Copyright - Sherman Library at Nova Southeastern University

On June 8, 2015, Apple announced its new music streaming service, Apple Music, and took direct aim at Spotify and Pandora.[ref]Apple Takes on Spotify with New Music Service[/ref] This move capped a busy month of court rulings, document leaks, and more than a little finger pointing and name calling in the pitched battle between content creators and the streaming services. To recap:

On May 19, 2015, persons unknown (but all available evidence points to Spotify) leaked the contract between Sony Music and Spotify to the website The Verge.[ref]This was Sony Music's contract with Spotify[/ref] (NB: The actual contract has been removed, but the link will take you to an in depth discussion of its terms.)
Just four days later, on May 23, 2105, in an interview with the New York Post, Spotify CEO Daniel Ek said that "greedy middlemen" were responsible for the microscopic payments musicians and composers receive from Spotify.[ref]Spotify CEO says middlemen gobble cash[/ref]
On May 27, 2015, Judge Gutierrez granted Flo and Eddie's Motion for Class Action Certification in their case against Sirius XM Radio[ref]Another Artist Rights Victory: Turtles Win Class Certification in Class Action Against SiriusXM #irespectmusic[/ref] (this link has a further link to the opinion), a lawsuit previously discussed in depth on this blog.[ref]Flo and Eddie v. Sirius XM Radio: Have Two Hippies from the 60's Just Changed the Course of Broadcast Music?[/ref] This order has been stayed pending an appeal.
The same day, Judge Louis Stanton of the District Court for the Southern District of New York ruled that Pandora has to pay 2.5% of gross revenue to BMI, the performing rights organization that represents music publishers and composers.[ref]Broadcast Music, Inc. v. Pandora Media, Inc. 2015 WL 3526105 United States District Court, for the Southern District of New York, 2015 at page 60.[/ref] Pandora was seeking a rate between 1.7% and 1.85% of gross revenue.[ref]Id. at 6[/ref]

Taking on the most damage from these events is Pandora. This blog has detailed before the financial black hole that is Pandora.[ref]More Money, No Profit: Is the "Free For All" Ethos of the Internet Killing Streaming?[/ref] From 2011 through 2013 Pandora has lost $86 million.[ref]Id.[/ref] In the first quarter of this year, Pandora has lost $48.3 million.[ref]Pandora's Court Defeat vs. BMI Is Not the Only Royalty Problem It Faces[/ref] On the announcement that it had received a negative ruling from the rate court, Pandora' stock fell 2.3%.[ref]Id.[/ref] With the announcement of Apple Music, Pandora's stock plummeted another 4%.[ref]Apple Takes on Spotify with New Music Service[/ref] The Flo and Eddie decision is significant, because Flo and Eddie have sued Pandora on precisely the same grounds that have already provided a win against Sirius XM in both California and New York. Factor in that the rate courts' decision is retroactive to 2013, and is calculated on the gross revenue, not the net, it's not hard to spot the huge black cloud in the skies over Pandora headquarters. As it stands right now, Pandora will owe BMI $15.9 million for 2013 alone. Judge Stanton made several telling findings of fact in his opinion about Pandora. Its revenue stream is derived 80% from its free tier, and 20% from its pay tier.[ref]Broadcast Music, Inc. v. Pandora Media, Inc. at 12[/ref] Pandora's main problem is that it sells only 60% of its available advertising space.[ref]Id.[/ref] On a per listener basis, a terrestrial radio station pays two times what Pandora pays and Spotify pays eight times what Pandora pays.[ref]Id. at 13[/ref] Between 2010 and 2013, BMI cut deals with "Spotify, Rdio, Rhapsody and Apple iTunes Radio at rates ranging from 2.5% to 4.6%."[ref]Id. at 36[/ref] Yet Pandora with a straight face tells the rate court it should not pay any more than it pays, and at the same time petitions Congress to lower these rates even further. Pandora's real strategy is to trim its "content costs" from 60% to 40%,[ref]Pandora's Court Defeat vs. BMI Is Not the Only Royalty Problem It Faces[/ref] instead of finding better ways to sell its unwanted advertising inventory. As Judge Stanton noted, "at present Pandora has not demonstrated sustained profitability."[ref]Broadcast Music, Inc. v. Pandora Media, Inc. at 12[/ref] And what of those "greedy middlemen" that Spotify complained about? Pandora pays 60% of its revenue to the record companies for use of the sound recordings.[ref]Broadcast Music, Inc. v. Pandora Media, Inc. at 17[/ref] Aren't they the real culprits here from making streaming sustainable for both the companies and musicians alike? Well no. As pointed out by Chris Castle over at the Music-Technology-Policy, if this is true, then an artist who is not signed to a record company and controls their own rights, should see a sustainable payment for their rights.