Monthly Archives: March 2009

Royalty Logic’s Appointments Clause challenge of the Copyright Royalty Judges

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Filed under Appointments Clause, Copyright Royalty Board

As I mentioned last week,  Royalty Logic, a royalty collection company that seeks to compete with SoundExchange, filed a motion to the Court of Appeals of the District of Columbia arguing that the appointment of the Copyright Royalty Judges transgresses the Appointments Clause.    I thought it’d be worthwhile to take a closer look at Royalty Logic’s Appointments Clause challenge and the history behind the creation of the Copyright Royalty Board.

Background

President Bush signed the Copyright Royalty and Distribution Reform Act into law in 2004.  The legislation created the Copyright Royalty Board structure, under which three Copyright Royalty Judges determine, among other things, the rates for the statutory licenses collected by the United States Copyright Office under 17 U.S.C. Sections 112(e), 114, 115, 116, 118, 119 and 1000.  Why would Congress delegate the determination of the statutory rates to a third party?  WIlliam Patry wrote a fascinating post that reached this general topic (we’ll discuss Patry’s post more later):

Congress decided that adjusting rates in the statute was not the way to go: too much time would go by, there had to be bills introduced, hearings, haggling, the whole political thing. Better to fob the job off to someone else (and then Congress could come in as the white knight and save the day if the decision was too favorable to one side: bad agency, bad agency!).

The Librarian of Congress is appointed by the President with the advice and consent of the Senate.  The three Copyright Royalty Judges are appointed by the Librarian of Congress “after consultation” with the Register of Copyrights, an officer also appointed by the Librarian.  [I made somehow made a mistake on this fact on an earlier rendition of this post.]  The Copyright Royalty Judges who decided the order at issue are James Scott Sledge (a retired United States Bankruptcy Judge from Alabama), William J. Roberts (an attorney advisor in the Copyright General Counsel’s Office who was promoted to senior attorney for compulsory licenses), and Stanley C. Wisniewski (an attorney who has provided expert economic testimony in federal court and before Senate and House committees).

The Appointments Clause generally

“He [the President] . . . shall nominate, and by and with the Advice and Consent of the Senate, shall appoint Ambassadors, other public Ministers and Consuls, Judges of the supreme Court, and all other Officers of the United States, whose Appointments are not herein otherwise provided for, and which shall be established by Law; but the Congress may by Law vest the Appointment of such inferior Officers, as they think proper, in the President alone, in the Courts of Law, or in the Heads of Departments.”

So, says the Appointments Clause, Art II Clause 2, Section 2 of the Constitution.   Under the Section, a principal officer must be appointed by the President with the advice and consent of the Senate.  Inferior officers, which likely will include the Copyright Royalty Judges, can only be appointed (1) by the President; (2) the President with the advice and consent of the Senate; (3) by the Courts of Law; or (4) by the Heads of Departments.

The Supreme Court has forwarded two policy aims underlying the Clause.

(1) Limit the possibility for corruption by disallowing legislators the power to both create offices and make appointment to the offices

The first rationale for the Appointments Clause, as discussed by Justice Scalia in his concurrence in Freytag, is to limit the corruption often associated with combining the power to create offices with the power to appoint officers.  As Justice Scalia discussed, “The foremost danger was that legislators would create offices with the expectancy of occupying them themselves. This was guarded against by the Incompatibility and Ineligibility Clauses, Article I, § 6, cl. 2. But real, if less obvious, dangers remained. Even if legislators could not appoint themselves, they would be inclined to appoint their friends and supporters. This proclivity would be unchecked because of the lack of accountability in a multimember body.” [citation omitted.]

(2) Avoid diffusion of power

A second rationale for the Appointments Clause is that it prevents Congress from distributing power too widely by limiting the actors in whom Congress may vest the power to appoint.  As forwarded by Justice Blackmun in Freytag, the Founders intended that Congress only be able to vest appointment in the President, who is accountable to the public, or a Department Head who also “shares accountability to the people.”

Irony

The Copyright Royalty Board is not Congress’ first attempt to delegate the responsibility of setting statutory royalty rates.  The Copyright Royalty Tribunal (born 1976, died 2003) consisted of members appointed directly by the President, upon advice and consent.  This method of appointment, according to the theory underlying the Appointments Clause, should have limited the possibility for corruption by both eliminating Congress’ ability to directly appoint cronies to positions they created, and vesting the responsibility and potential political fallout from the appointments in the President, who is personally accountable to the people.

How did it go?  Not so well, apparently.  Here’s what William Patry, who served as policy planning adviser to the Register of Copyrights, had to say about the death of the CRT.  I’ve included a large snipit because Patry’s post provides the best primary source available for understanding the formation of the CRB.

The CRT was originally a five member tribunal, in the legislative branch, with members appointed by the President. Other than the very first chair, Tom Brennan, the former chief counsel of the Senate IP Subcommittee, who helped write the legislation that created his chairmanship, no subsequent permanent CRT member had any real experience with copyright law; some had none; some weren’t even lawyers (there were former boxers, for example, and I don’t mean Barbara or the dog). As one Senator described the situation, the CRT was a dumping ground for unqualified people to whom the President owed a small favor.

The first years of the CRT were marked by incessant appeals of its decisions. It was only the deep compassion of the DC Circuit in affirming decision after decision that kept the CRT afloat. Eventually, with the initial rate setting and challenges out of the way, the CRT was reduced to three members, but even three was too many; even one full-time member was too many. In data I compiled for its abolition, I discovered that on average, the CRT had only two weeks of hearings a year. This cried out for ad hoc adjudication. That opportunity came in 1993.

