IP Law Chat

Collection of (Relatively) Recent Copyright Fair Use Decisions

Stacia Lay — Thu, 23 May 2013 11:55:00 -0800

Blogging has been sparse in recent months due to a busy schedule so I'm using the relatively recent spate of fair use opinions from various courts to belatedly summarize opinions of interest that have been issued over the last few months.

Cariou v. Prince, Case No. 11-1197-cv (2d Cir. Apr. 25, 2013):

Patrick Cariou published a book of "classical portraits and landscape photographs" that he took over six years while living among Rastafarians in Jamaica. Richard Prince, an "appropriation artist", created a series of paintings and collages that altered and incorporated a number of Cariou's photographs that Prince exhibited at the Eden Rock hotel and the Gagosian Gallery in New York. Cariou sued Prince and others for copyright infringement, to which defendants raised a defense of fair use. On the parties' cross-motions for summary judgment, the district court rejected the fair use defense, granted summary judgment to Cariou, and granted injunctive relief that included the destruction of all of the infringing works of art.

The Second Circuit first concluded that the district court had applied an incorrect legal standard in requiring that, in order to qualify for a fair use defense, Prince's works must comment on Cariou, his pictures, "or on aspects of popular culture closely associated with" Cariou or his pictures. The Second Circuit concluded that the

law imposes no requirement that a work comment on the original or its author in order to be considered transformative, and a secondary work may constitute a fair use even if it serves some purpose other than those (criticism, comment, news reporting, teaching, scholarship, and research) identified in the preamble to the statute.

Rather, to qualify as a fair use, a secondary work "generally must alter the original with 'new expression, meaning, or message.'"

Although the Second Circuit concluded that the district court applied the incorrect legal standard to its analysis of the fair use defense, the appellate court proceeded to examine the allegedly infringing works of art under the four fair use factors. In doing so, the court concluded that 25 made fair use of Cariou's photographs but that 5 presented "closer questions" and it therefore remanded to the district court to make the fair use determination with respect to those 5 artworks.

Because the Second Circuit reversed the district court's summary judgment decision, it also vacated the court's injunction and specifically noted that if the district court found defendants liable for copyright infringement with respect to the 5 artworks to be addressed on remand, destruction of Prince's artwork would not be a proper part of any injunctive relief, a proposition that the parties apparently agreed with.

Senior Circuit Judge Clifford Wallace of the Ninth Circuit sitting by designation dissented in part. Although he largely agreed with the majority's statement of the law, including the conclusion that the district court applied an incorrect legal standard, he argued that the entire fair use determination should be remanded for the district court to consider in the first instance applying the correct legal standard.

Associated Press v. Meltwater U.S. Holdings, Inc., Case No. 12 Civ. 1087 (DLC) (S.D.N.Y. Mar. 21, 2013):

In February 2012, the Associated Press sued Meltwater primarily alleging copyright infringement claims for using a computer program to scrape AP stories from the web and then providing excerpts of those stories to Meltwater's subscribers without the permission of the AP. Meltwater raised a number of affirmative defenses, including, as relevant to this description of the case, fair use.

The district court's opinion provides a lengthy description of various aspects of Meltwater's services but the court provides a good, brief summary description:

Meltwater uses automated computer programs or algorithms to copy or "scrape" an article from an online news source, index the article, and deliver verbatim excerpts of the article to its customers in response to search queries.

The parties both moved for summary judgment on Meltwater's fair use defense, as well as other issues not discussed in this summary. The fair use discussion of the court's 91-page opinion is lengthy, so I will try only to hit the high points as to each of the four factors.

As characterized by the district court, Meltwater argued that its use of the AP articles at issue was fair because its service "functions as an Internet search engine, providing limited amounts of copyrighted material to its subscribers in response to their queries and thereby pointing its subscribers to a source of information online." Such a service, Meltwater argued, was transformative of the original works and was therefore a fair use.

*Purpose and character of the use: Contrary to Meltwater's assertions, the district court found that neither the purpose nor the use of the AP articles by Meltwater was transformative:

Meltwater uses its computer programs to automatically capture and republish designated segments of text from news articles, without adding any commentary or insight in its News Reports. Meltwater copies AP content in order to make money directly from the undiluted use of the copyrighted material; this is the central feature of its business model and not an incidental consequence of the use to which it puts the copyrighted material.

In discussing this first fair use factor, the district court referenced--as it would often do throughout the opinion--Meltwater's characterization of itself "as a search engine that directs users to a source of information online." The court rejected that characterization, instead stating that Meltwater was "an expensive subscription service that markets itself as a news clipping service, not as a publicly available tool to improve access to content across the Internet." The court then went on at some length to explain its reasons for rejecting Meltwater's characterization of itself as a search engine, distinguishing two cases from the Ninth Circuit--Perfect 10, Inc. v. Amazon.com, Inc., 508 F.3d 1146 (9th Cir. 2007) and Kelly v. Arriba Soft Corp., 336 F.3d 811 (9th Cir. 2003).

The first factor thus did not support a finding of fair use, the district court concluded.

*Nature of the copyrighted work: Because the AP articles were news stories, which are "more vulnerable" to the fair use defense, and Meltwater copied articles that had already been published, the district court concluded that this factor, which it found to be at best neutral, should weigh in favor of a finding of fair use. That was the last good news for Meltwater in the fair use analysis.

*Amount and substantiality of the copying: From both a quantitative and a qualitative perspective, the district court concluded that this factor weighed strongly against a finding of fair use because Meltwater copied between 4.5% and 61% of the articles at issue and automatically copied the lede from the stories, which "'convey[ed] the heart of the story.'" The district court also again rejected Meltwater's attempts to justify its copying by characterizing itself as a search engine that took only that amount necessary to function as such.

*Effect of the use on the potential market or value of the work: This factor also strongly favored the AP, the district court concluded, essentially because the AP (or its licensees) and Meltwater existed in the same "commercial space" and competed for the same customers.

*Balancing of fair use factors: Based on the discussion of each individual fair use factor described above, the district court had no difficulty concluding that, on balance, the factors weighed heavily against Meltwater:

Meltwater's business model relies on the systematic copying of protected expression and the sale of collections of those copies in reports that compete directly with the copyright owner and that owner's licensees and that deprive that owner of a stream of income to which it is entitled. Meltwater's News Reports gather and deliver news coverage to its subscribers. It is a classic news clipping service. This is not a transformative use. As significantly, the rejection of the fair use defense here will further the ultimate aim of the Copyright Act, which is to stimulate the creation of useful works for the public good.

Discussion of the original filing of the case by the AP can be found here.

SOFA Entm't, Inc. v. Dodger Prods., Inc., Appeal Nos. 10-56535, 10-57071 (9th Cir. Mar. 11, 2013):

Dodger Productions used a seven-second clip of the Four Seasons on The Ed Sullivan Show in its musical about the Four Seasons called Jersey Boys. SOFA Entertainment sued Dodger claiming the unlicensed use of the clip constituted copyright infringement. Dodger claimed its use of the clip was fair use and both the district court and the Ninth Circuit "wholeheartedly agreed." The district court also awarded Dodger $155,000 in attorneys' fees and costs.

The Ninth Circuit had no difficulty concluding that each of the factors supported a finding of fair use and arriving at the following conclusion: "Dodger's use of the clip did not harm SOFA's copyright in The Ed Sullivan Show, and society's enjoyment of Dodger's creative endeavor is enhanced with its inclusion. This case is a good example of why the 'fair use' doctrine exists."

Likewise, the Ninth Circuit affirmed the district court's award of attorneys' fees and costs to Dodger, noting that as a result of SOFA's experience as a plaintiff in another case, "SOFA should have known from the outset that its chances of success in this case were slim to none." And awarding attorneys' fees and costs for litigating a meritorious fair use defense "against an unreasonable claim of infringement" served the policies of the Copyright Act, the Ninth Circuit concluded.

Lenz v. Universal Music Corp., Case No. 5:07-cv-03783-JF (N.D. Cal. Jan. 24, 2013):

There are more detailed facts in the opinion but essentially, in February 2007, Stephanie Lenz uploaded a 29-second video of her children dancing in the family's kitchen with Prince's song, "Let's Go Crazy," playing in the background, to YouTube. Universal requested that YouTube remove the video, using YouTube's DMCA notification procedure, and YouTube complied. Following DMCA counter-notices by Lenz, YouTube restored the video, which ultimately was down for about six weeks.

