IP Law Chat : IP Law Chat -- Hendricks & Lewis, intellectual property, trademark, copyright and technology attorneys

The Recording Industry Association of America (RIAA) brought suit challenging the decision of the Copyright Royalty Board, which sets the terms and rates for copyright royalties when copyright owners and licensees do not do so themselves. 

More specifically, the RIAA challenged the Board's decision with regard to royalty terms and rates for so-called Section 115 compulsory licenses under the Copyright Act.  Compulsory licenses allow "individuals to make their own recordings of copyrighted musical works for distribution to the public without the consent of the copyright owner."

As to those licenses, the Board institute a 1.5% per month late fee for late royalty payments and implemented a royalty rate structure for cell phone ringtones under which the copyright owners would receive 24 cents for every ringtone sold that used their copyrighted work.  The RIAA challenged both aspects of the Board's decision, claiming the decision was arbitrary and capricious.

As background, in 1996, the parties with an interest in compulsory licenses agreed to terms and rates for those licenses but also agreed that those terms and rates would expire in 10 years.  Therefore, in 2006, the Board instituted proceedings to set certain terms and rates to govern those licenses, the final determination of which were not published until 2009.  The RIAA's challenge to the Board's decision then followed.

The D.C. Circuit first noted that the Copyright Act requires the Board to balance four policy objectives when establishing reasonable terms and rates for Section 115 licenses:

(1) maximizing the availability of creative works to the public; (2) providing copyright owners a fair return for their creative works and copyright users a fair income; (3) recognizing the relative roles of the copyright owners and users; and (4) minimizing any disruptive impact on the industries involved.

With respect to the RIAA's challenge to the Board's imposition of a late fee, the D.C. Circuit readily disposed of each of the RIAA's arguments.

First, the court concluded that the Board appropriately considered market conditions when setting the late fee but was not required to adopt a fee that exactly matched the market rate.  Second, the court found that the existence of a right to terminate compulsory licenses for nonpayment did not negate the Board's authority to impose a late fee as the Copyright Act allowed for both.  Third, the court rejected the RIAA's argument that it was unreasonable to impose a late fee because it purportedly is uncertainty about what amount is owed to individual copyright owners of a jointly held copyright that causes late payments.  But, as the court noted, the regulations governing compulsory licenses provided a solution to that situation by allowing the licensee to satisfy its obligation by paying any one copyright owner.

The D.C. Circuit also rejected the RIAA's challenge to the structure of the cell phone ringtone royalty rate established by the Board on similar grounds.  The court concluded that the Board appropriately considered--but was not bound by--existing market rates for voluntary licenses.  And the court found that the Board considered the RIAA's claim that "plummeting" ringtone prices rendered the penny rate chosen by the Board inherently unreasonable and the RIAA had presented no basis to overturn the Board's decision on the issue.

The D.C. Circuit thus affirmed the Board's decision.

The case cite is Recording Indus. Ass'n of Am., Inc. v. Librarian of Congress, No. 09-1075 (D.C. Cir. June 22, 2010).

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Plaintiffs are various persons and entities who made their livelihoods by performing, distributing and selling public domain artistic works.  Plaintiffs brought this action challenging the constitutionality of the Copyright Term Extension Act and Section 514 of the Uruguay Round Agreements Act (URAA), the latter of which granted copyright protection to certain foreign works that had been in the public domain in the United States.  Somewhat more specifically, Section 514 restored "copyrights in foreign works that were formerly in the public domain in the United States for one of three specified reasons:  failure to comply with formalities, lack of subject matter protection, or lack of national eligibility."  As a result, the plaintiffs were either prohibited from using such previously public domain works or were required to pay cost-prohibitive licensing fees to the copyright holders.  (The Tenth Circuit's opinion gives a significantly more detailed description of Section 514.)

The District Court for the District of Colorado initially granted summary judgment to the government and on appeal, the Tenth Circuit concluded that the plaintiffs' challenge to the Copyright Term Extension Act was foreclosed by the Supreme Court's decision in Eldred v. Ashcroft, 537 U.S. 186 (2003).  In addition, although the Tenth Circuit concluded that Section 514 of the URAA had not exceeded the limitations of the Copyright Clause of the U.S. Constitution, it held that the plaintiffs had "shown sufficient free expression interests in works removed from the public domain to require First Amendment scrutiny" of Section 514.  The matter was thus remanded to the District Court to determine and apply the appropriate level of constitutional scrutiny to Section 514.

Upon remand, the parties agreed that Section 514 is a content-neutral regulation of speech thereby subject to intermediate scrutiny.  On cross-motions for summary judgment, the District Court granted the plaintiffs' motion, concluding that Section 514 was unconstitutional to the extent it "suppresses the right of reliance parties to use works they exploited while the works were in the public domain."  Both parties appealed: the government argued that Section 514 did not violate the First Amendment and the plaintiffs argued that the District Court had failed to provide all of the relief they had requested.

On appeal, analyzing Section 514 as a content-neutral regulation of speech, the Tenth Circuit reversed the District Court's decision, concluding that "the government has demonstrated a substantial interest in protecting American copyright holders' interests abroad, and Section 514 is narrowly tailored to advance that interest."

As to the importance of the government interest asserted, the Tenth Circuit had "no difficulty in concluding that the government's interest in securing protections abroad for American copyright holders" satisfied the applicable standard.  Section 514 secured foreign copyrights for American works, which previously had been unprotected, and thereby preserved the authors' economic and expressive interests.  The court noted that some estimated that billions of dollars were lost each year because foreign countries were not providing copyright protections to American works in the public domain abroad.

