We are very pleased to report that the National Law Journal has named Frankfurt Kurnit to its 2013 Midsize Hot List – a list of 20 of the nation’s top midsize law firms.  Here’s a link to the article.

When a photographer sells a “limited edition” of a photograph, does that mean that she cannot later sell any additional prints of that photograph, even if the reprints differ in size and medium from the original edition?  The answer is no, according to a federal judge who recently dismissed a collector’s lawsuit claiming that artist William Eggleston violated the law by selling digitized reprints of some of his most popular photographs. The decision should comfort artists wishing to create new editions of prior work, and is a cautionary tale for collectors interested in works sold in multiples.

Background

Eggleston is known as a pioneer of color photography.  Some of his most iconic works date from the early 1970s and include images of ordinary and even mundane aspects of American life.  Eggleston created larger, digital versions (the “Reprints”) of eight of his best-known photographs and sold them for record prices at auction last year.

In April 2012, Jonathan Sobel, one of Eggleston’s top collectors, filed a lawsuit against Eggleston and the trustees of his artistic trust, seeking to stop the artist from selling the Reprints. By his Complaint, Sobel claimed that he owns limited edition copies of each of the eight photographs that were used to create the Reprints.  Sobel alleged Eggleston created these “vintage” prints from photographic negatives or slides using a dye transfer process.  He claimed that his photographs were part of limited editions, which is evidenced by the fact that the prints are individually numbered, usually with a fraction (the “Limited Edition Prints”).

Sobel’s Complaint alleged five claims: (i) violation of the New York Arts and Cultural Affairs Law (“NYACAL”), a statute that provides art purchasers with rights and remedies against art merchants who sell artworks produced in multiples such as photographs, (ii) fraudulent misrepresentation; (iii) negligent misrepresentation; (iv) unjust enrichment; and (v) promissory estoppel.  As damages, Sobel sought the difference between the value of his collection of Eggleston photographs before and after the Reprint sales.  He also sought punitive damages, as well as injunctive relief prohibiting Eggleston from any future sales of the Reprints or any reprints of other vintage photographs.

The Decision

On June 1, 2012, the defendants moved to dismiss the Complaint in its entirety. On March 28, 2013, Judge Deborah A. Batts of the United States District Court for the Southern District of New York granted the defendants’ motion and dismissed Sobel’s Complaint in its entirety.

Judge Batts found that Sobel could not, as a matter of law, claim that the defendants violated NYACAL by holding out the Limited Edition Prints as restricted to a maximum number of photographs and subsequently creating and selling the Reprints.  NYACAL provides that, for multiples produced after 1949 and “offered as one of a limited edition, this shall be so stated, as well as the number of multiples in the edition, and whether and how the multiple is numbered.”  NYACAL § 15.03(6)(a). The statute further provides that, “[u]nless otherwise disclosed,” the number of multiples stated “shall constitute an express warranty . . . that no additional numbered multiples of the same image . . . have been produced.”  NYACAL § 15.03(6)(b) (emphasis added).  Interestingly, the statute only affords a warranty regarding past production of additional numbered multiples – the statute is silent concerning future production.

Judge Batts found that nothing in NYACAL prohibits the creation and sale of the Reprints.  She held that, because the statute only provides an express warranty that no other multiples “have been produced” at the time of sale, Sobel could not prevail because there was no allegation that the Reprints already had been produced at the time that he purchased the Limited Edition Prints.  Although Sobel argued that the court should consider legislative history showing the framers intended the statute to protect consumers by curbing the “deceptive” practices concerning the sale of multiples in the world of photography, the court refused to do so, finding that the statute was plain and unambiguous.

Moreover, Judge Batts found that NYACAL actually contemplates the reproduction of images previously sold in limited editions.  The statute provides: “If the multiple was made from a master which produced a prior limited edition, or from a master which constitutes or was made from a reproduction of a prior multiple or of a master which produced prior multiples, this shall be stated.”  NYACAL § 15.01(4)(b).  Per the court, the requirement of disclosure of the Limited Edition Prints to purchasers of the Reprints indicates that the creation of the Reprints does not violate the statute.

Judge Batts also dismissed Sobel’s fraudulent misrepresentation claim.  Notably, there was no allegation that any of the defendants made an explicit representation to Sobel that Eggleston would never create new editions of the photographs in question. Rather, Sobel argued that, by placing a fraction on the Limited Edition Prints, Eggleston promised that the photographs were limited edition works, and that no new prints would be created.  Judge Batts found that while the fraction stated on the Limited Edition Prints could constitute a promise that Eggleston would never increase the number of prints in that Limited Edition, it could not as a matter of law constitute a promise that new editions from the same master would never be made.  Judge Batts noted that, while the Limited Edition Prints and the Reprints were made from the same images, there were “markedly different” in medium and size – the Limited Edition Prints were created from negatives or slides via the dye transfer process, while the Reprints were digitally created and printed on an inkjet printer.  The Limited Edition Prints, which are approximately 16 x 20 inches, are much smaller than the Reprints, which are 44 x 60 inches.

Judge Batts dismissed Sobel’s three remaining claims for negligent misrepresentation, unjust enrichment and promissory estoppel.  She also denied Sobel’s motion to amend the Complaint.  Per the court, statements that an executive of the Eggleston Artistic Trust had made to a magazine concerning the limited nature of Eggleston’s editions could not give rise to a cognizable claim because: (i) there is no indication that Sobel had read the magazine article before purchasing the Limited Edition Prints and (ii) these statements do not constitute a promise that Eggleston would not reproduce the images in a different medium and different size.

