Can Disney prevent a commercial business – in this case Redbox – from reselling Disney’s movie download codes?
At first the answer was “no.”
My earlier post on this case* highlighted the California federal district court’s February 2018 opinion concluding that the language on Disney’s box-top packages failed to create a contract that would prevent Redbox from purchasing and reselling Disney movie download codes. However, I predicted that “Likely, in the future Disney will correct its ‘box-top license’ to make it legally enforceable . ..”
*To get the background facts of this case please read the initial post
Disney did just that when it released its Black Panther combo packs. Disney’s new packaging states that “Digital code redemption requires prior acceptance of licence terms and conditions. Codes only for personal use by recipient of this combination package or family member.” A warning elsewhere on the package states that “The digital code contained in this package may not be sold separately and may be redeemed only by the recipient of this combination package or a family member. Visit [various Disney websites listed] for code redemption and other applicable terms and conditions.” A paper insert states that “This digital code is part of a combination package and may not be sold separately,” and “Digital code redemption is subject to prior acceptance of license terms and conditions.”
However, purchasers of Disney combo packs now get a double-barreled contract – when they go to one of the Disney websites to download Black Panther, they are subject to an online agreement as well. Here, they must agree to Disney’s warning that “Digital codes originally packaged in a combination disc + code packages (sic) may not be sold separately and may be redeemed only by an individual who obtains the code in the original combination disc + code package ….”
All of this legal verbiage — both the box-top license and the online license — confronts consumers purchasing the Black Panther combo packs and using the download codes online, but it is aimed squarely at Redbox or anyone else that may have the temerity to purchase and resell Disney download codes.
Based on this onslaught of contractual terms the district court concluded that Disney has successfully entered into a restrictive contract with purchasers of the Black Panther combo packs. That is, when consumers (or Redbox) buy the Black Panther combo pack containing a disk and download code they are buying a restricted license to the code, and one of the terms of that license is that they may not resell it. By reselling the codes and encouraging purchasers to use codes violative of this contract, Redbox engaged in contributory copyright infringement.
Consistent with its February 2008 opinion, the court rejected Redbox’s first sale defense on the grounds that the case does not present a “single, discrete, particular copy to which the first sale doctrine could apply.” And, an enforceable license trumps first sale in any event, although the court did not rely on this.
Although the court had applied the copyright misuse doctrine in its earlier decision, it now rejected copyright misuse based on the changes to Disney’s contract terms. Under Disney’s “old” box-top license there was no Disney-purchaser contract, and Disney’s attempt to use its online contract to restrict resale of the contents of the combo packs constituted copyright misuse. However, Disney’s new box-top agreement cured this defect, since purchasers of the combo packs were now subject to a restricted license at the point of sale.
The outcome of this case is not surprising. The district court’s earlier decision gave Disney a roadmap to what it needed to do to correct the deficiencies that caused it to lose the first time. It was a simple matter for Disney to correct its packaging and online terms to make it clear that purchasers were buying the download codes subject to a restricted license, thus blocking Redbox’s resale strategy.
The court’s ruling applies only to Black Panther, not earlier movies distributed by Disney in the old packages – those products remain subject to the court’s earlier ruling. However, if this decision stands (I doubt Redbox will appeal) Redbox’s future distributing Disney download codes appears limited. Going forward Disney will, no doubt, use the same Black Panther contract language on all of its disk/download code combo packs, and Redbox’s sale of Disney download codes will eventually dry up as new movies replace older ones in Redbox’s kiosks.
The Supreme Court accepts appeals of very few copyright cases. In the last 20 years it has decided only 14 copyright cases, and most of those involved narrow, highly technical issues of copyright law.
One of these technicalities arises out of the fact that copyright registration is a precondition to filing a copyright infringement suit. However, the Copyright Act is not entirely clear on what this means: must a copyright plaintiff obtain registration from the Copyright Office (or, in rare cases, a denial, but in any case a decision on its application) before it may file suit for copyright infringement? Or, is it enough that the plaintiff has filed an application for infringement, permitting the suit to proceed while the application waits to be acted on by the Copyright Office, a process that typically takes about eight months?
The federal circuit courts have been divided on this issue. Some circuits hold that it is sufficient to have simply filed a registration application as a precondition to filing suit; other courts have held that a would-be copyright plaintiff must wait until the Copyright Office has acted on the registration request, the so-called “registration approach.”
Why does this matter? One reason is the statute of limitations – copyright owners face a three year statute of limitations, and an owner who files an application late in this three year period risks losing the right to enforce the copyright in an infringement action because of the time needed to review an application.
Another reason may be if the copyright plaintiff is seeking a preliminary injunction and can’t wait eight months for a standard registration to be issued.
While the Copyright Office does allow expedited applications (or “special handling”), the fee for this is $800 per application (versus $35 for a normal registration, so long as the applicant can wait eight months), an expense and delay most copyright plaintiffs are reluctant to incur, particularly when many copyright suits involve more than just one work, in which case the $800/work cost can become exorbitant.
The Court of Appeals for the Eleventh Circuit had this issue presented to it in Fourth Estate Public Benefit Corp. v. Wall-Street.com, LLC. In a decision issued in May 2017 the court highlighted the circuit split over this issue, noting that the Tenth Circuit requires that the registration be acted upon, while the Fifth and Ninth Circuits require only that the application have been filed. The remaining circuits either have not opined on this issue or have given unclear (and in the case of the Seventh Circuit conflicting) guidance.
