Introducing Stein McEwen LLP Fall 2012 IP Training Program October 1-19, 2012

 Stein McEwen LLP is pleased to announce that it will be hosting an intellectual property training program from October 1-12 with an add-on session from October 15-19, 2012 in Washington DC.

 The purpose of the Stein McEwen LLP Fall 2012 IP Training Seminar is to provide an overview of U.S. Intellectual Property Law, including patents, trademarks, copyrights, and trade secrets. The lectures will cover fundamentals of patent procurement, with optional sessions extending to the scopes of trademarks and copyrights, IP licensing, and IP litigation. A series of lectures will be presented by Stein McEwen LLP attorneys regarding these subjects, including workshops for the participants to receive hands-on experience.  These workshops will include activities such as reviewing disclosures of an invention and drafting sample claims to cover the subject matter of the invention. Tours of the U.S. Patent and Trademark Office, the U.S. Court of Appeals for the Federal Circuit, and a U.S. District Court will allow the participants an opportunity to understand the complexities of these agencies and courts.  At the U.S. Court of Appeals for the Federal Circuit, the participants will likely have an opportunity to observe a portion of a hearing involving patents. The IP Training Seminar is intended to provide a broad-based understanding of U.S. Intellectual Property Law, with a strong emphasis on patents. The already-implemented and still-to-take-effect provisions of the Smith-Leahy America Invents Act (AIA) will be woven throughout the syllabus.

 

Who Should Attend?

In-house staff members of corporate IP departments, patent attorneys, staff members of overseas law firms, inventors, and members of academia who deal in some aspect of IP.

Basic understanding of patent law for at least one country is recommended. No formal registration of any country’s patent office is required.

More information can be found at www.smiplaw.com/seminar_ipt.cfm.

If you have any questions, please contact Sarah Brogi at sbrogi@smiplaw.com or SM2012training@smiplaw.com.

President of Restaurant and Lounge Is Found Personally Liable For Unlicensed Public Music Performance

By Evelyn Li

The United States Court of Appeals for the Ninth Circuit affirmed a California district court’s granting of a summary judgment in favor of plaintiff-appellees for a total of $203,728.22. The judgment included a statutory infringement damage of $4,500 for each of the 8 infringements ($36,000), and attorneys’ fees and costs in the amount of $167,728.22. Plaintiff-appellees, Range Road Music, Inc. together with Sony/ATV harmony, Williamson Music Company and several other music companies (“Music Companies”) sued East Coast Foods, Inc.(“East Coast”) and its president Herbert Hudson for copyright infringement after collecting evidence through an independent investigator, Scott Greene, on unlicensed public performances of music owned by the Music Companies. Scott Greene was retained by American Society of Composers, Authors, and Publishers (ASCAP) to visit the restaurant “Long Beach Roscoe’s” owned by East Coast to investigate whether copyright infringement was likely occurring at the venue. Greene’s report identified eight songs, which were later confirmed by ASCAP as owned by the Music Companies, which were publicly performed in the restaurant during his visit. In addition to the report, the Music Companies also showed that ASCAP had repeatedly requested the East Coast to pay licensing fees between 2001 and 2007.

The defendants appealed to the Ninth Circuit after the district court granted summary judgment for the Music Companies and awarded damages as well as attorneys’ fees and costs against East Coast and Hudson. The Ninth circuit then reviewed the district court’s grant of summary judgment de novo both on the issue of the district court’s evidentiary ruling and the award of attorneys’ fees, and it found both judgments to be proper.

The main issues discussed by the Ninth circuit was (1) whether the district court erred in granting summary judgment for the Music Companies on its complaint of vicarious liability for copyright infringement; (2) whether East Coast and Hudson can be held liable for vicarious infringement; and (3) whether the district court’s award of attorney’s fees and costs to the Music Companies was an abuse of discretion.