[ref]@zoecello's Royalties Give the Lie to Daniel Ek's "Greedy Middlemen" Rant[/ref] He provided a link to the Spotify royalty statements from 2013-2015 posted by cellist Zoë Keating,[ref]ZK Spotify - Jan 2013 to May 2015[/ref] about whom this blog has written before.[ref]Copyright Blog Update: Google's Latest DMCA Abuse, Here Come the Bogus Bonds and Judge Says 1 + 1 = 1[/ref] I invite you to follow the link and look at the royalty statement. It's incomprehensible. There is absolutely no way to tell how or on what basis or formula Spotify is calculating the royalties it does pay. "As you will see in her statement, Zoë's per-stream royalties ranged from $0.0000013284 to approximately $0.01 per stream, except for 3 streams in "CH" (presumably Switzerland) that broke $0.02."[ref]@zoecello's Royalties Give the Lie to Daniel Ek's "Greedy Middlemen" Rant[/ref] Are you kidding me? One stream paid a little more than one ten thousandth of a cent? How is a musician or composer going to earn a sustainable living on a royalty of one ten thousandth of a cent? And remember, this is without those "greedy middlemen" getting in the way. For his part, Spotify's Daniel Ek states "And if we build the revenue model around ‘freemium' [a business model that gives basic products away for free], the music industry will be much larger than it's ever been before, more artists will be able to make a living by being artists and more people will listen in turn."[ref]Daniel Ek: Spotify and free music will save the industry, not kill it[/ref] This is what David Lowery over at The Trichordist derisively calls "magic unicorn math,"[ref]How To Translate an Article on Spotify Finances into Non Magic Unicorn Math[/ref] because when you take a look at the real numbers, they show just the opposite happening. Let's go back to Chris Castle's analysis of Zoë Keating's royalty statement. "Zoë's per stream average from 2013 was $0.0042, in 2014 it was $0.0040 and was $0.0032 in 2015. So even though Zoë's own total streams increased from 416,112 to 1,487,584 during the 2013-2015 period, her average per stream royalty declined from $0.0042 to $0.0032."[ref]Id ZK Spotify - Jan 2013 to May 2015.[/ref] The bottom line? On 1,487,584 streams, Zoë was paid $4,821.07, or a little more on an average than three tenths of a penny per stream.[ref]@zoecello's Royalties Give the Lie to Daniel Ek's "Greedy Middlemen" Rant[/ref] It's hard to see how an artist can make a sustainable living on these payments. And it gets worse from here. "And don't forget that Mr. Ek is quick to point out that streaming revenue is a growing share of overall digital revenues and displacing downloads. Yes, that's right. In a race to the bottom, micro-margin streams are replacing high margin downloads. Correct, it's called cannibalization."[ref]@zoecello's Royalties Give the Lie to Daniel Ek's "Greedy Middlemen" Rant[/ref] Yet the tech companies and their apologists scold the musicians and composers saying that if they don't accept these meager crumbs that Pandora and Spotify are offering them, the whole music business will collapse further. "Casey Rae, chief executive officer of The Future of Music Coalition in Washington, warned against changes that could hamper Pandora's growth. ‘For songwriters to get paid, the music has to be played. If Webcasting is not viable, there's a whole side of the marketplace that will evaporate,' he said."[ref]Pandora's Court Defeat vs. BMI Is Not the Only Royalty Problem It Faces[/ref] (Just so you understand who's doing the talking here, The Future of Music Coalition is partially funded by Google.[ref]Why I Was Banned From Speaking At San Francisco Music Tech #SFMUSICTECH[/ref]) So if webcasting is "not viable" at present royalty rates, why would Apple want to get into the streaming business? How does Apple think they're going to make a profit? Simple. Apple is going to charge for the service.[ref]Apple Takes on Spotify with New Music Service[/ref] Like Sirius XM, it will offer a free trial, but thereafter you have to pay $9.99 a month.[ref]Id.