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Antitrust Suit against Black & Decker and others revived by Fourth Circuit

By Nicole Daniel

On 15 September 2015 the Fourth Circuit revived an antitrust suit against Black & Decker Corp and others which accuses them of conspiring to boycott SawStop LLC’s table saw safety technology. However, the court upheld the dismissal of claims that the defendants manipulated the standard setting process to exclude SawStop LLC’s new technology.

In February 2014, SawStop launched its suit against Black & Decker Corp and other major toolmakers, claiming that the defendant manufacturers had colluded and thereby violated federal antitrust law.  SawStop claimed that the defendants,  through their industry organization Power Tool Institute Inc., refused to license a new safety technology created by SawStop. When a SawStop new technology blade detects contact between itself and a person the blade almost immediately retracts.

In its suit SawStop also accused the defendant companies of conspiring to change the standards of Underwriters Laboratories Inc., a company responsible for safety certification, to prevent a technology similar to SawStops’ from being installed as industry standard. Allegedly, to limit their product liability claims exposure, the defendant manufacturers planned to [have Underwriter’s Laboratories] implement an inferior safety standard; i.e. they wanted to implement a new standard through Underwriter’s Laboratories

In June 2014 the district court dismissed the entire case. The Fourth Circuit, however, in a split three-judge panel, found that even though SawStop did not have enough evidence to show that the defendant manufacturers’ participation in the process for setting safety standards for table saws went beyond cooperation that was ordinarily involved in such process, it did have enough evidence to go ahead with the alleged group boycott claim.

Judge G. Steven Agee for the majority wrote that the district court essentially committed two errors. The first error was to confuse standards for motion-to-dismiss and summary judgment. The second error was that a standard much closer to probability was applied even though the standard should have been closer to plausibility.

According to majority in the Fourth Circuit decision the district court applied the Supreme Court’s Iqbal and Twombly rulings, which to move ahead with an antitrust proceeding, require from the plaintiff to allege something that goes beyond parallel conduct, too stringent; especially given that the case in question was merely in the early stages.

Even though SawStop did not have enough details to plausibly allege that the defendants conspired to manipulate safety standards, SawStop put forward enough details to go ahead with the group boycott claim.

Therefore the Fourth Circuit revived the group boycott claim.

The Fourth Circuit further remanded the dispute over whether the plaintiff was harmed by the alleged anticompetitive behavior, or whether it was even necessary to show such harm since the alleged plot amounts to a per se antitrust violation. This issue was remanded since it had not been briefed sufficiently before the district court.

Importantly it was emphasized by the Fourth Circuit that its decision is not to be regarded as a “license for unlimited discovery” thereby noting that the district courts had power to restrict discovery.

Samsung Antitrust Complaint against Panasonic dismissed with Leave to Amend

By Nicole Daniel

On 30 September 2015, US District Court Judge Jeffrey White granted a partial dismissal of  Samsung’s third amended antitrust complaint against Panasonic Corporation, its affiliate Panasonic Corporation of North America and SD-3C LLC.

The dismissal concerned the market being described too broadly by Samsung. However, Samsung was given leave to amend its complaint.

In 1999 Panasonic and its partners developed SD cards as a modified format of the then-available flash memory cards. These are used in digital cameras and mobile phones. They also created SD-3C to license these SD cards to manufacturers. A standard license was created in 2003. In 2005 and 2006 two new forms of SD cards (the high capacity SD card and the microSD card) were developed, which were not covered by the 2003 license. Accordingly the SD Group met in the fall of 2006 to adopt an amended and restated license agreement.

Samsung started to manufacture the two new SD flash memory formats in 2006, and even though it refused to sign the 2006 license Samsung made the requested royalty payments to the defendants.

In June 2010 Samsung then filed suit alleging that the defendants conspired in order to monopolize the market for SD flash memory cards. Samsung also alleged that the licenses were anti-competitive agreements in restraint of trade.

The District Court granted two previous motions to dismiss in August 2011 and January 2012, since Samsung’s claims were time-barred. These statute of limitations determinations were reversed and remanded by the Ninth Circuit in April 2014. The panel held that the four-year statute of limitations had not expired at the time Samsung filed its complaint in June 2010 since it was alleged that the new licensing agreement between Panasonic and its coconspirators was adopted in the fall of 2006.

