by Lee Gesmer | Apr 28, 2013 | Copyright
Assume I were to take a well-known, in-copyright work of art, modify it in a variety of ways and publish the results as a coffee table book. To make this thought experiment easy, assume that the Statute of Liberty is covered by a U.S. copyright registration today—in fact, the Statue of Liberty was registered with the U.S. Copyright Office in 1876, but its registration has long-since expired. Assume I took 30 photographs of the Statue and published my book with the images modified in various ways. For example, I created collages, altered the face of the Statue and superimposed various objects on the Statue. Instead of holding a torch and a tablet, in one picture she is holding a photo of the head of Osama Bin Laden, and in anther she is holding a day-glo image of the World Trade Center buildings. In some cases I used only parts of the Statue, and in others I painted objects that obscured the face. You get the idea.
Would the sculptor be able to assert copyright infringement, or would my book be protected by the copyright doctrine of fair use? The legal question, more precisely, would be: is my use of the Statue sufficiently transformative to qualify as fair use?
An issue like this faced the Second Circuit Court of Appeals in a much-watched case, Cariou v. Prince. The court released its decision last 
Thursday, reversing a Southern District of New York District Judge’s decision that 30 images copied from Patrick Cariou’s Yes Rasta book of photographs of Rastafarians in Jamaica and modified and recontextualised by “appropriation
artist”* Richard Prince were not covered by the fair use defense to copyright infringement. The district court’s rationale for rejecting the fair use defense was that Prince’s works (contained in a collection entitled “Canal Zone”) `did not comment on, or critically refer back to, Cariou’s original works. The Second Circuit rejected this reasoning, holding that “the law imposes no requirement that a work comment on the original or its author in order to be considered transformative.”
*”Appropriation art” refers to taking photographs and other images that others have produced and incorporating them into paintings and collages that the appropriation artist then presents, in a different context, as his own.
The Second Circuit’s reversal of the district court did not come as great surprise. Prince had a seemingly strong argument that the district court had ignored established fair use principles, and had issued an injunction ordering the destruction of Prince’s works without weighing any of the free speech interests at issue. Nevertheless, the case is likely to be viewed as an important precedent in the area of fair use as applied to appropriation art. The heart of the court’s rational was stated as follows
[O]ur observation of Prince’s artworks themselves convinces us of the transformative nature of all but five, which we discuss separately below. These twenty-five of Prince’s artworks manifest an entirely different aesthetic from Cariou’s photographs. Where Cariou’s serene and deliberately composed portraits and landscape photographs depict the natural beauty of Rastafarians and their surrounding environs, Prince’s crude and jarring works, on the other hand, are hectic and provocative.
The court found that the the “composition, presentation, scale, color palette, and media are fundamentally different and new compared to the 
photographs, as is the expressive nature of Prince’s work.” The court stated that “[T]he fair use determination is an open-ended and context-sensitive inquiry.” If the original work “is used as raw material, transformed in the creation of new information, new aesthetics, new insights and understandings – this is the very type of activity that the fair use doctrine intends to protect for the enrichment of society.”
The Second Circuit concluded that 25 of the 30 Prince images were transformative as a matter of law, requiring no further fact finding (and no trial) on remand. It sent five pictures back to the lower court judge to decide whether they violated Cariou’s copyrights under the legal standard set forth in the opinion. One of the judges on the three-judge panel dissented from the majority’s decision to assess the transformative nature of some of Prince’s works, but not others, and argued that all of the works should be remanded to the district court for analysis under the proper legal standard.
Of course, the key question in cases involving “appropriation art” is how a judge or jury is to determine whether the appropriated work is sufficiently transformative. The “gray area” in cases of this sort can be large, and highly subjective. What one judge or jury may conclude is transformative, another may not, making it difficult to eliminate all risk when publishing works of this sort. Judges and juries who may have little of no art experience will be asked to make judgments as to whether a piece of appropriation art uses a sufficiently “different aesthetic” or whether it is something “new and different” than the original work. Moreover, the willingness of the Second Circuit to decide the issue of fair use as to 25 of the 30 works without providing Mr. Prince with a jury trial may encourage trial judges to decide appropriation art cases on summary judgment, adding to the trend away from jury trials in copyright cases.
Left: Patrick Cariou, Photograph from Yes Rasta. Right: Richard Prince, Graduation
Cariou v. Prince (2nd Cir. April 25, 2013)
[The images on this web page are from Richard Prince’s work, “Canal Zone.” All photos at issue in the case, both the originals and the “transformed” works by Richard Prince, are available on the Second Circuit website, here.]
by Lee Gesmer | Apr 24, 2013 | What Were They Thinking
I haven’t written a post that falls in the “what were they thinking” category for quite a while, but you don’t see this very often.
