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November 2, 2011 / Erach Screwvala

All Shook Up

Preliminary injunctions are powerful tools when pursuing infringing conduct. A preliminary injunction is an order from a court that forces a party to refrain from certain conduct. In an infringement case, that would typically result in forcing the defendant to pull the infringing conduct. Note the word preliminary. A preliminary injunction is issued before a full hearing on the case occurs, i.e., before the defendant can mount a defense to the allegations. A plaintiff must meet a high threshold to get an injunction: a substantial likelihood of success on the merits and irreparable harm if the injunction is not granted.

Why is a preliminary injunction so powerful? Consider a new television show about to premiere on a major network. The network has spent enormous sums promoting the program for months, through on air, print, and other advertising and promotion. Now imagine what happens if the day before a court issues an injunction preventing broadcast. Clearly, the plaintiff is in an excellent bargaining position.

Hence the high standard. Let’s focus on irreparable harm. Irreparable harm generally exists where the plaintiff has no other adequate remedy. If the plaintiff can be made whole through money damages, for example, there is usually no irreparable harm. The Ninth Circuit has long held that allegations of copyright infringement were entitled to a presumption of irreparable harm, essentially obviating the need for the plaintiff to present proof of harm. See, Elvis Presley Enterprises, Inc. v. Passport Video, 349 F.3d 622 (9th Cir. 2003).

The era of presumption has now come to a close, however. In 2006, the Supreme Court rejected an injunction in a patent infringement case, holding that there was no basis to depart from the ordinarily high standards for injunctions in other areas, including copyright law. eBay, Inc. v. MercExchange, LLC, 547 U.S. 388 (2006). Recognizing the impact of the Supreme Court decision, the Ninth Circuit in August put an end to the presumption in Flexible Lifeline Systems v. Precision Lift, Inc., 654 F.3d 388 (9th Cir. 2011). Plaintiffs seeking a preliminary injunction are now required to present proof of irreparable harm. Apparently, the King is dead.

October 27, 2011 / Erach Screwvala

Who’s the Patsy Now?

And now, a Battle Ragu.

In one corner, we have the venerable Patsy’s Pizzeria, first opened in East Harlem in 1933.  The original restaurant, including the name, was sold in 1991, and is now a franchise with multiple locations in the New York area.  In the other corner, Patsy’s Italian Restauarant, the noted Italian restaurant on West 56th Street in Manhattan.  For decades, each business co-existed in relative peace.  Patsy’s Pizzeria held a servicemark on “Patsy’s” and “Patsy’s Pizzeria” for restaurant services.  Patsy’s Italian Restaurant held a servicemark on “Patsy’s” and a stylized “Patsy’s PR” for restaurant services except pizzerias and a trademark on “Patsy’s” for sauce.

Let’s talk trademarks for a moment. Trademarks (and servicemarks) are words, symbols, or designs that distinguish the origin of one product or service from another. So long as the trademark is used to provide goods and services, the trademark owner will enjoy certain rights and protections. With trademark, however, comes responsibility. For example, if you stopped using your trademark to sell the goods or services associated with it, you will be held to have abandoned your trademark. Another example, relevant here, is whether you fail to maintain the standard and quality of the mark. This can occur through naked licensing.

Trademarks get licensed all the time, especially through franchising. When licensing a trademark, it is critical for the owner to maintain and assert control over the quality of the goods and services provided by the licensee. The failure to exercise such control can result in abandonment of the mark. See e.g., Barcamerica International U.S.A. Trust v. Tyfield Importers, Inc., 289 F.3d 589 (9th Cir. 2002).

And now, Round 1.  After decades of peaceful, or at least non-litigious peace, Patsy’s Italian Restaurant began to sell jarred sauce at retail. Not to be outdone, Patsy’s Pizzeria followed with its own jarred sauce that it offered for sale at its restaurants. That led to litigation in which each side sought to cancel the servicemarks held by the other. It became apparent to the District Court that Patsy’s Pizzeria falsified evidence about when it began to sell its sauce. Not surprisingly, for this and for other reasons, Patsy’s Italian Restaurant prevailed in the litigation.

Thus began a long and tortured course of litigation between the parties. The final act came when Patsy’s Italian Restaurant sued two licensees of Patsy’s Pizzeria for trademark infringement. A trial resulted in a convoluted jury verdict which determined, among other things, that Patsy’s Pizzeria falsified evidence in connection with one of its trademarks and had abandoned its mark through naked licensing. In giving effect to the jury verdict, the District Court cancelled the marks of both parties, holding that neither restaurant could use the word “Patsy’s” alone. The Second Circuit agreed.