Lenz sued Universal asserting a single claim for misrepresentation under Section 512(f) of the DMCA, which provides that a person "who knowingly materially misrepresents under this section . . . that material or activity is infringing" may be liable for damages resulting from the misrepresentation.

Both parties moved for summary judgment, which the district court denied.

The district court first rejected Universal's arguments that the DMCA did not apply and that YouTube was ineligible for the DMCA's safe harbor provision, and moved on to the substance of Lenz's claim of misrepresentation under the DMCA.

The district court referenced its earlier decision in the case in which it concluded that "a copyright owner must consider fair use before proceeding with a takedown notice under the DMCA." The court then concluded that Lenz had provided sufficient evidence that Universal failed to explicitly comply with that requirement.

The court also rejected Universal's argument that although its representative was not instructed to and did not explicitly consider fair use, he purportedly considered a number of factors relevant to a fair use determination:

While it agrees that requiring a copyright holder to engage in a full-blown fair use analysis prior to sending a DMCA takedown notice would be inconsistent with the remedial purposes of the statute, the Court disagrees that it is sufficient for a copyright holder to consider facts that might be relevant to a fair use analysis without making any effort to evaluate the significance of such facts in the context of the doctrine itself.

The remaining question, therefore, was whether Universal's failure to consider fair use before issuing its takedown notice was sufficient to establish liability for misrepresentation under Section 512(f). Relying on Rossi v. Motion Picture Ass'n of Am., Inc., 391 F.3d 1000 (9th Cir. 2004), the district court concluded that this failure was not sufficient to establish liability but rather Lenz was required to show that Universal had "some actual knowledge" that its takedown notice contained a material misrepresentation.

To make that showing, Lenz relied on the argument that "Universal's procedures for evaluating copyright infringement were so deficient that Universal willfully blinded itself as to whether any given video might constitute fair use." But ultimately, the district court concluded that neither party had demonstrated an entitlement to summary judgment on that issue.

Finally, the district court concluded that Universal had not established that it was entitled to summary judgment because Lenz had allegedly failed to prove that she suffered any damages, although it allowed for the possibility of a later motion addressing that issue if appropriate.

The district court's earlier decision, concluding that copyright owners must consider fair use before issuing a takedown notice under the DMCA, is discussed here.

SDNY Refuses to Dismiss Dental Patient's Claims Regarding Confidentiality Agreement and Copyright Assignment Required as Precondition to Treatment

Stacia Lay — Wed, 22 May 2013 10:11:36 -0800

In October 2010, Robert Allen Lee had a severe toothache and chose to visit Aster Dental because his insurance company listed it as a preferred provider. According to Lee, Aster Dental told him he would have to pay it directly and then it would submit his paperwork to his insurer for reimbursement.

Before it would provide treatment, Aster Dental required Lee--as it allegedly required all patients--to sign a "Mutual Agreement to Maintain Privacy," which essentially prohibited Lee from commenting on Aster Dental and purported to assign to Aster Dental Lee's copyrights in any published comments. Specifically, the agreement provided in part:

In consideration for treatment . . . Patient agrees to refrain from directly or indirectly publishing . . . commentary upon Dentist and his practice, expertise and/or treatment . . . . If Patient does prepare commentary for publication about Dentist, the Patient exclusively assigns all Intellectual Property rights, including copyrights, to Dentist for any written, pictorial, and/or electronic commentary. . . . This agreement shall be operative and effective at the time of creation (prior to publication) of the commentary. . . . In addition, Patient will not denigrate, defame, disparage, or cast aspersions upon the Dentist; and . . . will use all reasonable efforts to prevent any member of their immediate family or acquaintance from engaging in any such activity.

According to Lee's complaint, he was in severe pain and therefore signed the agreement in order to obtain treatment to relieve the pain. Lee was billed for and paid nearly $4,800 for the treatment but Aster Dental never forwarded his paperwork to his insurer for reimbursement. When Lee requested a copy of his paperwork in order to submit his claim directly to his insurer, Aster Dental referred him to a third party that imposed a $200 charge.

In August 2011, Lee commented about his experience at Aster Dental on several websites, including Yelp, in which he criticized it for overcharging him and refusing to submit his insurance claim or provide his dental records. The day after the comments, Aster Dental sent a letter to Lee threatening to sue him for breach of contract, defamation, and copyright infringement, stating that it would seek $100,000 in damages, and attaching a draft of a complaint.

In September and October 2011, Aster Dental also issued invoices to Lee, charging him $100 per day for copyright infringement. Also in October 2011, Lee received a second letter threatening litigation. And finally, also in September 2011, Aster Dental sent takedown notices to the websites where Lee had posted his comments.

Lee filed suit against Aster Dental and others seeking a declaration that, among other things, the confidentiality agreement he was required to sign was void for lack of consideration, was unconscionable and constituted a deceptive practice under New York law. As relevant to the motion before the court, Lee also sought a declaration that his comments were not defamatory and that his comments constituted fair use under the Copyright Act.

The Aster Dental defendants moved to dismiss for lack of subject matter jurisdiction and failure to state a claim but the district court denied the motion.

The district court readily concluded that it had subject matter jurisdiction over Lee's claims. First, because Lee sought a declaration that his postings constituted fair use under the Copyright Act and a declaration regarding copyright ownership, his claims arose under that act, providing an independent basis for the court's jurisdiction.

Second, the district court concluded that diversity jurisdiction existed, rejecting defendants' argument that Lee could not meet the jurisdictional amount of $75,000 because he only sought $4,766 in damages for breach of contract. Pointing to defendants' threat to sue Lee for $100,000 in damages, the district court stated that they "cannot walk away from the jurisdictional amount, $75,000, by arguing that their $100,000 threats were meaningless."

The district court also rejected defendants' assertion that there was no actual controversy for purposes of Lee's request for declaratory relief, calling their arguments "specious" and "ridiculous":

Defendants cannot pretend now that their notices to Lee were "just kidding," or that Lee lacked any reasonable apprehension of liability. A brief review of Defendants' conduct in response to Lee's exercise of basic rights shows how ridiculous their arguments are: (1) Defendants twice threatened Lee with suit, the second notification being from an attorney who did not specify a deadline by which suit would commence; (2) Defendants prepared and sent a draft version of the complaint they would file in a New York state court . . .; and (3) Defendants sent two invoices, one which threatened referral to a collection agency.

Finally, the district court rejected defendants' argument that Lee's declaratory relief claims with respect to the Copyright Act failed because their alleged copyrights in Lee's postings were never registered. Although Section 411(a) of the Copyright Act provides that a civil action for copyright infringement shall not be instituted until preregistration or registration of the copyright, Lee's claim was not one for copyright infringement, the district court noted. Rather, he sought "relief from Defendants' assertion that Lee's comments about Defendants' hardly defensible practices are subject to copyright protection. Defendants' argument that the copyright must be registered before relief can be granted to Plaintiff turns the law upside down."

The district court thus denied defendants' motion to dismiss Lee's claims.

Defendants answered Lee's complaint on April 10, 2013, which answer can be found here. A copy of Lee's complaint, without the exhibits, can be found here.

The case cite is Lee v. Makhnevich, Case No. 11 Civ. 8665 (PAC) (S.D.N.Y. Mar. 27, 2013).

Ninth Circuit: Righthaven and the Mythical Calf With Five Legs

Stacia Lay — Thu, 09 May 2013 14:05:34 -0800

I have much to catch up on after my blogging hiatus due to a very busy few months but the Ninth Circuit opinion today confirming the demise of Righthaven is short and to the point and worthy of a quick mention.

The gist of the case is that Righthaven filed copyright infringement claims against Wayne Hoehn and Thomas DiBiase for posting articles from the Las Vegas Review-Journal online. Righthaven claimed it had the right to sue for copyright infringement based on assignment agreements from the original owner of the copyrights, Stephens Media LLC, the owner of the Las Vegas Review-Journal.

The district court concluded that Righthaven did not have standing to sue because the assignment agreements (as well as other related documents) gave Righthaven nothing more than the bare right to sue alleged infringers. In the case of Hoehn, the district court also granted summary judgment in his favor on his fair use defense. You can find more details about the cases at the district court level here and here.

I have to give credit to an opinion that starts off by describing a story Abraham Lincoln told and manages, fairly effortlessly, to tie the story to the case before the court:

Abraham Lincoln told a story about a lawyer who tried to establish that a calf had five legs by calling its tail a leg. But the calf had only four legs, Lincoln observed, because calling a tail a leg does not make it so. Before us is a case about a lawyer who tried to establish that a company owned a copyright by drafting a contract calling the company the copyright owner, even though the company lacked the rights associated with copyright ownership. Heeding Lincoln's wisdom, and the requirements of the Copyright Act, we conclude that merely calling someone a copyright owner does not make it so.

