Copyright Law Blog: Exclusive Rights

Monthly Archives: March 2009

Scranton newspapers denied motion for remand to state court because of complete preemption

Shourin Sen - 16 March 2009 – 8:45 am

Filed under Jurisdiction, Misappropriation, Preemption

On March 6, Judge A. Richard Caputo of the federal district court in Scranton, Pennsylvania issued a decision that addressed complete preemption (which is different than the preemption set forth in 17 U.S.C. 301). The Scranton Times and the Times Partner published newspapers in Scranton, Pennsylvania. Wilkes-Barre Publishing Company published a daily newspaper in Wilkes-Barre, Pennsylvania.

Wilkes-Barre began publication of a “Scranton Edition” of it’s daily newspaper which contained obituaries. The Scranton Times and Times Partner alleged that, for a period of five days, Wilkes-Barre copied obituaries from their newspapers and/or websites.

The Scranton Times and the Times Partner filed a complaint in the Court of Common Pleas of Lackawanna County stating claims for misappropriation, unfair competition, conversion, fraud, breach of contract, tortious interference with existing business relations, and unjust enrichment. Wilkes-Barre removed the case to the federal district court in Scranton.

Complete preemption

The Scranton Times and the Times Partner filed a motion to remand the case to the Pennsylvania Court of Common Pleas on the grounds that the federal court didn’t have jurisdiction because the Plaintiffs didn’t bring any federal claims. The Court rejected this argument on the doctrine of complete preemption:

“A state claim which is ‘really one of federal law’ may be removed to federal court because ‘it is an independent corollary of the well-pleaded complaint rule that a plaintiff may not defeat removal by omitting to plead necessary federal questions in a complaint.’ ” “The Supreme Court has held that a state cause of action is ‘really’ a federal cause of action which may be removed to federal court if the “federal cause of action completely preempts … the state cause of action.” Goepel v. National Postal Mail Handlers Union, 36 F.3d 306, 310 (3d Cir.1994) (quoting Franchise Tax Board v. Construction Laborers Vacation Trust, 463 U.S. 1, 24 (1983)). [some citation omitted]

The Court found that while the Plaintiffs’ claims made no mention of federal copyright law, they “may not defeat removal by omitting to plead necessary federal questions” in their complaint. The Court then determined that the state law claims for misappropriation, unfair competition, tortuous interference with business relations and unjust enrichment were completely preempted by the Copyright Act. Thus, the Court found that it had subject matter jurisdiction over the four claims.

The Court further found that it had supplemental jurisdiction over the state law claims of conversion, fraud and breach of contract that weren’t completely preempted.

Misappropriation

The Scranton Times and the Times Partner brought a claim for misappropriation under INS v. AP. Judge Caputo “agree[d] with” the Second Circuit’s holding in National Basketball Association v. Motorola, Inc.,105 F.3d 841 (2d Cir.1997) that “only a narrow ‘hot news’ misappropriation claim survives preemption for actions concerning material within the realm of copyright.” Thus, the Court turned to the extra elements that allow a misappropriation claim “styled on” AP v. INS to survive preemption:

(i) the time-sensitive value of factual information,

(ii) the free-riding by a defendant, and

(iii) the threat to the very existence of the product or service provided by the plaintiff.”

The Court found that Scranton Times and the Times Partner satisfied the (i) time sensitive element because the time and place of funeral services are time sensitive. The Court further found that the allegations made in the complaint that the Wilkes-Barr Publishing Company copied the death notices found in Plaintiffs’ publications into its own newspaper-satisfied the (ii) “free-riding” element.

In regards to the (iii) threat to the very existence of the product or service, the Court found that Plaintiffs’ hadn’t alleged that the use of their obituaries for five days threatened the existence of their publications:

The Court acknowledges that these statements certainly allege that the Defendant caused Plaintiffs some actual loss during the five (5) day period of alleged plagiarism activity, along with speculative future losses in terms of goodwill, customer loyalty, and business relationships. The Court does not, however, find that Plaintiffs have alleged that Defendant’s activities have threatened the existence of their publications or has compromised or provided reduced incentive for Plaintiffs to continue collecting obituaries and printing them for public distribution.