The court found the Music Companies’ complaint sufficient because, first, they adequately provided specific evidence to raise a plausible inference that East Coast and Hudson exercised control over and financially benefitted from the infringing performance at the Long Beach Roscoe’s; and, second, the Music Companies provided sufficient evidence to establish a prima facie case of copyright infringement with no genuine issue of material facts. To reach the conclusion on whether the Music Company’s complaint was sufficient, the court explored the case law in Metro-Goldwyn-Mayer Studio Inc. v. Grokster, Ltd., 545 U.S. 913 (2005) and Twentieth Century Music Corp v. Aiken, 422 U.S. 151 (1975) to find that a vicarious infringer “profits from direct infringement while declining to exercise a right to stop or limit it” and, “The entrepreneur who sponsors such a public performance for profit is also an infringer—direct or contributory.”  Then, the court went on to discuss whether Scott Greene’s uncontested declaration was sufficient to establish that no genuine issue of material fact existed as to the Music Companies’ claim. East Coast and Hudson argued that Greene’s declaration was inadmissible because it was “expert testimony by a lay witness.” However, the court disagreed by stating that “identifying popular songs does not require ‘science, technical, or other specialized knowledge’ (Fed. R. Evid. 702).” Furthermore, the court mentioned “many of Greene’s identifications did not even require him to tax his memory: the live band announced the titles of several of the compositions they covered, and Greene transcribed other titles directly from a CD jewel case.”

In addition, the court found the argument raised by East Coast and Hudson that the Music Companies’ evidence of copyright infringement was inadequate due to a lack of showing on “substantial similarity” between the compositions performed at Roscoe’s and the copyrighted works to be a red herring. Under Funky Films, 462 F.3d 1072 (9th Cir. 2006), a demonstration of substantial similarity is only necessary to prove infringement “absent evidence of direct copying.” Accordingly, the court found no genuine issue of material fact existed because there were substantial proof of direct copying in this case.

Thus, the court concluded that the district court was correct in granting summary judgment for the Music Companies on the complaint of vicarious liability for copyright infringement.

Turning to the second issue on East Coast and Hudson’s liability for the infringement, the court looked to Perfect 10. Inc. v. Amazon.com, Inc., 487 F. 3d 701 which states that a defendant “exercises control over a infringer when he has both a legal right to stop or limit the directly infringing conduct, as well as the practical ability to do so.” Applying the facts in this case, the court found that East Coast and Hudson not only “exercised control over both the Long Beach Roscoe’s and the Sea Bird Jazz lounge,” but they also have “derived a financial benefit from the musical performances in the lounge.” Therefore, the court concluded that the district court properly held that Hudson and East Coast were jointly and severally liable for copyright infringement. Although Hudson and East Coast demonstrated that they are not proper defendants because Hudson has never owned the Long Beach Roscoe’s, the court found such argument to be “unsubstantiated and self-serving.”

On discussing the third issue on whether the district court’s award of attorney’s fees and costs to the Music Companies was an abuse of discretion, the Ninth Circuit relied on Entm’s Research Grp., Inc. v. Genesis Creative Grp., Inc., 122 F.3d 1211 (9th Cir. 1997) and 17 U.S.C. § 505 to find that the district court “properly applied factors set forth in Entertainment Research Group and articulated a reasoned explanation for its fee award.” Besides, the court also mentioned that such liability could have been avoided if East Coast and Hudson had purchased a license during the seven years in which ASCAP “importuned them to do so.” Also, the court found that the obfuscation of the corporate structure of Roscoe’s caused much of the fees and costs for East Coast and Hudson as well.

In conclusion, the Ninth Circuit affirmed the district court’s decision as to all the above mentioned three issues. East Coast and Hudson will be most likely paying the Music Companies a total of $203,728.22 for the unlicensed music performance in the public.

President of Restaurant and Lounge Is Found Personally Liable For Unlicensed Public Music Performance

By Evelyn Li

The United States Court of Appeals for the Ninth Circuit affirmed a California district court’s granting of a summary judgment in favor of plaintiff-appellees for a total of $203,728.22. The judgment included a statutory infringement damage of $4,500 for each of the eight infringements ($36,000), and attorneys’ fees and costs in the amount of $167,728.22. Plaintiff-appellees, Range Road Music, Inc. together with Sony/ATV harmony, Williamson Music Company and several other music companies (“Music Companies”) sued East Coast Foods, Inc.(“East Coast”) and its sole officer and director Herbert Hudson for copyright infringement after a collection of evidence through an independent investigator, Scott Greene, on unlicensed public performance of music owned by the Music Companies. Scott Greene was retained by American Society of Composers, Authors, and Publishers (ASCAP) to visit the restaurant “Long Beach Roscoe’s” owned by East Coast to investigate whether copyright infringement was likely occurring at the venue. Greene’s report identified eight songs, which were later confirmed by ASCAP as owned by the Music Companies, which were publicly performed in the restaurant during his visit. In addition to the report, the Music Companies also showed that ASCAP had repeatedly requested the East Coast to pay licensing fees between 2001 and 2007.

