The U. S. Court of Appeals for the Second Circuit reversed the certification of a class of plaintiffs consisting of freelance authors (and the trade groups representing the authors) and subsequent approval of a settlement of these plaintiffs’ copyright infringement claims arising out of the unauthorized electronic reproduction of their works. In Re Literary Works in Electronic Databases Copyright Litigation, Case No. 05-5943 (2nd Cir., Nov. 29, 2007) (Straug, J.; Walker, Jr., J. dissenting).

The named plaintiffs consist mainly of freelance writers who contracted with publishers to author works for print publication. The plaintiffs retained the copyrights in their works. Although the contracts did not grant the publishers the right to electronically reproduce those works or otherwise license them for electronic reproduction, the publishers did so. The plaintiffs brought this class action suit on the theory that through the electronic reproduction of their works, the defendants (publishers of original electronic content and companies that operate databases that license electronic content from publishers) infringed their copyrights.

The district court referred the parties to mediation. Before the mediator, the defendants argued that because the vast majority of the plaintiffs’ works were unregistered, the district court would not be able to certify the majority of the claims for inclusion in any proposed class and, therefore, the case had little settlement value. The defendants relied upon § 411(a) of the Copyright Act, which provides that “no action for infringement of the copyright in any United States work shall be instituted until preregistration or registration of the copyright claim has been made in accordance with this title.” Despite this jurisdictional issue, the parties engaged in years of negotiations until they reached settlement. The settlement agreement divided the plaintiffs’ claims into three groups: Category A claims concern copyrights that were registered prior to any infringement; Category B claims concern copyrights that were registered after the infringing reproduction but before the filing of the lawsuit; and Category C claims concern copyrights that were registered after the lawsuit or not at all. The majority of the plaintiffs’ claims fell into Category C. The different classes were eligible for different damages and under the settlement agreement, if the total cost of the claims exceeded a certain amount, the amount paid to Category C would be reduced—potentially to zero. Objectors opposed the class certification and settlement approval, arguing that the settlement was inadequate and unfair to Class C. After prolonged proceedings, the district court nonetheless granted final class certification and settlement approval, never reaching the issue of whether it had jurisdiction to certify a class consisting largely of claims arising from unregistered copyrights. The objectors appealed.

In reversing the district court’s class certification and settlement approval, the 2nd Circuit construed the registration requirement of § 411(a) to be one of a subject matter jurisdiction. The court rejected the plaintiff’s argument that § 411(a) merely set forth a “claim processing rule.” The court also rejected the argument that where one plaintiff’s claim arises from a registered copyright, § 411(a) vests jurisdiction over any related infringement claim. Rather, the court held that each claim within the certified class—as opposed to simply the named plaintiffs—must satisfy this subject matter requirement of § 411(a). The court analogized § 411(a) to the Article III jurisdictional requirement and the amount-in-controversy requirement of the diversity statute, 28 U.S.C. §1332, noting that each has been held to apply to each individual member of a class. Finally, the court rejected the argument that the supplemental jurisdictional statute, 28 U.S.C. §1367(a), provides an alternate source of jurisdiction for the claims stemming from unregistered copyrights.

In his dissent, Judge Walker argued that the legislative history of Title 17 confirms that § 411(a) is a claim-processing rule, not a jurisdictional bar. According to Judge Walker, the legislative history indicates only that registration is a prerequisite to certain remedies (i.e., statutory damages and attorneys’ fees) not that registration is required to secure copyright protection. Indeed, as noted by Judge Walker, registration is not a condition for copyright protection, as copyright protection “subsists … in original works of authorship fixed in any tangible medium of expression.” Judge Walker also cited to several cases from other circuit courts that have enjoined the infringement of unregistered copyrights.