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The Mildred Rule
Keeping Clients’ Email Out of the Spotlight When Litigation Hits the Fan

 

When I sat down to read the parties’ moving briefs in Viacom v. YouTube  back in the spring, I was reminded powerfully of something I have come to think of as the Mildred Rule (in honor of my late grandmother, pictured above with me in 1971).  Though the Mildred Rule did not come into play in the summary  judgment opinion that just issued, the opinion seemed to present an opportune moment for a post on the subject.

Among other things, Viacom argued that YouTube (1) intended to create a haven for massive copyright infringement, (2) knew that rampant infringement was occurring on the site, and (3) deliberately exploited infringing content in order to increase user traffic to the site.  In support of these arguments, Viacom introduced rafts of internal YouTube emails which, in florid and sometimes sarcastic language, exposed YouTube’s struggle to address the issue of infringing videos on the site.  In the emails, YouTube employees referred to content owners as “copyright bastards” and “a-holes.”  They made flippant comments such as, “save your meal money for some lawsuits!”  and “steal it! . . . haha ya.”  And they suggested that “one of the co-founders is blatantly stealing content from other sites,” and “we’re just trying to cover our asses so we don’t get sued.”

Fortunately for YouTube, Judge Stanton ruled on a purely legal issue and did not need to reach the evidence of YouTube’s knowledge in the emails.  (And incidentally, I thought YouTube’s counsel did a stellar job in their opposition papers of countering this evidence.)  Judge Stanton could, however, have ruled differently; for example, he could have found that the conflicting evidence submitted by both parties created a genuine issue of material fact about the state of YouTube’s knowledge, requiring the case to go before a jury.  To a jury, this kind of raw, emotional, unexpurgated email evidence could have a devastating effect on YouTube’s defense.  Indeed, Judge Stanton noted, “a jury could find that the defendants not only were generally aware of, but welcomed, copyright-infringing material being placed on their website.”

Which brings me to the Mildred Rule.  In its initial formulation, the Mildred Rule exhorted, “If you don’t want your grandmother to see it on the front page of the New York Times, don’t put it in an email.”  But that was not long after I graduated from law school (back in, roughly, the Pleistocene era); today, the Mildred Rule might be amended to read, “If you don’t want your grandmother to see it on nytimes.com (or huffingtonpost.com, or widely-disseminated-.com-of-your-choice), don’t put it in an email.” 

I am continually amazed at the statements people commit to email.  When I was a new lawyer, email was just beginning to take hold in the business environment.  When I worked on my first litigation that involved reviewing email (back then, we printed them out – on paper! - to review and produce them), I remember thinking that in the future, as people caught on to the fact that email really is permanent and can be discovered to a party’s significant detriment in litigation, we wouldn’t get so many juicy tidbits in discovery anymore, because people would learn to exercise more restraint before hitting the “send” button.  The opposite has happened.  The proliferation, and now ubiquity, of different forms of electronic communication has resulted in a steadily increasing degree of comfort with the medium, culminating in a generation of “digital natives” for whom email comes as naturally as breathing.

From the standpoint of lawyers who advise clients, and litigate on their behalf, this evolution presents a significant challenge.  Our role as counselor is to guide clients’ decisionmaking processes without unduly hampering the conduct of their affairs.  Email (like its progeny, instant messaging and texting) is not going away; nor should it.  And possibly, in view of society’s increasing digital exhibitionism on the social networking frontier, the notion that one might be embarrassed to have one’s grandmother read anything, however scurrilous, is hopelessly antiquated.  But the email evidence submitted in Viacom v. YouTube demonstrates a continuing need to educate clients about the potential pitfalls of email as a communication tool in the business environment.  So when the opportunity next presents itself, remember Mildred and help your clients keep their emails out of the spotlight before litigation hits the fan. 

I realize that this post is not, strictly speaking, a copyright post.  The Mildred Rule, however, is an equal opportunity rule which does not discriminate based on practice area; copyright litigants run afoul of it as often as parties to any other kind of dispute, as demonstrated so aptly in Viacom v. YouTube. 

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Where’s the Beef?
YouTube Opinion Lacks Heft

In sharp contrast to the voluminous materials submitted by the parties in support of their cross-motions for summary judgment in the Viacom v. YouTube litigation, the court’s opinion granting judgment in favor of YouTube is surprisingly lean.  Indeed, a third of the 30-page opinion is devoted to verbatim quotes of the statute and legislative history.  The opinion represents a resounding victory for YouTube and, by extension, the rest of the user-generated content industry (for the time being, anyway – Viacom, not surprisingly, has indicated that it will appeal the decision).  But – leaving the merits of the dispute aside for a moment – it also represents a lost opportunity for a thoughtful contribution to the jurisprudence in this developing area of law. 

