Posted on April 12, 2013 by James J. Kang

The Laws of Physics and Copyright Law: SDNY Rules that First-Sale Doctrine Does Not Apply to the Resale of "Used" Digital Media

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.”

Judge Sullivan, citing the laws of physics, noted the impossibility of transferring a “material object” over the Internet. A file sent over the Internet from Point A to Point B is not a simple transfer of the same “material object.” Instead, it is a reproduction of the file from Point A, made at Point B. Therefore, the uploading and downloading of digital media files sold in ReDigi’s marketplace are, in essence, a combination of (unauthorized) reproductions and the distribution of those reproductions. Accordingly, the Court ruled that ReDigi violated Capitol’s digital media reproduction and distribution rights.

Under U.S. copyright law, the first-sale defense can be asserted by owners of a copyrighted item “lawfully made under this title . . . .” 17 U.S.C. § 109(a). This defense only applies against assertions of infringement of a copyright holder’s right of distribution. Because the Court ruled that digital music files sold by ReDigi’s marketplace were not “lawfully made,” but instead were unauthorized reproductions, the first-sale defense could not be asserted.

So what does this mean to owners of lawfully purchased digital media who wish to sell their files? For now, selling the hard drive where the files reside may be the safest option, barring a contractual arrangement with the copyright owner, to avoid infringement.

ReDigi plans to appeal this decision, and has, since June 2012, been implementing ReDigi 2.0, which purportedly does not involve user and seller uploading and downloading.

Gibbons will continue to monitor developments concerning the first-sale doctrine and other copyright issues involving digital media.


James J. Kang is an Apprentice in the Gibbons Intellectual Property Department. Catherine M. Clayton, a Director in the Gibbons Intellectual Property Department, co-authored this post.
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Posted on March 27, 2013 by Jillian A. Centanni

Kirtsaeng v. John Wiley & Sons, Inc.: U.S. Supreme Court Reverses Lower Courts and Determines That International Copyright Exhaustion is Now the Rule

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.

In 2008, Wiley sued Kirtsaeng for copyright infringement under 17 U.S.C. §§ 106(3) and 602, as Kirtsaeng imported the books without authorization, and later resold them, allegedly infringing on Wiley’s exclusive right to distribution and related import prohibition. Kirtsaeng argued that the books he acquired were “lawfully made” and since he acquired them legitimately, the “first sale” doctrine permitted him to resell them or dispose of them without the copyright owner’s further permission. The District Court held that the “first sale” defense was unavailable because the “first sale” doctrine did not apply to “foreign-manufactured goods” and the Second Circuit agreed.

The key to the Supreme Court’s holding that the “first sale” doctrine applies to copies of a copyrighted work lawfully made abroad turned on the meaning of the phrase “lawfully made under this title.” The difference between Wiley’s interpretation and Kirtsaeng’s interpretation was whether the phrase imposed a geographical limitation. The Supreme Court agreed with Kirtsaeng that this language imposed a non-geographical limitation made “in accordance with” or “in compliance with” the Copyright Act, thus permitting the doctrine to apply to copies manufactured abroad with the copyright owner’s permission. The Supreme Court looked at the language of 17 U.S.C. § 109(a), its context, and the “first sale” doctrine’s common-law history in determining that Kirtsaeng’s interpretation was correct.

This ruling will have a substantial impact on how the publishing, music, motion picture and other copyright-oriented industries will conduct business overseas. It is likely that these industries will put pressure on Congress to amend the Copyright Act.

In addition, this ruling highlights the dichotomy between the views of international exhaustion in the copyright and patent arenas. International copyright exhaustion is now that law of the land, but this is certainly not the case for patents. The Supreme Court recently denied Ninestar Technology Co. Ltd.’s petition for a writ of certiorari to consider whether an initial authorized sale outside of the United States of a patented item exhausts the patent rights to that item. Furthermore, the Federal Circuit’s recent decisions in patent cases have rejected international exhaustion of patent rights.

Gibbons will continue to monitor developments concerning the “first sale” doctrine and international exhaustion of intellectual property rights.


Jillian A. Centanni is an Associate in the Gibbons Intellectual Property Department. James J. Kang, an Apprentice in the Gibbons Intellectual Property Department, co-authored this post.
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Posted on December 31, 2012 by Ralph A. Dengler

2013: The IP Law Year Ahead

Like 2012, 2013 promises to be a busy and significant year for intellectual property law.