Documents

The Scranton Times, L.P. et al v. Wilkes-Barre Publishing Company, 08 cv 02135 ARC, 2009 WL 585502 (M.D. Pa. March 15, 2009)

Punk band Minor Threat asks Forever 21 to stop selling a shirt that features its album logo

Shourin Sen - 13 March 2009 – 7:45 am

Filed under Originality, Subject Matter

There is a fun little copyright dust up that makes me think of pink hair. Forever 21 is chain of stores that targets teens and tweens. The chain sold shirts that appear to contain an image that the punk band Minor Threat used on the cover of their 1983 album, Out of Step. From a quick TESS search, it doesn’t appear that the band/label registered the image.

So is the manufacturer of the shirt and Forever 21 potentially liable for copyright infringement? 37 CFR 202.1 states the following:

The following are examples of works not subject to copyright and applications for registration of such works cannot be entertained:

(a) Words and short phrases such as names, titles, and slogans; familiar symbols or designs; mere variations of typographic ornamentation, lettering or coloring; mere listing of ingredients or contents; [emphasis added]

So, is the image of the phrase “minor threat” merely typographic ornamentation or does it possess sufficient originality to be granted exclusive rights as a “pictorial, graphical, or sculptural work”? And, if the work is granted exclusive rights would it survive a fair use analysis? Or, could there possibly be a viable common law trademark claim?

Looks like the answer to these questions is gray enough for the Dischord Records to send a cease-and-desist. Says Alec Bourgeois who conducts publicity at Dischord:

This is an unauthorized shirt and it is still unclear whether the shirt was produced by Forever 21 or if it is a bootleg that they just happen to carry. Either way the members of Minor Threat are looking into it and Forever 21 will be asked to stop selling it.

In the beginning, Minor Threat did not license anything and any shirts you saw were screened by band member Jeff Nelson. But Jeff stopped screening shirts and over the years the band members realized that the shirts were going to be made with or without their permission, so they may as well authorize a couple friendly printers in order to better control the quality, content and revenue.

The band and the label tend to deal with bootleg shirts on a case by case basis, acknowledging the vast difference between kids screening shirts for friends and professional printing studios screening shirts for profit. Obviously this absurd Forever 21 shirt falls under the ‘unacceptable’ category.

Some of you may remember a similar 2007 t-shirt dispute between Minor Threat and Nike.

Summary of hearing documentation on the Performance Rights Act (H.R. 848)

Shourin Sen - 12 March 2009 – 8:45 am

Filed under Legislation, Performance Rights

On Tuesday, the House Committee on the Judiciary held hearings on the proposed Performance Rights Act. Most of the hearing documentation consisted of the usual red meat type fairness arguments. Highlights on the jump:

Billy Corgan (Vocalist and Lead Guitarist, The Smashing Pumpkins):

From my perspective, this issue is one of fundamental fairness. If the performance of a song has value to a particular terrestrial radio station in its airing, I believe it is only right to compensate those performers who have created this work. Simply put, if a station plays a song, both the author and the performer should be paid. These particular performances must have value to the stations or they wouldn’t be playing them.

Mitch Bainwol (Chairman and CEO, RIAA) raised five issues:

First, this issue isn’t complicated as the broadcasters suggest. On the contrary, it’s pretty simple when you get down to it. This year radio will spin almost a billion songs in the United States, leading to billions in revenue from advertising. The payment to artists and labels for use of those recordings, however, will not amount even to a penny. As George Carlin famously said, what a ratio! . . . The broadcasters brandish hyperbolic diversionary rhetoric.

Paul Almeida (President, Department for Professional Employees, AFL-CIO):

In this worsening economic crisis, we are leaving 70 to 100 million dollars on the table each year because we do not have a performance right for artists here in the United States. Talented artists are denied the ability to recover what they are owed from the airplay of their music overseas. Does it really make sense for the U.S. to continue to allow millions of dollars to go into a French cultural fund every year, instead of coming home to the U.S. where it can help performers make ends meet, and help our local economies?

W. Lawrence Patrick (President, Patrick Communications):

We do know that SoundExchange has consistently argued in other royalty proceedings that the sound recording royalty is far more valuable than the composition royalty. In some proceedings, it has asked for a royalty over six times the amount of the composition royalty. At the House Judiciary Committee hearing held on July 31, 2007, when asked how much the performance fee would be, Marybeth Peters, the Register of Copyrights, suggested that it could a be simple matter of applying the “willing buyer, willing seller” criteria of Section 114 of the Copyright Act to broadcasting. Of course, that standard is the same standard that led to the current Internet radio royalties which have been so controversial.