Copyright Act Section 512(c) creates a “safe harbor” for internet service providers who allow users to upload copyrighted content to their services.  The “safe harbor” shields ISPs from liability for copyright infringement “by reason of the storage at the direction of a user” of infringing material if the service provider meets certain criteria.  The ISP must follow prescribed “notice and takedown” procedures to remove materials identified by  copyright owners as infringing.  Moreover, the ISP must neither have “actual knowledge” that material on the system is infringing nor be aware of “facts or circumstances from which infringing activity is apparent.” 

The court’s opinion centers on construing these knowledge provisions.  Specifically, “the critical question is whether the statutory phrases . . . mean a general awareness that there are infringements . . . or rather mean actual or constructive knowledge of specific and identifiable infringements of individual items.”

Actual vs. “red flag” knowledge

In my initial post on this decision, I stated that the court “analyzes the Section 512 safe harbor for ISPs and corresponding legislative history.”  Upon a closer reading of the opinion, this turned out to be something of an overstatement.  Rather, after reciting Sections 512(c) and (m) verbatim, as well as lengthy passages from the legislative history, the court simply concluded, with no discussion whatsoever, ”The tenor of the foregoing provisions is that the phrases ‘actual knowledge that the material or an activity’ is infringing, and ‘facts or circumstances’ indicating infringing activity, describe knowledge of specific and identifiable infringements of particular individual items.  Mere knowledge of the prevalence of such activity in general is not enough.”  Given the size of the case (the complaint sought $1 billion in damages), the significance of the legal issues, and the need for a well-developed body of jurisprudence to guide the ongoing development of new business models and to create settled expectations among copyright owners and users of content, it would have been nice to see a little closer parsing of the language in the statute and legislative history.  Clients, in my experience, are never thrilled to be advised on the tenor of the law – they want to know what the law is, so they can act accordingly. 

The one comment that the court made on the actual statutory language was in connection with subsection (m), which “explicit[ly]” states that the DMCA “shall not be construed to condition ’safe harbor’ protection on ‘a service provider monitoring its service or affirmatively seeking facts indicating infringing activity . . .”  Seizing on that language, the court noted, as a policy matter, that letting “knowledge of a generalized practice of infringement in the industry, or of a proclivity of users to post infringing materials, impose responsibility on service providers to discover which of their users’ postings infringe a copyright would contravene the structure and operation fo the DMCA.”

Having thus dispensed with statutory analysis, the court went on to recite the holdings of the Ninth Circuit and two of its district courts in cases where similarly situated defendants were found to be unaware of “facts and circumstances” sufficient to constitute red flags under the DMCA.  As with its discussion of the statute itself, the court engaged in no meaningful analysis of these opinions.  The court also cited favorably the Second Circuit’s opinion in Tiffany v. eBay, Inc., 600 F.3d 93 (2d Cir. 2010), a trademark case.  In eBay, Tiffany sued eBay for contributory trademark infringement because eBay allow sellers of counterfeit goods to continue to operate despite knowing, generally, that counterfeit Tiffany goods were being sold “ubiquitously” on the site.  The Second Circuit ruled for eBay, holding that it could not be liable unless it had knowledge of particular listings of counterfeit goods; the Viacom court concluded, “[a]lthough by a different technique, the DMCA applies the same principle. . . .”

Direct financial benefit where the ISP has the right and ability to control the infringing activity

Section 512(c) also prohibits an ISP from receiving “a financial benefit directly attributable to the infringing activity, in a case in which the service provider has the right and ability to control such activity . . .”  The parties hotly disputed whether YouTube had the right and ability to control the activity of users who uploaded infringing content, with each side devoting several pages of briefing to the issue.  Again, the court’s opinion gave the issue short shrift, holding without citation or elucidation that “[t]he ‘right and ability to control’ the activity requires knowledge of it, which must be item-specific,” and citing back to the sections of the opinion addressing the knowledge requirement. 

I was especially disappointed that the court did not address the question whether YouTube received a direct financial benefit from the allegedly infringing activity, though I recognize that the court did not need to reach the issue given its ruling (however cursory) on the right and ability to control the activity.  But there is a bothersome discrepancy between the traditional common-law doctrine of vicarious liability and the form of it enacted in the DMCA.  Recall that in Fonovisa, Inc. v. Cherry Auction, Inc., 76 F.3d 259 (9th Cir. 1996), a flea-market operator was held vicariously liable for the sale of bootleg recordings because it received a “direct financial benefit” from the infringing activity in the form of booth rental fees, admission fees, parking payments, concession stand revenues, and the like.  Even though these revenues were not directly tied to the sale of infringing goods, they were held to provide a direct financial benefit because the sale of pirated recordings was a “draw” for customers. 

The legislative  history of the DMCA, in part, states that the drafters intended to leave “current law in its evolving state” rather than “embarking on a wholesale clarification” of the doctrines of contributory and vicarious liability – suggesting that it did not intend to modify Fonovisa and its progeny.  Yet elsewhere, the legislative history states that “a service provider conducting a legitimate business would not be considered to receive a ‘financial benefit directly attributable to the infringing activity’ where the infringer makes the same kind of payment as non-infringing users of the provider’s service.”  This statement suggests that the booth rental fees and other revenues not directly tied to bootleg sales in Fonovisa would not constitute a direct financial benefit – setting up a conflict within the legislative history and with Fonovisa. 

