IP Law Alert : Intellectual Property Lawyers & Attorneys : Gibbons Law Firm : Copyrights, Patent Infringement, Unfair Competition

Owners of books and music in physical media form need not fear if ever they decide to sell, rent, or otherwise dispose of these copyright-protected materials. The first-sale doctrine permits such activities by extinguishing a copyright owner’s exclusive right of distribution of copyrighted items that have been lawfully sold or transferred. However, according to a recent federal court ruling, Capitol Records, LLC. v. ReDigi Inc., No. 12 Civ. 95 (S.D.N.Y. March 30, 2012) owners of digital versions of the same works may find it more difficult to sell, rent, or otherwise dispose of their digital files.

ReDigi Inc. (“ReDigi”) is a marketplace for buyers and sellers of “used” digital music files. Users can sell their legally purchased digital music by installing ReDigi’s “Media Manager” software. This software scans the user’s hard drive for digital music files purchased from iTunes, and will mark these as being eligible for sale. To avoid the possibility of copyright infringement, the Media Manager software considers all other digital music files, e.g. files downloaded from CDs or from other file-sharing websites, as ineligible for sale. The seller can then upload the eligible files onto ReDigi’s server. The Media Manager software monitors the seller’s computer to ensure that the uploaded files have not been retained. Other users can then purchase the digital music by downloading the files from the server.

In January 2012, Capitol Records, LLC (“Capitol”) brought suit against ReDigi, accusing ReDigi of violating Capitol’s exclusive rights of reproduction and distribution of many of its sound recordings. In his March 30 ruling, Southern District of New York District Court Judge Richard J. Sullivan agreed with Capitol, granting its summary judgment motion “on its claims for ReDigi’s direct, contributory, and vicarious infringement of [Capitol’s] distribution and reproduction rights.”

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Online resellers, used book stores, art galleries, and museums, among others, apparently can now breathe a sigh of relief and continue to display and resell goods originally sold or manufactured outside of the U.S., without the specter of a potential copyright infringement action looming on the horizon.

Last week, in Kirtsaeng v. John Wiley & Sons, Inc., the U.S. Supreme Court, on a 6-3 vote, held that the “first sale” doctrine applies to copies of a copyright-protected work lawfully made abroad. Under copyright law, the “first sale” doctrine states that “the owner of a particular copy or phonorecord lawfully made under this title . . . is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy or phonorecord.” 17 U.S.C. § 109(a). If a copy is made abroad and imported into the United States without the copyright owner’s permission, there is copyright infringement under § 106(3). In other words, international copyright exhaustion (once an authorized sale of a U.S. copyright-protected work is made outside of the U.S., the copyright in that work is “exhausted,” so subsequent reselling may occur) is now the rule.

Petitioner Supap Kirtsaeng (“Kirtsaeng”), a citizen of Thailand moved to the United States in 1997 to further his education. While studying in the United States, Kirtsaeng began a side business of purchasing and importing foreign edition English language textbooks from Thailand. These textbooks were authorized foreign editions published by a wholly-owned foreign subsidiary of Respondent John Wiley & Sons (“Wiley”). These textbooks were substantially similar to textbooks meant for the United States market, but were less expensive. Kirtsaeng resold these textbooks in the United States for profit.

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Closing the loop on our previous report, freelance commercial artist Wayne W. Peterson and the Harley-Davidson motorcycle company have reached a confidential settlement in their copyright spat. Peterson had alleged that the iconic motorcycle maker stole his copyrighted “Live to Ride” logo, created in 1985 and the “Harley-Davidson University” logo, created in 1991.

Peterson filed a boilerplate stipulation of dismissal this week, ending the case.

Ralph A. Dengler is Counsel to the Gibbons Intellectual Property Department. Todd M. Nosher, an Associate in the Gibbons Intellectual Property Department, co-authored this post.

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Last week, the U.S. Copyright Office published new exemptions to the Digital Millennium Copyright Act (“DMCA”), making circumvention of certain technological measures for restricting access to copyrighted works legally acceptable. The exemptions took effect on October 28, 2012, and will last until the end of 2015.

Under the new exemptions, for the next three years, one can legally “jailbreak” wireless telephone handsets (e.g., smartphones) purchased before January 2013. Jailbreaking a device is the process by which one bypasses Digital Rights Management (DRM) software installed on a device. Jailbreaking a mobile phone, for example, allows a user to download applications, extensions, and themes that are unavailable through the mobile phone manufacturer’s application store. Further, under the new exemptions, mobile phones purchased between now and January of 2013 can be unlocked (i.e., not tied to a particular service provider) by any party. But, phones purchased after January 2013 can only be unlocked with the cellular carrier’s permission. These exemptions to the DMCA, however, are not applicable to smartphones purchased after January 2013 or to tablet computers (e.g., iPads).

