It Isn’t Unfair If It Isn’t Infringement

The decade-long running litigation between the record labels and video-streaming service Vimeo may be slowly grinding to an end. Fresh off the heels of its appeals victory in which the Second Circuit held that the safe harbor provisions of the Digital Millennium Copyright Act of 1998 (the “DMCA”) include sound recordings made before 1972 (so-called Pre-72 recordings), Capitol Records, LLC v. Vimeo, LLC, 826 F.3d 78, 81 (2d Cir. 2016), cert. denied, 137 S. Ct. 1374 (2017), Vimeo can add another notch on its belt.

In addition to copyright infringement claims, which the Second Circuit’s decision mooted by the safe-harbor provisions of the DMCA, the record labels also sued under state unfair competition law. Vimeo moved to dismiss the unfair competition claims as similarly barred by the DMCA because “the phrase “infringement of copyright” confers protection against all state-law claims that seek to vindicate rights abridged by infringement of pre-1972 sound recordings, no matter what the claim is called under state law.” (emphasis in original). The district court held in Vimeo’s favor, finding that “if Vimeo is liable to Plaintiffs for unfair competition on Plaintiffs’
theory, Vimeo will necessarily be liable for the infringement of copyright. The DMCA safe
harbor therefore applies to Plaintiffs’ unfair-competition claims to the extent that Vimeo
otherwise meets the statute’s requirements.”

There are still claims regarding 59 videos that Vimeo had “red flag” knowledge of infringement, so those claims will continue.

The opinion and order is below:

Capitol Records v Vimeo (Op Re Unfair Comp) (3-31-18) by Christopher S. Harrison on Scribd

Got To Give It Up to Gaye

In a 2-1 decision, the 9th Circuit recently upheld one of the most controversial copyright infringement cases. The case involves the hit song “Blurred Lines” written by Pharrell Williams and Robin Thicke and whether it infringed the hit song “Got To Give It Up” written by Marvin Gaye. The case is controversial because it raises concerns about whether being inspired by a song isequivalent to infringing that song. Specifically, as stated by an amicus filed in the 9th Circuit by 200+ songwriters and composers,

The verdict in this case threatens to punish songwriters for creating new music that is inspired by prior works. All music shares inspiration from prior musical works, especially within a particular musical genre. By eliminating any meaningful standard for drawing the line between permissible inspiration and unlawful copying, the judgment is certain to stifle creativity and impede the creative process. The law should provide clearer rules so that songwriters can know when the line is crossed, or at least where the line is. (emphasis in original)

Critics of the jury verdict at the district court claimed the Williams and Thicke were found to have infringed not one particular song written by Gaye, but rather Gaye’s style of music. According to the Majority, part of the problem may be 9th Circuit precedent regarding the relationship between “access” and “similarity.” According to the Majority,

Access and substantial similarity are “inextricably linked.” Id. at 485. We adhere to the “inverse ratio rule,” which operates like a sliding scale: The greater the showing of access, the lesser the showing of substantial similarity is required.6 See Swirsky, 376 F.3d at 844; Three Boys Music, 212 F.3d at 485. Williams and Thicke readily admitted at trial that they had a high degree of access to “Got To Give It Up.” The Gayes’ burden of proof of substantial similarity is lowered accordingly.

Because Williams and Thicke readily admitted not just to “access” to “Got To Give It Up,” but also inspiration from it, the Majority reasoned the “inverse ratio rule provides that the stronger the showing of access, the lesser the showing of substantial similarity is required.”

Although there was much contemporaneous commentary regarding how the district court managed the evidence at trial, the Majority focuses primarily on the procedural issues presented on appeal.

For example, the Majority notes that it cannot review the denial of a summary judgment motion after a full trial on the merits. “The Supreme Court has squarely answered the question: “May a party . . . appeal an order denying summary judgment after a full trial on the merits? Our answer is no.” Ortiz v. Jordan, 562 U.S. 180, 183–84 (2011).”

In addition, the Majority states that Williams and Thicke’s decision at the end of trial in the district court not to file a motion for judgement as a matter of law (JMOL) under FRCP 50 precludes the appellate court from making such an award on appeal.

