IP Law Chat

Federal Circuit Reverses $5,000 Copyright Damages Award in Postal Service Stamp Case

Stacia Lay — Tue, 15 May 2012 08:32:07 -0800

Sculptor Frank Gaylord created a group of 19 statues for the Korean War Veterans' Memorial in Washington, D.C. referred to as "The Column." In 2002, the United States Postal Service issued a stamp commemorating the 50th anniversary of the armistice of the Korean War that featured a photo of "The Column" licensed from photographer John Alli. The Postal Service did not seek or obtain Gaylord's permission to use "The Column" on the stamp or related merchandise.

The Postal Service issued almost 87 million stamps bearing the image, sold merchandise carrying the stamp image, and licensed the stamp image to retailers.

Gaylord sued the government for copyright infringement. In an earlier appeal, the Federal Circuit concluded that the trial court had erred in finding that the Postal Service's use was protected by fair use and remanded the case for a determination of damages. A discussion of that earlier decision can be found here.

On remand, the trial court rejected Gaylord's claim for a 10% royalty on about $30.2 million in revenue and his claim for prejudgment interest. Instead, the court employed a "zone of reasonableness" standard to determine Gaylord's damages, concluding that the appropriate range was between $1,500 and $5,000. The court ultimately awarded Gaylord the maximum amount in that range, $5,000, as a one-time royalty.

The Federal Circuit reversed. It held that the method used to determine actual damages under the copyright damages statute was the appropriate measure. In this case, the court should have awarded actual damages based on the fair market value of a license that would cover the Postal Service's use, which value should be calculated "based on a hypothetical, arms-length negotiation between the parties."

Here though, the Federal Circuit concluded that the trial court had erred in limiting its analysis of this hypothetical negotiation inquiry to only one side of the negotiations. Specifically, the trial court had incorrectly focused only on the Postal Service's assertion that it had never paid more than $5,000 for a license. The Federal Circuit rejected this narrow focus, stating that "Defendants cannot insulate themselves from paying for the damages they caused by resting on their past agreements and by creating internal 'policies' that shield them from paying fair market value for what they took."

The Federal Circuit thus remanded for the trial court to consider all evidence relevant to the hypothetical negotiation inquiry and provided specific examples of the types of evidence it might consider, including evidence that the Postal Service itself licensed the stamp image to third parties to be used on merchandise for an 8% royalty.

The Federal Circuit likewise reversed the trial court's conclusion that Gaylord was not entitled to prejudgment interest, concluding that he was entitled to such interest "because it is necessary to make his compensation complete."

The case cite is Gaylord v. United States, No. 2011-5097 (Fed. Cir. May 14, 2012).

Rosetta Stone v. Google Fight Continues

Stacia Lay — Fri, 11 May 2012 09:29:14 -0800

This case involved Rosetta Stone's appeal from the district court's grant of Google's motion to dismiss and motion for summary judgment on Rosetta Stone's trademark-related claims. (The district court's order on the motion to dismiss is found here; its order on the motion for summary judgment is found here.)

Rosetta Stone in essence alleged that Google's policies allowing advertisers both to purchase keywords, including trademarks, that trigger the advertiser's ad and link when the keyword is searched and to use trademarks in the ad text itself created a likelihood of confusion and actual confusion that misled consumers to purchase counterfeit ROSETTA STONE software.

Rosetta Stone sued Google for direct, contributory, and vicarious trademark infringement, trademark dilution, and unjust enrichment.

As noted, Google's motion to dismiss Rosetta Stone's unjust enrichment claim was granted as was its summary judgment motion on all remaining claims. The Fourth Circuit reversed the district court's order on the direct infringement, contributory infringement, and dilution claims but affirmed it on the vicarious infringement and unjust enrichment claims.

First, the issues on which the Fourth Circuit reversed the district court.

As to Rosetta Stone's direct trademark infringement claim, the Fourth Circuit concluded that the district court had erred both in finding that there was no genuine issue of material fact as to whether Google's use of the ROSETTA STONE mark created a likelihood of confusion and in concluding that the functionality doctrine shielded Google from liability.

On the likelihood of confusion issue, the Fourth Circuit concluded that the district court had inappropriately viewed the evidence as it would in a bench trial and that there was sufficient evidence of three of the likelihood of confusion factors--intent, actual confusion, and consumer sophistication--to create a genuine issue of fact precluding summary judgment.

As to the district court's conclusion that the use of the ROSETTA STONE marks as keywords was protected by the functionality doctrine and therefore non-infringing, the Fourth Circuit held that the district court had improperly focused on whether the marks made Google's product more useful when the appropriate question was whether the marks were functional as Rosetta Stone used them. Because there was nothing functional about Rosetta Stone's use of its own marks, the Fourth Circuit rejected the functionality doctrine as an affirmative defense available to Google.

On contributory infringement, the Fourth Circuit concluded that there was sufficient evidence "to establish a question of fact as to whether Google continued to supply its services to known infringers," and thus reversed the district court's decision to the contrary.

As to the dilution claim, the Fourth Circuit concluded that neither basis for the district court's decision supported a grant of summary judgment.

The Fourth Circuit concluded that the district court had erred in requiring Rosetta Stone to establish, as part of its prima facie case, that Google was using the ROSETTA STONE marks as source identifiers for Google's own products and basing that requirement on the fair use defense available under the Federal Trademark Dilution Act ("FTDA").

Not only was it Google's rather than Rosetta Stone's obligation to establish fair use, the Fourth Circuit concluded that the district court had erred in making "nontrademark use coextensive with the 'fair use' defense." Specifically, the Fourth Circuit held that the FTDA's fair use defense required a showing both "that defendant's use was 'other than as a designation of source'" and that "defendant's use . . . qualif[ied] as a 'fair use.'"