“Where does this appeal go?  It goes up.” (bonus points if you can identify the riff)

It can come as no surprise that Viacom intends to appeal, and it will be very interesting to see what the Second Circuit thinks of this opinion.  I will post appeal briefs when they are available. 

For those of you feeling nostalgic for the ’80s after seeing the photograph at the beginning of this post, you can view the clip of the original Wendy’s “Where’s the Beef” commercial here, thanks to one laconic judge in the Southern District of New York.

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Judge Louis “Lightning” Stanton Quick on the Draw
Rules in Favor of YouTube in Viacom Suit

Today Judge Louis Stanton granted YouTube’s motion for summary judgment in the Viacom v. YouTube litigation – an incredibly quick decision in almost any case, but especially here, where the parties filed tremendously dense briefs and supporting declarations with hundreds of pages of exhibits.  Viacom v. YouTube, No. 07-2103 (S.D.N.Y. filed June 23, 2010).  The opinion is hot off the presses and I have not yet read it in its entirety, but in a significant holding, it analyzes the Section 512 safe harbor for ISPs and corresponding legislative history, concluding that “the phrases ‘actual knowledge that the material or an activity’ is infringing, and ‘facts or circumstances’ indicating infringing activity, describe knowledge of specific and identifiable infringements of particular individual items.  Mere knowledge of prevalence of such activity in general is not enough.” 

There is more – I will post further thoughts once I’ve had a chance to digest the entire opinion.  Hat tip to my colleague, Raffi Zerounian, for spotting this and bringing it to my immediate attention.

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File-sharing: Speak Now or Forever Hold Your Peace

Gavin McGimpsey, an undergraduate at Kenyon College, is conducting research into file-sharing and attitudes about copyright law.  The research is funded by Kenyon College’s John W. Adams Summer Legal Scholars Program in Socio-Legal Studies.  Mr. McGimpsey’s research includes a survey directed at those interested in file-sharing and copyright law.  If you are interested in participating in the survey, you can find it here.  For more information about Mr. McGimpsey and his project, click here. 

An Associate Provost at Kenyon College confirmed by telephone today that Mr. McGimpsey is enrolled there, and that he is undertaking this research project in connection with his studies.

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One Award to Rule Them All
Second Circuit Addresses What Constitutes a “Work” For Statutory Damages Purposes

Section 504(c) of the Copyright Act allows a plaintiff to elect statutory damages instead of actual damages and profits “for all infringements involved in the action, with respect to any one work . . .” For purposes of that subsection, “all the parts of a compilation or derivative work constitute one work.” The Copyright Act does not define “work,” though it defines a “compilation” as a “work formed by the collection and assembling of preexisting materials or of data that are selected, coordinated, or arranged in such a way that the resulting work as a whole constitutes an original work of authorship.” In litigation involving a work with multiple components, then, the question arises whether it is a single “work” or multiple “works” for purposes of assessing statutory damages.

A recent Second Circuit opinion illustrates the problem. Bryant v. Media Right Prodns., __ F.3d __ (2d Cir. 2010). In Bryant, two songwriters created and produced two albums – “Songs for Dogs” and “Songs for Cats” – and registered both the albums and, separately, at least some of the individual songs with the Copyright Office. They then authorized defendant Media Right to market the albums. Media Right in turn granted co-defendant Orchard Enterprises the right to distribute the albums “by any and all means and media,” including by digital download. Initially, Orchard only sold physical copies of the albums. In early 2004, however, Orchard began making the albums and the individual songs available for sale through Internet retailers like iTunes. Orchard recognized $578.91 from downloads of digital copies of the albums and the individual songs on the albums. The songwriters sued, alleging that their initial agreement with Media Right did not include the right to make copies of the albums, which Orchard did in order to enable digital sales.

The district court (ruling on competing summary judgments motions which the parties agreed to treat as a case stated, thus allowing the court rather than a jury to determine statutory damages) held that each album was a compilation and constituted a single work for purposes of computing statutory damages. The court found that Orchard’s infringement was innocent and imposed the minimum amount of statutory damages on Orchard, $200 per album for a total of $400. The court found that Media Right’s conduct was neither innocent nor willful, and imposed statutory damages on the company and its president, jointly and severally, for $1000 per album for a total of $2000. The plaintiffs’ entire award thus amounted to $2400. The court denied the plaintiffs’ request for attorney’s fees.

