For the 7th Circuit, the Fourth Factor is the Most Important Fair Use Factor

The U.S. Court of Appeals for the Seventh Circuit made it clear on September 15, 2014 that it disagrees with the Second Circuit’s interpretation of the fair use section of the Copyright Act, even though it affirmed a magistrate judge who had granted defendants’ summary judgment on their fair use defense. The case is Kienitz v. Sconnie Nation, No. 13-304.

Plaintiff-Appellant Michael Kienitz is professional photographer. He regularly licenses his photographs for a fee, which is contingent on their intended use because Plaintiff wants control over the way his photos are used. He has denied requests for licenses several times because he did not approve of the intended use of the photograph.

Plaintiff photographed Paul Soglin, the mayor of Madison, Wisconsin, at the mayoral inauguration ceremony in April 2011. The mayor then contacted Plaintiff to ask permission to use a photograph in connection with his political activities and for noncommercial uses. The photograph, featuring a close-up of Soglin’s face, was featured on the mayor’s website and Facebook page, credited to Plaintiff.

Soglin was quoted by The New York Times in September 2011 as wanting to put a stop to the Mifflin Street Block Party, an annual event in Madison which had started in May 1969 as part of the student protest movement on the U-W-Madison campus. Ironically, Soglin participated to the first Block Party in 1969 and was even arrested then.

That irony was not lost on Defendants-Appellees Sconnie Nation and Underground Printing-Wisconsin, which produce novelty items and tee-shirts. In March 2012, they decided to produce tee-shirts featuring the phrase “Sorry for Partying” over Plaintiff’s photograph of Soglin. The photograph was altered and the mayor’s face was printed in lime green against a black background with “Sorry for Partying” written in lime, pink and blue. They sold these tee-shirts from April 2, 2012 to May 6, 2012, stopping the day after the 2012 Mifflin Street Block Party.

Soglin informed Plaintiff about the tee-shirts. Plaintiff then registered the photograph with the Copyright Office on May 1, 2012 and filed a copyright infringement suit against Defendants. Both parties moved for summary judgment on the issue of fair use. In August 15, 2013, magistrate judge Crocker from the Western District Court of Wisconsin found Defendants entitled to summary judgment, holding that their use of the photograph was fair. Plaintiff appealed to the Seventh Circuit.

What is Fair Use?

Fair use is an affirmative defense to copyright infringement, and is codified by Section 107 of the Copyright Act, which sets forth four non-exclusive factors that courts must consider when determining whether a particular use of a copyrighted work is a fair:

  1. The purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;
  2. The nature of the copyrighted work;
  3. The amount and substantiality of the portion used in relation to the copyrighted work as a whole; and
  4. The effect of the use upon the potential market for or value of the copyrighted work.

Is Transformative Use Enough to Find Fair Use?

When analyzing the first factor, the magistrate judge had focused on whether a particular use is transformative, quoting the Supreme Court Campbell v. Acuff-Rose Music case, where the Court explained that a particular use is transformative if it adds something new and alters the original work while adding a new expression or message, instead of merely superseding the original work.

The magistrate judge found the use of the photograph to be transformative, also quoting the Second Circuit Cariou v. Prince case, where the Court of Appeals found the use by Richard Prince of photographs taken by Patrick Cariou to be transformative, as Prince’s paintings added something new to the Cariou’s photographs by “present[ing] images with a fundamentally different aesthetic.”

The Seventh Circuit stated that it was “skeptical” of this interpretation of §107, because focusing exclusively on transformative use “could override 17 U.S.C. §106(2), which protects derivative works.” Indeed, 17 U.S.C. §106(2) gives the author the exclusive right to prepare derivative works. The Seventh Circuit reasoned that fair use has to be more than being merely transformative, as every derivative works is by essence transformative and thus every derivative work would be considered fair use and would deny authors their exclusive rights under §106(2).