October 19, 2011 / Erach Screwvala

Pitch Forks Pilgrim

So you’ve got a great idea for a film, television show, whatever. You take your treatment or script and pitch your project to a studio or a producer. Unfortunately, you don’t get an offer. But hang on, now you see a preview for your show or film. Now what?

If you’re in California, the Ninth Circuit decision in Montz v. Pilgrim Films & Television, Inc., No. 08-56954 may offer a clue.

Let’s set the stage. Larry Montz, a parapsychologist hatches an idea to create a television show following a team of paranormal investigators in the field.  Years of pitching the project, including screenplays and videos followed, with no interest from any network or studio. Among the networks approached were NBC and the Sci-Fi Channel. Enter Ghost Hunters a series produced by NBC and Pilgrim for the Sci-Fi Channel. The program features John Conrad Hawes who leads a team of paranormal investigators around the country on field investigations. Sound familiar? It sure did to Montz, who sued. That he sued is not particularly remarkable. It’s the nature of the claim that is of interest here.

Rather than sue for copyright infringement, Montz claimed the existence of an implied-in-fact contract under California law in which the producers agreed to pay him for the use of his concept. In 1956, the California Supreme Court recognized the existence of an implied-in-fact contract where a writer submits a concept to a producer or studio on condition that she will be compensated for its use. Desny v. Wilder, 299 P.2d 257 (Cal. 1956). The producers, however, sought to dismiss the claim as preempted by copyright law. In 1976, the Copyright Act was amended to preempt state law claims over work that falls under the “subject matter of copyright” and where the state law affords relief that is “equivalent to any of the exclusive rights within the general scope of copyright.” 17 U.S.C. §301(a).

The District Court and a three-judge panel of the Ninth Circuit held that the Copyright Act preempted Montz’s state law claims. However, in a rehearing before all eleven judges of the entire Ninth Circuit, the Court, in a narrow 7-4 majority reversed and held that the Desny claim could proceed.

There was no serious question that the material submitted by Montz was within the subject matter of copyright.  At issue, then, was whether an implied-in-fact copyright claim provides relief equivalent to the Copyright Act.  What does that mean exactly?  Copyright owners have the exclusive right to reproduce, distribute, and publish copyrighted work and to prepare derivative works based on the copyrighted work.  17 U.S.C. §106.  Any state claim that fits within that bundle of rights is preempted by the Copyright Act.  Where does that leave Montz’s demand for payment under an implied-in-fact contract theory?

On rehearing, a majority of the Ninth Circuit held that the Copyright Act does not preempt an implied-in-fact contract for payment. In fact, the Ninth Circuit has previously held that Desny claims are not preempted because the agreement to pay for use of the copyrighted material does not fall within the exclusive rights under §106. Grosso v. Miramax Film Corp., 383 F.3d 965 (9th Cir. 2004). The Montz Court held that his claim was essentially identical to the claim at issue in Grosso.  In so holding, the Ninth Circuit concluded that the agreement to pay for the use of the material introduced an additional element that differed qualitatively from the rights secured by copyright. As the Court noted, the contract claim here was a bilateral agreement between Montz and the producers that he was to be paid if the concept was used. Therefore, his claim could proceed.

Remember that this was a 7-4 decision. Why did four members of the Court disagree? The dissent appears to focus on the allegation that the implied-in-fact contract included a promise by the producers to seek Montz’ permission before exploiting his concepts. According to the dissent, the fact that Montz sought to retain control over the use of his content causes preemption of his claim. In the minds of the dissenting judges, by seeking to partner as a co-producer on a series instead of engaging in an outright sale, his claim is no different than a claim arising under the Copyright Act.

Perhaps the Supreme Court will weigh in. Until then, Desny claims remain alive and well in California.

October 8, 2011 / Erach Screwvala

Supreme Court Caps ASCAP Suit

On October 3, the United States Supreme Court declined to hear an appeal by ASCAP in which ASCAP sought to define the term “public performance” in Section 101 of the Copyright Act to include digital downloads of music from sites such as Yahoo! and RealNetworks.  The decision not to hear the case by the Supreme Court left intact a Second Circuit ruling holding that digital downloads are not “public performances.”

ASCAP is a non-profit membership organization that represents composers, songwriters, and lyricists in licensing non-dramatic public performances of their work.  Listen to Froggy 101?  That’s a non-dramatic performance.  Put “Ring of Fire” in a seemingly endless loop on the bar jukebox?  Also, a non-dramatic performance.  Got nosebleed seats to see The Boss?  You get the picture.

