Breaking: This morning, Judge Paule of the Southern District of New York issued an opinion granting in part and denying in part the defendant’s motion for judgment as a matter of law in Capitol Records v MP3Tunes, in which the jury had found liability for copyright infringement and awarded over $48 million in damages.  The opinion is lengthy and fascinating, especially in its characterization of the parties, and particularly the defendant. This post summarizes the rulings on each issue and sprinkles in some of the court’s more colorful commentary. The entire 42-page opinion is definitely worth a read. In it, the court:

(1) Denied JMOL as to the jury’s finding of vicarious liability, because the evidence showed that the defendant received a financial benefit from the infringing conduct in the form of an expanded user base and additional subscriptions;

(2) Denied JMOL as to the jury’s finding of contributory infringement because the evidence showed the defendant’s constructive knowledge of infringement in a variety of ways;

(3) Denied JMOL as to the jury’s finding of so-called “tertiary liability” – the individual defendant’s secondary liability for the corporation’s secondary liability – and confirming that “tertiary liability” is a cognizable claim;

(4) Denied JMOL as to corporate liability under a theory of respondeat superior because executives seeded the MP3Tunes database with infringing tracks that attracted more users;

(5) Applied Viacom’s “exquisite” objective/subjective standard regarding red-flag knowledge and willful blindness, and granted JMOL as to the jury’s finding of infringement with respect to certain tracks because the defendant had no duty to affirmatively monitor its service under the DMCA;

(6) Denied JMOL as to the jury’s finding of contributory liability for allowing users to play tracks hosted by third-party sites through the user’s browser;

(7) Denied JMOL as to the jury’s finding of direct liability for the unauthorized reproduction of album cover art that MP3Tunes copied from Amazon each time a user uploaded tracks;

(8) Granted JMOL as to the jury’s finding of liability for the public display of cover art, because only one user was capable of viewing each copy of album cover (in so doing, the court declined to apply the Supreme Court’s recent ruling in Aereo because the Supreme Court specifically limited its holding in that case to substantially similar technologies);

(9) Granted JMOL in part as to the jury’s award of statutory damages for the infringement of cover art, holding that the plaintiff can only recover once for cover art and associated sound recording, not twice (because the Copyright Act limits an award of statutory damages to one award for all parts of a compilation);

(10) Denied JMOL as to the jury’s finding of unfair competition with respect to pre-1972 sound recordings (which are not covered by statutory copyright), because the evidence showed that the defendant misled users regarding legality of the service, and controlled the service;

(11) Denied the defendant’s Rule 59 request for a new trial, because the defendant failed to show that the verdict was “egregious or a miscarriage of justice”;

(12) Denied to remit the jury’s statutory damages award (which, depending on the song and theory of recovery at issue, ranged from $10,000 per song to $100,000 per song, and $15,000 per work of cover art), because of the defendant’s willful conduct and the need for deterrence; and

(13) Applied Gore to the jury’s punitive damages award on the plaintiff’s unfair competition claims and reduced the award from $7.5 million to $750,000, because it violated due process (the plaintiffs have the option to accept this reduced award or to retry the issue of punitive damages).

Whew! That’s a lot – but wait, there’s more! The court castigated the parties for what, by all appearances, was a scorched-earth litigation from start to finish. Here are a few choice quotes:

“A primary function of pre-trial litigation is to distill claims. Ultimately, the goal is to make a dispute understandable to a lay person. Despite this Court’s efforts to winnow the issues, the parties insisted on an 82-page verdict sheet on liability and a 331-page verdict sheet on damages that included dense Excel tables, necessitating at least one juror’s use of a magnifying glass. While the jury did its best, their assignment was beyond all reasonable scale.”

“Plaintiffs’ evidence on their most significant theories of liability – red flag knowledge and willful blindness – was sparse. And [defendant] Robertson – by his words, actions, and demeanor – came across as unworthy of belief.”

“This Court observed Robertson’s demeanor on the witness stand. No transcript can capture his whole affect; you really had to be there. In response to Robertson’s counsel’s first question, ‘Could you explain to the jury why you changed your name?’ – Roberson asked for a drink of water and then launched into a 735-word soliloquy . . .

Carried away on his own mystic transport, Robertson was overwhelmed with emotion and needed time to compose himself. Seizing the moment, his counsel posed a follow-up question: ‘Since you’re struggling, Michael, why don’t we move forward a little bit to the relationship between your birth father and your kids?’ Robertson responded with a 186-word finale . . .