In Fourth Estate the Eleventh Circuit sided with the Tenth Circuit, holding that the law requires that the Register of Copyrights have acted on the application before a copyright owner can file an infringement action.
The copyright holder appealed to the Supreme Court, and on June 28, 2018, the Supreme Court accepted certiorari in this case. Therefore, it will likely decide this issue during the 2018-2019 Term.
The issue is not one of constitutional magnitude — rather, it is a question of reading and interpreting the Copyright Act as written and enacted by Congress, along with whatever legislative history the parties can locate that bears on Congress’ intent. The law is sufficiently ambiguous (as reflected in the circuit split) that the Supreme Court could come out either way.
It will be helpful to have this issue resolved either way, since it is common for copyright plaintiffs to have not registered their works when they first consult an attorney. The attorney is then forced to determine whether a case can be filed in their circuit while registration is pending (as noted, most circuits haven’t decided this issue, making the decision more difficult), or whether the case cannot be filed until registration is completed. The attorney must then factor in the urgency of the legal claim and decide whether to advise the client to pay the additional expense required to expedite the registration. All-in-all, an unnecessarily complicated set of decisions.
If you’re interested in following this case as briefs are filed with the Supreme Court you can do so on the SCOTUSblog page dedicated to this case. The parties’ petitions for certiorari, as well as the Solicitor General’s brief on behalf of the United States urging the Court to accept review of this case and expressing its support for the holding of the Eleventh Circuit, are already available on SCOTUSblog.
Update: The Supreme Court ruled that registration is a prerequisite to filing a copyright case. Decision here.
It’s rare to see a court conclude that a copyright owner has engaged in copyright misuse, but that’s the position in which Disney Enterprises, Inc. finds itself in its copyright case against Redbox Automated Retail, Inc.
The case is convoluted, since it involves both contract and unusual copyright law issues.
Disney sells “combo packs,” which include video disks containing Disney movies and a piece of paper containing an alphanumeric download code. The download code can be used to stream the movies online. The cover of the combo pack boxes state that the “codes are not for sale or transfer.”
Redbox began purchasing Disney combo packs and, disregarding the warning on the boxes, disassembled the packages and sold the download codes in its kiosks.
Disney filed suit and asked the court for a preliminary injunction ordering Redbox to cease reselling the download codes. The court denied Disney’s motion (link to February 2018 opinion).
There were a number of issues the court needed to parse to decide Disney’s motion. The first was whether Redbox violated a contract based on the warning on the exterior of the boxes. Based on Ninth Circuit and California law the court concluded that the warning did not constitute a “shrink-wrap license,” since it failed to warn purchasers that by opening the box they would be bound to a contract: “Disney’s phrase does not identify the existence of a license offer in the first instance, let alone identify the nature of any consideration, specify any means of acceptance, or indicate that the consumer’s decision to open the box will constitute assent.”
Thus far this is classic shrink-wrap law. The legal consequence is that purchasers were entitled to transfer (sell, give away) the disks and the download code under the copyright “first sale” doctrine.* Bottom line, Disney did not prevail on its argument that Redbox violated a license when it purchased the combo packs and sold the download codes.
*Likely, in the future Disney will correct its “box-top license” to make it legally enforceable, but it didn’t help it in this case.
There was, however, a second license that Disney could point to. The online terms of use between Disney and combo pack purchasers (an entirely independent online license) permitted consumers to download movies only if they still owned the physical disks from the combo pack sold with the download code. In other words, the online license purported to penalize consumers for exercising their first sale rights in the contents of the combo packs by denying them the right to use the download code.
Disney argued that Redbox was encouraging end users who purchased download codes from Redbox to download movies in violation of this online agreement. Disney argued that the end users were direct infringers (since, if they no longer had the disks, they had no right to download movies), and Redbox was a contributory infringer, since it enabled them to do so by selling them the codes.
This would have been a winning argument, except that Redbox asserted that by imposing this requirement Disney was engaging in “copyright misuse.” Specifically, Disney was using its copyright in the movies (its right to control downloads) to prevent consumers from exercising their first sale rights in the media contained in the combo packs.
The court bought this argument, reasoning as follows:
Under U.S. copyright law, purchasers of the combo packs were free to resell (or give away) the contents of the packs under the “first sale” doctrine.
Disney’s download services license agreement with purchasers wrongly attempted to prevent this legal conduct. In other words, it forced them to agree that they would not exercise their rights under the first sale doctrine, rights they held as owners of the combo packs.
The court concluded that “this improper leveraging of Disney’s copyright in the digital content to restrict secondary transfers of physical copies directly implicates and conflicts with public policy enshrined in the Copyright Act, and constitutes copyright misuse.”
The court rejected Disney’s argument that the doctrine of copyright misuse is limited to situations in which a copyright holder attempts to use its copyright to to obtain some power over other, non-copyrighted goods or services.
There is another twist to this case. Most of the discussion leading up to this decision (both in court filings and in the copyright community), centered around the question of whether the download codes are subject to the first sale doctrine in the first instance. Is an alphanumeric download code a “copy” subject to first sale? Redbox argued that it was, and that this was yet another reason that Disney could not control the transfer or sale of the code once it had been purchased.