Stan Liebowitz, Ph.D. (Ashbel Smith Distinguished Professor of Managerial Economics, University of Texas at Dallas):

The time that individuals spend listening to the radio is time that could have been spent listening to prerecording music. According to the US Statistical Abstract (Table 1089) the time people spend listening to the radio (over two hours per day) is four times as great as the time they spend listening to prerecorded music (30 minutes per day). If radio did not exist, many of these individuals would likely be listening to prerecorded music in place of the nonexistent radio, since the two are substitute activities.

* * * * *

I examined changes in record sales in 99 US cities over a 5 year period of time (1998-2003) as other factors, such as radio listening (music and talk), Internet usage, income, education and other demographic variables (from the US Census) changed.

My findings were consistent with my earlier studies. Cities that had relatively large increases in radio listening tended to have decreases in record sales and vice versa. In other words, sound recording sales were negatively related to the intensity of radio broadcasting. The measured coefficients were quite large, although the results were of only borderline statistical significance. The coefficients imply that a one hour decrease in listening to music radio, which would be a drop to about half the current level, would increase record sales by .75 albums per person, an increase of almost 30%.

Steve Newberr y (Chariman of the Radio Board, NAB)

[T]he record labels have gone in search of new revenue streams to make up for these losses. For example, the labels now insist on so-called “360° deals” between record labels and performers. These contracts allow a record label to receive a percentage of the earnings from all of a band or artist’s activities (concert revenue, merchandise sales, endorsement deals, fan clubs, websites, artist management, publishing rights, etc.) instead of just record sales.

* * * * *

The fact that consumers have new ways in which to locate and obtain music does not diminish the value of over-the-air radio’s marketing and promotion. Over the past few years, a plethora of new digital channels are giving consumers the opportunity to acquire music legally in many new ways, but the sheer volume of music available online creates a cacophony of voices. In the new, fragmented world of the digital environment, in which millions of bands are vying for the attention of hundreds of millions of fans, on millions of websites, one of radio’s greatest strengths is that it cuts through the clutter. Radio exposes listeners to new music and drives them to the websites where their desire for the music that they heard can be monetized.

* * * * *

In many countries, the royalty rate paid to music composers and publishers is significantly higher than that paid for sound recordings, yet the Copyright Royalty Board decisions in the U.S. have provided rates for performing digital audio transmissions several times higher than rates paid to the composers. In its reliance on the example of foreign law, the American recording industry is, in effect, inviting policy-makers to compare non-comparables.

So were any of the arguments effective? Freshman Representative Jason Chaffetz (R-UT-3) chimes in on Twitter:

6th Circuit distinguishes “bare corporate receipt” from the corporate receipt doctrine

Shourin Sen - 11 March 2009 – 8:45 am

Filed under Access, Corporate Reciept

Jones v. Blige, 2009 WL 578753 (6th Cir. Mar. 9, 2009)

Background

James White was the business manager for Tim Acker, a hip hop artist who used the show-name “Benevolence.” White claimed that Andre Young (“Dr. Dre”) and Mary J. Blige’s song, “Family Affair,” infringed Acker’s work, “Party Ain’t Crunk.” White alleged that he had pitched “Party Ain’t Crunk” to the Senior Vice President of Artists and Repertoire for Universal Music Enterprises over the phone. White further alleged that the executive invited him to send a demo, which he dropped off at the label. White followed up with a call to the executive, who told him that “their department had decided to pass on [the CD].” At White’s request, the executive returned the materials White had submitted, sans the original envelope and cover letter, thus showing that White’s envelope had been opened.

The district court granted summary judgment for the defendants on the grounds that White failed to respond to a request for an admission that the lyrics of the two songs were not substantially similar and an admission that defendants had no access to the lyrics of “Party Ain’t Crunk.” The district court further found that no reasonable juror could find that the lyrics of the two songs were substantially similar.

Appeal

On appeal, White made the argument, among others, that he had established access by virtue of the corporate receipt doctrine. The doctrine states that the possession of a work by one employee of a corporation implies possession by another corporate employee who allegedly infringed the work.