The Tenth Circuit also concluded that Section 514 was narrowly tailored to further the substantial government interest asserted.  The court cited evidence that foreign countries could be expected to provide only as much protection to American copyright holders as the United States would provide to foreign copyright holders and that some countries might follow the United States' example in that regard.  Thus, in order to secure the benefits to American authors for their works abroad, the United States needed to impose the same burden on parties like the plaintiffs in the United States that it sought to impose on such foreign parties abroad.  In short, "the benefit that the government sought to provide to American authors is congruent with the burden that Section 514 imposes on [so-called] reliance parties."

The Tenth Circuit thus reversed the District Court's grant of summary judgment in favor of the plaintiffs, concluding that "because Section 514 advances a substantial government interest, and it does not burden substantially more speech than necessary to advance that interest, it is consistent with the First Amendment."

The case cite is Golan v. Holder, Nos. 09-1234 & 09-1261 (10th Cir. June 21, 2010).

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Two brothers--Aaron and Matthew Benay--wrote and copyrighted a screenplay entitled The Last Samurai.  The Benays contended that the creators of the film by the same name copied their screenplay without permission.  The Benays sued, alleging copyright infringement and breach of contract under California law.  The District Court for the Central District of California granted summary judgment in favor of the defendants on both claims and the Benays appealed.

The Ninth Circuit affirmed the grant of summary judgment on the copyright infringement claim, concluding that the Benays had failed to establish sufficient similarity between the screenplay and the film once stripped of the elements not protected under copyright law.

Nonetheless, the Ninth Circuit reversed summary judgment to the defendants on the breach of an implied in fact contract under California law.  The court noted that "[c]ontract law, whether through express or implied-in-fact contracts, is the most significant remaining state-law protection for literary or artistic ideas" as other such protections had been preempted by federal copyright law.  But contract claims for protection of ideas have not been preempted because they allege an "extra element" that changes the nature of the action, namely, "the agreement between the parties that the defendant will pay for the use of the plaintiff's ideas, independent of any protection offered by federal copyright law."

The Ninth Circuit's decision reversing summary judgment on the breach of contract claim proved the truth of its statement regarding the continued importance of state contract law to the protection of ideas.  In implied-in-fact contract claims, the court applies a "substantial similarity" standard between the plaintiff's idea and defendant's production.  But notwithstanding the use of the copyright term "substantial similarity," the standard is broader in implied-in-fact contract claims in that it is not limited to comparison of elements protected under copyright law:  "Rather, because the claim is based on contract, unauthorized use can be shown by substantially similar elements that are not protected under copyright law."  Therefore, the Ninth Circuit's conclusion that the screenplay and film were not substantially similar for purposes of copyright infringement did not preclude a finding that they were substantially similar for purposes of an implied-in-fact contract claim under California law.

Ultimately, after comparing the screenplay and film, the Ninth Circuit concluded that they shared a number of similarities that were substantial for purposes of an implied-in-fact contract claim and therefore reversed the grant of summary judgment in favor of the defendants on that claim.

The case cite is Benay v. Warner Bros. Entm't, Inc., No. 08-55719 (9th Cir. June 9, 2010).

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Joseph Orr runs eVisa, a multilingual education and information business that operates exclusively on the Internet at www.evisa.com.  The name eVisa came from an English language tutoring service called "Eikaiwa Visa" that Orr ran while living in Japan.

Visa sued JSL Corporation (through which eVisa operated) claiming that eVisa was likely to dilute the Visa trademark.  The District Court granted summary judgment in favor of Visa and JSL appealed.

In a brief opinion, authored by Chief Judge Kozinski, the Ninth Circuit affirmed, readily concluding that summary judgment was appropriate on Visa's claim of dilution by blurring as the marks were "effectively identical" and Visa is a strong trademark.  The Ninth Circuit also rejected JSL's arguments regarding the use of the word "visa" for its common English definition noting that for trademark purposes, the significant factor is the way the word is used in a particular context:

In the context of anti-dilution law, the "particular context" that matters is use of the word in commerce to identify a good or service.  There are, for instance, many camels, but just one Camel; many tides, but just one Tide.  Camel cupcakes and Tide calculators would dilute the value of those marks.  Likewise, despite widespread use of the word visa for its common English meaning, the introduction of the eVisa mark to the marketplace means that there are now two products, and not just one, competing for association with that word.  This is the quintessential harm addressed by anti-dilution law.

The case cite is Visa Int'l Serv. Ass'n v. JSL Corp., No. 08-15206 (9th Cir. June 28, 2010).

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The Southern District of New York brought an end to the copyright infringement case brought by Viacom against YouTube and Google (referred to collectively as YouTube) by granting summary judgment in favor of YouTube on all of Viacom's claims for direct and secondary copyright infringement.

Despite its length, the Court's conclusion was short:  YouTube was entitled to the protections of the Digital Millennium Copyright Act's ("DMCA") "safe harbor" provisions, 17 U.S.C. 512(c).  The "critical question," according to the Court, was whether the knowledge required under the DMCA's language was "a general awareness that there are infringements (here, claimed to be widespread and common), or rather mean actual or constructive knowledge of specific and identifiable infringements of individual items."

Based on lengthy excerpts of legislative history supported by case law, the Court concluded that "[g]eneral knowledge that infringement is 'ubiquitous' does not impose a duty on the service provider to monitor or search its service for infringements."  Rather, the burden is on the copyright owner to identify infringements.  But if a service provider knows of specific instances of infringement from notice from the copyright owner, that provider must promptly remove the infringing material.  Because in this case it was uncontroverted that YouTube removed material when it was given notices, it was protected "'from liability for all monetary relief for direct, vicarious and contributory infringement'" under the DMCA.

The case cite is Viacom Int'l Inc. v. YouTube, Inc., 07 Civ. 2103 (LLS) (S.D.N.Y. June 23, 2010) and the Court's opinion can be found here.

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