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Athletes’ Right of Publicity Claim Preempted by Copyright Act

By Marie-Andrée Weiss

The U.S. Court of Appeals for the Ninth Circuit ruled on 5 April 2017 that the Copyright Act preempted the California right of publicity claims of Plaintiffs, former college athletes whose photographs are part of the National Collegiate Athletic Association (NCAA) library of images license online by Defendant. The case is Maloney v. T3Media, 15-55630.

Plaintiffs played on the Catholic University basketball team from 1997 to 2001, which won the 2001 Men’s Division III NCAA championship game. Defendant T3Media entered into an agreement with NCAA in 2012 to store, host and license the images in the NCAA photo library. The NCAA runs 90 championships in 24 sports across 3 divisions, and its library contains thousands of photographs of championship games, including some taken during the 2001 Men’s Division III championship game in which Plaintiffs participated.

T3Media sold non-exclusive licenses online for two years that allowed users to download copies of the NCAA photographs for personal use. Plaintiffs contended that such action was a violation of their California statutory right of publicity, California Civil Code § 3344, California common law right of publicity, and a violation of California Unfair Competition Law.

They filed a putative class action suit in June 2014 in the U.S. Central District Court of California on behalf of current and former NCAA athletes whose names, images and likeness had been used without their consent by Defendant for purpose of advertising, selling, or soliciting the purchase of these photographs.

 

The two-steps of an anti-SLAPP analysis

Defendant moved for a special motion to strike under California anti-SLAPP statute, Cal. Code Civ. Proc. § 425.16, which aims to prevent strategic lawsuits against public participation (SLAPP). Courts follow two-steps when assessing an anti-SLAPP motion to strike: first the moving defendant must show that plaintiff’s suit arises from an act in furtherance of defendant’s right to free speech, as protected by the First Amendment. The second part of the assessment shifts the burden to plaintiff who must demonstrate a probability of prevailing on any of her claims.

T3Media had argued that the photographs at stake, and their captions, had been published in a public forum in connection with a matter of public interest. The district court agreed, finding that the photographs “fell within the realm of an issue of public interest (District Court, at 1134).

This shifted the burden to Plaintiffs to demonstrate a reasonable probability of prevailing on any of their claims. Defendant claimed three affirmative defenses: (1) Plaintiffs’ claims were preempted by federal copyright law, (2) were barred under the First Amendment, and (3) California right of publicity law exempts from liability use of likeness in connection with any news, public affairs, or sports broadcast or account.

The district court did not address the last two defenses as it found that Plaintiffs’ claims were preempted by the Copyright Act, because Plaintiffs asserted rights that fell within the subject matter of copyright, and granted Defendant special motion to strike. Plaintiffs appealed to the Ninth Circuit, which affirmed.

As Plaintiffs had conceded that their suit arose from acts in furtherance of T3Media’s right to free speech, the Ninth Circuit only examined whether Plaintiffs indeed had demonstrated a reasonable probability of prevailing on their claims, and found they had not met that burden, as the Copyright Act preempted their claims.

 

The copyright preemption two-part test

Section 301 of the Copyright Act provides that common law or statutory state laws are preempted by rights “equivalent to any of the exclusive rights within the general scope of copyright.” Courts in the Ninth Circuit use a two-part test to determine whether a state law claim is preempted the Copyright Act: the courts first decide if the subject matter of the state law is within the subject matter of copyright, and then determine if the rights asserted under state law are equivalent to the exclusive rights of the copyright holders, as determined by Section 106 of the Copyright Act. Parties only argued about the first part of the test.

 

The right of publicity claim is not preempted if its basis is the use of a likeness

Plaintiffs argued that their right of publicity claim was not preempted by the Copyright Act because publicity right claims protect the persona of an individual, which cannot be fixed in a tangible medium of expression (p. 12). They relied on Downing v. Abercrombie & Fitch, where the Ninth Circuit held that “the content of the protected right must fall within the subject matter of copyright” for the Copyright Act to preempt the state claim (Downing at 1003). Plaintiffs reasoned that their likeness is not with the subject matter of copyright and thus their state claim cannot be preempted by the Copyright Act.

Defendants argued that Plaintiffs’ likeness had been captured in an artistic work and had not been used on merchandise or in advertising. Indeed, the Ninth Circuit noted that “the “core” of the publicity right is the right not to have one’s identity used in advertising” (p. 13). The court of appeals concluded “that a publicity-right claim is not preempted when it targets non-consensual use of one’s name or likeness on merchandise or in advertising. But when a likeness had been captured in a copyrighted artistic visual work and the work itself is being distributed for personal use, a publicity-right claim interferes with the exclusive rights of the copyright holder, as is preempted by section 301 of the Copyright Act“ (p. 13)(emphasis of the Court).

The Ninth Circuit distinguished its Downing case from the case at stake, as the right of publicity claim in Downing is not about the publication of the photograph, but its use: Abercrombie used the surfer’s likeness in the catalog and had also sold reproductions of the tee-shirts worn by them in the photograph. The Ninth Circuit concluded that If the basis of the right of publicity claim is the use of a likeness in a photograph, the right of publicity claim is not preempted by copyright (p. 17).

 

When is a likeness misused in a work protected by copyright?

Therefore, the “crux of the issue” was whether the basis of the publicity-right claim was indeed to defend Plaintiff against a misuse of their likeness by Defendant. The court reasoned that Section 301 does not distinguish among different types of work protected by copyright, and that the pertinent issue was the way the likeness was used, not the type of the copyrighted work. In Downing, the basis of the publicity-right claim was not the publication of the photograph, but its use to advertise Abercrombie’s products and the creation of tee-shirts similar to those worn by Plaintiffs in the photograph, which were commercial exploitation of Plaintiff’s likeness (p. 19).

