Copyright Law Blog: Exclusive Rights

Monthly Archives: May 2009

Judge Sotomayor on copyright (and a smattering of other soft-IP)

Shourin Sen - 28 May 2009 – 9:00 am

Filed under News

[Update] Below is the gold collection of Judge Sotomayor copyright decisions. Please let me know if you come across a case that I’m missing. After I removed the false positives, there were fewer cases than the seventy-five I originally estimated. Apparently, the overzealous seventy-five number won the site a link from law.com, so the lesson to learn from all of this is overestimate by a lot and you’ll get hits. (I’ll post Judge Sotomayor’s six hundred and fifty-two Second Amendment cases next week.)

Smith v. The Educ. People, Inc., 2008 WL 749564 (2d. Cir. 2008) (summary order)
Jorgensen v. Sony BMG Music Entertainment, 310 Fed.Appx. 419 (2d. Cir. 2008) (summary order)
Major League Baseball v. Salvino, 542 F.3d 290 (2d. Cir. 2008) (Sotomayor concurring)
Smith v. The Educ. People, Inc., 2008 WL 749564 (2d Cir. 2008) (summary order)
Hudson v. Universal Studios Inc., 235 Fed.Appx. 788 (2d. Cir. 2007) (summary order)
Boone v. Jackson, 206 Fed.Appx. 30 (2d. Cir. 2007) (summary order)
Dow Jones & Company, Inc. v. International Securities Exchange, Inc., 451 F.3d 295 (2d. Cir. 2006) (Leval writing)
U.S. v. Broadcast Music, Inc., 426 F.3d 91 (2d. Cir. 2005) (Parker writing)
Playtex Products, Inc. v. Georgia-Pacific Corp., 390 F.3d 158 (2d. Cir. 2004) (Lanham Act) (Sotomayor writing)
Terrell v. Eisner, 104 Fed.Appx. 210 (2d. Cir. 2004) (summary order)
Briarpatch Ltd., L.P v. Phoenix Pictures, Inc., 373 F.3d 296 (2d. Cir. 2004) (Cardomone writing)
Tufenkian Import/Export Ventures, Inc. v. Einstein Moomjy, Inc., 338 F.3d 127 (2d. Cir. 2003) (Calabresi writing).
Queenie, Ltd. v. Nygard Intern., 321 F.3d 282 (2d. Cir. 2003) (Sotomayor concurring)
Nadel v. Isaksson, 321 F.3d 266 (2d. Cir. 2002) (breach of oral royalty agreement) (Sotomayor writing)
Specht v. Netscape Communications Corp., 306 F.3d 17 (2d. Cir. 2002) (Sotomayor writing) (the validity of arbitration clauses in click-through contract)
Matthew Bender & Co., Inc. v. West Publishing Co., 2002 WL 1583912 (2d. Cir. 2002) (summary order on attorneys’ fees)
Matthew Bender & Co., Inc. v. West Pub. Co., 240 F.3d 116 (2d. Cir. 2001) (Straub writing)
Oliveira v. Frito-Lay, Inc., 251 F.3d 56 (2d. Cir. 2001) (Leval writing) (affirming dismissal of trademark claim brought by Astrud Gilberto for use of her recording in a commercial)
Tishberg v. Doe, 8 Fed.Appx. 93 (2d. Cir. 2001) (summary order)
Bassett v. Mashantucket Pequot Tribe, 204 F.3d 343 (2d. Cir. 2001) (Leval writing)
Nadel v. Play-By-Play Toys & Novelties, Inc., 208 F.3d 368 (2d. Cir. 2000) (Sotomayor writing) (has a great opening line)
Nedakkuc Art Co. Ltd. v. Washington Mint, LLC, 208 F.3d 203 (2d. Cir. 2000) (summary order)
A. Brod, Inc. v. SK&I Co., L.L.C., 998 F.Supp. 314 (S.D.N.Y. 1998)
Tasini v. New York Times Co., 981 F.Supp. 841 (S.D.N.Y. 1997)
Tasini v. New York Times Co., 972 F.Supp. 804 (S.D.N.Y. 1997)
Castle Rock Entertainment v. Carol Pub. Group, Inc., 955 F.Supp. 260 (S.D.N.Y. 1997)
Favia v. Lyons Partnership, 1996 WL 194306 (S.D.N.Y. 1996)
Top Rank, Inc. v. Allerton Lounge, Inc., 1998 WL 35152791 (S.D.N.Y. 1996) (adopting Judge Magistrate recommendation for statutory damages)
Krueger International, Inc. v. Nightingale, Inc., 915 F.Supp. 595 (S.D.N.Y. 1996) (tradedress action)
Comedy III Productions, Inc. v. Class Publications, Inc., 1996 WL 219636 (S.D.N.Y. 1996) (Lanham Act)
Peer Intern. Corp. v. Luna Records, Inc., 887 F.Supp. 560 (S.D.N.Y. 1996)
Peer Intern. Corp. v. Luna Records, Inc., 1995 WL 125389 (S.D.N.Y. 1995)
Peer Intern. Corp. v. Luna Records, Inc.,1995 WL 350916 (S.D.N.Y. 1995) (motion for attorneys’ fees)
Jaguar Cars, Ltd. v. Nat. Football League, 886 F.Supp. 335 (S.D.N.Y. 1995) (Lanham Act)
Galet v. Carolace Embroidery Products Co., Inc., 1994 WL 542275 (S.D.N.Y. 1994)
Screenlife Establishment v. Tower Video, Inc., 868 F.Supp. 47 (S.D.N.Y. 1994)