In 1993, as a result, in my opinion, of the appointment as chair of the then-wife of a former Congressman from Nebraska, the CRT simply imploded. It was a soap opera worthy of prime-time television, but for the substantial amounts of money that were involved. We didn’t set out to abolish the CRT, the CRT invited it. I was minding my own business in the subcommittee’s offices in the Cannon House Office Building. We began to get visits from different CRT members and the General Counsel, complaining about the fights that were destroying the place. For example, two members (a majority) would vote to change a regulation and send it to the Federal Register. The Federal Register would send it back because the change had not been transmitted by the chair; the chair, who was on the losing side of the vote, refused to transmit it. Moreover, we were told by the private sector that members were lobbying the private sector ex parte. No agency can function like that; the CRT was dangerously out of control.

So, given the CRT’s struggles, it shouldn’t be surprising that in 1994 Congress passed legislation that put the choice of the panel in the hands of the Librarian of Congress.  At its core, the decision appears to be motivated by pragmatism.  The CRTs were not high profile enough positions for the President to incur public derision if he appointed unqualified individuals.  There was a need to put the appointments into the hands of someone who, for lack of a better word, cared more about a functioning statutory royalty regime.

In light of the CRT’s issues, it would be easy to view the Appointments Clause as theory gone wrong, at least in terms of political appointees for positions of only niche-interest.  But we should, perhaps, pause for a moment to discuss how the world has changed since 1993.  Would the President be able to appoint unqualified candidates in the age of the internet?  It feels to me like the that type of story would be covered in niche-legal blogs on Monday, migrate to generally legal blogs by Wednesday, and be an embarrassing item in general publications by Thursday or Friday.  But who knows? Regardless, there is an interesting symmetry to the fact that William Patry’s post provides the best policy argument for both why we should read the Appointments Clause laxly in regards to the Copyright Royalty Judges, and why it should be given teeth.

The Librarian of Congress is not a “head of department” and cannot appoint inferior officers, such as the CRJs, without violating the Appointments Clause

Royalty Logic’s strongest argument targeting the Copyright Royalty Judges under the Appointments Clause is, if the CRJs  are inferior officers, the Librarian of Congress must be a “head of department” to wield the power to make the appointments.

In Freytag v. commissioner, 501 U. S. 868 (1991), the Supreme Court held that vesting the Chief Judge of the United States Tax Court, an Article I Court, with the power to appoint special trial judges did not transgress the structure of separation of powers embodied in the Appointments Clause.  The Supreme Court, however, broke sharply in their rationale for the decision.

The majority opinion, delivered by Justice Blackman, and joined by Justices Rehnquist, White, Marshall, and Stevens, found that the appointment of the special trial judges did not transgress the Appointments Clause because the United States Tax Court was a “Court of Law,” which along with the President and “heads of department,” is granted the power to make appointments under the Constitution.  In doing so, the majority read the phrase “heads of departments” narrowly to encompass the principals of Cabinet level departments:

This Court for more than a century has held that the term “Departmen[t]” refers only to “a part or division of the executive government, as the Department of State, or of the Treasury,’” expressly “creat[ed]” and “giv[en] . . . the name of a department” by Congress. Germaine, 99 U.S. at 99 U. S. 510-511. See also Burnap, 252 U.S. at 252 U. S. 515 (“The term head of a Department means . . . the Secretary in charge of a great division of the executive branch of the Government, like the State, Treasury, and War, who is a member of the Cabinet”). Accordingly, the term “Heads of Departments” does not embrace “inferior commissioners and bureau officers.” Germaine, 99 U.S. at 99 U. S. 511.

Confining the term “Heads of Departments” in the Appointments Clause to executive divisions like the Cabinet-level departments constrains the distribution of the appointment power just as the Commissioner’s interpretation, in contrast, would diffuse it. The Cabinet-level departments are limited in number, and easily identified. Their heads are subject to the exercise of political oversight, and share the President’s accountability to the people.

If the Court of Appeals for the District of Columbia elects to adopt the definition of “heads of departments” presented by the majority in Freytag, the appointment of the Copyright Royalty Judges will likely be held to transgress the Appointments Clause. The Librarian of Congress, under a reasonable appraisal, is not one of the “few in number” and easily identifiable “Cabinet-level” department heads who is “personally accountable to the people.”  I may be mistaken, but I’m not aware of too many people who would consider the position to be a launching pad for a political career.   The Librarian’s direct accountability to the people would seem to me to be attenuated at best.

Indeed, people much smarter than I have argued that similar appointments situations are cut-and-dry violations of the Appointments Clause.  John F. Duffey, a law professor at GWU, applied the majority decision in Freytage when he created a stir a couple of years ago by arguing that the method of appointing administrative patent judges was “almost certainly unconstitutional.”

I  harbor doubts, however, that the  Court of Appeals for the District of Columbia will elect to adopt the majority decision’s definition of principal officer.  The Supreme Court in Freytag broke five-four with only one current Justice siding with the majority and three current Justices adopting the concurring position.  Given the forward-leaning nature of the majority opinion, I wouldn’t be surprised if the Court of Appeals uses the definition of principal officer from the concurring decision.

