September 12, 2013
Managing Intellectual Property
By Margaret A. Esquenet; John F. Hornick
Authored by Margaret A. Esquenet, John F. Hornick, and Brian R. Westley
From art and literature to technology, court rulings in the past year have had important implications for U.S. copyright law. In one case with potentially sweeping implications, the Supreme Court in Kirtsaeng v John Wiley & Sons held that the first-sale doctrine allows anyone to import and sell copyrighted works originally lawfully made and sold abroad. Other decisions relate to disruptive technologies that threaten established business models, with courts sometimes siding with the copyright owner and other times accommodating the challenger. Meanwhile, amid the increasing intersection of copyrights and technology, the United States Register of Copyrights urged Congress to create a new statute that is less complex and more flexible for the digital age. One possible challenge for any new law that might emerge is the rise of home-based 3D printing, which could make existing copyright law become increasingly difficult to enforce.
Kirtsaeng v John Wiley & Sons, Inc, 133 S Ct 1351 (2013)1In a decision that significantly affects a copyright owner's ability to control the distribution of foreign versions of software, books and other works, the Supreme Court held that copyright law's first-sale doctrine is not geographically restricted. The Court found that under the first-sale doctrine one may purchase a work subject to U.S. copyright law at reduced prices abroad, import it into the United States, and resell the work for a profit, without running afoul of the copyright owner's rights. Under the first-sale doctrine, once a person obtains ownership of a lawfully made copy of a copyrighted work, the person can sell or otherwise dispose of that copy as he or she wishes.
The case was brought against Supap Kirtsaeng, a citizen of Thailand who came to the United States to study mathematics. While studying in the United States, Kirtsaeng's family and friends in Thailand purchased and sent him English-language versions of textbooks manufactured abroad. Kirtsaeng then sold the textbooks in the United States for a profit. The copyright owner sued Kirtsaeng, claiming the unauthorised importation and resale of the textbooks manufactured and distributed abroad infringed Wiley's exclusive rights to distribute the copyrighted works. The lower courts ruled for the copyright owner, holding that the first-sale doctrine does not apply to foreign-made works because the Copyright Act2limits the first-sale doctrine to works "lawfully made under this title."
The Supreme Court determined that this phrase did not contain any geographical restrictions. Although the facts of the case revolved around books, there is no reason to believe that it would not apply to other copyrighted works such as software, music, and films.
Status: In May, the District of Arizona, citing to Kirtsaeng, held that the initial foreign sale of devices containing copyrighted software was subject to the first-sale doctrine and the plaintiff could not prevent the importation of the devices on that basis (AFL Telecommunications LLC v SurplusEQ.com3, 2013 WL 2211629 (D Ariz May 20 2013). Accordingly, this Supreme Court precedent may be broadly applied to a variety of copyrightable works and difficult to overcome.
Oracle America, Inc v Google Inc, 872 F Supp 2d 974 (ND Cal 2012)4Oracle's Java is the world's most popular programming language. In Oracle v. Google, the district court held for Google, finding that copyright protection does not extend to certain elements within the application programming interface (API) of Java. Specifically, the Court found that the API declaring code and hierarchy are not copyrightable because they constitute a command structure that is a "method of operation" under 17 USC §102(b). Google did not challenge the copyrightability of the API as a whole; accordingly, the district court did not consider that issue and it is not part of the appeal.
On appeal to the Federal Circuit, the parties advanced legal and policy arguments for and against copyright protection for the contested API elements. The decision on appeal will affect the ability to use Java APIs to create new software programs, with substantial impacts on interoperability.
Status:The appeal is pending before the Federal Circuit.
Fox sued Dish Network for copyright infringement over the Hopper digital video recorder, a device that allows users to skip over television commercials, arguing the device infringed Fox's reproduction right of its shows. The Ninth Circuit dealt a potential blow to the television advertising business in affirming a district court's refusal to issue a preliminary injunction against the device. Concluding that Fox was unlikely to succeed on this claim, the court explained that infringing the reproduction right requires copying by the defendant, not the user. Fox argued that because Dish participates in the operation of the device, Dish made the copies. The Ninth Circuit, however, determined that the district court did not err in concluding that the user, not Dish, actually makes the copies because the device responds to the users' commands. The Ninth Circuit also held that Fox was unlikely to succeed on its claim of secondary copyright infringement, which requires Fox to establish that Dish's users were infringing.
Although the Court determined that Fox established a prima facie case of direct infringement by Dish users, the Court held that Dish was likely to succeed on its affirmative defence that the users' copying was fair use. Just as the Supreme Court held in Sony Corp of America v Universal City Studios, Inc,5the Ninth Circuit determined that users primarily used the device for time-shifting (recording a programme to view it later and then erasing it).