Parody and Fair Use

Plaintiff argued in front of the magistrate judge that the tee-shirt was a derivative work and that “the concept of transformative use is most apt in cases where the defendant is making a commentary on the very work that is copied, such as with parody.” But the magistrate judge was not convinced, noting that even though the tee-shirts did not aim at parodying the photograph itself, “the garishness of Soglin’s re-colored visage could be viewed as mocking the gravitas and rectitude with which [Plaintiff]’s… portrait imbues the mayor” and that the Supreme Court, in Campbell, held that “[a] parody that more loosely targets an original… may still be sufficiently aimed at an original work to come within our analysis of parody.”

The magistrate judge also cited Cariou, where the Second Circuit held that “[t]he law imposes no requirement that a work comment on the original or its author to be considered transformative” and concluded that “parody is only one type of fair use.”

The Seventh Circuit Affirmed But…

For the Seventh Circuit, “the most important [factor] usually is the fourth (market effect). “ This is not the opinion of the Second Circuit in Cariou, for which the first factor is “the heart of the first use inquiry” (quoting its Blanch v. Koons case). For the Seventh Circuit, a use which is a complement to the protected work is allowed, while a substitute use is prohibited. The Seventh Circuit compared Plaintiff’s original work with the tee-shirts and found that Defendants removed so much from the original that only the outline of the mayor’s face remained and this cannot be copyrighted. It therefore affirmed the magistrate judge’s order, but added that:

There is no good reason why defendants should be allowed to appropriate someone else’s copyrighted efforts as the starting point of their lampoon, when so many non-copyrighted alternatives (including snapshots they could have taken themselves) were available. The fair-use privilege under §107 is not designed to protect lazy appropriators. Its goal instead is to facilitate a class of uses that would not be possible if users always had to negotiate with copyright proprietors.”

This is surprising, as using an official picture to comment on the mayor’s change of opinion over the block party is certainly an important aspect of the work, as a mere snapshot would not be as efficient a material than an official photograph. Defendants wanted to use a picture of “Soglin as Mayor,” not merely “Soglin” and, as such, were not merely “lazy approprietors.”

Also, it should be noted that fair use should not be used as a way to censor speech. It can be argued that these tee-shirts were political speech, and, as such, protected by the First Amendment. This case also shows how moral rights could be used to censor speech. If the U.S. would grant comprehensive moral rights, as in the E.U., Plaintiff would have likely invoked them as he was careful to state that he does not license a photograph if he does not approve of its use.

The Supreme Court did not grant certiorari in the Cariou case, but if there should be a recurrent split on how to interpret §107, another case may become an opportunity for the Supreme Court to reaffirm, or modify, its fair use doctrine. Could this case be the one?

European Court of Justice Defines Parody

by Marie-Andrée Weiss

On September 3, the European Court of Justice (ECJ) published its judgment in the Deckmyn v. Vandersteen case, C-201/13 where it defined what a parody is under European Union (EU) law. The ECJ also stated that copyright holders have a “legitimate interest” to ensure that their work is not associated with a discriminatory parody, but stopped short at giving copyright holders an absolute right to strike down discriminatory parodies.

The ECJ had been asked by the Brussels Court of Appeals for a preliminary ruling in the interpretation of article 5.3(k) of Directive 2001/29/EC on the harmonization of certain aspects of copyright and related rights in the information society (the “Information Society Directive“), which gives Member States the option to provide an exception to copyright infringement if the infringing work has been used “for the purpose of caricature, parody or pastiche.”

In that case, the heirs of Willebrod Vandersteen, the author of the Suske en Wiske comic books, and the holders of the intellectual property rights associated with these works, had sued Johan Deckmyn and the Vrijheisfonds VZW, a non-profit association which sole purpose is to support financially the Belgium nationalist political party Vlaams Belang, to which Deckmyn belongs. Deckmyn had distributed in January 2011 a calendar inspired by a cover of the Suske en Wiske’s album ‘De Wilde Weldoener’ (The Compulsive Benefactor) at a New Year reception in Ghent. While the cover of the original album showed a middle-aged man wearing a bowler hat, business shoes and a toga, throwing coins at people while flying in the air, the calendar showed a caricature of the mayor of Ghent, wearing a toga and the black, yellow and red belt which is the attribute of mayors in Belgium, flying in the air while distributing money to “people wearing veils and people of colour” (at 9).