To date, the defendants have not appealed the decision.

The Takeaway

Judge Batts’s decision, presuming it stands,  means that photographers can continue to reproduce images that they previously sold as “limited editions,” at least where the reproductions differ in medium and size from the prior edition.  We can therefore expect that photographers will continue to create digitized, poster-sized versions of their most popular images.

The decision is also a caveat emptor reminder to collectors, who must understand the non-obvious fact that a “limited edition” does not mean that an artist is limited to selling that edition.  By way of example, when a collector buys a print that is marked 3/50, that does not necessarily mean that the artist will never sell more than 50 prints of that image.  Because additional productions of an image beyond a limited edition could potentially affect the value of limited edition prints, collectors should bear this decision in mind, and consider whether they can obtain from the dealer and/or artist an explicit representation and warranty governing future reproduction of the image in question.

- Amelia Brankov

A New York federal judge has declared that a film based on an Emma Thompson screenplay does not infringe the copyright of another screenplay and play based on the same historical events.   The decision in Effie Film, LLC v. Murphy, No. 11 Civ. 783, 2013 WL 1188018 (S.D.N.Y. Mar. 22, 2013) (hereinafter “Murphy”) is a win for all those seeking to dramatize real historical events despite possible interference from competing versions of the same events.

Plaintiff Effie Film, LLC (“Effie Film”) was formed to produce the film “Effie” from Thompson’s screenplay about the awful real-life marriage between Effie Gray (“Gray”) and John Ruskin (“Ruskin”), a Victorian-era art critic.  Defendant Gregory Murphy (“Murphy”) wrote a screenplay and stage play, both titled “The Countess,” also about Gray and Ruskin’s marriage.  Murphy’s ongoing claims to Effie Film and the media that “Effie” infringes his copyright in “The Countess” caused Effie Film to take the somewhat unusual move of preemptively seeking declaratory judgment that “Effie” does not infringe Murphy’s copyright.  Judge Griesa agreed that there was no infringement and granted Effie Film’s motion for judgment on the pleadings.

Interestingly, Effie Film asked Judge Griesa to rule on the copyright infringement of a film not yet made.  When the case was filed in February 2011, “Effie” had no financing and no cast.  Murphy attempted to get the case dismissed arguing the action was premature and presented no actual controversy, but as time went on, “Effie” took shape— the funding was secured, cast finalized, script revised, and shooting completed.  Meanwhile, Murphy continued publicly claiming infringement, including in an April 2011 Daily Mail article he penned called The Day I sat in Emma Thompson’s kitchen and accused her of stealing my movie.  Judge Griesa therefore allowed Effie Film to amend its complaint on March 2012 reflecting changed circumstances, and the court issued its March 22, 2013 ruling on the basis of “Effie’s” final “shooting script,” reasoning that minor changes in editing would not be material.  In his decision, Judge Griesa dispensed with Murphy’s argument that the court could not issue a declaratory judgment without having seen the film, reasoning that filmmakers’ unique intellectual property concerns and business realities could justify this preemptive procedural relief.

On the merits, this decision addressed the evolving question of copyright law as applied to historical fiction, the sole issue being the substantial similarity between “Effie” and “The Countess.”  For substantial similarity, the court employed the standard of “‘total concept and overall feel ‘. . . as instructed by our ‘good eyes and common sense’” as set forth in Peter F. Gaito Architecture, LLC v. Simone Development Corp., 602 F.3d 57, 66 (2d Cir. 2010) (citations omitted).  But substantial similarity in what, exactly?  For any work of historical fiction, this question is fraught with difficult distinctions and competing policy interests.

A leading Second Circuit case on historical fiction and copyright is Hoehling v. Universal City Studios, Inc., 618 F.2d 972 (2d Cir. 1980), which held, “the protection afforded the copyright holder has never been extended to history, be it documented fact or explanatory hypothesis,” since “the cause of knowledge is best served when history is the common property of all.”  Id. at 974.  Thus, historical “interpretations” are not copyrightable.  Id. at 978.  The Hoehling decision, however, has received criticism by those who note the originality and imaginative, subjective work required to put a historical narrative together.  See Effie Film, LLC v. Pomerance, No. 11 Civ. 2087, 2012 WL 6584485, at *17-18 (S.D.N.Y. Dec. 18, 2012) (discussing “considerable commentary and criticism” generated by Hoehling in case law and scholarly works).  

Judge Griesa applied the more recent holding in Crane v. Poetic Products Ltd., 593 F. Supp. 2d 585 (S.D.N.Y. 2009) aff’d, 351 F. App’x 516 (2d Cir. 2009), as representing the current state of the law.   Crane synthesized Hoehling with Feist Publications, Inc. v. Rural Telephone Service Co., Inc., 499 U.S. 340 (1991), which recognized potential “thin” copyright protection for “factual compilations.”  Id. at 348, 349.  Thus, Judge Griesa, citing Crane, held “[h]istorical ‘facts’ and interpretations themselves are not copyrightable, only their creative selection and arrangement to form a new work.”  2013 WL 1188018, at *14.  Moreover, copyright does not protect so-called “scènes à faire,” or “elements that are included in the work, not as a product of an author’s creativity, but because they are obligatory given the work’s other narrative and aesthetic choices,” which in “Effie’s” Victorian England setting would include “travel by carriage, glittering ballrooms, stiff dinners, conversations over tea, and tensions arising from an overly-rigid system of class and gender roles.”  Id.

