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Know when to hold ’em, know when to fold ’em … (Aereo)

It’s difficult to read Aereo’s section of Aereo and ABC’s July 9, 2014 joint letter to the U.S. District Court without experiencing a good dose of disbelief.

Until the Supreme Court issued its decision in ABC v. Aereo on June 25, 2014 (earlier blog post on that decision), Aereo insisted that it was not a cable company entitled to a compulsory license under Section 111 of the Copyright Act (17 U.S.C. section 111(c)). Aereo denied it was a cable system in filings with the district court and in its brief to the Supreme Court. At oral argument Justice Sotomayer questioned whether Aereo was a cable company, and Aereo’s attorney responded –

Now, we are not a cable service. The reason we’re not a cable service is because cable takes all signals and pushes them down. There’s a head in. It’s defined by statute. There’s a very particularized regulatory structure that deals with taking a lot of content and pushing it down to consumers. Aereo is an equipment provider.

However, after the Supreme Court decision Aereo tried to change its stripes. In the July 9th letter it states:

The Supreme Court has now ruled that “having considered the details of Aereo’s practices, we find them highly similar to those of the CATV systems in Fortnightly and Teleprompter. And those are activities that the 1976 amendments sought to bring within the scope of the Copyright Act. … Accordingly, Aereo is entitled to a compulsory license under the Copyright Act, 17 U.S.C. § 111. And because Aereo is entitled to a license under Section 111, the transmissions Plaintiffs have sought to enjoin do not infringe Plaintiffs’ rights under the Copyright Act.

Aereo has been careful to follow the law, and the Supreme Court has announced a new and different rule governing Aereo’s operations last week. Under the Second Circuit’s precedents, Aereo was a provider of technology and equipment with respect to the near-live transmissions at issue in the preliminary injunction appeal. After the Supreme Court’s decision, Aereo is a cable system with respect to those transmissions. . . .

The Supreme Court’s holding that Aereo is a cable system under the Copyright Act is significant because, as a cable system, Aereo is now entitled to the benefits of the copyright statutory license pursuant to the Copyright Act, 17 U.S.C. § 111(c). Aereo is proceeding to file the necessary statements of account and royalty fees. By holding that Aereo is a cable system, the Supreme Court has overruled WPIX, Inc. v. ivi, Inc., 691 F.3d 275, 279 (2d Cir. 2012) to the extent it might apply to Aereo … .

The Supreme Court did not hold that Aereo is a cable system. “Highly similar,” for purposes of applying the public performance provision, yes. A cable system, no. Nor, as Aereo asserted in its letter to the court, did the Supreme Court “overrule” WPIX, Inc. v. ivi, Inc., 691 F.3d 275 (2d Cir. 2012), which held that “Congress did not … intend for § 111’s compulsory license to extend to Internet transmissions.”

It didn’t take long for the Copyright Office to point this out to Aereo. After the Supreme Court decision Aereo submitted royalty and filing fees of approximately $5,000 (about 1% of revenue) to the Copyright Office. In a July 16, 2014 letter the Copyright Office’s General Counsel, citing WPIX v. ivi, advised Aereo that “in the view of the Copyright Office, internet retransmissions of broadcast television fall outside the scope of the Section 111 license.”

To make matters worse (for Aereo), Aereo faces a double hurdle: under the federal Communications Act Aereo must negotiate and obtain “retransmission consent” from broadcasters, a process which, for reasons Jeff John Roberts explains on Gigaom, puts Aereo in an economically hopeless position.

Clearly, the decision-makers at Aereo are not fans of Kenny Rogers, or they would know it’s time to either walk away or to run.

It would be great to receive low-cost Internet access to broadcast television, but despite Aereo’s attempts to reinvent itself following the Supreme Court decision holding it to be a copyright infringer, it is extremely unlikely that service will come from Aereo.

 

Failure to Obtain or Properly File for Copyright Registration Dooms Plaintiffs in Alicea v. Machete Music

Failure to Obtain or Properly File for Copyright Registration Dooms Plaintiffs in Alicea v. Machete Music

[catch-up post] The First Circuit issued an copyright law opinion in March addressing a number of issues related to copyright law. However, the unwritten lesson of this case is that artists need to obtain ownership rights in writing. Failure to do so led to the unfavorable outcome the plaintiffs experienced in this case.