The concurrence, delivered by Justice Scalia and joined by Justices O’Connor, Kennedy and Souter, found that the appointment of special trial judges by the Chief Justice of the U.S. Tax Court didn’t violate the Appointments Clause because the Chief Judge was a head of a department.  In reaching this decision Justice Scalia used no less than three different definitions of what constitutes a department for purposes of the Appointments Clause:

  • “‘Departments’ means all independent executive establishments”;
  • Departments are “all agencies immediately below the President in the organizational structure of the Executive Branch”;
  • A Department is a “freestanding, self-contained entity in the Executive Branch, whose [principal officer] is removable by the President (and, save impeachment, no one else).”

All three of Justice Scalia’s tests for what constitutes a department require that the body be in the Executive Branch  — a literal reading of Justice Scalia’s opinion would imply that if the Library of Congress is in the Executive Branch, the appointments of the CRJs would be proper; and conversely, if the Library of Congress is part of the Legislative Branch then the appointments of the CRJs would violate the Appointments Clause.  Accordingly, much of Royalty Logic’s and the Department of Justices’ briefs battle on the issue of whether the Library of Congress is an executive or legislative agency.

Notwithstanding Justice Scalia’s language to the contrary, the argument over whether the Library of Congress is a legislative or executive agency appears to me to be irrelevant.  Scalia based his concurring position on the rationale that the Appointments Clause was designed to limit Congress’ ability to create new offices, and appoint people they owe political favors, without checks, to those same offices.  Regardless of which branch a department is located in, if an inferior officer is selected by a principal appointed by the President, the check on corruption remains the same.  What difference does it make if the Library of Congress leans more towards the Executive or Legislative Branch?  As long as the President appoints the person who picks the CRJs, Congress will not be able to insert people they owe favors into positions they legislate without first having to get someone appointed by the President, and whose actions reflect on the President,  to first sign on.

Potential for Supreme Court review

Royalty Logic’s appeal looks to me to be a strong candidate for Supreme Court review, even if the appointment of the CRJs is not found to violate the Appointments Clause.   The makeup of the Supreme Court has changed significantly since it last addressed a similar Appointments Clause issue, and the existing case law is a mess that merits refinement.

music attorneys

Secondary liability claims against CEO and GC of software company dismissed: a compensation package tied to corporate profits doesn’t by itself create a direct financial interest

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Filed under Secondary Liability

Netbula, LLC v. Chordiant Software, Inc., 2009 WL 750201 (N.D. Cal. 2009)

Netbula brought suit against Chordiant Software alleging copyright infringement, and claims for vicarious copyright infringement against the company’s CEO and General Counsel.  The CEO and GC moved to dismiss.

To state a claim for vicarious copyright infringement a plaintiff must allege that a defendant had:

(1) the right and ability to supervise the infringing conduct and (2) a direct financial interest in the infringing activity. Perfect 10, Inc. v. Visa Int’l Serv. Ass’n, 494 F.3d 788, 802 (9th Cir.2007).

Direct Financial Interest in the Infringing Activity

Netbula alleged that the CEO and GC had compensation packages from which they personally profited in some way from their company’s net income.  In addition, the CEO owned shares of Choridant, but neither officer was a majority holder.  Judge James Ware of the federal district court in San Jose dismissed the claims with leave to amend.  Judge Ware, citing Veoh, found that the direct financial interest alleged was too attenuated:

Plaintiffs simply allege that [the CEO] and [the GC] have compensation packages under which they personally profit “in some way” from Chordiant’s profits. Such allegations only show that [the CEO] and [GC's] compensation is a function of Chordiant’s performance. Plaintiffs do not allege a direct relationship between their compensation and Chordiant’s acts of primary infringement.

Right and Ability to Supervise

Netbula alleged that, as acting CEO and GC of Chordiant, the officers had  “the right and ability to supervise Chordiant’s infringing act.”  Judge Ware found that Netbula failed to satisfy the prong because its claims were conclusory and didn’t allege sufficient facts.  According to the Court, Netbula didn’t allege more than general superviosry power within the corporation and didn’t speak to oversight regarding the alleged infringing conduct.

software and technology attorneys

Howard Stern’s motion to dismiss claim for vicarious infringement of live spokesman software denied

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Filed under Secondary Liability

Live Face on Web, LLC v. Howard Stern Productions, Inc., 2009 WL 723481 (E.D. Pa. 2009)

Live Face on Web, a software firm, designed a product that allowed a company to display a “live” spokesperson on a website.   Live Face alleged that Cameo HD appropriated its software and offered it to Howard Stern Productions.

According to the complaint, Howard Stern Productions put up videos on its website of its show’s cast that were powered by the software.   Live Face brought suit against Cameo HD and Howard Stern Productions for direct copyright infringement.  In addition, Live Face took a flier on contributory and vicarious infringement.   Howard Stern Productions moved to dismiss.

Contributory infringement

(1) direct copyright infringement by a third party; (2) knowledge of the third-party infringement; and (3) a material contribution to the infringement.

Judge McGlaghlin granted the motion to dismiss the claim for contributory infringement, finding that the complaint didn’t allege facts that would show Howard Stern Productions knew of Cameo’s third-party infringement.

Vicarious infringement

(1) direct copyright infringement by a third party; (2) an obvious and direct financial interest in the exploitation of the copyrighted materials; and (3) the right and ability to supervise the infringing activity.