[/ref] It's not that webcasting itself that is not viable, it's just that the terrestrial broadcast, ad supported, model does not work for streaming, as detailed previously on this blog. Plus, Apple has people with actual music business experience at the controls here, like famed record producer Jimmy Iovine,[ref]Apple Takes on Spotify with New Music Service[/ref] who was also one of the founders of Interscope Records. Think about it. Let's hire people who have actually been in the record business and know how it works, and know that what works that is not what is being peddled by Pandora and Spotify. Iovine had this to say to The Guardian: "You come out, you build this service, and a lot of it is based on free. So if you have a hit record, you're only being paid on 20% of it, because 80% of it is free. So this generation [of] artists, the next five to seven years, they've got to pay for the future? What's that? No. No! That's wrong from my viewpoint. From a musician's standpoint, "So if you get 100m streams and you're only really being paid on 20 million, that doesn't work for the artist. Record companies will be here forever, but those artists will not be here forever. The individual who writes that song, at that moment, deserves to be compensated for it in a fair way. … "90% of them were broke last week! These aren't trust-fund people coming in making this music, y'know! Maybe there's eight artists in the world that can just do anything they want financially, but there's thousands of artists who could use a couple of bucks to get by and do this stuff right,… "That's where I come at it from, you know what I mean? And we tried to build something that had enough of each thing to build an ecosystem that just feeds off each other, and gives back to an artist."[ref]Apple Music interview: 'Algorithms can't do it alone - you need a human touch'[/ref] Apple Music's Eddie Cue had this to say: "Our viewpoint was very simple: let the artist and label control it. They can put it up on Connect for free if they want to, or they can put it up behind the [subscription] paywall, or they can make it available on the iTunes Store for sale. They're in control of their music and how they want to distribute it."[ref]Id.[/ref] Let the artist control their music? It's Apple Music to my ears.

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The “Art of No Deal” Will Cost Trump Plenty in Copyright Infringement Case

On September 13, 2024, a Federal Court Judge issued summary judgement against Donald Trump and his campaign in the long running copyright infringement dispute with Barbadian based musician Eddy Grant over the Trump campaign’s use of Grant’s song “Electric Avenue” in a Trump campaign video. 1 I have been following this case for a long time and have blogged about it previously. 2 To anyone who read the Judge’s initial ruling on Trump’s Motion to Dismiss, the ruling against Trump should not be surprising. The only real surprise is why the case got this far.As I suggested in my previous blog post, the case should have quickly been settled. Yet for whatever reason, including Trump’s own pugnacious personality, it was not, and now it will cost him. According to the complaint, Grant is seeking $300,00 in statutory damages, the maximum for infringement of not only the song “Electric Avenue” but sound recording as well. 3 The attorney’s fees, for four years of litigation, will easily top the amount of damages. And Trump is personally liable for both amounts.“It’s everything we asked for,” one of Grant’s lawyers, Brett Van Benthysen, told Business Insider. “100%.” 4The real question is why litigate? This crops up time and time again in copyright cases, where copyright defendants take to the costly step of litigating such malleable issues as “fair use” when a simple settlement, or license fee for that matter, would resolve the issue once and for all and make it go away, for a lot less money. And for Trump, the result is the prospect of a very large judgment against him, creating a lot of negative publicity around him at a time when negative publicity is very much not in his best interest. To which we can add the recent injunction granted against Trump for his use of “Hold On, I’m Comin” and a lawsuit filed by The White Stripes over use of the song “Seven Nation Army.” 5As I noted three years ago:Many times, an [infringement claim] occurs when songs are used at campaign rallies. The composers feel that this is an implied endorsement. The campaigns usually rely on a license from the performing rights organizations. However, sometimes the use is in a campaign video, and since this is a “synchronization” use, it absolutely requires a license and absolutely requires permission, even in the internet age. 6To this, Trump trots out the same fair use argument that got pummeled in the Court’s rejection of his Motion to Dismiss. Indeed, large sections of the Court’s opinion on summary judgement could have been cut and pasted from its previous ruling. For the fine details of that ruling, I invite you to read my previous blog post. 7The only new matter Trump brings to the Court is the contention that the “Electric Avenue” sound recording was