Accordingly Samsung filed a Third Amended Complaint, followed by a motion to dismiss by the defendants in February 2015.

In his opinion Judge White stated that the alleged market, i.e. flash memory cards, was too broad as it did not distinguish between reduced-size and full-size memory flash memory cards. Samsung was given leave to amend its complaint to address the deficiencies described by Judge White. However, Judge White held that Samsung offered plausible allegations that the defendants agreed to refrain from competing and instead opted to create a new technology standard in which the defendants could share control.

Germany’s Federal Cartel Office finds ASICS’ restrictions of online sales illegal

By Gabriele Accardo

On 27 August 2015, the Federal Cartel Office (“FCO”) concluded its proceedings concerning certain anticompetitive restrictions in the distribution system of ASICS Deutschland (“ASICS“), and found that ASICS breached the EU competition rules on anticompetitive agreements, insofar as it restricted online sales of its small and medium-sized authorized dealers (see Newsletter 2/2014, p. 20 for more background).

The FCO took issue with ASICS’ prohibiting its dealers from using price comparison engines for their online presence and from using ASICS brand names on the websites of third parties to guide customers to their own online shops.

While ASICS had already amended the clauses concerned, Andreas Mundt, President of the FCO, noted that if manufacturers prohibit their authorized dealers from using price comparison engines and online sales platforms or from using the manufacturers’ brand names in their own search engine advertisements, it will de facto no longer be possible for consumers to find the smaller retailers, in particular, on the Internet. This in turn would allow manufacturers, such as ASICS, to control price competition in both online and offline channels.

The FCO also noted that while small and medium-sized distributors could not compensate for the sales lost due to the limited reach of their “shops” resulting from ASICS’ prohibition, the online business will ultimately be concentrated in the hands of the manufacturers themselves and a few large retailers or leading marketplaces.

The FCO has not specifically ruled on the outright prohibition to use online marketplaces such as eBay or Amazon, due to the fact that the other online restrictions were found anti-competitive.

Interestingly, the FCO noted competition authorities have received numerous complaints from distributors about the conditions for online sales set by brand manufacturers, and that the European Commission’s current sector inquiry into e-commerce will also possibly provide further insights on this issue. Not surprisingly, the FCO stated that further decisions by the authorities or the courts can be expected in this area.

Dance Baby, Dance!

By Marie-Andrée Weiss

A Ninth Circuit panel held on 14 September  2015, that “[c]opyright holders cannot shirk their duty to consider- in good faith and prior to sending a takedown notification- whether allegedly infringing material constitute fair use.”

The case, Lenz v. Universal Music, aka “The Dancing Baby Case,” started in February 2007, when Stephanie Lenz uploaded to YouTube a 29-second video of her toddler son dancing to the song Let’s Go Crazy, by Prince. This did not fare well with Universal, which was at the time enforcing Prince’s copyright. It sent YouTube a takedown notification, which included a “good faith belief” statement, as required by 17 U.S.C. § 512(c)(3)(A)(v) of the Digital Millennium Copyright Act (DMCA), that it had “a good faith belief that use of the material in the manner complained of is not authorized by the copyright owner, its agent, or the law.”

YouTube removed the video and notified Lenz of the removal, who sent YouTube a counter-notification. The video was reinstated, but Universal protested, claiming that there was no evidence that Lenz had ever been granted a license to use Prince’s song. Lenz sent another counter-notification to YouTube, which finally reinstated the video in July 2007.

Lenz filed a suit against Universal, alleging that it had misrepresented in its take-down notice that the video was infringing. Under the DMCA, 17 U.S.C. § 512(f), anyone who knowingly materially misrepresented that material or activity was infringing, or that material or activity was removed or disabled by mistake or misidentification, is liable for damages caused by such misrepresentation.

The District Court denied both parties summary judgment and they brought interlocutory appeal. On September 14, 2015, the Ninth Circuit panel affirmed.


Does the DMCA require copyright holders to consider whether the unauthorized use is fair use?

