Unless they were decided by the Supreme Court, involved major players or were widely anticipated to begin with, most copyright cases do not get a lot of press. Here are six somewhat below-the-radar decisions from recent months that will be of real consequence in the copyright world.
While the bundle of rights offered by copyright law includes many things, it does not include the right to a credit. However, in Murphy v Millennium Radio Group,(1) the Third Circuit found that a credit's removal – whether digital or not – from any copyrighted work may violate the Digital Millennium Copyright Act's prohibition on tampering with copyright management information (CMI).
In this case, the plaintiff took a photo of two radio broadcasters for a local magazine's "Best of" edition. The humorous photograph portrayed the two DJs, naked, wearing only a sign proclaiming the name of their radio station. The radio station then used the photograph in a contest where its listeners altered the photo in other amusing ways. In administering the contest, the station also removed the photographer's name from the bottom of the photo.
The district court dismissed a copyright infringement claim based on fair use grounds, and further dismissed the plaintiff's CMI claim. The Third Circuit reversed, but while this reversal was interesting, it did not create new law. Typically, there have been few cases even mentioning CMI, and just about all of those were at the district court level. Those courts that found no CMI violation reasoned that:
the removal of mere credits, especially non-digital credits, cannot violate the Digital Millennium Copyright Act because the act was intended to safeguard technological measures used to protect copyrighted works; and
finding a CMI violation for simple credit removal would go against the bar on copyright credit claims and potentially blur the lines of copyright and trademark.
The Third Circuit, however, held that the clear language of the Digital Millennium Copyright Act(2) had no such limitations in the actual definition of CMI, and so it could include any form of credit. Like MDY Indus, LLC v Blizzard Entertainment, Inc,(3) in which the Ninth Circuit interpreted the Digital Millennium Copyright Act's 'access' right, this may be a case where the court correctly read the literal interpretation of the act, even if that interpretation might contrast with the original intent of the law. Such a finding may cast a wide net for potential Digital Millennium Copyright Act violations, so there could be a substantial rise in 'removal of credit' claims going forward. However, a CMI violation is an additional claim, not a substitute for a copyright claim, since it still must "induce, enable, facilitate, or conceal" an infringement.
In Kernal Records Oy v Mosley,(4) the plaintiff's copyright predecessor (who was from Norway) first published his song on an Australian magazine website. The plaintiff sued the US-based defendants in the United States after they allegedly copied the work without authorisation. Once the court decided that the initial online posting was a publication, the main issue was where exactly the work was first published. Under Section 411 of the Copyright Act, "United States works" must be registered with the US Copyright Office before a lawsuit can be brought, but foreign works are immune from that requirement. So, to what country did the plaintiff's work belong, according to the court? The answer was every country.
The court held that first publication over the Internet amounts to "simultaneous publication in the United States and other nations around the world that have Internet service". Therefore, such works are subject to the procedural requirements of each and every country. Kernal rejected the holding and rationale of the only other court to delve deeply into this issue in Moberg v 33T LLC,(5) which considered a holding like the one adopted in Kernal, but stated that such a holding would:
subjected copyright holders to the formalities of every country;
allowed US residents to infringe on otherwise foreign works with minimal recourse; and
was contrary to the goals of the Berne Convention for the Protection of Literary and Artistic Works – the treaty that the United States signed agreeing to protect foreign works without requiring creators to undertake any formalities in the United States.
Essentially, the Kernal court rejected those concerns because it found that nothing in the Copyright Act stated that the place of publication did not include every place in which the work could be accessed, and (similar to the Third Circuit's Murphy decision described above) the absence of any limiting language trumped any treaty. To make matters worse for the plaintiff, even though no court had ever come to such a conclusion previously, the Kernal court refused to allow the plaintiff the chance to register its work and amend its complaint, stating that the plaintiff should have done so as soon as the defendant had raised the issue.