Judge R. Guy Cole, writing for a panel that included Judges Cornelia Groefsema Kennedy and Ronald Lee Gilman, affirmed the district court, and created an end-around by distinguishing bare corporate receipt from the corporate receipt doctrine. While Judge Cole didn’t explicitly demarcate the dividing line between the two, it appears that for the corporate receipt doctrine to come into play, there must be some evidence tending to show a reasonable possibility of access:

While we are cautious of making it overly difficult for plaintiffs to establish access where the chain of possession of a work within a corporation is difficult to prove, Plaintiffs in this case have set forth no evidence tending to show a reasonable possibility that their work made its way from [the A&R executive] to the creators of “Family Affair.” There is no evidence that Blige, Young, or the other artists knew [the A&R executive] or worked with him, even indirectly. There is no evidence of the nature of Blige’s and Young’s relationships with Universal employees that would support an inference that [the A&R executive] transferred Plaintiffs’ song to Blige or Young through other intermediaries at Universal. As far as the record shows, Blige and Young were affiliated with [the A&R executive] only through an attenuated corporate connection, and to find a reasonable possibility of access, a jury would be required to make an implausible leap, unsupported by evidence other than bare corporate receipt.

Precedent

For precedent, Judge Cole cited to an unpublished decision, Glanzmann v. King, 887 F.2d 265 (6th Cir .1989), where the Circuit found that the application of the corporate receipt doctrine would have resulted in the “implausible … quantum leap” that Stephen King had “access to a script submitted to a secretary at Columbia Pictures, even though the evidence suggested no reasonable possibility that the script had made its way to King.” The Court also cited to holdings in the 2d, 4th and 8th Circuits:

Other circuits have rejected “bare corporate receipt” as sufficient proof of access, requiring plaintiffs to introduce some evidence that it was “reasonably possible that the paths of the infringer and the infringed work crossed.” Towler v. Sayles, 76 F.3d 579, 583 (4th Cir.1996) (requiring a “close relationship” for the corporate receipt doctrine to apply); see also Jorgensen v.. Epic/Sony Records, 351 F.3d 46, 48 (2d Cir.2003) (“[B]are corporate receipt …, without any allegation of a nexus between the recipients and the alleged infringers, is insufficient to raise a triable issue of access.”); Moore, 972 F.2d at 942 (a “bare possibility” of access is not enough; rather, a plaintiff must show that the defendant had a “reasonable possibility” of viewing his work).

Documents:

Jones v. Blige, 2009 WL 578753 (6th Cir. Mar. 9, 2009)

The every once in a while, daily copyright roundup

Shourin Sen - 10 March 2009 – 8:45 am

Filed under Daily Copyright Roundup

President Obama named three more czars this past week: Chris Henderson as Recovery Czar, Van Jones as Green Jobs Czar, and Vivek Kundra as Technology Czar. The President had already selected his Drug Czar, Cybersecurity Czar, Energy and Environment Czar, Health Czar, Urban Affairs Czar, and attempted to appoint a Government Performance Czar.

What Czar hasn’t President Obama appointed yet? The IP Czar. I’ll continue to stand by this prediction. (Though, the IP-Czar, unlike the other czar positions, is Senate-confirmable so one would assume that the position would take longer to staff.)

The E.D.V.A. granted Phish a TRO, but its motion for seizure was denied.

Patently-O, this past week, ran a point-counterpoint from Google and Monsanto on the merits of patent reform. The debate between Google and Monsanto may be a preview of the fight we will see over future copyright term extension legislation — with content companies arguing for more expansive rights, and Google arguing for less. It’s been about 10 and half years since President Clinton signed the Copyright Term Extension Act. It will be interesting to see if the anti-copyright term extension crowd has reached a tipping point and Google represents critical mass. For that matter, if a term extension were up for debate now, would it pass? Regardless, blood sport is right around the corner.

Doug Lichtman, Professor of Law at UCLA, has posted a webcast on Tenenbaum that features Professor Charlie Nesson, Steven Marks from RIAA, Cathy Sharkey from NYU, Tom Colby from GW, and Dan Markel from Florida State. The webcast has spurred impassioned detractors, a sign of how heated the debate will be in the coming months.

Deven R. Desai, Associate Professor of Law at Thomas Jefferson, has posted a historical paper at SSRN titled “Copyright’s Hidden Assumption: A Critical Analysis of the Foundations of Descendible Copyright.” A snipit from the Abstract:

Copyright operates under a hidden, erroneous assumption: heirs matter in copyright. This Article examines the possible historical and theoretical bases for the heirs assumption and finds that neither supports it. In short, the assumption is a myth that harms copyright policy and ignores a less obvious, but quite important, heir: society in general. An examination of the historical debates shows that the idea of providing for heirs through copyright has played a minor role in U.S. copyright history. Instead, heirs have been props to advance an agenda of furthering term extensions, advancing rent-seeking opportunities, and allowing authors to exert power against publishers.