The Fourth Circuit likewise concluded that the district court had improperly focused only on the fact that Rosetta Stone's brand awareness had increased since Google had revised its trademark policy in finding that Rosetta Stone had failed to show that use of the marks was likely to impair the distinctiveness or harm the reputation of its marks. On remand, the Fourth Circuit stated that the district court should address other factors that may inform its determination of that question.

The Fourth Circuit also directed the district court on remand to reconsider whether Rosetta Stone's mark was famous for purpose of its dilution claim, which required a determination of when Google made its first allegedly diluting use of the mark and whether the mark was famous at that point.

Second, the two issues on which the Fourth Circuit affirmed the district court's decision.

On the vicarious infringement question, the Fourth Circuit concluded that Rosetta Stone's evidence that Google jointly controls the appearance of ads or sponsored links on its search-results page was not evidence "that Google acts jointly with any of the advertisers to control the counterfeit ROSETTA STONE products" and therefore summary judgment in favor of Google was proper.

And as to the unjust enrichment claim, the Fourth Circuit concluded that Rosetta Stone's allegations were insufficient to withstand even a motion to dismiss and thus affirmed the district court's order. Specifically, the Fourth Circuit held that "Rosetta Stone failed to allege facts showing that it 'conferred a benefit' on Google for which Google 'should reasonably have expected' to repay."

Rosetta Stone alleged that Google's keyword auctions of the ROSETTA STONE marks was an involuntary benefit that it conferred on Google and that Google is therefore "knowingly using the goodwill" established by those marks to derive revenues. But the Fourth Circuit concluded that Rosetta Stone had not "alleged facts supporting its general assertion that Google 'should reasonably have expected' to pay for the use of marks in its keyword query process."

The case cite is Rosetta Stone Ltd. v. Google, Inc., No. 10-2007 (4th Cir. Apr. 9, 2012).

Second Circuit Sends Viacom/YouTube Dispute Back to the SDNY

Stacia Lay — Thu, 10 May 2012 15:25:27 -0800

Because this decision was well covered during my hiatus from blogging, I'll (try to) keep this brief.

In June 2010, the Southern District of New York granted summary judgment in favor of YouTube on all of Viacom's copyright claims, finding that YouTube was entitled to the protections of the Digital Millennium Copyright Act's ("DMCA") safe harbor provisions. (SDNY's decision here; my discussion of the decision here.)

On appeal, the Second Circuit:

concluded that the SDNY correctly held that the safe harbor provision of Section 512(c)(1)(A) "requires knowledge or awareness of facts or circumstances that indicate specific and identifiable instances of infringement";
concluded that the "willful blindness doctrine" may apply "in appropriate circumstances" to demonstrate the knowledge or awareness of specific instances of infringement required under Section 512(c)(1)(A);
vacated the grant of summary judgment because a reasonable jury could conclude that YouTube had the requisite knowledge or awareness under Section 512(c)(1)(A) and remanded for the SDNY to determine that issue and to consider the application of the "willful blindness doctrine";
concluded that the SDNY erred "by requiring 'item-specific' knowledge of infringement in its interpretation of the 'right and ability to control' infringing activity under 17 U.S.C. 512(c)(1)(B)," and reversed and remanded for further fact-finding on the issues of control and financial benefit;
concluded that the SDNY "correctly held that three of the challenged YouTube software functions--replication, playback, and the related videos feature--occur 'by reason of the storage at the direction of a user' within the meaning of 17 U.S.C. 512(c)(1)," but remanded for further fact-finding regarding a fourth software function, specifically involving syndication of YouTube videos to third parties.

In case its directions for remand were not clear, the Second Circuit also specifically directed that the parties be allowed to brief specific issues "with a view to permitting renewed motions for summary judgment as soon as practicable," including:

"Whether, on the current record, YouTube had knowledge or awareness of any specific infringements (including any clips-in-suit not expressly noted in this opinion);"
"Whether, on the current record, YouTube willfully blinded itself to specific infringements;"
"Whether YouTube had the 'right and ability to control' infringing activity within the meaning of [Section] 512(c)(1)(B); and"
"Whether any clips-in-suit were syndicated to a third party and, if so, whether such syndication occurred 'by reason of the storage at the direction of the user' within the meaning of [Section] 512(c)(1), so that YouTube may claim the protection of the [Section] 512(c) safe harbor."

The case cite is Viacom Int'l, Inc. v. YouTube, Inc., Docket Nos. 10-3270-cv, 10-3342-cv (2d Cir. Apr. 5, 2012).

There was extensive coverage of the Second Circuit's decision but Eric Goldman's Technology & Law Blog provides an excellent discussion of the case as well as a number of links to case materials.

In Trademark Case, Ninth Circuit Rejects Doubling of Actual Damages Award as Punitive

Stacia Lay — Thu, 10 May 2012 14:21:48 -0800

Skydive Arizona apparently owns and operates one of the largest skydiving centers in the world, including providing planes and personnel for skydiving events in 30 states other than Arizona. It has operated under the mark "SKYDIVE ARIZONA" since 1986.

The defendants, referred to as SKYRIDE, operated an internet and telephone-based service that made skydiving arrangements and issued certificates that could be redeemed at various drop zones around the country. SKYRIDE owned and operated numerous related websites and registered a number of domain names specific to Arizona including skydivearizona.net, arizonaskydive.com, and skydivingarizona.com.

Skydive Arizona did not advertise with or accept certificates issued by SKYRIDE.

Skydive Arizona sued SKYRIDE for false advertising, trademark infringement, and cybersquatting under the Lanham Act. Skydive Arizona alleged that SKYRIDE misled consumers as to SKYRIDE's ownership of skydiving facilities in Arizona when in fact SKYRIDE neither owned nor operated any such facilities. Skydive Arizona also alleged that SKYRIDE misled consumers into believing that Skydive Arizona would accept SKYRIDE's certificates.