The Ninth Circuit then went into more detail but essentially agreed entirely with the district court's conclusion that Righthaven lacked standing because under Silvers v. Sony Pictures Entertainment, Inc., 402 F.3d 881 (9th Cir. 2005) (en banc), "the assignment of the bare right to sue for infringement, without the transfer of an associated exclusive right, is impermissible under the Copyright Act and does not confer standing to sue." "That covers Righthaven," the Ninth Circuit concluded, "for all it was really assigned was a bare right to sue for infringement."

But in the absence of standing to sue, the district court lacked subject matter jurisdiction over the case, the Ninth Circuit concluded, and therefore the district court's alternative basis for its decision in favor of Hoehn--fair use--could not stand. The Ninth Circuit thus vacated that portion of the district court's decision addressing the fair use defense.

The case cite is Righthaven LLC v. Hoehn, Appeal Nos. 11-16751, 11-16776 (9th Cir. May 9, 2013).

You can also find much more prior coverage of Righthaven cases here, here and here.

Seventh Circuit: "Phifty-50" Rap Duo Had Zero Chance of Success on Trademark Claim Over "50/50" Movie Title

Stacia Lay — Thu, 21 Feb 2013 12:20:50 -0800

Eastland Music Group, the "proprietor" of the rap duo Phifty-50 (which according to the Seventh Circuit "has to its credit one album (2003) and a T-shirt"), successfully registered the trademark "PHIFTY-50" and also claimed a trademark in "50/50."

Eastland sued Lionsgate and others claiming that they infringed its trademark rights by using "50/50" as the title of a film that opened in 2011. The district court dismissed Eastland's complaint for failure to state a claim, concluding that the movie title was descriptive because the film apparently concerned "a 50% chance of the main character surviving cancer."

Eastland appealed, raising various substantive and procedural arguments that ultimately the Seventh Circuit concluded it need not reach to affirm the dismissal

because this complaint fails at the threshold: it does not allege that the use of "50/50" as a title has caused any confusion about the film's source--and any such allegation would be too implausible to support costly litigation.

The Seventh Circuit noted that the film's title, "50/50," differed from Eastland's registered mark "PHIFTY-50," and that Eastland's mark existed in a crowded field as a "very junior user" with correspondingly "weak and narrow" rights.

Finally, citing Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23 (2003), the Seventh Circuit noted that the "title of a work of intellectual property can infringe another author's mark only if the title falsely implies that the latter author is its origin" but here,

Eastland Music's complaint does not (and could not plausibly) allege that consumers treat it as the producer or source of the film 50/50, or treat Lionsgate as the producer of the 2003 rap album.

The case cite is Eastland Music Group, LLC v. Lionsgate Entm't, Inc., Appeal No. 12-2928 (7th Cir. Feb. 21, 2013).

Seventh Circuit Affirms Dismissal of Invasion of Privacy and Misappropriation Claims Against Joan Rivers

Stacia Lay — Wed, 20 Feb 2013 16:35:11 -0800

Ann Bogie attended a stand-up comedy show featuring Joan Rivers at a casino in Wisconsin. During the performance, Rivers told a joke about Helen Keller and was heckled by an offended audience member who had a deaf son. The exchange was filmed and included in a documentary entitled Joan Rivers: A Piece of Work that was sold nationwide.

After the performance, Bogie gained entry to a backstage area where Rivers had exited that was closed to the general public. Bogie asked Rivers to sign a copy of Rivers' book and the two engaged in a brief conversation in which "Bogie expressed frustration with the heckler and sympathy for Rivers." (The Seventh Circuit quotes the full conversation in its opinion.) The brief conversation was filmed, presumptively without Bogie's permission, and included in the documentary. The film showed that there were at least three other individuals in close proximity to Bogie and Rivers during this conversation, which lasted 16 seconds, representing 0.3 percent of the 82-minute film.

Bogie sued Rivers and others for invasion of privacy and misappropriation of her image under Wisconsin law (which, it turns out, is modeled in part on New York law). The district court dismissed Bogie's claims with prejudice on the defendants' motion to dismiss for failure to state a claim after viewing the film and Bogie appealed.

After agreeing with the district court that Bogie's invasion of privacy claim could be decided as a matter of law based on viewing the scene in the film, the Seventh Circuit likewise agreed that both of her claims were subject to dismissal with prejudice.

As to Bogie's invasion of privacy claim, the Seventh Circuit concluded that Bogie could not prove that her conversation with Rivers occurred in a place (the backstage area) that a reasonable person would consider private:

[Bogie] voluntarily approached a celebrity just after a public performance. Any reasonable person would expect to encounter some kind of a security presence, and indeed here that presence was visible. Furthermore, the camera crew must have also been visible to Bogie as they were filming both Rivers and, of course, Bogie. Courts have found that even performers themselves cannot count on a reasonable expectation of privacy in their own backstage areas.

The Seventh Circuit also concluded that Bogie could not prove that the alleged intrusion into her privacy would be highly offensive to a reasonable person, an objective test. "The fact that Bogie was embarrassed to be filmed saying something she regrets having said and now deems offensive does not convert the filming itself into a highly offensive intrusion."

The Seventh Circuit also affirmed the dismissal with prejudice of Bogie's misappropriation claim, concluding that the documentary was subject to the newsworthiness exception to such claims and that the 16-second clip of Bogie was merely incidental.

The case cite is Bogie v. Rosenberg, Appeal No. 12-1923 (7th Cir. Jan. 17, 2013).

UPDATE: Ninth Circuit Suggests Parties "Play Nice" in Long-Running Bratz Dolls Dispute

Stacia Lay — Wed, 20 Feb 2013 15:15:05 -0800

For the second time, the long-running dispute between Mattel and MGA over the Bratz dolls made its way to the Ninth Circuit, which dispensed some painful conclusions to both parties.

The Ninth Circuit's earlier decision is discussed here along with more detailed facts of the underlying dispute. Long story short, the dispute began when Carter Bryant conceived the idea for a line of Bratz dolls which he pitched to MGA while still employed by Mattel. MGA liked the idea, Bryant signed a consulting agreement with MGA, MGA released the Bratz dolls, and the lawsuits began.

On the first appeal, the Ninth Circuit vacated the equitable relief at issue and remanded the case to the district court, noting that it was likely "the entire case will probably need to be retried." Chief Judge Kozinski, who authored both opinions, apparently was prophetic as the case was retried.

After the retrial, the jury rejected Mattel's claim that MGA infringed Mattel's copyrights in connection with the Bratz dolls. The jury also concluded that Mattel misappropriated MGA's trade secrets. MGA was ultimately awarded approximately $170 million in damages in connection with its trade secret claim and received its attorneys' fees and costs with respect to that claim and under the Copyright Act.

As to MGA's successful trade secret claim, Mattel had moved to dismiss the claim arguing that the statute of limitations had run on the claim. The district court denied the motion, concluding that MGA's claim was a compulsory "counterclaim-in-reply" to Mattel's own trade secret misappropriation counterclaim and was therefore permissible. Mattel appealed that decision.

The Ninth Circuit agreed with Mattel that MGA's trade secret claim was not a compulsory counterclaim-in-reply because that claim and Mattel's claim "did not rest on the same 'aggregate core of facts'." The court thus vacated the verdict in favor of MGA on that claim and the related damages, fees and costs and directed the district court to dismiss the claim without prejudice on remand.

But there was bad news for Mattel as well. The Ninth Circuit upheld the award of attorneys' fees to MGA under the Copyright Act for successfully defending against Mattel's copyright claim, which the district court apparently characterized as being "stunning in scope and unreasonable in the relief it requested." While the Ninth Circuit didn't explicitly agree or disagree with the district court's characterization of Mattel's claim, it readily concluded that the court had "properly exercised its discretion in awarding and calculating attorneys' fees and costs," which apparently were in the neighborhood of $140 million.

The case cite is Mattel, Inc. v. MGA Entm't, Inc., Appeal No. 11-56357 (9th Cir. Jan. 24, 2013).

UPDATE: Supreme Court Argument in Kirtsaeng v. John Wiley & Sons, Inc.