Conversion claim for website fails because of lack of ownership, implied contract

Shourin Sen - 27 May 2009 – 9:00 am

Filed under Preemption

Conwell v. Gray Loon Outdoor Marketing Group, Inc., 2009 WL 1409477 (Ind. 2009)

The Supreme Court of Indiana addressed a fun little copyright case last Tuesday. The story goes like this: Piece of America sold novelty packages that included one-square-inch parcels of land in each of the fifty states. The company approached Gray Loon to design and host its website. Gray Loon submitted a proposal that contained language stating that it was its “philosophy that clients have purchased goods and services from us and that inherently means ownership of those goods and services as well.” Grey Loon completed the design at a cost of $8,500, which Piece of America paid in full. The parties never executed a contract.

About a year later, Piece of America requested that Gray Loon make substantial changes. Gray Loon didn’t submit a proposal for the revisions, but completed the work, which it billed at $5,224. Three months went by without payment or assurances of payment for either the revisions or the hosting fee. Gray Loon informed Piece of America that if it didn’t receive payment, it would take the site offline, and it eventually followed through.

Gray Loon filed suit for non-payment, and Piece of America countersued for conversion, claiming Grey Loon had taken from it the pre-revision version of its website.

Analysis of the conversion claim:

Indiana law states that a person can bring a civil action against a “person who knowingly or intentionally exerts unauthorized control over property of another.” Ind.Code § 35-43-4-3 (2008).

According to the Court, Gray Loon’s stated philosophy of client ownership didn’t “carry the weight and certainty required by the Copyright Act,” and the “formalities of copyright ownership transfer were clearly not met, inasmuch as the proposal-the only document purporting to grant [Piece of America] any ownership interest in Gray Loon’s intellectual property-was not signed as required by § 204.”

Thus, the Court found that Piece of America’s claim failed because it only owned a non-exclusive license, not a copyright (emphasis mine):

While copyright transfer requires a signed writing, one incidence of ownership that may be transferred without a writing is a “nonexclusive license,” a creation fashioned by courts for situations in which parties intended to transfer a copyright, but failed to do so in writing. Such a license can be granted orally or implied from the conduct of the parties. Effects Assocs., Inc., 908 F.2d at 558; 3 Nimmer on Copyright § 10.03[A], at 10-36. “Nonexclusive licenses do not constitute transfer of ownership rights and do not come within the purview of copyright law. Rather, they simply permit the use of a copyrighted work in a particular manner. An implied nonexclusive license is granted when (i) a person (the licensee) requests the creation of a work; (ii) the creator (the licensor) makes that particular work and delivers it to the licensee; and (iii) the licensor intends that the licensee copy and distribute his work. See Effects, 908 F.2d at 558-59.” Holtzbrinck Publ’g Holdings, L.P. v. Vyne Commc’n, Inc., 2000 WL 502860 *4 (S.D.N.Y.2000).

What POA had was a nonexclusive license. Piece of America, the licensee, requested the creation of a website. Gray Loon, the creator/licensor, made and “delivered” the work to the licensee. As a nonexclusive licensee, POA never had ownership of the site under copyright law. POA purchased a non-exclusive license, which we might read as granting it rights to use the site as its own. This conclusion makes short work of POA’s conversion claim. Because the website actually did not belong to POA, it cannot bring a claim for conversion. Furthermore, even if POA had owned the website, Gray Loon did not commit conversion. It performed the work-including hosting the site-at POA’s request. When POA did not pay, Gray Loon discontinued its hosting service and refused to hand over a copy of the site. Because this contingency was not addressed by the proposal, the common law of contract applies, not conversion.

Merit briefs posted for Reed Elsevier v. Muchnick

Shourin Sen - 27 May 2009 – 8:45 am

Filed under Jurisdiction

The merit briefs for the petitioner and respondent went up on Friday. I’ve also added the merit briefs to the full collection of documents I’m keeping here.

Merit briefs

Also, as a piece of housekeeping, some of you may have heard that the President nominated Judge Sotomayor of the Second Circuit for the Supreme Court. If you’re like me, you’re probably already a little tired of the circus surrounding the confirmation process. At the risk of adding to the melee, I thought it’d be fun to collect some of the Judge’s copyright opinions. So if you have any interest, tomorrow I’ll post Judge Sotomayor’s roughly seventy-five copyright decisions.

Beginning signs of the registration backlog in the courts?

Shourin Sen - 22 May 2009 – 9:00 am

Filed under Jurisdiction, Registration

The Washington Post ran an article on Tuesday detailing the registration backlog at the Copyright Office. Apparently, the Office is struggling with the implementation of its relatively new electronic system, and the processing time for paper registration has tripled from six to 18 months. The Office plans to encourage electronic filing by raising the fees for paper registration from $45 to $65, while holding the fees for electronic registration steady at $35. I hope the tactic ameliorates the situation because there are a few cases popping up that may (or may not) be a sign that the registration backlog is beginning to cause troubles in the courts.