not properly registered with the U.S. Copyright Office.Interestingly enough, there is no discussion about whether the “Electric Avenue” sound recording had to be registered with the Copyright Office in the first place. Eddy Grant was born in Ghana, raised in the UK, and presently resides in Barbados, 8 and as such is protected by the Berne Convention.In that situation, according to the expert folks at the Copyright Alliance:“A foreign author may bring a copyright infringement action in a U.S. district court without registering his or her work with the U.S. Copyright Office. However, a foreign author must register his or her work with the U.S. Copyright Office in order to obtain certain statutory benefits that are provided under the 1976 Copyright Act, such as the presumption of validity and the ability to claim statutory damages and attorney’s fees in an infringement action.” 9So, Grant’s lawsuit would have been sustainable in any event. The real crux would be his ability to ask for statutory damages and attorneys fees, which he clearly is asking for.Now, while the song “Electric Avenue” was registered for copyright in the U.S. in 1983, 10 it does not appear that the sound recording was registered until many years later. “Electric Avenue” was recorded at Grant’s studio in Barbados and he is the sole musician on the recording, so the sound recording copyright unquestionably belongs to him. The sound recordings rights to “Electric Avenue” (amongst others) were licensed to Warner Music UK in 2001 for a five-year period, and for a territory which included the United States. 11 During this agreement, a “Greatest Hits” compilation was released which included “Electric Avenue.” This collection of sound recordings was registered with the U.S. Copyright Office in 2002. 12 The license agreement expired in 2006, by which all rights reverted to Grant. 13For his part, Trump contends the “Greatest Hits” registration was insufficient to register the component part of “Electric Avenue.” All of these arguments fail.The Court cites to previous Second Circuit precedent that held:“a publisher that filed collective works copyright registrations for issues of its magazine would have thereby obtained copyright registration for…the articles contained in the issue if the publisher owned the copyrights for those articles.” 14The Court also notes that:“[Trump argues] that the registration for a collective work does not include the registration for any previously published part but have failed to point out any case that supports that position.” 15Not a good strategy.Also in his answer, Trump asserted that he had “absolute presidential immunity” from Grant’s lawsuit. 16 This argument was apparently so ridiculous that it didn’t even merit discussion in the summary judgement opinion.But once again, why litigate this issue when a quick settlement and a much smaller fee would have made the entire matter disappear from the public eye? Further, why not take the video down after the cease and desist letter? Why wait until a lawsuit is filed until the video is removed from the public eye?I’m not alone in this thought. As my colleague David Newhoff wrote at the Illusion of More website:“When I wrote about the Grant v. Trump copyright case on October 1, I was wrong about one thing: that Team Trump would quickly settle the matter as a relative storm in a teacup within the legal tornadoes swirling around the ex-president.” 17Even the website Torrent Freak wondered:“In an ideal world, the failure of Trump’s motion to dismiss in September 2021 should’ve been seen as an opportunity to settle the case privately.A very small slice of humble pie and some tea, perhaps, so that everyone could move on. Or even negotiating the terms of the settlement Grant offered in August 2020 before filing the lawsuit.” 18And as a high-profile individual that once published a book under his name about “The Art of the Deal,” Trump should have known that “The Art of No Deal” can be much costlier.Notes:Grant v. Trump 2024 WL 4179057 SDNY 2024 (citations are to the WestLaw pagination) ↩“Electric Avenue” Derails Trump Train ↩Donald Trump Loses ‘Electric Avenue’ Legal Battle With Eddy Grant; Jury Could Be Convened Over Compensation From Ex-POTUS – Update ↩Donald Trump loses legal fight over using Eddy Grant song without permission ↩Id. ↩“Electric Avenue” Derails Trump Train ↩“Electric Avenue” Derails Trump Train ↩Wikipedia – Eddy Grant ↩Are Foreign Creators Protected in the US? ↩Grant v. Trump at 1 ↩Id. at 2 ↩Id. ↩Grant v. Trump at 2 ↩Grant v. Trump at 3 ↩Grant v. Trump at 5 ↩Trump Claims “Absolute Immunity” in Eddy Grant Copyright Suit ↩Id. ↩Eddy Grant Wins: Trump’s ‘Fair Use’ of ‘Electric Avenue’ Was Anything But ↩...