The court sided with Disney on this issue, holding that the sale of a download code was not the sale of a copy that would be subject to first sale: “Disney appears to have sold something akin to an option to create a physical copy at some point in the future.Because no particular, fixed copy of a copyrighted work yet existed at the time Redbox purchased, or sold, a digital download code, the first sale doctrine is inapplicable to this case.” However, this conclusion was trumped by the court’s ruling that Disney had engaged in copyright misuse.
This case is ongoing, and I expect that the district court’s preliminary injunction ruling will be the subject of an eventual appeal by Disney.
Update: As I noted above, one option open to Disney was to revise its “box-top license” to make it legally enforceable. Disney did just this when it released Black Panther, and it brought a new motion for preliminary injunction with respect to sales of this movie. This time it prevailed. The district court issued a new decision on August 29, 2018, holding that Redbox may not sell or transfer the combo pack codes for Black Panther.
The Court of Appeals for the Federal Circuit’s second decision in the long-running Oracle v. Google copyright case is astonishing, since it is the first time a federal appeals court has reversed a jury verdict on copyright fair use. But, it’s not surprising – the CAFC telegraphed its views on Google’s fair use defense in its first decision, which held that Oracle’s Java declaring code was copyright-protected (“Google overstates what activities can be deemed transformative under a correct application of the law”).
Like its 2014 decision, the 2018 decision (decided by the same 3-judge panel) rejecting Google’s fair use defense has triggered a flood of articles analyzing, supporting or criticizing the decision.
Rather than rehash what other commentators have said about this case, here are what I see as the practical take-aways.
First, and most importantly: it ain’t over until it’s over. Google is almost certain to seek Supreme Court review (it did, unsuccessfully, after the 2014 decision – all the more reason to try again, now that it’s facing a trial on damages).
While the Supreme Court takes only a small percentage of cases, there’s a reasonable chance it will take this one. A significant factor will be whether the Solicitor General’s office argues in favor of appeal. It didn’t in 2014, arguing that the CAFC’s decision on copyrightability was correct, that the Java “declaring code” fell within the definition of a computer program —“a set of statements or instructions to be used directly or indirectly in a computer in order to bring about a certain result” — and not the exclusion for a “method of operation” or “system.”
However, the Solicitor General was more receptive to Google’s fair use argument: “legitimate concerns with interoperability and lock-in effects are better addressed through the fair use doctrine ….”
What position it will take on fair use on an appeal from the current decision remains to be seen. However, if I were Google I’d rather be seeking the Solicitor General’s support from an Obama Department of Justice than a Trump DOJ.
That said, the Supreme Court hasn’t decided a copyright fair use case in almost 25 years. It has never decided a software copyright case (although it tried in Lotus v. Borland, where it tied 4-4). This case is a good candidate for Supreme Court review, with or without the Solicitor General’s support, either on the copyrightability issue (the 2014 decision), fair use (the 2018 decision) or both. If nothing else, the Supreme Court could reverse the CAFC on the narrow ground that there were facts on which the jury could have found fair use, and therefore the CAFC went too far in usurping the role of the jury.
Second, this case was decided by the Court of Appeals for the Federal Circuit, supposedly applying Ninth Circuit copyright law. The case is not binding on any other circuit, not even the Ninth Circuit, from which it arose. It’s no secret that the CAFC is not viewed as an influential court on matters of copyright law. In fact, it gets very few copyright appeals (it’s primary role is that of an appeals court for patent cases, and even its performance in that context is controversial). Therefore, the case may have less practical impact than would have been the case if it were decided by the Ninth Circuit or the Second Circuit, the two most influential federal appeal courts on copyright matters.
This is not to say it is unimportant – at least for now, it will have persuasive force for courts adjudging the copyrightability of APIs and fair use in the context of API reproduction.
Third, every fair use case stands on its own set of facts, and therefore it’s difficult to apply precedent in this area of copyright law. This is particularly true with respect to software copyright law. This is both a negative and a positive for companies in a position similar to Google – negative in that uncertainty makes it difficult to chart a liability-free course through the shoals of fair use; positive in that future litigants can distinguish this case, which is based on facts that are highly specific. However, few companies can afford the enormous costs that Google has incurred in the defense of this case, so on balance the decision is a negative for companies seeking to copy an API without the copyright holder’s permission.
The bottom line: if a client asked me whether it could use an API such as Java without permission, I would tell them they could not, since they face a double legal hurdle: first, whatever federal court they find themselves in may follow the CAFC’s 2014 decision, and hold that they’ve violated the copyright owner’s exclusive rights of reproduction and distribution, at the very least. Even the First Circuit, which decided Lotus v. Borland in favor of Lotus on the grounds that the user commands in Lotus 1-2-3 were a “method of operation” is not necessarily safe for defendants. It’s been too long (over 25 years) and an API like Java is too different from the command structure in Lotus for a defendant like Google to feel secure in the First Circuit.
Second, the outcome of a fair use defense is always uncertain – that is baked into the very nature of copyright fair use. If the client is copying the API to achieve interoperability or to move an API to a new hardware platform, it may have a better argument than Google had with Java and Android (Google’s defense failed on both of these issues), but fair use is so unpredictable that in most cases it would be borderline negligence for an attorney to tell a client to rely on it as a defense.