The Ninth Circuit noted further that it held in 2006, in Laws v. Sony Music Entertainment, Inc., that “federal copyright law preempts a claim alleging misappropriation of one’s voice when the entirety of the allegedly misappropriated vocal performance is contained within a copyrighted medium” (Laws at 1141). The Ninth Circuit also cited its Jules Jordan Video, Inc. v. 144942 Canada Inc. 2010 case, where it ruled that federal copyright law preempts a claim alleging misappropriation of one’s name and persona based entirely on the misappropriation of DVDs of movies in which plaintiff performed and of which he owned the copyright. Plaintiff had objected to the use of his likeness on the covers of counterfeit DVDs, which the Ninth Circuit found to be “still shots” of the performance protected by copyright. The Ninth Circuit reasoned that Plaintiff claim was a copyright claim, not a claim that his likeness has been used on an unrelated product or in advertising. For the Ninth Circuit, a likeness embodied in a work protected by copyright is misused if it is used on an unrelated product or in advertising.

 

Why did Plaintiffs’ claim fail

Plaintiffs’ attorney argued at the hearing that Defendant was selling the photographs “as poster art, as desktop backgrounds, as digital goods” (video at 11:36). This is an interesting argument, as the Ninth Circuit attaches great importance to the type of use of the likeness. However, it is the consumers who are choosing how to use the images, within the rights provided to them by the license, not the Defendant.

The District Court explained that ruling in favor of Plaintiffs “would destroy copyright holders’ ability to exercise their exclusive rights under the Copyright Act, effectively giving the subject of every photograph veto power over the artist’s rights under the Copyright Act and destroying the exclusivity of rights the Copyright Act aims to protect (District Court at 1138).

Plaintiff’s attorney recognized during the hearing that non-commercial use of the photos would be acceptable (video at 13:36). When asked by the judges to give an example of non-commercial use, he suggested editorial use, in a student newspaper or a national newspaper. While the Court did thus not address the issue of free speech, several media organizations filed an amici curiae brief in support of Defendant, to ensure that “the right of publicity is not transformed into a right of censorship—one that can be used to prevent the dissemination of matters of public importance” (amici curiae brief p. 9).

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Streaming by Using a Multimedia Player: ECJ Rules in Favor of Copyright Holders

By Martin Miernicki

Following the opinion of the Advocate General, the ECJ gave its opinion in Stichting Brein v. Wullems (C‑527/15) on 26 April 2017.[1] The court had to deal with a multimedia player (“filmspeler”), a device which allowed end users to easily stream content from online sources. Pre-installed add-ons – freely available on the internet – to the “filmspeler” contained links which connected to third-party websites which in turn made available protected works without the right holders’ consent; the multimedia player was specifically marketed for this function and sold for profit.

 

Background

Articles 2(a) and 3(1) of the so-called Copyright Directive reserve the exclusive rights to reproduction as well as communication to the public in respect of their works for authors. Article 5(1) exempts certain temporary acts of reproduction from the scope of the authors’ exclusive rights, subject to the “three-step test” contained in article 5(5). Stichting Brein v. Wullems marks a further important addition to the case law involving the construction of these provisions, especially in the online environment. Relevant prior judgements include Nils Svensson v. Retriever Sverige (C-466/12), C More Entertainment v. Linus Sandberg (C-279/13), BestWater International v. Michael Mebes (C-348/13), and GS Media v. Sanoma Media Netherlands (C-160/15)[2] (on hyperlinks) as well as Infopaq Int’l v. Danske Dagblades Forening  (C-5/08, “Infopaq I”), Football Association Premier League v. Media Protection Services (C-403/08 & C-429/08), Infopaq Int’l v. Danske Dagblades Forening (C-302/10, “Infopaq II”), and Public Relations Consultants Ass’n v. Newspaper Licensing Agency (C-360/13) (on temporary reproductions).

 

The questions referred

The questions referred to the ECJ by the national (Dutch) court related to the perspective of both commercial and end users. It asked, first, whether the sale of a multimedia player as described above constituted a communication to the public within the meaning of the Copyright Directive’s article 3(1); and, second, whether the streaming of unauthorized content by end users with the aid of such multimedia player was covered by article 5(1) and compatible with article 5(5) of the directive.

 

Selling the multimedia player constitutes a communication to the public

In reference to its prior case law, the court held that the defendant’s conduct constituted an “act of communication” (para 42), directed to a “public” (para 46). Moreover, it reaffirmed its concept of the “new public”. In line with its ruling in GS Media, the court attributed significant importance to the fact that the multimedia player was sold for profit and with the full knowledge that the links provided connected to works made available without the consent of the right holders (para 49 et seq).

 

Streaming by using the media player is not exempted from the scope of the reproduction right

The actual question was whether the acts at hand carried out by end users could be considered “lawful use” within the meaning of the Copyright Directive. In this respect, the court distinguished the present case from its prior decisions and ruled that the temporary reproductions made while streaming unauthorized content through the media player did not satisfy the conditions set forth by article 5(1). Again, the court emphasized that this function was the “main attraction” of the multimedia player (para 69). Finally, the court noted that the streaming would “adversely affect the normal exploitation” of the copyrighted content and thus conflict with the “three-step test” (para 70).

 

What does the judgement mean?