Although Fox argued that Dish customers were also using the devices for other purposes, namely skipping over commercials, the Ninth Circuit stated that "commercial-skipping does not implicate Fox's copyright interest because Fox owns the copyrights to the television programmes, not to the ads aired in the commercial breaks".
Status: On August 7, 2013 Fox petitioned the Ninth Circuit to review the case en banc. On August 30, the court ordered Dish Network to reply to Fox's petition.
In another set of cases with important implications for disruptive technologies, several major broadcasters sued Aereo and its competitor Aereokiller, alleging that their business of streaming over-the-air broadcasts using thousands of individual antennas infringes the broadcasters' copyrights. Aereo and Aereokiller enable their subscribers to watch broadcast televisions programmes over the internet for a monthly fee. They use thousands of dime-sized antennas to access free over-the-air broadcasting and, at the request of the user, stream those videos to subscribers' devices or save them for later viewing.
This system is specifically designed to comply with the Second Circuit's Cablevision6decision (Cartoon Network v CSC Holdings, 536 F.3d 121 (2d Cir 2008)). In Cablevision, a cable provider allowed its subscribers to access a "remote DVR". When a subscriber pressed "record" on its remote, Cablevision saved a stream of the channel to a remote hard drive and allowed the user that requested the recording to access it. The Second Circuit held that this did not violate the copyright owner's "public performance" right.
In April, the Second Circuit affirmed the district court's denial of a preliminary injunction against Aereo in WNET, Thirteen v Aereo, Inc7, 712 F 3d 676 (2d Cir 2013). The Court held that Aereo's transmissions of unique copies of broadcast television programmes created at its users' requests were not "public performances" of the broadcasters' copyrighted works, citing Cablevision. The Court found that like Cablevision, Aereo required its subscribers to request the recording and that Aereo streamed the unique recorded copy only to that subscriber. The Court held that, "just as in Cablevision, the potential audience of each Aereo transmission is the single user who requested that a program be recorded". Judge Chin dissented, asserting that Aereo's technology was a "sham" with the sole purpose of circumventing the Copyright Act.
In December 2012, the Central District of California issued an injunction against Barry Driller Content Systems d/b/a Aereokiller d/b/a FilmOn X, holding that the broadcasters showed a likelihood of success on the merits of their claims that the streaming service infringed their "public performance" rights (Fox Television Stations, Inc v Barry Driller Content Systems,8 PLC, 915 F Supp. 2d 1138 (CD Cal 2012)). More recently, the federal district court for the District of Columbia also issued a nationwide injunction against Aereokiller, only excepting states in the Second Circuit from the scope of the injunction (Fox Television Stations, Inc v FilmOn X LLC,92013 WL 4763414, (DDC September 5 2013)).
Status: In August 2013, the Ninth Circuit heard oral arguments on Aerokiller's appeal. If the Ninth Circuit affirms the district court's decision, it will create a circuit split between the Ninth and Second circuits (and the District of Columbia) making the issue ripe for review by the Supreme Court.
Metropolitan Regional Information Systems v American Home Realty Network, Inc, 2013 WL 3722365 (4th Cir July 17 2013)10In a case of first impression for any circuit court, the Fourth Circuit ruled that an electronic signature can operate as an assignment of rights under the Copyright Act's Section 204 "writing requirement". The ruling may have significant implications for the validity of electronic transfers in other areas. Metropolitan Regional Information Systems, Inc (MRIS) is a real estate multiple listing service. Upon payment of a subscription fee to MRIS and assent to terms, subscribers upload their real estate listings to the MRIS Database and agree to assign to MRIS the copyrights in each photograph included in any such listing. American Home Realty Network, Inc (AHRN) copied MRIS's multiple listing service (MLS) content for its "real estate referral" website. MRIS sued AHRN for copyright infringement in the District of Maryland and obtained a preliminary injunction.
Appealing the preliminary injunction, AHRN argued that: (1) MRIS failed to properly register its copyright in the individual photographs and that (2) MRIS did not possess copyright interests in the photographs because the subscribers' electronic agreement to MRIS's terms of use failed to transfer those rights. The Fourth Circuit first held that a registrant of collective work databases is eligible for copyright protection for the individual works contained within the databases regardless of whether the registrant provides the names and authors of each individual work to the U.S. Copyright Office.
The Fourth Circuit disagreed with a number of district court cases holding that copyright registrants failed to comply with the requirements of Section 409 by not listing authors of each component work in the application to register the compilation. The court explained that requiring registrants to list each author would impede, rather than encourage, registration, particularly when there is an extremely large number of individual works. The Fourth Circuit also held that an electronic signature can operate as an assignment of rights under Section 204 of the Copyright Act. In this case, the Court found that when the subscriber of MRIS assented to an electronic terms of use agreement, there was a written transfer of the exclusive rights of copyright ownership in its photographs. The ruling is the first by an appellate court to rule on the applicability of the E-Sign Act to electronic copyright transfers.
