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Preview: Contemporary Intellectual Property, Licensing & Information Law

Contemporary Intellectual Property, Licensing & Information Law

Published: 2014-03-30T11:54:27-06:00


DMCA 512 may have some bite for copyright owners - but very small


    Section 512 and the interpretation courts have given it have shifted too much of the burden to the rights owners. Every little step back to a better balance is welcome. In that spirit, the court’s decision in   Columbia Pictures Industries, Inc. v. Fung, 710 F3d. 1020 (9th Cir.  2013) is welcome.    In Fung, the Ninth Circuit restated it approach to the concept of when a “direct financial benefit” occurs due to infringing conduct, but seemingly loosened the approach to when an online provider has the ability to control third parties who place content on its site. The case involved an online provider that had been found to have induced infringement by third parties posting and downloading digital copies of motion pictures. The site contained various elements that encouraged (induced) subscribers to post and download digital motion picture files, including files of motion pictures that were still in first release. Virtually all of the files on the site were infringing and there was no doubt that the infringements constituted a substantial draw for subscribers, rather than an incidental benefit of the service. In fact, the infringing content was virtually the entire draw or value of the subscription service.     The site obtained its revenue from advertising, with rates based on the number of users who saw the ads and clicked on them. The court held that the ad revenue constituted a direct financial benefit from the draw that infringement produced since this contributed to the user traffic on the site. Although this extends the idea of direct benefit slightly from cases where fees are paid for the service itself, the extension is appropriate where advertisement rates so closely are connected to traffic on the site. In fact, there was evidence that Fung referred to the content (obviously infringing) in selling advertising. A more direct connection can hardly be imagined.                 As to whether Fung had the “right and ability to control” the infringing conduct, the court reiterated the conclusion that it and the Second Circuit have adopted: this standard is not met by mere proof that the site operator could locate and remove infringing files or block infringing conduct. Instead, the court described a more holistic test requiring a showing of more actual involvement or influence by the site operator. The test is: With respect to the second prong of § 512(c)(1)(B), we recently explained in UMG that the “right and ability to control” infringing activity involves “something more” than “merely having the general ability to locate infringing material and terminate users' access.” … As we held in UMG, the § 512(c)(1)(B) “right and ability to control” requirement does not depend only upon the ability to remove known or apparent infringing material. Instead, there must also be substantial influence on the infringing activities of users, indicating that it is the overall Fung unquestionably had the ability to locate infringing material and terminate users' access. In addition to being able to locate material identified in valid DMCA notices, Fung organized torrent files on his sites using a program that matches file names and content with specific search terms describing material likely to be infringing, such as “screener” or “PPV.” And when users could not find certain material likely to be infringing on his sites, Fung personally assisted them in locating the files. Fung also personally removed “fake[ ], infected, or otherwise bad or abusive torrents” in order to “protect[ ] the integrity of [his websites'] search index[es].” … Crucially, Fung's ability to control infringing activity on his websites went well beyond merely locating and terminating users' access to infring[...]

"Transformative fair use" compared to "transformative purpose infringement", some cases get this totally wrong including in Google Books


  In Acuff v. Rose, 510 U.S. 569, 114 S. Ct. 1164 (1994), the Supreme Court set out the rule that transformative use (copying) of a small part of a work could be fair use even if done for commercial purposes (the case involved a parody). Since then, the idea of transformative fair use has been the most important issue in contested fair use cases. It is clear that the Court was referring to copying of part of a work and using it to create a new work of expression. This is different in concept and kind from the decisions that morph the concept into one that protects comprehensive copying so long as the copies are used for a different purpose than the author's original purpose for the work. Properly understood, this comprehensive copying is simply "infringement".Acuff v. Rose created an inherent conflict with the author's exclusive right to make derivative works from its original work since a transformative work is most often a derivative work. But, properly limited, the concept is important to keep flexibility for the creation of new works based in part on existing works. The search for proper limits or boundaries on this limited fair use idea is where courts should focus attention. The Supreme Court's opinion, itself, mentions some factors, including that in Acuff It was unlikely that the original artist would use or license part of the work to parody it.           But this type of analysis is entirely different from what some courts have morphed the concept into which protects some comprehensive copying of a work so long as the copying is for a different purpose than the original author's intended original purpose for the work. Properly understood, this comprehensive copying is simply transformative purpose infringement.           The court's analysis in Cariou v. Prince, 714 F.3d 694 (2nd Cir. 2013) reflects the Supreme Court's approach to transformative fair use copying that creates new expressive works. In Cariou, Prince created artworks based on black and white photos previously created by Cariou. Most of Prince's works used colors and images that engaged a different feel for the serene subject matter that Cariou had photographed. The court commented: Here, our observation of Prince's artworks themselves convinces us of the transformative nature of all but five, which we discuss separately below. These twenty-five of Prince's artworks manifest an entirely different aesthetic from Cariou's photographs. 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. Cariou's black-and-white photographs were printed in a 9 1/2" x 12" book. Prince has created collages on canvas that incorporate color, feature distorted human and other forms and settings, and measure between ten and nearly a hundred times the size of the photographs. Prince's composition, presentation, scale, color palette, and media are fundamentally different and new compared to the photographs, as is the expressive nature of Prince's work. This is not to say that verbatim copying cannot be fair use, but that a "new" work that merely takes a verbatim copy of another work and adds nothing is not fair use. But on the other hand, a verbatim copy that is folded within a broader expressive work may well meet appropriate standards of transformative fair use. See Selzer v. Green Day, Inc., 725 F.3d 1170 (9th Cir. 2013) (holding that verbatim copying of poster as part of broader four minute video was transformative).          Cases where courts protect copying verbatim of all of copyrighted works as fair use because the copies are then used for different purposes than the copyright owner has previously used its work, can be described as "new purpose" cases. They stretch the boundaries of fa[...]

