drawn in the private sector between supporters and opponents of the now-tabled Stop Online Piracy Act. We posited possible overriding concerns for each side, and wondered whether we might have seen this fight once before – like that time when a group of content providers sued a tiny search-engine company over a home-video website it had purchased the year before. All kidding aside, the titanic Viacom v. YouTube lawsuit was in many ways the prequel to the current debate, and the 2010 opinion denying the plaintiffs’ claims may very well have been the catalyst for advancing the legislation now known as SOPA.  Continue reading