The Second Circuit affirmed, finding that the plain language of the Act established that the albums were compilations since each album is a “collection of preexisting materials – songs – that are selected and arranged by the author in a way that results in an original work of authorship – the album.” It concluded that the fact that certain songs had been registered separately was irrelevant, relying on the Conference Report that accompanied the final Copyright Act, which explains many of its provisions. The Report states that a “compilation” “results from a process of selecting, bringing together, organizing, and arranging previously existing material of all kinds, regardless of whether . . . the individual items in the material have been or ever could have been subject to copyright.”

Bryant represents the third occasion upon which the Second Circuit has construed Section 504’s one-award restriction. In Twin Peaks Prodns., Inc. v Publ’ns, Int’l Ltd., 996 F.2d 1366 (2d Cir. 1993), the court awarded the plaintiff one statutory damages award for each of 8 episodes of a television series. Rather than explaining why each episode constituted a single work, the court stated its conclusion in the converse: “The author of eight scripts for eight television episodes is not limited to one award of statutory damages just because he or she can continue the plot line from one episode to the next and hold the viewers’ interest without furnishing a resolution. . . . [O]urs is the easy case of infringement of eight separate works that warrants eight statutory awards, whether the registrations apply to the teleplays or the televised episodes.” Though the opinion did not explicitly say so, it appeared to turn on the fact that each television episode aired independently. In WB Music Corp. v. TRV Communication Group, Inc., 445 F.3d 538 (2d Cir. 2006), the court awarded thirteen statutory damages awards for thirteen infringed songs because the songs themselves had been released separately and not as part of an album. The Bryant court thus found its opinion in harmony with both Twin Peaks and WB Music because the plaintiffs’ songs were issued as part of CD compilations and not individually, like the Twin Peaks episodes but unlike the songs in WB Music.

The Second Circuit also rejected the “independent economic value” approach adopted by the First, Ninth, Eleventh and D.C. Circuits. This approach looks at whether each element of a work has “independent economic value” and can live its own copyright life. Following this approach, the First Circuit, for example, allowed multiple statutory damages awards for individual television episodes that were released collectively on videotape as part of a complete series. Gamma Audio & Video, Inc. v. Each-Chea, 11 F.3d 1106 (1st Cir. 1993).

Practice tip: statutory damages and the plaintiff’s choice of forum

Now that the Second Circuit has squarely rejected the “independent economic value” approach, plaintiffs have an additional consideration when deciding where to sue for infringement. If a plaintiff issued the components of a multi-part work as part of a collection and not singly, and is considering seeking statutory damages rather than actual damages and profits, it may be better off suing in a circuit that will look at whether those parts have independent economic value rather than in the Second Circuit.

Attorney’s fees and offers of judgment

An interesting side note to the case involves the court’s denial of the plaintiffs’ request for attorney’s fees. Copyright Act Section 505 allows a court, in its discretion, to award a “reasonable attorney’s fee to the prevailing party” in a copyright case. Though some commentators argue that such awards seem virtually guaranteed to prevailing parties, here the court exercised its discretion to deny the award to the prevailing plaintiffs.

The denial boiled down to the reasonableness of the parties’ conduct in the litigation. The Second Circuit found that the defendants’ arguments were objectively reasonable, and the defendants prevailed on several important issues. Moreover, the defendants “also were reasonable in trying to resolve the case short of trial: [Defendants] made an Offer of Judgment in the amount of $3000, which [Plainitffs] rejected, in favor of continuing to demand over $1 million in damages, notwithstanding the evidence that [Defendants] had received less than $600 in revenues from infringing sales.”

This portion of the opinion, tacked on to the end in just a few sentences, is interesting for a couple of reasons. First, it illustrates that the prevailing party’s conduct in the course of the litigation retains relevance in the attorney’s fees analysis. Second, it highlights a thorny question at the intersection of civil procedure and copyright that remains unresolved.

Federal Rule of Civil Procedure 68 governs offers of judgment, and provides that a party defending against a claim may offer to the opposing party to allow judgment on specified terms. If the opposing party fails to accept the offer within 14 days, and later obtains a judgment that is less favorable than the offer, then “the offeree must pay the [offeror’s] costs incurred after the offer was made.” But “costs,” at least in the sense of true, out-of-pocket costs, are dwarfed by attorney’s fees in typical litigation. Do Rule 68 “costs” include attorney’s fees? In Marek v. Chesney, 473 U.S. 1 (1985), the Supreme Court held that Rule 68 “costs” include attorney’s fees if the underlying statute so prescribes. Because attorney’s fees can amount to substantial sums, the offer of judgment can be a powerful tool in a defendant’s arsenal in settlement negotiations where such fees are included as costs.