On many occasions I have said that I would love to hear what Google’s copyright counsel advised Google when Google said it wanted to copy parts of the Java API and include it in Google’s Android smart phone operating system. It would be an understatement to say that this would have been very risky advice. Perhaps Google was advised that this course of action involved a big legal risk, and it concluded that the risk was justified. Regardless, unless Google can persuade the Supreme Court to reverse the CAFC, it faces a jury trial that could exceed $20 billion in damages.
You can find plenty of commentary on whether the Ninth Circuit Court of Appeals ruled correctly when it upheld a jury verdict that “Blurred Lines” infringed the copyright in “Got To Give It Up.” But another aspect of this decision has received little attention, and that is a mistake made by trial counsel for the Williams/Thicke defendants in this case.
One of the things that keeps lawyers awake at night (or should) is the risk that they will unknowingly waive a client’s legal rights. I wrote about this in 2008 (Traps for the Unwary – Waiver), and again in 2010 (Mister Softee Bitten By Waiver Under FRCP 50 ). In the 2010 post I observed that Microsoft’s failure to move for judgment as a matter of law (“JMOL” in legal jargon) under Rule 50 may have cost it several hundred million dollars.
The bottom line is that lawyers always need to be alert to the risk of a waiver.
When it comes to waivers during trial, one of the biggest mistakes a lawyer can make is to fail to move for JMOL before jury deliberations, and to then timely renew that motion after trial if the jury verdict makes it necessary. Failure to make these motions puts a losing party at a significant disadvantage on appeal: the party will be precluded from challenging the sufficiency of the evidence supporting the verdict.
This was the error in the Microsoft case, and it occurred once again in Gaye v. Williams. This was a high profile case, and it would be reasonable to expect the lawyers for Williams and Gaye (and their publisher) to avoid this mistake. The Ninth Circuit addressed their failure to file Rule 50 motions as follows:
The Thicke Parties . . . failed to make a Rule 50(a) motion for judgment as a matter of law at trial. Their failure to do so “precludes consideration of a Rule 50(b) motion for judgment as a matter of law.”
This procedural limitation is well worth underscoring. We held, in a case in which a party made an oral Rule 50(a) motion, but failed to renew its motion, that the party “waived its challenge to the sufficiency of the evidence because it did not renew its pre-verdict Rule 50(a) motion by filing a post-verdict Rule 50(b) motion.” . . . We further held that. . . a party’s failure to renew a Rule 50(a) motion “precluded [us] from exercising our discretion to engage in plain error review.” . . . Thus, when we stitch together Rule 50’s requirements with our case law, we are left with this result: Because “a post-verdict motion under Rule 50(b) is an absolute prerequisite to any appeal based on insufficiency of the evidence,” . . . and because a Rule 50(a) motion is, in turn, a prerequisite for a Rule 50(b) motion, . . . an advocate’s failure to comply with Rule 50’s requirements gives us serious pause, and compels us to heighten the level of deference we apply on appeal.
This was an important case, with a lot at stake. After their unsuccessful appeal Thicke and Williams are faced with a $5 million-plus judgment, an ongoing royalty obligation of 50%, and very little chance that they can persuade the Supreme Court to take this case and change the result. Whether the outcome would have been different had their lawyers filed Rule 50 motions is impossible to say. However, in litigation you need every advantage you can get, and waiving your ability to challenge the sufficiency of the evidence on appeal is not a trivial mistake.
To be clear, Federal Rule of Civil Procedure 50 requires that a party move for judgment, with specificity, on every issue before the case goes to the jury (Rule 50(a)), and then again following the verdict if the jury finds against the party (Rule 50(b)). Failing to file either motion will compromise the party’s ability to raise the issue on appeal – in other words, it will result in a waiver.
Why Pharrell Williams and Robin Thicke’s lawyers failed to make these motions will likely never be known. Nor can we know whether, had they done so, the outcome on appeal would have been different. But we, and their clients, can be left to wonder.
**********
Rule 50(a)(2):
A motion for judgment as a matter of law may be made at any time before the case is submitted to the jury. The motion must specify the judgment sought and the law and facts that entitle the movant to the judgment
Rule 50(b):
If the court does not grant a motion for judgment as a matter of law made under Rule 50(a), the court is considered to have submitted the action to the jury subject to the court’s later deciding the legal questions raised by the motion. No later than 28 days after the entry of judgment . . . the movant may file a renewed motion for judgment as a matter of law.
In only three years the “Jumpman” case has become an established teaching tool in CopyrightX. I’ve taught it in the first class for three years running, and I know many other teaching fellows have as well. It’s a great way to get people who are new to copyright law thinking about copyright issues, in this case whether a photograph by Nike infringes a photo of Michael Jordan taken by Jacobus Rentmeester in 1984. The two photos are show below: Rentmeester’s original on the left, Nike’s allegedly infringing photo on the right. Rentmeester also alleged that Nike’s Jumpman logo (above) infringed the copyright in his photo.
Now, the Ninth Circuit has upheld this ruling. Rentmeester v. Nike (9th Cir. February 27, 2018).
In a lengthy and detailed opinion the court outlined the steps necessary to establish copyright infringement of a photograph, and held that neither Nike’s photo, nor the Jumpman logo (above), infringed Rentmeester’s 1984 photo of Michael Jordan. If anything, this case will now be even more fun to teach to people new to copyright law.
It’s long been widely assumed that in-line linking is not a basis for copyright infringement. Following a recent decision by a Southern District of New York federal judge, that is no longer true.