The heirs sued for copyright infringement and won in the court of first instance. Defendants appealed and raised a parody defense under point (6) of Article 22(1) of the June 30, 1994 Belgium copyright law, asserting that a parody must be itself original, and that it must be humorous and seeking to ridicule the original work. The heirs disputed that definition of a parody. In order to decide the case, the Brussels Court of Appeals asked several preliminary questions to the ECJ. It asked whether a parody is an autonomous concept of European Union law, and also asked if a parody must be original, if a parody must be such that it cannot be reasonably attributed to the author of the original work, if a parody must seek to be humorous, whether it must mock the original work or not, and finally if a parody must mention the source of the parodied work.

The concept of parody is an autonomous concept of EU law

Pedro Cruz Villalón, Advocate General (AG) of the ECJ, published his opinion on the case on may 22, 2014. An AG publishes an opinion to guide the ECJ, but the court is not obliged to follow it. In AG Villalón’s opinion, parody is an autonomous concept of the EU law. The ECJ followed its AG’s opinion and held that the concept of parody is indeed an autonomous concept of EU law. As such, it must be interpreted uniformly throughout the European Union.

What is a Parody?

However, the Information Society Directive does not define what is a parody. Therefore, the meaning and scope of this legal concept “must be determined by considering its usual meaning in every day language, while also taking into account the context in which it occurs and the purposes of the rules of which it is part” (paragraph 19).

In his Opinion, AG Villalón undertook to define what is a parody. It quoted the definition of parody given by dictionaries in several languages, among them the definition provided by the Shorter Oxford English Dictionary, «A prose, verse or (occas[ionally]) other artistic composition in which the characteristic themes and the style of a particular work, author, etc. are exaggerated or applied to an inappropriate subject, esp[ecially] for the purposes of ridicule (…)»  AG Villalón explained that parody is “in its most summary statement structurally an “imitation” and functionally “burlesque“” (AG Opinion, at 48).

The ECJ provided a somewhat different definition of a parody, as it stated that a parody’s essential characteristics are (1) “to evoke an existing work, while being noticeably different from it” and (2) “to constitute an expression of humour and mockery.” The parody, however, does not have to display an original character of its own, but it must display “noticeable differences” with the original work, and “it could reasonably be attributed to a person other than the author of the original work itself; that it should relate to the original work itself or mention the source of the parodies work” (at 33).

Parody and Freedom of Expression

The right to parody is, however, not absolute. The ECJ noted that, in this case, the parody conveyed a discriminatory message, and that the EU has adopted the principle of non-discrimination based on race, color, or ethnic origin, as defined by the Council Directive 2000/43/EC of June 29, 2000. As such, copyrights holders have “a legitimate interest in ensuring that the work protected by copyright is not associated with such a [discriminatory] message” (at 31). AG Villalón had asked in his opinion “[t]o what extent the interpretation by the civil courts of the scope of the parody exception may be conditioned by fundamental rights?” (Opinion at 76). He concluded that if the message conveyed by the parody is “radically contrary to the deepest convictions of society,” then the parody exception to copyright infringement should not apply. For AG Villalón, the Member States would have to determine, on a case to case basis, if a particular parody reaches this extreme level.

But the ECJ did not go as far, merely stating that the courts must balance the rights of the copyright owners with the right of freedom of expression of the parodist, and to do so, must take all the circumstances of the case into account to preserve such fair balance, without adding that the threshold would be whether a particular parody is “radically contrary to the deepest convictions of society.