Lenz argued that the “good faith belief” statement of the complaining party required by 17 U.S.C. § 512(c)(3)(A)(v), “that use of the material in the manner complained of is not authorized by…the law,” must be interpreted as including a belief that the use of the protected work is not fair use.

This question was an issue of first impression in all the U.S. circuits, and the panel held that the DMCA “unambiguously contemplates fair use as a use authorized by law,” adding that “[f]air use is just not excused by the law, it is wholly authorized by the law.” Section 107 of the Copyright Act provides four factors which are used by the courts to determine if an unauthorized use of a work protected by copyright is fair. As such, fair use is indeed “authorized by law.”

Universal had argued that fair use was not “authorized by law” but was a mere affirmative defense, which may excuse an impermissible conduct, but not authorize it. The panel disagreed, citing the Supreme Court Sony Corp. of Am. V. Universal City Studios, Inc. case, where the Court held that an individual “mak[ing] a fair use of the work is not an infringer of the copyright in respect to such use.” The panel also cited a 2015 article by Lydia Pallas Loren, where the author argued that “Congress did not intend fair use to be an affirmative defense- a defense, yes, but not an affirmative defense.” The panel concluded that even if “fair use is classified as an affirmative defense . . . [it is] for the purposes of the DMCA … uniquely situated in copyright law so as to be treated differently than traditional affirmative defenses.”


The nature of the good faith belief that the use of a protected work is not fair use

That left the question of the nature of the “good faith belief” required by § 512(c)(3)(A)(v) that use of the material is not authorized by the law. The panel cited Rossi v. Motion Picture Ass’n of Am., Inc., where the Ninth Circuit held that this requirement “encompasses a subjective, rather than objective, standard” and further held that “in § 512(f), Congress included an expressly limited cause of action for improper infringement notifications, imposing liability only if the copyright owner’s notification is a knowing misrepresentation. A copyright owner cannot be liable simply because an unknowing mistake is made, even if the copyright owner acted unreasonably in making the mistake” (at 1004-1005).

For the panel, it is enough that the copyright holder has a subjective good faith belief that the use of the allegedly infringing work is not fair use. Therefore, Universal should be found liable only “if it knowingly misrepresented in the takedown notification that it had formed a good faith belief that the video was not authorized by law, i.e. did not constitute fair use,” and this is a question of fact for the jury to determine. However, the subjective good faith belief must go beyond mere “lip service.”

But consideration of fair use “need not be searching or intensive” either, as Rossi does not require “investigation of the allegedly infringing content.” The panel was “mindful of the pressing crush of voluminous infringing content that copyright holders face in a digital age.” The panel noted, “without passing judgment,” that “implementation of computer algorithms appears to be a valid and good faith middle ground for processing a plethora of content while still meeting the DMCA’s requirements to somehow consider fair use,” citing Disney Enters., Inc. v. Hotfile Corp., 2013 WL 6336286, where the United States District Court for the Southern District of Florida was “unaware of any decision to date that actually addressed the need for human review” of DMCA takedown notices. In this case, file storage company Hotfile had received some 400,000 DMCA takedown requests.


Willful blindness doctrine is applicable in DMCA context, but not in this case

The panel also held that the courts may use the willful blindness doctrine to determine whether a copyright holder knowingly materially misrepresented that it held a good faith belief the use of a work is not fair use. Indeed, the District Court had authorized Lenz to proceed to trial under a willful blindness theory. The panel cited the Second District Viacom Int’l v. YouTube case, where the court was the first to consider the application of the willful blindness doctrine in the DMCA context, and found it applicable. The panel, however, ruled that Lenz could not proceed to trial on this theory, as she had failed to establish the factors necessary to demonstrate willful blindness established by the Supreme Court in Global-Tech Appliances v. SEB, that is, (1), the defendant’s subjective knowledge that there is a high probability that the fact exists, and (2) that defendant has taken deliberate actions to avoid learning that fact. Lenz had failed to establish that Universal subjectively believed, before sending the notification, that “there was a high probability that the video was fair use” and thus could not proceed to trial on a willful blindness theory.