Case in point, Specific Software Solutions, LLC v. Institute of Workcomp Advisors, LLC, 2009 WL 1393331 (M.D. Tenn. 2009).

Specific Software and the Institute of Workcomp Advisors both ran consulting businesses that advised on workers compensation issues. The the two companies had an amicable relationship but then suffered a fallout, eventually leading to the Institute of Workcomp Advisors sending Specific Software Solutions a cease-and-desist alleging infringement of its website. A couple months after the cease-and-desist was received, Specific Software Solutions filed a complaint seeking a declaratory judgment that the Institute of Workcomp Advisor’s copyright was invalid or, in the alternative, a finding of non-infringement.

The problem? Institute of Workcomp Advisors’ copyright registration application wasn’t yet reviewed by the Copyright Office. The Institute filed a motion to dismiss, arguing that the court didn’t have jurisdiction over the claim because its application wasn’t processed. Now, we should pause here for moment to discuss this litigation tactic. One might expect that both parties would want to litigate the copyright issue. A likely explanation for the move is that the Institute of Worcomp Advisors, a North Carolina corporation, wanted to litigate closer to home.

The plaintiff made two arguments in regards to copyright registration: [1] that registration wasn’t required in a declaratory judgment proceeding; and [2] registration should be interpreted to have occurred on filing, not on a determination by the Copyright Office. Judge Aleta A. Trauger rejected both arguments and granted the Institute of Workcomp Advisor’s motion to dismiss. The Court’s analysis of whether registration should be interpreted as occurring on filing, as argued by Nimmer, or after Copyright Office review is interesting:

Plainly, from a statutory interpretation perspective, the defendant has the better of the argument. Sections 411(a), 410(a), and 410(b) all show a clear congressional intent to have the Copyright Office review the materials submitted and pass judgment on their copyrightability before those materials are considered “registered” for purposes of the jurisdictional requirements of Section 411(a). Section 410(d) deals with the “effective date” of a registration, not what it takes for a registration to occur, and multiple provisions of this title clearly demonstrate that registration occurs after a Copyright Office review, not simply by the applicant submitting materials.

That said, numerous courts and the widely cited treatise Nimmer on Copyright, take the opposite view, concluding that the court has jurisdiction over an infringement action following the submission of the fee, deposit, and application. See e.g. Apple Barrel, 730 F.2d at 386; Int’l Kitchen Exhaust Cleaning Assoc. v. Power Washers of N. Am., 81 F.Supp.2d 70, 72 (D.D.C.2000); Iconbazaar, 308 F.Supp.2d at 633-34. Using Section 410(d) as their statutory foundation, the side favoring this “broad,” or “application,” approach argue that “policy considerations” support their position because, “given that the claimant [after application] has done all that it can do, and will ultimately be allowed to proceed regardless of how the Copyright Office treats the application, it makes little sense to create a period of legal limbo in which suit is barred.” (Docket No. 12 at 3, quoting Nimmer on Copyright § 7.16(B)(1)(a)(i)).

Indeed, in Int’l Kitchen, after noting that courts had come out differently on the issue, the court cited Section 410(d) and Nimmer and simply stated that “judicial economy” favored not dismissing the case simply because the plaintiff did not have a registration certificate from the Copyright Office. 81 F.Supp.2d at 72. A similar approach, that is, discounting the language of Sections 410(a), 410(b), and 411(a), focusing on Section 410(d) and arguing that the registration process is of little import because the “owner of the work may bring suit even if his copyright application is denied” is also found in the Iconbazaar case, along with most cases taking this “broad” view. 308 F.Supp.2d at 634.

To the court, the recent decisions of other district courts in this circuit are more soundly reasoned and should be followed. Plainly, the courts in Int’l Kitchen and Iconbazaar have correctly recognized that there is something “uneconomic” about dismissing a complaint simply because the plaintiff does not have a certificate of registration, especially when the plaintiff, under Section 411(a), will be allowed to sue even if the Copyright Office denies the registration and refuses to issue the certificate. But, as the courts of this circuit have recognized, it is the role of the courts to “interpret a statute to give effect to each clause, sentence, and word so that none is rendered superfluous or surplusage.” Ripple Junction, 2005 WL 2206220, at * 4 (citing U.S. v. Perry, 360 F.3d 519, 537 (6th Cir.2004)). To read the statute to mean that registration occurs when the applicant files his materials would be to misread and render superfluous numerous provisions of the Copyright Act, perhaps most notably Section 411(a), which provides the procedure for how a lawsuit may still be filed even if registration is refused by the Copyright Office. Id .

A couple of quick comments:

Nimmer’s view that registration should be interpreted as occurring on filing is particularly troublesome in the context of websites. The Court’s comments to the contrary, judicial economy doesn’t favor interpreting registration as occurring on filing in this circumstance. Websites are unique in that they are constantly being amended, and the two parties and the court have to know which version of the site is being litigated to effectively handle the dispute. We saw this issue last week in Facebook v. Power Ventures.