Transatlantic Antitrust and IPR Developments, Issue No. 3/2014 (July 14, 2014)

Editor-in-chief: Juha Vesala (TTLF Fellow)

Contributors: Aurelia Magdalena Goerner, Béatrice Martinet Farano (TTLF Fellow), Gabriele Accardo (TTLF Fellow), Irene Calboli
(TTLF Fellow), Marie-Andrée Weiss (TTLF Fellow), Mark Owen (Taylor Wessing), Nicole Daniel (TTLF Fellow)


Content

Antitrust

United States

U.S. FTC makes Actavis’ acquisition of Forest subject to conditions

Apple settles with U.S. states and consumers in the e-books price fixing case

European Union

General Court upholds the EU Commission’s decision against Intel

Motorola Mobility won’t appeal the European Commission’s decision on patent licensing

ZTE files antitrust complaint with the European Commission against the patent-licensing practices of Vringo

French Competition Authority orders PMU to separate its online horserace betting activity from its physical point of sale network

Italian competition authority investigates online hotel bookings

German Federal Cartel Office closes investigation into online sales ban required by adidas

Intellectual property

United States

U.S. Supreme Court rules that online television streaming Aereo is illegal

U.S. PTO Trademark Trial and Appeal Board cancels registration of marks containing name Redskins (Blackhorse, et al. v. Pro-Football, Inc., TTAB (June 18, 2014))

Fair Use May Prevent Copyright from being Used as Censorship Tool

The Curious Incident of Characters and Copyright at the Seventh Circuit

Massachusetts May Soon Have a Post Mortem Right of Publicity, Albeit Only for Personalities

European Union

Meltwater: CJEU confirms that online browsing does not require a license

EU trade secrets law moves closer to the U.S.

Read More…

EU trade secrets law moves closer to the U.S.

By Mark Owen (Taylor Wessing)

The likely final shape of the EU’s Directive on Trade Secrets (“TSD”) is becoming clearer.  The draft Directive (previously reported in Newsletter 2/2014 p. 30) has recently been amended by the EU Council and, though some further adjustment will take place, this should now be very close to being a final draft.  With the recent changes, it is notable how close the draft Directive now is to the United States’ Uniform Trade Secrets Act (“UTSA”), adopted wholly or largely by most U.S. states.  Both approaches are also close to that set out in the TRIPS agreement, and so means there is an increasing harmonisation of civil procedures and remedies around the protection of trade secrets. This short article provides an update on the changes made by the EU Council as well as highlighting some similarities with the UTSA approach.

Minimum standard

The TSD is now to provide a minimum level of protection for trade secrets, but Member States are largely free to impose stricter laws.  While welcome for rights-owners and potentially allowing greater flexibility than a completely harmonised pan EU approach, this will inevitably mean that a fragmented approach continues.

Scope of protection – what does “trade secret” mean?

The TSD applies to information which is secret, has commercial value and in respect of which reasonable steps have been taken to keep it secret.  The UTSA takes the same approach but in addition lists types of information which may be covered (“formula, pattern, compilation, program, device, method, technique, or process”), a list which while not expressed to be exhaustive notably omits business information of a less technical nature.  In contrast, the TSD refers to “undisclosed know-how and business information”, and so is potentially broader than the UTSA.

All three codes identify the same types of restricted act, namely unlawful acquisition, use or disclosure of trade secrets.  But there are differences between how each deals with the question of whether a mental element needs to be proved, such as of dishonesty or of gross negligence as to where the information came from.  The revised TSD has removed an earlier requirement that the rights-owner prove that the defendant had been acting “intentionally or with gross negligence”.  TRIPS makes it harder for rights-owners, requiring that the conduct be “contrary to honest commercial practices” or has a “gross negligence” element. The UTSA adopts different language but a similar approach, requiring knowledge that it is a trade secret, or the use of “improper means”.

Exceptions

One of the biggest areas of debate over the draft TSD has been around which acts should be permitted without the rights-owner’s consent.  A number of activities will not amount to a breach of the new trade secret right, including lawful observation or disassembly, or anything else which is in accordance with honest commercial practices.  A lot rides on what “lawful” means here; for example if you have purchased a software licence but the licence contains terms barring observation for the purposes of creating competing software does that render the activity unlawful?