As for the damages provided by § 512(f), the panel held that they are broader than the “monetary relief” defined by § 512(k) and that § 512(f) must not thus be narrowly constructed as requiring Plaintiff to prove she suffered monetary losses.

The case will now be tried. However, the district court’s judgment, whether in favor of Plaintiff or Defendant, is likely to be appealed, as the case is now a cause célèbre.

The Batmobile is a Character Protected by Copyright

By Marie-Andrée Weiss

The Ninth Circuit held on 23 September  2015, that the Batmobile, Batman and Robin’s vehicle of choice when rushing to save Gotham City, is entitled to copyright protection. The case is DC Comics v. Mark Towle, 2:11-cv-03934.

Appellant Mark Towle builds and sells replicas of the Batmobile, which was first featured in a Batman comic book in 1941. These comic books are published by Appellee, DC Comics. DC Comics had licensed its rights to ABC for the 1966 Batman television show and to Batman Productions in 1988, which in turn sub-licensed it to Warner Bros. which produced the 1989 Batman movie.

Real life models of the Batmobile were created for the 1966 Batman television show and for the 1989 Batman movie, although both of these versions of the Batmobile were not exactly replicating the Batmobile drawn in the comics. It is the 1966 and the 1989 versions of the Batmobile which Appellant produces and sells.

DC Comics filed a copyright, trademark infringement, and unfair competition suit against Towle in 2011, who claimed in defense that the Batmobile was not protected by copyright. The Central District Court of California held in 2013 that the Batmobile was entitled to copyright protection.


Characters are protected by copyright

As the Ninth Circuit court is located in California, Mickey Mouse’s home state, it is not surprising that it had recognized in 1978 that characters are protectable by copyright, holding in Walt Disney Productions v. Air Pirates that Walt Disney characters are protected by copyright, because a comic book character “has physical as well as conceptual qualities [and is] more likely to contain some unique elements of expression.” In Air Pirates, the Ninth Circuit distinguished comic book characters from literary characters, which it had found not to be protectable in 1954. In 1988, the Ninth Circuit recognized that television or motion pictures characters are also protectable by copyright.

However, the Ninth Circuit also held in Halicki Films v. Sanderson Sales & Mktg that only characters that are “especially distinctive” are entitled to copyright protection. In Halicki, the character of Eleanor the car, featured in the Gone in 60 Seconds movies, was found to be protected by copyright, as Eleanor was more a character than a mere automobile because of its “physical as well as conceptual qualities.” So strong were these qualities that it did not even matter that Eleanor was a 1971 Ford Mustang in one of the movies, and a 1967 Shelby GT-500 in another! Others courts have recognized that characters may be protected by copyright, if the character at stake was found to have persistent character traits and attributes. For instance, James Bond never asks for a Bloody Mary, or cringes at the thought of using a lethal weapon.


A three-part test to determine whether a particular character is protected by copyright

In order to find out if the Batmobile is a character protected by copyright, the Ninth Circuit established a three-part test to determine if a particular character can be protected by copyright: (1) the character must have “physical as well as conceptual qualities,” (2) must be “sufficiently delineated” so that it will be recognized as being this particular character, and (3) must be “especially distinctive” and “contain some unique elements of expression.”

Applying this test to the Batmobile, the Ninth Circuit found the Batmobile to be protectable by copyright. First, it has “physical as well as conceptual qualities,” as it has appeared graphically in comic books and as a three-dimensional car in the television show and the movie. Secondly, it is “sufficiently delineated” to be recognizable wherever it appears, in comic books or on film. The Batmobile almost always looks like a bat, has bat-wings from its top or its back, features a bat emblem, and has a curved windshield. It is used to fight crime, and can be driven very fast, much more than the current 25MPH limit in New York City. The Batmobile is always equipped with the latest technology: in 1966, it already had a mobile phone! Thirdly, it is especially distinctive and “contains unique elements of expression” and “has [an] unique and highly recognizable name.” The Ninth Circuit concluded that “the Batmobile is a character that qualifies for copyright protection.”