Before attempting to describe this decision (or the most interesting aspects of it), it’s worth pointing out that the First Circuit judge who wrote the opinion not only began his opinion with the famous Mark Twain quote (“only only one thing is impossible for God: to find any sense in any copyright law on the planet”), but added the comment that “Twain’s deity would fare little better with the tangled skein of copyright and contractual claims presented by the plaintiffs in this case.”

The First Circuit judge’s comment may be an understatement. The confusing facts make the decision difficult to follow. However, in essence the plaintiffs (Massachusetts musicians and producers of “Reggaeton” music) alleged that seven songs which they jointly composed and performed were modified and distributed by the defendants on the “Erre XI” album (image above), infringing the plaintiffs’ copyrights in the compositions in the songs.

The plaintiffs’ problems with this claim appear to stem from the fact that there were multiple contributors to the musical works at issue, but the artists and producers didn’t bother to enter into agreements assigning clear ownership to any one participant (or group of participants). The plaintiffs then got tangled up in the complexities of registration with the Copyright Office, and were unable to extricate themselves in time, leading to dismissal of the case.

The plaintiffs obtained registrations on four of the works (more on that below), but they hit a seemingly insurmountable obstacle when they attempted to register the compositions for three of the songs. Two years after they had filed for registration the Copyright Office still was unable to determine if the deposited recordings of these three songs were acceptable to register the compositions, and refused to issue registration certificates.*

*note: You can obtain a copyright in a composition by registering a notated copy (i.e., sheet music), or a phonorecord containing the composition. (link) In this case the plaintiffs attempted to obtain registrations based on phonorecords containing the compositions.

The reason for this refusal appears to be that that the plaintiffs had attempted to satisfy the copyright deposit requirement for compositions by submitting copies of the defendants’ allegedly infringing recordings rather than the plaintiffs’ original recordings, leading to no end of confusion at the Copyright Office.* Possibly (although the First Circuit opinion is unclear on this) the plaintiffs were unable to obtain the original recordings from the defendants.

*note: The Copyright Office described the snafu as “whether a copy of an unauthorized track, that contains the original composition embedded in the track, can be used as deposit material.” The Copyright Office explained that “in general, an unauthorized copy cannot be used as deposit material.”

The district court granted defendants’ motion for summary judgment, finding that the plaintiffs had not satisfied the registration precondition of the Copyright Act, observing that not only had they not obtained registration certificates on the three compositions, but they have not even “shown that they had submitted all the necessary application materials for registration.”

The First Circuit declined, as it has in the past, to take sides in the “application versus registration” issue. That is, before filing suit for copyright infringement must a plaintiff have completed the registration process, or is it sufficient just to have filed an application for registration? The First Circuit observed that the circuits are split on “whether the registration requirement is satisfied at the time the copyright holder’s application is received by the Copyright Office (the ‘application approach’) or at the time the office acts on the application and issues a certificate of registration (the ‘registration approach’).” However, the court was unwilling to decide the issue in this case, noting that there was insufficient evidence to show that the plaintiffs had even met the requirements for an application. Thus, the plaintiffs lost on three of the songs based on their failure to obtain a registration certificate or file a proper application.

Why did the plaintiffs lose on the four songs on which they did obtain registrations? Because, as the First Circuit explained, a musical composition and a sound recording of that composition are separate works, with their own distinct copyrights. Under the arcane registration requirements of the Copyright Office, a musical composition and a sound recording may be registered in a single application only if ownership of the copyrights in both is exactly the same, a requirement the plaintiffs admitted they could not satisfy in this case. Accordingly, the four recordings on which the plaintiffs did obtain registration were invalid.

The plaintiffs’ ineffective pleading appears to have contributed to the unfavorable outcome here. When, on appeal, the plaintiffs argued for a copyright on the sound recordings, the First Circuit noted that the allegations of the complaint were limited to the compositions. When the plaintiffs argued that the works were entitled to joint ownership, the First Circuit noted that the complaint failed to adequately allege a claim of joint ownership.

The case, which also addresses breach of contract, Lanham Act and other miscellaneous issues, is linked below.

Alicea v. Machete Music, 744 F.3d 773 (1st Cir. 2014)