The first of part of the judgement is line with the prior case law. As pointed out by the Advocate General, exempting the sale of a media player like that at issue would be too “reductionist” (para 49). Indeed, there is no significant difference between posting a hyperlink on a website and integrating that link in a multimedia player (para 51). However, some questions concerning the court’s concept of the “new public” remain. It is not clear, for instance, under what circumstances a person “ought to know” that a hyperlink provides access to infringing content; it is even more difficult to define the scope of the “for profit” criterion. In both GS Media and the present case, the situation was rather clear; yet, demarcation problems might arise, especially, if the communication does not occur as a core part of the activities carried out for profit, but is of a rather complementary nature (e.g., a lawyer posting hyperlinks on his or her law firm’s blog). Nevertheless, it seems that the (subjective) approach taken by the court in both cases towards the communication to the public of protected works strikes a reasonable balance between the protection of right holders and the interests of internet users.

This also applies, in principle, to the ECJ’s ruling in respect of streaming by end users. In this context, it should be noted that the court merely gave its opinion on article 5(1). Other exemptions or limitations may apply for the benefit of consumers, especially the “private copying exemption” contained in article 5(2)(b) of the Copyright Directive (cf. para 70). Furthermore, as the GA noted, the question whether an end user knew (or should have known) that he or she was streaming illegal content can be taken into account when dealing with personal liability (para 71). Lastly, although the decision will clearly have strong implications for the streaming of copyrighted works in general, the ECJ limited its decision to the streaming of protected works via the “filmspeler”, so that the possibility of flexible approaches in future cases is not excluded.

[1] See already Transatlantic Antitrust and IPR Developments Issue 1-2016.

[2] See for more details Transatlantic Antitrust and IPR Developments Issue 2-2016 and Issue 3-4/2016.

CJEU: EU-Directive 2001/29/EC Does Not Permit National Legislation to Provide a Special Defense to Copyright Infringement for Retransmission of Television Broadcasts via the Internet

By Katharina Erler

The Fourth Camber of the Court of Justice of the European Union (CJEU) ruled on 1 of March 2017 that Article 9 of EU InfoSoc Directive (2001/29/EC) does not cover national legislation, which provides a special defense to copyright infringement by retransmission of works broadcast on television channels by cable or via the internet. In particular, Article 9 must be interpreted as not permitting national legislation which allows the immediate retransmission of free-to-air broadcasts by cable and via the internet, if it is done within the area of the initial broadcast. The case is ITV Broadcasting Limited v. TVCatchup Limited, C-275/15.

The appellants in the main proceedings, commercial television broadcasters ITV, Channel 4 and Channel 5, own copyrights under national law in their televisions broadcasts and included films. TVCatchup (TVC) offered an internet television broadcasting service, permitting its users to receive streams of TV shows, including those transmitted by ITV, Channel 4, and 5.

It is important to note that the CJEU has dealt with this case before: In its judgement of 7 March 2013, ITV Broadcasting and Others (C-607/11), the CJEU held that the retransmission of protected works and broadcasts by means of an internet stream, such as the service of TVCatchup, constitutes a communication to the public under Article 3 of Directive 2001/29/EC (InfoSoc Directive) and therefore must be authorized by the authors concerned.

The High Court of Justice (England & Wales) followed this judgement and found that TVC had infringed the copyright of television broadcasters. It, however, found that TVCatchup could rely on a defense under Section 73 (2) (b) and (3) of the United Kingdom’s Copyright, Designs and Patent Act (CDPA).

The broadcasters filed an appeal against this High Court decision. The Court of Appeal (England & Wales) took the view that the national defense provisions in Section 73 (2) (b) and (3) must be interpreted in light of Article 9 of Directive 2001/29 and consequently referred a number of questions concerning the interpretation of Article 9 to the CJEU for a preliminary ruling.

 

Legal context

Article 9 (“Continued application of other legal provisions”) of Directive 2001/29/EC of the European Parliament and of the Council on the harmonization of certain aspects of copyright and related rights in the information society (InfoSoc Directive) states that the Directive shall be without prejudice to provisions concerning in particular […] access to cable of broadcasting services […].

Article 1 of the InfoSoc Directive (2001/29/EC) with regard to the scope of the Directive stipulates that this Directive shall leave intact and shall in no way affect existing Community provisions relating to […] (c) copyright and related rights applicable to broadcasting of programs by satellite and cable retransmission.

Section 73 (2) (b) and (3) of the United Kingdom’s Copyright, Designs and Patent Act (CDPA), which implemented Directive 2001/29/EC, that copyright is not infringed “if and to the extent that the broadcast is made for reception in the area in which it is re-transmitted by cable and forms part of a qualifying service”.

 

Consideration of the questions referred to the CJEU

Of five questions referred to the CJEU by the Court of Appeal, the CJEU explicitly only responded to one, which referred to the phrase “access to cable of broadcasting services” under Article 9 of Directive 2001/29/EC, and asked whether it applies to (1) national provisions which require cable networks to retransmit certain broadcasts or (2) national provisions which permit the retransmission by cable of broadcasts (a) where the retransmissions are simultaneous and limited to areas in which the broadcasts were made for reception and/or (b) where the retransmissions are of broadcasts on channels which are subject to certain public service obligations.

In essence, the CJEU answered the question whether Article 9 of Directive 2001/29/EC might be interpreted as permitting national legislation to provide a separate general defense to retransmission of broadcasting services via cable— including the internet—without the authors consent.

By emphasizing that the concept of “access to cable broadcasting services” must be given an autonomous and uniform interpretation throughout the European Union, the CJEU—in line with the opinion of the Advocate General from 8 September 2016—found that the term “access to cable” is different from that of “retransmission of cable” under Article 1 (c), because only the latter notion designates the transmission of audio-visual content. Therefore, taking into account the wording, Article concerns not the transmission of content and the public access to this content, but rather the access to a network.