The defendants appealed to the Ninth Circuit after the district court granted summary judgment for the Music Companies and awarded damage as well as attorneys’ fees and costs against East Coast and Hudson. The Ninth circuit then reviewed the district court’s grant of summary judgment de novo both on the issue of the district court’s evidentiary ruling and the award of attorneys’ fees, and found both judgments to be proper.

The main issues discussed by the Ninth circuit was (1) whether the  Music ‘ complaint was sufficient for a granting of summary judgment (2) whether East Coast and Hudson can be held liable for vicarious infringement; and (3) whether the district court’s award of attorney’s fees and costs to the Music Companies was an abuse of discretion.

The court found the Music Companies’ complaint sufficient because first they adequately provided specific evidence to raise a plausible inference that East Coast and Hudson exercised control over and financially benefited from the infringing performance at the Long beach Roscoe’s; and second the Music Companies provided sufficient evidence to establish a prima facie case of copyright infringement with no genuine issue of material facts. To reach this conclusion, the court explored the case law in Metro-Goldwyn-Mayer Studio Inc. v. Grokster, Ltd., 545 U.S. 913 (2005) and Twentieth Century Music Corp v. Aiken, 422 U.S. 151 (1975) to find that a vicarious infringer “profits from direct infringement while declining to exercise a right to stop or limit it” and, “The entrepreneur who sponsors such a public performance for profit is also an infringer—direct or contributory.”  Then, the court went on to discuss whether Scott Greene’s uncontested declaration was sufficient to establish that no genuine issue of material fact existed as to the Music Companies’ claim. East Coast and Hudson argued that Greene’s declaration was inadmissible because it was “expert testimony by a lay witness.” However, the court disagreed by stating that “Identifying popular songs does not require ‘science, technical, or other specialized knowledge’ (Fed. R. Evid. 702).” Furthermore, the court mentioned, “many of Greene’s identifications did not even require him to tax his memory: the live band announced the titles of several of the compositions they covered, and Greene transcribed other titles directly from a CD jewel case.”

In addition, the court found the argument raised by East Coast and Hudson that the Music Companies’ evidence of copyright infringement was inadequate due to a lack of showing on “substantial similarity” between the compositions performed at Roscoe’s and the copyrighted works to be a red herring. Under Funky Films, 462 F.3d 1072 (9th Cir. 2006), a demonstration of substantial similarity is only necessary to prove infringement “absent evidence of direct copying.” Accordingly, the court found no genuine issue of material fact existed because there were substantial prove of direct copying in this case.

Thus, the court concluded that the district court was correct in granting summary judgment for the Music Companies on the complaint for copyright infringement.

Turning to the second issue on East Coast and Hudson’s liability for the infringement, the court looked to Perfect 10. Inc. v. Amazon.com, Inc., 487 F. 3d 701 which states that a defendant “exercises control over a direct  infringer when he has both a legal right to stop or limit the directly infringing conduct, as well as the practical ability to do so.” Applying the facts in this case, the court found that East Coast and Hudson not only “exercised control over both the Long Beach Roscoe’s and the Sea Bird Jazz lounge,” but they also have “derived a financial benefit from the musical performances in the lounge.” Therefore, the court concluded that the district court properly held that Hudson and East Coast were jointly and severally liable for the copyright infringement. Although Hudson and East Coast demonstrated that they are not proper defendants because Hudson has never owned the Long Beach Roscoe’s, the court found such an argument to be “unsubstantiated and self-serving.”

On discussing the third issue on whether the district court’s award of attorneys’ fees and costs to the Music Companies was an abuse of discretion, the Ninth Circuit relied on Entm’s Research Grp., Inc. v. Genesis Creative Grp., Inc., 122 F.3d 1211 (9th Cir. 1997) and 17 U.S.C. § 505 to find that the district court “properly applied factors set forth in Entertainment Research Group and articulated a reasoned explanation for its fee award.” Besides, the court also mentioned that such liability could have been avoided if East Coast and Hudson had purchased a license during the seven years in which ASCAP “importuned them to do so.” Also, the court found that the obfuscation of the corporate structure of Roscoe’s caused much of the fees and costs for East Coast and Hudson as well.