WNET was wrong and should be reversed


A system captures broadcast signals and makes them available to potentially millions of the system's subscribers without a license from the copyright owners; is the system engaging in a public performance of the copyrighted works involved? The obvious answer is yes. But a divided (2-1) panel of the Second Circuit held that the capture and retransmission did not constitute a "public" performance. Go figure. If transmission to a potential audience of millions is not distribution to the public, what is?In WNET.Thirteen v. Aero, Inc., 712 F.3d 676 (2nd Cir. 2013) a divided panel of the Second Circuit, felt itself bound by the prior panel decision in Cartoon Network, and held that the system operated by Aero did not infringe the public performance right of the cable television broadcasters whose programs were redistributed through the Aero system without a license, The WNET decision has been accepted by the Supreme Court on a writ of certiorari so the issue of what amounts to a "public" performance in the digital world may be resolved. The Court should reverse. Aero's system captured the cable programs on a large number of small (dime-sized) antennas. Aero customers could watch a slightly delayed streaming "broadcast" of the program and/ or reserve a copy for later viewing. The system reserved a copy of a particular program for an individual customer on a particular antenna at a given time. Once a user would watch a program, the antenna would be free for another user. The two judge majority accepted the view that the so-called "transmit clause of the "public" performance concept was not met when a copy was performed for a single person. The fundamental issue is whether a digital service that makes unauthorized transmissions of performances (or displays) copyrighted works to thousands (or millions) of paying subscribers is infringing the copyright owners' exclusive right to control public performance and display of its work. The obvious answer is yes. A service or system that does this clearly transmits the work to the "public". Yet, both Cablevision and CNET hold that this obvious proposition does not apply in the digital world if digital technology is used to create thousands (millions) of copies of the performances or display for particular individuals, who then watch their own copy. The metaphysics involved in this result is to transform the idea of transmitting a performance to the public to performing a particular copy of that performance in public. The two-judge majority expressed this as follows: First the Transmit Clause directs courts to consider the potential audience of the individual transmission. If that transmission is "capable of being received by the public" the transmission is a public performance; if the potential audience of the transmission is only one subscriber, the transmission is not a public performance, except as discussed below. Second private transmissions -- that is those not capable of being received by the public--should not be aggregated. It is therefore irrelevant to the Transmit Clause analysis whether the public is capable of receiving the same underlying work or original performance of the work by means of many transmissions. Third, there is an exception to this no-aggregation rule when private ommercial issues, but digital systems make it important. The statute transmissions are generated from the same copy of the work. In such cases, these private transmissions should be aggregated, and if these aggregated transmissions from a single copy enable the public to view that copy, the transmissions are public performances. Fourth "any factor that limits the potential audience of a transmission is relevant" to the Transmit Clause analysis This analysis ignores the policy and language of the public performance (and display) provision of the Copyright Act by focusing on performance of a copy, rather than of a work. Before the digital methods of distribution came into play, this focus on particular copies did not genera[...]

Arbitration as a consumer dispute resolution tool


Several months ago the Supreme Court insulated arbitration clauses in consumer and other small claims settings from the most frequent challenge to their enforceability – the allegation that they are unconscionable unless they allow class action proceedings. The decision presents businesses with a choice – many will use mandatory arbitration clauses in licensing, online, services, and other contracts.   The Federal Arbitration Act (FAA) states a strong federal policy in favor of arbitration. It also bars state laws that discriminate against enforcing contractual arbitration clauses. The statute states: A written provision in … a contract evidencing a transaction involving commerce to settle by arbitration a controversy … arising out of such contract or transaction ... shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract. 9 U.S.C. § 2. Starting in the 1990’s, a number of licensors, banks, service providers, online providers, and hard goods manufacturers began to use arbitration clauses in their contracts for a number of reasons, including to eliminate risk of class action claims for small problems. Sometimes this latter effect was done with an express “no class action” term, while in others it was left to the idea that class action arbitration was not appropriate unless expressly agreed to by both parties. While courts in most jurisdictions enforced these terms, courts in some jurisdictions held that no-class-action arbitration clauses were unconscionable. These decisions were uncontrolled judicial law-making of a type that has always been a risk under unconscionability doctrine: the judges invalidated the clauses because they personally believed that a class action was the preferred way to protect “consumer rights” and that a judicial rule preserving this remedy should override laws about enforcing contracts or federal law about arbitration. Remnants of this judicial activism (in the same jurisdictions with the same judges) remain for choice of judicial forum clauses.  But, for arbitration clauses, the game of judicial activism ended with the Supreme Court ruling in AT&T Mobility Co. v. Concepcion, 131 S.Ct. 1740 (2011) when a majority held that California’s rule invalidating class action waivers in arbitration clauses as unconscionable was invalid. It was invalid because it conflicted with the purposes and policies of the FAA. In a prior case, Stolt-Nielson, SA v. Animalfeeds Int’l Corp., 130 S.Ct. 1758 (2010), the Court had concluded that a party could not be forced to engage in class action arbitration where the arbitration clause was silent on the issue, emphasizing the contractual nature of an agreement to arbitrate. Concepcion held that policy conflict preemption existed: the unconscionability decisions were invalid because they conflicted with federal policy favoring arbitration and did so in a way that contradicted the basics of arbitration, which are grounded in tailored, contractual and streamlined dispute resolution. There are many other aspects inherent in arbitration, such as the lack of a jury, the selection of special arbitrators, expedited procedures, the lack of judicial review, and the like. The ruling in Concepcion is that these normal aspects of arbitration (including lack of class actions) are what Congress supported and that they cannot be undermined by the states in the guise of unconscionability or similar “general” rules. So, now the choices presented to licensors and other companies in consumer space are to 1) present arbitration clauses on fair terms and avoid the risk of class action lawsuits, or 2) rely on ordinary remedy clauses and accept that class action claims might occur.  For many companies, the choice will be option 1. But this works only if the terms enable the individual c[...]