Setting Article 9 in the context of the whole Directive, the CJEU clearly states that the exclusion of EU provisions on “cable retransmission” from the scope of Directive 2001/29/EC, in this instance, refers to EU Directive 93/83 concerning copyrights applicable to satellite broadcasting and cable retransmission. Since, however, the case at hand concerns the retransmission within one Member State, the provisions of Directive 93/83, which solely apply to cross-border retransmissions, are irrelevant.

Highlighting that the principal objective of the InfoSoc Directive (2001/29/EC) is to establish a high level of protection for authors, the CJEU referred to its earlier ruling from the previous referral by the UK High Court in the same case (ITV Broadcasting and Others, C-607/11). As ruled in that decision, the retransmission by means of an internet stream, such as the one at issue, constitutes a “communication to the public” under Article 3 (1) of Directive 2001/29/EC and, therefore, results in copyright infringement unless it falls within the scope of Article 5, which sets out an exhaustive list of exceptions and limitations to the right of communication to the public. In the view of the CJEU, it is common ground that the retransmission at issue does not fall within the scope of any of the exceptions and limitations set out in Article 5 of Directive 2001/29/EC.

Most importantly, the CJEU ruled – referring to the opinion of the Advocate General from 8 September 2016 – that Article 9 of Directive 2001/29/EC may not be interpreted to mean that it independently permits exceptions to the right of communication to the public in Article 3. The objective pursued by Article 9 is, indeed, to maintain the effect of provisions in areas other than the area harmonized in Directive 2001/29/EC. Keeping the general objective of the Directive, especially the high level protection of authors and the exhaustive nature of Article 5 in mind, the CJEU found that Article 9 may not be interpreted as covering retransmissions.

The Court noted furthermore, that the InfoSoc Directive contains no legal basis that would justify affording less protection to television channels subject to public service obligations.

As a result of the CJEU’s decision, the national exception to copyright under Section 73 of UK’s CDPA with regard to retransmissions shall be considered as not compatible with the EU legal framework. This decision seems to be consistent with the objective of the InfoSoc Directive, which is to set harmonized rules on copyrights and especially to ensure a high level of protection for the authors.

It is worth mentioning that the question of whether national rules can regulate retransmission and introduce exceptions of copyright was again raised in a case, decided by the CJEU shortly thereafter. On 16 March 2017, in AKM v. Zürsnet (C-138/16), the CJEU, in contrast to the earlier case ITV Broadcasting v. Others (C-607/11), found that the transmission of television and radio broadcasts by a cable network installation does not constitutes a communication to a new public under Article 3 of the InfoSoc Directive. In that Case, the CJEU held that due to the fact that the persons who receive the transmission of the protected works have been taken into account by the rightsholders when they granted the original authorization for the national broadcaster, the transmission does not infringe copyright under the InfoSoc Directive. The CJEU did not take into account its broad interpretation of “communication to the public” as referred to in its earlier decision ITV Broadcasting and Others (C-607/11). This decision, however, might cause confusion as to the requirements of “communication to the public” in Article 3 of the InfoSoc Directive and the question of whether national legislation may introduce exceptions of copyright for retransmissions of broadcasts.

CJEU rules that lending an e-book is legal if the first sale right has been exhausted

By Marie-Andrée Weiss

The Third Chamber of the Court of Justice of the European Union (CJEU) ruled on 10 November 2016 that it is legal under EU law for a library to lend an electronic copy of a book. However, only one copy of the e-book can be borrowed at the time, the first sale of the e-book must have been exhausted in the EU, and the e-book must have been obtained from a lawful source. The case is Vereniging Openbare Bibliotheken v. Stichting Leenrecht, C-174-15.

 

Legal framework

Article 2 of Directive 2001/29/EC of the European Parliament and of the Council of 22 May 2001 on the harmonisation of certain aspects of copyright and related rights in the information society (the InfoSoc Directive) provides authors exclusive rights in their works, including, under its Article 3, the exclusive right to communicate their works to the public by wire or wireless means. Its Article 4 provides that these exclusive rights are exhausted by the first sale or by other transfers of ownership of the work in the EU.

Article 6(1) of Directive 2006/115/EC of the European Parliament and of the Council of 12 December 2006 on the rental right and lending right and on certain rights related to copyright in the field of intellectual property, the Rental and Lending Rights Directive (RLR Directive), gives Member States the right to derogate from the exclusive public lending right provided to authors by Article 1 of the RLR Directive, provided that authors are compensated for such lending.

Article 15c(1) of the Dutch law on copyright, the Auteurswet, authorizes lending of a copy of a literary, scientific, or artistic work, provided that the rightsholder consented to the lending and is compensated for it. The Minister of Justice of the Netherlands set up a foundation to that effect, the Stichting Onderhandelingen Leenvergoedingen (StOL), which collects lending rights payments as a lump sum from lending libraries and then distributes those payments to rightsholders through collective management organizations.

The Dutch government took the view that e-books are not within the scope of the public lending exception of the Auteurswet and drafted a new law on that premise. The Vereniging Openbare Bibliotheken (VOB), which represents the interests of all the public libraries in the Netherlands, challenged this draft legislation and asked the District Court of The Hague to declare that Auteurswet covers lending of e-books.

The Court stayed the proceedings and requested a preliminary ruling from the CJEU on the question of whether Articles 1(1), 2(1)(b) and 6(1) of the Renting and Lending Rights Directive authorize e-lending, provided that only one library user can borrow the e-book at a time by downloading a digital copy of a book which has been placed on the server of a public library.

If this is indeed authorized by the Directive, the District Court asked the CJUE whether article 6 of the Directive requires that the copy of the e-book which is lent has been brought into circulation by an initial sale or other transfer of ownership within the European Union by the rightsholder, or with her consent within the meaning of Article 4(2) of the InfoSoc Directive.