The Supreme Court is slated to decide a number of IP cases, including: Already, LLC d/b/a Yums v. Nike, Inc. (addressing the significance of a limited covenant-not-to-sue on declaratory judgment jurisdiction); Bowman v. Monsanto (determining whether the Federal Circuit erred by not finding patent exhaustion in second generation seeds and created an exception to patent exhaustion for self-replicating technologies); Gunn v. Minton (pertaining to whether federal courts have exclusive “arising under” jurisdiction when legal malpractice claims stem from a patent case); Kirtsaeng v. John Wiley & Sons, Inc. (regarding international copyright exhaustion, i.e., how Section 602(a)(1) and Section 109(a) of the Copyright Act apply to a copy that was legally acquired abroad and then imported into the United States); Federal Trade Comm’n v. Watson Pharm., Inc. (involving whether Hatch-Waxman reverse payment settlement agreements are legal); and most recently, Ass’n for Molecular Pathology v. Myriad Genetics, et al. (regarding the patentability of human genes and whether the petitioners have standing to challenge those patents). A pending petition for certiorari is Retractable Techs., Inc. v. Becton, Dickinson and Co. (regarding whether a court may depart from the plain and ordinary meaning of a claim term and whether claim terms are subject to de novo review on appeal). Following the Federal Circuit’s en banc decisions in Akamai and McKesson regarding induced infringement by multiple actors, it is possible that a petition for certiorari will be filed shortly in these cases.

The New Year will also see implementation of the first-to-file rule beginning on March 16, 2013, just as other provisions of the America Invents Act become the norm, such as the amendments to 35 U.S.C. § 102 regarding the definition of prior art.

We are also awaiting the launch of the Intellectual Property Exchange International, Inc. (IPXI) - the first exchange focused on IP.

Gibbons will continue to monitor these and other IP law developments. We wish all our readers a Happy New Year!


Ralph A. Dengler is Counsel to the Gibbons Intellectual Property Department. Jillian A. Centanni, an Associate in the Gibbons Intellectual Property Department, co-authored this post.
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Posted on November 21, 2012 by Ralph A. Dengler

Freelancer of "Live to Ride" Logo and Harley-Davidson Settle Their Dispute

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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Posted on October 2, 2012 by Owen J. McKeon

Protecting Fashion Designs: The Innovative Design Protection Act of 2012

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.

The bill will amend Title 17, the Copyright Act, Section 1301 of the United States Code. The companion bill in the House of Representatives is H.R. 2511.

Gibbons will continue to track this important development in the area of copyright protection for fashion designs.


Owen J. McKeon is a Director in the Gibbons Intellectual Property Department. Christopher H. Strate, an Associate in the Gibbons Intellectual Property Department, co-authored this post.
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Posted on September 5, 2012 by Ralph A. Dengler

Freelancer Survives "Live to Ride" Logo Dispute with Harley-Davidson -- For Now

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.

Harley-Davidson responded to the Complaint with a motion to dismiss for failure to state a claim upon which relief can be granted, under Fed. R. Civ. P. 12(b)(6), arguing that Peterson’s action is barred on two dispositive grounds: laches and statute of limitations. As to the former, Harley-Davidson asserted that Peterson’s delay in bringing the suit in 2012 was unreasonable, relative to works created in 1985 and 1991. Regarding the latter, Harley-Davidson argued that the three-year statute of limitations under the Copyright Act of 1976, 17 U.S.C. § 507(b) (“no civil action shall be maintained … unless it is commenced within three years after the claim accrued”) barred any claims by Peterson for alleged acts of infringement occurring before April 25, 2009.

In a recent Decision and Order, Judge Lynn Adelman denied Harley-Davidson’s motion, finding that while laches and the statute of limitations are affirmative defenses, the Complaint alone, while sufficiently pled, did not plead all the ingredients of laches or statute of limitations. That is, the Complaint did not admit all the elements necessary for Harley-Davidson to prevail on its defenses. In particular, the Court found that it was unclear whether Peterson’s delay was unreasonable as a matter of law. In addition, under the “continuing-violation doctrine” as presently applied by the Seventh Circuit to copyright, the statute of limitations does not begin to run on a copyright claim regarding a series of infringements until the entire series is done. At this juncture, the Court viewed Harley-Davidson’s alleged transgressions as a single course of infringement, albeit beginning in the mid-1980s, but left the door open for Harley-Davidson to develop the factual record to counter this and to distinguish the Seventh Circuits governing law.

With this denial, next up procedurally will be Harley-Davidson’s Answer. Recent copyright decisions that were reported here and here, involving Marvel Comics and copyright disputes regarding characters made on a “work for hire” basis, may provide a factual roadmap for Harley-Davidson to consider in its defense of the case. A scheduling conference is set for early September.


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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Posted on January 11, 2012 by Ralph A. Dengler

Caveat Author: Understanding Copyrights, Revisited ....

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.

Regarding the former, the court found that in the course of conduct between the parties in 1971 and 1972, when the work was created, plaintiff was paid by a check which bore a legend on the back of it indicating that by endorsing the check, plaintiff was assigning all rights to Marvel. The court noted that when an individual endorses a check subject to a condition, he accepts that condition. As to the 1978 contract, the court determined that plaintiff relinquished all rights to the character in consideration for future freelance work. And although the parties extensively briefed “works for hire” as well, the court did not need to consider this theory since the foregoing findings were dispositive.

Of note, plaintiff had testified that his understanding during the freelance period when he created Ghost Rider was that Marvel would own the rights to Ghost Rider for comic books, but that he would personally retain rights to exploit the character in non-comic media. The court found no record evidence whatsoever to support this contention.