[W]hen we stitch together Rule 50’s requirements with our case law, we are left with this result: Because “a post-verdict motion under Rule 50(b) is an absolute prerequisite to any appeal based on insufficiency of the evidence,” id. at 1089, and because a Rule 50(a) motion is, in turn, a prerequisite for a Rule 50(b) motion, see Tortu, 556 F.3d at 1081–83, an advocate’s failure to comply with Rule 50’s requirements gives us serious pause, and compels us to heighten the level of deference we apply on appeal. [FRCP 50 is copied below for ease of reference.]

Taken together, the Majority states its hands are tied, reasoning that it has no authority “to review a factbound summary judgment denial after a full trial on the merits, or to enter judgment as a matter of law in the absence of a Rule 50(a) motion below.”

In its conclusion, the Majority pushes back on the idea that its decision will “punish songwriters for creating new music that is inspired by prior works,” taking the opportunity to assign the blame on Williams and Thicke’s trial counsel.

Our decision does not grant license to copyright a musical style or “groove.” Nor does it upset the balance Congress struck between the freedom of artistic expression, on the one hand, and copyright protection of the fruits of that expression, on the other hand. Rather, our decision hinges on settled procedural principles and the limited nature of our appellate review, dictated by the particular posture of this case and controlling copyright law. Far from heralding the end of musical creativity as we know it, our decision, even construed broadly, reads more accurately as a cautionary tale for future trial counsel wishing to maximize their odds of success.

Ouch…

The 9th Circuit’s decision is below:

Pharrell Williams v Marvin Gaye (Blurred Lines 9th Cir. 3-21-18) by Christopher S. Harrison on Scribd

Rule 50. Judgment as a Matter of Law in a Jury Trial; Related Motion for a New Trial; Conditional Ruling

(a) Judgment as a Matter of Law.

(1) In General. If a party has been fully heard on an issue during a jury trial and the court finds that a reasonable jury would not have a legally sufficient evidentiary basis to find for the party on that issue, the court may:

(A) resolve the issue against the party; and

(B) grant a motion for judgment as a matter of law against the party on a claim or defense that, under the controlling law, can be maintained or defeated only with a favorable finding on that issue.

(2) Motion. A motion for judgment as a matter of law may be made at any time before the case is submitted to the jury. The motion must specify the judgment sought and the law and facts that entitle the movant to the judgment.

(b) Renewing the Motion After Trial; Alternative Motion for a New Trial. If the court does not grant a motion for judgment as a matter of law made under Rule 50(a), the court is considered to have submitted the action to the jury subject to the court’s later deciding the legal questions raised by the motion. No later than 28 days after the entry of judgment—or if the motion addresses a jury issue not decided by a verdict, no later than 28 days after the jury was discharged—the movant may file a renewed motion for judgment as a matter of law and may include an alternative or joint request for a new trial under Rule 59. In ruling on the renewed motion, the court may:

(1) allow judgment on the verdict, if the jury returned a verdict;

(2) order a new trial; or

(3) direct the entry of judgment as a matter of law.

(c) Granting the Renewed Motion; Conditional Ruling on a Motion for a New Trial.

(1) In General. If the court grants a renewed motion for judgment as a matter of law, it must also conditionally rule on any motion for a new trial by determining whether a new trial should be granted if the judgment is later vacated or reversed. The court must state the grounds for conditionally granting or denying the motion for a new trial.

(2) Effect of a Conditional Ruling. Conditionally granting the motion for a new trial does not affect the judgment’s finality; if the judgment is reversed, the new trial must proceed unless the appellate court orders otherwise. If the motion for a new trial is conditionally denied, the appellee may assert error in that denial; if the judgment is reversed, the case must proceed as the appellate court orders.

(d) Time for a Losing Party’s New-Trial Motion. Any motion for a new trial under Rule 59 by a party against whom judgment as a matter of law is rendered must be filed no later than 28 days after the entry of the judgment.

(e) Denying the Motion for Judgment as a Matter of Law; Reversal on Appeal. If the court denies the motion for judgment as a matter of law, the prevailing party may, as appellee, assert grounds entitling it to a new trial should the appellate court conclude that the trial court erred in denying the motion. If the appellate court reverses the judgment, it may order a new trial, direct the trial court to determine whether a new trial should be granted, or direct the entry of judgment.

