Judge Zobel Affirms Statutory Damages Award Against Joel Tenenbaum

by Lee Gesmer | Aug 29, 2012 | Copyright

Not surprisingly,  Massachusetts District Court Judge Rya Zobel has allowed the $675,000 statutory damages award against Joel Tenenbaum to stand in full. The background of this case is well known to many people, but the nutshell version is as follows.

Joel Tenenbaum was sued by Sony in 2007.  Sony alleged copyright infringement with respect to Tenenbaum’s download of 30 digital music files.  Harvard Professor Charles Nesson undertook the pro bono defense of Tenenbaum, and the case went to a jury trial, at which the jury awarded $675,000, 15% of the potential statutory maximum. The trial judge, Nancy Gertner (now retired from the bench), reduced this award to $67,500, concluding that it was excessive under the constitutional standard for evaluating punitive damages.  The First Circuit reinstated the verdict, and remanded the case to the district court, with instructions to consider the verdict under the principles of common law remittitur before considering a constitutional challenge. Tenenbaum appealed this decision to the Supreme Court, which declined review. On remand the case was assigned to Judge Zobel, who issued her decision on August 23, 2012.

Judge Zobel found that the evidence supported the jury verdict, and therefore declined Tenenbaum’s request that she remit the verdict. Judge Zobel’s decision summarizes the somewhat damning evidence against Tenenbaum, including his disregard of multiple warnings, and that he may have lied during the legal proceedings. Apparently, Tenenbaum blamed the downloads on a foster child living in his family’s home, his sisters, a family house guest, and burglars, before finally admitting responsibility at trial. (Downloading burglars?)

Judge Zobel also rejected Tenenbaum’s challenge to the verdict on grounds of constitutional due process, using the standard set forth in St. Louis, I.M. & S. Ry. Co. v. Williams, as had been suggested by the First Circuit.  Under this standard, as described by Judge Zobel –

a statutory damages award comports with due process as long as it “cannot be said to be so severe and oppressive as to be wholly disproportioned to the offense or obviously unreasonable.” The constitutionality of the award must be assessed “with due regard for the interests of the public, the numberless opportunities for committing the offense, and the need for securing uniform adherence to” law.

Judge Zobel held that the jury’s statutory damages verdict was “neither ‘wholly disproportioned to the offense’ nor ‘obviously unreasonable.’ It does not offend due process.”

Where will this case go from here?  Most likely Tenenbaum will re-appeal to the First Circuit, seeking review of Judge Zobel’s due process ruling.  From there, it’s on to a second try with the Supreme Court.

Sony v. Tenenbaum (D. Mass. August 23, 2012)

First Circuit Copyright Decision in Society of the Holy Transfiguration

by Lee Gesmer | Aug 7, 2012 | Copyright

Copyright cases involving translations of ancient religious texts are rare, but in its August 2, 2012, 75 page opinion in Society of the Holy Transfiguration Monestary v. Archbishop Gregory of Denver, the First Circuit addresses many issues of modern copyright law in a case involving just that.  The issues the First Circuit discusses include the transfer of copyright ownership by operation of law, the consequences of publication without copyright notice prior to March 1, 1989, the requirement of originality in derivative works, substantial similarity analysis (along with its many sub-doctrines), the requirement that the accused infringed have engaged in “volitional conduct,” the DMCA and fair use.

While not making new law in any of these areas, this case is a good round up of copyright law in the First Circuit.

Is It Copyright Infringement, or Is It Something Else?

by Lee Gesmer | Aug 1, 2012 | Copyright

One of the thorny issues that comes up in copyright cases is whether a dispute actually falls under federal copyright law.  What the plaintiff may claim to be copyright infringement the defendant may argue is a breach of contract, or vice versa. If copyright law does control, any state law claim based on rights that are the equivalent of those protected by the Copyright Act are preempted, and must be dismissed. A common example is breach of contract: if copyright law applies, a claim for breach of contract is likely to be preempted.

The consequences of a ruling one way or the other on this issue can have strategic consequences (whether the case proceeds in federal or state court) or substantive (the standard for liability, or the measure of damages). One context in which this issue arises involves idea submission – where the plaintiff pitches an idea idea hoping to persuade the recipient to purchase the idea for commercial development.  When the defendant allegedly uses the idea to create a copyrightable work, is the claim one of copyright infringement or breach of an “implied contract”?

This was the issue in Forest Park Pictures v. Universal Television Network, Inc., decided by the Second Circuit in June.   Actor Hayden Christensen had pitched Universal on a TV show about a concierge doctor to the rich and famous.  He claimed that Universal breached an “implied contract” when it created the series Royal Pains, and then refused to compensate him.   Universal argued that the dispute should be governed by copyright law, and therefore any state law claims (such as Christensen’s claim for breach of implied contract) were preempted.  The Second Circuit disagreed with Universal (and the trial court), holding that a breach of implied contract claim concerning an idea was not preempted by copyright law, and therefore the case could proceed on the state law theory of breach of an implied contract.

One strategic consequence, in the context of this case, is that it may be more difficult for a defendant to persuade a court to dismiss an implied contract case case before trial, than a copyright case. In this regard, see my recent post, noting that the courts are receptive to a motion to dismiss a copyright claim if a comparison of the original and alleged infringing works can resolve the question of substantial similarity.  Therefore the ruling in this case likely favors the plaintiff’s ability to avoid dismissal before trial.

Forest Park Pictures v. Universal Television Network, Inc.

Fourth Circuit Upholds Copyright Damages Based on Sales Abroad Under Rarely Applied “Predicate Acts” Doctrine

by Lee Gesmer | Jun 8, 2012 | Copyright

It is a well-known principle of copyright law that the Copyright Act has no extraterritorial reach.  For example, a U.S. copyright holder cannot bring suit for copyright infringement, in the U.S., against individuals or companies who reproduce and sell, outside the U.S., software, music CDs, DVDs or other copyright-protected works.