There’s a missing fact from the decision that I find troublesome. The Court in an otherwise thorough factual rundown failed to mention when the Institute of Workcomp Advisors filed its registration. This popped a red flag for me. Was it two months ago? six months ago? 16 months ago? The Court may have omitted this detail to lessen the possibility of being overturned on appeal. The fact that the Court didn’t mention the date would hint that it may be on the higher end of the spectrum.

DWI, Driving With Infringing (DVDs)?

Shourin Sen - 20 May 2009 – 10:13 pm

Filed under Criminal Enforcement of IP

United States v. Brooks (S.D. Ga. 2009)

There was a somewhat perplexing decision last Wednesday in a criminal copyright infringement prosecution, courtesy of the federal district court in Augusta, Georgia. Here comes the facts.

Cop received a tip from his narcotics division to be on the lookout for a Hummer, and to tail it for a traffic violation that would provide probable cause for a traffic stop. Cop encountered a Hummer that went into the middle lane to move around an accident and pulled it over. Cop ran a background check on the Defendant’s car tag, insurance, criminal background, and outstanding warrants, all of which came back clear. While the cop was writing the traffic ticket, a second cop pulled up with a narc dog. Narc dog alerts on the hummer after an open-air sniff search. Cop #2 searched the car and found marijuana “shake” (which apparently means, small pieces of pot) in the center console. Defendant wasn’t given a citation for the pot and it appears that it wasn’t taken into custody or tested (presumably because there wasn’t sufficient quantity).

What did the cops find? “[S]everal large boxes filled with DVDs that [Cop #2] described as ‘bootleg.’ Again, however, [Cop #2] did not have specific information about the DVDs, such as the number discovered, because he was not the person in charge of counting and/or cataloging the evidence collected.” Following the search of the Hummer, the Defendant was arrested and a search warrant for Defendant’s residence was obtained and executed.

The Defendant was charged with the criminal distribution and reproduction of copyrighted material. The Defendant filed a motion to suppress contending that the search of his car and house transgressed his Fourth Amendment rights. I’m not going to go into the Court’s analysis of the traffic stop. Can you pick out the fundamental problem with this case?

[Insert Jeopardy theme song.]

Mere possession of infringing DVDs isn’t illegal. You can drive around with a truck full of them. You just can’t reproduce or distribute ten or more infringing copies of a copyrighted work which have a total retail value of more than $1,000. If it wasn’t the marijuana, what in fact was the Defendant arrested for? And was there probable cause to search the defendants house based only on the possession of material he was legally allowed to carry?

Many, many questions. Very few answers.

Breaking News: Every pending copyright case lacks jurisdiction

Shourin Sen - 20 May 2009 – 9:00 am

Filed under Appointments Clause, Jurisdiction

So I promised myself I wouldn’t break out the copyright siren because it’s so, you know, annoying. But this story needs, no, scratch that, it deserves, the siren. Did you realize that under current precedent every pending copyright case lacks jurisdiction? Such is apparently the status of things.

Our story begins in the grand ole’ year of 1991. C+C Music Factory and Color Me Badd topped the charts, the Minnesota Twins were in the World Series, I had the biggest crush on Sarah from second period band, and the Supreme Court issued a feisty little decision in Freytag v. Commissioner of Internal Revenue. In the case, A five Justice majority held that a head of a department, for purposes of the Appointments Clause, must be the head of a “Cabinet-level department[]” that is “limited in number and easily identified.” The Constitution only vests the power to appoint inferior officers in the President, the Courts of Law, and the Heads of Departments. Thus any appointment that wasn’t made by the President, the Courts of Law, or a Cabinet-level like department head, transgresses the Constitution.

Who are the not quite Cabinet-level department heads who still make appointments, transgressing the Supreme Court’s prevailing interpretation of the Appointments Clause? Well, one of them is the Librarian of Congress. Even the most fervent advocate, I think, would be hard-pressed to make the argument that the Library is a Cabinet-level department. The Library isn’t one of those departments like the State Department, the Department of the Interior, or the Commerce Department; the Librarian doesn’t go through an exhaustive confirmation process; he isn’t a political figure; he doesn’t change when administrations change; &c.

So, under current precedent the appointments made by the Librarian of Congress are invalid. If you’ve been following this blog, you may recognize this issue from the Appointments Clause challenge to the Copyright Royalty Board. But really, why stop there? Who else has the Librarian of Congress appointed in violation of the Appointments Clause?

The Register of Copyrights, together with the “subordinate officers and employees of the Copyright Office,” are all appointed by the Librarian of Congress. 17 U.S.C. § 701(a). You know, those people who are in charge of that whole registration thing, as well as a host of other amazing policy work I don’t want to make light of.