Defendant’s copies of the Batmobile

Defendant argued that he had copied the 1966 and the 1989 versions of the Batmobile, but not the comic book Batmobile, and that, therefore, Plaintiff lacked standing, as it does not own the copyright of these two Batman features. But the Ninth Circuit was not convinced, because Defendant had copied derivative works and thus had necessarily infringed the copyright of the underlying work, the Batmobile from the comics, citing Apple Computer Inc. v. Microsoft Corp, a case where the Ninth Circuit held that Apple could claim copyright infringement in both an original graphical user interface and a derivative thereof.

The Ninth Circuit concluded that Plaintiff owns a copyright interest in the 1966 and the 1989 Batmobile characters, and that Defendant had infringed Plaintiff’s copyright in the Batmobile.

To the Batmobile©, Robin!

Copyright cannot be used to censor an unflattering picture

By Marie-Andrée Weiss

The Eleventh Circuit affirmed on 17 September 2015 the District Court for the Southern District of Florida, which had granted last year summary judgment to Appellee Chevaldina based on her fair use defense.

On September 17, 2015, the Eleventh Circuit affirmed a District Court summary judgment ruling in Katz. V. Chevaldina. Appellee Chevaldina had prevailed in the district court based on a fair use defense. Appellant Raanan Katz had filed a copyright infringement suit against her over the unauthorized use of a photograph (see here for a TTLF post about the 2014 ruling).


Registering a copyright in order to take down an unflattering picture

At stake was the use by Chevaldina, in several of her blog posts, of a photograph protected by copyright. Katz owns shopping centers and is a part owner of the Miami Heat basketball team. Chevaldina is a former tenant of Katz, and not a happy one. She created a blog to write about him and his allegedly unfair business practices, and used a photo of Katz she had found on Google image. to illustrate several posts in three different ways: without modifying it, by adding captions to it and by cropping and pasting it into cartoons mocking Katz.

The photograph had been taken by Seffi Magriso while Katz was watching a basketball game in Israel, and had been published on the web site of the Israeli newspaper Haaretz to illustrate an article about Katz. It shows Katz slightly sticking his tongue out and is rather unflattering. Indeed, Katz found the photo “ugly”, “embarrassing” and “compromising.” It is not surprising that Chevaldina used it to illustrate “several scathing blog posts” about Appellant and his business practices, and Katz took umbrage at this use.

When Katz discovered the blog and the use of the photo, which Chevaldina had found on Google Image, he filed a defamation suit against Chevaldina. He then had Magriso assign his copyright to him and filed a separate copyright infringement suit against Chevaldina. It seems that Katz had acquired the copyright of the photograph and registered it with the U.S. Copyright Office for the sole purpose of suing Chevaldina.

The defamation suit was ultimately tossed out by the Florida Court of Appeals, and so the copyright infringement suit was the only way left for Katz to have the photograph taken down. The district court granted summary judgment to Chevaldina. Katz appealed.


The photograph is protected by fair use

The Eleventh Circuit weighed the use of the photograph in the light of the four fair use factors of Section 107 of the Copyright Act: (1) purpose and character of the use, (2) nature of the copyrighted work, (3) amount of the copyrighted work used and (4) effect on of the use on the potential market or value of the copyrighted work, and the court found the use to be fair use.

As for the first factor, the purpose and character of the use, the Eleventh Circuit found that the district court had been right in finding the use to be noncommercial and transformative. The photograph was used to illustrate blog posts, which criticized Katz, his business and his attorneys. Chevaldina’s purpose was not commercial, but rather was to educate others about “the alleged nefariousness of Katz.” She did not gain financially from the blog posts, and, while having the intention to write a book about her dealings with Katz, this alone did not make the blog a commercial venture. Also, Chevaldina’s use of the photograph was transformative, as “she used Katz’s purportedly “ugly” and “compromising” appearance to ridicule and satirize his character.” The first factor weighed in favor of fair use.

As for the second factor, the nature of the work, the Eleventh Circuit noted that the photograph “is merely a candid shot in a public setting, and there is no evidence…that Magriso…attempted to convey ideas, emotions, or in any way influence Katz ‘s pose, expression, or clothing.” The Eleventh Circuit agreed with the district court that the nature of the copyrighted work was “primarily factual” and found the second factor to weigh in favor of fair use.