Stacia Lay — Fri, 02 Nov 2012 09:56:49 -0800

The Supreme Court heard argument on October 29, 2012, in a Second Circuit case addressing the question of the applicability of the first sale doctrine of the Copyright Act to copyrighted works that are legally acquired abroad and then resold in the United States. The Second Circuit concluded that the first sale defense in Section 109(a) of the Copyright Act applies only to copies of copyrighted works manufactured in the United States.

You can listen to the Supreme Court argument in the case here.

And you can read the original post about the Second Circuit's decision in the case here.

The case cite is Kirtsaeng v. John Wiley & Sons, Inc., No. 11-697.

Federal Circuit Concludes Software Used to Render Online Service Not In Use In Commerce for Trademark Purposes

Stacia Lay — Tue, 18 Sep 2012 10:30:00 -0800

Lens.com appealed the decision of the Trademark Trial and Appeal Board granting summary judgment to 1-800 Contacts and ordering the cancellation of Lens.com's registration for the mark LENS in connection with "computer software featuring programs used for electronic ordering of contact lenses[.]"

Specifically, the TTAB granted summary judgment on 1-800 Contacts's claim of abandonment, concluding that Lens.com's software was "merely incidental to its retail sale of contact lenses, and is not a 'good in trade,' i.e., 'solicited or purchased in the market place for [its] intrinsic value.'"

Because it was undisputed that Lens.com did not sell software, the issue on appeal was whether its software was a "good" that was "transported in commerce."

Although there was "ample" case law addressing goods in trade with respect to "traditional articles" used in conjunction with services, the Federal Circuit noted that there was little precedent on the question of whether an internet service provider's software is an independent good in commerce or is merely incidental to the internet service.

While the Federal Circuit agreed that "distribution of [s]oftware over the internet can satisfy the jurisdictional predicate for 'use in commerce' . . . whether consumers actually associate a mark with software, as opposed to other services, is a factual determination that must be conducted on a case-by-case basis." And the court identified several factors to consider in making this determination, including whether the software

(1) is simply the conduit or necessary tool useful only to obtain applicant's services; (2) is so inextricably tied to and associated with the service as to have no viable existence apart therefrom; and (3) is neither sold separately from nor has any independent value apart from the services.

Applying those factors, the Federal Circuit concluded that Lens.com's software was merely the conduit through which it renders its online services, and while the software "may provide greater value to Lens.com's online retail services by enhancing the overall consumer experience, there is no evidence that it has any independent value apart from . . . rendering the service." The court thus affirmed the TTAB's conclusion that Lens.com's mark was not in use in commerce with respect to its software and the TTAB's grant of summary judgment to 1-800 Contacts, Inc. on the question of abandonment.

The case cite is Lens.com, Inc. v. 1-800 Contacts, Inc., Case No. 2011-1258 (Fed. Cir. Aug. 3, 2012).

Service Retransmitting TV Programming Over the Internet Not Entitled to "Cable System" Defense to Copyright Infringement

Stacia Lay — Fri, 14 Sep 2012 13:54:32 -0800

Plaintiffs, producers and owners of copyrighted television programming, sued ivi, Inc. and its chief executive officer for copyright infringement for streaming that programming over the Internet without their authorization.

Plaintiffs sought a preliminary injunction and the district court granted it, holding that plaintiffs were likely to succeed on the merits because ivi was not a "cable system" entitled to a compulsory license under Section 111 of the Copyright Act and that the other factors supported issuing an injunction.

Because it was undisputed that plaintiffs had valid copyrights in the television programming that ivi publicly performed without authorization, the principal issue on appeal was whether the district court was correct in concluding that ivi was not a "cable system" under Section 111 of the Copyright Act. If ivi was a "cable system," it was entitled to a compulsory license to retransmit the programming and would therefore have a statutory defense to plaintiffs' copyright infringement claims. If ivi was not, it had no such defense.

The Copyright Act defines a "cable system" in part as:

a facility, located in any State, territory, trust territory, or possession of the United States, that in whole or in part receives signals transmitted or programs broadcast by one or more television broadcast stations licensed by the Federal Communications Commission, and makes secondary transmissions of such signals or programs by wires, cables, microwave, or other communications channels to subscribing members of the public who pay for such service.

17 U.S.C. Section 111(f)(3).

The Second Circuit concluded that it was unclear, based on the statutory language alone, whether ivi (which the court described as "a service that retransmits television programming live and over the Internet") constituted a "cable system." For instance, the court opined that it was "certainly unclear whether the Internet itself is a facility, as it is neither a physical nor a tangible entity; rather, it is 'a global network of millions of interconnected computers.'"

Thus, the Second Circuit looked to legislative history for any guidance as to whether ivi constituted a "cable system" under Section 111. The court divined "two societal benefits" that Congress sought to balance in enacting Section 111: "Congress enacted Section 111 to enable cable systems to continue providing greater geographical access to television programming while offering some protection to broadcasters to incentivize the continued creation of broadcast television programming." From this history, the Second Circuit concluded that Congress did not intend Section 111's compulsory license to extend to Internet retransmissions.

The Second Circuit then took the second step of looking to the Copyright Office's interpretation of the statute, which is to be accorded deference provided that it is reasonable. According to the court, the "Copyright Office has consistently concluded that Internet retransmission services are not cable systems and do not qualify for Section 111 compulsory licenses," a position the court found both "reasonable and persuasive."

The Second Circuit summarized its holdings:

(1) the statutory text is ambiguous as to whether ivi, a service that retransmits television programming over the Internet, is entitled to a compulsory license under Section 111; (2) the statute's legislative history, development, and purpose indicate that Congress did not intend for Section 111 licenses to extend to Internet retransmissions; (3) the Copyright Office's interpretation of Section 111 -- that Internet retransmission services do not constitute cable systems under Section 111 -- aligns with Congress's intent and is reasonable; and (4) accordingly, the district court did not abuse its discretion in finding that plaintiffs were likely to success on the merits of the case.

The court then readily concluded that the district court had not abused its discretion in finding that the other factors (irreparable injury, balance of hardships, and the public interest) supported its grant of a preliminary injunction.

The case cite is WPIX, Inc. v. ivi, Inc., Case No. 11-788-cv (2d Cir. Aug. 27, 2012).

Second Circuit Addresses Availability of Copyright Protection for Architectural Drawings

Stacia Lay — Fri, 14 Sep 2012 10:55:59 -0800

Scholz Design, Inc. alleged, in part, that defendants infringed its copyrights in three front-elevation architectural drawings of homes it designed by copying and posting them on various websites.

Defendants moved to dismiss the complaint arguing that because the architectural drawings contained insufficient detail from which a building could be constructed, they could not be protected by Scholz's copyright. The district court agreed, reasoning that

"copyright protection extends to the component images of architectural designs to the extent that those images allow a copier to construct the protected design," and therefore "the copied images do not fulfill the intrinsic function of an architectural plan and thus the act of copying them does not violate any right protected by a copyright for architectural technical drawings."

The Second Circuit reversed. Specifically, the court disagreed with defendants' argument--adopted by the district court--that the architectural drawings were not entitled to copyright protection because they did not have sufficient detail to allow for construction of the home depicted in the drawings.

The Second Circuit opined that the district court's decision likely stemmed from a misunderstanding regarding the applicability of the Architectural Works Copyright Protection Act ("AWCPA"), which added protection to "architectural works." Prior to the enactment of the AWCPA, although architectural structures themselves were not entitled to copyright protection, architectural plans, blueprints, and drawings like that at issue in the case were covered under the Copyright Act's protection of "pictorial, graphic, and sculptural works."

In this case, Scholz contended that the architectural drawings were protected under that latter pre-existing category of works subject to copyright protection and the Second Circuit agreed:

Sketches or drawings such as those allegedly infringed here . . . did receive protection before enactment of the AWCPA, although the architectural works they depicted did not. The district court seems to have misunderstood the import and relevance of this distinction in concluding that under section 102(a)(5), architectural sketches or drawings are required to include a certain level of detail to receive protection. Where the complaint alleges unlawful copying of a pictorial work registered under section 102(a)(5), there is no requirement of any level of detail.

Thus, the Second Circuit reversed the district court's grant of the motion to dismiss the copyright infringement claim, characterizing it "as a straightforward case of copyright infringement."

The case cite is Scholz Design, Inc. v. Sard Custom Homes, LLC, Case No. 11-3298 (2d Cir. Aug. 15, 2012).