In conclusion, the Ninth Circuit affirmed the district court’s decision as to all the above mentioned issues. East Coast and Hudson will be most likely paying the Music Companies a total of $203,728.22 for the unlicensed music performance in public.

eBay Reseller of OEM Software Denied First Sale Defense

By Zi Wang

In Adobe Sys. v. Hoops Enter. LLC (N.D. Cal. 2012), the court rejected the first sale defense asserted by an eBay reseller of original equipment manufacturer (OEM) copies of software, drawing a distinction between licenses and sales of copyrighted works.

Adobe sued the defendants for copyright infringement, alleging that the defendants sold OEM copies of Adobe software through the use of eBay and other websites.  The defendants countersued Adobe for a declaratory judgment of copyright misuse.  In particular, the defendants contended that Adobe’s assertion of copyright protection contravened the first sale doctrine, as codified in 17 U.S.C. § 109.  The defendants also asserted the first sale doctrine as an affirmative defense.

The defendants obtained OEM copies of Adobe software that had been unbundled from the hardware with which they were originally packaged, such as Dell and Hewlett-Packard computers.  The defendants then re-bundled the software with items such as a piece of photo paper, a blank DVD, or a media card reader without Adobe’s authorization, and resold it online.

Adobe stated that it distributes its copyrighted software pursuant to licensing agreements that restrict the use, location of distribution, transfer and sometimes who is qualified to obtain the product, and does not transfer title to the software at any time.  Under Adobe’s licensing agreements applicable to OEM copies, these copies may not be unbundled and sold separately or re-bundled with products not approved by Adobe.

The defendants proffered evidence of Adobe’s licensing agreements with Dell and Hewlett-Packard.  The court included details of the Dell agreement in its opinion as an example.  The agreement contains following provisions and restrictions:

Dell is granted a license.

Dell is required to obtain a similar agreement with any third-parties prior to authorizing or sublicensing the software to them.

Adobe retains ownership of intellectual property rights in the software and places substantial restrictions on Dell’s use of the software.

Dell is prohibited from promulgating the software through specified means and requires that the software be bundled with specified Dell hardware.

Dell is obliged to take steps to prevent resellers from selling the software separately from this hardware.

Dell is required to include Adobe’s end-user license agreement with the hardware in such a way that the user can read it before accessing the software media and must include Adobe’s “copyright and proprietary notices.”

The court followed the Ninth Circuit’s holding in Vernor v. Autodesk, Inc., 621 F.3d 1102 (9th Cir. 2010) that the first sale affirmative defense is unavailable to those who are only licensed to use their copies of copyrighted works.  The court also adopted a three-prong test set out in Vernor:  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.

Accordingly, the court found that the first sale doctrine does not apply to the Adobe OEM software at issue because Adobe licenses, rather than sells, its OEM software.

Take-Away Points:  Copyright owners are well advised to utilize carefully drafted licensing agreements and maintain sufficient control over the copyrighted works in order to maximize their rights under copyright law.  End-users of software products that come with computer hardware should be put on notice that they cannot assume that they “own” their copies of such software and their rights vis-à-vis these copies may be curtailed by licensing agreements between software vendors and hardware manufacturers.

“Sharing the Sandbox”

By Dan McPheeters and Michael D. Stein

In our previous posts, we covered the pitched-battle between content producers on the one hand, and content distributors and access providers on the other. Specifically, we focused on an element in the enforcement provision of the Stop Online Piracy Act that was almost singularly responsible for the outrage among the latter group and spurred the internet blackout on January 18th. Roots of this battle date back to the middle of the last decade, and SOPA itself may have been the direct result of the enormously influential decision from the Southern District of New York in Viacom v. YouTube. In our fourth and final post (for now) on this topic, we look to whether this battle shows any signs of abating, and whether that would be a good thing for consumers.

One of the truly unique features to the outcome of the SOPA debate (at least thus far) has been the identity of the losers: the “Hollywood” lobby is, to put it bluntly, not used to losing. This is an important place to start when evaluating possible “next steps.” SOPA (and PIPA) supporters are a who’s who of D.C.’s powerful lobbies, including the RIAA, MPAA, and the U.S. Chamber of Commerce, to name but a few. A measure of their commitment can been seen not only in their pursuit of this specific goal since at least 2005 (or, according to some, even earlier than that), but in the fact that the U.S. Chamber of Commerce was willing to lose the likes of Yahoo! as a member and square off against another member, Google, in order to support these two bills. Let there be no doubt: supporters of these two bills are not simply going to fold up and walk away from this issue. However, given the sheer muscle displayed by the content distributors, it would seem likely that a détente may be the only option from both perspectives.