In Angiodynamics v. Biolitec AG Massachusetts federal district court judge Michael Ponsor (pictured left) entered a preliminary injunction forbidding the defendant from entering into a merger with its German subsidiary corporation, so as not to put the company’s assets outside the reach of the plaintiff. In addition to corporate defendants, the corporate defendant’s CEO, Wolfgang Neuberger, was named as an individual defendant.
The injunction order was appealed, and the First Circuit upheld the injunction. The defendant then went forward with the merger in direct violation of the court’s order.
When Judge Ponsor received the plaintiff’s motion for contempt he ordered that Mr. Neuberger appear at the hearing on that motion. Neuberger declined to attend on the grounds that he was “afraid that the Court may . . . incarcerate him.”
Based on my experience with Judge Ponsor, he is a relatively easy-going, patient judge (as federal judges go). Not in this case. In response to the plaintiff’s motion for contempt he wrote that the defendant violated the injunction “in every way it could be violated: text, substance, spirit, body, and soul.” Judge Ponsor has been on the federal bench for 25 years. He wrote that the defendants’ conduct “constitutes the most flagrantly offensive violation of a court order that this court has personally encountered.”
Judge Ponsor entered an order that, in its severity, is unprecedented in my experience:
First, he ordered that a warrant be issued for the arrest of Wolfgang Neuberger. He stated that “the court asks the marshals to do everything possible to ensure that the warrant is effectuated internationally and Neuberger is brought to stand before this court.” This warrant is not to be taken lightly. In 2012 the U.S. Marshall Service arrested 36,200 federal fugitives. The Marshall Service “sees to it that there is no safe haven for criminals who flee the territorial boundaries of the United States.” Germany will not extradite a German citizen to the U.S. for criminal prosecution, but Neuberger is subject to arrest in many other countries that do have extradition treaties with the U.S.
Second, he ordered that the defendants be fined as follows: $1 million on May 10; $2 million on June 1; $4 million on July 1; $8 million on August 1 and on the first of each month thereafter. These fines will continue until the merger is reversed and the status quo ante restored. Likewise, only then will Mr. Neuberger be released from prison (assuming he is apprehended).
Third, Judge Ponsor has requested that the U.S. Attorney’s Office prosecute Neuberger for criminal contempt.
In the meantime, the fines ordered by Judge Ponsor will continue to accumulate unless and until the merger is reversed. Whether the plaintiff will be able to enforce those fines in Germany is an open (and doubtlessly difficult) question. However, a judgment against Biolitec (whether to enforce the fines or, perhaps, a default judgment) would be a serious obstacle to the company ever selling products (lasers and laser delivery systems) in the U.S. in the future, since the plaintiff could attach or trustee process any monies owed to Biolitec by an entity in the U.S.
Bottom line, Biolitec should reverse that merger post haste. What were they thinking?
Angiodynamics v. Biolitec AG (April 11, 2013)
by Lee Gesmer | Apr 21, 2013 | Copyright
The copyright content industry has launched two no-holds-barred legal challenges against non-piratical websites that host third-party videos. That is, service providers whose intent is not obviously to induce or encourage copyright infringement and that follow the “notice and take down” rules of the Digital Millennium Copyright Act (DMCA). Until last Thursday the outcome had been a complete loss for the content industry in one case, UMG v. Veoh (9th Cir. 2013). In the second case, Viacom v. YouTube, the content owners were hanging on by their fingernails following an adverse summary judgment ruling by Southern District of New York District Court Judge Louis Stanton in 2010, followed by a largely (but not entirely) affirming decision by the Second Circuit in 2012. However, following Judge Stanton’s post-remand decision, issued on April 18, 2013, the content owners are left with a complete loss in the second case as well. Absent another appeal to the Second Circuit, Viacom v. YouTube is over.
The outcome of these two cases in the influential Second and Ninth Circuits is not only a loss for the copyright owners, but a significant level of clarification as to what hosting sites such as YouTube and Veoh should do to ward off future attempts to pierce the copyright liability safe harbors created by the DMCA.
The conclusion of the YouTube case (assuming no further appeal) is particularly significant. When Google purchased Youtube for $1.65 billion in 2006 it took a huge legal risk that it would be responsible for copyright infringement damages of as much as six times that amount.*
*Viacom alleged infringement of 63,060 video clips. Assuming the videos had been timely registered, at the maximum statutory damages of $150,000 per clip, the theoretical damages in the case exceeded $9.4 billion.
Last week’s district court decision shows that Viacom did not come close to prevailing on the issues that were the subject of the Second Circuit’s remand.