Ninth Circuit Resolves Dispute Over Ownership of Marilyn Monroe's Right of Publicity By Applying Judicial Estoppel

Stacia Lay — Fri, 14 Sep 2012 09:50:04 -0800

In a long-running dispute over ownership of Marilyn Monroe's right of publicity, the Ninth Circuit ultimately resolved the dispute through application of judicial estoppel, concluding that New York law applied to the question, that New York law did not provide for a posthumous right of publicity, and therefore Marilyn Monroe LLC did not inherit that right and could not enforce it against others.

The case began in 2005 when Marilyn Monroe LLC and its licensee ("Monroe LLC") sued Milton Greene Archives, Inc. and Tom Kelley Studios, Inc. ("Milton Greene") in Indiana, claiming ownership of Marilyn Monroe's right of publicity and alleging that Milton Greene was violating that right by using Monroe's image and likeness for commercial purposes without authorization.

Milton Greene then sued Monroe LLC and others in California seeking, in part, a declaration that Monroe LLC did not own Marilyn Monroe's right of publicity.

The cases were later consolidated in the Central District of California.

In May 2007, the Central District of California granted summary judgment in favor of Milton Greene, holding that Monroe LLC did not own Marilyn Monroe's right of publicity because at the time of her death in 1962, under either New York or California law, no right of publicity could have passed through her will. Thus, because Monroe LLC had not inherited Marilyn Monroe's right of publicity, the district court concluded that it had no standing to assert those rights against Milton Greene.

In June 2007, in direct response to the Central District of California's decision, a California state senator introduced a bill, which was enacted in September 2007, that amended California law

to provide that the California statutory right of publicity is deemed to have existed at the time of death of any deceased personality who died before January 1, 1985; is a property right, freely transferable and descendible; and, in the absence of an express testamentary transfer, could pass through the residual clause in the will of the deceased personality.

Monroe LLC then sought reconsideration of the grant of summary judgment to Milton Greene based on this change in California law.

The Central District of California granted the motion for reconsideration but again granted summary judgment in favor of Milton Greene. The issue came down to whether California or New York law applied, which in turn would be decided based on where Monroe was domiciled at the time of her death. If she was domiciled in California, that state's law would apply and the amendment to the law permitted Monroe's right of publicity to pass to Monroe LLC through the residual clause of her will. But if she was domiciled in New York, that state's law would apply and because "the New York legislature had rejected Monroe LLC's efforts to amend its laws to enact a similar descendible, posthumous right of publicity," Marilyn Monroe's right of publicity would have been extinguished at her death. Ultimately, the district court concluded that judicial estoppel precluded Monroe LLC from arguing that Marilyn Monroe was domiciled in California when she died, that therefore New York law applied, and summary judgment in favor of Milton Greene was appropriate.

Although it took the long route, the Ninth Circuit ultimately agreed with the Central District of California, stating that "[t]his is a textbook case for applying judicial estoppel":

Monroe's representatives took one position on Monroe's domicile at death for forty years, and then changed their position when it was to their great financial advantage; an advantage they secured years after Monroe's death by convincing the California legislature to create rights that did not exist when Monroe died. Marilyn Monroe is often quoted as saying, "If you're going to be two-faced, at least make one of them pretty." There is nothing pretty in Monroe LLC's about-face on the issue of domicile. Monroe LLC is judicially estopped from taking the litigation position that Monroe died domiciled in California. Our conclusion in this regard is guided by the need to preserve the dignity of judicial proceedings that have taken place over the last forty years and to discourage litigants from "playing fast and loose with the courts."

(footnote omitted). The Ninth Circuit's opinion details at some length Monroe LLC's "about-face" on the issue of Marilyn Monroe's domicile at the time of her death.

Thus, the Ninth Circuit concluded that Marilyn Monroe died domiciled in New York, New York law applied to the question whether Monroe LLC had the right to enforce her posthumous right of publicity, and because no such right exists under New York law, Monroe LLC could not enforce the right against Milton Greene or "others similarly situated."

The case cite is Milton H. Greene Archives, Inc. v. Marilyn Monroe LLC, Case Nos. 08-56471, 08-56472 (9th Cir. Aug. 30, 2012).

Eighth Circuit Upholds $222,000 Damages Award for Infringement of 24 Sound Recordings

Stacia Lay — Fri, 14 Sep 2012 08:36:26 -0800

This appeal followed a third jury trial of copyright infringement claims over file sharing involving 24 sound recordings.

The first jury trial found Jammie Thomas-Rasset liable for willful copyright infringement and awarded statutory damages of $9,250 per work for a total of $222,000. The district court subsequently granted Thomas-Rasset's motion for a new trial based on an erroneous instruction to the jury that making sound recordings available for distribution on a peer-to-peer network violates the copyright owner's distribution right regardless of whether actual distribution has been shown. The district court concluded that making a work available to the public is not "distribution."

The second jury trial again found Thomas-Rasset liable for willful copyright infringement and awarded statutory damages of $80,000 per work for a total of $1,920,000. Upon Thomas-Rasset's post-trial motion, the district court remitted damages to $2,250 per work for a total of $54,000, finding that the jury's award was "shocking." The record companies declined the remitted award and thus a third trial was held limited to the question of the amount of statutory damages.

The third jury trial awarded statutory damages of $62,500 per work for a total of $1,500,000. Thomas-Rasset moved to alter the judgment, arguing that any statutory damages award would be unconstitutional or alternatively, that the award should be reduced under the Due Process Clause. The district court granted the motion again reducing the award to $2,250 per work for a total of $54,000, the maximum amount the court concluded was permitted by the Due Process Clause. The district court also entered a permanent injunction against Thomas-Rasset but refused to enjoin her from "making available" copyrighted works for distribution to the public.

The record companies appealed arguing that the district court erred in granting a new trial based on the "making available" jury instruction in the first trial and in holding that the Due Process Clause limited the statutory damages award to $2,250 per work. The companies sought reinstatement of the first jury's statutory damages award of $222,000, and an injunction that included language prohibiting Thomas-Rasset from making the copyrighted works available to the public.

Thomas-Rasset cross-appealed arguing that even the minimum statutory damages award authorized by the Copyright Act would be unconstitutional.

The Eighth Circuit first addressed what it characterized as "tactical maneuvers" that sought to either, depending on the party, obtain or avoid review of the legal question whether making copyrighted works available is part of the copyright owner's distribution right under the Copyright Act. Noting that it "reviews judgments, not decisions on issues," the Eighth Circuit stated that the only matters in controversy were whether the record companies were entitled to damages of $222,000 and an injunction that included the "making available" language.

As to the injunction issue, the Eighth Circuit accepted, without deciding, the district court's interpretation of the Copyright Act that the distribution right did not include an exclusive right to make the recordings available to the public. But the appeals court concluded that the district court had still erred in refusing the language the record companies sought because it had authority to issue a broad injunction even if the conduct did not violate rights under the Copyright Act "where 'a proclivity for unlawful conduct has been shown.'" The Eighth Circuit held that such a proclivity had been shown here.

As to the statutory damages issue, the Eighth Circuit held that the award of $9,250 per infringed work for a total of $222,000, did not contravene the Due Process Clause. The court concluded that the award was "not 'so severe and oppressive as to be wholly disproportioned to the offense and obviously unreasonable,'" noting that the award fell toward the lower end of the range established by Congress (currently $750 to $150,000 per infringed work).

The Eighth Circuit also rejected the notion that the noncommercial nature of the infringement made the award severe and oppressive or wholly disproportionate to the offense, again emphasizing the wide range of statutory damages available in the Copyright Act. And "[f]or those who favor resort to legislative history," the court noted that Congress apparently "was well aware of the threat of noncommercial copyright infringement when it established the lower end of the range."

Thus, in the end, the Eighth Circuit remanded with instructions to enter judgment for statutory damages in the amount of $222,000, and to enter a permanent injunction that precluded Thomas-Rasset from making any of the record companies' copyrighted works "available for distribution to the public through an online media distribution system."

The case cite is Capitol Records, Inc. v. Thomas-Rasset, Case No. 11-2820 (8th Cir. Sept. 11, 2012).

Ninth Circuit Clarifies Application of Single-Publication Rule to Websites

Stacia Lay — Thu, 13 Sep 2012 09:46:14 -0800

Charles Yeager filed suit in 2008 alleging, in part, that statements made on the website of Aviation Autographs--which sells aviation-related memorabilia including items related to or signed by Yeager, violated his common law right to privacy and California's statutory right to publicity.

As described by the Ninth Circuit, at his deposition in the action, "Yeager did not recall answers to approximately two hundred questions, including questions on topics central to this action." But about three months later, in connection with his opposition to the defendants' motion for summary judgment, Yeager filed a declaration that allegedly contained "many facts that Yeager could not remember at his deposition."