 

Disney gets “Frozen” by Redbox, the “Rogue One”

Judge Dean Pregerson has denied Disney’s motion for preliminary injunction filed in the Central District of California against movie kiosk distributor Redbox. According to Disney’s complaint, Redbox was purchasing “combo-packs”–a physical DVD coupled with a code that could be used to stream or download a digital copy of the same movie–of Disney movies, decoupling the redemption code from the physical DVD and selling the codes separately, which Disney alleged (among other things) constitutes contributory infringement (i.e., inducing others to create unauthorized copies of Disney movies) and breach of Disney’s “click thru” license.

The court’s treatment of the issue of breach of a click thru license is fairly straight forward. The court notes that Disney puts on the outside of its combo-packs the phrase “Codes are not for sale or transfer.” Disney argued that by opening the combo-packs, Redbox was agreeing to be bound by a contract that prohibited reselling the redemption codes. The court rejects Disney’s argument that a binding contract exists by virtue of Redbox opening the combo-pack that contains the “not for sale or transfer” because (among other reasons) of

the presence of other, similarly assertive but unquestionably non-binding language on the Combo Pack boxes casts further doubt upon the argument that the phrase “Not For Sale or Transfer” communicates the terms or existence of a valid offer. The packaging also states, for example, that “This product . . . cannot be resold or rented individually.” (Marinelli Decl., Ex. A.) This prescription is demonstrably false, at least insofar as it pertains to the Blu-ray disc and DVD portions of the Combo Pack. The Copyright Act explicitly provides that the owner of a particular copy “is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy.” 17 U.S.C. § 109(a); UMG Recordings, Inc. v. Augusto, 628 F.3d 1175, 1180 (9th Cir. 2011) (discussing first sale doctrine). Thus, the clearly unenforceable “cannot be resold individually” language conveys nothing so much as Disney’s preference about consumers’ future behavior, rather than the existence of a binding agreement.

Judge Pregerson’s treatment of Disney’s contributory infringement claim is, in contrast, somewhat novel. Redbox raised the affirmative defense of copyright misuse, which “”prevents copyright holders from leveraging their limited monopoly to allow them control of areas outside the monopoly.” A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1026 (9th Cir. 2001).” Disney’s terms of use regarding the digital copies obtained via the redemption codes stated that the individual redeeming the download be the current owner of the physical DVD associated with the combo-pack. In other words, the only party that could redeem the code was the party that purchased the combo-pack and still retained possession of the DVD. Judge Pregerson found that requiring the rightful purchaser of the DVD to retain possession of the DVD to redeem the download code exceeded Disney’s copyright, which constituted misuse. Or, as Judge Pregerson put it

Combo Pack purchasers cannot access digital movie content, for which they have already paid, without exceeding the scope of the license agreement unless they forego their statutorily-guaranteed right to distribute their physical copies of that same movie as they see fit. This improper leveraging of Disney’s copyright in the digital content to restrict secondary transfers of physical copies directly implicates and conflicts with public policy enshrined in the Copyright Act, and constitutes copyright misuse.

Judge Pregerson’s treatment of copyright misuse is somewhat novel in that it applies to an instance in which the copyright owner is trying to restrict access to the particular copyrighted work, rather than trying to use the copyright monopoly to restrict access to unrelated products. Judge Pregerson’s order is below.

Disney v. Redbox (2!20!18 Order) by Christopher S. Harrison on Scribd

Mayday! Mayday! UMG Took Us Down!!

After UMG won its MSJ (order here), Golden Eagle has apparently settled at a full fare price. According to The Hollywood Reporter, the settlement could be worth $30-40mm to UMG.