The third factor, the amount of the work, did not weigh for or against a finding of fair use, even if Chevaldina used the entire photograph without altering it, as copying less of the image “would have made the picture useless to [her] story that Katz is a predatory commercial landlord.”

The fourth factor, the effect of the use on the potential market, weighed in favor of fair use, as “[d]ue to Katz’s attempt to utilize copyright as an instrument of censorship against unwanted criticism, there is no potential market for his work.” The Eleventh Circuit also noted that it was very unlikely that Katz would ever change his mind and decide to publish the photograph, considering how much he dislikes it.

As weighting of the four fair use factors “tilt[ed] strongly in favor of favor of fair use”, the Eleventh Circuit affirmed the district court’s grant of summary judgment.


A concerning trend, using copyright to censor speech

Will this case temper the ardor of some to use copyright as a way to censor speech? Indeed, we have recently seen several, fortunately unsuccessful, attempts to use copyright to take down online criticism, such as City of Inglewood v. Teixeira, or Lee v. Makhenevich. Copyright laws were not enacted by Congress to suppress free speech. It is a concerning trend, which may fade away as plaintiffs realize that filing such suits only point the spotlight at the speech they are trying to suppress.

Recent Developments in the Apple-Samsung Dispute over iPhone Patents

By Nicole Daniel

A number of developments have occurred in Apple’s patent and antitrust case against Samsung since May, when the Federal Circuit affirmed the awards of at least $548 million in damages.

In August, the Federal Circuit not only denied Samsung’s request for an en banc hearing, it also denied Samsung’s request that the appeals court stay its mandate. In the latter request Samsung cited its pending petition for certiorari to the Supreme Court.

Thereby the Federal Circuit essentially denied Samsung’s requests to delay the enforcement of the May ruling concerning Apple’s win over Samsung’s copying of the iPhone. Accordingly the remanded parts of the decision, which regard the Apple’s trade dress, will soon be back in district court.

In September Apple urged US District Judge Lucy Koh to enter an immediate judgment based on the Federal Circuit’s mandate since the Federal Circuit has settled all liability issues in the case. Only a decision on the amount of damages remains. The judgment Apple wants shall include a partial final judgment amounting to $548 million in damages from Samsung. Apple also wants about $180 million in supplemental damages and $1.9 million in costs before the retrial starts. It comes as no surprise that Samsung disagreed with Apple’s proposed approach.

A few days later, on 17 September 2015, the Federal Circuit vacated Judge Koh’s order denying Apple’s request for a permanent injunction against the infringing features in smartphones and tablets by Samsung. In short, in a 2-1 decision the court held that Apple properly established that irreparable harm would be caused by Samsung’s continued infringement.

There was indeed a causal nexus between Samsung’s patent infringement and Apple’s lost sales. To prove a causal nexus some connection between the patented features and demand for the infringing products has to be shown. Therefore it was enough that the patented features were related to the infringement and also relevant to customers when examining which phone to purchase. There was no need for Apple to establish that these patented features were the reason why customers chose Samsung phones over Apple phones.

On 18 September 2015 Judge Koh entered partial final judgement of $548 million against Samsung and scheduled the start of the final trial for 28 March 2016.

The final trial will be a damages-only retrial for the five Samsung smartphones models for which the Federal Circuit vacated trade dress damages in its May ruling. Accordingly the sole issue will be to determine what damages Samsung will have to pay for patent infringement on these smartphones models.

Apple commented that it will also seek the aforementioned $180 million in supplemental damages for Samsung’s continued infringement during the period between the August 2012 verdict and September 2013, when it stopped selling the infringing models.

Another relevant issue in this regard is the ‘915 patent. Samsung states that Apple should not be allowed to seek supplemental damages for this patent since the US Patent and Trademark Office in 2014 invalidated that patent because of prior art. Samsung wants to stay the retrial during the US Patent and Trademark Office’s re-examination of this patent and the connected appeals are ongoing. Judge Koh said she was “completely unconvinced” by Samsung’s motions to stay the case.


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