Howard Stern Productions made two arguments in regards to (2) direct financial interest:  first, that the Live Face claim should fail because it didn’t alleged that visitors were drawn to the website specifically because of the ability to infringe; and second, even if Live Face wasn’t required to make such a showing, an allegation merely linking advertising revenue to the number of website users was insufficient to satisfy the element.   Judge McGlaghlin denied the motion to dismiss, finding that Howard Stern Production’s framing of the direct financial interest element was overly narrow:

That these allegations are sufficient at this stage is reinforced by Nimmer’s view of the direct financial interest element. According to Nimmer, courts “seem to have relaxed” the standard over time, and “[i]t seems scarcely an exaggeration to posit that ‘an obvious and direct financial interest’ is now understood to encompass a possible, indirect benefit.’ “ Nimmer on Copyright, § 12.04[A][2]; see also A & M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1023 (9th Cir.2001) (finding direct financial interest where defendant’s “future revenue” depended on increases in userbase); Fonovisa, Inc. v. Cherry Auction, Inc., 76 F.3d 259, 263 (9th Cir.1996) (finding direct financial interest from admission fees, concession stand sales, and parking fees at the flea market at which the infringing material was available); Shapiro, Bernstein, 316 F.2d at 307 (explaining the line of cases in which infringing activities provide a proprietor with “a source of customers and enhanced income”); Aimster, 252 F.Supp.2d at 655 (finding direct financial interest where every website user had to pay a registration fee, and where the company solicited contributions to the Aimster litigation and also sold posters, jeans, and other Aimster-related merchandise on its website, thus benefiting the defendant’s overall “commercial enterprise”); see also Ellison, 357 F.3d at 1079 (stating that the “essential aspect” of the direct financial interest inquiry is whether there is a causal relationship between the infringing activity and “any financial benefit a defendant reaps, regardless of how substantial the benefit is in proportion to a defendant’s overall profits” (emphasis added)).

software and technology attorneys

Filings from D.C. Court of Appeals review of Copyright Royalty Board order

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Filed under Appointments Clause, Copyright Royalty Board

On Thusday, the D.C. Court of Appeals heard oral arguments on the Copyright Royalty Board’s May 1, 2007 order concerning royalty rates on digital audio transmissions and ephemeral reproductions of sound recordings.  Since the briefs aren’t available on the federal docket, I thought it might be of use to some of you to post them here.  Thanks to all of the parties who have made the filings available.  I’ll continue to update the links if any more trickle in.

In re Digital Performance Right in Sound Recordings and Ephemeral Recordings, Copyright Royalty Judges 2005-1 CRB DTRA (2007)  (order)

Department of Justice (in defense of the order)

SoundExchange (in defense of the order)

Royalty Logic (arguing that th order should be vacated because the CRJs are unconstituional under the appointments clause)

Noncommercial broadcasters (arguing that the order should be modified to establish annual flat per-station fees for noncommercial services; and remanded to adjust the notice and recordkeeping terms)

music attorneys

Judge Batts dismisses copyright and trademark infringement claims for lack of SMJ

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Filed under Contract Rescission, Lanham Act, Subject Matter

Pot Luck, LLC v. Freeman, 06 cv10195 DAB, 2009 WL 693611  (S.D.N.Y. 2009)

Judge Batts issued a second copyright decision last week.  Pot Luck created a film High Times’ Potluck, for which it entered into two distribution agreements with Ardustry.   Pot Luck alleged that, subsequent to the release, Ardustry failed to distribute and promote the film as agreed under the licenses, and that it had yet to receive proper compensation.  Ardustry, at the time of the motion, continued to distribute the Film under the licenses.

Pot Luck brought an action for, among others things,  copyright infringement, and false designation & unfair competition under the Lanham Act.  Ardustry moved to dismiss the copyright and trademark claims for lack of subject matter jurisdiction.

Copyright Claim

Judge Batts dismissed the copyright action finding that Pot Luck must rescind the licenses before it could recover for infringement.   The Court found that the licenses “unambiguously” denied Pot Luck the right to rescind its agreement, and that similar limitations have been upheld under New York law (Cafferty v. Scotti Bros. Records, Inc., 969 F.Supp. 193, 198 (S.D.N.Y.1997)):

Both the License Agreement and the World Rights Agreement . . . explicitly limit Plaintiff’s right to rescind the licenses, stating under “Grant of Rights” that “[l]icensor hereby grants, sells, transfers, and assigns to Licensee the exclusive and irrevocable right[s]. . .

Because any claim for rescission is barred by the unambigious language of the licenses, and because Plaintiff must show a plausible claim that the licenses were rescinded in order to bring a cause of action arising under the Copyright Act, Defendants’ motion to dismiss Plaintiff’s copyright claim for lack of subject matter jurisdiction is GRANTED.

Lanham Act (trademark)

Pot Luck brought its trademark claim under Section 43(a), alleging that by distributing its film, Ardustry was likely to confuse as to the true origin of the film.  Judge Batts dismissed the claim, finding that consumers weren’t confused as to “the origin” of the film, because Ardustry was indeed “the origin” of the film, as the term is used in Section 43 of the Lanham Act:

[T]he Supreme Court has read the phrase “origin of goods” as it is used in § 43 to refer only “to the producer of the tangible goods that are offered for sale, and not to the author of any idea, concept, or communication embodied in those goods.” Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23, 37 (2003). The Court found that to “hold otherwise would be akin to finding that § 43(a) created a species of perpetual patent and copyright, which Congress may not do.” Id.