It is uncertain how far this decision will extend once lawyers examine the ramifications of a work being subject to every country's formalities and rules. However, based on this decision, copyright owners should consider whether they can avoid first publication over the Internet in circumstances where it could come back to hurt them, and further should comply with various formalities as soon as an issue arises. Certainly, a strict following of Kernal could force copyright owners to jump through many hoops and, in the end, Congress may be forced to clarify its intent.
In Penguin Group (USA) Inc v American Buddha(6) the defendant published four of the plaintiff's works on its Oregon-based website, and the plaintiff sued in New York. The defendant moved to dismiss on personal jurisdiction grounds.
In determining whether the defendant should be subject to jurisdiction in New York, the court looked at New York's long-arm statute for tortious acts committed "outside New York". One necessary factor in that analysis is whether "the tortious act caused an injury to a person or property in New York" (ie, was the 'situs' of the injury). The district court found that the injury occurred when the defendant copied the works in Oregon and thus dismissed the case. However, the Second Circuit took the unusual step of transferring the question to the New York Court of Appeals, stating that it would interpret the rule consistent with the New York courts.
The appeal court returned with the answer: "A New York copyright owner alleging infringement sustains an in-state injury... when its printed literary work is uploaded without permission onto the Internet for public access."(7) Since an online infringement extends throughout the world, and is thus accessible in New York, the site of the injury was not limited to the place where the work was uploaded. The Second Circuit adopted this reasoning and remanded the case to the district court for further review of the other long-arm statute factors.
While some reports have suggested that Penguin stands for the proposition that copyright infringement defendants will always be subject to personal jurisdiction in the location of the copyright owner, that is not correct. The Second Circuit made clear that the personal jurisdiction defence would still turn on whether the other four long-arm factors, as well as the requirements of due process, were satisfied. However, when read in combination with Kernal, one could conclude that Penguin did not go nearly as far as it could have. For example, one reading of Kernal would lead to the conclusion that the long-arm statute for tortious acts committed outside the state need not be consulted because the infringement itself happened in New York. If putting a work on the Internet means that it is simultaneously published everywhere, then one could argue that when an alleged infringement is internet based, the infringement act itself happened everywhere. In fact, in the District of Nevada, a group of cases involving a plaintiff known as Righthaven decided – in a bit of a mix of Penguin and Kernal – that personal jurisdiction challenges to the plaintiff's home forum should be overcome whenever a defendant copies the plaintiff's work on the Internet if it knows that the work belongs to a copyright owner in that forum.
However, as discussed below, the good news for Righthaven was relatively short lived.
In the Righthaven case, the Righthaven company entered into an agreement with the Las Vegas Review Journal and the Denver Post to sue third parties for alleged infringement of their works on the Internet. So far, Righthaven has sued hundreds of bloggers and websites, all in the Districts of Nevada and Colorado.
At first, these lawsuits were fairly successful and managed to extract many small settlements out of various defendants. However, Righthaven was recently forced to produce the copyright 'assignment' between itself and the publications it represents, which in turn has led to the dismissal of various Righthaven cases and opened up the doors to sanctions, and even threats of class actions, from prior settling parties. Why this development?
In Silvers v Sony Pictures Entertainment, Inc,(8) the Ninth Circuit made clear that one cannot merely transfer the right to sue for a copyright infringement. Rather, to have copyright standing, one must be the owner, or at least the exclusive licensee, of an actual copyright right under Section 106 of the Copyright Act. According to the two judges who decided Righthaven, LLC v Democratic Underground, LLC(9) and Righthaven, LLC v Hoehn(10) (as well as at least three more Nevada Righthaven cases), the Righthaven assignments did not come close to meeting that standard. While the agreements purported to be assignments of copyright, they made clear that:
the publications retained the right to exploit all copyrights;
Righthaven could not exploit the copyrights other than to bring infringement lawsuits; and
the publications even had discretion over whom to sue.