Did YouTube Have Knowledge or Awareness of Specific Infringements? The Second Circuit instructed the district court to determine whether YouTube actually knew of (or was willfully blind to) specific instances of infringement of video clips at issue in the case, or whether there were facts or circumstances indicating such specific infringement. Viacom was unable to do so. In fact, Viacom admitted that “neither side possesses the kind of evidence that would allow a clip-by-clip assessment of actual knowledge.” Judge Stanton rejected Viacom’s argument that the burden fell on YouTube to prove lack of knowledge (in effect to prove the negative), stating that the foundation for this argument was an “anachronistic,” pre-DMC concept. Given the DMCA’s statutory scheme—which places the burden on copyright holders to provide a statutory “take down” notice—the burden of showing that YouTube knew of or was aware of specific infringements could not be shifted to YouTube to disprove.
Did YouTube Willfully Blind Itself to Specific Infringement? The Second Circuit held that “the willful blindness doctrine may be applied, in appropriate circumstances, to demonstrate knowledge or awareness of specific instances of infringement under the DMCA.” This may have been the most controversial aspect of the Second Circuit’s 2012 decision. Not only is the doctrine vague, but it seems inconsistent with the DMCA’s “notice-and-takedown” procedure. The Second Circuit’s holding suggests that awareness of specific infringement may lead to infringement liability even in the absence of a take-down notice.
On remand Judge Stanton construed the Second Circuit’s holding narrowly: he held that “willful blindness” required blindness to “specific and identifiable instances of infringement.” He found that the specific locations of the infringements (the URLs) were not provided, and YouTube had no duty to look for infringing clips, even among a number as small as 450 clips. Nevertheless, the fact that the Second Circuit imported a “willful blindness” standard into the DMCA remains one of the most troubling “here be dragons”* aspects of the DMCA, and is the most obvious basis for an appeal by Viacom.
*”Here be dragons” refers to the medieval practice of putting dragons, sea serpents and other mythological creatures in uncharted areas of maps. As noted above, parts of the DMCA still remain unexplored. They are “terra incognita.”
Did YouTube Have the “Right and Ability to Control” Infringing Activity? By this point in the decision Viacom was no longer hanging on by its fingernails, it was in free fall. Judge Stanton reviewed the precedents in which service providers have been found to control infringing activity (Perfect 10 v. Cybernet Ventures (service provider provided detailed instructions regarding layout, appearance and content); Metro-Goldwyn-Mayer Studios v. Grokster (“purposeful , culpable expression and conduct” might rise to level of control under DMCA)),* and found that YouTube’s conduct satisfied neither of these standards. YouTube’s decision to exclude whole movies and TV shows, nudity and pornography, along with several other content catagories, did not rise to the level where YouTube had the right and ability to control infringing activity.
*The “purposeful, culpable expression and conduct” standard is another troublesome interpretation of the law in the Second Circuit. However, It shouldn’t be difficult for service providers to stay on the safe side of this line by avoiding the types of encouragement or inducement of infringing behavior that typified Grokster and similar cases.
Did Youtube Improperly Syndicate Clips to Third Parties? YouTube did deliver some video clips to Verizon Wireless, but they were not the clips-in-suit. Apparently some clips-in-suit were provided to Apple, AT&T and others, but this was done at the direction of users in order to enable people to access the videos in various mobiles formats. The court found this process is protected under the DMCA
Implications of YouTube and Veoh. The online copyright infringement liability provisions of the DMCA comprise a singularly complex set of rules for online copyright infringement where the offending works are posted by third parties. This amendment to the Copyright Act was signed into law in late 1998, before music and video sharing were even a twinkle in the eyes of Internet entrepreneurs. The first music file sharing system, Napster, was not released until mid-1999, and YouTube not until 2005. Neither Congress nor the copyright content industries foresaw these technologies and their impact in 1998. As a result, interpretation and application of the DMCA has been a legal battleground for the last 13 years. At first, lawsuits by the copyright content industry were like taking candy from babies—early entrepreneurs lacked the legal sophistication to avoid liability for copyright infringement, and they were easily mowed down by industry lawsuits. The Napster (2001), Aimster (2003) and Grokster (2005) cases are representative of “the early years” of DMCA litigation. The second generation cases—Veoh and YouTube, present a completely different picture. Today, it’s hard to imagine that anyone with competent legal representation would make the mistakes made by Napster, Aimster and Grokster. While, as discussed above, the “here be dragons” label may still apply to some parts of the DMCA safe harbor map, the YouTube and Veoh cases have illuminated enough of the map that online service providers can stay well clear of potential liability for third-party content, and last week’s decision in YouTube only adds to this body of knowledge.
by Lee Gesmer | Apr 16, 2013 | Copyright
Copyright owners who wish to file mass copyright suits based on a “BitTorrent Swarm” joinder theory—cases in which dozens (sometime hundreds) of anonymous defendants are joined in a single suit and then identified by serving subpoenas on their ISPs—are not welcome in Massachusetts.