Justin Goldman took a photograph of Tom Brady. Under the copyright laws, one of his exclusive rights is the right of public display.
Goldman posted the photo to Snapchat. It went viral and was embedded in a tweet. A number of mainstream media publications posted the tweet by embedding the tweet into articles on their sites. Because the tweet was linked “in-line” (displaying content from one site within another via a link), none of the publications downloaded the image, copied it, or stored it on their own servers.
Is this copyright infringement? Specifically, did the embedded tweet violate Goldman’s right of public display?
SDNY judge Katherine Forrest held that it could, and granted summary judgment to Goldman on this issue, leaving for trial or later motions whether Goldman released his image into the public domain by posting it on Snapchat and whether the defendants have a fair use defense.
In her ruling the judge outright rejected the Ninth Circuit’s so-called “server test,” established in Perfect 10 v. Amazon in 2007. This case held, in the context of a search engine, that whether a website publisher is directly liable for infringement based on the public display right turns on whether an image is hosted on the publisher’s own server, or is embedded or linked from a third-party server. Judge Forrest stated:
The plain language of the Copyright Act, the legislative history undergirding its enactment, and subsequent Supreme Court jurisprudence provide no basis for a rule that allows the physical location or possession of an image to determine who may or may not have “displayed” a work within the meaning of the Copyright Act.
However, the judge took pains to distinguish the in-line linking at issue in this case from the images at issue in Perfect 10:
In Perfect 10, Google’s search engine provided a service whereby the user navigated from webpage to webpage, with Google’s assistance. This is manifestly not the same as opening up a favorite blog or website to find a full color image awaiting the user, whether he or she asked for it, looked for it, clicked on it, or not. Both the nature of Google Search Engine, as compared to the defendant websites, and the volitional act taken by users of the services, provide a sharp contrast to the facts at hand.
This dicta may be of some reassurance to Google and other search engines, but it leaves publications that want to engage in in-line linking with a great deal of uncertainty.
As noted, this case is not over – the defendants can proceed to trial (or seek summary judgment) on defenses such as fair use and waiver. In theory, the case could go to the Second Circuit, and the Second Circuit could either adopt or reject the server test. However, it seems unlikely this will happen. Given the potential damages and the costs of defense, the more likely outcome is that the case will settle, leaving this decision on the books. (See update below). If so, the extent to which it will be persuasive on other courts, or even with other judges within the Southern District, is an open question.
In the meantime, online publications face a tough decision: do they pull back on in-line linking based on this decision, or do they assume this case is an outlier, and the server test remains good law? No lawyer can provide an unequivocal answer to this question, other than to say that the legal risks of in-line linking are now greater than they were before this decision was issued.
[Update]: On March 19, 2018, the federal district court judge certified her decision for immediate appeal to the Second Circuit. The order stated, in relevant part, as follows:
The Court credits the parties’ representations that its February 15, 2018 Opinion, . . . has created tremendous uncertainty for online publishers. In this case, the embedded image was hosted on Twitter; given the frequency with which embedded images are “retweeted,” the resolution of this legal question has an impact beyond this case. . . . Accordingly, in order to bring resolution to an important and controlling question of law and to more efficiently resolve this matter, the Court certifies its February 15, 2018 Opinion for interlocutory appeal. All other proceedings are stayed pending this appeal.
[Update 2 – May 2019]: The Second Circuit denied interlocutory review, and the case settled as to all defendants. Accordingly, this case will not be heard by the Second Circuit, and the District Court’s opinion will stand unreviewed.
Copyright law is confusing, but music copyrights take it up a notch. Often, judges and jurors with no background in a music genre are asked to determine whether two works are “substantially similar” after being subjected to esoteric analysis by musicologists who present arguments that even a trained musician might find hard to follow.
However, whether Pharrell Williams and Robin Thicke’s 2012 recording of “Blurred Lines” infringes Marvin Gaye’s 1976 composition of “Got To Give It Up” presents issues of copyright law that are challenging even by the arcane standards of music copyright law.
A quick recap: in 2015 a California jury found that Pharrell Williams and Robin Thicke’s (“Williams”) recording of Blurred Lines infringed the copyright in the composition of Got To Give It Up, and awarded Marvin’s Gaye’s heirs over $7 million in damages. The judge reduced this damages award to $5.3 million, but awarded a “running royalty” of 50% of future songwriter and publication royalties, which over time could be millions more.
After losing the jury trial Williams and Thicke appealed to the Ninth Circuit Court of Appeals, which heard oral argument in October 2017.
The copyright and music communities have been entranced by this case, and there are strong opinions on both sides. How will the Ninth Circuit rule? What arguments did the parties make that will determine the outcome of the appeal?
One way to answer these questions is to read the hundreds of pages of dense legal briefs Williams and Gaye filed with the Ninth Circuit. However, because the Ninth Circuit releases videos of oral arguments (on Youtube, no less) an easier alternative is to watch the video. The parties had only 30 minutes each to make their case, so they were forced to cut the chaff and argue the issues that are most important to their cases. All-in-all, watching the oral argument can be more edifying (and a lot less time consuming) than reading the briefs.
In this case oral argument is particularly interesting for two reasons: first, both sides were represented by preeminent appellate lawyers, two of the best in the country, so the arguments of the parties are well-articulated. Second, the oral argument makes it clear that the appeal may turn on one key issue: in a case claiming infringement of a musical composition created before sound recordings became protected by copyright, is the copyright limited to the sheet music? Or, may the copyright owner go beyond the sheet music deposited with the copyright office and play for the jury a contemporaneous sound recording of the composition?