Trademarks used functionally and not as a mark


Trademark law gives the mark owner a right to protect against conduct that is likely to create confusion about sources or sponsorship of a product or service. But trademark law does not give the mark owner control over all use of the image, word, or phrase that constitutes its mark. Volumes of reported cases and billions of dollars of litigation have gone into drawing the distinction and the amounts have increased in the digital information age. There are many doctrines used. Now, apparently, the Ninth Circuit has reincarnated another – functional use of a mark.  So, for example, a fan of the Chicago White Sox (like me) creates a car decal, or a poster with the club’s name and mark without purporting them to be “official” White Sox products The fan (me) should not be held to be an infringer even if I sell or give copies to other fans. Right? I hope so.             In the 1980’s, one concept that would protect me was encompassed in the idea of “functional” use of a mark. International Order of Job's Daughters v. Lindeburg & Co., 633 F.2d 912 (9th Cir.1980). The court commented: Trademark law does not prevent a person from copying so-called “functional” features of a product which constitute the actual benefit that the consumer wishes to purchase, as distinguished from an assurance that a particular entity made, sponsored, or endorsed a product. .... It is not uncommon for a name or emblem that serves in one context as a … trademark also to be merchandised for its own intrinsic utility to consumers. We commonly identify ourselves by displaying emblems expressing allegiances. Our jewelry, clothing, and cars are emblazoned with inscriptions showing the organizations we belong to, the schools we attend, the landmarks we have visited, the sports teams we support, the beverages we imbibe. Although these inscriptions frequently include names and emblems that are also used as … trademarks, it would be naive to conclude that the name or emblem is desired because consumers believe that the product somehow originated with or was sponsored by the organization the name or emblem signifies.             My display of a White Sox insignia on my Hummer is not a trademark use, whether we call it functional or something else. In fact, however, the concept was not widely used in case law for several decades until the Ninth Circuit revived it in 2011, in Fleischer Studios, Inc. v. A.V.E.L.A., Inc., 636 F.3d 1115 (9th Cir. 2011) where the court held that the use of the “Betty Boop” image on dolls as well as t-shirts and handbags was not an infringement. The court held that the use was functional and not as a trademark: Even a cursory examination … of “the articles themselves, the defendant's merchandising practices, and any evidence that consumers have actually inferred a connection between the defendant's product and the trademark owner,” reveal that A.V.E.L.A. is not using Betty Boop as a trademark, but instead as a functional product. … Betty Boop “w[as] a prominent feature of each item so as to be visible to others when worn....” A.V.E.L.A. “never designated the merchandise as ‘official’ [Fleischer] merchandise or otherwise affirmatively indicated sponsorship.” Fleischer “did not show a single instance in which a customer was misled about the origin, sponsorship, or endorsement of [A.V.E.L.A.'s products] … “The name and [Betty Boop image] were functional aesthetic components of the product, not trademarks. There could be, therefore, no infringement.”            So, if this approach were to continue, a mark owner would have to distinguish between when i[...]