In United States v. ASCAP, et al., ASCAP tried to expand the definition of public performance to include downloads of musical works.  Defining public performances to include downloads would create a new revenue stream for ASCAP’s members worth tens of millions of dollars.  Let’s look first at the definition of public performance under §101.

The Copyright Act defines a public performance in two parts:

(1) to perform or display it at a place open to the public or at any place where a substantial number of persons outside of a normal circle of a family and its social acquaintances is gathered; or
(2) to transmit or otherwise communicate a performance or display of the work to a place specified by clause (1) or to the public, by means of any device or process, whether the members of the public capable of receiving the performance or display receive it in the same place or in separate places and at the same time or at different times.

How do downloads fit in to this definition?  According to ASCAP, downloads “transmit or otherwise communicate a performance or display of the work.”  Seems logical.   However, let’s split the hair a little finer.  The definition calls for the transmission of a performance of the work.  Is the file downloaded by the user really a performance?  The Second Circuit said no.

To arrive at this holding, the Second Circuit drew an important contrast between song downloads and streaming.  In the latter, the music was heard by the user at the same time it was transmitted over the internet, much like a radio or television broadcast.  Hence, streaming clearly results in a public performance of the work.  By contrast, a download transfers a file to a computer and then the user listens to the file at his or her convenience.  Since the download does not immediately result in a broadcast of the work, there has been no public performance.

August 12, 2011 / Erach Screwvala

Public Domain Pitfalls

Sometimes that shiny object lying on the ground isn’t the prize it appears to be.

There was a time when copyright owners had to observe certain formalities to maintain protection for their works of art. A single mistake resulted in a protected work falling into the public domain. Of course, once a work is in the public domain, anyone is free to use it. Of course nothing is black and white when it comes to copyright law and this is no exception.

In 1939, MGM released The Wizard of Oz. MGM registered a copyright in the film and it remains viable to this day. In connection with the release of the film, the studio created and released a variety of publicity materials, such as posters, still photographs, to promote the film. The studio failed to include proper copyright notices on the material and so it passed into the public domain. A Nevada company acquired some of this material which it then licensed for the manufacture of shirts, mugs, and other knickknacks, no doubt secure in its right to do so.

Not so fast. Warner, which now owns the copyright to the film, sued alleging infringement of the film copyright. The Eighth Circuit agreed, affirming the district court’s judgment in favor or Warner. Warner Bros. Entertainment v. X One X Productions, No. 10-1743.  How did that happen?

The decision makes sense when you consider that copyright can exist in layers. For example, a sound recording carries with it multiple copyrights: the recording itself and the underlying compositions on the recording. So too with a film or television show, which quite often includes copyrighted background music. Even if one element of a copyrighted work falls into the public domain, the remaining elements still enjoy protection from infringement.

So how did the publicity materials violate the film copyright? To understand, we need to understand how a single work can implicate multiple copyrights. Take, for example, a CD. For each recorded track, there are at least two separate copyrights: the copyright in the actual recording and the copyright to the underlying composition. A television show or a film also typically has multiple layers of copyrights, whether in the use of recorded music as background or the use of pre-existing film or television clips.

Here, the additional layer was the use of the film characters in the publicity materials. Courts have routinely held that copyright protection can extend to characters where those characters have distinctive characteristics, such as visual look, speech, and mannerisms. Thus, it has been held that James Bond qualifies for copyright protection. Metro-Goldwyn-Mayer v. American Honda Motor Company, 900 F.Supp. 1287 (C.D. Cal. 1995). Where the film character is based on a literary character, as was true here, the protection is limited to the incremental expressions of character beyond that included in the underlying work. Of course, as the Court noted, literary works often allow for imagination in the embodiment of a character, which a film would typically take further.

This decision points out the importance of understanding how works can implicate many layers of copyright protection. Even when licensing material, you must take care to determine what other rights exist in the material you license and then take steps to license the additional material as well.

July 22, 2011 / Erach Screwvala

No Butts About It

Peanut butter and jelly, coffee and donuts, bagels and cream cheese. All classic combinations. Law and funny? Well, not so much. A recent decision involving the animated series South Park gives us an opportunity to discuss parody as a fair use defense to claims of copyright infringement. Ok, so maybe South Park can’t make the law funny, but at least it comes from funny.

The case, Brownmark Films v. Comedy Partners, LLC , involved an internet video cleverly titled “What What (In the Butt).” The video, which the Eastern District of Wisconsin described as containing “an array of bizarre imagery,” went viral on YouTube, generating millions of hits. In an episode of South Park titled “Canada On Strike,” Butters makes an internet video in the hopes of going viral and getting rich in the process.