UMG’s Motion for Summary Judgment

Umg v Inflight (Umg Msj)

Global Eagle’s Response

UMG v Inflight (Inflight Res to UMG MSJ)

Judge Wu’s Tentative Order

UMG v Inflight (Order Re UMG MSJ)

Judge Wu’s Supplemental Order

UMG v Inflight (Supp Order Re UMG MSJ)

Rdio Fights Back

Rdio is pushing back against Sony in Rdio’s bankruptcy case. You may recall that Sony has sued 3 former Rdio executives for fraud in relation to Rdio’s sale to Pandora and Chapter 11 filing. Rdio has hired Winston Strawn to investigate whether Sony conspired with other record labels to fix prices in the subscription streaming service market. According to the attached motion filed in N.D. Cal. Bankruptcy Court, Rdio “believes that Sony and Orchard have engaged in anticompetitive conduct to fix and control prices and unreasonably restrain trade for the licensing, marketing, and use of music by services, like the Debtor, for the digital streaming of music to consumers worldwide.” The bankruptcy code provides fairly broad discovery for debtors to investigate creditor claims, so Rdio might actually be able to get some documents out of Sony. As the first major interactive service to go belly up, this may be the opening salvo in Sherman Act claims against the labels.

 Sony has engaged Glenn Pomerantz from Munger Tolles, who represented SoundExchange in Web IV.

 

Rdio v Sony re MFNs by Christopher S. Harrison on Scribd

CRO Smack Down: 2nd Cir. Holds 512 covers Pre-72

The Second Circuit delivered its highly anticipated decision in the Capitol Records v. Vimeo case. Various record labels sued UGC site Vimeo for copyright infringement of sound recording fixed prior to February 14, 1972, so-called Pre-72 recordings. The labels argued that the safe harbor provisions of Sec. 512 of the Copyright Act, which provides immunity to copyright infringement liability to UGC host sites subject to certain conditions, do not apply to Pre 72 recordings, which are not covered by the Copyright Act but rather are the subject to various state statutory and common law protections. Relying heavily on a 2011 report concerning the legal state of Pre 72 recordings from the Copyright Office, the federal district court for the Souther District of New York granted the labels’ motion for summary judgment.1  Vimeo appealed.

In discussing the origins of Sec. 512, the Second Circuit describes the “compromise” that Congress sought to establish between content creators and content users. That compromise provided creators with a ‘notice and takedown’ provision, which allowed creators to avoid filing individual copyright infringement actions against each and every unauthorized use online. That compromise provided users immunity from infringement claims and monitoring responsibilities, provided the user expeditiously remove content in response to a takedown request. This compromise, the Second Circuit concludes, would be illusory if Pre 72 recordings weren’t subject to the 512 safe harbor.

The Second Circuit begins by noting that  “the district court accepted without discussion the position taken by the United States Copyright Office in a report prepared in 2011 that the safe harbor does not protect against liability for infringement of pre-1972 sound recordings.” The Second Circuit then dissects the report and its shortcomings.

The Second Circuit points out that

The Report begins its analysis by asserting that § 512(c)’s term “infringement of copyright” is defined in § 501(a) as the violation of “any of the exclusive rights of the copyright owner as provided by sections 106 through 122.” Section 501(a), however, does not contain such a definition. The Copyright Act’s definitions are set forth in § 101, and do not include a definition for “infringement of copyright.

The Second Circuit rejects the Office’s conclusion, reasoning

The statement that one who violates rights identified in specified sections is an “infringer of copyright” does not purport to set forth an exclusive definition of “infringer of copyright.” … To state that conduct x violates a law is not the same thing as saying that conduct x is the only conduct that violates the law. (emphasis in original)

The Second Circuit concludes, therefore, that the safe harbor must include Pre 72 recordings or the entire “compromise” envisaged by Congress would be illusory.

what Congress intended in passing § 512(c) was to strike a compromise under which, in return for the obligation to take down infringing works promptly on receipt of notice of infringement from the owner, Internet service providers would be relieved of liability for user-posted infringements of which they were unaware, as well as of the obligation to scour matter posted on their services to ensure against copyright infringement. The purpose of the compromise was to make economically feasible the provision of valuable Internet services while expanding protections of the interests of copyright owners through the new notice-and-takedown provision. To construe § 512(c) as leaving service providers subject to liability under state copyright laws for postings by users of infringements of which the service providers were unaware would defeat the very purpose Congress sought to achieve in passing the statute.