Data protection privacy - meet the First Amendment


I and others had been wondering when the political frenzy to protect pseudo privacy (actually, personal data protection) laws and regulations restricting a person or a corporation’s use of non-sensitive, personal information about another individual lawfully obtained outside a traditionally confidential relationship would encounter the First Amendment. There have been a few skirmishes with mixed results. But finally, a direct encounter occurred and the pseudo privacy concepts lost as they should.  The case was the U.S. Supreme Court ruling in Sorrell v. IMS Health Inc., 2011 WL 2472796 (U.S. 2011). The Court dealt with a conflict between a Vermont statute restricting disclosure or sale of data for commercial purposes and the First Amendment. The anti-sale and disclosure rules lost. The Vermont statute that precluded the sale, disclosure, and use of pharmacy records identifying doctors and what drugs they were prescribing for patients to data mining companies who would organize and resell it to “detailers” (pharmaceutical sales persons) to tailor their marketing to doctors. The Court held that data and its sale, distribution and use was speech protected by the First Amendment and that “[s]peech in aid of marketing… is a form of expression protected by the Free Speech Clause of the First Amendment.” This decision is especially important with respect to the frenzy to impose restrictions on persons or businesses who have obtained the data. The state had tried to argue that regulating data was akin to regulating a commodity, but of course, it is not. First Amendment limits apply to those regulations. The Court commented: “Vermont has imposed a restriction on access to information in private hands. … Here [we have] “a case in which the government is prohibiting a speaker from conveying information that the speaker already possesses.” … An individual's right to speak is implicated when information he or she possesses is subjected to “restraints on the way in which the information might be used” or disseminated. Furthermore, the statute focused on content and particular speakers (and not others) and, thus, was subject to strict scrutiny. Even if it were not viewed under strict scrutiny, it would still be invalid under a First Amendment analysis requiring that content regulation serve a substantial purpose and be narrowly tailored to achieve that purpose with minimal burden on speech. Vermont had argued that selling the data was not speech, but merely selling a commodity or, in the alternative, that the statute regulated conduct, rather than speech, since it precluded sale or licensing. The six-justice majority rejected both arguments. This Court has held that the creation and dissemination of information are speech within the meaning of the First Amendment. Facts, after all, are the beginning point for much of the speech that is most essential to advance human knowledge and to conduct human affairs. There is thus a strong argument that prescriber-identifying information is speech for First Amendment purposes. The Court agreed the First Amendment does not prevent restrictions directed at commerce or conduct from imposing incidental burdens on speech, but this law imposed more than an incidental burden on protected expression and when that is the case, it doesn’t matter that the speech is commercial. To sustain the law, Vermont had to show at least that the statute directly advanced a substantial governmental interest and was drawn to achieve that interest. It failed to do so. Vermont argued that its law was (1) necessary to protect medical privacy, including physician confidentiality, avoidance of harassment of doctors by salespersons, and the integrity of the doctor-patient relationship, and (2) integral to the achieving the policy objectives of im[...]

UCITA in court and doing well


  When the Uniform Computer Information Transactions Act (UCITA) was being debated nationally in the late 1990’s and early 2000’s, it became part of a wildly intense debate about the nature of contract law that ultimately led to the rejection of two misguided efforts to revise ancient UCC Article 2. UCITA barely survived vitriolic and often dishonest attacks. It was enacted in two commercially major states and the concepts it set out have become mainstream judicial analyses, referred to in a number of legal treatises.   In my opinion, the true test of a contract law statute lies in how little litigation it creates. Under that standard, UCITA has been a true success in Maryland and Virginia. Ten years after enactment, it is only now that a small trickle of cases under UCITA have begun to appear.   One of the false arguments brought by opponents against UCITA was that it tipped the scale too strongly in favor of vendors and online providers wanting to impose terms. The Court of Appeals in Specht v. Netscape Communications Corp., 306 F.3d 17 (2d Cir. 2002) refuted that claim, commenting the UCITA enacted contract formation rules consistent with common law, but placed them in a codified form. A similar observation was made by a neutral scholar, Bob Hillman. See Robert A. Hillman & Jeffrey J. Rachlinski, Standard-Form Contracting in the Electronic Age, 77 N.Y.U. L.Rev. 429, 491 (2002) (“[W]e contend that UCITA maintains the contextual, balanced approach to standard terms that can be found in the paper world.”).   So, the first time a court was asked in Virginia to apply UCITA to a contract formation issue, what happened? The court applied UCITA and reached the conclusion that the particular online provider did not do enough to create a contractual obligation with respect to users of its site.     The case was Cvent v. Eventbrite, 2010 WL 3732183 (ED Va. 2010). The case involved scraping of data from the Cvent site by Eventbrite. The data concerned venues for events. There were a number of claims, including a claim for violation of computer crime law. But also a claim for breach of contract. The court said:   Cvent's breach of contract claim fails to state an entitlement to legal relief because Cvent has not alleged sufficient facts to support a plausible allegation that a contract existed between Cvent and Eventbrite. … Cvent relies exclusively on its “Terms of Use,” which are displayed on secondary pages of its website and can be accessed only through one of several dozen small links at the bottom of the first page. … Moreover, users of event's website are not required to click on that link, nor are they required to read or assent to the Terms of Use in order to use the website or access any of its content. This case is therefore not a “clickwrap” case, but rather falls into a category of alleged contracts that many courts have termed “browsewrap agreements.” … Most courts which have considered the issue … have held that in order to state a plausible claim for relief based upon a browsewrap agreement, the website user must have had actual or constructive knowledge of the site's terms and conditions, and have manifested assent to them. … UCITA provides a breach of contract claim for violation of electronic Terms of Use, if a person (1) has an “opportunity to review” the terms and (2) engages in statements or conduct indicating, or leading one to infer, the person's “assent” to the terms. Individuals, however, are only deemed to have had an “opportunity to review” a term if the term is “available in a manner that ought to call it to the attention of a reasonable person,” or if the website “disclose[s] the availa[...]