Marc L. Roark, Associate Professor of Law, University of Missouri, posted an empirical paper titled “Limitation of Sales Warranties as an Alternative to Intellectual Property Rights: An Empirical Analysis of iPhone Warranties’ Deterrent Impact on Consumers.” A snipit from the abstract:

This article considers whether limitation of warranties may actually have the deterrence effect on consumers that manufacturers desire; said differently, the article weighs whether manufacturers can achieve their goals of preventing consumers from using their products in an unauthorized manner by removing warranty protections from the consumer. The Article presents a behavioral model based on the Triandis’ model of planned behavior and enhances the model by accounting for likely and unlikely benefits and detriments. The model suggests that participants weigh the detrimental impact together with the probability and magnitude of the detriment against the beneficial impact together with the probability and magnitude of the benefit when making the decision to engage in technological piracy. Considering only half of the equation – what deterrents are likely to impact consumer behavior – the Article then reconciles the model to empirical evidence suggesting that Apple’s warranty could be a stronger deterrent for consumers than civil liability.

Phish files for TRO in preparation for reunion tour

Shourin Sen - 5 March 2009 – 8:45 am

Filed under Preliminary Injunction

Phish, Inc. v. John Does 1-100 et al, 09 cv 00022 RAJ FBS (E.D. V.A. Feb 25, 2009).

The iconic rock band Phish filed a complaint seeking a temporary restraining order in preparation for their upcoming reunion tour. The restraining order would prohibit people from, among other things, selling merchandise that infringed their trademarks in the vicinity of their March 6-8 Hampton, Virginia concerts. The band also requested that the federal district court in Newport, Virgina order a United States Marshal and the local and state police to seize and impound any infringing merchandise being sold.

The complaint contains a couple of (perhaps unintentionally) funny snipits:

Plaintiff has regularly received financially lucrative offers to license Plaintiffs Marks for use on a variety of products, such as the manufacturers of the PHISH FOOD ice cream, Ben & Jerry’s. However, Plaintiff is careful to limit such merchandising activities only to products of the highest quality and pursuant to arrangements by which it maintains complete control over the manner in which its name and likenesses are represented, in line with the high regard in which the Phish name is considered in the popular music industry.

And:

Because they are generally nomadic individuals without a business premises or other connection to the area, Bootleggers often flee the area permanently once they have sold Bootleg Merchandise [ED: or get a bad case of the munchies]. Thus, Phish has been unable to determine their identity.

Phish will offer free MP3s of the concerts at its website. The band last toured in December 2005.

Documents:

Supreme Court grants cert in Reed Elsevier, et al., v. Muchnick, et al.

Shourin Sen - 3 March 2009 – 8:45 am

Filed under Jurisdiction, Settlement

The Supreme Court granted cert in Reed Elsevier v. Muchnick yesterday. Here’s a quick rundown on the case.

New York Times Co. v. Tasini:

Our story begins about a decade ago. In New York Times Co. v. Tasini, six freelance authors brought a copyright infringement suit against a group of publishers including the New York Times, Newsday, Time and LexisNexis. The freelancers were hired as independent contractors to write articles for the news outlets. The publishers licensed the articles to electronic databases such as LexisNexis.

17 U.S.C. 201(c) states the following:

“In the absence of an express transfer of the copyright or of any rights under it, the owner of copyright in the collective work is presumed to have acquired only the privilege of reproducing and distributing the contribution as part of that particular collective work, any revision of that collective work, and any later collective work in the same series.”

The freelancers claimed that, under 201(c), they only licensed their works for use as a contribution in newspapers and not in electronic databases. In 2001, the Supreme Court agreed, finding that if the publishers wanted to include the articles in electronic databases they needed to have had obtained specific authorization to do so.

Negotiations and settlement:

Following the ruling in Tasini, the National Writers Union brought a consolidated copyright class action against a group of forty publishers. The sides engaged in four years of negotiations before reaching an industry-wide settlement. The settlement divided the authors into three groups:

Category A: copyrights that were registered prior to any infringement;
Category B: copyrights that were registered after the infringing reproduction but before December 31, 2002;
Category C: copyrights registered after December 31, 2002 or not registered at all.