So no big deal, right? A valid copyright registration isn’t important? I mean, it has a pretty stamp and looks all official and stuff, but so what? IT’S ONLY A JURISDICTIONAL REQUIREMENT! To quote the Second Circuit from In Re: Literary Works in Electronic Database Litigation, now set for oral arguments at the Supreme Court:

[T]here is widespread agreement among the circuits that section 411(a) is jurisdictional. See La Resolana Architects, PA v. Clay Realtors Angel Fire, 4 416 F.3d 1195, 1200 (10th Cir. 2005) (“Section 411(a) is the jurisdictional lynchpin to copyright 5 infringement actions[.]”); Positive Black Talk Inc. v. Cash Money Records Inc., 394 F.3d 357, 6 365 (5th Cir. 2004) (noting that section 411(a) “supplement[s]” the “broad underlying” 7 jurisdictional grants in 28 U.S.C. §§ 1331, 1338 and acts as an additional “jurisdictional 8 prerequisite”); Xoom, Inc. v. Imageline, Inc., 323 F.3d 279, 283 (4th Cir. 2003) (“Copyright 9 registration is a jurisdictional prerequisite to bringing an action for infringement under the 10 Copyright Act.”); Murray Hill Publ’ns, Inc. v. ABC Commc’ns, Inc., 264 F.3d 622, 630 n.1 (6th 11 Cir. 2001) (noting that while copyright protection exists prior to registration, “[t]he registration 12 requirement under section 411[a] is a jurisdictional prerequisite to the right of the holder to 13 enforce the copyright in federal court”); Brewer-Giorgio v. Producers Video, Inc., 216 F.3d 14 1281, 1285 (11th Cir. 2000) (“It is well settled in this Court that the registration requirement is a 15 jurisdictional prerequisite to an infringement suit.” (internal quotation marks omitted and 16 alterations incorporated)); Data Gen. Corp. v. Grumman Sys. Support Corp., 36 F.3d 1147, 1163 17 (1st Cir. 1994) (describing registration under section 411(a) as a “jurisdictional requirement”).

In the immortal words of Scooby Doo, “Ruh Roh Raggy!” So if the officers at the Copyright Office are unconstitutional appointments, and the registrations issued by the Copyright Office aren’t valid, and valid registrations are a jurisdictional requirement . . . no courts have jurisdiction to hear any copyright cases. (Except for the renegade Seventh Circuit which held that registration is a case processing rule, and not a requirement for jurisdiction. I know what you’re thinking: Judge Posner saves copyright in Illinois, isn’t. that. just. sooooooooo. typical. Though, the Circuit would still have to reject cases if it strictly follows the registration rules. Every pending copyright case lacks jurisdiction. And no one can bring a new case either. The end.

Have a happy Wednesday.

Supreme Court to hear Appointments Clause challenge; Ramifications for the Copyright Royalty Board litigation

Shourin Sen - 19 May 2009 – 9:00 am

Filed under Appointments Clause, Copyright Royalty Board

On Monday, the Supreme Court granted cert in Free Enterprise Fund and Beckstead and Watts, LLP, Petitioners v. Public Company Accounting Oversight Board, et al. This is news that will almost certainly have ramifications for the pending Appointments Clause challenge of the Copyright Royalty Board.

The two cases

The facts in Free Enterprise Fund share many similarities with those in the Copyright Royalty Board litigation. The Securities and Exchange commission is comprised of five officers who are appointed by the President with the advice and consent of the Senate. The Chairman of the SEC serves at the pleasure of the President, while the four other officers can only be removed for cause. The Commission, in turn, appoints a Public Company Accounting Oversight Board, after consultation with the Chairman of the Board of Governors of the Federal Reserve and the Secretary of the Treasury. The SEC is empowered to set Board rules and procedures, to overturn any sanction proposed by the Board, to limit or relieve the Board of its powers, and remove members of the board for cause.

To quickly review, in the Copyright Royalty Board litigation, the Librarian of Congress is appointed by the President with the advice and consent of the Senate. There are no limitations on the President’s power to remove the Librarian of Congress. The three Copyright Royalty Judges are appointed by the Librarian of Congress after consultation with the Register of Copyrights, an officer who is also appointed by the Librarian of Congress. (I somehow made a mistake on this not inconsequential fact in an earlier post on this case.) The Librarian of Congress may remove a Copyright Royalty Judge for cause. Determinations by the Copyright Royalty Judges are appealed to the United States Court of Appeals for the D.C. Circuit.

The Appointments Clause

According to the Appointments Clause, Congress may only vest the power to appoint inferior officers in the President, the Courts of Law, or the Heads of Departments. In Freytag v. Commissioner of Internal Revenue, a majority of the Supreme Court held that a Head of a Department must be the head of a “Cabinet-level department[]” that is “limited in number and easily identified.” Four concurring justices adopted a less strenuous test for a Head of a Department stating that one need be only a head of any agency “immediately below the President in the organizational structure of the Executive Branch,” including “all independent executive establishments.” The D.C. Circuit in Free Enterprise Fund rejected the test set forth by the majority in Freytag — standing precedent — and instead adopted the less potent test used in the concurrence:

In Freytag, the Supreme Court described Departments as being “like the Cabinet-level departments,” 501 U.S. at 886 (emphasis added), which are “limited in number and easily identified,” id. Although the Court did not identify the precise characteristics of “Cabinetlike” departments and reserved the issue of whether independent agencies are departments, id. at 887 n.4, four Justices urged that “Departments” should be understood to encompass “all agencies immediately below the President in the organizational structure of the Executive Branch,” including “all independent executive establishments,” id. at 918-19 (Scalia, J., joined by O’Connor, Kennedy, and Souter, JJ, concurring in part and in the judgment) (hereinafter “Concurring Op.”). They reasoned that the Framers “chose the word ‘Departmen[t]’ . . . not to connote size or function (much less Cabinet status), but separate organization – a connotation that still endures even in colloquial usage today.” Id. at 920. Noting that the Constitution makes no reference to the term “Cabinet,” id. at 916-17, and that the Court has not held that “‘the Heads of Departments’ are Cabinet members,” id. at 917, the concurring justices observed that even the sparse history of the Appointments Clause included the 1792 Act creating a Post-Master General, who, while not a cabinet member, had power to appoint an assistant and deputies, id. As Congress has continued to empower non-Cabinet officers to appoint inferior officers, id. at 918, the concurring justices cautioned that to conclude such action violated the Appointments Clause would “cast[] into doubt the validity of many appointments and a number of explicit statutory authorizations to appoint,” id.

Thus, on appeal, the Supreme Court will address an issue in Free Enterprise Fund that is almost directly on point to the Appointments Clause challenge of the Copyright Royalty Board. If the SEC is found to be a Department, under whatever test the Supreme Court applies, the appointment of the Copyright Royalty Judges will likely stand. Likewise, if the Supreme Court gives the Appointments Clause teeth and finds that the SEC isn’t a Department, the appointment of the Copyright Royalty Board will likely be held to transgress the Constitution.

There are two potentially substantive differences between Free Enterprise Fund and the Copyright Royalty Board litigation, one of which looks to me like a red herring, the other may be a game changer. The red herring is that the Library of Congress is sometimes thought of as a legislative branch establishment and not part of the executive. I think the importance of this fact can be overstated since the Librarian of Congress is appointed by the President.

The potential game changer is that the Copyright Royalty Judges are appointed by one person who answers directly to the President. The board in Free Enterprise Fund, in contrast, is appointed by the five Securities and Exchange commissioners. Part of the theory underlying the Appointments Clause is that it’s integral to have a consolidated chain of command so that you know whose head must roll if an inferior officer is underqualified or makes a bad decision. Having five people select an appointment makes for an attenuated chain of command.

So what now?

To be completely honest, as I am not an appellate litigator, or any type of litigator, I’d be interested to hear any of your more informed opinions on whether the Copyright Royalty Board litigation will be stayed pending the upcoming Supreme Court decision.

Update: Word comes via the legal blog grapevine (thanks again!) that there is no set course of action that an appellate court will follow in this circumstance. A court may refrain from deciding a case because they either don’t want to be wrong or decide an issue that they are not forced to address. Some courts, alternatively, will jump the Supreme Court to give the tribunal the benefit of its analysis, or find that it is able to distinguish the facts and proceed accordingly.

Thanks to the wonderful SCOTUS blog for the collection of documents:

Opinion Below (D.C. Circuit)
Petition for certiorari
Brief in opposition for respondents Public Company Accounting Oversight Board
Brief in opposition for the United States
Reply brief for Petitioners
Amicus curiae brief for Washington Legal Foundation (in support of petitioners)
Amicus curiae brief for Mountain States Legal Foundation (in support of petitioners)
Amicus curiae brief for American Civil Rights Union (in support of petitioners)

A9 wins summary judgment motion on contributory infringement claim; entitled to DMCA 512(c) safe harbor

Shourin Sen - 18 May 2009 – 9:00 am

Filed under DMCA, Secondary Liability

Perfect 10, Inc. v. Amazon.com, Inc., 2009 WL 1334364 (C.D. Cal. 2009)

This past Tuesday, Judge A. Howard Matz released an order in Perfect 10, Inc. v. Amazon.com, an ancillary to the blockbuster copyright case Perfect 10 v. Google. Judge Matz is in a horse race with Judge Batts of the S.D.N.Y. for the title of most prolific judge on copyright issues over the past few months, which is great on both fronts for anybody who like well-articulated copyright decisions. The Court earlier granted summary judgment in favor of defendant A9 on claims for direct and vicarious copyright infringement. At issue in this order was the final remaining claim for contributory copyright infringement.

A9, a wholly owned subsidiary of Amazon, sought a summary determination that it was entitled to the § 512(c) safe harbor provisions of the DMCA due to the fact that Perfect 10 sent infringement notices in A9′s search results to Amazon, not itself. Perfect 10, in response, argued two grounds: first that A9 had actual knowledge of the infringement from court papers filed during litigation; and second, that A9 should be equitably estopped from seeking safe harbor. The court rejected the arguments and granted summary judgment in favor of A9 on the remaining claim.

Actual knowledge

Perfect 10 argued that the court papers it sent to A9 during litigation conferred actual knowledge of infringement:

Perfect 10 contended that A9 is not entitled to the safe harbor because it did in fact receive Perfect 10′s DMCA notices, and therefore had actual knowledge of infringement. An ISP is not entitled to the § 512(c) safe harbor if it has “actual knowledge that the material or an activity using the material on the system or network is infringing.” 17 U.S.C. § 512(c)(1)(A)(i) (emphasis added). The ISP must know that “specific infringing material is available using its system,” Amazon.com, 508 F.3d at 1172 (emphasis in original).