In his analysis of substantial similarity, Judge Griesa started with the “most obvious” and “most important” observations — that “Effie” and “The Countess” have no dialogue in common, no characters in common that are not historical figures, and “greatly differing internal structures” for their narratives.  Id. at *16.  The court devoted most attention to the last element, exhaustively describing (1) the actual historical background, (2) the narrative of “Effie,” and (3) the narrative of “The Countess.”  In real life, Gray met Ruskin when she was twelve and later married him, though the marriage was never consummated because Ruskin found Gray’s womanly body repulsive.  Ironically, Ruskin was a renowned art critic who made his reputation supporting artists who rejected artificial beauty in favor of celebrating nature in all its flaws.  Ruskin and his parents made Gray progressively wretched, until Gray fell in love with Ruskin’s male painter friend, John Millais, in Scotland.  Gray eventually escaped her marriage by having a doctor confirm her virginity and serving a notice of annulment.  In what could be characterized as an act of romantic comeuppance, she later married Millais.  Ruskin on the other hand went insane.

In comparing the historical facts to both “Effie” and “The Countess,” the Murphy court implicitly shows how odd the substantial similarity inquiry can be.  In Murphy, some of the more concrete protectable elements were actually similar.  The court acknowledged similarities between “Effie” and “The Countess” in fictionalized plot and character elements — the use of a “Greek chorus” of certain characters in both works expressing similar ideas; the use of a pretend letter by Gray’s parents as a ruse for Gray to escape Ruskin’s house; certain character motivations, etc.  Judge Griesa dismissed these with little discussion as failing to create a substantially similar total concept and feel.  Rather, he found the main cognizable difference between “Effie” and “The Countess” lay in abstract narrative structures and metaphorical themes.  To demonstrate this, the court resorted to comparisons of the “leisurely and generous pace” with which “The Countess” describes the characters’ time in Scotland, compared to “Effie’s” depiction of Scotland as “the final step of a cruel laboratory experiment in social chemistry” in which “[t]he reactants have already been mixed and heated.”   Id.  The court noted the number of pages in each work devoted to each plot episode, though even this quantitative measure was in service of the abstract, as the numbers “attempt to demonstrate what can really be truly appreciated only from reading the two works.”  Id. at *17.  The court also examined the difference between the “metaphorical significance of naming and renaming” in “Effie,” versus the “darker and more deeply metaphorical significance [of] Scotland” in “The Countess,” observing that “a theme, of course, is not copyrightable.”  Id. at *17-18.  This somewhat tortured exercise illustrates how difficult it is for courts to determine substantial similarity after setting aside historical facts, interpretations, and scènes à faire.

Remarkably, this is not the first case analyzing the copyrightable elements of this historical saga.  Judge Griesa acknowledged his reliance on Judge Oetken’s recent decision in Effie Film, LLC v. Pomerance, No. 11 Civ. 2087, 2012 WL 6584485 (S.D.N.Y. Dec. 18, 2012), a similar case in which Effie Film successfully obtained another judgment on the pleadings declaring Effie did not infringe on two works by a different author on the same subject.  Between them, these two courts have therefore concluded that this agonizing matrimonial experience could be dramatized in “Effie” without infringing on at least three other different versions.

Ultimately, what is striking about both Pomerance and Murphy is that such an esoteric story of a family, unhappy in its own way, came to be written so many different ways.  Perhaps the defendants were motivated in part by the seemingly low odds that this many parties would coincidentally think to make a film about the same miserable Victorian marriage — its potential for overextended metaphors notwithstanding.  “Effie,” featuring Dakota Fanning, has no US release date yet.

- Sarah Park

The Federal Trade Commission (“FTC”) revealed this week the results of its latest Undercover Shopper Survey. The Undercover Shopper program was designed by the FTC to test the effectiveness of self-regulatory programs by the motion picture, music recording, and electronic game industries.  Under the program, the FTC sends 13- to 16-year-olds, unaccompanied by a parent, to attempt to buy R-rated movie tickets, R-rated DVDs, unrated DVDs that were R-rated when first released in theaters, music CDs carrying a Parental Advisory Label (PAL) that warns of explicit content, and video games rated “M” (suitable for persons age 17 and older).  Between April and June 2012, these teenagers attempted to make product purchases at national and regional chain stores and theaters across the United States.

The results of the Undercover Shopper Survey show promising and “continued progress” in the FTC’s effort to curb marketing to children of violent entertainment products.  The video game industry had the highest level of ratings compliance, with only 13% of underage teenage shoppers able to buy M-rated video games at major national retailers.  Ratings enforcement at the movies was at its highest level since the FTC began its Undercover Shopper program in 2000, with less than one-quarter of underage shoppers able to buy a ticket to an R-rated movie (down from one-third in 2010).  AMC Entertainment, Regal Entertainment Group, and Marcus Theatres demonstrated the highest level of enforcement.  Thirty percent of shoppers were able to purchase R-rated DVDs (compared to 38% in 2010), and 30% were able to buy unrated DVDs (down from 47% in 2010).  Blockbuster, Best Buy, Walmart, and Kmart denied more than three quarters of R-rated DVD purchase attempts.  Forty seven percent of underage shoppers were able to purchase CDs with the PAL label (down from 64% in 2010 and 72% in 2009).  Barnes & Noble, Best Buy, Target and Kmart all denied sales of CDs with the PAL label to half or more of the undercover shoppers.