Test

Many headlines were generated on September 24, 2021, when Marvel Characters, Inc. filed a series of lawsuits against many former Marvel Comics illustrators.1 The suits, filed in New York and Los Angeles, all have the same basic fact pattern and asked for the same relief. The suits sought a declaratory decree that the termination notices served on Marvel by the authors and heirs of the former Marvel illustrators were invalid. At stake are the characters Iron Man, Spider-Man, Daredevil, Ant-Man, Hawkeye, Dr. Strange, Black Widow, Falcon, Thor and more.2When the Copyright Act was re-written, eventually enacted in 1976, for the first time, the right of an individual author to terminate a grant of copyright, and reclaim ownership, was added. But to make matters even more confusing, there were two different termination schemes enacted, one for post-1978 grants3 and one for pre-1978 grants.4 Yet, both systems have the same legal trap, the author cannot terminate a work that was prepared as a “work made for hire.” That is the central dispute in the suits that were filed. Yet, what constitutes a work made for hire after 1978, is largely governed by the Copyright Act. For pre-1978 works, it is largely a question of court decisions on the topic. Unfortunately for the Marvel illustrators, the case law does not favor their position.The case law on the subject indicates that a pre-1978 creative work is “made for hire” when it is prepared at the “instance and expense” of the hiring party. This is the rule in the Second, Ninth and Fifth Circuits, and cited as controlling by a Bankruptcy Court ruling involving, interestingly enough, Marvel Comics.5“If the employer can meet its burden to show some credible evidence that an employee worked at the ‘instance and expense’ of the employer, then the court will presume that the employer holds the copyright to the material produced.”6The Second Circuit defines “instance and expense” as “when the ‘motivating factor in producing the work was the employer who induced the creation.’”7The Fifth Circuit adds that another factor is “whether the employer had the right to direct and supervise the manner in which the work was being performed. Actual exercise of that right is not controlling, and copyright is vested in the employer who has no intention of overseeing the detailed activity of any employee hired for the very purpose of producing the material.”8According to the Second Circuit: “[t]he ‘expense’ component refers to the resources the hiring party invests in the creation of the work. We have, at least in some cases, continued the tradition of treating the incidents of a traditional employment relationship as relevant to the analysis. (Citation omitted) We have, moreover, suggested that the hiring party’s provision of tools, resources, or overhead may be controlling…In other cases, however, we seem to have focused mostly on the nature of payment: payment of a ‘sum certain’ suggests a work-for-hire arrangement; but ‘where the creator of a work receives royalties as payment, that method of payment generally weighs against finding a work-for-hire relationship.’”9The last quote is telling, as it came in a lawsuit bearing what Marvel calls “virtually identical circumstances,” Marvel Characters, Inc. against former Marvel illustrator Jack Kirby.That case described in detail “The Marvel Method”:“Under the Marvel Method, [Stan] Lee would not write a detailed script for a story before assigning an artist to draw it. Instead, at a ‘plotting conference,’ or in a ‘plot outline,’ Lee gave the artist the general contours of the story he had in mind: an outline of the plot, a description of the hero, and suggestions for how the story should look. The artist would draw the story along the lines of Lee’s ‘main theme.’ After an artist completed the pencil drawings, Lee edited his work and added dialogue and captions. Use of the Marvel Method allowed Lee to keep multiple artists working on assignments simultaneously.”10Here’s where it starts to get sticky. Stan Lee was certainly an employee of Marvel. Whatever his contributions to the creation of a character were certainly works for hire which would remain with Marvel. Even though individual authors can terminate individual author’s shares, the questions then become “who created what” and “is this still relevant today”?Let’s take Daredevil for example. His original costume was yellow. Who decided to change it to all red? So does the termination notice apply to “yellow” Daredevil or “red” Daredevil?Or let’s look at Iron Man, whose suit of armor and look have changed vastly over the years:Does the termination only apply to the original Iron Man? Who gets authorship over the changes? Or, let’s take on the character of Tony Stark. For the