Therefore, under Dastar, “[t]he right to copy creative works, with or without attribution, is the domain of copyright not of trademark or unfair competition. The failure to credit the true author of a copyrighted work is not a false designation of origin, but a violation of copyright.”

Lanham Act (unfair competition)

Judge Batts dismissed the Lanham Act unfair competition claim finding that Section 43 does not provide a general action for unfair competition, but is instead a “category of claims consisting primarily of causes of action for false designation of origin and false advertising.”

Rebecca Tushnet provides more commentary on the trademark implications here.

trademark attorneys

Monday odds and ends

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Filed under Daily Copyright Roundup

The Department of Justice has filed a motion for interevention in SONY BMG Music Entertainment v. Tenenbaum, arguing that the Copyright Act’s statutory damages provisions are constitutional.  Here’s commentary from Ben Sheffner and Ray Beckerman.

Jane C. Ginsburg has posted a new paper on SSRN titled “Contracts, Orphan Works, and Copyright Norms: What Role for Berne and TRIPs?”

The abstract:

This Chapter addresses the extremes of private ordering, and the extent to which the principal multilateral copyright instruments, the Berne Convention and the TRIPs Accord, limit the range of State responses to the problems encountered at the far ends of the copyright-contract spectrum. At one end, we encounter private ordering at its most aggressive, in which private parties enter into agreements (or, more likely, the stronger party coerces the weaker parties, who may be mass market consumers) to protect subject matter or rights excluded from the ambit of copyright’s exclusivity. At the other end, the difficulties arise not from overweening sellers forcing their way with timid buyers, but from failure to find the seller at all. The buyers, would-be copyright exploiters, are unable to locate the right holders from whom to negotiate a license to use their works. In this case, no contract can be concluded, unless the State steps in for the absent right holder. In the first case, a contract has been concluded, but at a cost that the State could not exact were it to seek the same result through public ordering.

The analysis of Part I proceeds in three steps. First, a review of the relevant Berne-TRIPs provisions will identify and assess the “maxima.” Second, consideration will be given to whether the prescriptive force of the maxima extends to extra-copyright means of achieving copyright-prohibited objectives. Finally, an inquiry will be made into whether the mandatory exclusions and restrictions apply only to foreign Berne Union works or whether the treaties can also be read to compel their domestic application. Part II shifts from private ordering to State-imposed licenses and other interventions that limit the exercise of exclusive rights. Where Part I inquires whether current multilateral instruments limit private parties’ freedom effectively to expand the scope of copyright subject matter or rights, Part II examines whether those same instruments constrain State responses to systemic failures of private ordering by limiting the remedies available against the unauthorized exercise of otherwise exclusive rights. The example of failed private ordering that will be considered concerns the problem of “orphan works,” where the inability to find right holders means that would-be exploiters cannot enter into private agreements with them.

This exploration of the extremes of the copyright-contract spectrum finds little prescriptive force in the Berne-TRIPs “maxima” with respect to private agreements to protect subject matter the treaties exclude from copyright’s ambit. By contrast, Berne-TRIPs “minima” can meaningfully constrain a State’s prerogative to impose compulsory licenses or limit remedies when private agreements cannot be concluded, for example because a willing buyer cannot find the seller (willing or otherwise). The minima should not, however, be regarded as an impediment to resolving the “orphan works” problem. Rather, attention to the minima should enable States to shape an orphan works regime which both permits the exploitation of unlocatable right holders’ works, and fairly compensates those right holders who, notwithstanding a rigorously diligent but unsuccessful search, subsequently turn up and object to the uses made of their works.

Robert Brauneis has a new legal history/copyright paper up on SSRN, “The Transformation of Originality in the Progressive-Era Debate Over Copyright in News”:

Snipits form the abstract:

In the 1991 case of Feist Publications, Inc. v. Rural Telephone Service Co., Inc., the Supreme Court held unanimously that only those aspects of works which exhibited a “modicum of creativity” could be protected by copyright, and hence that factual matter was not copyrightable. Feist confirmed and expanded on the Court’s statements in the 1918 case of International News Service v. Associated Press that news was not copyrightable apart from its literary form. Yet for the first three-quarters of the nineteenth century, the notion that copyright incorporated an originality requirement which excluded factual matter from protection was unknown to Anglo-American law. Courts routinely found infringement of fact-based works, such as maps, charts, road-books, directories, and calendars, on the basis of the copying of their factual content, and concluded that the industry of plaintiffs in gathering and presenting facts should be protected under copyright law. What caused the transformation in the doctrine of originality between the Civil War and World War I?

This article argues that the rise of creativity-based originality in copyright law has strong ties to a previously little-examined episode in copyright history: the debate over legal protection for news in the last decades of the nineteenth century.

music attorneys

Wyeth denied summary judgment on use of sculpture in advert

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Filed under Fair Use

Reyes v. Wyeth Pharmaceuticals, Inc., 2009 WL 661393 (D.P.R. Mar. 9, 2009)

Martha Reyes created a glass sculpture titled “Watcher of the Fire.”  Reyes lent the sculpture to Cordero, one of the defendants, so that he would photograph the work.  Reyes had never exhibited the sculpture or offered it for sale.

Cordero, unbenounced to Reyes,  offered the sculpture to Wyeth, Amgen and ERC Communications for use in a publicity campaign.  ERC drafted an advertisement that contained the work, which ran in the El Nuevo Dia newspaper.  Reyes recognized the sculpture and apparently, though the record was unclear, contacted authorities, which lead to the filing of criminal charges against Cordero.