Infringement and disclosure risk in development on copyleft platforms


While many companies that write apps or develop parallel platforms grounded in open source willingly disclose code and comply with copyleft rules (e.g., some transferees to also disclose their code), others prefer to protect (e.g., not disclose) some of their code and not force customers who resell products to disclose their code. The issue for these companies has always been how can they approach an open source platform or program without being caught in the copyleft “license” with a duty to disclose if they retransfer their products. The answer has never been certain, but the stakes today have never been higher.  The problems lie in the details. A Working Paper produced by a Free Software European Legal Network underscores how difficult it is to decide when a line is crossed and copyrighted code has been copied, triggering copyleft license obligations.     Let’s take a “simple” question: if developer of program B replicates all or part of a copyleft program’s api or header files (e.g., of the core Linux kernel), do the copyleft rules e.g., of GPL v.2) apply to program B and, possibly, to programs based on it, requiring disclosure of source code and other limitations on licensing? The reality is that no one can give a viable general legal opinion on this. There is wild uncertainty in both the views of the community and in law. That defines a huge risk for companies engaged in this space.   To start with, the term “api” has different meanings that affect the legal issues.   A free software Working Paper states: “The term “API” or programming interface is used in two manners, being two sides of the same concept. On the one hand, an API is an abstraction, being a set of conventions or definitions to which a developer should develop his/her program … [On] the other hand, the term is used to describe the actual code or part of a program that receives/handles the input from the other programs …”    Wikipedia states: “the scope of meaning is usually determined by the context of usage.”   Are api’s or header files copyrighted? If we are talking only about concepts, the answer may be no, depending on how general these are. If we are talking about details, then the answer is maybe.    Header names are not copyrighted, but that is like saying that each individual word in this paragraph is not copyrighted. True, but that says nothing about the copyrightability of the paragraph. Complex programs and header file structures are generally copyrightable because they involve numerous choices by the designer and because the way in which these choices organize the terms and code constitutes expression. The Linux core header files, for example, involve large amounts of text and code, they are almost certainly copyrighted. Indeed, one U.S. court held that taken as a whole, a table of nine variables used to predict the performance of pitchers in baseball games was copyrighted. In contrast, another court held that a short piece of code (25 bytes) used to lock out use of a printer cartridge was not copyrightable - it was entirely caught up in the process it served. A European Directive states that computer “interfaces” are not protected by copyright, but does not indicate what “interface” means. Numerous U.S. courts hold that user interfaces taken as a whole are copyrighted.   When is use of particular copyrighted header files or api’s infringement?In U.S. law, this asks whether what is copied or caused to be copied involves copyrightable elements of the first program, or whether the second program is a “derivative work” of the first. Each case stands on its own.    For[...]

Ninth Circuit rejects Chamberlain places DMCA back on a proper track


In 2004, in the Chamberlain case, the Federal Circuit unaccountably grafted a non-statutory element on the access control provisions of the DMCA, requiring that there be some connection to preventing infringement for there to be protection against circumvention of a technology control on access to a copyrighted work. The Ninth Circuit, in the MDY case, expressly rejects Chamberlain, returning the statute to its intended purpose – creating a right to protect controls on access to works in digital contexts.  Chamberlain was and remains bad law and invokes bad policy. While followed within the Federal Circuit, it is not widely followed elsewhere. It was explicitly rejected by the Ninth Circuit in MDY Industries, LLC v. Blizzard Entertainment. Inc., 2010 WL 5141269 (9th Cir. 2010). The statute itself could scarcely be clearer. It proscribes circumventing a device that effectively controls access to a copyrighted work (17 USC 1201(a)(1) and, in separate sections proscribes trafficking in deices that enable such circumvention and trafficking in devices that enable circumvention of devices that protect rights created under copyright law. It is this last section that deals with a link between protecting the technology and a risk of infringement, not the first two, as Chamberlain would have us believe.             MDY involved a DMCA trafficking claim against a company that sold software bots that enabled users to play a popular online game automatically, without being present. Unlike the court in Chamberlain, the MDY court recognized the importance of the statutory distinction between access control and rights protection technology, specifically Chamberlain. The ability to assert legal rights to enforce controls on access comprises a new, independent form of protection (the right to prevent circumvention of access controls) given to a copyright owner to encourage distribution and offer protection for works distributed in digital form. Given the statutory framework, this is clearly the only way properly to interpret Section 1201 – as an additional form of protection not connected to copyright infringement. The court cited four statutory textual differences between the access provision and the rights protection provision that compelled this result. The most telling is that § 1201(a)(2) prohibits the circumvention of a measure that “effectively controls access to a work protected under this title,” whereas § 1201(b)(1) concerns a measure that “effectively protects a right of a copyright owner under this title in a work or portion thereof.” The court read § 1201(b)(1) to reinforce copyright owners' traditional exclusive rights under § 106 by granting them an additional cause of action. Sections 1201(a)(1) and (a)(2), however, use the term “work protected under this title”, the subsection creates a new right distinct from the exclusive rights established under traditional copyright law. The court also referenced the legislative history of DMCA, including the following comments by the Senate Judiciary Report: [I]f an effective technological protection measure does nothing to prevent access to the plain text of the work, but is designed to prevent that work from being copied, then a potential cause of action against the manufacturer of a device designed to circumvent the measure lies under § 1201(b)(1), but not under § 1201(a)(2). Conversely, if an effective technological protection measure limits access to the plain text of a work only to those with authorized access, but provides no additional protection against copying, displaying, performing or distributing the work, then a potential cause of action against the [...]