There are many ways in which the parties can find a way to coexist in the boundless space of the internet. Whether devising new ways of segmenting content into greater parts (thus creating a windfall for both parties by increasing both the amount of product and the amount of product requiring access), ramping up direct-to-consumer distribution channels, or outright collaboration in a way that exploits the comparative advantages of each group, there is most certainly room for the two parties to work together and generate enormous value.

However, the first step has to be an end to the types of legislative provisions and rhetorical battles that threaten the distributors’ business models, and with it the modern internet itself (see the comments from the President of the RIAA). And it is precisely the magnitude of this threat that may prolong this battle for the foreseeable future, with all the value of harmony lost with it. People locked in a Mexican stand-off on Monday are highly unlikely to play squash together on Tuesday. But is this a bad thing?

The crux of the internet blackout, and the tremendous level of support it received from average users, was not the result of some sinister smear campaign by the Snidely Whiplashes employed by Facebook and Google. The beauty of Web 2.0 centers around the ability of users to participate in the creation of content, whether by creating YouTube videos that fall within fair use, or the ability of talented but disconnected artists to better market their work (Justin Bieber, anyone?). Regulating when a Twilight spoof on YouTube crosses the line from fair use to infringement is a worthy goal, and pursuing clearer lines and easier enforcement rules are goals for which content producers can hardly be begrudged. But SOPA and Viacom went further, and in a way that made it facially apparent that other motives were at play. In overreaching, the high-ground was forfeited and the vox populi responded.

The response by consumers and the parties themselves suggests two positives arising from the aftermath of this issue. First, as with any market, the fact of near- and medium-term competition between producers and distributors will result in innovations by both parties that increase content production and drive down prices. Whether direct-to-consumer marketing that bypasses the overhead of the traditional broadcasters, or a wider variety of producers in general as distributors realize they can exploit their built-in access advantages by financing an increase in the amount of content, consumers will gain from this fight as more content is delivered at reduced costs. Second, and more importantly, the likelihood that Hollywood will try an access-killing approach such as the enforcement provisions of SOPA and the primary argument in Viacom has to be seen as remote, at least in the near-term. What this means is refocusing on the goal of clarifying the lines of copyright infringement itself. Because Web 2.0 is inherently about the democratization of content creation, this focus on clarifying the associated property rights will benefit everyone by reducing the ambiguities and uncertainties in the law, the effect being to strengthen the value of those rights to the creators. The result is an enormous increase in wealth to everyone involved.

The modern internet saved itself by defeating SOPA, but content producers have no shortage of Megaupload-type cases to bandy about as examples in the next round. Meanwhile, the public appears unwilling to sacrifice the greater access that Web 2.0 provides them; whether the reasons are economic or expressive, it seems unlikely that content distributors will have imposed on them the type of contributory infringement liability argued for in Viacom. All of which is to say that consolidation may be the next and best step to take for both parties. Clearly, distributors like Google need to demonstrate that the notice and takedown feature of the DMCA works as an effective means to police piracy, if for no other reason than winning the political debate over whether “enough” is done to protect IP. Producers likewise need to regroup and abandon the contradictory argument that vigorous ownership rights should be supported by collective enforcement duties. Instead, producers should focus on developing better means of preemptive protection and engage in a concerted effort to clarify the rules surrounding property rights, especially rights concerning active distribution and derivative works.

Royalty Fee? Wasn’t Peter and the Wolf Free?

By Rob Lower and Michael Stein

Summary

In Golan v. Holder (Decided 18 January 2012) the Supreme Court upheld the constitutionality of amendments to US copyright law made in 1994. The practical effect of the holding is that the authors of foreign works may receive copyright protection for works in the public domain.

In 1994, Congress amended 17 U.S.C. §104A to bring the US into compliance with the Berne Convention for the Protection of Literary and Artistic Works, an international treaty joined by the US in 1989. Under Berne, member countries must provide all other member countries with the same level of copyright protection available to their own citizens.

While there is little opposition to providing foreign authors with US copyright protection, the decision to provide such protection for works in the public domain has been the subject of much criticism.