The Defendants in this action moved for summary judgement, arguing that the advertisement was a noninfringing fair use. Judge Francisco A. Besosa of the federal district court in San Juan denied.

image

Purpose And Character Of The Use

Wyeth argued that its use was noncommercial because the advertisement was meant to raise public awareness for rheumatoid arthritis.  Judge Besosa wasn’t convinced:

On the whole, this first statutory factor, purpose and character of use, neither weighs strongly for or against a finding of fair use. Although defendants’ use of the Watcher was somewhat transformative, it was minimally so. Similarly, although defendants present the “naci para crear” and “Salud Wyeth” campaigns as educational and non-commercial enterprises, the Court finds that they nonetheless stand to profit from them, and thus from the utilization of the Watcher. Lastly, in utilizing the Watcher as part of the “naci para crear” campaign, Cordero did not act in good faith. Because the profit/nonprofit distinction and the good faith sub factors do not carry overwhelming weight, when viewed alongside an only somewhat transformative use, the final balance is neutral.

Nature Of The Copyrighted Work

The Court found that as a creative work of art, the sculpture fell closer to the traditional core of “intended copyright protection.”

Amount And Substantiality Of The Portion Used

The Court’s analysis of amount and substantiality was somewhat interesting.  Judge Besosa found that Wyeth didn’t copy more of the sculpture than was necessary:

Defendants’ message certainly could have been communicated in ways that did not involve the Watcher, but that is not the focus of this inquiry. Given that defendants chose to present an artist exhibiting art, their message could not have been communicated as effectively by obscuring or including only part of the sculpture. Thus the Court finds that the defendants did not copy more of the Watcher than was necessary to communicate their message. Accordingly, this factor neither weighs for nor against a finding of fair use.

Effect Of The Use Upon The Market For Or Value Of The Copyrighted Work

Judge Besosa centered the market effect analysis on potential implications of similar wide scale uses:

The Court must also ask whether wide scale use of works of art (or sculptures in particular) in advertisements or other visual media would in general affect the market for such artwork. Nuñez, 235 F.3d at 24-25. While this is a somewhat nuanced question (depending upon the purpose of the sculpture and how it is used in the visual media) it is clear that widespread use of artwork in advertisements without permission of the copyright holder would destroy the market for selling the artwork for use in advertisements.

The Court found that the factors, when weighed  together, “tilt the scales” against a finding of fair use.

fine arts attorneys

No relief for L.A. “Going to the Olympics” muralist: Congress didn’t validly abrogate sovereign immunity under the Copyright Remedy Clarification Act

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Filed under CRCA, Sovereign Immunity

Frank Romero painted a mural titled “Going to the Olympics” to commemorate the 1984 Olympics. The mural is located in L.A. on the Alameda Street underpass of freeway 101.  In 1984, it looked like this:
image

Then it looked like this:

image

Now it looks like this:

image

Romero filed suit, asserting that the California Department of Transportation had violated his 106A right of integrity, potentially granted to him under the Visual Artists Rights Act of 1990. 106(A)(3)(b) provides, in part, that an author of a visual work has the right to “prevent any destruction of a work of recognized stature.” Caltrans moved to dismiss claiming that it was immune from suit under the Eleventh Amendment.

Waiver of sovereign immunity by accepting federal funds

Romero argued that Caltrans waived its sovereign immunity by accepting federal funds to build and maintain California’s highways, which Romero contended, included an allocation for mural restoration. Romero argued that, by accepting the funds, Caltrans agreed to abide by the Copyright Remedy Clarification Act (“CRCA”), 17 U.S.C. § 511(a), which provides that “[a]ny State … shall not be immune, under the Eleventh Amendment of the Constitution of the United States.” (Emphasis added.)  Judge Philip S. Gutierrez rejected this argument finding that the federal government hadn’t conditioned the funds upon California waiving sovereign immunity:

It is true that one way for a state to waive its immunity is to accept federal funds. Clark v. State of Cal., 123 F.3d 1267, 1271 (9th Cir.1997) (quoting Atascadero, 473 U.S. at 247). However, “mere receipt of federal funds cannot establish that a State has consented to suit in federal court.” Atascadero, 473 U.S. at 246-47. Rather, the “funding statute [must] ‘manifest a clear intent to condition participation in the programs funded under the Act on a State’s consent to waive its constitutional immunity.’ ” Id. at 247; see also Clark, 123 F.3d at 1271. In this case, Romero has failed to point the Court to any provision in the relevant funding statute that manifests a clear intent to condition the State’s participation on its consent to waive its Eleventh Amendment immunity.

Congressional abrogation of sovereign immunity

Romero next argued that Congress abrogated California’s Eleventh Amendment immunity in the CRCA.  The Court cited Seminole Tribe of Fla. v. Fla., 517 U.S. 44, 55 (1996) for the relevant standard:

It is now well-established that Congress can abrogate a State’s sovereign immunity only if it has (1) unequivocally expressed its intent to abrogate the immunity and (2) acted under a valid exercise of power.