Ninth Circuit in Vernor got first sale doctrine right


The Ninth Circuit revisited the ownership question involved in copyright first sale in Vernor v. Autodesk, Inc., 2010 WL 3516435 (9th Cir. 2010) and got it right, adopting a variation of the Federal Circuit’s DSC decision and the approach taken by all other Circuit Courts that have looked at the question.  The terms of the contract control whether the transferee becomes the owner of the copy.Vernor involved a single payment, perpetual software license that limited the licensee’s use and right to transfer the software.  Copies of the software were sold by the licensee to Vernor, who then offered them for resale on eBay.  Vernor did not use the software and did not assent to the licenses.  But the original licensee did.  The question was whether Vernor’s intended resale was protected by first sale doctrine.  The parties and the court agreed that if the first transfer was not an authorized sale and did not give the first licensee the right to make a sale under the authority of the licensor, Vernor was not protected by first sale doctrine.  This is an application of ordinary rule that there is no good faith purchaser in copyright law. That rule exists because the rights involved are intangible in nature while good faith purchase concepts typically focus on rights in tangible objects.               The District Court held that the single payment perpetual license terms controlled and that the first transfer was a sale.  The Ninth Circuit reversed.  It adopted an integrated approach reconciling its prior opinions and properly focused on the overall terms of the license and whether the license gave rights equivalent to the owner of a copy.  The issue is not ownership of the plastic, but ownership of the copy, which includes rights in the work. The Ninth Circuit set out a more structured approach to distinguishing between when a license does and does not transfer ownership than did the Federal Circuit in DSC.  But the ruling was simple and correct:   We hold today that a software user is a licensee rather than an owner of a copy where the copyright owner (1) specifies that the user is granted a license; (2) significantly restricts the user's ability to transfer the software; and (3) imposes notable use restrictions.   The court’s analysis did not conclude that these three elements were the only elements that make a license transaction not a sale of a copy, but the three elements clearly indicate a license, rather than a transfer of copy ownership.               In the particular case, the court held that there was no transfer of copy ownership:   Autodesk retained title to the software and imposed significant transfer restrictions: it stated that the license is nontransferable, the software could not be transferred or leased without Autodesk's written consent, and the software could not be transferred outside the Western Hemisphere. The [license agreement] also imposed use restrictions against the use of the software outside the Western Hemisphere and against modifying, translating, or reverse-engineering the software, removing any proprietary marks from the software or documentation, or defeating any copy protection device. Furthermore, the [license agreement] provided for termination of the license upon the licensee's unauthorized copying or failure to comply with other license restrictions.   The focus is not simply on ownership of the plastic, but whether the transaction gave rights in the work that is part of the copy and that are consistent with copy ownership.  This is consistent with the congressional judgment in both of the first sale exemptions (§&sec[...]

Why are free and open sources licenses different?


  Millions of dollars and thousands of hours have been spent during the last decade worrying about how to deal with free and open source software licenses. This leads me to ask ‘what makes these licenses different in a way that attracts all of this attention, both negative and positive?’  The difference does not lie in the fact that the FOSS licenses are less restrictive than a typical “commercial” license. Some are less restrictive, but especially as you move toward the GPL model, other FOSS licenses are more restrictive on the licensee than are most commercial licenses.  True, the restrictions often lead in different directions and have different goals. But the scope of risk in incorporating a restrictive license into a product are similar whether the license is an ordinary commercial license or a FOSS license.   The difference does not lie in that the FOSS licenses are more ambiguous than other licenses.  Many of them in fact are very ambiguous.  Many early licenses were written without legal advice and were poorly drafted; many current licenses contain terms that have not been tested in court and are susceptible to multiple interpretations. But a realistic assessment of current commercial licenses would also reveal many untested and ambiguous terms.   The difference does not lie in that FOSS licenses are more widespread.   The difference does not lie in that FOSS licenses are more diverse in their terms.   Where lies the difference? In three things, I think.   First, FOSS licenses often creep in without a commercial party as a licensor. Doing business with a company whose product or service uses a FOSS license is no more or less difficult than dealing with any licensor. The licensor has terms on which it insists and, unless it can be bargained away from those terms, the licensee either accepts the terms or finds another business solution. This leaves the licensee with an understandable deal and with a counterparty that has a commercial stake in the deal and with whom small lapses in performance can be negotiated.    But many FOSS-based transactions are not commercial in the foregoing sense. Instead, software subject to a FOSS license may come into a product without the producer knowing that this has happened or, in any realistic way, assenting to the terms. Also, the software often comes from a non-commercial party. An engineer downloads software from an academic’s site and uses part or all of it in the company’s newest product. This is fine if one of the truly free, non-restrictive licenses is involved, but it creates potential havoc where one of the falsely labeled free but more restrictive licenses purportedly governs.   Second, especially at the “open source” end of the spectrum, the restrictive terms of many FOSS licenses aim toward eliminating valuable assets of the company by mandating disclosure of source code associated with the FOSS-licensed software. This is the so-called viral effect of FOSS licenses, especially the GPL, and has been widely discussed. I will not reprise that discussion here. FOSS adherents have an almost religious belief that the exact terms of their restrictive licenses will be enforced exactly as written. Knowing both contract and copyright law, I doubt that this will be true, but that is a topic for another day. No company wants to unknowingly put itself into a position of risking valuable assets on the costly roll of the dice that is modern litigation, especially not when the third factor or difference is considered.   Third, in addition to many of the FOSS-based “transactions” not involving a commer[...]