The district court held that Yeager's declaration was a "sham," disregarded it with respect to facts that he could not remember at his deposition, and granted summary judgment to defendants on all of Yeager's claims.

The Ninth Circuit's published opinion addressed two issues: the district court's conclusion that Yeager's declaration was a sham; and the district court's application of the single-publication rule to conclude that Yeager's common law right to privacy and statutory right to publicity claims were time barred.

As to the sham affidavit rule, the Ninth Circuit concluded, apparently for the first time, that an abuse of discretion standard applies to review of a district court's application of the rule.

The Ninth Circuit also rejected Yeager's contention that his declaration could not be a "sham" because it did not declare facts that contradicted facts testified to at his deposition. Although "newly-remembered facts, or new facts, accompanied by a reasonable explanation, should not ordinarily lead to the striking of a declaration as a sham," here, the Ninth Circuit found it "implausible that Yeager could refresh his recollection so thoroughly by reviewing several documents in light of the extreme number of questions to which Yeager answered he could not recall" in his deposition and the number of exhibits used in the deposition to try to refresh his memory.

The Ninth Circuit then addressed the single-publication rule, which limits tort claims based on mass communications to a single cause of action that accrues upon the first publication of the communication. Under that rule, the statute of limitations is reset when a statement is republished.

Here, there was no evidence that the defendants added any information about Yeager or changed the challenged statements about him on the website after October 2003, and thus, the district court applied the single-publication rule to conclude that Yeager's right to privacy and right to publicity claims, which were filed in 2008 and subject to a two-year statute of limitations, were time barred.

The Ninth Circuit affirmed, rejecting Yeager's argument that the website was republished for purposes of the single-publication rule, and the statute of limitations restarted, each time defendants made additions to or revised the content of the website, even if the additions or revisions did not pertain to Yeager.

Instead, the Ninth Circuit held that, at least under California law, "a statement on a website is not republished unless the statement itself is substantively altered or added to, or the website is directed to a new audience." The court concluded that this holding was consistent with other cases and, from a policy perspective, "prevents freezing websites in anticipation of litigation."

The Ninth Circuit also issued an unpublished decision that rejected Yeager's other challenges to the grant of summary judgment to the defendants and the award of attorneys' fees to them.

The case cite is Yeager v. Bowlin, Case Nos. 10-15297, 10-16503 (9th Cir. Sept. 10, 2012).

Fair Use Fracas Over Publication of Photos of Secret Celebrity Nuptials

Stacia Lay — Thu, 16 Aug 2012 13:17:01 -0800

Noelia Lorenzo Monge, a pop singer and model, and Jorge Reynoso, her manager and a music producer, are apparently Latin American celebrities who were secretly married in Las Vegas in 2007. At their wedding, employees of the chapel, using Monge's camera, took three photos of the wedding, and three more photos were taken of the couple on the wedding night. The photos were apparently intended to be only for the couple's private use.

They managed to keep their wedding a secret--even from their families--for two years but in 2009, a paparazzo who occasionally worked as a bodyguard and driver for the couple, took a memory chip containing the wedding photos along with other photos and videos and sold it to Maya Magazines, which publishes "TVNotas," a Spanish-language celebrity gossip magazine. Maya then published six of the secret wedding photos, three from the ceremony and three from the wedding night.

After the pictures were published, the couple registered copyrights in five of the six photos published and then sued Maya alleging copyright infringement and misappropriation of likeness under California law. The district court dismissed the two misappropriation of likeness claims on a motion to dismiss, concluding that the photos fell within the public affair and public interest exceptions to the prohibition against using another's likeness for advertising purposes without the person's prior consent.

The parties filed cross-motions for summary judgment and the district court granted Maya's motion, concluding that its publication of the photos constituted fair use under Section 107 of the Copyright Act.

In an opinion that included spirit exchanges between the majority and the dissent the Ninth Circuit reversed the district court on the fair use issue.

The majority opinion started with a brief history of the fair use defense and the relevant factors, describing them in a way that did not bode well for Maya and noting that the Supreme Court had not given "a fair use free pass to news reporting on public figures," a sentiment that would be repeated a number of times in the opinion.

Stating that news reporting was "not sufficient itself to sustain a per se finding of fair use," the majority opinion dove into an analysis of the fair use factors.

As to the question of the degree to which Maya's use of the photos was transformative, the majority concluded that the photos were published essentially in their entirety and that "neither minor cropping nor the inclusion of headlines or captions transformed the copyrighted works." The majority also rejected the proposition that the photos' newsworthiness lead to transformation. Nor did a difference in purpose between the couple's creation of the photos (to document their wedding) and Maya's publication of the photos (exposing the couple's secret wedding) constitute transformation for purposes of fair use. Thus, ultimately, the majority concluded that "Maya's use--wholesale copying sprinkled with written commentary--was at best minimally transformative."

The majority also had no difficulty concluding that Maya's use of the photos was commercial in nature, again repeating that "newsworthiness, by itself, is insufficient to demonstrate fair use."

As to the nature of the copyrighted works at issue--the wedding photos--although they "were not highly artistic" the majority emphasized the unpublished nature of the photos before Maya's publication, concluding that this factor outweighed the claim of fair use.

As to the amount and substantiality of the portion used, the majority concluded that this factor weighed "decisively" against fair use because both quantitatively and qualitatively, "every single photo of the wedding and almost every photo of the wedding night were published" and the minimal cropping of the photos demonstrated that the "heart" of each copyrighted work was published.

And as to the final factor--the effect upon the potential market--the majority opinion again concluded that it did not weigh in favor of fair use, re-emphasizing the importance of the previously unpublished nature of the photos and the copyright owner's right to control first publication. The majority also rejected the district court's conclusion that no potential market for the photos existed because the couple did not intend to sell publication rights stating that the "potential market for the photos exists independent of the couple's present intent."

Thus, the majority concluded that on balance the factors did not favor a finding of fair use as no factor tipped in Maya's favor. The majority opinion concluded by referencing yet again the proposition that "[w]aving the news reporting flag is not a get out of jail free card in the copyright arena" and that "Maya's effort to document its expose does not automatically trump the couple's rights in its unpublished photos."

Circuit Judge Smith wrote a spirited dissent that saw troublesome implications in the majority's opinion:

The majority's fair use analysis . . . thwarts the public interests of copyright by allowing newsworthy public figures to control their images in the press. . . . Under the majority's analysis, public figures could invoke copyright protection to prevent the media's disclosure of any embarrassing or incriminating works by claiming that such images were intended only for private use. The implications of this analysis undermine the free press and eviscerate the principles upon which copyright was founded. Although newsworthiness alone is insufficient to invoke fair use, public figures should not be able to hide behind the cloak of copyright to prevent the news media from exposing their fallacies.

The case cite is Monge v. Maya Magazines, Inc., Nos. 10-56710, 11-55483 (9th Cir. Aug. 14, 2012).

SDNY Adopts Concurrent Use Order for "Heart Attack" Themed Food Marks

Stacia Lay — Fri, 27 Jul 2012 12:25:00 -0800

Heart Attack Grill is apparently a chain of "medically themed" restaurants with only one restaurant currently open in Las Vegas. The Grill's menu includes four burgers, "the Single Bypass Burger," "the Double Bypass Burger," "the Triple Bypass Burger," and "the Quadruple Bypass Burger." The Grill has obtained trademark registrations for its restaurant name and its burger names. The court's description of the largest of the Grill's burgers--the Quadruple Bypass Burger--gives you the flavor of the joint: it weighs in "at 8,000 calories, consists of four half-pound beef patties, eight slices of American cheese, a whole tomato and half an onion served in a bun coated with lard." The court also noted that, "[a]s of this writing," one of the Grill's customers had suffered a heart attack while eating at the restaurant.

The Second Avenue Deli is a kosher deli with two locations in Manhattan. Since 2004, the Deli offered "the Instant Heart Attack Sandwich" and proposed to add "the Triple Bypass Sandwich" to its menu. The Instant Heart Attack Sandwich consists of two large potato pancakes filled with a choice of corned beef, pastrami, turkey, or salami. The proposed Triple Bypass Sandwich would also use potato pancakes but would include three, rather than two, layers of the pancakes. The Deli attempted to obtain trademark registrations for both sandwich names but the PTO preliminarily denied both applications because of a likelihood of confusion with Heart Attack Grill's marks.