I’ve written about the phenomenon of BitTorrent swarm mass copyright suits before, but it looks like the door has been all but closed to these cases in the District of Massachusetts. As a reminder, here’s how these cases work.
Assume you are the CFO of an adult movie publisher. Sales aren’t doing very well (given all the free porn on the Internet), and you’re under pressure to increase revenues. You hear about a gambit used by some other adult movie companies, and you decide to give it a try.
You know your movies are being downloaded from the Internet, infringing your copyrights. You sue a group of downloaders, all of whom are part of the same “Bit Torrent Swarm,” as “Does”—that is, anonymous defendants whose names will be substituted into the suit at a later date. You contend that the fact they are part of the same “swarm” justifies joining them all in a single case.*
*This argument relies on Rule 20(a)(1)) of the Federal Rules of Civil Procedure, which allows multiple defendants to be joined in a single case where the claims arise “out of the same transaction, occurrence, or series of transactions or occurrences.” The plaintiffs in this line of cases argue that the members of the same BitTorrent swarm fall under this rule, and therefore are properly joined.
This is is very efficient for you, since if you filed a separate suit against each defendant you’d have to pay a $350 filing fee in each case, while one suit against multiple defendants requires a one-time filing fee of $350. Not only do you save the cost of multiple filing fees, but you achieve economies of scale in the litigation itself by minimizing court appearances, consolidating discovery, and possibly conducting a single trial.
After filing suit* you request a subpoena from the court ordering the downloaders’ ISPs to disclose the downloaders’ names and addresses to you. Then, before you substitute each downloader’s real name into the lawsuit (thereby, presumably, causing the downloader no end of public scorn and humiliation), you let him or her know the suit is coming and settle each claim for five thousand dollars. Five grand here, five grand there, pretty soon you’re talking real money.
*Here is an example of a complaint showing how the anonymous defendants are identified by IP address.
Sounds too good to be true, and in Massachusetts it may be. Apart from the fact that a lot of defendants don’t roll over as easily as you might hope (“either I pay you five grand or you’re gonna tell my old lady and my employer? That’s an easy choice, dude. Can I give you their numbers?”), the Massachusetts federal judges just don’t cotton to this use of the courts. Last Fall I posted on an October 12, 2012 decision by U.S. District Court Judge William Young, who ruled that Third Degree Films could not sue 47 “Does” in one case and then use the court’s subpoena power to discover their identities. He held that Third Degree Films would have to file a separate lawsuit against each defendant. Third Degree could not use Rule 20 joinder to create a “low-cost, low-risk revenue model for the adult film companies.”*
*An earlier decision by Judge Young in this case is here.
At almost the time, on October 10, 2012, Massachusetts U.S. District Court Judge Richard Stearns dismissed a mass copyright infringement case (New Sensations, Inc. v. Does 1-201, Sept. 21. 2012), ordering that the cases be defended and litigated in separate causes of action. The same month Massachusetts U.S. District Court Judge F. Dennis Saylor issued a similar order in Third Degree Films v. Does 1-72 and Massachusetts Chief Magistrate Sorkin issued an order to show cause in a mass copyright case against 29 anonymous defendants. (Discount Video Center v. Does 1-29). In something of an understatement, Magistrate Sorkin noted that the “landscape has changed in several material respects” when it comes to the issue of joinder in mass copyright cases.
More recently, Massachusetts U.S. District Court Judge Mark Wolf signaled solidarity with these judges, questioning the right of adult film companies to use “mass copyright infringement lawsuits” to identify anonymous Doe defendants “intending to send demand letters and achieve prompt settlements for limited amounts rather than intending to actually litigate the claims asserted.”
In one case (Exquisite Media v. Does 1-35), Judge Wolf ordered the film company to address, by January 31, 2013, the legal issues implicated by Exquisite’s joinder of 35 anonymous defendants in one lawsuit (an “order to show cause”). Exquisite failed to respond, and on April 12th,Judge Wolf dismissed the case as to all 35 Does. In a second case assigned to Judge Wolf, Kick Ass Pictures v. Does 1-25, the movie publisher filed Doe suits against 25 anonymous defendants. Again, Judge Wolf issued an order to show cause. Kick Ass, like Exquisite Media, failed to respond, and on April 12th Judge Wolf dismissed this case as well.
The message is clear: the District of Massachusetts is not a receptive venue for adult film companies seeking to file mass copyright cases joining multiple defendants based on the BitTorrent swarm theory.*
*This post has not attempted to collect every mass copyright BitTorrent case in Massachusetts.
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.”