First, some background on this issue.
It has long been a requirement that to register a copyright a copy of the work be deposited with the Copyright Office – the so-called “deposit copy.”
However, pre-1978 the Copyright Act did not protect sound recordings, only musical compositions. Gaye wrote Give It Up in 1976 and registered the sheet music for the composition, which was little more than a sketch of the melody, lyrics and chords (a “lead sheet”). But, he did not register his recording of the song. Indeed, since sound recordings were not protected the Copyright Office would not have accepted a deposit of the recording.
At the trial of this case, there was never any question that the jury would hear Blurred Lines, the allegedly infringing work. But as the case developed leading up to trial, a hotly contested issue was whether Gaye’s heirs should be limited to the lead sheet of Give It Up, or whether they could also play the recording for the jury.
The trial judge sided with Williams on this issue – he held that the scope of Gaye’s copyright was defined by the sheet music deposit filed with the Copyright Office 40 years earlier. This led to the surprising fact (widely commented on during the trial) that Gaye was never allowed to play Give It Up for the jury.
However, trial are messy, and despite this ruling, during trial (according to Williams), the judge allowed Gaye’s music experts to testify about the sound recording and play musical excerpts based on parts of the sound recording that were not present in the sheet music.
At oral argument before the Ninth Circuit it quickly became clear that whether this was permissible would be the focus of the hearing. Williams’ lawyer argued that the deposit copy (the sheet music submitted to the Copyright Office) strictly defines the scope of the copyright. In other words, Gaye’s copyright is defined, note for note, by the sheet music. Because the judge let Gaye go beyond the sheet music, she argued, the court should order a new trial.
The lawyer for Gaye’s heirs argued that the deposit copy does not define or limit the scope of the copyright in the composition. The best evidence of the composition, she argued, is the studio recording of Give It Up. Therefore, even if the jury did hear evidence present in the sound recording but not in the sheet music, the jury verdict should stand.
Gaye’s lawyer also argued that an expert can testify to what is “implied” in the sheet music – the sheet music deposit can be “interpreted” based on what would be understood by a knowledgeable musician. And, the sound recording may be relevant to that interpretation. Therefore, to the extent that Gaye’s music expert went beyond the sheet music “note for note,” this interpretation was permissible.
The problem, for the lawyers and the judges at the hearing, is that there appear to be no clear precedents to help determine which view of the law is correct. No court has squarely addressed this issue, and there is no legislative history to guide the Ninth Circuit judges.
It’s difficult to predict how the Ninth Circuit will resolve this issue, assuming they address it at all. Gaye’s lawyer had a “Plan B” argument that she stressed to the court, which is that even if the court accepts Williams argument regarding the limiting scope of the deposit copy, Gaye’s expert provided enough evidence for the jury to find in favor of Gaye based on the sheet music alone, without any evidence from the recording. Courts often will usually take the easier of two routes to a decision, so the Ninth Circuit may be able to avoid the issue that attracted most of the time and attention at the hearing by accepting this alternative argument.
However, if the Ninth Circuit does address the relevance of the sound recording to the pre-1978 composition, it will be an important copyright law precedent. There is a large catalog of pre-1978 music that is potentially subject to infringement claims, and the likely success of those claims will be viewed in light of the Ninth Circuit’s holding in this case.
If the Ninth Circuit does uphold the jury verdict in favor of Gaye, I wouldn’t discount the likelihood that Williams and Thicke will seek review by the Supreme Court. $5.3 million is a lot of money, and 50% of the future royalties for Blurred Lines is likely to increase that number substantially. The unusual issue of copyright law at the heart of this case could induce the Supreme Court to accept an appeal of this case.
Lastly, a discussion of the Blurred Lines case would be incomplete without a mention of Skidmore v. Led Zeppelin, in which the heirs of Randy Wolfe (aka Randy California), asserted copyright infringement of the 1967 Spirit song “Taurus” in the opening notes to “Stairway to Heaven.” That case was tried in federal court in California in 2016, and resulted in a jury verdict of non-infringement for Led Zeppelin, the opposite result to Blurred Lines. The judge in that case held that Wolfe’s case would be limited to the pre-1978 deposit copy, and refused to allow Wolfe to play the sound recording of Taurus for the jury. He appears to have been more strict than the judge in Blurred Lines in refusing to allow Wolfe’s expert to provide any interpretation of the sheet music.
The Led Zeppelin case is on appeal to the Ninth Circuit, although oral argument has not yet taken place and therefore any decision is likely to be issued after a decision in Blurred Lines. If the Blurred Lines panel of judges doesn’t decide the sound recording issue, the Ninth Circuit may have a second opportunity to rule on the issue in the Led Zeppelin case. If the Blurred Lines judges do decide that issue, it will be binding throughout the Ninth Circuit, including the court in the Led Zeppelin appeal.