most part, Stark has been Iron Man. Sometimes Iron Man has been other characters, most notably James Rhodes.11This is important because despite termination, Marvel gets to keep the derivative versions of the character made while they held the copyright.12And then we get to the problems of proof on these issues. Stan Lee is dead. So are Gene Colan, Don Heck and Don Rico.13 Stan Lee was deposed extensively in the Jack Kirby litigation, but these may not have any bearing on the creation of Iron Man or Spider-Man. While it is true that Marvel as Plaintiff has the burden of proof, how are the various defendants going to introduce evidence to the contrary?Then there is the ruling on how “the Marvel Method” results in a decision of “work made for hire.”“In the work-for-hire context, ‘an essential element of the employer-employee relationship is the right of the employer to direct and supervise the manner in which the [artist] performs his work.’ (citation omitted) If the hiring party ‘took the initiative in engaging [the artist]’ and had ‘the power to accept, reject, or modify her work, then the work is a work for hire. (citation omitted) It is undisputed that at all times between 1958 and 1963 Lee had complete editorial and stylistic control over all work that Marvel published…. If Lee did not approve of the artist’s work, it was not published. (citation omitted) Kirby was no exception. Lee edited Kirby’s work and reviewed and approved all of his work prior to publication. (citation omitted) Lee’s testimony is consistent with the recollection of Kirby’s daughter, Susan Kirby, who testified that Lee asked her father to ‘redo pages.’ (citation omitted) Neal Kirby testified about one instance where Lee rejected a ‘cover’ created by Kirby.”14In affirming, the Second Circuit wrote:“Understood as products of this overarching relationship, Kirby’s works during this period were hardly self-directed projects in which he hoped Marvel, as one of several potential publishers, might have an interest; rather, he created the relevant works pursuant to Marvel’s assignment or with Marvel specifically in mind. Kirby’s ongoing partnership with Marvel, however unbalanced and under-remunerative to the artist, is therefore what induced Kirby’s creation of the works…Marvel’s inducement, right to supervise, exercise of that right, and creative contribution with respect to Kirby’s work during the relevant time period is more than enough to establish that the works were created at Marvel’s instance.”15As to the “expense” prong:“The facts underlying the expense component are not in dispute. Marvel paid Kirby a flat rate per page for those pages it accepted, and no royalties. It did not pay for Kirby’s supplies or provide him with office space. It was free to reject Kirby’s pages and pay him nothing for them. The record contains anecdotal evidence that Marvel did in fact reject Kirby’s work or require him to redo it on occasion, if less often than it did the work of other artists, but with what frequency is unclear… In the final analysis, then, the record suggests that both parties took on risks with respect to the works’ success—Kirby that he might occasionally not be paid for the labor and materials for certain pages, and Marvel that the pages it did pay for might not result in a successful comic book. But we think that Marvel’s payment of a flat rate and its contribution of both creative and production value, in light of the parties’ relationship as a whole, is enough to satisfy the expense requirement.”16Given that the facts surrounding the current dispute are bound to be the same, how does the Marvel illustrator’s cases succeed?According to the Marvel illustrator’s attorney, “At the core of these cases is an anachronistic and highly criticized interpretation of ‘work-made-for-hire’ under the 1909 Copyright Act that needs to be rectified.”17Except that in this instance the appellate court in both jurisdictions where the suits have been filed have both affirmed the “instance and expense” test.And if they succeed, what do they get? Certainly not total ownership of the copyrights at issue, since, as noted, Stan Lee was definitely an employee of Marvel. Co-ownership?Co-ownership of a copyright means all parties own the copyright equally. And being a co-owner means that you can license a work without the permission of the other co-owners, subject to your duty to account for all the compensation one would receive. Could this happen?Doubtful. The movie business is not like other businesses and thrives on exclusivity. Would a movie company really make a deal for one of the Marvel characters knowing that they would not have exclusive rights and that Disney would in essence be looking over their shoulder?All likely outcomes point to a