This seemingly rehearsed, five-minute fable-like narrative left the jury nonplussed and Plaintiffs’ counsel shell-shocked. It was a dramatic presentation. Even if true, Robertson’s decision to spin this yarn backfired on him. The jury saw it for what it was – a transparent attempt to tug at their heartstrings. Plaintiffs’ counsel failed to appreciate what the jury grasped and reflexively moved for a mistrial claiming unfair prejudice. But Robertson’s manipulative conduct only prejudiced him and that prejudice was not unfair. In denying Plaintiffs’ motion, this Court observed, ‘[j]urors see through performances, and the Oscars are over for this year.’ The jury’s verdict demonstrated that this Court’s observation was spot on.”

Well then.  That’s quite a way to start the week.

2nd Circuit Finds the Beef – Reverses Summary Judgment Grant in YouTube

On April 5, the Second Circuit issued its highly anticipated opinion in Viacom v. YouTube, reversing the District Court’s grant of summary judgment and remanding for further proceedings.  Significantly, the opinion marks the first time that a court has drawn a meaningful, substantive distinction between actual and “red-flag” knowledge under the DMCA.  This sets it apart from earlier DMCA opinions, including that of the Ninth Circuit in UMG Recordings, Inc.  v. Shelter Capital (involving the Veoh videosharing service) and, notably, the lower court opinion in Viacom.  Practitioners and ISPs now have some judicial guidance as to how to construe their rights and responsibilities under the DMCA.

Ominously for YouTube, the Second Circuit held that a reasonable jury could find that, under DMCA Section 512(c), YouTube had actual knowledge or awareness of specific infringing activity on its website.  Moreover, the Second Circuit ruled that the District Court had incorrectly construed the DMCA’s control and benefit provisions in holding that the “right and ability to control” infringing activity required that the ISP have knowledge of specific, identifiable instances of infringement.  Finally, the court affirmed the District Court’s holding that three of YouTube’s software functions fell within the safe harbor for infringement occurring “by reason of user storage,” and remanded for further fact-finding with respect to a fourth software function.  Continue reading

Appealing YouTube: The Experts Debate!

I have been an active member of the Copyright Society of the USA for years, and am currently a member of its Executive Committee. It’s a terrific group for those interested in copyright issues, and maintains chapters throughout the country. I thought readers of this blog might like to know about this upcoming chapter event in Washington, D.C.:

The Washington D.C. Chapter of the Copyright Society of the U.S.A. is holding a membership building event on Wednesday, July 27th, 2011 from 4 p.m. to 6 p.m.

Arent Fox LLP, 1050 Connecticut Ave., N.W., Washington, D.C. 20036, will host the event.
There will be a networking reception from 4: p.m. to 4:30 p.m, followed by the panel discussion from 4:30 p.m. to 6 p.m.

Lawyers who submitted amici briefs to the Second Circuit in the pending appeal of Viacom/Football Association Premier League v. YouTube will debate issues related to copyright safe-harbors for user generated content sites. The case will be argued soon, so don’t miss this opportunity to learn about the issues from experts.

The speakers will include:
Moderator
Robert Kasunic, Deputy General Counsel, U.S. Copyright Office

Panelists
Jonathan Band of Jonathan Band PLLC
Patrick Coyne of Finnegan, Henderson, Farabow, Garrett & Dunner LLP
Russell Frackman of Mitchell Silberberg & Knupp LLP
Ron Lazebnik of Fordham University School of Law
Mary Rasenberger of Skadden, Arps, Slate, Meagher & Flom LLP.

Any non-member who joins the Copyright Society of the U.S.A. immediately prior to registering for the event may attend for free. Attendance is $40 for non-members and Copyright Society members. Attendance is $25 for Student members of the Copyright Society. Any Copyright Society member who invites a guest who joins the Society immediately prior to registering for the event may attend at half price.

Registration materials and a membership application are at the following link.

http://www.csusa.org/chapters/dc/CSUSA%20DC%20EVENT%20July%202011.pdf

Space is limited. Please register early. The registration deadline is extended to July 25, 2011.

Second Round
Who’s on Second? A look at secondary liability and the DMCA

A couple of weeks ago, I reprised my talk on secondary liability and the DMCA for the State Bar of California’s IP Section. I updated my original talk – initially delivered last fall to the ABA – to reflect the current status of the UMG v. Veoh and Viacom v. YouTube appeals, which in the interim were fully briefed (and, in the case of Veoh, argued). You can review the revised and updated outline here.

The outline also notes a late-breaking development in the YouTube case stemming from the United States Supreme Court’s recent decision in Global-Tech v. SEB, a patent case addressing the doctrine of willful blindness. I have posted a fuller analysis of this development over at The 1709 Blog, which you can read here.