Affected Foreign Works

There are three circumstances under which US authors could have received copyright protection in the US, while foreign authors could not. The Court stated this could have occurred if the “United States did not protect works from the country of origin at the time of publication; the United States did not protect sound recordings fixed before 1972; or the author had failed to comply with U.S. statutory formalities . . . “

 Who Sued?

This lawsuit was brought by a group of orchestra conductors, musicians, publishers, and others (Petitioners) who may now be forced to pay royalties before performing foreign works such as Prokofiev’s Peter and the Wolf.

Petitioners argued that removal of works from the public domain would unduly interfere with Petitioners’ First Amendment free speech rights, and that removal of the works from the public domain would exceed the authority given to Congress in the Copyright Clause of the Constitution. The Court dismissed both of these arguments, citing the Court’s own precedent and past grants of retroactive copyright protection by Congress.

Supreme Court Precedent — Eldred v. Ashcroft

The Court leaned heavily on its own 2003 Ashcroft decision in dismissing Petitioners’ arguments. In Ashcroft, the Court upheld the constitutionality of a 20 year extension of copyright protection for works that had never reached the public domain. While Ashcroft clearly supports extending the time remaining before works enter the public domain, the Court had to reach beyond Ashcroft to find support the extension of copyright protection to work already in the public domain.

Petitioner’s First Amendment Free Speech Rights

Petitioners maintained that the First Amendment’s freedom of expression guarantee would be offended by retroactive grants of copyright protection. Specifically, Petitioners argued that Ashcroft did not support interference with Petitioners’ “vested rights” in works in the public domain.

The Court acknowledged that “some restriction on  expression is  the  inherent  and  intended effect of every grant of copyright,” before concluding that “built-in First Amendment accommodations” such as the “idea/expression dichotomy” and “fair use” defense adequately protected Petitioners’ free speech rights. Golan, p23–24.

The Copyright Clause

Petitioners also argued that Congress had exceeded both the authority delegated to them in the Copyright Clause, and the scope of the copyright term extension approved in Ashcroft.

The Court cited the Copyright Act of 1790 as a past grant of “protection to many works previously in the public domain.” Prior to the 1790 Act, copyright regulation was a matter of state law, and because three states provided no copyright protection in 1790, the 1790 Act allowed authors in those states to remove their works from the public domain.

The Copyright Clause empowers Congress “[t]o promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.”  Art. I, §8, cl. 8.

Petitioners argued that because the works being removed from the public domain have, by definition, already been created, an unanticipated windfall for foreign authors cannot promote the progress of science. Petitioners also argued that removal of works from the public domain would likely result, effectively slowing the progress of science.

Although the creation of existing works cannot be inspired by a post-creation windfall, Petitioners’ focus on this narrow class of works seems too constricted to address the panoply of ways the progress of science can be promoted.

For example, providing a foreign author copyright protection for his or her past writings could incentivize investment in the dissemination of works presently unavailable in the US. By the same token, retroactive copyright protection could incentivize dissemination of previously created works in new languages and formats (e.g., Kindle). This conclusion is fortified by the United States’ stature as the world’s largest economy, likely able to incentivize the creation of new works along with further dissemination of past works in more consumable formats.

Finally, the progress of science can also be advanced by providing US authors with reciprocal intellectual property rights in Berne countries that have previously disregarded US intellectual property rights, citing the United States’ noncompliance with Berne as a reason.[1] 

Conclusion

Providing foreign authors with the level of copyright protection that has been available to domestic authors seems to be a rational means of “promot[ing] the Progress of Science“ here in the US.


[1] “Thailand and Russia balked at protecting U. S. works, copyrighted here but in those countries’ public domains, until the United States reciprocated with respect to their authors’ works.” Golan, p6.

“It’s Like Déjà Vu All Over Again”

By Dan McPheeters and Michael Stein

Yesterday (presuming you read serials in order), we looked at the lines drawn in the private sector between supporters and opponents of the now-tabled Stop Online Piracy Act. We posited possible overriding concerns for each side, and wondered whether we might have seen this fight once before – like that time when a group of content providers sued a tiny search-engine company over a home-video website it had purchased the year before. All kidding aside, the titanic Viacom v. YouTube lawsuit was in many ways the prequel to the current debate, and the 2010 opinion denying the plaintiffs’ claims may very well have been the catalyst for advancing the legislation now known as SOPA.  Continue reading

“In the Blue Corner, Our Challenger…”

By Dan McPheeters and Michael Stein

In our last post, we explored an element of SOPA that served as a point of division between supporters and opponents of the bill. Today, we look at the dynamics of the fight and the driving concerns of each side. Much of this may be common knowledge by now, but it helps set up our next post, where we explore SOPA in the context of Viacom v. Youtube and try to determine whether this was a unique fight or merely another round of what could be a long war between entrenched content developers and online distributors.