 

 

Second Circuit Decision

Capitol Records v Vimeo (2nd Cir. Op)

Copyright Office Pre-72 Report

Copyright Office Pre 72 Report

  1. There were also questions of red flag knowledge that were decided under the Second Circuit’s prior YouTube decision, but I don’t find those particularly interesting or newsworthy.

Everything Old is New Again

In the latest lawsuit involving the public performance of so-called Pre 72 sound recordings 1, defendant CBS Radio is making a claim almost as controversial as the plaintiff’s allegations. Much digital ink has been spilled criticizing the decisions of federal district courts in California and New York finding that record companies enjoy a state law right of public performance in their Pre 72 recordings, despite not having ever asserted such rights before 2012. 2 CBS, in its recent motion for summary judgment, makes a similarly bold assertion: that it cannot be liable to plaintiff for infringing a performance right in plaintiff’s Pre 72 recordings because CBS only performs “remastered” versions of plaintiff’s sound recordings — and not the original Pre 72 sound recordings owned by the plaintiff.

The question of when a remastering or remixing of an existing recording is entitled to a new copyright has been debated before.3 The problem here is that record labels have been remastering previously released recordings for many years and *not* attempting to secure a new copyright in those remastered versions. The reason is fairly obvious — as plaintiff’s point out in their response to CBS’ motion — if a record company could secure a new copyright simply by remastering a perviously copyrighted sound recording, a shrewd record executive could extend the life of copyright in a sound recording forever. While CBS is correct that remastering engineers contribute significant creativity in the process of applying new technologies to remaster a sound recording to (hopefully) improve the listener’s experience of listening to a previously released recording, it strikes me as dubious to conclude therefore that the resulting remastered sound recording is entitled to an entirely new federal copyright. If CBS is correct, then we could find ourselves in a world in which the originally issued sound recording enters the public domain, but the digitally remastered version continues to enjoy copyright protection, even though to the layperson those are the same recording.

CBS’ motion for summary judgment

ABS v CBS (CBS MSJ)

ABS’ response

Abs v Cbs (Abs Resp Cbs Msj)

CBS’ Reply

ABS v CBS (CSB Reply)

  1. Sound recordings created (“fixed”) prior to February 15, 1972 are not protectable by federal copyright. Instead, such recordings are protected, if at all, under state law until 2067.
  2.  Steve Gordon, The Current State of Pre-1972 Sound Recordings, 4 NYU J. Intell. Prop. & Ent. L. 336, at 347 (2015) (questioning “whether Judge Gutierrez’s decision will be upheld” because it ignored clear legislative intent); Noah Drake, Flo & Eddie, Inc.: Public Performance Rights for Pre-1972 Sound Recordings, 6 Calif. L. Rev. Cir., at 61, 66-67 (2015) (criticizing failure to consider legislative history); Tyler Ochoa, A Seismic Ruling on Pre-1972 Sound Recordings and State Copyright Law, Tech. & Mktg. L. Blog (Oct. 1, 2014), avail. at http://blog.ericgoldman.org/ (“Interpreting a state statute first enacted in 1872 to provide such rights now, some 75 years later, will wreak havoc with existing commercial practices” and “undo a 75-year-old consensus that state law does no  provide a public performance right”). Numerous amici in the Ninth Circuit Pandora appeal document the criticism. See Flo & Eddie v. Pandora, No. 15-55287, 2015 WL 5313052 (9th Cir. Sep. 9, 2015) (Computer & Communications Industry Association); id., 2015 WL 5331515 (National Association of Broadcasters); id., 2015 WL 5313054 (Yale Law School Information Society Project and Affiliated Scholars of Intellectual Property and Free Expression Law); id., 2015 WL 5313053 (9th Cir. Sep. 9, 2015) (Copyright and Intellectual Property Law Professors).
  3.  See James J. Schneider, Defeating the Terminator: How Remastered Albums May Help Record Companies Avoid Copyright Termination, 53 B.C. L. Rev. 1889, 1902 (2012).