The FTC issued its first report on marketing violent entertainment to children in 2000.  Since then, the Commission has called on the entertainment industry to be more vigilant in restricting the marketing of mature-rated products to children, clearly and prominently disclosing rating information, and restricting children’s access to purchasing mature-rated products in stores.  The last report to Congress on marketing violent entertainment to children was published in 2009.  As these newest survey results show, retailers remain vigilant in their efforts to keep inappropriate entertainment products out of the hands of America’s minors.  Further information about entertainment product ratings can be found here.

- Hannah Taylor

How Veoh Reconciled with Viacom (But Went Out of Business In the Meantime)

Veoh, or what is left of it, won a recent victory in the Ninth Circuit in UMG Recordings v. Shelter Capital Partners (Veoh), No. 10-55732 (“Veoh”), a significant opinion in the evolving jurisprudence on Digital Millennium Copyright Act (DMCA) safe harbors.  In a March 14, 2013 superseding decision, the Ninth Circuit resolved a difference with Second Circuit law as set forth in the April 2012 decision in Viacom Int’l, Inc. v. Youtube, Inc., 676 F.3d 19 (2d Cir. 2012) (“Viacom”).  The new opinion therefore puts to rest the current speculation that a circuit split would set safe harbor issues up for Supreme Court review. 

Background: A Ninth and Second Circuit Split

Veoh is a video-sharing platform similar to YouTube, featuring videos that are both user-generated and from major content providers like SonyBMG, ABC, and ESPN.  Veoh’s name may well not be as familiar as YouTube’s, since Veoh effectively went out of business in 2010 when a start-up acquired its assets two hours short of a bankruptcy filing.  Veoh’s troubles included the numerous rounds of litigation from content providers including UMG described here.

In 2009, the lower court dismissed UMG’s case, finding Veoh was covered by the DMCA safe harbor under 17 U.S.C. § 512(c) limiting liability for “infringement of copyright by reason of the storage at the direction of a user of material that resides on a system or network controlled or operated by or for the service provider.”  The Ninth Circuit affirmed in a December 2011 ruling.  While UMG’s petition for rehearing was pending, the Viacom decision came down, which disagreed with the Ninth Circuit’s ruling specifically on the meaning of “right and ability to control” — a service provider is protected by the safe harbor only if it “does not receive a financial benefit directly attributable to the infringing activity, in a case in which the service provider has the right and ability to control such activity.”  17 U.S.C. § 512(c)(1)(B).  The Second Circuit also applied a different version of the test for the service provider’s knowledge of infringement.

The Ninth Circuit therefore granted UMG’s petition and ordered additional briefing in light of Viacom, asking: (1) did the Second Circuit draw the correct distinction between “actual” and “red flag” knowledge?; (2) does a service provider have to be aware of the specific infringing material to have the “right and ability to control” the infringing activity, and should the Ninth Circuit adopt the Second Circuit’s resolution of these questions?

In its March 14, 2013 opinion, the Ninth Circuit adopted the Second Circuit’s holdings on both issues, though the outcome of the case remained the same.

Actual and “Red Flag” Knowledge: Placing the Onus on the Copyright Holder

One area the circuits differed slightly was with respect to the service provider’s knowledge.

Under section 512(c)(1)(A), a service provider can only qualify for safe harbor if it “(i) does not have actual knowledge that the material or an activity using the material on the system or network is infringing;” “(ii) in the absence of such actual knowledge, is not aware of facts or circumstances from which infringing activity is apparent; or” “(iii) upon obtaining such knowledge or awareness, acts expeditiously to remove, or disable access to, the material.”

The knowledge issue in Veoh was fairly narrow.  UMG never disputed Veoh promptly removed infringing material once notified.  It was also undisputed UMG did not use the DMCA notice protocol.  Veoh employed certain preemptive controls, requiring users to register and accept terms and conditions before allowing them to upload videos.  Veoh also used automatic technologies including “hash filtering” software and Audible Magic comparing “fingerprints” of files to a database on uploaded videos.  UMG argued this was “too little too late” and that Veoh had lagged in adopting the technology.

The court framed the issue as whether actual or red flag knowledge must be with respect to a specific instance of infringement, or whether it was enough to show Veoh’s general knowledge that infringement occurred on its site.  The court held knowledge must be specific, even for red flags.  In Viacom, the Second Circuit clarified the test by holding that the distinction between actual and red flag knowledge is the difference between subjective and objective knowledge, and that in either event the knowledge must be specific.  In the superseding opinion, the Ninth Circuit adopted this test, noting that it still found no evidence of Veoh having subjective or objective specific knowledge of infringement.

Thus, the trend continues of placing the burden on the copyright holder to point out specific infringement to service providers.  The Ninth Circuit declared “[c]opyright holders know precisely what materials they own, and are thus better able to efficiently identify infringing copies than service providers like Veoh, who cannot readily ascertain what material is copyrighted and what is not.”  However, the Ninth Circuit did cite Viacom for the principle that, at the same time, the service provider “cannot willfully bury its head in the sand.”  How much evidence is needed to meet this standard, and whether it is different from the “objective knowledge” standard, remains to be seen.

Right and Ability to Control

The more significant difference between Veoh and Viacom was over what it means for a service provider to have the “right and ability to control” infringing activity, exempting it from the safe harbor.