After the Heart Attack Grill sent the Second Avenue Deli a cease-and-desist letter, the Deli filed a declaratory judgment action seeking a declaration that (1) neither of its marks infringed the Grill's marks and that both could therefore be registered; or (2) if the court found a likelihood of confusion, that the Deli may use the Instant Heart Attack Sandwich mark in New York, New Jersey, and Connecticut to the exclusion of the Grill's mark as the Deli's use was senior to the Grill's registration of its Heart Attack Grill mark.

The Heart Attack Grill counterclaimed for dilution (which was later dismissed) and a declaration that (1) the Deli could not register its marks or expand use of its marks; or (2) the parties may use their marks under conditions set by the court.

Following "extensive" discovery, both parties moved for summary judgment.

As to the Deli's Instant Heart Attack Sandwich mark and the Grill's Heart Attack Grill mark, the parties represented that there was no likelihood of confusion with the Deli's current use of the mark on menus at its two Manhattan locations and on the Deli's website menu.

Despite the parties' representation, the court made its own assessment of the likelihood of confusion between the marks and ultimately reached the same conclusion as the parties. In particular, the court emphasized the lack of competition between the parties in the same geographic market.

But the court declined to grant the Deli's additional request for a declaration that its expanded use of the Instant Heart Attack Sandwich mark, specifically that it was entitled to exclusive use of the mark in New York, New Jersey, and Connecticut, concluding that the record was inadequate to determine the possibility of a likelihood of confusion in geographic areas neither party had yet entered.

Ultimately, the court adopted a concurrent use order that the parties had apparently agreed to at oral argument under which the Deli could (1) serve the Instant Heart Attack Sandwich anywhere in Manhattan; (2) advertise the sandwich on its in-restaurant menus; (3) advertise the sandwich on interior and exterior signs at the Manhattan locations; and (4) reproduce the menu used in the Manhattan locations in its Internet advertising.

As to the Triple Bypass Sandwich, at oral argument the Grill, "in a commendable effort to resolve the present dispute," urged the court to find that there was no likelihood of confusion between the Triple Bypass Sandwich mark proposed to be used by the Deli and the Grill's Triple Bypass Burger mark under specific conditions. Those conditions were that the sandwich is only shown on a menu and only sold in the current restaurants with no interior or exterior signage. The Grill also agreed that the Deli could use the Triple Bypass Sandwich on its website but only insofar as it is shown on the online menu.

The court agreed that this was a fair agreement that was unlikely to lead to confusion and therefore adopted it.

Several times in its opinion, the court applauded the parties for narrowing the issues in dispute, making concessions and ultimately reaching an agreement that the court largely adopted. Nonetheless, in addressing the possibility of future disputes, the court noted that the parties had spent "many months (and presumably a great deal of money in legal fees and costs)" litigating a dispute "only to agree at argument on terms that could readily have been arrived at long ago and which do not seem to impinge either's practical interests in the slightest." Thus, should future disputes arise, the court "strongly encourage[d] the parties to eschew provocative cease-and-desist letters or precipitous lawsuits, and instead to work together to try to resolve their differences cooperatively."

The case cite is Lebewohl v. Heart Attack Grill LLC, Case No. 11 Civ. 3153 (PAE) (S.D.N.Y. July 5, 2012).

Second Circuit: No Copyright Preemption of Breach of Contract Claim Over Network's Use of Idea for Television Series

Stacia Lay — Wed, 25 Jul 2012 15:02:05 -0800

Forest Park pitched an idea for a television series to the USA Network by mailing a written series treatment for the idea to the network and meeting with network representatives. The concept was for a series called "Housecall," "in which a doctor, after being expelled from the medical community for treating patients who could not pay, moved to Malibu, California, and became a 'concierge' doctor to the rich and famous." Forest Park alleged that at the meeting with the network, it was understood that the idea was being pitched with the intention of the network purchasing it for development. Discussions ended between the parties without the network purchasing the idea.

About four years later, the USA Network produced and aired a show called "Royal Pains," "in which a doctor, after being expelled from the medical community for treating patients who could not pay, became a concierge doctor to the rich and famous in the Hamptons."

Forest Park then sued USA Network for breach of contract and the network moved to dismiss under Fed. R. Civ. P. 12(b)(6), alleging in part that the claim was preempted by the Copyright Act. The district court agreed with the network and dismissed the complaint.

The Second Circuit disagreed, instead concluding that Forest Park had adequately plead a breach of contract claim that included an implied promise to pay, which was based on rights that were not the equivalent of those protected under the Copyright Act and was therefore not preempted.

As to the first requirement for preemption--that the work comes within the subject matter of copyright--the Second Circuit emphasized that a work may fall within the subject matter of copyright for preemption purposes even if it contains uncopyrightable material. Put somewhat more succinctly, the "scope of copyright for preemption purposes . . . extends beyond the scope of available copyright protection." This case was a good example of that proposition because the work at issue was Forest Park's ideas for the series manifested in the series treatments it prepared and it was the ideas embodied in those written materials that Forest Park alleged the network improperly used. Thus, even though ideas are not copyrightable, the court found that the work still fell within the subject matter of copyright for purposes of the preemption question.

As to the second requirement for preemption--that the right asserted is equivalent to an exclusive right under the Copyright Act--the Second Circuit concluded that there were several qualitative differences between Forest Park's claim that there was an implied-in-fact agreement that required the network to pay for the use of its idea and a copyright violation claim:

"First, the Copyright Act does not provide an express right for the copyright owner to receive payment for the use of a work."
"Second, a plaintiff suing for failure to pay under a contract must prove extra elements beyond use or copying, including mutual assent and valid consideration."
"Third, a breach of contract claim asserts rights only against the contractual counterparty, not the public at large."

The Second Circuit also noted that its sister circuits had also concluded that some contract claims do not involve rights equivalent to those under the Copyright Act and are therefore not preempted, including the Ninth Circuit in Montz v. Pilgrim Films & Television, Inc., 649 F.3d 975 (9th Cir. 2011) (en banc) (previously blogged here).

The Second Circuit did not decide whether preemption is always precluded when there is a contract claim or only when the claim includes a promise to pay because here, the complaint specifically alleged a contract that included an implied promise to pay for the use of Forest Park's idea:

The alleged contract does not simply require USA Network to honor Forest Park's exclusive rights under the Copyright Act . . .; it requires USA Network to pay for the use of Forest Park's ideas. A claim for breach of a contract including a promise to pay is qualitatively different from a suit to vindicate a right included in the Copyright Act and is not subject to preemption.

The case cite is Forest Park Pictures v. Universal Television Network, Inc., No. 11-2011-cv (2d Cir. June 26, 2012).

Ninth Circuit: "Non-Consumer" Confusion Relevant to "Likelihood of Confusion" Question

Stacia Lay — Wed, 25 Jul 2012 13:45:40 -0800

I'm a bit delayed in blogging about this opinion and, to be perfectly frank, I didn't find the facts of particular interest. Nonetheless, there were a couple of issues addressed by the Ninth Circuit that are worth at least a brief description.

This was a trademark case involving, as the case name suggests, a dispute over various REARDEN-formative marks, which apparently were inspired by the "Hank Rearden" character in Ayn Rand's Atlas Shrugged.

The first issue of interest was the Ninth Circuit's discussion of the "use in commerce" requirement for service marks, not because the opinion broke new ground but because it is an issue I still often hear discussed even among trademark attorneys.

The court emphasized that there are two elements required for a service mark to be used in commerce--the mark must be "used or displayed in the sale or advertising of services" and "the services are rendered in commerce"--both of which must be satisfied. Evidence of actual sales, or the lack of such evidence, is not necessarily dispositive of the "use in commerce" determination, the court noted. Rather, non-sales activities, like solicitation of potential customers, are relevant to the "totality of the circumstances" analysis used in the Ninth Circuit to determine whether both prongs of the "use in commerce" requirement have been met.

The second legal issue involved the "evidence of actual confusion" factor of the Sleekcraft "likelihood of confusion" factors used in the Ninth Circuit in trademark cases. Specifically, the Ninth Circuit concluded that "non-consumer confusion" may be relevant to the "likelihood of confusion" inquiry "in three specific and overlapping circumstances" including:

where there is confusion on the part of: (1) potential consumers; (2) non-consumers whose confusion could create an inference that consumers are likely to be confused; and (3) non-consumers whose confusion could influence consumers. In all three instances, the non-consumer confusion bears a relationship to the existence of confusion on the part of consumers themselves.