Some judges made clear their displeasure with Righthaven's tactics and, apparently, saw this standing issue as an easy way out. However, even with the standing dismissal, one judge was upset enough by these cases to go so far as to find a blogger's copying of an entire article to be fair use. It remains to be seen whether Righthaven will abandon these suits or try to edit the assignment agreement - the Hoehn case is now on appeal before the Ninth Circuit. The outcome of these cases makes clear, however, that if a copyright owner wishes to have third parties, subsidiaries or other entities enforce its copyrights, it needs to ensure that actual copyright rights are transferred beyond just the right to bring suit.
The defendant in Warner Bros Entertainment Inc v X One X Productions(11) used images from old 'public domain' publicity materials that promoted films – including Gone with the Wind and The Wizard of Oz – to create T-shirts, lunch boxes and so on. In many cases, the defendant added a character's signature phrase to the product or combined multiple images on a product. The plaintiff sued, stating that even though the images (of the actors in costume) were taken from public domain materials and were not in the actual films, the defendant could not create new materials with those images without violating the film copyrights, as those copyrights included the characters themselves.
The district court agreed with the plaintiff and entered a permanent injunction against all of the defendant's products (except for instances of exact duplication of individual items of public domain material in the same manner, such as a public domain poster being duplicated in whole and sold as a poster). The Eighth Circuit affirmed for the most part, stating that the "freedom to make new works based on public domain materials ends where the resulting derivative work comes into conflict with a valid copyright". Since in Warner Bros the films actually came after the publicity photos were released, the court had to determine what of the characters was protected after accounting for what was in the public domain.
The court held that although the Gone with the Wind actors in the publicity photos were in costume, they were not "shown in a consistent, unique outfit and hairstyle". Therefore, other than the images themselves, nothing regarding the characters could be put in the public domain. Otherwise, "almost any image of Vivian Leigh or Clark Gable would be sufficient to do so as well".(12) For The Wizard of Oz, the court likewise found that certain changes among publicity photos, such as costume colours and hairstyles, made it so that no character elements should be deemed in the public domain. In some ways, the court's limited analysis is somewhat peculiar, since characters in films do change costumes – a better question for Gone with the Wind, for example, might have been whether the actors' costumes in the publicity photos were all representative of the American South during the Civil War.
The appeal court did reverse the district court's injunction in instances where the defendant used a public domain image or part of a public domain image, two-dimensionally, by itself, on any type of product. For example, a poster could be duplicated on a T-shirt, although the court clarified that such a product change could be allowed only where the publicity photo was published before the film; otherwise it would "necessarily exhibit" the film characters and could not be put on other products. The court affirmed in all other respects. It found infringement where the defendant:
combined two public domain materials;
added "a printed phrase from the book underlying the subject film", such as "There's no place like home" to the public domain material; or
converted a two-dimensional public domain work into a three-dimensional work.
Such transformations were found to add "a new increment of expression of the film character" not present in the original public domain materials, and were thus an attempt to portray the film characters themselves.
The court's reasoning leaves many questions open. It is unclear whether simple recognition of a film should infringe upon copyright when the image is in the public domain and came before the film existed. A single line from a film might not be copyrightable by itself, so the question arises of whether the addition of that line to a public domain image (or the mere combination of two public domain images) should be handled under copyright law as opposed to trademark law, or even right of publicity law. For example, if someone were to take a legitimate photograph of Clint Eastwood and get his permission to sell it on a T-shirt, would there be a violation of the Dirty Harry character copyright by adding a line saying "Go ahead, make my day"?
Finally, Barclays Capital Inc v Theflyonthewall.com, Inc(13) dealt with the relation between 'hot news' misappropriation and copyright law. The plaintiffs in Barclays issued analyst reports to their clients regarding the securities of public companies, complete with buy or sell recommendations. Since the recommendations themselves moved markets when made public, the plaintiffs' clients had an informational advantage and could obtain financial gains by knowing the recommendation before the general public. The defendant, Theflyonthewall.com, obtained these reports as soon as they were issued, and then informed the general public of the buy or sell recommendations before the market opened. As such, the plaintiffs' clients were unable to reap the financial rewards of getting the reports and were thus less likely to execute trades with the plaintiffs (and reap the resulting commissions) based on those reports.