In 2011, the Ninth Circuit held this provision to mean a service provider must have specific knowledge of infringing activity in order to have the ability to control it.  The YouTube defendants unsuccessfully relied on this holding before the Second Circuit, which noted that this reading would render a different provision of the DMCA duplicative, since any service provider with specific knowledge who obtained a financial benefit from infringement and did not effect expeditious removal would be excluded from the safe harbor anyway under 512(c)(1)(A). Thus, the Second Circuit held 512(c)(1)(B) could not contain a specific knowledge requirement.  However, the Second Circuit agreed with the Ninth that the vicarious copyright liability standard does not apply, so the ability to control must mean “something more” than the mere ability to remove infringing activity.  The Viacom court cited two examples of cases that did find the ability to control — examples of “a service provider exerting substantial influence on the activities of users, without necessarily — or even frequently — acquiring knowledge of specific infringing activity.”

In its superseding opinion, the Ninth Circuit again affirmed the vicarious liability standard did not apply, and agreed with the Second Circuit that “something more” was required for control.  The court made clear “Congress could not have intended for courts to hold that a service provider loses immunity under the safe harbor provision of the DMCA because it engages in acts specifically required by the DMCA to obtain safe harbor protection,” namely removing infringing material.

The Veoh court however backtracked from the specific knowledge requirement and adopted the Second Circuit standard — that the service provider “must exert substantial influence on the activities of users,” which could include “high levels of control over activities of users” as in Perfect 10, Inc. v. Cybernet Ventures, Inc., 213 F. Supp. 2d 1146 (C.D. Cal. 2002) or “purposeful conduct” as in Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913 (2005), the two examples used in Viacom.

MGM involved purposeful inducement with the aim of fostering infringement and may lie at one end of the spectrum.  However, the Cybernet example may highlight tensions in this issue.  Businesses must walk a fine line between establishing controls and parameters, perhaps even to prevent copyright violations in the first place, and exercising so much control they escape the safe harbor for any violations which evade their systems.  Service providers may also see tension between organizing and adding value to content, to differentiate themselves from competitors, and adding so much value as to amount to excessive control for the safe harbor.  In Cybernet, the service provider, controlling a network of sites, had a “monitoring program” where participating sites got “detailed instructions regard [sic] issues of layout, appearance, and content,” and it monitored images to ensure “celebrity images [did] not oversaturate the content,” forbidding certain types of images.  213 F. Supp. 2d at 1173.  The Ninth and Second Circuits have now found this type of control over content amounts to sufficient control over infringing activity.  Interestingly, in Veoh, the Ninth Circuit noted in a footnote, without comment, that Veoh similarly monitored its site for pornography content “using a ‘porn tool’ to review thumbnail images of uploaded videos tagged as ‘sexy.’”  And as noted, Veoh performed ongoing monitoring for copyright violations.  The distinction might be in the automated manner and purpose of Veoh’s monitoring.  But to the extent service providers control content for reasons other than copyright, courts could ask whether service providers could and therefore should monitor for specific infringement as well.  The case law on this topic is sparse, and service providers should navigate this developing area with care: these circuit courts may have finally ruled definitively and similarly, but their opinions address the legality of the business practices and software tools employed many years ago.

- Sarah Park

On March 11, 2013, the United States Court of Appeals for the Ninth Circuit affirmed the district court’s judgment and  award of attorneys’ fees in favor of the company that produced the Broadway musical hit Jersey Boys.  The company had been sued for copyright infringement for including in the musical a 7-second clip from a January 2, 1966 episode of The Ed Sullivan Show in which Ed Sullivan introduces the Four Seasons.

In holding that the producer’s use of the clip constituted fair use as a matter of law, the Ninth Circuit did not hide its deep skepticism of the interests of the plaintiff, SOFA Entertainment, Inc. (“SOFA”).  The court observed that while the Copyright Act grants authors a “limited monopoly over their works” in order to foster creativity, “an overzealous monopolist can use his copyright to stamp out the very creativity that the Act seeks to ignite.”

Several points about the Ninth Circuit’s application of the four-factor test for fair use are worth exploring.

Purpose and Character of the Use

In analyzing the first factor, the court, following a common trend in cases grappling with fair use, jumped directly to the question of whether the use of the clip was “transformative.”  The court held that by using the Ed Sullivan introduction as a “biographical anchor” to mark an “important moment in the band’s career,” the producer “put the clip to its own transformative ends.”  In support of that holding, the court relied on Elvis Presley Enters., Inc. v. Passport Video, 349 F.3d 622, 629 (9th Cir. 2003) and Bill Graham Archives v. Dorling Kindersley Ltd., 448 F.3d 605, 609 (2d Cir. 2006).

The court’s reliance on the Elvis case is particularly noteworthy.  In that case, owners of copyrighted materials relating to Elvis Presley, including SOFA (a point not lost on the Ninth Circuit, as discussed below), sued the producer of a 16-hour video documentary covering the life of Elvis that incorporated many copyrighted video clips of The Ed Sullivan Show and other programs without authorization.  Although you would not know it from reading the Jersey Boys decision (this blogger certainly did not), SOFA and the other plaintiffs actually prevailed in that lawsuit, with the Ninth Circuit affirming the lower court’s grant of a preliminary injunction against the filmmaker.  Elvis Presley Enters., 349 F.3d at 911.  However, the Ninth Circuit noted that its decision might have been different had it been “examining the case ab initio as district judges,” as opposed to “whether the district court abused its discretion” in determining that the plaintiffs were likely to succeed on the merits of their attack against the documentarian’s fair use defense.  Id. at 630.  Indeed, the Ninth Circuit observed that the first fair use factor was “a close issue” based on its finding that the “use of many of the television clips is transformative because they are cited as historical reference points in the life of a remarkable entertainer.”  Id. at 629 (emphasis added).  But the inclusion of lengthier clips, played without interruption, had the “same intrinsic entertainment value” as the original, and thus tipped the first factor against a finding of fair use.  Id.  In the case of Jersey Boys, on the other hand, the court was not persuaded that the 7-second clip was used for its “own entertainment value,” even though it was part of a feel-good Broadway musical about a rock and roll band.