At the legislative level, at least initially, SOPA was surprisingly bi-partisan on both sides of the issue. With Rep. Lamar Smith (R) and John Conyers (D) on one side and Minority Leader Pelosi (D) and Rep. Issa (R) on the other, this was far from the typical controversial bill. Indeed, very little was made of SOPA on a partisan or political level that would illustrate some greater principle (except, as some have said, that we now have more evidence that Congress fails to understand the internet).

On the private sector side, however, the differences were easy to see. On the one hand, the MPAA and RIAA reprised their roles from the mid-2000’s as policemen of content piracy and portrayed the bill as being necessary to preserve an American industry and jobs. They were backed by the House Judiciary Committee and its Chairman, Lamar Smith, who issued a statement maintaining support for the bill the same day last week thatopponents, such as Wikipedia, staged the now-famous internet blackout. Continue reading

SOPA is dead! (What, no longer newsworthy?)

By Dan McPheeters and Michael Stein

Now that the immediate reactions and analyses have died down, we thought we could dedicate the inaugural series of the revamped Stein McEwen “blawg” to taking stock of the SOPA debate and explore what the future may look like for online regulation viz. piracy.

The opposition to the Stop Online Piracy Act (“SOPA”), culminating in the internet blackout last Wednesday, coalesced around the idea that the bill would kill the internet as we know it (see, e.g., David Post’s series at the Volokh Conspiracy). Supporters, on the other hand, asserted that the bill “only target(ed) foreign websites that are primarily dedicated to illegal activity.” As is often the case in politics and PR, both statements are true.

While SOPA was primarily aimed at foreign websites directed to US users, the enforcement provision allowed the Government to obtain an injunction against websites such as Google and Huffington Post in order to force their compliance with the Government’s quest to purge the internet of the offending material. Here is where things became ugly – because the targets of SOPA are foreign persons/companies, it is difficult to serve them with process or otherwise obtain jurisdiction over them. Any attempt by the Dept. of Justice to file a suit is likely going to be ex parte, yet that is fully contemplated by the statute; the AG is specifically authorized to “commence an in rem action against a foreign infringing site or the foreign domain name used by such site” in the event the person behind the alleged infringement cannot be found after a “good faith effort.” (SOPA §102(b)(2)). Continue reading

Feature Comment: Injunctions in Copyright Not Automatic

By Christopher Reaves

In the face of the Supreme Court’s eBay opinion, two Ninth Circuit panels both found that its command against presumptions of irreparable harm applied to copyright. These decisions harmonize the Ninth Circuit’s law with the Second’s, and continue the trend of standardizing injunctive relief into the four-factor test, full stop.

Military Bid Leads to Infringement Suit, Injunction

In 2008, Precision Lift, Inc. and West Coast Weld Tech sought a contract to design a maintenance platform for the Air Force’s C-130. Under the joint venture agreement, Precision would handle the bidding process and West Coast would design and manufacture the platforms. However, while the bidding was still in progress, Flexible Lifeline Systems purchased most of West Coast’s business, including all IP rights to the design drawings used in the Air Force bid. After Flexible expressed disinterest in continuing the joint venture, Flexible substituted in one of Flexible’s competitors as manufacturer on the bid, but continued to use the original design and drawings.

Flexible then registered the design drawings with the Copyright Office and sought a preliminary injunction to halt their use in the bidding. The District of Montana found that Flexible was likely to succeed on the merits, and that the public interest and equities both supported an injunction save for purposes of the Air Force bidding, which Flexible had shown no interest in participating in. Flexible did not present, and the court did not find, any particular facts showing irreparable harm absent the injunction; both instead relied on Ninth Circuit precedent that irreparable harm is presumed in a copyright case. The court therefore allowed Precision to continue the Air Force bid but otherwise enjoined Precision’s use of the drawings.