As a practical takeaway, authors need to ensure they fully understand and can document what they believe their copyrights are, before contractually binding themselves.


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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Posted on December 7, 2010 by Gibbons P.C.

Revisions to Federal Rule of Civil Procedure 26 - New Untested Protections for Testifying Experts

On December 1, 2010, the latest version of the Federal Rules of Civil Procedure went into effect. As part of the new rules, significant changes were made to Rule 26 regarding the discovery of information from experts retained to provide testimony. As of Wednesday, witnesses who were not previously required to provide a written report must now provide a summary disclosure of their opinion. In addition, draft expert reports and some communications between expert witnesses and counsel will no longer be discoverable, and expert reports will now only need to contain information regarding “facts or data considered by the witness in forming” an opinion.

Of special interest are the last two changes to Rule 26. Specifically, Fed. R. Civ. P. 26(a)(2)(B)(ii)  will now limit expert reports to “facts or data” rather than having previously required the disclosure of “data or other information” considered by the witness. As explained in the notes of the Advisory Committee, the facts or data limitation is meant to keep these disclosures to those which are factual in nature and will now exclude the discovery of counsel’s theories or mental impressions.

Similarly, draft expert reports and communications between expert witnesses and counsel will no longer be discoverable. Rather, the Advisory Committee explained that Fed. R. Civ. P. 26(b)(4) will now provide work-product protection against the discovery of “draft reports and disclosures or attorney-expert communications.” However, there will be three exceptions to the protection of attorney-expert communications, namely, those involving an expert’s compensation; facts or data provided by the attorney to an expert that were used in forming the opinion; and any assumptions that counsel provided to the expert and were relied upon to form the opinion.

Because these amendments are new and their bounds untested, counsel and clients should remain careful when communicating with testifying experts in connection with a litigation.
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Posted on March 10, 2010 by Gibbons P.C.

Reed Elsevier v. Muchnick: Copyright Registration is Not a Jurisdictional Requirement

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.

The Supreme Court Distinguishes Claim Processing Rules from Jurisdictional Requirements

At the outset, the Supreme Court noted that jurisdictional rules are generally “prescriptions delineating the classes of cases (subject-matter jurisdiction) and the persons (personal jurisdiction) implicating that authority.” The Court recognized the difficulty of distinguishing “jurisdictional” conditions from claim-processing rules, and cited to its 2006 holding in Arbaugh v. Y & H that a statutory requirement is a jurisdictional requirement only if Congress identifies it as such. Because the registration requirement of §411(a) is not identified as a jurisdictional requirement, it is not, and instead works as a claim-processing rule. The Court continued by noting that the registration requirement in §411(a) has qualities of a claim processing rule:

  1. it imposes a precondition to filing a claim that is not clearly labeled jurisdictional,
  2. it is not located in a jurisdiction-granting statutory provision, and
  3. it admits several congressionally authorized exceptions.

Unanswered Questions

The Supreme Court decision confirmed that courts can adjudicate disputes involving unregistered works. Even so, the Court declined to address the question of whether the registration requirement of §411(a) is satisfied by filing an application, or whether the Copyright Office must either grant or reject the application before a claim for infringement may be brought.

Circuit courts are divided on this issue. For example, the Fifth Circuit held in Positive Black Talk v. Cash Money Records that simply filing an application is adequate, as long as all required elements are deposited with the Copyright Office. This view has been called the “Application Approach.” Conversely, the Tenth Circuit in La Resolana Architects, PA v. Clay Realtors Angel Fire held that simply filing all the required elements of an application is not enough to satisfy §411(a), and that either a rejection or an acceptance must be received by applicant in order for a party to bring an infringement claim. This has been called the “Registration Approach.”

While the Second Circuit has yet to address the issue, three recent district court cases in the Southern District of New York have applied the Registration Approach. In Do Denim v. Fried Denim, Judge Swain granted defendant’s motion to dismiss the copyright infringement claim for lack of subject matter jurisdiction under §411. Do Denim had filed its deposit, application, and fee with the Copyright Office prior to filing suit, but it had yet to receive either a grant or refusal. Two other Southern District decisions have followed Do Denim in support of dismissal of the claim of infringement of an unregistered copyright: DMBJ Productions v. TMZ TV, and Lewinson v. Henry Holt and Company, LLC.

Inconsistent application of §411(a) has been a concern of copyright litigators for some time, and other blogs have addressed the split between circuits. In fact, the ABA Section of Intellectual Property Law recently wrote to the Senate suggesting legislation adopting the Application Approach.

While Muchnick abrogates cases describing §411(a) as “jurisdictional,” calling the section a claim-processing rule does not provide instruction on how strictly courts should apply the rule. As such, filing an infringement suit based solely on a pending application may risk dismissal in courts inclined to apply the Registration Approach. Even in a jurisdiction that adopted the Application Approach, obtaining a registration first may be advantageous, particularly in a preliminary injunction case where the presumptions flowing from registration may be important.
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