Interestingly, the first fair use factor does not mention the “transformative use” test, but does direct courts to examine “whether such use is of a commercial nature.”  Nevertheless, the Ninth Circuit swept aside the fact that Jersey Boys is a commercial production as having “little significance,” based solely on the court’s determination that the use of the clip was “transformative.”

The Nature of the Copyrighted Work

The court found that the second factor, which looks to whether the use is “closer to the core of intended copyright protection,” Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 579, favored the producer because the clip contained “mainly factual information – who was about to perform.”  Remarkably, the Ninth Circuit held that it was “doubtful that the clip on its own qualifies for copyright protection” at all.  The court rejected SOFA’s argument that Sullivan’s “trademark gesticulation and style” warranted strong copyright protection.  While “movement and intonation are elements of original performance,” held the court, Sullivan’s “charismatic personality” is not copyrightable.

The Amount and Substantiality of the Portion Used

SOFA conceded that the 7-second clip was not quantitatively significant, but argued that Jersey Boys “attempted to capitalize on the central and most beloved part of The Ed Sullivan Show” – the host’s introduction of new acts – attempting to analogize the face to The Nation’s infringing publication of the “heart” of President Ford’s memoirs in Harper & Row Publishers, Inc. v. Nation Enterpises, 471 U.S. 539, 565 (1985).  The Ninth Circuit rejected the analogy, holding that unlike the “distinctive expression” of President’s Ford’s writing copied by the magazine, in the clip used by Jersey Boys Ed Sullivan was only introducing a band.  As discussed above, the court was not convinced that that footage contained any “qualitatively significant” expression under copyright law.

The Market Effect

The most interesting point about the court’s analysis of the fourth factor was its brevity and what it did not say.  The court found that the fourth factor favored fair use because “Jersey Boys is not a substitute for The Ed Sullivan Show.”  Despite the fact that SOFA’s business model is based on obtaining fees for licensing its library of content, the decision contains no discussion of the impact that the unlicensed use of its materials by Jersey Boys and others in its wake would have on SOFA’s licensing market.  This absence can be explained by the district court’s finding that SOFA’s “only evidence in support of its argument that Defendant’s use of the Clip has a deleterious effect on an existing or potential market for Plaintiff’s copyrighted work” was a self-serving and unsubstantiated declaration.  Sofa Entm’t, Inc. v. Dodger Prods., Inc., 782 F. Supp. 2d 898, 909 (C.D. Cal. 2010).

Attorneys’ Fees

The Ninth Circuit also affirmed the district court’s award of attorneys’ fees.  “In light of the education SOFA received as the plaintiff in Elvis Presley Enterprises,” the court found, “SOFA should have known from the outset that its chances of success were slim to none.”  Given that SOFA won in the Elvis case, SOFA and its attorneys must be scratching their head at this harsh ruling.

While this, like so most copyright cases, is very fact specific, the decision does run counter to a number of recent copyright cases in which the use of relatively small amounts of visual or musical materials in a commercial production was found to be infringing.  It also stands as a warning to aggressive copyright owners that there may be a price to pay for over-zealously asserting their rights, especially when they fail to produce hard evidence of the adverse impact that the challenged use is having on the value of their copyright.

Jeremy Goldman

In a recent decision, a California appellate court upheld a lower court holding in favor of Paramount Pictures against a private equity source of financing for a slate of the studio’s films.

In Marathon Funding LLC v. Paramount Pictures Corporation, the court enforced the provisions in the investment agreement which stated in several ways that there was no joint venture between Paramount and the investment group, and that Paramount had no fiduciary obligation to the investment group. As a result, the investor group was not able to recoup an accounting charge Paramount had assessed as a result of an error by Paramount’s outside law firm. In addition, a contractual provision providing for attorneys’ fees to prevailing parties was also enforced against the investor group. While the legal conclusions did not surprise us, the case does serve as an important reminder to entertainment law practitioners.

First, because contractual formulas for contingent compensation have become more and more complicated, it is imperative for practitioners to run numerical examples based on contract language to see what amounts would be payable by applying the language as drafted. In this case, Paramount’s written contract with the investment group contained a box office bonus provision that – owing to a drafting error by outside counsel — did not reflect the terms negotiated at the deal stage. Under the erroneous formula present in the contract, the actor Tommy Lee Jones was entitled to a box office bonus of $17.5 million for his role in No Country for Old Men. If the formula agreed to at the deal stage had been applied, Mr. Jones would have received approximately $5 million. (The formula which had been agreed upon when the deals were struck provided that fixed bonuses would be paid when either domestic box office reached certain levels, or when worldwide box office receipts reached twice the domestic trigger amounts.  The attorney, however, drafted the provision so that the bonuses would be paid once worldwide box office, when multiplied by two, reached the level prescribed for the domestic box office triggers.) The box office bonus provision applied not only to Mr. Jones’s bonus, but also to the producer’s and the writer/director’s bonus.  Paramount obtained a settlement in malpractice litigation against the drafters of $2.75 million, which it used toward Mr. Jones’s box office bonus of $17.5 million. Paramount then allocated the error among itself and the investors (according to their proportional ownership interests in the film). Paramount thus charged the investor group approximately $2 million more than it would have charged the group absent the error.