The district court entered summary judgment in Skydive Arizona's favor for false advertising and a jury found in its favor on the remaining claims, awarding $1 million in damages for willful false advertising, $2.5 million in actual damages for willful trademark infringement, more than $2.5 million in lost profits, and statutory damages of $100,000 for each of six violating domain names.

Post-verdict, the district court doubled the jury's actual damages awards for false advertising and trademark infringement, raising those awards to $2 million and $5 million, respectively.

After quickly affirming the district court's grant of summary judgment in favor of Skydive Arizona on the false advertising claim, the Ninth Circuit addressed the "gravamen" of the appeal, namely, the district court's decision on damages.

The Ninth Circuit affirmed the district court's upholding of the jury's award of actual damages and lost profits and rejected SKYRIDE's contention that the entire judgment should be vacated because it was grossly excessive and punitive.

The Ninth Circuit disagreed, however, with the district court's damages enhancement. Although the Lanham Act allows an award of up to triple the amount of lost profits, actual damages, and costs to compensate the mark holder, it "has been construed to expressly forbid the award of damages to punish an infringer." But the Ninth Circuit concluded that the district court's damages-enhancement decision had an improper "punitive motivation" requiring reversal of the enhancement of the actual damages award.

As modified by the Ninth Circuit's decision, Skydive Arizona was thus awarded $1 million in actual damages for false advertising, $2.5 million in actual damages for trademark infringement, $2,500,004 in lost profits for the infringement, and $600,000 in statutory damages for cybersquatting.

Judge Noonan wrote an opinion dissenting in part on the question of whether there was proof of harm to Skydive Arizona's goodwill to support the $2.5 million in damages.

The case cite is Skydive Arizona, Inc. v. Quattrocchi, No. 10-16099 (9th Cir. Mar. 12, 2012).

Fifth Circuit Rejects Ford's Dilution Claim Because Commercial Printer Did Not "Use" the Marks to Identify its Goods

Stacia Lay — Tue, 08 May 2012 14:48:10 -0800

This case involved a number of trademark issues but one seemed more interesting.

National Business Forms & Printing ("NBFP") is a commercial printer that makes signs, stickers, banners, decals and the like. Ford Motor sued NBFP for, among other claims, trademark infringement and dilution under the Lanham Act for NBFP's use of 14 of Ford's trademarked logos on these materials.

As to the dilution claim, although the district court concluded that the Ford marks at issue were famous, it found that NBFP had not made "use" of the marks in identifying its own goods or services as required by the Trademark Dilution Revision Act ("TDRA") in filling printing orders from used car dealers.

The Fifth Circuit agreed with the district court "that NBFP did not 'use' Ford's marks (as the TDRA contemplates that term) in identifying or distinguishing its own goods or services merely by reproducing them for customers as part of its commercial printing business" and therefore Ford's dilution claim failed.

The case cite is Nat'l Bus. Forms & Printing, Inc. v. Ford Motor Co., No. 10-20023 (5th Cir. Feb. 16, 2012).

Election of Statutory Damages Did Not Preclude Attorneys' Fee Award in Louis Vuitton Counterfeit Trademark Case

Stacia Lay — Tue, 08 May 2012 14:14:41 -0800

Louis Vuitton sued defendants for trademark counterfeiting and infringement under the Lanham Act and the district court awarded it $3 million in statutory damages and more than $500,000 in attorneys' fees.

On appeal, defendants argued, in part, that by electing to receive statutory damages under 15 U.S.C. 1117(c), Louis Vuitton waived its ability to receive an attorneys' fee award because subsection (c), unlike subsections (a) and (b), did not explicitly provide for such an award.

Subsection (a) provides that a plaintiff may be entitled "to recover (1) defendant's profits, (2) any damages sustained by the plaintiff, and (3) the costs of the action." 15 U.S.C. 1117(a). The last sentence in subsection (a) states that the "court in exceptional cases may award reasonable attorney fees to the prevailing party."

Subsection (c), dealing with the use of counterfeit marks, provides that the plaintiff may elect to recover statutory damages "instead of actual damages and profits under subsection (a)[.]" No explicit mention is made to an award of attorneys' fees (or costs for that matter).

Acknowledging that district courts had gone both ways on the issue (and in some cases have simply avoided explicitly answering the question) and noting that the Ninth Circuit had explicitly identified but not answered this specific question, the Second Circuit ultimately concluded that an election of statutory damages under subsection (c) did not preclude an award of attorneys' fees in "exceptional cases" under subsection (a).

The case cite is Louis Vuitton Malletier S.A. v. LY USA, Inc., Docket No. 08-4483-cv(L) (2d Cir. March 29, 2012).

SDNY Adopts Injury Rule for Determining When a Copyright Infringement Claim Accrues

Stacia Lay — Tue, 08 May 2012 13:02:19 -0800

Time for a few brief mentions of interesting cases and developments in the law after another busy period which kept me from blogging.

Jack Urbont sued Sony and others alleging copyright infringement and New York common law claims relating to his rights to the musical composition and sound recording of the "Iron Man Theme." Sony moved to dismiss in part Urbont's copyright infringement claims relating to alleged infringements occurring prior to May 21, 2007, asserting that those claims were untimely.

The question presented to the Southern District of New York was the proper rule to apply to determine when a copyright infringement claim "accrued" under the Copyright Act, 17 U.S.C. 507(b).

Sony urged the injury rule, under which a claim accrues at the time of each act of infringement regardless of the copyright owner's knowledge of the infringement. Urbont, in turn, urged the discovery rule, under which a claim does not accrue until the copyright owner knows or has reason to know of the injury that forms the basis of the copyright infringement claim.