The settlement agreement then allocated damages per group:

Category A claimants received a flat fee;
Category B claimants received the greater of either a flat fee or a percentage of the original price of the work;
Category C claimants also received the greater of either a flat fee or a percentage of the original price of the work. However, if the cost of all claims (plus the cost of notice, administration, and attorney’s fees) exceeded $18.5 million, then the amount paid to Category C claimants was reduced – potentially to zero.

The District Court approved the settlement under Rule 23.

The Second Circuit:

Objectors from Class C appealed the approval of the settlement on the grounds that it was inadequate and unfair to Category C claimants and that the disparate treatment of Category C claimants illustrated that named plaintiffs, who each possess at least some registered copyrights, did not adequately represent those absent class members who possess only unregistered copyrights. The Second Circuit raised the issue of jurisdiction sua sponte: whether the S.D.N.Y. lacked subject matter jurisdiction to approve any settlement that includes a release of copyright claims for unregistered works.

17 U.S.C. 411(a) states in part:

[N]o action for infringement of the copyright in any work shall be instituted until registration of the copyright claim has been made in accordance with this title [17 U.S.C. Sects. 101 et seq.] [emphasis added]

The Defendants of the settlement argued that for federal question jurisdiction to arise under the Copyright Act, only one of the classes needed to have members who had registered. Judges Ralph K. Winter, Jr. & Chester J. Straub rejected this argument and found that each claim in a certified class must be registered for federal question jurisdiction to arise under 411(a).

Judges Winter & Straub further held that the text of 411(a) precluded the use of supplemental jurisdiction to grant jurisdiction to Class C. Thus, the Second Circuit vacated the order approving the settlement.

Judge John M. Walker, Jr. dissented on the grounds that since “Congress passed § 411(a) to facilitate the enforcement of copyrights, . . . compliance with § 411(a) is a mandatory prerequisite to the accrual of a cause of action for damages, but not a prerequisite to the possession of constitutional standing.” Judge Walker found that the suit fell “within the ambit of . . . Denney v. Deutsche Bank A.G., 443 F.3d 253 (2d Cir. 2006), that not all members of a settlement-only class must possess a valid cause of action under the applicable law at the time of settlement.”

The cert petition:

The Defendants of the settlement argued for certiorari on three grounds:

Broad releases are often necessary to achieve complex settlements; the power to settle cases necessarily entails the power to approve releases of claims beyond the approving court’s jurisdiction;
There is tension between the Second Circuit’s decision and the Supreme Court’s expectation in Tasini that “[t]he parties (Authors and Publishers) may enter into an agreement allowing continued electronic reproduction of the Authors” works”;
The settlement provides a strong public benefit.

Documents:

Providing DVDs of photo images is a taxable retail sale of tangible personal property, holds Minnesota Tax Court

Shourin Sen - 2 March 2009 – 8:45 am

Filed under Tax

Bakewell v. Commissioner of Revenue, 2009 WL 427029 (Minn.Tax Regular Div. Feb. 19, 2009).

The Appellants ran a wedding photography business that charged only for the service of a photographer, but provided their customers with DVDs containing digital images, and assigned all copyrights to its customers. According to the Court:

The business operated differently from traditional wedding photography businesses. Traditional wedding photographers retained customers’ negatives and the copyrights to the photographs and packaged their services to include a set of finished prints as part of the cost of hiring the photographer.

The appellant didn’t collect sales tax from its customers. The question before the Court was whether providing DVDs containing digital images constituted a retail sale of tangible personal property, taxable under Minnesota’s sales tax statute.

Minn. Stat. § 297A.62, subd. 1 states that a sales tax is imposed on gross receipts from retail sales made in Minnesota. “Sale” is defined as “any transfer of title or possession, or both, of tangible personal property, whether absolutely or conditionally, for a consideration in money …. “ And, “tangible personal property” is defined as “personal property that can be seen, weighed, measured, felt, or touched, or that is any other manner perceptible to the senses.”

The Court found that the DVDs were tangible personal property and that the business practice was taxable:

DVDs contain the photographs in a readily useable form . . . The customer is not paying for just the photographs, it is also paying for the ease of portability and retrievability of the images provided by the DVD. We find, therefore, that the DVDs are tangible personal property.

The Court noted, however, that if the photographers had only transmitted images to their customers electronically via email or the internet, a sales tax wouldn’t be assessed. It was the fact that the images were “transferred on . . . DVD that ma[de] it taxable.”

Documents:

Bakewell v. Commissioner of Revenue, 2009 WL 427029 (Minn.Tax Regular Div. Feb. 19, 2009).