Second, when representing investor groups, an attorney as part of due diligence should review all contracts which provide for payment of any contingent compensation other than studio-defined net profits.  Again, numerical examples should be run based on the contract provisions to see what the impact might be on repayment to investors. The problem for Marathon’s representatives in this case was that if they had reviewed the box office bonus provisions in the agreements for the producer, writer/director, and principal cast, the numbers would have reflected the higher payment than the one negotiated as part of the deal terms.

On the other hand, had Marathon’s representatives discovered the error after proper due diligence and notified Marathon, the investment group would have expected to see higher box office bonus payments than had been negotiated. That’s because when Paramount advised the producer and the writer/director that the language as drafted did not reflect the deal, the producer and writer/director agreed to reform their contracts — resulting in lower payments to them than contractually required.  (Mr. Jones, however, refused to vary from the language in the agreement, insisting on the higher payment, and winning it in a separate arbitration). Put another way, had the investor group seen in the accountings lower payments to the producer and the writer/director than the group expected to see, they arguably would have been pleased. As a result, they might not have brought a lengthy lawsuit they would ultimately lose – a loss that also included a post-judgment award to Paramount of more than $690,000 in attorneys fees.

- Thomas D. Selz 

Using a famous name in your URL can lead to more traffic to your website.  But it can also lead to lawsuits.  A recent New York case provides a good example.  On February 28, a New York federal court ruled in favor of Donald Trump (“Trump”) and found the registrant and user of the Internet domain names trumpbudhabi.com, trumpbeijing.com, trumpindia.com and trumpmumbai.com (collectively, the “Domain Names”) liable for violation of the Anti-Cybersquatting Consumer Protection Act (the “ACPA”).  The full opinion can be read here.

Trump is a famous real estate developer and hotelier who is also known for his popular television shows The Apprentice and The Celebrity Apprentice.  He owns several registrations and pending applications with the United States Patent and Trademark Office (the “USPTO”) for the mark TRUMP in connection with various goods and services including commercial, residential, and hotel properties.  Trump also holds various domain names incorporating the TRUMP mark, including several names promoting real estate projects that append a geographic location to the word “trump.”

In 2007, J. Taikwok Yung (doing business under the name Web-adviso) (“Yung”) registered the Domain Names following announcement of Trump’s development of property in India.  In October 2010, Trump informed Yung that his use of the Domain Names infringed the TRUMP mark and made Yung liable under the Anti-Cybersquatting Consumer Protection Act (the “ACPA”).  After an arbitrator ordered Yung to transfer the Domain Names to Trump, Yung sought a declaration in federal court that the Domain Names do not, among other things, violate the ACPA.  Trump counter-claimed.

The ACPA holds liable any person who, with bad faith intent to profit from a distinctive or famous mark, registers, traffics in or uses a domain name that is identical or confusingly similar to such mark.  The Court found the TRUMP mark presumptively distinctive and the Domain Names to be confusingly similar to the TRUMP mark.  It then found that Yung’s lack of intellectual property rights in the Domain Names, business activity using the word “trump” or other connection to the Domain Names, as well as Yung’s efforts to acquire high-value domain names, all indicated Yung’s bad faith intent.

Yung asserted that the ACPA’s “fair use” defense and/or the First Amendment protected his use of the Domain Names.  The ACPA precludes a finding of bad faith intent where the registrant/user reasonably believes that its use is fair or otherwise lawful.  Description, parody, criticism, commentary and news reporting all may be fair uses.  However, the Court found that Yung used headings such as “News” and “Political Commentary” on his websites primarily to invoke the “fair use” defense rather than to provide news or commentary.  Moreover, the Domain Names did not use the TRUMP mark to comment on, criticize or otherwise communicate about Trump or his business, and thus neither the ACPA’s “fair use” defense nor the First Amendment applied.  Thus the Court found Yung liable for violation of the ACPA.

The decision represents the most recent application of the somewhat murky law under the ACPA in connection with traditional trademark law, especially in the context of celebrity names.  Back in 2001, Kevin Spacey and Bruce Springsteen were unable to stop the use of the domain names kevinspacey.com and brucespringsteen.com, respectively.  Since that time, celebrities have enjoyed more success under the ACPA, with Tom Cruise, Scarlett Johansson, Jennifer Lopez and professional basketball player Chris Bosh all successfully re-claiming URLs making use of their names.  While the decisions focus at least in part on whether the registrants profited from the URLs, the term “profit” is applied loosely (for example, the registrant of scarlettjohannson.com was found to profit from his website’s boost of his reputation as a media artist).  Thus the Trump decision highlights the continuing trend toward heightened protection of celebrity names from alleged cybersquatters by WIPO and the courts.

-Gayle Denman

The New York Yankees have long been known in some circles as baseball’s “Evil Empire.” But while the nickname certainly began as an insult, the team recently turned the tables and claimed ownership of it – brushing back a merchandising company called Evil Enterprises. Here’s what happened.

The New York Yankees (the “Yankees”) were founded in 1903.  Larry Lucchino, the President of the Boston Red Sox, first dubbed the Yankees the “Evil Empire” in 2002. The Yankees use and own several marks for clothing including YANKEES UNIVERSE, THE HOUSE THAT RUTH BUILT and BRONX BOMBERS. However, they do not use the mark EVIL EMPIRE or own any applications or registrations for EVIL EMPIRE.