If there is no settlement and the parties proceed to judgment in a copyright case, how do Rule 68 and Section 505 interact? Section 505 defines costs as including attorney’s fees, thus bringing Rule 68 into play. The rules differ from each other in important ways, however. While Section 505 allows an award of attorney’s fees to any prevailing party, whether plaintiff or defendant, Rule 68 only shifts costs to a party “defending against a claim” – usually the defendant, though the rule would seem to apply equally to a counterclaim defendant. Moreover, Section 505 gives the court discretion to award attorney’s fees, while Rule 68 is phrased in mandatory terms. Relying on Rule 68’s mandatory language, the Eleventh Circuit, in Jordan v. Time, Inc., 111 F.3d 102 (11th Cir. 1997), awarded costs (including attorney’s fees) to the defendant even though the plaintiff prevailed, because the plaintiff recovered less than the amount of the offer of judgment – a traditional application of Rule 68. In contrast, the Seventh Circuit, in Harbor Motor Co. v. Arnell, 265 F.3d 638 (7th Cir. 2001), held that in copyright cases, only prevailing parties can receive attorney’s fees under Rule 68 because the Supreme Court in Marek tied the award of Rule 68 fees to those costs that are “properly awardable under the substantive statute at issue,” and Section 505 only awards fees to prevailing parties. The Seventh Circuit thus reads Section 505 as a limitation on Rule 68.

The Bryant court makes no reference to a request for attorney’s fees by the defendants. Presumably, the defendants made no such request, and there is nothing in the opinion suggesting how the court might have ruled had they done so. I believe the Eleventh Circuit view is the better one. Marek v. Chesney instructs us to look to the underlying statute to determine whether it defines costs as including fees, not the circumstances under which fees are to be awarded: “where the underlying statute defines ‘costs’ to include attorney’s fees, we are satisfied such fees are to be included as costs for purposes of Rule 68.” Moreover, the Eleventh Circuit approach is consistent with the policy, emphasized by the Supreme Court in Marek, in favor of encouraging settlement of disputes. It will be interesting to see how case law develops in this area.

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Fair or Foul?
Find out at PLI’s Understanding Copyright Law 2010

Wondering whether your contemplated use of copyrighted material is a fair use? Perplexed by the thicket of seemingly contradictory opinions on the four statutory fair use factors? Eager to learn more about transformative uses? Join me on July 12, 2010 for an informative presentation on fair use as part of PLI’s program Understanding Copyright Law 2010.

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In the Ninth Circuit, Plaintiffs Need Only Apply
Court Adopts “Application Approach” to Registration as a Precondition to Filing Suit

The Ninth Circuit has chosen sides in the debate over what constitutes “registration” sufficient to file suit, adopting what has come to be referred to as the “application approach.”  Cosmetic Ideas, Inc. v. IAC/InteractiveCorp, __ F.3d __ (9th Cir. 2010).  Section 411(a) of the Copyright Act provides that “no action for infringement of the copyright in any United States work shall be instituted until registration of the copyright claim has been made in accordance with this title.”  In order to register a copyright, the claimant must file with the Copyright Office (1) an application, (2) a deposit copy of the work being registered, and (3) a filing fee.  If, upon examination, the Copyright Office determines that the material deposited is copyrightable and that the other requirements of the statute have been met, then it registers the claim and issues a certificate of registration.  The Copyright Act gives no guidance, however, as to whether “registration” for purposes of filing suit occurs upon submission of the application, deposit copy and filing fee (the “application approach”), or whether it occurs after the Copyright Office determines that the material deposited is copyrightable and “registers” the copyright (the “registration approach”).  Courts have split on the question. Compare, e.g., La Resolana Architects v. Clay Realtors Angel Fire, 416 F.3d 1195 (10th Cir. 2005) (collecting cases and adopting registration approach) with In re Napster, Inc., 191 F. Supp. 2d 1087 (N.D. Cal. 2002) (application approach).

The court started its search for an answer in the plain language of the Copyright Act.  Sections 408 through 412 each addresses some aspect of registration.  Portions of sections 410 and 411 suggest that registration requires the Copyright Office to take affirmative steps after the filing of the application, deposit copy and fee, indicating that the registration approach is the correct one.  But the court found that other sections lead to the opposite conclusion.  Section 408, for example, states that a copyright owner “may obtain registration . . . by delivering to the Copyright Office” the application, deposit copy and fee.  Moreover, § 410(d) provides that the effective date of registration is the date the application, deposit copy and fee are received by the Copyright Office – not when the Copyright Office takes action to register or deny the claim.

Because the court found the plain language of the Act conflicting, it turned to the purpose of the statute and its underlying policies.  Though the 1976 Act made registration optional, Congress valued having a robust registry of existing copyrights.  Accordingly, it built various incentives into the Act to encourage copyright owners to register and deposit copies of their works.  For example, in order to be eligible to recover statutory damages and attorney’s fees in the event of infringement, the copyright owner must have registered the work before the infringement began.  The registration certificate is prima facie evidence of the validity of the copyright and the facts stated in the form when the work is registered before, or within five years of, publication of the work.  Perhaps most importantly, registration is a prerequisite to bringing a lawsuit for copyright infringement.