Where the defendant re-published the plaintiffs' entire reports, the copyright claim was obvious. However, in many cases the defendant merely published only the fact of the plaintiffs' recommendations. Since copyright does not protect facts, no matter how much 'sweat of the brow' was used in arriving at those facts, a copyright claim was thus unlikely to succeed under such circumstances. Instead, the plaintiffs sued the defendant on a hot news theory.
After a bench trial, the district court found in favour of the plaintiffs. Citing National Basketball Ass'n v Motorola, Inc,(14) the court stated that hot news was a viable theory, not pre-empted by copyright, as long as:
a plaintiff gathered time-sensitive information at its own expense;
the defendant was in direct competition with the plaintiff's product or service; and
the defendant's use of the information constituted free riding on the plaintiff's efforts, and would drastically eliminate the plaintiff's incentive to produce the good or service if other parties also engaged in free riding.
The district court found that all of these factors were satisfied. The court then fashioned an interesting injunction, holding that the defendant could not release the plaintiffs' recommendations to the public for a period ranging from 30 minutes to several hours after they were issued by the plaintiffs.
The Second Circuit reversed, ruling that the hot news claim was pre-empted by the Copyright Act. The court did not eliminate hot news as a viable claim altogether. Instead, it stated that it was bound to accept the prior panel holding in NBA that hot news could exist in very narrow circumstances. In NBA, the court found that (keeping in mind that sporting events themselves are not copyrightable, but the recordings of those events are) the NBA's claims against a news service reporting on elements of the game in real time were pre-empted because they were based in copyright, including "acts of reproduction, performance, distribution or display". The NBA court did state that if an "extra element is required instead of or in addition to the [copyright-related] acts", there is no pre-emption and a state claim can exist. For hot news, those extra elements are time sensitivity, free riding and the threat to the product's very existence.
However, in Barclays the Second Circuit discounted most of the tests set forth in NBA, essentially calling them "dictum". Rather than rely on those tests, the court found pre-emption based on various other factors. First, it held that even though the recommendations were not copyrightable, they were nevertheless written subject matter allegedly reproduced by the defendant, making the claim subject to copyright law. Further, the defendant was not free riding on the plaintiffs because it was not disseminating the plaintiffs' gathering of news. Rather, the plaintiffs' recommendations (which were created, not gathered) were the actual news, and thus the defendant was 'breaking' the news. Nor was the defendant selling the news as its own: it gave full attribution to the plaintiffs because it was the fact that the plaintiffs had made the recommendation that was important. The court did "not perceive a meaningful difference" between Theflyonthewall.com's reporting of a plaintiff's recommendation and a traditional newspaper reporting on the score of a game or the winner of an award. Finally, since the plaintiffs gave their reports to their clients with the hope of reaping profits when those clients made stock trades, the court noted that to the extent that those profits were diverted, they were not directly diverted to the defendant, but instead were diverted "to whatever broker happens to execute a trade placed by the recipient of the news of the Recommendation".
It is unclear why the Second Circuit discounted the NBA test as dictum. Judge Raggi's lengthy concurrence rightfully points out that the majority really offered no clear test of their own for future cases – she would have reversed on her opinion that the plaintiffs failed to establish that their services were in direct competition with the defendant's core news aggregation service. Whichever reasoning (or combination of reasonings) is correct – or, more importantly, followed in the future – this case can be seen as one more obstacle for any plaintiff wishing to bring a hot news claim. At this point, there are extremely limited circumstances in which a copyright claim would not be viable, but a hot news claim would be.
For further information on this topic please contact Brad Newberg at Reed Smith LLP's Falls Church office by telephone (+1 703 641 4200), fax (+1 703 641 4340) or email (email@example.com). Alternatively, contact Joseph I Rosenbaum at Reed Smith's New York office by telephone (+1 212 521 5400), fax (+1 212 521 5450) or email (firstname.lastname@example.org).