The SDNY noted that neither the Supreme Court nor the Second Circuit has ruled on the accrual rule applicable to federal copyright infringement claims and that district courts in the Second Circuit had followed both rules at different times.

But, after noting that since the 2004 decision in Auscape Int'l v. Nat'l Geographic Soc'y, 409 F. Supp. 2d 235 (S.D.N.Y. 2004), a majority of the district courts had applied the injury rule, and after its own review of the legislative history of the Copyright Act and Supreme Court and Second Circuit guidance, the SDNY concluded that the injury rule provided the appropriate approach for determining when a copyright infringement claim accrues.

The case cite is Urbont v. Sony Music Entm't, 11 Civ. 4516 (NRB) (S.D.N.Y. March 27, 2012).

UPDATE: Supreme Court Grants Cert in Case Involving the First Sale Doctrine and Foreign Manufactured Work-

Stacia Lay — Tue, 17 Apr 2012 07:49:48 -0800

The Supreme Court granted cert yesterday 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.

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

You can find the original post about the Second Circuit's opinion here.

Court Finds No Likelihood of Confusion Between "Kinbox" and "Kinect"

Stacia Lay — Wed, 14 Mar 2012 14:30:39 -0800

Kinbook, LLC developed an application available on Facebook intended to allow the sharing of online messages, photos and videos among friends and family. The application allows users to create private "sub-social" networks and upload data to offsite storage.

After learning that Facebook had aggressively opposed trademark applications for "_____Book" formative marks for applications connected with Facebook, Kinbook decided to name its Facebook application "Kinbox" and "Munchkinbox" (the latter being for use by children and their family).

Kinbook launched its application on Facebook in December 2009 and its marks were registered with the PTO in September 2010.

In November 2010, Microsoft released the "Kinect" gaming sensor for use in connection with its XBOX 360 console. The "Kinect" is a hardware sensor that allows a user to operate and interface with the XBOX 360 using gestures and spoken commands.

Also, in April 2010, Microsoft launched a new line of mobile smartphones known as "Kin One" and "Kin Two." Two months later, Microsoft announced that it would cease production of the "Kin" phones.

Claiming that Microsoft's "Kinect" mark was confusingly similar to its "Kinbox" mark, Kinbook sued Microsoft for unfair competition and reverse trademark infringement under the Lanham Act. Microsoft moved for summary judgment and the District Court granted its motion.

The District Court's opinion contains no surprises or new statements of law but is still a worthwhile read for its resolution of the likelihood of confusion question in a concise and straightforward manner that is peppered with a sense of humor.

One example is the court's discussion regarding the "sophistication of the consumers" factor of the likelihood of confusion analysis. According to Microsoft, its target audience for XBOX 360 users is 5 to 80 years of age, which led Kinbook to argue that the court should look to the least sophisticated consumer, namely, the 5-year-old, who could easily confuse "Kinbox" and "Kinect." The District Court was not impressed with the argument:

First, it would be completely unreasonable to assign a 5 year-old as "the reasonably prudent purchaser" for the purposes of this analysis. No matter what else the ever-remarkable current-day precocious 5 year-old can accomplish, this Court cannot fathom a 5 year-old with either the faculties or the financial means to independently purchase a retail item costing hundreds of dollars. Second, even the hypothetical precocious 5 year-old dispatched by indulgent parents (or grandparents) to make her or his own selections of amusement would likely be able to distinguish between a free software application, and a $150 piece of gaming hardware.

The court also rejected the argument that the fact that the parties both marketed their products on the internet, and specifically Facebook, increased the likelihood of confusion, noting that "advertising on the internet and, more specifically, on Facebook has become vast and indiscriminate, and 'virtually every business today' uses the internet and Facebook for marketing purposes."

The case cite is Kinbook, LLC v. Microsoft Corp., No. 10-4828 (E.D. Pa., Jan. 24, 2012).

UPDATE: Constitutionality of Law Restoring Copyrights of Certain Public Domain Foreign Works

Stacia Lay — Fri, 09 Mar 2012 08:32:43 -0800

UPDATE: Back in June 2010, I wrote about the Tenth Circuit's decision in Golan v. Holder, Nos. 09-1234 & 09-1261 (10th Cir. June 21, 2010), which upheld the constitutionality of Section 514 of the Uruguay Round Agreements Act (URAA). The URAA granted copyright protection to certain foreign works that had been in the public domain in the United States. To round out the discussion of the case, see here for the Supreme Court's January 2012 decision agreeing with the Tenth Circuit and concluding that Section 514 is constitutional.

And for more history on the case, here is my original report on the case from June 2010:

Plaintiffs are various persons and entities who made their livelihoods by performing, distributing and selling public domain artistic works. Plaintiffs brought this action challenging the constitutionality of the Copyright Term Extension Act and Section 514 of the Uruguay Round Agreements Act (URAA), the latter of which granted copyright protection to certain foreign works that had been in the public domain in the United States. Somewhat more specifically, Section 514 restored "copyrights in foreign works that were formerly in the public domain in the United States for one of three specified reasons: failure to comply with formalities, lack of subject matter protection, or lack of national eligibility." As a result, the plaintiffs were either prohibited from using such previously public domain works or were required to pay cost-prohibitive licensing fees to the copyright holders. (The Tenth Circuit's opinion gives a significantly more detailed description of Section 514.)

The District Court for the District of Colorado initially granted summary judgment to the government and on appeal, the Tenth Circuit concluded that the plaintiffs' challenge to the Copyright Term Extension Act was foreclosed by the Supreme Court's decision in Eldred v. Ashcroft, 537 U.S. 186 (2003). In addition, although the Tenth Circuit concluded that Section 514 of the URAA had not exceeded the limitations of the Copyright Clause of the U.S. Constitution, it held that the plaintiffs had "shown sufficient free expression interests in works removed from the public domain to require First Amendment scrutiny" of Section 514. The matter was thus remanded to the District Court to determine and apply the appropriate level of constitutional scrutiny to Section 514.