The original video qualifies for Copyright protection, since copyright protects art — even bad art. The South Park video unquestionably copies directly from the original video. Several visual elements from the original video and Butters repeats the phrase “What What (In The Butt)” just like the performer in the original video. Brownmark sued for infringement. Open and shut case, right?

Not so fast. In response to Brownmark’s claim for copyright infringement, the makers of South Park claimed fair use, arguing that their video was a parody of the original. The District Court agreed.

Fair use permits the use of copyrighted material “for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research.” 17 U.S.C. §107. Parody has long been recognized as a fair use under the Copyright Act. See, e.g., Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569 (1994) (Supreme Court held that 2 Live Crew parody of Roy Orbison’s “Pretty Woman” was fair use). But how can we tell the difference between parody and plain infringement?

Parody is an art form that uses imitation and exaggeration to poke fun at an artist, style or genre.  The District Court easily found that the South Park episode was parody.  The District Court held that the point of the South Park video was to “lampoon the recent craze in our society of watching video clips on the internet that are — to be kind — of rather low artistic sophistication and quality.”  In addition, the District Court held that the South Park video actually transforms the original video by making it even more outrageous.  So, the South Park episode is essentially a social commentary on our fascination with the internet and the video represents a central component of the commentary.

Of course, the law being what it is, establishing the parody does not end the analysis.  The Copyright Act sets forth four factors that Courts typically look at to determine whether fair use has been established. Although the statute does not intend these to be exhaustive, they typically form the basis of the Court’s decision.  The statutory factors include “the purpose and character of the use,” the amount of the original work used, and the effect of the use on the value of the original work.

Applying these factors, the District Court had no difficulty finding that the South Park video was fair use.  The Court noted that the South Park video used only enough elements of the original video to make the reference clear and to establish the parody that was the point of the episode.  The District Court further concluded that inasmuch as South Park sought to hold the original video — and the internet video craze in general — up for ridicule, there would be little to no impact on the value of the original work.

June 24, 2011 / Erach Screwvala

Mind the Gap

To my mind, one of the more fascinating aspects of Copyright Law is the statutory right of recapture. A recent rule adopted by the Copyright Office addresses a hypertechnical flaw in the statutory enactments of these rights by Congress. And, I suppose, it reveals me as a Copyright nerd.

First, let’s examine how the termination process works. Suppose you’re a new author trying to get a publishing deal. As an unproven author, you have little leverage in the negotiating process. You will more than likely have to agree to give away rights for the life of the copyright. Several years later, it turns out you’re John Updike — not literally, just literarily, and commercially. Now, in negotiations with publishers, you have substantially more leverage. But what about those early deals?

The Copyright Act permits authors, after a certain amount of time has passed and within a specific window of time, to terminate prior grants of rights so that they can be resold. So, that first book deal you did granting rights for the life of the copyright? You can cancel it and then resell those rights to the same publisher, or a different publisher, if you prefer.

As the Copyright Act has evolved and changed, so has the recapture right. Currently, the procedure exists in two separate statutes, §203 and 304 of the Copyright Act.  §203 applies to any grants on or after January 1, 1978, the effective date of the 1976 amendments to the Copyright Act.  §304 controls all grants for works that had an existing copyright as of January 1, 1978. Note that one statute is implicated by the date of the transfer, but the other is triggered by the date of the copyright.

Suppose that on December 31, 1977 you sign a contract with a publisher for an unfinished novel. On January 2, 1978, you complete and copyright the novel and deliver it to the publisher for publication. What statute governs your termination rights? §203 appears to be out, because the grant was made prior to January 1, 1978. Same too with §304, since the copyright did not exist prior to January 1, 1978. And herein lies the gap.

Although Congress certainly didn’t intend to create a class of works that would not enjoy termination rights, by establishing different criteria for the application of each provision, it did exactly that. To address this inequity, the Copyright Office has adopted a rule that transfers on the hypothetical would be accepted as terminations under §203. In support of the rule, the Copyright Office reasoned that a grant in a copyrighted work cannot be effective unless and until the work in question exists. So, our author who signed a contract on December 31, 1977 did not effectively make the transfer until January 2, 1978, the date that the work was completed.

This raises some important practical questions. First, the recordation of a termination notice is not a presumption of validity. Will Courts reach the same conclusion as the Copyright Office did and rule that §203 governs termination of the transfer described here? Can authors now provide an accurate date of creation to satisfy the requirement of §203, since under §304 it is the date of the transfer that is important? As the window for termination on these grants starts to open, Congress should provide clarity to rights-holders and grantees alike by clarifying the appropriate procedure.