Evil Enterprises (Applicant) applied for a trademark for BASEBALLS EVIL EMPIRE on July 7, 2008 based on intent to use the mark in commerce. Applicant sought to use the mark for “clothing, namely, shirts, t-shirts, sweatshirts, jackets, pants, shorts and hats” in International Class 25. The Yankees opposed registration of Applicant’s mark, pointing to (1) the Yankees’ prior rights in the mark EVIL EMPIRE and the likelihood of confusion between that mark and Applicant’s mark, (2) Applicant’s mark’s false suggestion of a connection with the Yankees and (3) Applicant’s mark’s disparagement of the Yankees.

The Trademark Trial and Appeal Board (the “TTAB”) first found that the Yankees’ other registrations for clothing and the strong public association between the Yankees and the mark EVIL EMPIRE gave the Yankees a direct commercial interest in the opposition proceeding and thus standing to oppose Applicant’s mark. The TTAB then addressed the likelihood of confusion inquiry, finding that Applicant’s admission of its awareness of this public association prior to filing established the Yankees’ prior rights in the mark EVIL EMPIRE. The TTAB agreed with the Yankees that there was a likelihood of confusion, basing its decision on: (1) the fame of the mark EVIL EMPIRE; (2) the Yankees’ and Applicant’s similar goods, channels of trade and classes of consumers; and (3) the similar appearances, sounds, connotations and commercial impressions of EVIL EMPIRE and Applicant’s mark.  The TTAB rejected Applicant’s parody defense in light of the likelihood of confusion.

The TTAB also found that Applicant’s mark falsely suggested a connection with the Yankees due to (1) the similarity of EVIL EMPIRE and Applicant’s mark; (2) the likelihood that Applicant’s mark would be recognized by consumers as pointing only to the Yankees; (3) the Yankees’ lack of connection with the clothing to be sold by Applicant; and (4) consumers’ likely presumption of a connection between the Yankees and Applicant’s mark due to the Yankees’ fame. It dismissed the Yankees’ disparagement claim in part because of the Yankees’ earlier admission that the team “implicitly embraced” the EVIL EMPIRE moniker by playing the STAR WARS theme music at games. This admission undermined the Yankees’ ability to later label Applicant’s Mark offensive or objectionable.

In sum: The … Yankees win! The … Yankees win! (And the TTAB decision is here.)

- Gayle Denman

In a December 2012 decision, a federal district court in Washington State held that  a company’s numerical “player grades” assigned to college football players to reflect their likelihood of success in the National Football League were copyrightable, but also that the republication of these grades by a sportswriter covering the NFL draft was fair use. See National Football Scouting Inc. v. Rang, 105 USPQ2d 1074 (W.D. Wash. 2012).

Plaintiff National Football Scouting formulated the grades as part of detailed and confidential reports on prospective NFL players that it sold to NFL teams on a subscription basis for $75,000 a year.  Defendant Robert Rang is a high school teacher who publishes articles on a publicly available website owned by an entity called Sports Xchange.  Rang’s articles about NFL players disclosed some of the player grades developed by NFL Scouting.

In reaching the first part of its holding–that the player grades are protected by copyright–the court held that the “numeric expression of a professional opinion can be copyrightable,” citing prior decisions that had determined that valuations and predictions based upon the compilation of data from a number of sources and the weighing of a variety of factors may be protected.  Other courts have found copyright protection in analogous circumstances. For example, the Second Circuit upheld copyright protection for projections of used car prices. See CCC Information Services, Inc. v. McLean Hunter Market Reports, Inc., 44 F.3d 61 (2d Cir. 1994).  One could take issue with the Rang court’s holding in that regard, given the well-established rule of copyright law that single words and short phrases cannot be copyrighted. Under that principle, should a grade like a B+ or an 85 be protected simply because the letter or number refers to more detailed expression?  Clearly, the purveyor of such a grade could not prevent another from using it in a different context.

In analyzing whether the defendant’s use was fair, the court applied the “non-exclusive” four-factor test set forth in the Copyright Act.  In the most significant part of its ruling, the court concluded that the first prong of the test, the purpose and character of the use, favored Rang.  The court purported to apply the standard set forth by the Supreme Court and other courts in which a central inquiry is whether the new use is “transformative” in that it “adds something new, with a further purpose of different character, altering the first with new expression, meaning or message.”  Despite the fact that the grades were published for the same basic purpose as the original–as part of a written evaluation providing information about a player’s prospective ability as an NFL player–the court found that Rang’s use was “highly transformative” because it was accompanied by his own original thoughts and commentary about the players.

With respect to the other factors, the court ruled that the fact that National Football Scouting’s reports were unpublished favored the plaintiff and that the very small amount of copying (although it took the most valuable part of the original) slightly favored the defendant.  Turning to the key fourth factor–the effect of the infringement on the market for the original–the court noted that the plaintiff’s scouting reports are sold for a high price to a limited number of professional football teams and the defendant’s articles are made available to the general public.  Accordingly, the court concluded that the defendant’s use of the player grades did not damage the value of the plaintiff’s scouting reports.

Whether or not the case was correctly decided, the application of the “transformative” test to the facts of this case is interesting. The test was first articulated by the Supreme Court in the music parody case Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569 (1994), and works best in situations where the later use purportedly makes some comment about the earlier use or where the two uses serve very different functions. Now, more and more courts are focusing their analysis on whether the second use is transformative even in situations such as the one in the Rang case, where a small amount of copyrightable expression is used in another publication serving essentially the same purpose (i.e., providing evaluations of potential NFL players). The court could have concluded that the use was fair by focusing on the small amount of copyrighted material taken and the absence of market harm without having to reach the conclusion that Rang’s use was highly transformative.

I give the Court a C+ on the explication of its holding, but concede that others are free to republish this grade.

-Edward H. Rosenthal