Additionally, the DMCA now contains an exemption to legally rip DVDs “in order to make use of short portions of the motion pictures for the purpose of criticism or comment in the following instances: (i) in noncommercial videos; (ii) in documentary films; (iii) in nonfiction multimedia e-books offering film analysis; and (iv) for educational purposes in film studies or other courses requiring close analysis of film and media excerpts, by college and university facility, college and university faculty, college and university students, and kindergarten through twelfth grade educators.” The DMCA, however, does not contain an exemption to allow circumvention for space-shifting purposes, that is, the act of copying digital content for use on a device other than the one for which it was originally intended.

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Just as design patents for smart phones and yoga pants are recently making headlines, the Senate Judiciary Committee has approved a bill, S. 3523, entitled the Innovative Design Protection Act of 2012, which would extend copyright-like protection to fashion designs (the “Act”).

The protection of the proposed Act would extend to “fashion design[s],” defined as the appearance as a whole of an article of apparel including men’s, women’s or children’s clothing, including undergarments, outer wear, gloves, footwear, headgear, handbags, purses, wallets, tote bags, belts and eyeglass frames. Given that many other countries already have laws that provide design protection for fashion design, the passage of the Act has the potential to help encourage and sustain the U.S. fashion industry.

The essence of the bill, which is sponsored by Senator Charles Shumer of New York, is to protect fashion designs from knockoffs that are substantially identical in overall appearance to the original elements of the design. Under the proposed Act, protection would be limited to unique, distinguishable, non-trivial and non-utilitarian variation over prior designs. The protection would not extend to parties that independently came up with the same design, reproduced a single copy of the design for personal or immediate family use (the “Home Sewing Exception”) or shows the fashion design in an illustration or picture. Moreover, while typical copyright protection lasts for the life of the author plus 70 years, the proposed fashion design protection would only last for 3 years. As to enforcement, the proposed Act would require a design owner to provide written notice to an accused infringer 21 days prior to instituting an infringement action, and limit the design owner to prospective damages from the date that the action is instituted.

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A pending action in the Eastern District of Wisconsin serves as a reminder of the need for clarity and specificity in any IP-related deal, and in this case, in a matter involving copyright.

Wayne W. Peterson is a freelance commercial artist who produced various commissioned works for the Harley-Davidson motorcycle company from the mid-1970s through the mid-2000s. Two of Peterson’s works, the “Live to Ride” logo, created in 1985 and the “Harley-Davidson University” logo, created in 1991, are the subject of Peterson’s Complaint.

Peterson asserts that he owns the federally registered copyrights to these works, and that the license he granted to Harley-Davidson for their use was limited; yet Harley-Davidson has used these works without authorization on countless product runs and various packaging and marketing materials since he created them. Peterson is seeking an injunction for this alleged copyright and contributory copyright infringement.

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We previously reported on the Intellectual Property Exchange International (“IPXI”), the “world’s first financial exchange focused on IP rights,” as well as its recent developments and sponsorships.

The IPXI seems on course to commence operations this summer, or early fall. The article, published last week in IP Law360, provides an in depth look at this new market for monetizing IP assets, as well as some considerations for those contemplating the IPXI for their IP portfolios.

Ralph A. Dengler is Counsel to the Gibbons Intellectual Property Department. Todd M. Nosher, an Associate in the Gibbons Intellectual Property Department, co-authored this post.

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Pinterest, a play on words of “pin” and “interest,” is a virtual, online “pin board,” where user’s can organize and share things they find on the web. While Pinterest is attracting a loyal community of social media users, the site is also the source of some concern for those same users and owners of intellectual property.

The stated Mission of Pinterest is “to connect everyone in the world through the ‘things’ they find interesting . . . a favorite book, toy, or recipe [which] can reveal a common link between two people. With millions of new pins added every week, Pinterest is connecting people all over the world based on shared tastes and interests.” According to the website, a “pin” is an image added to a user’s Pinterest “board” from either a website or as an uploaded image from a user’s computer. Users add the “Pin It” applet to their web browser, which then allows a user to add a pin (an image) by clicking on the “Pin It” button, and adding the requested pin to the user’s pinboard.

For those individuals and companies looking to capitalize on the free promotion that Pinterest offers, they can add a “Pin It” button to their webpages which looks and functions similarly to the buttons offered by other social media websites. Adding another “button” to companies’ webpages is another avenue to increase the social awareness of a brand or products. While many brand owners, companies and individuals will appreciate being “pinned” by users, there will undoubtedly be those who object.