In view of these incentives, the court found that the “application approach better fulfills Congress’s purpose of providing broad copyright protection while maintaining a robust federal register.”  The application approach avoids “unnecessary delay” in litigation by allowing a plaintiff to sue immediately after filing the application for registration, rather than waiting for the Register to take action, during which time the infringer could continue to profit from its wrongful conduct.  Moreover, a plaintiff could lose its rights due to the statute of limitations while waiting for registration to issue.  Given that § 411(a) allows a plaintiff to litigate its claim even if the Copyright Office rejects registration, the court found it made little sense to put potential plaintiffs in such a state of “legal limbo.”

With the Ninth Circuit now having signed on to the “application approach,” the tally of circuits which have weighed in on the issue stands as follows:

Application approach: Fifth, Seventh and Ninth Circuits

Registration approach: Tenth and Eleventh Circuits

District courts in circuits which have not yet ruled on the issue remain all over the map – sometimes even within the same district.

Practice tip

Before filing suit, it pays to know whether your circuit has weighed in on this issue, and if so, whether it adopted the application or registration approach. If you find yourself in a “registration” jurisdiction and are eager to file suit on an unregistered copyright, consider taking advantage of the “special handling” registration process, which provides for expedited registration of the claim upon payment of a premium filing fee (currently, $760 instead of the $35 charged for normal handling of electronically filed claims). Particulars of this process can be found in Copyright Office Circular 10.

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2nd Circuit Rejects Crumby Old PI Standard
Applies eBay to Preliminary Injunctions in Copyright Cases

Holden Caulfield might have called it a crumby old rule.  Using more diplomatic terms, the Second Circuit concluded that the standard it has long applied to preliminary injunctions in copyright cases is “inconsistent with the ‘test historically employed by courts of equity,’” and has been abrogated by the Supreme Court’s ruling in eBay v. MercExchange.  Salinger v. Colting, __ F.3d __ (2d Cir. 2010).

Salinger pitted J.D. Salinger against an author who wrote a sequel to the iconic novel “Catcher in the Rye” entitled “60 Years Later: Coming Through the Rye.”  As its title implies, “60 Years Later” picks up the story of Holden Caulfield (referred to as “Mr. C”) in his 70’s, in a world that also includes Mr. C’s now-elderly author, a fictionalized Salinger.  Faux Salinger is haunted by his creation and wants to bring him to life to kill him, but ultimately cannot bring himself to do so.  Instead, he frees Mr C, who then reunites with his younger sister, Phoebe, and estranged son, Daniel.

Consistent with his famous and longstanding practice of refusing to authorize adaptations of his work, Salinger sued to enjoin the U.S. publication of “60 Years Later.”  In July 2009, the District Court granted Salinger’s motion for a preliminary injunction, finding that (1) Salinger has a valid copyright in “Catcher” and the Holden Caulfield character; (2) “60 Years Later” does not constitute a fair use; and (3) “60 Years Later” infringes Salinger’s copyrights.  Courts in the Second Circuit have long issued preliminary injunctions in copyright cases upon a finding of irreparable harm to the plaintiff coupled with a likelihood of success on the merits; significantly, courts presumed irreparable harm if the plaintiff could establish a prima facie case of copyright infringement. The District Court adhered to this standard in granting Salinger’s request for a preliminary injunction.  Though the court noted that the Supreme Court had recently rejected the practice of presuming irreparable harm in the eBay case, it reasoned that eBay “dealt only with the presumption of irreparable harm in the patent law context, and thus is not controlling in the absence of Second Circuit precedent applying it in the copyright context.” Salinger v. Colting, 641 F. Supp. 2d 250, 268 n.6 (S.D.N.Y. 2009).

The Second Circuit held that the standard enunciated in eBayapplies to preliminary injunctions in copyright cases, reasoning that the the Supreme Court relied not merely on patent law, but on traditional principles of equity as well as copyright cases in reaching its conclusion.  Thus, in order to obtain a preliminary injunction in a copyright case in the Second Circuit, the plaintiff must demonstrate (1) either (a) a likelihood of success on the merits or (b) sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of hardships tipping decidedly in the plaintiff’s favor; (2) a likelihood that the plaintiff will suffer irreparable harm absent the injunction; (3) the balance of hardships between the plaintiff and defendant tips in the plaintiff’s favor; and (4) issuance of the injunction will not disserve the public interest.  Courts may no longer presume irreparable harm.  Rather, they must “actually consider the injury the plaintiff will suffer if he or she loses on the preliminary injunction but ultimately prevails on the merits, paying particular attention to whether the remedies available at law, such as monetary damages, are inadequate to compensate for that injury.”

In considering the first factor – the probability of success on the merits – the Second Circuit cautioned courts to be “particularly cognizant of the difficulty of predicting the merits of a copyright claim at a preliminary injunction hearing,” especially where the defendant has raised a “colorable” fair use defense.  With respect to the second and third factors – irreparable harm and balancing of hardships – the only relevant harm is that which occurs to the parties’ legal (commercial) interests and which cannot be remedied after a final adjudication.  Both plaintiffs and defendants in copyright suits have property interests in their respective works, as well as First Amendment rights of expression (including, on the part of plaintiff copyright owners like Salinger, the right not to speak) at stake. 