Getting Tufer

TufAmerica has discovered that it can be very expensive to bring a copyright infringement claim when you don’t own the copyright allegedly being infringed. In this case, TufAmerica sued the Beastie Boys (including their record label [UMG] and music publisher [UMPG]) over the alleged sampling of TufAmerica’s recording artist Trouble Funk’s 1982 release “Say What” on the Beastie Boy’s track “Shadrach” from their 1989 release Paul’s Boutique. Judge Nathan of the SDNY recently granted Defendant’s motions for attorneys’ fees and costs totaling nearly $850,000! Judge Nathan had earlier granted Defendant’s motion for summary judgment, finding that TufAmerica lacked standing to sue for infringement because it did not own an exclusive license to the Trouble Funk recording / musical composition at issue. Instead, Judge Nathan found that, at most, TufAmerica had acquired a “bare right to sue,” which is not an exclusive license and does not provide standing under the Copyright Act’s Sec. 501’s standing requirements.

Judge Nathan’s decision is below.

TufAmerica v Beastie Boys (Atty Fee Award)

Getting Tuf

Also from TufAmerica’s lawsuit against the Beastie Boys over the alleged sampling of TufAmerica’s recording artist Trouble Funk’s 1982 release “Say What” on the Beastie Boy’s “Shadrach” from their 1989 release Paul’s Boutique, I give you Trouble Funk’s recording contract and co-publishing agreement.

Recording Agreement

Trouble Funk Recording Contract (1984)

Co-Publishing Agreement
 

Co Publishing Agreement

If “Ambient” Music Is “as ignorable as it is interesting,” Can It Be Worth $15mm?

ESPN recently initiated a rate proceeding with performing rights organization BMI. ESPN claimed that the rate BMI was seeking was above market and asked the federal district court for the Southern District of New York, which has continuing jurisdiction over the consent decree between BMI and the Department of Justice to determine “reasonable” rates. BMI has responded (attached below) and claims it is simply asking ESPN to continue paying the same percentage of revenue rate to which it agreed 10 years ago.

BMI claims that ESPN utilizes a BMI blanket license to cover so-called “incidental and ambient” music performances, such as in broadcasts of live sporting events; e.g., at Heinz Field the Pittsburgh Steelers sometimes play Styx’ “Renegade” during commercial breaks when the Steelers are on defense to “hype” the crowd. If the Steelers are on Monday Night Football and ESPN breaks back to the game before “Renegade” has stopped playing, for the purpose of music copyright licensing ESPN has “performed” that song, for which it must have a license. This is true even though Heinz Field already has its own license to perform that song to the fans sitting in the stadium to watch the game. In a bit of litigation hyperbole BMI argues that “ambient stadium music is a critical component of the broadcast that allows ESPN to attract viewers by making them feel like they are sitting in the stadium cheering on their favorite team.” How can something that is “ambient” (e.g., “as ignorable as it is interesting”) also be a “critical component” of a broadcast?

So how much does BMI want ESPN to pay for this ambient but “critical component”? $15 million per year. That figure is the product of ESPN’s annual revenue ($11b in 2014) multiplied by 0.1375%, the lowest rate among the rates charged for cable television broadcasts (“music intensive” programming networks pay 0.9% of gross revenue, “general entertainment” programming networks pay 0.375% of gross revenue, and “news and sports” programming networks pay 0.1375% of gross revenue.).

However, in 2005, the last year of ESPN’s prior license with BMI, ESPN’s annual revenue was “just” $5b. 1 This is one of the problems with a percentage of revenue royalty rate: while it may be that ESPN viewed its “incidental and ambient” music performances on live broadcasts of sports to be “worth” $6.875mm annually, it does not mean that those same performances are “worth” more than twice that amount. This is especially true at a time when ESPN’s revenues are declining rapidly and content acquisitions costs are increasing. 2

BMI’s answer is below:

Espn v Bmi (Bmi Answer)

  1. http://www.bloomberg.com/news/articles/2005-10-16/in-the-zone
  2. “ESPN’s subscriber losses, which have seen it lose nearly 8.5 million homes in the last 4 1/2 years, according to Nielsen estimates, or down about 8 percent, are at a rate that is declining faster than the rest of the industry.” http://awfulannouncing.com/2015/espn-make-3-billion-lost-revenue-increased-fees.html