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On Wednesday, January 18, 2012, thousands of internet companies including Google and Wikipedia protested against the Stop Online Piracy Act (SOPA) proposed by the House and its counterpart in the Senate, the Protect IP Act (PIPA). For example, Wikipedia blacked out its website while Google collected over 7 million signatures for its anti SOPA and PIPA petition. Since the high profile protests, key House and Senate supporters have withdrawn their support, questioning the viability of both bills.

SOPA and PIPA are supported by original content providers such as the movie and music industry. The bills target “rogue” overseas internet sites trafficking copyright material and counterfeit goods. One example is the streaming of movies or television shows for free without the permission of the copyright holder thereby violating the intellectual property held by the music and movie industry. This type of piracy has been ongoing for years since the days of Napster, but avoid U.S. prosecution because the rogue sites are located outside of the country where U.S. laws cannot reach them. The goal of the proposed bills therefore is to starve the rogue sites by barring advertisers, payment facilities, and internet service providers from conducting business with these sites. Harsher criminal penalties are also proposed with a maximum of five years in prison for anyone involved with unauthorized streaming of copyright material.

While both sides agree that rogue sites violating U.S. laws should be stopped, the bills’ detractors argue that SOPA and PIPA also promote censorship and have the unintended consequences of implicating legitimate internet companies within its broad provisions. One particular concern was that user generated websites like YouTube, may be held liable under SOPA and PIPA for the content that its users upload on the site. Other concerns involve implications of an entire website even when only a minor portion link to the infringing content. Critics of SOPA and PIPA also claim that the bills weaken the safe harbor protections available under the DCMA by shifting the burden to the website owner to actively monitor its content for infringing activity.

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We previously reviewed a copyright case involving Marvel and a comic book author’s relinquishment of any copyrights in the iconic characters Hulk, Spiderman, the X-Men and others because the works were determined to be “for hire.” Marvel Worldwide v. Kirby.

In an unrelated action, Judge Forrest of the Southern District of New York recently found in favor of Marvel, in Gary Friedrich Enters., LLC v. Marvel Enters., Inc. The court ruled that the plaintiff writer, Gary Friedrich, although he indisputably conceived of the character, “Ghost Rider,” and wrote the initial comic book, had ceded all rights in the character to Marvel.

The decision turned on two defining moments where the court found plaintiff conveyed his rights by contract: 1) at the time of plaintiff’s payment for the initial creation of the character in 1971 and 1972; and 2) in a separate contract signed by the parties in 1978, when plaintiff was a freelancer for Marvel.

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What can the Hulk, Spiderman and the X-Men teach us about copyrights? Well, artists and authors alike must understand the terms under which they are creating their works, or potentially lose any copyrights they, and their heirs, might otherwise enjoy. IP Law360 recently reported on Marvel Worldwide v. Kirby from the Southern District of New York, which underscores the importance of such understanding.

In short, a “work for hire” exists when an artist or author creates a work on behalf of, or commissioned by, another. Typically, this arises in an employer-employee situation when an artist or author creates a work in the regular course of employment. Copyrights under such circumstances generally belong to the employer.

The Marvel case concerned legendary comic book artist Jack Kirby, who in 1972 assigned to Marvel all rights he “may have or control” in any of the works he created for Marvel. Importantly, Kirby acknowledged that he had created the subject works “as an employee for hire” of Marvel in the 1960’s (when the Copyright Act of 1909 was in force). In 2009, Kirby’s heirs attempted to terminate these assignments based on the Copyright Act of 1976, which gives authors or heirs the right to terminate a prior copyright assignment 56 years after the date of the original copyright. Of note, the 1976 Act was enacted, inter alia, to address apparent flaws in the 1909 Act. While the heirs gave timely notice to Marvel, the Court ruled that the 1976 Act specifically excluded copyrights in a work for hire, which is what the Court determined Jack Kirby’s creations were pursuant to the 1909 Act.

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Gibbons is pleased to announce that Catherine M. Clayton, a Director in the firm's Intellectual Property Department, will host a roundtable on Internet privacy and emerging issues relating to on-line and new media enforcement on September 22, 2011 at 12:00 pm. This program is part of the International Trademark Association’s (INTA) roundtable series, and will take place at the firm’s Newark office.

The roundtable will examine a host of emerging issues, including the impact of Internet privacy issues on brand owners; taking action against Internet scams; protesting infringement on social media sites; and the upcoming roll-out of new generic top level domains (gTLDs) for brand names, generic terms and locations. To register, please visit INTA’s website.

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On July 26, 2010, the Library of Congress ruled that “jailbreaking” of smartphones is a fair use under the Copyright Act. Under the Copyright Act, the Librarian of Congress is required to review classes of works every three years for exemptions to the ban against circumventing technological measures that control access to copyrighted materials. The purpose for the triennial review is to determine whether users of copyrighted works are adversely affected by the anti circumventing ban in their ability to make noninfringing uses of copyrighted work. As part of its decision making process, the Copyright Office provides notice of its rulemaking, solicits input from the public and makes a final recommendation to the Library of Congress.