The Second Circuit vacated the preliminary injunction and remanded to the District Court to consider the remaining eBayfactors.  It was careful to note, however, that it agreed with the District Court that Salinger was likely to prevail on the merits and would not disturb that finding.  Moreover, it cautioned that its ruling “is not to say that most copyright plaintiffs who have shown a likelihood of success on the merits would not be irreparably harmed absent preliminary injunctive relief.  As an empirical matter, that may well be the case, and the historical tendency to issue preliminary injunctions readily in copyright cases may reflect just that.”  This caveat seems practically to invite district courts to continue to find irreparable harm as a matter of course where the plaintiff has established a likelihood of success on the merits.

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Viacom and YouTube Open the Kimono
Parties Publicly File Redacted Copies of Summary Judgment Motions

Today, the parties in Viacom v. YouTube, No. 07-2103 (S.D.N.Y. filed March 13, 2007) made public redacted copies of  their summary judgment motions and supporting declarations, which were originally filed under seal on March 8.  The volume of materials is staggering, though not surprising in such a significant and vigorously disputed case.  Whatever else one concludes about the filings, there appears to be a very thoroughly developed record here.  I will be posting my reactions to the filings in the coming days, but in the meantime, here are copies of the briefs and most of the declarations (not all exhibits are included).

Viacom MSJ
Hohengarten Declaration
Ostrow Declaration
Solow Declaration

YouTube MSJ
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Snatching Settlement From the Jaws of Defeat
Supreme Court Holds Registration a Precondition to Suit, Not Jurisdictional

Section 411(a) of the Copyright Act provides that “no civil action for infringement of the copyright in any United States work shall be instituted until . . . registration of the copyright claim has been made. . .” For decades, courts have ruled and commentators (including myself) have pronounced that registration is a “jurisdictional prerequisite” to the filing of an infringement action. Yesterday, however, the Supreme Court ruled that “Section 411(a)’s registration requirement is a precondition to filing a claim that does not restrict a federal court’s subject-matter jurisdiction.”  Reed Elsevier, Inc. v. Muchnick, 559 U.S. __ (2010). The case follows a recent Supreme Court trend against so-called “drive-by jurisdictional rulings,” which reflexively characterize limitations as jurisdictional in nature without conducting a thorough analysis to distinguish true jurisdictional conditions from mere claim-processing rules or preconditions to filing suit.

The opinion, authored by Justice Thomas, relies heavily on the text and structure of the Copyright Act in reaching its conclusion. Though the word “jurisdiction” appears in § 411(a), the section does not expressly state that its registration requirement is jurisdictional. The section concludes by stating:

“The Register [of Copyrights] may, at his or her option, become a party to the action with respect to the issue of registrability of the copyright claim . . . but the Register’s failure to become a party shall not deprive the court of jurisdiction to determine that issue.”

The Court found that the limiting phrase “that issue” refers only to a court’s authority to determine the registrability of a copyright claim which has been denied by the Register of Copyrights, even if the Register does not appear in the infringement action. Congress added this provision to relieve copyright claimants of the necessity of seeking mandamus against the Register of Copyrights before bringing suit, which had been a requirement under prior law. Thus, the use of the word “jurisdiction” in this context does not authorize a court, as a general matter, to adjudicate claims for infringement of unregistered works.

Moreover, § 411(a) explicitly allows courts to hear claims with respect to three particular types of unregistered works: (1) foreign works; (2) claims involving the rights of attribution and integrity under § 106A; and (3) works which the Register of Copyrights denied registration. And § 411(c) authorizes courts to adjudicate infringement actions involving certain types of broadcast works if the copyright owner declares an intention to seek registration and then registers the work within three months of its transmission. The Court reasoned that it would be “at least unusual to ascribe jurisdictional significance to a condition subject to these sorts of exceptions.” Structurally, § 411(a)’s registration requirement is located in a provision separate from those granting federal courts subject-matter jurisdiction over copyright claims (28 U.S.C. §§ 1331, granting jurisdiction over federal questions generally, and 1338(a), addressing copyright claims specifically), lending further weight to the argument that Congress did not intend the section to act as a limit on judicial power.

The Court also analyzed § 411(a) against the backdrop of two recent cases in which the Court differentiated between jurisdictional and claim-processing rules. In the first, Arbaugh v. Y & H Corp., 546 U.S. 500 (2006), the Court held that Title VII’s definition of an employer subject to the statute as including only those having fifteen or more employees was an element of a plaintiff’s claim for relief, not a jurisdictional issue. The applicable jurisdictional section of Title VII made no reference to the 15-employee threshold, which instead appeared in a separate provision that did “not speak in jurisdictional terms or refer in any way to the jurisdiction of the district courts.”