Status:This case, and another case against AHRN by a different MLS in the District of Minnesota, continue in district court.
Cariou v Prince, 714 F 3d 694, 699 (2d Cir 2013)11In a case with important implications for the art world, the Second Circuit ruled that to qualify as fair use, copyright law imposes no requirement that a secondary use must comment on the original work or its author to be considered transformative. Instead, the work must generally alter the original with "new expression, meaning, or message".
The Court's decision was largely a victory for appropriation artist Richard Prince. Prince was sued for copyright infringement in 2008 by Patrick Cariou, a professional photographer who published a book featuring portraits and landscapes taken during six years he spent living among Rastafarians in Jamaica. Prince altered and incorporated some of Cariou's photographs into a series of paintings and collages. The portions of Cariou's photos that Prince used varied significantly from piece to piece. Prince's alterations included painting "lozenges" over the subjects' facial features and using only portions of some of the images.
The district court ruled in favour of Cariou and entered a permanent injunction against Prince, requiring him to deliver to Cariou all infringing works that had not yet been sold so that they could be destroyed. In ruling for Cariou, the district court determined that to qualify as fair use, Prince's work must "comment on Cariou, on Cariou's Photos, or on aspects of popular culture closely associated with Cariou or the Photos". The Court based its conclusion in part on Prince's deposition testimony that he was not trying to create anything with a new meaning or message.
The Second Circuit, however, determined that copyright law imposes no such requirement for a secondary use to be considered transformative. The Second Circuit held that most of Prince's works were transformative because they added something new and manifested "an entirely different aesthetic" from Cariou's photos. For instance, the court explained: "Where Cariou's serene and deliberately composed portraits and landscape photographs depict the natural beauty of Rastafarians and their surrounding environs, Prince's crude and jarring works, on the other hand, are hectic and provocative." Still, the Second Circuit cautioned that its decision should not be interpreted to mean that any cosmetic change to the photos would constitute fair use.
Status:Cariou submitted a petition12for writ of certiorari to the Supreme Court.
Authors Guild, Inc v Google Inc, 721 F 3d 132 (2d Cir 2013)13Google and the Authors Guild continue their eight-year legal fight over Google's scanning of 20 million library books. The Authors Guild argues that Google is committing large-scale copyright infringement, while Google asserts its actions are covered under the Copyright Act's "fair use" provisions. In a setback to the Authors Guild, the Second Circuit in July reversed a district court decision that certified the following proposed class of authors:
all persons residing in the United States who hold a United States copyright interest in one or more Books reproduced by Google as part of its Library Project, who are either (a) natural persons who are authors of such Books or (b) natural persons, family trusts or sole proprietorships who are heirs, successors in interest or assigns of such authors.
In appealing the grant of class certification, Google argued that the Authors Guild was unable to "fairly and adequately protect the interests of the class" because many members benefit from Google's scanning project and oppose the Authors Guild's efforts. Google also argued that it intended to assert a "fair use" defence, which might moot the litigation. A three-judge panel of the Second Circuit vacated the district court's order and remanded the case for consideration of the fair use defence, holding that resolution of that issue would necessarily inform and "perhaps moot" the class certification issues.
Status: The U.S. District Court for the Southern District of New York is considering the fair use issue.
The significance of copyright to 3D printing, or of 3D printing to copyright, lies in the potentially widespread personal manufacturing of copyrighted objects independent of established markets in ways that cannot be detected, prevented or controlled. We call this "3D printing away from control".
Copyright applies in three basic areas of 3D printing: 3D objects, CAD files of 3D objects and software. Creative objects, such as action figures, are often copyrightable. For CAD files to be copyrightable, they must either be created by a person from scratch, or modified by a person from a pre-existing CAD file. CAD files created by 3D scanners probably are not copyrightable (see Meshworks, Inc v Toyota Motor Sales USA, Inc, 528 F 3d 1258 (10th Cir 2008)). This is probably true of scans of functional objects and may also be true of scans of copyrighted objects, but this is less certain (for example, just as a photo of a copyrighted object is copyrightable, a CAD file could be too). The big copyright winners in 3D printing could be software, including software for design, scanning, manufacturing and machine control, streaming of CAD files, file authentication and security, digital rights management (DRM), and file management.
Copyright infringement principles apply to 3D printing just as they apply elsewhere. If someone copies and distributes a 3D printed copy of a copyrighted object, a copyrighted CAD file, or copyrighted software, the copyright owner is likely to object and may sue for infringement. If copies of copyrighted CAD files are posted online, copyright owners may issue DMCA takedown notices and the host will probably comply.
