The U.S. Court of Appeals for the Seventh Circuit ruled in favor of Viacom and South Park Digital Studios (SPDS), makers of the animated television show South Park, in dismissing a copyright infringement action that was still in the initial pleading stages. Addressing the procedural and substantive grounds for dismissing the suit, the 7th Circuit found waiver and determined that only two pieces of evidence, the works in issue, were needed to prove SPDS’s fair use defense. Brownmark Films LLC v. Comedy Partners et al., Case No. 11-2620 (7th Cir. June 7, 2012) (Cudahy, J.). As such, the dispute was resolved without the burdens or expense of discovery and trial.
Brownmark owned a copyright in a video that went viral on the Internet. The viral video was later parodied on an episode of South Park. In the episode “Canada on Strike,” the South Park creators spoofed a strike by the Writers’ Guild of America by depicting striking Canadians demanding a share of the “internet money” they believed was owed to them as a result of disseminating viral videos and online content. To illustrate the point, the South Park Elementary school boys decided to create a viral video in order to earn enough “internet money” to put an end to the Canadian strike. In the episode, the South Park characters earn substantial “theoretical dollars” through their viral video “What What (In the Butt)” (WWITB). The WWITB video parodies the original Brownmark video featuring an adult male singing and dancing in tight pants.
When Brownmark filed suit against the creators of South Park, the complaint cited to both the original version of the WWITB video, as well as the parody version airing on South Park, yet neither work was submitted to the district court. SPDS moved for dismissal under Rule 12(b)(6), arguing that the South Park version of the video fell within the fair use defense of § 107 of the Copyright Act. When moving for dismissal, SPDS submitted both the original and parody WWITB videos to the court. Brownmark responded to the motion only by contesting whether the district court could dismiss the complaint based on SPDS’s affirmative defense. In other words, Brownmark addressed the pleading requirements and the federal rules but did not address the substance of the fair use defense arguments. After the district court granted the motion to dismiss, Brownmark appealed.
On appeal, the 7th Circuit first analyzed whether the district court erred in considering SPDS’s fair use defense in the context of a Rule 12(b)(6) motion to dismiss for failure to state a claim. Acknowledging that a court ruling on a Rule 12(b)(6) motion cannot typically consider matters outside of the “four corners” of the complaint, the panel explained that the incorporation by reference doctrine provided the means by which the court could consider documents attached to a motion to dismiss if those documents are referred to in the complaint. Here, the original work and the allegedly infringing work were both referenced in the Brownmark complaint (and subsequently attached to the Rule 12(b)(6) briefing papers). The 7th Circuit notes that a Rule 12(c) motion for judgment on the pleadings would have been a more procedurally correct vehicle for SPDS to challenge the allegations, but the attachment of the disputed videos converted the motion to dismiss to a motion for summary judgment. Ultimately, the court elected to go through the fair use analysis without quibbling over the miscaptioning for SPDS’s motion.
With the motion properly before the court, it addressed the fair use issue. Since Brownmark never argued the merits of the fair use defense in the district court, the 7th Circuit concluded that those arguments were waived on appeal. Despite finding waiver on the merits, the court analyzed each of the fair use factors and agreed with the district court that this was “an obvious case of fair use.” In determining whether a work constitutes fair use, the district court correctly considered the non-exclusive factors including the purpose and character of the use, the nature of the copyrighted work, the amount and substantiality of the portion of the copyrighted work used in relation to the copyrighted work as a whole and the effect of the use upon the potential market value of the copyrighted work.
Although discovery may often be required to weigh these factors, in this particular case, the court concluded that the merits of the claim could be evaluated simply by viewing the two works side by side. The South Park episode was definitively found to be a parody of the original WWITB video. The 7th Circuit explained that the South Park video had “transformative value” because its use was calculated to “comment on and critique the social phenomenon that is the ‘viral video.’” Despite using a substantial portion of Brownmark’s work, the court held that South Park’s version of the WWITB video did not “supplant” the original work. Lastly, the court drew an interesting conclusion as to the market effect of the parody video; noting that since there is no “internet money” to be made on Brownmark’s viral video and the only ensuing revenues would come from advertising dollars, the South Park spoof of the original work likely increased the value of Brownmark’s work. In other words, since the value of viral videos is tied to the number of online views, the alleged infringement (by way of a national broadcast) would—ironically—actually boost the number of views for the original work. Accordingly, Brownmark’s video would not have declined in value following the airing of the parody. Having evaluated all the factors, the district court’s fair use finding was affirmed.
Practice Note: This case is notable for recognizing that intellectual property claims may be brought in an effort to impose litigation costs and force a settlement but that the federal rules provide sufficient tools to squelch frivolous suits before litigation costs become a significant obstacle.