Has the worm turned on transformative use?


  A while ago, I commented about the misreading that courts were doing with respect to fair use, especially with respect to so-called “transformative use.” Maybe they heard, but at least they have begun to figure it out. The worm may have begun to turn.  “Fair use” is a defense to a claim of copyright infringement. Its origins lay in the notion that there should be some flexibility in enforcement of the rights of a copyright owner to enable limited use of copyright expression (e.g., I quote a paragraph of your article in my book). The doctrine does go past that occasionally, but the concept should treat the copyright owner’s rights as dominant, providing merely an equitable basis to permit some copying of the owner’s expression that are not harmful to the copyright owner. This loosens up the world of expression to enable productive use of ideas and words of prior creative people, but makes sure that we will still have creative people who make and distribute new works. So, the Supreme Court in the Acuff-Rose said that fair use applies when the use of part of a work involves a “transformative” use. The court said: “The central purpose … is to see … whether the new work merely “supersede[s] the … original creation, or instead adds something new, with a further purpose or different character, altering the first with new expression, meaning, or message; it asks, in other words, whether and to what extent the new work is “transformative.”” In other words, add something change the original into part of your new work, but do not supersede uses that might be exploited by the copyright owner itself. Somehow, that simple idea got “transformed”. Some cases began to protect what are best described as “new purpose” uses.  They stretch the boundaries of fair use doctrine beyond a breaking point because they suggest that verbatim use of a work is fair if the infringer uses the work for a purpose that the rights owner does not currently engage even if the “new purpose” affects a market that has been or might reasonably be explored by the copyright owner.  Hopefully, that theme will be discarded in the future. A better analysis was in U.S. v. ASCAP, 599 F.Supp.2d 415 (SD NY 2009), where the issue what whether ASCAP licensing extends to commercial use of ringtone “previews”. These are brief, illustrative examples of cell phone ringtones available for a phone user to determine what ringtone he or she desires. The previews are up to 30 seconds long excerpts. ASCAP licensing does not apply if the previews are fair use. The court held that the “previews” were not transformative fair use. The court distinguished the “new purpose” cases and concluded that the use of previews to advertise products (the ringtones) was an infringing, commercial use that did not entail a purpose different from the entertainment purpose for which the works (the musical works) were originally intended. Additionally, ASCAP was already licensing various types of short segments of works for third party use. The court concluded that adverse market impact should be measured in reference to reasonable or likely to be developed markets. Here, there existed a realistic market for use in short segment licensing and, thus, this type of usage indicated that the previews had a significant, adverse market impact. Similarly, the Federal Circuit in Gaylord v. U.S., 2010 WL ---- (Fed. Cir. 2010) held that the use of images of sculptural work in a postage stamp was not a transformative fair use. The stamp did not [...]

Indirect Trademark Liability - who takes the risk?


  Online aggregators, site operators and search engines are in a seemingly endless conflict with content providers and rights owners. This extends to trademark law. The confrontation relates to deciding what obligations aggregators (and others) have to police and prevent advertising and sale of counterfeit products or services through their systems. A recent Second Circuit case leaves one pondering the answer where at least some of the advertised products or services from third parties are counterfeits.  As with copyright and patent, indirect liability exists under trademark law, although there are very few reported cases dealing with it. The Supreme Court described the concept as follows: if a manufacturer or distributor intentionally induces another to infringe a trademark, or if it continues to supply its product to one whom it knows or has reason to know is engaging in trademark infringement, the manufacturer or distributor is contributorially responsible for any harm done. Inwood Laboratories, Inc. v. Ives Laboratories, Inc., 456 U.S. 844, 102 S.Ct. 2182, 72 L.Ed.2d 606 (1982). This formulation facially refers to supplying products and does not specifically address whether access and service providers (such as Google, Bing, eBay) also have potential liability. Generally, however, the concept has been extended to service providers, at least where the service provider has sufficient control and can monitor the instrumentality or conduct involved in the infringement.       The Second Circuit in Tiffany (NJ) Inc. v. eBay, Inc., 2010 WL 1236315 (2nd Cir. 2010), assumed without deciding that the concept applied to eBay’s auction services, but concluded that eBay was not indirectly liable for what is apparently a very large amount of sales of counterfeit Tiffany products by auction sellers. The issue turned on whether eBay’s generalized knowledge that numerous counterfeit sales under the Tiffany occurred on its site was sufficient for liability. The court held that, while the applicable standard involved knowledge or reason to know of the infringing conduct, mere generalized knowledge did not suffice. Instead, for “contributory trademark infringement liability to lie, a service provider must have more than a general knowledge or reason to know that its service is being used to sell counterfeit goods. Some contemporary knowledge of which particular listings are infringing or will infringe in the future is necessary.” This, of course, is a win for the aggregators et. al. In practice, eBay maintained an active program of responding to notices of claimed infringement as to specific products or sellers. Thus, there was no pattern of eBay continuing to provide its site or services to persons it had reason to know were infringing the Tiffany mark.       Tiffany sets out a narrow interpretation of contributory liability, giving broad freedom for aggregators and enhancing the difficulty of enforcing a mark online. The court did, however, provide two important grounds for caution applicable to access and service providers.  First, it emphasized that its concept would not allow a provider to adopt a policy of “willful blindness.” Exactly what that means remains to be seen, but it suggests that some policing obligation arises if the environment involves widespread (albeit not universal) trademark infringement. eBay had a very active program of responding to infringements. The court commented: [We] agree with the district court that if eBay had reason to suspect that counterfeit Tiffany goods were being sold through its website, and intentionally shielded[...]