What if, however, the initial infringement occurs in the United States, and the infringer distributes infringing copies outside the U.S.?  For example, what if an employee illegally copies an employer’s software program in the U.S., transports it to France (either on physical media or electronically), and sells it in Europe?  May the U.S. copyright holder recover damages based on lost profits or infringer profits in Europe?

Surprisingly, this “infringe locally/sell abroad” issue has rarely come up under copyright case law in the U.S.  Until recently, only two courts have addressed it under the current copyright statute, the Second Circuit in 1988 (Update Art v. Modin) and the Ninth Circuit in 1998 (L.A. News Service v. Reuters).  However, in each of those cases the courts did permit recovery of damages arising from overseas infringing uses as long as the “predicate act” of infringement occurred within the United States, enabling further reproduction abroad.  By a “predicate act,” these courts meant simply that if the initial infringement took place in the U.S. and the foreign violations were directly linked to that infringement, then damages could be based on foreign sales.

This is what happened in Tire Engineering and Distribution, LLC. v. Shandong Linglong Rubber Co., a case decided by the Fourth Circuit in early June 2012.  The facts of this case (somewhat simplified) involved the copying of designs for specialized tires for underground mining vehicles.  The designs were copied in the U.S. by former and current employees of the plaintiff and provided to the foreign defendants, who sold infringing products abroad.  The case proceeded to a jury trial in Virginia, where the trial court instructed the jury that it could find damages based upon infringement that occurred outside the United States, if those infringing acts “were a consequence or result of predicate infringing acts that occurred inside the United States.”  The jury awarded the plaintiff $26 million in damages under this theory.

The Fourth Circuit upheld this verdict, holding that a plaintiff could invoke the predicate act doctrine by showing a domestic violation of the Copyright Act and damages flowing from foreign exploitation of that infringing act.  In this case, the reproduction of the plaintiff’s blueprints in the United States constituted the predicate act necessary to satisfy this standard.

While this case involved a somewhat unusual fact pattern, it points out a legal doctrine that few lawyers are aware of, but which may be applicable in an interconnected world where markets for copyrighted works are international.  The plaintiff’s lawyers in this case might easily have concluded, mistakenly, that their client would be unable to recover damages based on infringing sales outside the U.S.  Instead, they utilized a little-known principle of copyright law, proceeded through trial hoping that it would be applied in their case, and on appeal persuaded the Fourth Circuit (which had never before addressed this issue) to adopt the predicate-act doctrine.

 Tire Engineering and Distribution, LLC. v. Shandong Linglong Rubber Co. (4th Cir. June 6, 2012)

Hey Dude, That Program’s Mine! Vernor v. Autodesk

by Lee Gesmer | Sep 17, 2010 | Copyright

You’re out cruising garage sales on a hot summer Sunday morning when you spot an unopened copy of AutoCAD sitting on a card table for $40 – 40 buckeroos for a program people spend $700 for new.  Yeah, it’s a couple of versions back, but you figure you can get $340 for it on eBay, and not break a sweat.  You buy it from the clearly clueless seller, and the next thing you know you’re watching bids come in at over $300.  Except that Autodesk, proud owner of this high-end computer aided design program, objects.  You don’t own that program, they say, we licensed it to the original seller, and she had no right to sell it, no right at all.  You are infringing our copyright by reselling the software, so take it off eBay right now, Autodesk’s lawyers insist in a hand delivered, “sign-here-to-acknowledge-receipt-sir” letter.  In the meantime, they’ve sent eBay a DMCA take-down notice and eBay has killed your sale.

(more…)

Decision in Viacom v. YouTube: Dog Bites Man (Mark Cuban was wrong)

by Lee Gesmer | Jun 25, 2010 | Copyright

Despite all the hoopla, this week’s copyright decision in Viacom v. YouTube (link on Scribd) was predicatable – a decision in the opposition direction would have been a shocker.  Viacom accused YouTube (owned by Google) of massive copyright infringement.  The court dismissed the case on summary judgment in favor of YouTube.

Of course, there is no question that copyright infringement is taking place on YouTube every instant of the day.  The court noted that video is being uploaded to YouTube at the rate of 24 hours per minute.  My calculator tells me that this is over 12.6 million hours of video per year.  It’s no secret that people are uploading copyright material at a fantastic rate – a search of YouTube will find that almost any popular song can be located.  it’s a simple matter to download the clip (either video of just audio), and share it with friends or on peer-to-peer networks.   YouTube “ground zero” for online copyright infringement.

However, as I’ve noted in the past, the Digital Millenium Copyright Act – the DMCA – is a federal law that protects publishers such as YouTube as long as they follow the DMCA’s “notice and take-down” procedures (aka “whack-a-mole”), which YouTube has faithfully done.  Thus, YouTube was able to claim that it followed “the letter of the law” and therefore its conduct fell within this statutory safe harbor.

Southern District of New York Federal District Court Judge Louis L. Stanton rejected Viacom’s argument that YouTube was aware of, and ignored, massive copyright infringement by YouTube users.  The DMCA, the judge held, does not permit Viacom to establish liability based on “a general awareness that there are infringements.”   The DMCA requires specific knowledge, and when YouTube had that knowledge (usually based on notice from Viacom), it “took down” the copyrighted work.

The atmospherics of the case were also helpful to YouTube.  Unlike music sharing sites like Grokster, which were shown to have been aware of infringement but turned a blind eye to it (See Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913 (2005)), there were very few “smoking gun” emails uncovered by Viacom in discovery, so YouTube was able to credibly argue that it was not encouraging or turning a blind eye to infringement. (more…)