This year, the Library of Congress granted exemptions to six of the 19 submitted classes of works. One of the interesting exemptions is the ability to “jailbreak” or circumvent the technological measures contained on smartphones and in particular Apple’s iPhone, to prevent unapproved software from being installed and run on such phones. In other words, it is now permissible as fair use to “jailbreak” Apple’s iPhone in order to make the operating system on that phone interoperable with a third-party’s software that has not been approved by Apple.

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In Barclays Capital Inc. v. TheFlyOnTheWall.com, 06 Civ. 4908 (S.D.N.Y. March 18, 2010), Judge Denise Cote issued a narrowly tailored injunction against republication of financial services firms stock recommendations.

FlyOnTheWall.com (Fly) collected and published summaries of stock analyst reports within minutes after they were released by financial institutions to their clients. FlyOnTheWall sometimes included summaries of the research reports, but following commencement of the suit it only published headlines such as "EQIX: Equinox initiated with a Buy at BofA/Merrill." Three financial institutions filed suit against Fly for hot news misappropriation and copyright infringement.

After denying the parties' cross motions for summary judgment, Judge Cote held a bench trial. She made extensive findings regarding the business models of the financial institutions, including how each one devotes substantial efforts to developing original research and provides its research to clients at no charge in the hope the client will place trades with the firm based on the recommendations. She described how each institution conducts a morning call at roughly 7:15 am, and the substantial efforts by the institutions to reach their clients beginning at 8 am and continuing to mid-day and sometimes over two days. She also made findings about the firms' efforts to restrict access to the research, to control press coverage for 4 hours or until 2 pm, and their surveillance programs. The court also credited evidence that the unauthorized redistribution of recommendations was a major contributor to the decline in the resources each firm devotes to equity research.

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Last week, the Supreme Court issued its highly-anticipated decision in Reed Elsevier v. Muchnick. The decision arose out of a class action settlement between publishers and authors following the Supreme Court’s holding affirming copyright infringement in New York Times, Co. v. Tasini. The Southern District of New York certified the settlement, but the Second Circuit reversed, holding that pursuant to §411(a) of the Copyright Act, the Court lacked subject-matter jurisdiction to approve the settlement because the settlement covered both registered and unregistered works. The Supreme Court reversed, holding that the registration requirement of §411(a) was a claim processing rule and not a jurisdictional requirement. It left open, however, the question of how strictly §411(a) should be applied.

The Second Circuit Decision

During proceedings before the Second Circuit in Reed Elsevier, the court sua sponte asked the parties to brief the issue of whether §411(a) was a jurisdictional requirement. In response, all parties filed briefs asserting that the district court had subject-matter jurisdiction to approve the settlement. The Second Circuit ruled that the district court lacked the subject-matter jurisdiction necessary to certify the settlement because some of the works at issue were unregistered. Certiorari was granted to resolve the question of whether §411(a) restricts the subject-matter jurisdiction of federal courts. Because no party’s brief supported the Second Circuit’s holding that the court lacked subject-matter jurisdiction, the Supreme Court assigned an amicus to draft the brief in support of the Second Circuit’s holding.

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Is a technology provider liable for direct copyright infringement when it provides the means for infringement instructed by its users? In the Cablevision case, Cartoon Network, LP LLLP v. CSC Holdings, Inc., 536 F.3d 121 (2d Cir. 2008), the Second Circuit endorsed a line of cases holding that the provider is not liable absent “volitional conduct” that causes the copying to take place. Two recent district court decisions in the Southern District of New York appear to have applied this rule in seemingly inconsistent fashion.

Most recently, in Cellco P'ship v. Am. Soc'y of Composers, 2009 U.S. Dist. (S.D.N.Y. Oct. 14, 2009), the court held that Verizon was not liable for direct copyright infringement where it provided the technology that allowed cell phone users to play ringtones. The opposite result was reached a few months earlier in Arista Records LLC v. Usenet.com (PDF), 633 F. Supp. 2d 124 (S.D.N.Y. 2009), in which the court found the defendants were directly liable where they provided the technology that allowed users to download infringing sound recordings. How can we make sense of these outcomes?

Cablevision
We begin with a quick overview of Cablevision, in which the Second Circuit held that Cablevision’s Remote Storage DVR System (“RS-DVR”) technology did not directly infringe the plaintiffs’ content. The Second Circuit noted that direct infringement could not be proven unless “volitional conduct” could be established. The Second Circuit found Cablevision’s conduct was analogous to a store proprietor who charges customers to use a photocopier on his premises, and unlike that of a copy service that makes copies at the customer’s request. As such, Cablevision was not directly liable.

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