In Bowles v. Russell, 551 U.S. 205 (2007) – an opinion also authored by Justice Thomas – the Court held that the 14-day deadline in the Federal Rules of Appellate Procedure for filing notices of appeal was “mandatory and jurisdictional,” and could not be extended by court order. Interestingly, the Bowles opinion relied much more heavily on judicial precedent than on statutory text (“We have long and repeatedly held that the time limits for filing a notice of appeal are jurisdictional in nature”), an argument that failed to win the day in Reed Elsevier despite record citations to over 200 lower court opinions characterizing § 411(a) as jurisdictional. Justice Ginsburg, concurring in Reed-Elsevier, attempted to reconcile this apparent divergence by noting that Bowles relied on a “long line of [Supreme Court] decisions left undisturbed by Congress,” whereas the cited 411(a) decisions issued from lower courts and amounted to “drive-by jurisdictional rulings that should be accorded no precedential effect.”

Why It Matters

Jurisdictional rules “speak to the power of the court rather than to the rights or obligations of the parties,” whereas claim-processing rules establish a substantive element of a particular claim. Because a court has no power to act without jurisdiction, a jurisdictional requirement may not be waived either intentionally or unintentionally by the parties or by the court. The question of the court’s jurisdiction may be raised at any time during the litigation, including after judgment and on appeal. And the court may raise the issue itself (“sua sponte”) even if the parties do not. In Arbaugh, the defendant employer did not raise the employee-numerosity issue until after it lost at trial. Had the requirement been jurisdictional in nature, the trial court would have been required to throw out the jury verdict and dismiss the case entirely (in fact, the trial court so concluded and the Fifth Circuit affirmed). Instead, the Supreme Court held that it constituted an element of the plaintiff’s claim. The objection that a plaintiff has failed to state a cause of action may not be made after judgment; thus, it is likely that on remand the defendant employer would have been found to have waived the objection.

In Reed-Elsevier, the jurisdictional issue arose only on appeal after lengthy proceedings below. The Reed-Elsevier case stemmed from the Supreme Court’s 2001 opinion in New York Times Co. v. Tasini, 533 U.S. 483 (2001), in which the Court held that the publishers of various online databases such as LEXIS/NEXIS infringed the copyrights of freelance authors by reproducing their works electronically without permission. On remand, the case was consolidated with other lawsuits brought by freelance authors based on the same theory of liability.

The consolidated Reed-Elsevier complaint asserted claims by named plaintiffs, each of whom owned at least one copyrighted work registered pursuant to § 411(a), and also purported to state claims on behalf of a class of authors, some of whom had not registered their copyrighted works. Because of the size and complexity of the consolidated action, the District Court referred the case to mediation. The parties conducted extensive negotiations over a period of three years before reaching a proposed settlement agreement in 2005. The parties then moved to certify a settlement class and to approve the settlement agreement. A handful of freelance authors objected to the settlement. The District Court overruled the objections, certified the class, and approved the settlement agreement.

The objectors appealed, raising both procedural and substantive objections to the settlement agreement. At no time, however, did any party argue that the District Court lacked subject-matter jurisdiction over the unregistered copyright claims. (Indeed, no party objected to subject-matter jurisdiction even before the Supreme Court; the Court was forced to appoint amicus counsel to play devil’s advocate and argue against jurisdiction.) Shortly before oral argument, the Court of Appeals, acting on its own initiative, ordered the parties to submit briefs on the question whether § 411(a) deprived the District Court of subject-matter jurisdiction over those claims. A divided panel of the Second Circuit held that the District Court lacked jurisdiction to certify a class and to approve a settlement involving unregistered works.

The Supreme Court’s opinion leaves unresolved the procedural and substantive objections to the settlement raised below, which will be addressed on remand. But the parties have at least survived to fight another day, rather than seeing the culmination of three years of arduous negotiations evaporate at the flick of the Second Circuit’s pen.

The Supreme Court also declined to address the question whether § 411(a)’s registration requirement is a “mandatory precondition” to suit that district courts may enforce sua sponte by dismissing claims even absent objection by the opposing party. And as a related matter, debate continues to rage at the district court level as to what, precisely, constitutes registration adequate to initiate suit. Must a plaintiff actually receive the registration certificate from the Copyright Office in order to proceed, or is the submission of the application, deposit copy and application fee sufficient? Compare, e.g., In re Napster, Inc., 191 F. Supp. 2d 1087 (N.D. Cal. 2002) with La Resolana Architects v. Clay Realtors Angel Fire, 416 F.3d 1195 (10th Cir. 2005). Resolution of these issues must await another day.

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• About Naomi Jane Gray

  Naomi Jane Gray is a partner in the law firm of Harvey Siskind LLP, where she focuses her practice on intellectual property (including copyright, trademark and trade secrets) litigation and counseling.
  
  The statements and opinions posted on this blog are personal to Naomi Jane Gray and do not necessarily represent the views of Harvey Siskind LLP or its clients.
  

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