The District Court also asked whether Article 6 of the RLR Directive requires that the e-book which is lent was obtained from a lawful source.

Finally, the District asked the CJEU to clarify whether e-lending is also authorized (if the copy of the e-book which has been brought into circulation by an initial sale or other transfer of ownership within the European Union by the right holder or with her consent) when the initial sale or transfer was made remotely by downloading.

 

First: Is e-lending legal under the renting and lending rights directive?

The CJEU noted that Article 1(1) of the RLR Directive does not specify whether it also covers copies which are not fixed in a physical medium, such as digital copies (§ 28). The CJEU interpreted “copies” in the light of equivalent concepts of the WIPO Copyright Treaty of 20 December 1996, which was approved by the European Community, now the European Union. Its Article 7 gives authors the exclusive right to authorize “rentals” of computer programs. However, the Agreed Statements concerning the WIPO Copyright Treaty, which is annexed to the WIPO Treaty, explains that Article 7’s right of rental “refer[s] exclusively to fixed copies that can be put into circulation as tangible objects,” thus excluding digital copies from the scope of Article 7.

The Court noted, however, that “rental” and “lending” are separately defined by the RLR Directive. Article 2(1) (a) defines “rental” as “making available for use, for a limited period of time and for direct or indirect economic or commercial advantage,” while Article 2(1) (b) defines “lending” as “making available for use, for a limited period of time and not for direct or indirect economic or commercial advantage, when it is made through establishments which are accessible to the public.” The Court examined preparatory documents preceding the adoption of Directive 92/100, which the RLD Directive codified and reproduced in substantially identical terms, and noted that there was “no decisive ground allowing for the exclusion, in all cases, of the lending of digital copies and intangible objects from the scope of the RLR Directive.” The Court also noted that Recital 4 of the RLR Directive states that copyright must adapt to new economic developments and that e-lending “indisputably forms part of those new forms of exploitation and, accordingly, makes necessary an adaptation of copyright to new economic developments” (§ 45).

The CJEU noted that borrowing an e-book as described by the District Court in its preliminary question “has essentially similar characteristics to the lending of printed works,” considering that only one e-book can be borrowed at the time (§ 53). The CJEU therefore concluded that that “lending” within the meaning of the RLR Directive includes lending of a digital copy of a book.

 

Second: May only e-books first sold in the EU be lent?

The InfoSoc Directive provides that the exclusive distribution rights of the author are exhausted within the EU after the first sale or other transfer of ownership in the EU of the work by the right holder or with his consent. Article 1(2) of the RLR Directive provides that the right to authorize or prohibit the rental and lending of originals and copies of copyrighted works is not exhausted by the sale or distribution of originals and copies of works protected by copyright.

The CJEU examined Article 6(1) of the RLR Directive in conjunction with its Recital 14, which states it is necessary to protect the rights of the authors with regards to public lending by providing for specific arrangements. This statement must be interpreted as establishing a minimal threshold of protection, which the Member States can exceed by setting additional conditions in order to protect the rights of the authors (at 61).

In our case, Dutch law required that an e-book made available for lending by a public library had been put into circulation by a first sale, or through another transfer of ownership, by the right holder or with his consent within the meaning of Article 4(2) of the InfoSoc Directive. The Court mentioned that Attorney General Szpunar had pointed out in his Opinion that if a lending right is acquired with the consent of the author, it may be assumed that the author’s rights are sufficiently protected, which may not be the case if the lending is made under the derogation provided by Article 6(1) (Opinion at 85). AG Szpunar concluded that therefore only e-books which had been made first available to the public by the author should be lent. The CJEU ruled that Member States may subject as condition to e-lending the fact that the first sale of the e-book has been exhausted in the EU by the right holder.

 

Third: May a copy of an e-book obtained from an unlawful source be lent?

Not surprisingly, the CJEU answered in the negative to this question, noting that one of the objectives of the RLR Directive, as stated by its Recital 2, is to combat piracy and that allowing illegal copies to be lent would “amount to tolerating, or even encouraging, the circulation of counterfeit or pirated works and would therefore clearly run counter to that objective” (at 68).

The Court did not answer the fourth question as it had been submitted only in the case the Court would rule that it is not necessary that the first sale of the e-books being lent had been exhausted in the EU.

This is a welcome decision since, as noted by AG Szpunar in his Opinion, it is crucial for libraries to be able to adapt to the fact that more and more people, especially younger ones, are now reading e-books instead of printed books.

Partial victory for BMI: Federal judge rules against full-work licensing requirement

By Martin Miernicki

On 16 September 2016, Judge Stanton issued an opinion interpreting the BMI Consent Decree. He concluded that the decree does not require BMI to issue “full-work” licenses.

 

Background

On 4 August 2016, the U.S. Department of Justice (DOJ) published a closing statement concluding its review of the ASCAP and BMI Consent Decrees. It stated that said decrees prohibited ASCAP and BMI from issuing fractional licenses and required them to offer full-work licenses.[1]  Both ASCAP and BMI immediately announced to fight the opinion, the latter seeking a declaratory judgement, asking the “rate court” for its opinion.[2]

 

The court’s opinion

In its declaratory judgement, the court rejected the DOJ’s interpretation of the BMI Consent Decrees, ruling that “nothing in the Consent Decree gives support to the [Antitrust] Division’s view.” It held that the issue of full-work licensing remained unregulated by the Consent Decree; rather, this question should be analyzed under other applicable laws, like copyright or contract law. In conclusion, the court explained that the decree “neither bars fractional licensing nor requires full-work licensing.” The court furthermore distinguished the question at hand from its decision in BMI v. Pandora,[3] where it struck down attempts by major publishers to partially withdraw rights from BMI’s collective licensing regime.