Caltran’s didn’t dispute the fact that (1) Congress intended to abrogate immunity.  In regards to (2) acting under a valid exercise of power, Judge Gutierrez cited Seminole for the proposition that Congress can abrogate sovereign immunity when acting to enforce constitutional rights under Section 5 of the Fourteenth Amendment (“The Congress shall have power to enforce, by appropriate legislation, the provisions of this article”), but cannot circumvent the Eleventh Amendment under the powers granted in Article I. Congress’ power under the Fourteenth Amendment is remedial not substantive:

In determining whether, for purposes of Congress’ enforcement power under section 5 of the Fourteenth Amendment, federal legislation is permissibly remedial or impermissibly substantive, there must be a congruence and proportionality between the injury to be prevented or remedied and the means adopted to that end. This determination can be made by looking at three factors: (1) the nature of the injury to be remedied and whether the state exhibited a pattern of constitutional violations; (2) Congress’ consideration of the adequacy of state remedies to redress the injury; and (3) the coverage of the legislation.

The Court found that (1) it didn’t appear that the CRCA was enacted in response to substantial evidence of copyright infringement by the States; (2) Congress barely considered the availability of state remedies (such as claims for the unlawful taking of private property by the States or breach of contract claims) for infringement when it enacted the CRCA; and (3), the CRCA doesn’t respond to a history of widespread and persisting deprivation of constitutional rights of the type Congress has faced in enacting proper prophylactic § 5 legislation.

Thus, Judge Guitierrez granted Celtran’s motion to dismiss, and joined the Fifth Circuit (Chavez v. Arte Publico Press, 204 F.3d 601, 605 (5th Cir.2000)) and the Southern District of California (Masters, Inc. v. Bd. of Trustees of the Cal. State Univ. Sys., 552 F.Supp.2d 1088, 1094 (S.D.Cal.2008)) in finding that Congress didn’t abrogate sovereign immunity under the CRCA:

In summary, the Court finds that although Congress expressed its unequivocal intent to abrogate the Eleventh Amendment enacting the CRCA, Congress did not have authority to exercise those powers under section 5 of the Fourteenth Amendment. Accordingly, Congress did not validly abrogate sovereign immunity under the CRCA.

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Complaint for declaratory judgment dismissed due to lack of subject matter jurisdiction; prior lawsuits and defendant’s filing in another jurisdiction a week later didn’t create a case and controversy

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Filed under Subject Matter

This past Wednesday, Judge Kenneth A. Marra of the federal district court in Miami, Florida issued a decision that addresses when a case and controversy arises for purposes of subject matter jurisdiction.

Breckenridge Pharmaceutical and Everett Laboratories  manufacture vitamin supplements.  The two corporations are currently engaged in patent litigation over a product (not at issue in this case) in the District of New Jersey.

On the same day that Breckenridge Pharmaceutical launched a new multi-vitamin named Nutravance, it filed a complaint seeking, among other things, a declaratory judgment that a number of Everett patents were invalid, or in the alternative, that Nutravance didn’t infringe the patents; and that the copyright for an Everett product insert was invalid, or in the alternative, that any copying by Breckenridge of the product insert was fair use.  At the time of the filing, Everett wasn’t aware that Breckenridge had began to market Nutravance.

Judge Marra found that a case and controversy didn’t exist and granted Everett’s motion to dismiss.

The standard for a case and controversy

Judge Marra set forth the standard for a case and controversy as follows:

Courts must determine whether the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.  The MedImmune Court emphasized that the dispute must be definite and concrete, touching the legal relations of parties having adverse legal interests; and that it be real and substantial and admit of specific relief through a decree of a conclusive character, as distinguished from an opinion advising what the law would be upon a hypothetical state of facts. [citation and quotations omitted]

Prior lawsuits

Breckenridge further argued that Everett’s prior lawsuits against Breckenridge and other competitors show that an actual and substantial controversy existed between the parties.  Everett had, according to the complaint, filed five previous lawsuits.  Only one of the lawsuits was against Breckenridge and none of the suits concerned Nutravance.

Judge Marra agreed that prior litigious conduct is one factor to be considered but found that a prior suit premised on other patents is only given minimal weight, and cannot alone create a real and immediate controversy.

Everett’s filing of a suit a week after Breckenridge filed their action

Breckenridge argued that the fact that Everett filed a patent infringement suit against it (presumably in the D. N.J.) only a week after they filed their action supports a finding that there was a case and controversy.  Judge Marra agreed, noting that “the fact that Defendant did sue Plaintiffs . . . reflects the reasonableness of Plaintiffs’ belief that Defendant intended to initiate legal proceedings against them.”

The Court, however, found that subject matter jurisdiction must have existed at the time the declaratory judgment action was filed, and that later events may not create jurisdiction when none existed at the time of filing:

At the time Breckenridge initiated this lawsuit, it did not have an objectively reasonable basis to believe that Everett would sue it for infringement. The fact that Breckenridge chose to throw down the gauntlet without a valid basis should not inure to its benefit because Everett has since countered with a lawsuit of its own. To hold otherwise would impose a chilling effect on the right of a patent holder, who is prematurely sued in a declaratory judgment action, to initiate what it believes is a legitimate infringement action for fear that its suit will be used against it in a forum selection battle. Therefore, while the Court may use a subsequently filed suit to support its conclusion that a “substantial dispute” existed at the time the declaratory suit was filed, if the Court concludes, as it does here, that there was no “substantial dispute” at the time of filing, a subsequently filed suit should not affect the outcome.

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Family Guy’s use of “When You Wish Upon a Star” in “I Need a Jew” found to be a non-infringing fair use

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Filed under Fair Use, Parody

S.D.N.Y Judge Deborah A. Batts issued an interesting decision yesterday that addressed a caricature of the children’s song “When You Wish Upon a Star.”