Update: The Ninth Circuit issued its decision on March 21, 2018, upholding the jury verdict. The court did not decide the question of whether Gaye’s evidence should have been limited to the deposit copy, instead deciding the case under what I describe above as Gaye’s “Plan B.” The court stated:
The parties have staked out mutually exclusive positions. The Gayes assert that Marvin Gaye’s studio recording may establish the scope of a compositional copyright, despite the 1909 Act’s lack of protection for sound recordings. The Thicke Parties, on the other hand, elevate the deposit copy as the quintessential measure of the scope of copyright protection. Nevertheless, because we do not remand the case for a new trial, we need not, and decline to, resolve this issue in this opinion. . . . Both experts referenced the sound recording. Both experts agreed that sheet music requires interpretation. The question of whose interpretation of the deposit copy to credit was a question properly left for the jury to resolve.
Second Update: The case was reheard en banc, and the jury’s verdict in favor of Led Zeppelin was upheld. Link
If you were asked why copyright law exists you probably would respond along the lines of “to give authors and artists a financial incentive to create new works, and to protect the integrity of their works.” It’s unlikely you would respond, “to give someone the ability to manage their online reputation and remove defamatory online reviews.”
Yet, in a bizarre case that has wound its way through the courts of Massachusetts for the last six years, that is exactly what attorney Richard Goren attempted to do. Ultimately, Goren was unsuccessful, but only after years of litigation, culminating in an appeal to the First Circuit Court of Appeals, the highest federal court in Massachusetts.
Background. I first wrote about this case in 2014, and the facts are described in detail in that post. In short, a person named Christian DuPont (about which the case record discloses little beyond his name) published two posts on RipOffReport defaming Goren. RipOff, as is its practice, refused to take down the posts, claiming protection under Section 230 of the Communications Decency Act.
That’s when Goren’s copyright workaround strategy took hold.Goren sued DuPont for defamation in Massachusetts state court. DuPont didn’t show up, so he was defaulted. Goren then asked the court to assign to him ownership of the copyright in the posts.
Copyright in hand, Goren (and an LLC he assigned the copyright to) again asked RipOff to remove the posts; RipOff again refused.
Goren – disregarding the possible Streisland Effect consequences – then sued RipOff for copyright infringement in federal court in Massachusetts.
In the end RipOff won. The posts defaming the attorney remain on Rip Off Report to this day.
The Copyright Issue. Goren’s lawsuit asserted that he now owned the copyright in the two posts, and that RipOff was infringing that copyright by continuing to publicly display the posts without his consent.
RipOff’s defense was twofold: first, that when DuPont first published the posts he had assigned the copyrights to RipOff via RipOff’s online agreements. If that was the case the state court’s assignment to Goren was invalid, and Goren owned no copyright he could assert against RipOff.
Second, even if DuPont had not assigned the copyrights to RipOff, he had given RipOff a nonexclusive license to display the posts, and Goren owned the copyrights subject to this license.
These defenses required the court to consider two issues. First, did RipOff’s online agreement transfer ownership of the copyrights from DuPont to RipOff?
Second, if ownership was not conveyed, did the online agreement transfer a license to RipOff, allowing RipOff to continue to display the posts even after copyright ownership had been transferred to Goren?
The district court analyzed RipOff’s online agreement in this case in excruciating detail. The agreement was imperfect, but the court concluded that it was legally effective, at least as a matter of contract law. However, the court concluded that the conveyance of ownership was ineffective as a matter of copyright law. The Copyright Act requires that “[a] transfer of copyright ownership, . . . is not valid unless an instrument of conveyance, or note or memorandum of transfer, is in writing and signed by the owner of the rights conveyed….” 17 U.S.C. § 204. DuPont never signed an instrument transferring his ownership to RipOff, and therefore RipOff did not own the copyright in the posts.
However, RipOff was still left with a perpetual, irrevocable nonexclusive license to display the posts (a limited license does not require a signed conveyance), and therefore Goren’s copyright ownership was subject to the rights granted by this license.
The First Circuit upheld the district court’s ruling that, based on this reasoning, RipOff’s continued publication of the posts was not copyright infringement.
Attorney’s Fees. The district court found that the legal and factual basis for Goren’s copyright claims were “at best questionable,” notwithstanding Goren’s claim that he had litigated in good faith.The court awarded RipOff $123,000 in attorney’s fees under the Copyright Act. An award of attorney’s fees is infrequent in copyright cases, but the Supreme Court has vested broad discretion in district courts to award attorney’s fees to prevailing parties in copyright cases (seeKirtsaeng v. Wiley, USSC 2016), and this discretion is rarely upset by appeals courts. In this case the district court did not abuse its discretion, and therefore the fee award was upheld by the First Circuit.*
*RipOff’s post-judgment motion for attorney’s fees involved some procedurally complex issues. The First Circuit decision is worth reading by lawyers who seek statutory attorney’s fees in federal court.
Takeaway. If this case strikes you as crazy complicated, you’re in good company. If nothing else, it shows how the copyright system has the potential to be manipulated for purposes other than the policies that underlie copyright law. Goren failed in this case, but only because RipOff had the foresight to create an online agreement that required posters to give it a license – but for that, Goren’s copyright claim might have succeeded. The case is a reminder of how important it is that websites ensure that their online browsewrap/clickwrap agreements are effective. And, it teaches that (at least in the First Circuit) an online agreement will not be sufficient to effect an assignment.
Many copyright lawyers who have watched this case have applauded the outcome on the ground that what Goren attempted to achieve subverted the goals of copyright law, which are to “promote the progress of science” (Constitution, Article I Section 8. Clause 8) not for reputation management. In the words of Professor Eric Goldman (below), the case exposes the “ugly interface between copyright and reputation management.”