 

The way forward

The court’s opinion is a clear success for BMI, but also for ASCAP, since it can be expected that Judge Stanton’s ruling will be influential in analogous questions regarding the ASCAP Consent Decree. However, this success is not final. BMI reported that the DOJ appealed the decision on 11 November 2016. It is hence up to the Court of Appeals for the Second Circuit to clarify the meaning of the decree.

[1] Under a full-work license, a user obtains the right to publicly perform the entire work, even if not all co-owners are members of the organization issuing the license. Conversely, a fractional license only covers the rights held by the licensing organization.

[2] For more information on the background of the decision see Transatlantic Antitrust and IPR Developments Issue No. 3-4/2016.

[3] BMI v. Pandora, Inc., No. 13 Civ. 4037 (LLS), 2018 WL 6697788 (S.D.N.Y. Dec. 19, 2013).

Who’s on Second (Circuit)? Transformative fair use

By Marie-Andrée Weiss

The Second Circuit found on 11 October 2016 that verbatim use of the famous ‘Who’s on First’ Abbott and Costello routine in the Hand to God play was not transformative enough to be fair use. The Second Circuit nevertheless affirmed the dismissal of the lower judgment as Plaintiffs did not have a valid copyright interest in the routine. The case is TCA Television Corp. v. McCollum, No. 1:16-cv-0134 (2d Cir. Oct. 11, 2016).

William ‘Bud’ Abbott and Lou Costello formed a comedy duo which was popular in the thirties and forties. Who’s on First is one their most famous routines, where Abbott plays the manager of a baseball team which Costello just joined. The newbie wants to know the name of his fellow players and the manager obliges: they are “Who,” “What,” and “I Don’t Know.” Misunderstandings ensue, fired up at a rapid pace. The routine was named “Best comedy routine of the 20th Century” by Time magazine in 1999.

The play Hand to God, written by Robert Askins, was shown off-Broadway in 2011 at The Ensemble Studio Theatre, and has since been shown on Broadway and in London. The play is about Jason, an introverted young man from a small Texas town who participates in his church’s “Christian Puppet Ministry,” a sock puppet show. Tyrone, Jason’s sock puppet takes a life on its own and blurts out embarrassing facts, maybe because it is an incarnation of the devil, maybe because Jason uses him to say what he truly thinks. Jason recites Who’s on First, with Tyrone as his partner, to a young woman in order impress her, and then pretends that he is the one who came up with the routine. Tyrone then calls him a liar and tells the girl she is stupid for believing that Jason indeed created the routine. An excerpt of that scene was used in a promotional video for the play.

When Abbott and Costello’s heirs learned about this use, they filed a copyright infringement suit against the Ensemble Studio Theatre and the playwright in the Southern District of New York (SDNY). Defendants conceded that they had used part of the routine, but argued in defense that is was “part of a sophisticated artistic expression” and also that Plaintiffs do not own a valid copyright in the routine.

On December 17, 2015, Judge Daniels from the SDNY dismissed the copyright infringement suit brought by Plaintiffs because, while Plaintiffs had indeed established a continuous chain of title in the copyright, use of the routine by Defendants was fair use. Plaintiffs appealed.

 

The use of the routine is not protected by fair use

Plaintiffs had argued that the play had not added anything new to the original routine as Jason merely recited it without transforming it, and that therefore is was not fair use. The Second Circuit agreed.

When examining whether a particular use of a work protected by copyright is fair, courts use the four factors enumerated by Section 107 of the Copyright Act: the purpose and character of the use, the nature of the copyrighted work, the amount and substantiality of the portion used and the effect of the use on the market.

Judge Daniels had found, when examining the purpose and the character of the use of the routine in the play, that it was transformative enough to be fair use. He had cited the Second Circuit Cariou v. Prince case, where the Court had found that Richard Prince’s use of Cariou’s photographs to create new works was transformative enough to be fair use because Prince had “employ[ed] new aesthetics with creative and communicative results distinct from Cariou’s” and also had incorporated “new expression” in his works.

For Judge Daniels, “the performance through the anti-hero puppet… create[d] new aesthetics and understandings about the relationship between horror and comedy that are absent from Abbott and Costello’s… routine.” He further explained that “[t]he contrast between Jason’s s seemingly soft-spoken personality and the actual outrageousness of his inner nature, which he expresses through the sock puppet, is, among other things, a darkly comedic critique of the social norms governing a small town in the Bible Belt.”

The Second Circuit found this reasoning to be “flawed in what it identifies are the general artistic and critical purpose and character of the [p]lay” and that the court did not explain how “extensive copying of [the] routine was necessary to this purpose.” Section 107 enumerates the uses which are fair: criticism, comment, news reporting, teaching, scholarship and research. For the Second Circuit, the use of the routine “does not appear to fit within any of these statutory categories.”

Even though the Second Circuit had held in Cariou that it is not essential that a use comments on the original work to be transformative, it also held that a use is transformative only if it alters the original work with “new expression, meaning, or message.” For the Second Circuit, this was not the case as the routine had not been altered in the play, but used for what it is, a famous classic routine, instantly recognizable by the audience. The Court quoted its own On Davis v. Gap, Inc. case which explained that a use is not transformative if it used the original “in the manner it was made to be” used. The Court pointed out that it was necessary that the routine is not altered, so that the audience can recognize it and laugh when Jason pretends he created it. For the Second Circuit, the use of the routine is  a mere “McGuffin,” an event which sets the plot, in that case informing the audience that Tyrone the sock puppet can speak unprompted and has a foul mouth. However, not “any new dramatic purpose justif[ied] [d]efendants’ extensive copying of the [r]outine.” As the use was not transformative, the purpose and character of the use factor weighed in Plaintiff’s favor.