The UTSA includes a partial list of “proper means” for discovering a trade secret, which includes reverse engineering provided the acquisition of the product was done by fair and honest means.  Suddenly of interest with the rise of drones is the UTSA’s view that otherwise lawful airplane overflight to take pictures should not be regarded as “lawful means”.  This provides a neat illustration of the dangers of the use in legislation (or here in the guidance notes) of technology-specific examples.  As custom, practice and the common view of what is acceptable evolves, such examples risk being overtaken.  While some technologies may become less objectionable, the recent debates around online privacy show that others may become more problematic.

Procedure and remedies

The EU has been making determind efforts to implement a common range of both procedures and remedies for IP cases across the courts of Member States, largely through the IP Enforcement Directive (2004/48/EC).  As trade secrets are not a universally recognised form of intellectual property, they were not subject to that Directive and so the TSD has its own regime. This bears close resemblance to the main features of the Enforcement Directive and includes all the usual remedies (damages, injunctions and destruction of infringing goods).  One interesting remedy is that in appropriate cases the Court shall be free to publish the information in question, if it feels the attempts to protect have been abusive, something likely to make claimants think very seriously before threatening trade secret litigation under the TSD.

In common with the UTSA, the TSD now contains provisions ensuring the confidentiality of trade secret proceedings.  The revised TSD also removes an issue of great concern to rights-owners which was a limitation period of only two years.  This has now been extended to six, in line with other IP infringements.

U.S. FTC makes Actavis’ acquisition of Forest subject to conditions

By Gabriele Accardo and Aurelia Magdalena Goerner

On 30 June 2014, the U.S. Federal Trade Commission (“FTC”) stated that, in order to address the competition concerns raised by Actavis’s proposed acquisition of Forest Laboratories, it has tentatively accepted the proposed settlement agreement between the FTC’s Bureau of Competition and the two pharmaceutical companies.

In brief, under the proposed settlement agreement, Actavis and Forest agreed to sell or relinquish their rights to four generic pharmaceuticals that treat hypertension, angina, cirrhosis, and prevent seizures.

According to the FTC’s complaint, the effects of the proposed acquisition, as originally proposed, would violate federal antitrust laws insofar as it may substantially lessen competition in the markets for three generic products that treat hypertension, angina and cirrhosis. In particular, the number of suppliers in the markets concerned would be reduced from three to two (for angina) and from four to three (for hypertension and cirrhosis), whereas market concentration would increase substantially post-merger.

Moreover, the proposed transaction would delay the introduction of generic competition against Lamictal ODT, the branded lamotrigine orally disintegrating tablets used to prevent seizures, manufactured by Forest and marketed by GlaxoSmithKline (“GSK”). No companies currently market a generic version in the U.S., whereas Actavis holds the only approved abbreviated new drug application to market generic Lamictal ODT. Thus, absent the proposed acquisition, Actavis is likely to be the first generic entrant and would be the sole competitor to Forest/GSK’s branded Lamictal ODT product for a significant period of time.

In particular, under the proposed settlement agreement, the companies have agreed to relinquish their rights to market generic diltiazem hydrochloride to Valeant Pharmaceuticals International, sell generic ursodiol and generic lamotrigine ODT to Impax Laboratories, and sell generic propranolol hydrochloride to Catalent Pharma Solutions.

The proposed settlement will preserve competition in the markets for these important drugs and is part of the FTC’s ongoing effort to protect U.S. consumers from higher heath care-related costs.

A description of the consent agreement package will be published in the Federal Register by the FTC shortly. Following a public consultation that will last until 30 July 2014, the FTC will decide whether to make the proposed consent order final. A monitoring trustee will then oversee the swift implementation of the consent order.

It may be recalled that last June 2013, the U.S. Supreme Court reversed the eleventh Circuit opinion in the landmark FTC v. Actavis case (see Newsletter 3-4 2013, p. 3 for more background), holding that reverse payment settlement agreements may violate federal antitrust laws but are not a per se violation, thus recognizing the impact that such settlement agreements would have on American consumers in the pharmaceutical market. Yet the validity of such agreements will still be tested under the rule-of-reason. 

Follow

Get every new post delivered to your Inbox.

Join 25 other followers