Background:

Fox created and produced the show “Family Guy.”  One of the episodes, “When You Wish Upon a Weinstein,” lampooned Peter, the show’s father character, for believing in racial stereotypes about Jewish people.  The episode featured a song “I Need a Jew” set to the music of “When You Wish Upon a Star.”  Fox requested permission from Bourne & Co., the song’s publisher, but was rebuffed.

Bourne brought suit for infringement alleging that “I Need a Jew” “consist[ed] of of a thinly-veiled copy of the music ‘When You Wish Upon a Star’ coupled with anti-Semitic lyrics.”  Fox moved to dismiss.  The parties agreed that the work would be infringing sans fair use.  But there was dispute, which Judge Batts for purposes of the motion resolved in favor of Bourne, over whether “When You Wish Upon a Star” was associated with Walt Disney and his namesake corporation, and whether Disney’s rumored anti-Semitism was a part of the “popular lore” surrounding the Walt Disney persona.

Satire v. Parody:

Fox sought to justify its use as parody in two ways:

1) as a comment on the “saccharine sweet,” “innocent” and “wholesome” world view presented in and represented by “When You Wish Upon a Star,” and 2) by evoking “the song most associated with Walt Disney and his company” Commenting “on the song while simultaneously making a sharp point about Walt Disney’s reputed anti-Semitism”

Bourne argued that Fox only commented on racism and bigotry and not on the song “When You Wish Upon a Star” itself, which Judge Batts fiercely rejected:

Defendants’ use of “When You Wish Upon a Star” calls to mind a warm and fuzzy view that is ultimately nonsense; wishing upon a star does not, in fact, make one’s dreams come true. By pairing Peter’s “positive,” through racist, stereotypes of Jewish people with the fairy tale world-view, “I Need a Jew “comments both on the original work’s fantasy of stardust and magic, as well as Peter’s fantasy of the “superiority” of Jews. The song can be “reasonably perceived” to be commenting that any categorical view of a race of people is childish and simplistic, just like wishing upon a star.

Of particular note, Judge Batts absolved Fox of the need to show that the public equated “When You Wish Upon a Star” with Disney or that the public associated Walt Disney with anti-Semitism.  Judge Batts found that, since a parody doesn’t have to be effective to be considered a fair use, a court only needs to find that a parodic character is “reasonably perceived.”

Plaintiffs argue that the evidence fails to support Defendants’ claim that they intended in the Episode at issue to comment on Walt Disney’s purported anti-Semitism. First, Plaintiff argues that although “When You Wish Upon a Star” ” was sometimes used as a theme song . . . by the Walt Disney Company” Bourne “specifically refused to admit that their song was associated in the minds of the public with the Disney Company or was in any way associated with Walt Disney individually or personally, and further refused to admit that the public associates the Disney Company with Walt Disney personally.” Further , Plaintiff argues that Defendants have provided “no admissible evidence that the public actually believes Mr. Disney was an anti-Semite.”

However, Plaintiff misapprehends the nature of the inquiry in making both of these arguments. Defendants need to prove neither that the public associates the song with Walt Disney individually or personally nor “actually believes” Walt Disney was an anti-Semite; Defendants need only demonstrate that “a pardoic character may be reasonably perceived” Campbell, 510 U.S. at 582-583. Further, the Supreme Court has held that the law protects parodies even when the fail to speak clearly. Campbell, at 582 quoting Yankee Publishing Inc. v. News America Publishing, Inc. 809 F.Supp. 267 280 (S.D.N.Y. 1992) (Leval, J.) (noting “First Amendment protections do not apply only to those who speak clearly, whose jokes are funny, and whose parodies succeed”). Therefore , even if Defendants intended to make an “inside joke” about Walt Disney’s alleged anti-Semitism but that joke failed, it can still support a finding of fair use if it’s “parodic character can be reasonably perceived.”

I. Purpose and character

The second interesting part of the judgment concerned the Court’s evaluation of the first prong of a fair use evaluation, purpose and character.  Judge Batts side-stepped the question of whether the work was commercial or non-commercial and only addressed whether the use was transformative.

The Court finds that the new work is transformative; consequently the first factor weighs in favor of a finding of fair use.

IV. Effect of the Use Upon the Potential Market

A third noteworthy part of the decision is Judge Batt’s examination of potential market harm.  Similar to our analysis of “Goodnight Bush,” “I Need a Jew” wasn’t a risk to act as a market substitute for “When You Wish Upon a Star”:

Even Plaintiff admits that its song is known for its wholesomeness and sweetness, where Family Guy’s parody of it is so different as to be (they argue) offensive. Plaintiff does not even make the contention that “I Need a Jew” could in any way for “When You Wish Upon a Star.

Instead, Bourne argued that it was losing an opportunity to license its works, which Batts rejected:

Plaintiffs argues for a reading of the fourth factor that would swallow the rule entirely. All uses of copyrighted work under a fair use rationale deprive the owner of licensing fees. If a parody of the original work would usurp the market for licensing other comedic uses of the original work, then all parodies would fail under this prong of the analysis. The Supreme Court clearly intended otherwise as did Congress in creating an opportunity for fair use under 17 U.S.C. 107.

Thus, Judge Batts dismissed the claim for copyright infringement:

Plaintiff reaps the benefit of their song’s association with Pinocchio and Disney, and enjoys its reputation for wholesomeness; it is precisely that beneficial association that opens the song up to ridicule by parodists seeking to take the wind out of such lofty, magical, or pure associations.

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