The Court also found that the nature of the work factor weighed in favor of Plaintiffs, as the routine was created to entertain the public, and thus is “at the heart of copyright’s intended protection.” It dismissed Defendants’ argument that use of the routine was justified by the need to use “an instantly recognizable “cultural” touchstone in the relevant scene” because Defendants could have used another cultural touchstone, such as “inventing the Internet” or “out-swimming Michael Phelps.” These examples are not convincing as they are not examples of cultural touchstones performed by a duo, a format which was needed in a play about a man and his evil sock puppet.

The amount and substantiality of the use factor weighted “strongly” in favor of Plaintiffs as the copying of the original work was “substantial” and because, while even a substantial use can be fair use “if justified,” it was not the case here. The fourth factor, the effect on the potential market, also did weigh in favor of Plaintiffs because there is a licensing market for the routine.

However, even though all of the fair use factors weighed in favor of Plaintiffs, the Second Circuit nevertheless affirmed the dismissal of the case because Plaintiffs failed to prove they own a valid copyright in the routine.

 

Plaintiffs do not own the copyright in Who’s on First

Judge Daniels had found that Plaintiffs had proven a continuous chain of title in the copyright of the routine, but the Second Circuit disagreed.

The routine was first performed in 1938 on the radio. It was also performed by Abbot and Costello in their 1940 One Night in the Tropics movie (Tropics) and in 1945 in their Naughty Nineties movie. As both the routine and the two movies were created before January 1, 1978, date of the entry into force of the 1976 Copyright Act, they are subject to the 1909 Copyright Act, which only protects published or registered works. A work was protected for twenty-eight years under the 1909 Copyright Act, if it was published with the required copyright notice. However, public performance of a work was not a publication under the 1909 Copyright Act, Silverman v. CBS Inc. (SDNY 1986), and therefore the routine was not first published in 1938, but in 1940. Unpublished and unregistered works were protected indefinitely by common law, but became automatically protected by copyright on January 1, 1978.

In November 1940, Abbot and Costello allegedly assigned their rights in the routine as performed in the two movies to Universal Pictures Company (UPC), which registered the copyright of Tropics in 1940 and of The Naughty Nineties in 1945, and timely renewed both copyrights. As the common law copyright of the routine as first performed in 1938 was never assigned, Abbot and Costello had retained it. They registered a copyright for “Abbott and Costello Baseball Routine” in 1944, but did not renew it and thus the work is in the public domain since 1972.

Plaintiff did not rely on the 1944 registration to claim they own the copyright, but rather in an agreement made in 1984 where UPC quitclaimed all of its rights in the performance of the routine to Abbott &Costello Enterprises (ACE), a general partnership formed by the comedians’ heirs. ACE was later dissolved and copyrights’ ownership were divided among Abbot and Costello heirs.

Defendants had argued that the routine was in the public domain because only Abbott and Costello could have renewed the copyright of the movies, but Plaintiffs argued that UPC had the authority to do it because the comedians had assigned ownership of their common law copyright in the routine to UPC, the routine had merged into Tropics, and the copyright was transferred to ACE by the quitclaim.

For Judge Daniels, the 1940 registration of the One Night movie by UPC in 1940 “extinguished whatever common law copyright Abbott and Costello had in the unpublished version of the [r]outine.” However, the Second Circuit found that Abbott and Costello had merely intended to license the use of the routine to UPC, not to assign their common law copyright in it. The Second Circuit did not interpret the agreement as being a work-for-hire agreement either, because the routine had already been created in 1938 and thus could not have been created at UPC’s “instance and expense” as required it to be a work for hire, Playboy Enters., v. Dumas (2d Cir. 1995). The routine had not merged in the movies either, as “authors of freestanding works that are incorporated into a film… may copyright these ‘separate and independent works’”, 16 Casa Duse, LLC v. Merkin (2d Cir. 2015) and the routine is such a freestanding work.

When is the output of a copyright-protected software program itself protected by copyright?

By Marie-Andrée Weiss

When is the output of a copyright-protected software program itself protected by copyright? This is a case of first impression for any court of appeals which is pending at the Ninth Circuit. The case is Design Data Corporation v. Unigate Enterprise, Inc., 14-16701. On 17 October, 2016, counsels for both parties presented their arguments at the Ninth Circuit to a three-judge panel, composed of Judge Consuelo M. Callahan, Judge Michael Daly Hawkins and Judge Andrew D. Hurwitz.

Design Data Corporation (DDC) has created a computer aided design (CAD) steel detailing software, SDS/2, which can be used to draw 2-D and 3-D drawings and models of structural steel components. The designs can only be viewed through the SDS/2 software, the SDS/2 Viewer software, and in electronic images exported from SDS/2. Unigate Enterprise (UE) is a company which provides steel detailing CAD files to its clients in the U.S. It does not produce the files itself, but instead outsources their production to contractors in China.

DDC believed that UE had used the SDS/2 software illegally. Representatives of DDC visited UE’s office in August 2012 and UE allowed the representatives to search UE’s computers and copy some files. They found a folder containing installation files for SDS/2 and three patch files which can be used to circumvent SDS/2’s licensing requirement. Defendants admitted during discovery that one of its co-owners downloaded a copy of SDS/2 to an external hard drive, but that she believed this copy to be a free demonstration copy of the software, and that she did not install the software, nor did she try to use it. UE admitted that SDS/2 had been used to create files and drawings in five of its projects, but argued that they were made by contractors in China.

DDC sued UE for direct copyright infringement, claiming it had illegally downloaded a copy of the software and also had copied files and images which are output of the SDS/2 software protected by copyright. It also sued UE for contributory copyright infringement claiming that UE imported from China infringing files and images generated by SDS/2 in violation of 17 U.S.C. §602.