The Court wasn’t buying:

They are legally irrelevant. The absurd result otherwise would be that the complaint or any other pleading that contains sufficient identification of the alleged infringement could count as a DMCA notification.

Equitable estoppel

Perfect 10 made five core arguments in regards to equitable estoppel. First, Perfect 10 contended that Amazon instructed copyright owners to send DMCA notices regarding its affiliates directly to Amazon in the Conditions of Use posted on its site. The Court disagreed finding that neither Amazon’s Conditions of Use or filings with the Copyright Office included A9 among it affiliates.

Second, Perfect 10 argued that Amazon held itself out as an authorized agent for A9 because Amazon’s counsel responded to notices sent from Perfect 10, apparently on behalf of both Amazon and A9. The Court found that the fact that A9′s counsel was cc’d on a letter was insufficient to support the conclusion that Amazon was acting on its behalf, especially since A9 designated its own copyright agent on its site and in filings with the Copyright Office.

Perfect 10′s third and fourth estoppel arguments centered on Amazon’s actions, not A9′s. Perfect 10 contended that Amazon was the proper recipient because the infringing activity took place on its website, because the A9 search box was included on Amazon.com. The Court found that since A9 designated its own copyright agent, Amazon wasn’t the proper recipient, a fact that Perfect 10 was aware of as evidenced by the fact that Perfect 10 brought suit against A9 as well as Amazon.

Fourth, Perfect 10 argued that Amazon was obligated to notify A9 of the alleged infringements because it owns and hosts the site/corporation. The Court disagreed finding no precedent for the requirement that one ISP must pass along notices to another, because of ownership or hosting. The Court noted that even if Amazon’s representations were misleading it wouldn’t mean that A9 failed to comply with the DMCA’s requirements for designating a copyright agent or that a third party could ignore the designation:

Perfect 10 cites no authority that would require one ISP, by virtue of its ownership or hosting of another ISP, to pass along a DMCA notice, where the two ISPs are distinct corporate entities and, more importantly, have each properly designated its own copyright agent. That Amazon’s representations may have been misleading does not mean A9 failed to comply with the DMCA’s requirements for designating a copyright agent or that [Perfect 10] could ignore A9′s designation. See 17 U.S.C. § 512(c)(3)(A) (“To be effective …, a notification of claimed infringement must be a written communication provided to the designated agent of a service provider …”) (emphasis added).

Finally, Perfect 10 argued that A9 failed to satisfy the DMCA’s requirements for the designation of a copyright agent to receive notifications of infringement. Subsection 512(c)(2) requires a service provider to designate a copyright agent “by making available through its service, including on its website in a location accessible to the public, and by providing to the Copyright Office, substantially the following information: the name, address, phone number, and electronic mail address of the agent. [emphasis added]” Perfect 10 argued that A9 failed to meet the requirements because the name of the agent on its Copyright Office filing was outdated. The Court rejected the veracity of the factual assertion, but noted that even if it was true, it was not of consequence:

In any event, these are precisely the sort of technical departures from the listed requirements that Congress believed were inconsequential. There is no genuine dispute that the Copyright Office designation was valid and accurate and enabled anyone who saw it to contact A9′s designated agent, through mail, fax, telephone, or the online complaint form. Hence, A9′s Copyright Office listing substantially complies with § 512(c)(2).

UMG’s secondary liability claims against Veoh’s investors dismissed with prejudice

Shourin Sen - 17 May 2009 – 5:58 pm

Filed under Secondary Liability

UMG Recordings, Inc. v. Veoh Networks Inc. (C.D. Cal. 2009)

We last checked in on UMG v. Veoh in early February. At the time, Judge A. Howard Matz dismissed a series of secondary liability claims against Veoh’s investors, including contributory infringement, vicarious infringement and inducement to infringe. The previous claims where dismissed without prejudice providing UMG the opportunity to do some more fishing and refile if it so desired. The previous order for dismissal, however, ended with a rather stern signal for where the Court stood on the issue of secondary liability for investors:

Although Plaintiffs may file a Second Amended Complaint, they should reflect carefully what is likely to result if they do so. The Court’s existing scheduling requirements and the near certain additional costs and complications that will flow from attempting to go after deep pockets whose potential liability could entail vexing issues of corporate governance caution that “less may be more.”

UMG decided to file a second amended complaint alleging secondary liability claims against Veoh’s investors, nonetheless. The Court, last Tuesday, addressed the claims after the additional discovery, finding that few new allegations of substance were uncovered. Regardless, the discussion of the allegations as they are is certainly interesting:

Although the[ new] details are titillating insofar as they offer a glimpse into the inner workings of Veoh and its Board of Directors, they boil down to allegations that overlap almost entirely with the allegations of the FAC: the Investor Defendants knew that infringing activity was occurring on Veoh’s site; as board members and financial supporters of Veoh the Investor Defendants could have done more to prevent this activity, such as implementing filtering software or hiring employees to ferret out infringing content; and the Investor Defendants hoped to eventually profit from their investment in Veoh, and thus sought to attract more users to Veoh by providing funding and by implementing policies that “facilitated more infringement.”