Upon remand, the parties agreed that Section 514 is a content-neutral regulation of speech thereby subject to intermediate scrutiny. On cross-motions for summary judgment, the District Court granted the plaintiffs' motion, concluding that Section 514 was unconstitutional to the extent it "suppresses the right of reliance parties to use works they exploited while the works were in the public domain." Both parties appealed: the government argued that Section 514 did not violate the First Amendment and the plaintiffs argued that the District Court had failed to provide all of the relief they had requested.

On appeal, analyzing Section 514 as a content-neutral regulation of speech, the Tenth Circuit reversed the District Court's decision, concluding that "the government has demonstrated a substantial interest in protecting American copyright holders' interests abroad, and Section 514 is narrowly tailored to advance that interest."

As to the importance of the government interest asserted, the Tenth Circuit had "no difficulty in concluding that the government's interest in securing protections abroad for American copyright holders" satisfied the applicable standard. Section 514 secured foreign copyrights for American works, which previously had been unprotected, and thereby preserved the authors' economic and expressive interests. The court noted that some estimated that billions of dollars were lost each year because foreign countries were not providing copyright protections to American works in the public domain abroad.

The Tenth Circuit also concluded that Section 514 was narrowly tailored to further the substantial government interest asserted. The court cited evidence that foreign countries could be expected to provide only as much protection to American copyright holders as the United States would provide to foreign copyright holders and that some countries might follow the United States' example in that regard. Thus, in order to secure the benefits to American authors for their works abroad, the United States needed to impose the same burden on parties like the plaintiffs in the United States that it sought to impose on such foreign parties abroad. In short, "the benefit that the government sought to provide to American authors is congruent with the burden that Section 514 imposes on [so-called] reliance parties."

The Tenth Circuit thus reversed the District Court's grant of summary judgment in favor of the plaintiffs, concluding that "because Section 514 advances a substantial government interest, and it does not burden substantially more speech than necessary to advance that interest, it is consistent with the First Amendment."

The case cite is Golan v. Holder, Nos. 09-1234 & 09-1261 (10th Cir. June 21, 2010).

A Reminder That Damages Aren't the Only Danger in Copyright Infringement Cases

Stacia Lay — Fri, 02 Mar 2012 11:03:20 -0800

Nothing remarkable about this copyright infringement case except that it serves as a useful reminder that damages for infringement are not always the biggest money risk in such cases. In this case, the statutory damages awarded totaled $36,000. But the district court also awarded plaintiffs their attorneys' fees, totaling $162,728 and change, an award that was affirmed on appeal.

The case cite is Range Road Music, Inc. v. East Coast Foods, Inc., No. 10-55691 (9th Cir. Feb. 16, 2012).

Sixth Circuit Addresses Vesting of Copyright Renewal Rights

Stacia Lay — Fri, 02 Mar 2012 08:31:51 -0800

This case involved the renewal copyrights to the songs by singer/songwriter Roger Miller who assigned his copyrights, original and renewal, to Sony's predecessor-in-interest.

Sony filed applications to register the renewal copyrights in Miller's songs in January and April 1992 and the copyrights were subsequently registered. Miller, however, died on October 25, 1992, and in his will, he granted all his intellectual property interests to his wife who in turn assigned those interests to Roger Miller Music, Inc.

The basic issue before the Sixth Circuit was whether Sony owned the renewal copyrights when Miller was still living at the time Sony, his assignee, applied to register those copyrights but died before the actual start of the renewal term.

Looking to the statutory language of the Copyright Act, which states in part that the renewal copyright vests in any party entitled to it "at the time the application is made," and legislative history, the Sixth Circuit concluded that Sony, as assignee of the author, secured an interest in the renewal copyrights because Miller was alive at the time Sony applied for renewal. That Miller subsequently died before the beginning of the renewal term did not divest Sony of its ownership of the renewal copyrights.

The case cite is Roger Miller Music, Inc. v. Sony/ATV Publishing, LLC, No. 10-5363 (6th Cir. Feb. 22, 2012).

Court Rejects First Sale Defense Relying on Vernor v. Autodesk Test

Stacia Lay — Thu, 01 Mar 2012 08:48:16 -0800

Relying on the test recently established by the Ninth Circuit in the Vernor v. Autodesk, Inc. (see here for more on that case), the Northern District of California rejected a first sale defense in another software resale case.

Adobe sued defendants for copyright and trademark infringement for selling Adobe software via eBay and another website. According to the court's opinion, the defendants obtained unbundled OEM versions of Adobe software from several companies including Dell and Hewlett-Packard and then sold that software. Defendants argued, in part, that their actions were protected under the first sale doctrine.

To determine whether the first sale defense applied, the court had to answer the question whether Adobe sold or licensed copies of its software to the OEM companies from which defendants obtained their copies of the software.

Looking to the test established by the Ninth Circuit in Vernor, the court easily concluded that Adobe licensed, rather than sold, its software to OEMs and therefore the first sale defense was unavailable to defendants.

Under Vernor, to determine whether a software user is a licensee rather than an owner, the court looks at whether the copyright owner "(1) specifies that the user is granted a license; (2) significantly restricts the user's ability to transfer the software; and (3) imposes notable use restrictions."

In this case, Adobe's agreements specified that they granted a license (hardly a surprise). The court also found that the agreements imposed both significant transfer and use restrictions, although the opinion is light on details as the agreements were apparently filed under seal.

Thus, because the court found that Adobe licenses, rather than sells, the OEM versions of its software, the first sale doctrine did not apply and the court granted partial summary judgment in favor of Adobe.