UE moved for summary judgment, claiming that merely downloading a software program without installing or using is de minimis copying and that therefore not direct infringement. UE also argued that it cannot be held liable for contributory infringement, as “wholly extraterritorial acts of infringement cannot support a claim under the Copyright Act even when authorized by a party in the United States,” quoting Subafilms, Ltd. v. MGM-Pathe Communications Co., 24 F.3d 1088, 1092, 1995 (9th Cir.1994).

On August 6, 2014, Judge William Orrick from the Northern District Court of California granted Defendants’ motion for summary judgment both for contributory infringement and direct infringement. Defendants had correctly argued that they could not be sued for contributory infringement. Judge Orrick also found that downloading a copy of SDS/2 “without any evidence that the copy was installed or used… amount[ed] at most to a de minimis ‘technical’ violation that is not actionable as a matter of law.”

DDC appealed to the Ninth Circuit, asking the Court to reverse summary judgment. DDC’s counsel argued before the Ninth Circuit that UE did “consciously implement a business model… that was designed to exploit a breach in the copyright protection afforded to software developers by shifting its infringement of [Plaintiff’s software] overseas.” However, as UE cannot be sued for contributory infringement, DDC argued instead that UE directly infringed its copyright by downloading the software and by reproducing the output of the software program which is protected by copyright.

 

Direct infringement: did UE violate copyright law by copying DDC’s software?

Judge Callahan and Judge Hurwitz were both troubled by the fact that UE had advertised on its site that it used the SDS/2 software. UE’s counsel answered that UE was counting on contractors to use it, but admitted that UE had never asked DDC if it was indeed true that the contractors were legally using the software. UE admitted it had downloaded the software, and therefore copied it, but argued it had not used it and therefore this de minimis copying was not actionable. DDC argued that, by downloading the software, UE had copied the entire SDS/2software code and therefore the copying was not de minimis.

Judge Hurwitz asked UE’s counsel whether the de minimis doctrine should apply each time someone copies a work protected by copyright, even if he does not use it, and the UE’s counsel answered in the affirmative.

 

Direct infringement: is the output of the software protected by copyright?

DDC argued also that UE has directly infringed the SDS/2 software because it has copied the steel component designs which are a visual display of the software, and are as such output of the software also protected by copyright. For Judge Hurwitz, this is the “really interesting issue in this case.” However, not every output of a software is protectable by copyright. The question of when the output of a computer program is protectable by copyright has not yet been answered by any court which makes it an issue of first impression.

Software’s source code, which is human-readable, and its object code, which is machine-readable, are both protectable by copyright as literary works, if they are original and fixed in a tangible medium of expression. However, the functional elements of the software, such as its systems or procedures, are not protected by copyright since copyright law does not protect process, system, and method of operation. Judge Orrick had quoted Altai and found that the “job files” and the other documents produced by the SDS/2 software “are data not covered by copyright”

Courts often use the abstraction-filtration-comparison test, first coined by the Second Circuit in Computer Assocs. Int’l v. Altai, to assess which parts of a software program are protected by copyright. The Second Circuit specified that the decision “[did] not control infringement actions regarding categorically distinct works, such as… products of computer programs.” There is no case where a court used the abstraction-filtration-comparison test to determine whether the output of a software has been infringed.

Judge Hurwitz asked DDC’s counsel what makes in her view a particular output protectable by copyright. She offered a test: an output would be protected by copyright if one can tie some sort of creative expression that is included in that output as having emanated from the software. Judge Hurwitz asked her what percentage of creative expression would trigger copyright protection. What if 80% of the creative expression originates from the software user? She conceded that in this case the output would “probably not” be protected by copyright. Judge Callahan found this test too complicated.

UE’s counsel then proposed another test. The output would be protected to the extent that it includes creative expression that has been fixed in the software and embodied in the output. However, if there is additional creative content added to the output by a user, and therefore the proportionality is too imbalanced and weights too heavily in favor of the user, it could be found under the abstract-filtration-comparison test not original and thus not protected. Judge Hurwitz said, that while there is no case addressing the issue, some seem to suggest that the output of a software program may be, in some instances, so substantially similar to the software program that it deserves protection. Judge Hurwitz noted, however, that plaintiff must show substantial similarity.

DDC’s counsel argued that there is not only substantial similarity, but even identity, because, if one inputs the same data into the software, one gets the same design out of it, in an expression which is fixed. But Judge Callahan quoted paragraph 721.6 of the Compendium of U. S. Copyright Office Practice about the “Relationship Between a Computer Program and a Work Created with a Computer or a Computer Program,” which explains that “ownership of the copyright in a work is distinct from ownership of any material object that may be used to create that work.” Judge Callahan asked DDC’s counsel whether this was relevant to the case and she answered that DDC owns the copyright in the software and also owns a copyright in “unnecessary creative expression that accompanies that.” She specified that DDC is not arguing that it owns the copyright in the entire design of the component, only in the expression that accompanies it. DDC considers this to be direct infringement, as it is a derivative work of the component of the software image files.

On rebuttal, Judge Hurwitz asked again DDC’s counsel to explain the relationship between both the creative input of the software and the creative input of its users, and how and when the ratio of these two creative inputs would trigger, or not, the copyright protection of the output. DDC’s counsel answered that DDC is focused on expressive content that is not in the actual design of the component, such as the font or the colors used, the shape of a comment box, or the placement of certain components around the design which appear in the design file, but which are not the design itself. She argued that these elements must be identified using the abstraction-filtration-comparison test to find out whether some elements are protected by copyright, but conceded that there was not any computer software case which used this test.