But Presumption Rejected in Search Engine War

Perfect 10 supplies nude images through its password-protected website to its subscribers; it holds copyright in those images. Third parties sometimes copy these images to their own websites and blogs, infringing on the copyright and making them available for free. If these copies are on a public website, Google’s “web crawler” inevitably links to these copies, as part of its automatic indexing process. Additionally, Google owns the Blogger service, whose users have posted some of Perfect 10’s images directly. When Perfect 10 began sending take-down requests to Google, Google obeyed some but found others deficient.

Perfect 10 began a lengthy infringement suit against Google, and sought a preliminary injunction to force Google to remove all the images and links. After remand from an earlier appeal on issues of fair use and secondary liability, the Central District of California held that Perfect 10 had failed to show sufficient evidence of irreparable harm. Specifically, it found that Perfect 10’s expert had only shown a decrease in business without demonstrating causation between Google’s actions and the slump. Perfect 10 appealed again, asking the Circuit Court to apply the presumption of harm instead.

Ninth Circuit: The Presumption is Dead, Twice Over

On August 3, 2011, Judge Ikuta, joined by Chief Judge Kozinski and Judge Hawkins, ruled that the presumption was no longer good law, and upheld the rejection of Perfect 10’s injunction. The Supreme Court in eBay v. MercExchange had overturned a similar presumption in the contexts of patent infringement and permanent injunctions. The panel saw no reason to limit the decision to patents, citing the eBay court’s references to the similarities between patent and copyright and its broad language as to the applicability of “traditional equitable principles.” It also looked to the example of the Second Circuit, which had interpreted eBay the same way in Salinger v. Colting the previous year.

As for any distinction between preliminary and permanent injunctions, the panel quoted Amoco Production Co. v. Gambell, where the Supreme Court rejected the distinction while overturning yet another injunctive presumption. The court therefore ruled that the presumption was invalid in the context of a preliminary injunction in a copyright case, and also held that the district court had not abused its discretion in finding that Perfect 10 had not shown evidence of causation between the infringement and the alleged irreparable harm.

Two weeks later, on August 22, Circuit Judges Schroeder, McKeown, and Callahan echoed the Perfect 10 court with a per curiam opinion in Flexible. Repeating much of Ikuta’s reasoning, the panel also noted similar rulings in not only the Second Circuit (Salinger) but also the First (CoxCom v. Chaffee) and Fourth (Christopher Phelps & Assocs. v. Galloway) Circuits, and a supporting shift in post-eBay treatises. Then, having removed the presumption, the panel quickly found that the district court had failed to make any other findings that would support a finding of harm, and remanded for further development of the record.

Post-Case Analysis: It’s Over, But Not Over

The Supreme Court has a long history of eliminating presumptions, and even lenient standards (see Winter v. NRDC), in the context of injunctive remedy, regularly pushing courts back into the four corners of the traditional equitable test. IP infringement held out against this pattern longer than most, due to its ties to trespass of traditional property. Nonetheless, once eBay came down, the copyright presumption was not long for this world, as other circuits quickly realized. Thus the only question in either of these cases was whether the Ninth Circuit would put it out of its misery or leave that job for an inevitable appeal to SCOTUS. And with both major copyright circuits in agreement, the matter seems quite settled.

Yet this is hardly the end for IP injunctions. The Federal Circuit very recently stated in Robert Bosch LLC (in the context of patents) that “[w]hile the patentee’s right to exclude alone cannot justify an injunction, it should not be ignored either.” It then emphasized the property nature of patents, and the heavy likelihood of harm in any competitive environment. In other words, the exclusive rights of IP are still to be considered as part of the irreparable harm analysis. The factor is no longer the instant win it once was, but when the parties are competitors, as they were in Robert Bosch, it should not be a hard point to argue.

The Perfect 10 opinion (99 U.S.P.Q.2d 1533, No. 10-56316) is available at: http://www.ca9.uscourts.gov/datastore/opinions/2011/08/03/10-56316.pdf

Oral arguments can be heard at: http://www.ca9.uscourts.gov/media/view_subpage.php?pk_id=0000007250

 

The Flexible Lifeline opinion (99 U.S.P.Q.2d 1837, No. 10-35987) is available at: http://www.ca9.uscourts.gov/datastore/opinions/2011/08/22/10-35987.pdf

Oral arguments can be heard at: http://www.ca9.uscourts.gov/media/view_subpage.php?pk_id=0000007437