The case cite is Adobe Systems, Inc. v. Hoops Enterprise LLC, N. C 10-2769 CW (N.D. Cal.).

AP Sues News Monitoring Service, Meltwater, for Copyright Infringement and "Hot News" Misappropriation

Stacia Lay — Wed, 29 Feb 2012 09:10:03 -0800

After sparse blogging due to a busy period, time to briefly highlight some of the more interesting legal opinions and cases that crossed my desk in the last couple/few months.

One of the more interesting (at least to me) new cases to watch is the case filed on Valentine's Day by the Associated Press against Meltwater (which, according to its website, offers a media monitoring service) for copyright infringement and "hot news" misappropriation.

In its complaint, the AP alleges that Meltwater employs a "parasitic business model" that involves "routinely copying, verbatim, the heart of AP's and other publishers' stories, and selling that infringing content to its subscribers."

Although, according to the AP, Meltwater characterizes itself as a "modern day commercial clipping service," the AP distinguished Meltwater's practices from other news aggregators:

8. In contrast to the practice of other news sources and news aggregators who deliver the AP's news reports to the public, Meltwater does not license the content that it delivers to its subscribers. Google News, Yahoo News, and AOL, for example, have negotiated arrangements with AP to distribute its content. Further, unlike Google News or other news aggregators that deliver search results to the public for free, Meltwater is a closed commercial business that only provides news excerpts and other services after payment of a substantial annual fee. Critical to Meltwater's business model is the fact that it incurs no expense to create or license the content it delivers, allowing it to reap substantial subscription fees with minimal expenses while undercutting its competitors--including the AP, and other entities who have paid valuable consideration to AP for licenses to distribute its content.

The AP's complaint also emphasized that its lawsuit was "not a general attack on news aggregators--many of whom are AP's licensees" nor did it "in any way seek to restrict linking or challenge the right to provide headlines and links to AP articles."

Extensive description of both the AP and its news-gathering process and Meltwater's news services can be found in the AP's 41-page complaint here.

The case caption is Associated Press v. Meltwater U.S. Holdings, Inc., et al., No. 12 Civ. 1087 (S.D.N.Y.), filed February 14, 2012.

UPDATE: Capitol Denied Preliminary Injunction in Case Against ReDigi

Stacia Lay — Tue, 07 Feb 2012 10:46:47 -0800

Capitol Records was denied a preliminary injunction in its case against the owner of the "ReDigi" music service, which Capitol has sued for copyright infringement in connection with ReDigi's online marketplace for "used" digital music files.

The district court's order gives no reasons for the denial of the preliminary injunction, instead merely referring to the reasons that apparently were stated on the record at the hearing on the motion.

Earlier, the district court also denied the request from Google to file an amicus curiae brief apparently intended to "highlight the importance of the copyright law questions." The court stated that it believed "that the parties are fully capable of raising these issues themselves -- and have every incentive to do just that[.]"

The original post about Capitol's filing of its complaint can be found here.

Capitol Sues Music Service Offering "Used" Digital Music

Stacia Lay — Tue, 10 Jan 2012 09:02:48 -0800

Capitol Records has sued the owner of the "ReDigi" music service, which, according to Capitol, offers an online marketplace for "used" digital music files. Although, according to Capitol, ReDigi "touts its service as the equivalent of a used record store," only for digital music, Capitol claims that it is in fact "a clearinghouse for copyright infringement."

In its complaint, Capitol alleges that ReDigi's service involves making multiple, unauthorized copies of digital music files. Capitol quotes from ReDigi's pre-launch press release to illustrate the alleged copying: "[A]fter downloading ReDigi's proprietary 'Music Manager' software, users designate the songs they wish to sell from their desktop computers. 'Eligible' tracks are then allegedly removed from the user's computer and 'synced' devices, 'stored in the ReDigi cloud and offered for sale on ReDigi's website.'" Additional copies are made, Capitol alleges, when ReDigi stores the files in its "cloud" and when the files are downloaded to the purchaser's computer.

Capitol's complaint rejects several "excuses" ReDigi allegedly makes for its activities. First, Capitol questions the efficacy of ReDigi's "Verification Engine," which Capitol alleges "analyzes each file uploaded for sale to ensure that the track was 'legally downloaded' by the user in the first instance and thus 'eligible for sale.'" Second, Capitol likewise questions the claim that ReDigi makes sure "the original user will not 'willfully use/possess any copies of the sold item.'"

Finally, and perhaps most interestingly, Capitol rejects ReDigi's assertion that its service is protected by the first sale doctrine of the Copyright Act, 17 U.S.C. 109. That doctrine provides that the "owner of a particular copy or phonorecord lawfully made under [the Copyright Act] is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy or phonorecord."

Capitol alleges that ReDigi is not the "owner" of any particular copy of a copyrighted work as required by the doctrine, nor is it selling the actual "particular copy." As to the latter point, Capitol argues that "[n]either ReDigi nor its users resell the original material object that resided on the original user's computer," rather, "ReDigi and its users duplicate digital files both in uploading and downloading discrete copies distinct from the original file that originally resided on a user's computer."

Capitol alleges claims for direct copyright infringement, as well as inducement of copyright infringement, contributory and vicarious copyright infringement, and common law copyright infringement for pre-1972 recordings.

The case cite is Capitol Records, LLC v. ReDigi Inc., Case No. 1:12-cv-00095-RJS (S.D.N.Y.), filed January 6, 2012. A copy of Capitol's complaint can be found here.