I was surprised when I read the Ninth Circuit’s recent decision in Antonick v. Electronic Arts, Inc. (9th Cir. Nov. 22, 2016). In that case the plaintiff alleged copyright infringement against EA* based on copying of computer source code for the John Madden Football game, but failed to introduce the source code into evidence, choosing instead to rely solely on expert testimony to prove copying.
*[footnote] Technically speaking, this was a breach of contract case. However, the contract between Antonick and EA stated that Antonick would receive royalties on the sale of any “derivative work”, as that term is defined under U.S. copyright law. As a result, the parties and the courts applied copyright law to determine whether EA had breached its royalty agreement with Antonick.
This was an enormous risk, and it doomed Mr. Antonick’s case. The Ninth Circuit panel held:
Antonick’s claims rest on the contention that the source code of the Sega Madden games infringed on the source code for Apple II Madden. But, none of the source code was in evidence. The jury therefore could not compare the works to determine substantial similarity.
Expert testimony alone was not sufficient, the court ruled. However, even if expert testimony had been sufficient, Antonick’s case failed: the expert testimony presented by Antonick related to how the games appeared to users (the user interface), not the source code. Antonick’s case was based on similarities between the source code of the products, not the user interface.
Maybe there was a good reason that Antonick’s lawyers didn’t introduce the source code into evidence. Perhaps the original source code (which is decades old) was no longer available, and Antonick was trying to skirt this issue; if so this isn’t apparent from the opinion. I hope, for Antonick’s sake, that his lawyers didn’t think they could prove copying of source code by focusing on the user interface of the programs, since similarities in interfaces don’t necessarily mean the source code that generates them are the same or similar.
Trial lawyers know that one goal at trial is to introduce as much evidence into the record as possible, to avoid just this kind of outcome. As long as evidence is in the record, a party can point to it to support its case even if (as likely was the case here), the evidence is computer source code incomprehensible to the jury. A document may be incomprehensible to the jury, but as long as it is in evidence, the courts will adopt the fiction that that the jury considered it in reaching its verdict.
In this case Antonick prevailed in a jury trial, but the judge set the verdict aside post-trial, based on his failure to introduce the two works. Antonick appealed, but lost on appeal.
Antonick went the last mile to try to save his case on appeal, retaining famed copyright lawyer and treatise author David Nimmer (“Nimmer on Copyright”) to argue his case. This was unsuccessful.
Here is the video of oral argument before the 3-judge 9th Circuit panel. Nimmer’s argument begins at :20 in the video, and his rebuttal testimony begins at 1:10.
The district court’s opinion, which discusses the plaintiff’s failure to introduce the works at issue into evidence in more detail, is available here.
The U.S. Copyright Office has issued a new rule that has important implications for any website that allows “user generated content” (UGC). This includes (for example), videos (think Youtube), user reviews (think Amazon or Tripadvisor), and any site that allows user comments.
In order to avoid possible claims of copyright infringement based on UGC, website owners rely on the Digital Millennium Copyright Act (the “DMCA”). However, the DMCA imposes strict requirements on website owners, and failure to comply with even one of these requirements will result in the loss of protection.
One requirement is that the website register an agent with the Copyright Office. The contact information contained in the registration allows copyright owners to request a “take down” of the copyright owner’s content.
The Copyright Office is revamping its agent registration system, and as part of this process it is requiring website owners to re-register their DMCA agents by the end of 2017, and re-register every three years thereafter. Gesmer Updegrove LLP’s Client Advisory on this new rule is embedded in this post, below. You can also click here to go directly to the pdf file on the firm’s website.
In August, MediaPost reported that Redigi and one of its founders, John Ossenmacher, had filed bankruptcy:
“ReDigi recently stipulated to pay Capitol $3.5 million in damages, but also appealed the underlying copyright infringement finding to the 2nd Circuit Court of Appeals. This week, the company said in an appellate filing that it had declared bankruptcy in U.S. District Court for the Southern District of Florida. ReDigi co-founder John Ossenmacher also declared bankruptcy in the same court.” (link)
I’ve written about this case several times, and in April 2013 I observed:
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. (link)
In fact, this is what transpired. In September 2013 Capital Records amended its complaint to include Redigi founders John Ossenmacher and Larry Rudolph as defendants.
I also noted that –
According to the court decision Redigi consulted legal counsel before launching Redigi and engaging the recording industry in a test case.
A test case can be a great idea, but I can’t help but wonder whether the lawyers Redigi consulted warned Messrs. Ossenmacher and Rudolph that they risked personal liability. Business people are told that a corporation or LLC protects them from personal liability, but there are many exceptions to this rule, and one of these is copyright infringement. To quote a New York federal court on this issue:
It is well established that all persons and corporations who participate in, exercise control over or benefit from an infringement are jointly and severally liable as copyright infringers. . . . An individual, including a corporate officer, who has the ability to supervise infringing activity and has a financial interest in that activity, or who personally participates in that activity is personally liable for infringement.
Sadly, I have met many lawyers, including “IP lawyers,” who were unaware of this fact. I hope Mr. Ossenmacher’s lawyers were not in this group, and that he knew the personal risk he undertook when founding Redigi.
This site is hosted by Gesmer Updegrove LLP, a technology law firm based in Boston, Massachusetts. You can find a summary of our services here. To learn how GU can help you, contact: Lee Gesmer