The court found support for its conclusion that "non-consumer" confusion may be relevant in: (1) the well-established relevance of confusion on the part of potential consumers; (2) the prior use of "non-consumer" confusion as a proxy for consumer confusion (citing TrafficSchool.com, Inc. v. Edriver Inc., 653 F.3d 820 (9th Cir. 2011)); and (3) prior decisions recognizing that "non-consumer" confusion can contribute to consumer confusion as in the case of "post-purchase confusion" (citing Karl Storz Endoscopy-Am., Inc. v. Surgical Tech., Inc., 285 F.3d 848 (9th Cir. 2002)).

Summing it up, the court stated that:

it appears to be a matter of basic common sense to recognize the very real possibility that confusion on the part of at least certain non-consumers could either: (1) turn into actual consumer confusion (i.e., potential consumers); (2) serve as an adequate proxy or substitute for evidence of actual consumer confusion (i.e., non-consumers whose confusion could create an inference of consumer confusion); or (3) otherwise contribute to confusion on the part of the consumers themselves (i.e., non-consumers whose confusion could influence consumer perceptions and decision-making).

The case cite is Rearden LLC v. Rearden Commerce, Inc., No. 10-16665 (9th Cir. June 27, 2012).

Ninth Circuit Concludes That Food, Drug, and Cosmetic Act Trumps False Advertising Lanham Act Claim

Stacia Lay — Fri, 08 Jun 2012 08:00:00 -0800

Both Pom Wonderful and Coca-Cola apparently sell pomegranate juice blends. Coca-Cola's is named either (the parties apparently disputed what the actual name was) "Pomegranate Blueberry" or "Pomegranate Blueberry Flavored Blend of 5 Juices." Coca-Cola's juice contained only 0.3% pomegranate juice and 0.2% blueberry juice; the juice was primarily comprised of apple and grape juices.

Pom sued alleging, in part, that the name, labeling, marketing, and advertising of Coca-Cola's juice violated the Lanham Act's false advertising provision. On Coca-Cola's motion to dismiss and later on summary judgment, the district court concluded that Pom's Lanham Act challenge to the name and labeling of Coca-Cola's juice was barred because it could be construed as an impermissible challenge to the FDA regulations permitting the name and labeling and could improperly require the court to interpret and apply the FDA's labeling regulations under the Food, Drug, and Cosmetic Act ("FDCA").

Faced with a potential conflict between the Lanham Act and the FDCA, the Ninth Circuit tries to give as much effect as possible to both statutes. But the FDCA did limit claims under the Lanham Act, even in cases where the FDA had not concluded that particular conduct violated the FDCA where the claim would require litigating the question of whether the conduct did violate the FDCA. In short, "the Lanham Act may not be used as a vehicle to usurp, preempt, or undermine FDA authority."

The Ninth Circuit agreed with the district court that this presented a case where Pom's Lanham Act claim regarding the name and labeling of Coca-Cola's juice was barred by the FDCA and its regulations.

As to the naming portion of Pom's claim, the Ninth Circuit found that FDA regulations appeared to authorize Coca-Cola's name. Therefore, allowing Pom's challenge would create a conflict with the regulations and undermine the FDA's determination that naming the product like Coca-Cola did is not misleading. The Ninth Circuit reached the same conclusion with respect to Pom's labeling claim.

But the Ninth Circuit vacated the summary judgment with respect to the district court's conclusion that Pom lacked standing under California's Unfair Competition Law and False Advertising Law. It also remanded for the court to address standing, preemption and similar issues with respect to Pom's state law claims.

The case cite is Pom Wonderful LLC v. Coca-Cola Co., No. 10-55861 (9th Cir. May 17, 2012).

Fourth Circuit Adopts Predicate-Act Doctrine Allowing Recovery of Damages for Foreign Violations of Copyright Act Linked to a Domestic Violation

Stacia Lay — Thu, 07 Jun 2012 13:20:28 -0800

Plaintiffs, domestic developers and producers of specialized tires for underground mining vehicles, alleged that defendants, foreign entities, manufactured and sold competing tires based on Plaintiffs' blueprints that had allegedly been stolen.

Five claims were submitted to the jury including claims under the Copyright Act and the Lanham Act. The jury found in plaintiffs' favor on all counts and awarded them $26 million in damages. On appeal, the Fourth Circuit made two holdings worthy of at least brief mention.

First, the Fourth Circuit joined the Second, Ninth, Sixth and Federal Circuits in adopting the "predicate-act" doctrine, which is an exception to the general rule that the Copyright Act has no extraterritorial reach. Under that doctrine, "[o]nce a plaintiff demonstrates a domestic violation of the Copyright Act, then, it may collect damages from foreign violations that are directly linked to the U.S. infringement."

The Fourth Circuit also rejected the defendants' argument that the predicate-act doctrine did not apply where the Copyright Act's three-year statute of limitations barred the recovery of damages from the domestic violation of the Act.

Second, the Fourth Circuit declined to adopt the "diversion-of-sales" theory to extend the Lanham Act's extraterritorial reach. The Lanham Act applies extraterritorially only when the foreign acts have a "significant effect" on U.S. commerce. Under the "diversion-of-sales" theory, however, some courts have found such a "significant effect on U.S. commerce where sales to foreign consumers would jeopardize the income of an American company."

Although the Fourth Circuit noted that there were compelling reasons for the use of the doctrine in other cases, it concluded that it was not appropriate to apply it in this case. Specifically, in those other cases, the courts had emphasized that the defendants were U.S. companies that also had substantial domestic business activity, neither of which was true in this case.

The case cite is Tire Eng'g & Distrib., LLC v. Shandong Linglong Rubber Co., Ltd., No. 10-2271 (4th Cir. June 6, 2012).

Seventh Circuit Affirms South Park Fair Use Ruling on Motion to Dismiss

Stacia Lay — Thu, 07 Jun 2012 09:32:45 -0800

Brownmark Films, the alleged co-owner of the copyright in the viral video "What What (In the Butt)" ("WWITB"), sued the entities involved in the production of South Park for copyright infringement relating to an episode of that show that included a parody of the video.

According to the district court's entertaining description, the original WWITB video was

a nearly four minute ditty regarding the derriere of the singer of the underlying work. . . . The music video begins with an array of bizarre imagery -- from a burning cross to a floating pink zeppelin -- and only gets stranger from there. The heart of the video features an adult African American male ensconced in a bright red, half-buttoned, silk shirt, dancing, grinning creepily at the camera, and repeatedly singing the same cryptic phrases: "I said, what what, in the butt" and "you want to do it in my butt, in my butt."

The parody, which comprised 58 seconds of the 25 minute South Park episode, recreated much of the original but "star[red] Butters, a naive nine-year old, in a variety of costumes drawing attention to his innocence: at various points he is dressed as a teddy bear, an astronaut and a daisy."

The South Park defendants moved to dismiss under Rule 12(b)(6) based on the affirmative defense of fair use. Critically, Brownmark argued that the district court could not consider a fair use defense on a 12(b)(6) motion to dismiss but did not address the substance of the defendants' fair use claim.

Although the district court noted that evaluating a fair use defense at the pleadings stage was "irregular," it concluded that it was appropriate in this case. The district court then "readily" concluded that "South Park's parody of the WWITB video falls squarely within the fair use protections afforded by the Copyright Act." It thus dismissed Brownmark's complaint with prejudice.

On appeal, the Seventh Circuit's opinion spent a large portion of time on the procedural issues, concluding that the district court could and did properly consider the fair use affirmative defense on a summary judgment motion regardless of the caption for the motion used by the South Park defendants, and that therefore the district court could consider the videos proffered by the defendants in connection with their motion.

Having resolved those issues, the Seventh Circuit, like the district court, had no difficulty in resolving the substantive fair use question.

First, the court held that Brownmark had waived its fair use argument because it never opposed the substance of the fair use defense in the district court but instead had relied on its procedural arguments.

Second, even if the argument had not been waived, the Seventh Circuit held that "the South Park episode is clearly a parody of the original WWITB video, providing commentary on the ridiculousness of the original video and the viral nature of certain YouTube videos."

And because the Seventh Circuit specifically referred to the district court's opinion on the motion to dismiss as "well-reasoned and delightful," I just had to get a copy of it, which can be found here. The district court also later granted the defendants' request for an award of attorneys' fees and costs, which order can be found here.

The case cite is Brownmark Films, LLC v. Comedy Partners, No. 11-2620 (7th Cir. June 7, 2012).