The challenge for copyright will be widespread 3D printing away from control. As has already happened with peer-to-peer file-shared music, the same may happen with copyrighted objects as home 3D printers become ubiquitous. Although 3D printing copyrighted objects at home (or in other ways that are away from control) may be infringement, the copyright will become increasingly impractical or impossible to enforce.
Is there a solution? DRM is an unlikely candidate. Proposals to stream CAD files that vanish afterprinting do not account for scanning and P2P file sharing away from control. The best hope may be iTunes-like models for copyrighted CAD files, which make 3D printing a legal copy sufficiently easy and economical.
Maria Pallante, the United States Register of Copyrights, is urging14Congress to develop a comprehensive new framework for the nation's copyright laws because the existing 1976 Copyright Act is inadequate for the 21st century. Pallante testified this spring before the House Subcommittee on Courts, Intellectual Property and the Internet. She told lawmakers that a new statute should be more flexible and less technical than the existing one, which is too complex for most people to understand. "[A]uthors do not have effective protections, good faith businesses do not have clear roadmaps, courts do not have sufficient direction, and consumers and other private citizens are increasingly frustrated," she said.
An important issue for Congress to consider is what belongs under a copyright owner's control in the digital age. "People around the world increasingly are accessing content on mobile devices and fewer and fewer of them will need or desire the physical copies that were so central to the 19th and 20th century copyright laws," Pallante said.
Other areas of the law that need addressing include clarifying the scope of exclusive rights, revising exceptions and limitations for libraries and archives, exempting incidental copies in appropriate instances, providing guidance on statutory damages, updating the framework for cable and satellite transmissions, encouraging new licensing regimes, and improving the systems of copyright registration and recordation.
Pallante offered one recommendation that would limit the length of copyright protections, which in most cases is the life of the author plus 70 years. She suggested that Congress consider reverting works to the public domain after life plus 50 years—unless the copyright owner's heirs or successors register their interests with the Copyright Office. Such a change, she said, would make the law more functional.
A new copyright act should also expand the role of the Copyright Office, Pallante said. Her suggestions include having the Office administer a small copyright claims tribunal, offer arbitration or mediation services, or issue advisory opinions.
In response to Pallante's testimony, the House Judiciary Committee held several copyright hearings15this summer to determine whether changes in the law are needed. Lawmakers heard from rights holders, such as the Copyright Alliance and the American Society of Media Photographers, and from technology companies about the role of copyrights and fair use in innovation.
"There is little doubt that our copyright system faces new challenges today," said House Judiciary Committee Chairman Bob Goodlatte, adding that a widespread review of the nation's copyright laws is timely given the rapid technological changes that are occurring.
Any substantial overhaul of U.S. copyright law is likely to take some time. The last major rewrite began in the 1950s but took more than 20 years to become law. In fact, Pallante said, the process took so long that former Register of Copyrights Barbara Ringer came to refer to the 1976 Copyright Act as a "good 1950 copyright law".
Endnotes
1http://www.supremecourt.gov/opinions/12pdf/11-697_4g15.pdf.
2http://www.copyright.gov/title17/.
3http://www.scribd.com/doc/144010864/AFL-Telecommunications-LLC-v-SurplusEQ-com-Inc.
4http://www.cand.uscourts.gov/wha/oraclevgoogle.
5https://supreme.justia.com/cases/federal/us/464/417/case.html#445.
6http://www.ca2.uscourts.gov/decisions/isysquery/339edb6b-4e83-47b5-8caa-4864e5504e8f/1/doc/07-1480-cv_opn.pdf.
7https://www.eff.org/cases/wnet-v-aereo.
8http://dockets.justia.com/docket/california/cacdce/2:2012cv06921/539666/.
10http://scholar.google.com/scholar_case?case=16894963413741074996&q=Metropolitan+Regional+Information+System,
+Inc.+v.+American+Home+Realty+Network,+Inc.+&hl=en&as_sdt=2,38.
11http://cyberlaw.stanford.edu/our-work/cases/cariou-v-prince.
12http://aandalawblog.blogspot.co.uk/2013/07/will-cariou-v-prince-case-be-heard-by.html.
13http://www.managingip.com/TopicList/113/Copyright-Topics/Google-Books.html.
14http://www.managingip.com/Article/3203257/Search/US-Congress-launches-sweeping-copyright-review.html.
Copyright © Finnegan, Henderson, Farabow, Garrett & Dunner, LLP. This article is for informational purposes, is not intended to constitute legal advice, and may be considered advertising under applicable state laws. This article is only the opinion of the authors and is not attributable to Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, or the firm's clients.
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