Ninth Circuit Again Rejects Copyright Misuse Defense in Connection With Apple's Copyright Infringement Claim

Stacia Lay — Wed, 05 Oct 2011 14:27:18 -0800

The primary point of interest in this case is the Ninth Circuit's rejection of the copyright misuse defense to a claim of copyright infringement alleged by Apple. With this rejection, there is still only a single case in which the Ninth Circuit has upheld the use of the defense, Practice Mgmt. Info. Corp. v. Am. Med. Ass'n, 121 F.3d 516 (9th Cir. 1997), amended by 133 F.3d 1140 (9th Cir. 1998).

Beginning in April 2008, Psystar began manufacturing and selling personal computers originally named "OpenMac" and later renamed "Open Computers," on which Psystar had installed a copy of Mac OS X through use of imaging (details of the exact process are described in the Ninth Circuit's opinion). Psystar shipped its Open Computers with an unopened copy of Mac OS X purchased from Apple or third party vendors. "The unopened copy enabled Psystar to maintain it had purchased a copy of Mac OS X for each computer it sold, but the computer actually was to run on the copy of the altered Mac OS X installed in the Psystar computer."

Apple then sued Psystar for, among other things, copyright infringement and Psystar counterclaimed for a declaratory judgment that "Apple was misusing its copyright in Mac OS X by requiring purchasers to run their copies only on Apple computers." Specifically challenged was the following provision of Apple's Software License Agreement ("SLA"):

This License allows you to install, use and run one (1) copy of the Apple Software on a single-Apple-labeled computer at a time. You agree not to install, use or run the Apple Software on any non-Apple labeled computer, or to enable others to do so.

On cross motions for summary judgment, the district court concluded, in relevant part, that Psystar had infringed Apple's exclusive right to create derivative works and that Apple's SLA was not unduly restrictive and was therefore not copyright misuse.

The Ninth Circuit affirmed that conclusion

principally because [Apple's] licensing agreement was intended to require the operating system to be used on the computer it was designed to operate, and it did not prevent others from developing their own computer or operating systems. These licensing agreements were thus appropriately used to prevent infringement and control use of the copyrighted material.

In reaching that conclusion, the Ninth Circuit opined a bit about the proliferation of license agreements, rather than sales, in the software industry, which it stated was a result of the first sale doctrine. The court also cited to its (relatively) recent opinion in Vernor v. Autodesk, Inc., 621 F.3d 1102 (9th Cir. 2010) (previously blogged here) in which it upheld a license agreement and rejected the first sale defense. In particular, the Ninth Circuit cited the three-factor test adopted in Vernor to distinguish between a software license and a sale of a copy of copyrighted software:

[A] software user is a licensee rather than an owner of a copy where the copyright owner (1) specifies that the user is granted a license; (2) significantly restricts the user's ability to transfer the software; and (3) imposes notable use restrictions.

Under this test, the Ninth Circuit readily concluded that those, like Psystar, who purchased copies of Mac OS X were licensees not owners of those copies because Apple's SLA states that the software is licensed, not sold (which still seems like a non-factor to me as most if not all owners of copyrighted software will characterize the transaction as a license) and imposed significant use and transfer restrictions with respect to the copies of the software.

Thus, because Apple's SLA was a valid license agreement that reasonably restricted use of the software without preventing the development of competing products, Psystar's copyright misuse defense failed.

The case cite is Apple Inc. v. Psystar Corp., No. 10-15113 (9th Cir. Sept. 28, 2011).

UPDATE: TTAB Denies Microsoft's Summary Judgment Motion in Opposition to Registration of Apple's APP STORE Mark

Stacia Lay — Tue, 04 Oct 2011 10:25:24 -0800

Microsoft's motion for summary judgment in its opposition to Apple's attempt to register its APP STORE mark ended with something of a whimper last week, with the TTAB denying the motion with essentially no substantive discussion. Details of the opposition proceeding and the parties' briefing on Microsoft's summary judgment motion can be found here.

Despite extensive briefing by the parties, the TTAB concluded that Microsoft had failed to show that there were no genuine disputes of material fact. In particular, with respect to Microsoft's claim that Apple's APP STORE mark is generic, the TTAB found "that genuine disputes of material fact exist, at a minimum, regarding how the relevant public primarily uses or understands the term APP STORE[.]"

The TTAB's opinion can be found here.

Ninth Circuit: No Presumption of Irreparable Harm for Injunctive Relief in Copyright Infringement Cases

Stacia Lay — Wed, 24 Aug 2011 10:26:19 -0800

Keeping it short and to-the-point, in case it still was not clear, the Ninth Circuit reiterated that the presumption of irreparable harm for obtaining injunctive relief in copyright infringement cases is no longer good law after the Supreme Court's decisions in 2006 and 2008:

We conclude that presuming irreparable harm in a copyright infringement case is inconsistent with, and disapproved by, the Supreme Court's opinions in eBay [Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006)] and Winter [v. Natural Resources Defense Council, Inc., 555 U.S. 7 (2008)]. . . . Thus, our long-standing precedent finding a plaintiff entitled to a presumption of irreparable harm on a showing of likelihood of success on the merits in a copyright infringement case . . . has been effectively overruled. . . . Accordingly, we hold that even in a copyright infringement case, the plaintiff must demonstrate a likelihood of irreparable harm as a prerequisite for injunctive relief, whether preliminary or permanent.

The case cite is Flexible Lifeline Systems, Inc. v. Precision Lift, Inc., No. 10-35987 (9th Cir. Aug. 22, 2011).

Second Circuit Concludes First Sale Doctrine Does Not Apply to Copyrighted Works Manufactured Outside the U.S.

Stacia Lay — Wed, 24 Aug 2011 08:47:54 -0800

In an opinion that seemed almost uncomfortable at times with its conclusion, the Second Circuit joined the Ninth Circuit in holding that the Copyright Act's so-called "first sale" defense to copyright infringement does not apply to copies of copyrighted works manufactured outside the United States.

John Wiley & Sons publishes journals and books that are sold domestically and internationally. Wiley's wholly-owned subsidiary ("Wiley Asia") manufactures the books sold in foreign countries.