The only allegations that are arguably new are that the Investor Defendants’ principals sometimes acted as the “public face” of Veoh, and that the Board considered copyright matters. But these allegations do not support UMG’s infringement claims. The “public face” allegations simply claim that the investors (a) explained Veoh’s policies to the public, and (b) sought relationships with content providers. Neither of these allegations suggests anything unlawful. In fact, the allegations concerning relationship building, including an attempt to form an agreement with UMG, actually suggest that the investors were actively seeking to ensure that copyrights were not violated. In addition, the fact that the Board considered copyright matters at its meetings is neither surprising nor damning. If the Board had not considered copyright matters, UMG would likely claim that it had been derelict in its duties.

The Court found, once again, that the merits of secondary liability for copyright infringement didn’t trump the benefits of corporate governance structures. The claim was dismissed with prejudice so this issue is now preserved for appeal, which I would anticipate is forthcoming given UMG’s tactical decision to file a second amended complaint:

In the absence of clear precedent, this Court is not willing to expand the scope of copyright liability in a manner that presents a substantial risk of upending well established concepts of corporate governance. Although the judicially-fashioned principles of secondary copyright liability serve an important purpose, UMG’s proposed extension of these principles would likely invite a wholesale weakening of the no less important principle that the corporate form is meant to protect shareholders, directors, and officers from ordinary liability. To allow for derivative copyright liability to be imposed on these Investor Defendants would be particularly problematical. The vast and rapid expansion of software technology in telecommunications is generally beneficial to our economy and society, and we should not erect obstacles to that growth in the absence of sound legal and policy-based reasons.

Copyright registration and the DMCA: Revisiting Facebook v. Power Ventures

Shourin Sen - 17 May 2009 – 11:41 am

Filed under DMCA

I thought it’d be worthwhile do revisit the DMCA portion of the order in Facebook v. Power Ventures that we discussed a couple of days ago. There is a lot going on in the DMCA analysis that, upon further reflection, deserves more discussion. To review, Facebook brought suit against Power Ventures for offering a website that would ask a user for her Facebook login. Power Ventures would then scrape the user’s content from Facebook, allegedly along with some of Facebook’s content, and redisplay it on Power Ventures’ site.

Our last discussion of the order addressed the difference between copyright infringement and a claim for copyright infringement under the Copyright Act. 17 U.S.C. 102 extends protection to original works that are fixed in a tangible medium. An author, however, cannot bring a claim for copyright infringement until she registers her copyright. And her infringement claim is only as broad as her registration.

To use the present case as an example, Facebook operates a large site that is constantly being amended. Power Ventures may have infringed a great deal of content on Facebook’s website, but if it wasn’t covered under the registration upon which Facebook based its claim, Power Ventures cannot be found liable. Facebook is, of course, able to file a new registration for the updated site and bring a new claim, but it wouldn’t have a full set of remedies available. To receive statutory damages, an author must register her copyright before infringement occurs, or within the first three months of publication.

The DMCA:

Now does the same thing hold true for a DMCA violation? Must an author register a work underlying a DMCA violation before it can bring a claim? The answer appears to me to be no. 17 U.S.C. 1201 (”Circumvention of copyright protection systems”) states as follows: “(1) (A) No person shall circumvent a technological measure that effectively controls access to a work protected under this title . . .” The language of Section 1201 tracks the language of 17 U.S.C. 102, which as noted above, extends copyright protection to “original works of authorship fixed in any tangible medium of expression.” The registration provision of the Copyright Act, 17 U.S.C. 411, also only explicitly applies to “action[s] for infringement,” not violations of the DMCA.

What should we take away from this? DMCA claims can be, and often are, more broad than the copyright infringement claims that are pleaded in the same complaint. Facebook’s infringement claim only extends as far as its registration, which if the registration’s title “Facebook homepage” is any indication, only encompass the site’s homepage. Facebook’s DMCA claim can encompass all of the material of sufficient originality on Facebook’s website.

User Generated Content

As best as I can tell, the Court found that Power Ventures was potentially liable for a DMCA violation in regards to both user content and Facebook’s content; that Power Ventures would be liable for a DMCA violation if Facebook could prove that the company offered a tool to circumvent a technological measure to reach user content. If this was indeed the holding there are some clarifications in order. The Court cited Chamberlien Group, Inc. v. Skylink Techs, Inc. for the prima facia test for a DMCA violation:

The elements necessary to state a claim under the DMCA are (1) ownership of a valid copyright; (2) circumvention of a technological measure designed to protect the copyrighted material; (3) unauthorized access by third parties; (4) infringement because of the circumvention; and (5) the circumvention was achieved through software that the defendant either (i) designed or produced primarily for circumvention; (ii) made available despite only limited commercial significance other than circumvention; or (iii) marketed for use in circumvention of the controlling technological measure. See Chamberlain Group, Inc. v. Skylink Techs, Inc., 381 F.3d
1178, 1203 (Fed. Cir. 2004).

Facebook’s terms of use were explicit that a user only granted Facebook a non-exclusive license, and did not assign a copyright in her work to the site. Provided that you accept the test from Chamberlien for liability under the DMCA, Facebook’s claim of a violation for circumvention of a technology measure to reach user content can’t stand. Facebook didn’t possess “ownership of a valid copyright” in the user content and does not satisfy the first prong of the Chamberlien test.