Standard Forms Often Need Reconsideration


In light of the many changes in privacy, intellectual property, and e-commercial law that have occurred in the past decade, standard forms and model agreements that were first brought into existence only a relatively short time ago should be re-examined to make them consistent not only with the demands placed by new law, but also with the new language and approaches that have become central to modern practice.

            I first recognized this issue when long ago I was doing bankruptcy and commercial law.  In 1980 or so, Congress altered bankruptcy law to, among many other things, render invalid any clause in a contract or lease that purports to terminate the agreement if a party (typically, the buyer, lessee or licensee) files for bankruptcy relief.  Twenty years after this legislation, most standard form contracts and standard leases still contained a term that purports to end the contract in the event that bankruptcy is filed.  Many standard forms still contain this clause, almost thirty years after the law changed.

           There are many illustrations of this failure to adjust terms to reflect mandatory law in a standard form.  We can see it in standard form disclaimers of warranty in local transactions in states that ban broad disclaimers in the relevant transactions.  It also occurs in drafts of guaranty and indemnity provisions, which are seldom updated.

            But the most important context in which this problem occurs today involves adjusting forms to reflect modern (and ubiquitous) provisions of privacy and e-commerce laws.  The issues here are addressed in an important article by Holly Towle, a partner at KL & Gates and a leading expert in both privacy and e-commercial law. 

           Her article and the general issue of keeping forms updated to reflect modern law and terminology need to be addressed.


The Limits of First Sale Doctrine


One clear message of intellectual property law is that mere possession, or even ownership, of a product or a copy does not vitiate the rights-owner’s interest in and right to control use or disposition of the product or copy. First sale doctrine carves out a very limited exception to this.I often talk about first sale (or exhaustion as it is sometimes called) in reference to patent or copyright law. Trademark issues may be even more important, at least online. As with copyright and patent law, the theory behind the doctrine in trademark law in part involves defining what it means to own an item, and in part places restrictions on the intellectual property owner’s right to control the secondary market in goods for which the mark owner decided to authorize an unrestricted sale.   On the other hand, even after an unrestricted sale, the doctrine preserves many of the mark-owner’s interests with respect to its mark and the product. An owner of a genuine and unmodified item purchased at an authorized sale may resell the item, describing it appropriately, even if doing so requires use of the trademark. Thus, if I own a Dell Laptop computer, I have the right to sell it describing it as a “Dell” computer. The right to accurately describe the resold property comes from first sale doctrine and from concepts of nominative fair use.               Issues about first sale or fair use almost never arise where the reseller sells only one item. They arise when the reseller resells multiple items. In this setting, where the items resold are unused, the reseller may become the direct competitor of the mark owner and its authorized dealers. The question is under what conditions trademark law permits this. Viewed from the mark owner’s perspective, this involves its ability to control marketing channels for its product, including the online marketplace, and to protect its trademark.             Not all resale activity is allowed even if the reseller owns the item.  Trademark owners’ protected interests that continue to apply relate to maintaining the trademark as identifying the source of the goods or services involved, which is the bedrock of trademark law. The balance then is between allowing the reseller to deal with its property while preventing confusion as to its immediate source or denigrating of the value of the mark.  The most commonly litigated limitation centers on whether the reseller creates the appearance of a relationship between it and the mark owner. Basically, while the reseller can use the mark to describe the product it resells, the reseller cannot create the impression that it acts with the sponsorship or authorization of the mark owner (unless, of course, that is true). Thus, while a used car seller can sell and advertise that it sells Mercedes cars, it cannot falsely convey the impression that it is a Mercedes authorized dealership.  Some settings make clear that no sponsorship is present. For example, in Tiffany (NJ), Inc. v. Ebay, Inc., 576 F.Supp.2d 463 (SD NY 2008) the court held that Ebay and its auction resellers of genuine Tiffany products were protected by first sale concepts even though the sellers referred to their products as Tiffany and Ebay advertised the availability of Tiffany products on its auction website. In context, there was no reasonable inference that Tiffany sponsored, authorized, or was in control of the sales of Tiffany products in this environment.     [...]