To help subsidize his educational costs in the U.S., defendant Supap Kirtsaeng's friends and family shipped him foreign edition textbooks printed outside the U.S. by Wiley Asia, which he then sold on websites like eBay.

Wiley sued Kirtsaeng in the Southern District of New York alleging, in part, that Kirtsaeng's conduct constituted copyright infringement.

Kirtsaeng requested a jury instruction charging the jury that the first sale doctrine was a defense to copyright infringement but the District Court denied the request, rejecting the applicability of the defense to foreign editions of the books.

Along with evidentiary issues, Kirtsaeng appealed the conclusion that the first sale defense was unavailable but the Second Circuit affirmed.

The Second Circuit first looked to the statutory language of the first sale doctrine in Section 109(a) of the Copyright Act:

Notwithstanding the provisions of section 106(3), the owner of a particular copy . . . lawfully made under this title, or any person authorized by such owner, is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy[.]

(Emphasis added).

Focusing on the phrase "lawfully made under this title," the Second Circuit ultimately concluded that it was "utterly ambiguous text" because it

could plausibly be interpreted to mean any number of things, including: (1) "manufactured in the United States," (2) "any work made that is subject to protection under this title," or (3) "lawfully made under this title had this title been applicable."

Given this ambiguity, the Second Circuit concluded that it was "best" to interpret the first sale doctrine in a way that best comports with Section 602(a)(1) of the Copyright Act and the Supreme Court's opinion in Quality King Distributors, Inc. v. L'anza Research Int'l, Inc., 523 U.S. 135 (1998).

Section 602(a)(1) provides:

Importation into the United States, without the authority of the owner of the copyright under this title, of copies or phonorecords of a work that have been acquired outside the United States is an infringement of the exclusive right to distribute copies or phonorecords under section 106, actionable under section 501.

The Supreme Court's decision in Quality King addressed the interplay between Sections 602(a)(1) and 109(a), albeit on different facts. Specifically, in Quality King, the copyrighted works had been manufactured in the United States, sold to foreign distributors where they had been purchased by the defendant and then re-imported into the U.S. for re-sale. In that case, the Supreme Court concluded that the first sale defense was available.

The Supreme Court found it "significant" that Section 602(a)

does not categorically prohibit the unauthorized importation of copyrighted materials. Instead, it provides that such importation is an infringement of the exclusive right to distribute copies "under section 106." [But] the exclusive right to distribute is a limited right. The introductory language in [section] 106 expressly states that all of the exclusive rights granted by that section . . . are limited by the provisions of [sections] 107 through 120. One of those limitations . . . is provided by the terms of [section] 109(a), which expressly permit the owner of a lawfully made copy to sell that copy "[n]otwithstanding the provisions of section 106(3)."

(footnote omitted).

Despite the differing facts and acknowledging that the Supreme Court's Quality King opinion did not answer the question, the Second Circuit concluded that the Court's dicta "suggests that copyrighted material manufactured abroad cannot be subject to the first sale doctrine contained in [section] 109(a)."

For instance, the Second Circuit latched onto a hypothetical offered by the Supreme Court that it felt supported its conclusion:

If the author of [a] work gave the exclusive United States distribution rights--enforceable under the Act--to the publisher of the United States edition and the exclusive British distribution rights to the publisher of the British edition, . . . presumably only those made by the publisher of the U.S. edition would be 'lawfully made under this title' within the meaning of [section] 109(a). The first sale doctrine would not provide the publisher of the British edition who decided to sell in the American market with a defense to an action under [section] 602(a) (or, for that matter, to an action under [section] 106(3), if there was a distribution of the copies).

The Second Circuit acknowledged that the Supreme Court was recently offered the opportunity to answer the question not resolved in Quality King--whether copies of copyrighted works manufactured outside the U.S. are subject to the first sale doctrine.

The Supreme Court granted review in Omega S.A. v. Costco Wholesale Corp., in which the Ninth Circuit again held that, with one exception, the first sale doctrine does not apply to works manufactured outside the U.S. But an equally divided Supreme Court affirmed the judgment without opinion, leaving the questioned unanswered.

Nonetheless, while stating that it was "perhaps a close call" but "comforted" by the Supreme Court's decision in Quality King, the Second Circuit held that the first sale defense in Section 109(a) applies only to copies of copyrighted works manufactured in the United States.

The Second Circuit's decision was not unanimous, however. The dissenting judge argued that the language of the first sale doctrine "does not refer to a place of manufacture: It focuses on whether a particular copy was manufactured lawfully under title 17 of the United States Code" (i.e., under the Copyright Act). Under that Act, a "U.S. copyright owner may make her own copies or authorize another to do so. . . . Thus, regardless of place of manufacture, a copy authorized by the U.S. rightsholder is lawful under U.S. copyright law."

The dissenting opinion's interpretation of "lawfully made under this title" found support in other provisions of the Copyright Act using similar language as contrasted with other provisions where Congress explicitly made reference to the place of manufacture, demonstrating an ability to do so when intended.

Economic justifications as well as the policies underlying the first sale doctrine further supported the dissenting opinion's interpretation of the doctrine to foreign manufactured copies of copyrighted works. For instance, the majority's rule would provide greater protection to works manufactured abroad than those manufactured domestically. As to the latter, once a copy is sold, regardless of where that sale takes place, the copyright holder's right to control distribution is exhausted, unlike foreign manufactured copies.

In the end, although it agreed with the majority that it was a "close call," the dissenting opinion would hold that the first sale doctrine does apply to foreign manufactured copies of copyrighted works.

The case cite is John Wiley & Sons, Inc. v. Kirtsaeng, No. 09-4896 (2d Cir. Aug. 15, 2011).