settlement at some point. This is what happened to the Kirby case even after the affirmance by the Second Circuit.18Notes:The suits are Marvel Characters Inc. v Lieber, 21-cv-7955; Marvel Characters Inc. v Ditko, 21-cv-7957; and Marvel Characters Inc. v Dettwiler, 21-cv-7959, all in U.S. District Court, Southern District of New York (Manhattan); Marvel Characters Inc. v Solo, 21-cv-5316, U.S. District Court, Eastern District of New York; and Marvel Characters Inc. v Hart-Rico, U.S. District Court, Central District of California (Los Angeles.)Marvel Suing to Keep Rights to ‘Avengers’ Characters From Copyright Termination, Marvel Sues to Prevent Losing Copyrights to ‘Avengers’ Characters, Disney sues former Marvel artists over Iron Man and Spider-Man rights17 USC 20317 USC 304(c)In Re: Marvel Entertainment Group 254 B.R. 817 (D. Del 2000)Id. at 828Sigel v. National Periodical Publications 508 F.2d 909 (2d. Cir.1974) at 914Murray v. Gelderman, 566 F.2d 1307, 1310 (5th Cir.1978) at 1310Marvel Characters Inc.v. Kirby 726 F.3d 119 (2d. Cir. 2013) at 140Marvel Worldwide v.Kirby 777 F.Supp. 2d 720 (SDNY 2011) at 732Wikipedia – Iron Man17 USC 304 (c) (6) (A)Disney sues former Marvel artists over Iron Man and Spider-Man rightsMarvel Worldwide v.Kirby 777 F.Supp. 2d 720 (SDNY 2011) at 740Marvel Characters Inc.v. Kirby 726 F.3d 119 (2d. Cir. 2013) at 141Id. at 142Disney sues former Marvel artists over Iron Man and Spider-Man rightsId....

Appellate Court Rules That “Sophisticated Plaintiffs” Are Entitled to Equal Protection Under the Copyright Laws

Appellate Court Rules That “Sophisticated Plaintiffs” Are Entitled to Equal Protection Under the Copyright LawsIt’s one of those principles that should not need to be debated: people are entitled to equal protection under the law. Yet strangely, one Federal Court went out of its way to penalize a litigant, because they were a “sophisticated copyright litigator” causing the dismissal of the case. Now, the Second Circuit has reversed this erroneous decision, stating “[t]here is no ‘sophisticated plaintiff’ exception to the discovery rule or to a defendant’s burden to plead and prove a statute of limitations defense.”The Plaintiff here is Michael Grecco Productions, Inc., the business arm of photographer Michael Grecco. In an appendix filed with the case, it was claimed that MGP had filed more than 100 copyright lawsuits. Why this matters is beyond me. Anyone with a clear mind knows that the internet is a cesspool of copyright infringing material, with photographers taking the brunt of the injuries. According to the website Torrent Freak, Google processed over one BILLION takedown notices in the first four months of 2024 alone. 2 One hundred lawsuits is not even a drop in the ocean.This legal squabble arises because the defendant here claims that MGP’s lawsuit was filed too late and thus barred by the statute of limitations under Section 507(b). The question arose as to the proper time using the “discovery” rule. The Court below ruled that MGP’s “relative sophistication as an experienced litigator in identifying and bringing causes of action for unauthorized uses of Grecco’s copyrighted works leads to the conclusion that it should have discovered, with the exercise of due diligence, ‘Davis’s alleged infringement ‘within the three-year limitations period.’” 3Rather than trying to amend its complaint, MGP stood by its original filing and the Court dismissed the case. MGP filed an appeal. The second Circuit made quick work of the District Court’s reasoning.“Although the district court claimed to apply the discovery rule, its calculation actually employed the injury rule; it started the three-year clock when the infringement allegedly began, while also implying that some extension of time might be available if MGP was unable to discover the infringement within those three years. In essence, the calculation incorrectly reflected the discovery rule as an equitable extension and not the rule of accrual.” 4“MGP filed its complaint on October 12, 2021. Thus, to be timely, MGP must have been unable, with the exercise of due diligence, to discover the infringing activity prior to October 12, 2018, three years before the complaint was filed. [Citation omitted] By contrast, the district court held that MGP “must have been unable, with the exercise of due diligence, to discover the infringing activity prior to August 16, 2020, three years after the infringing activity allegedly began.” 5“Although the district court claimed to apply the discovery rule, its calculation actually employed the injury rule; it started the three-year clock when the infringement allegedly began, while also implying that some extension of time might be available if MGP was unable to discover the infringement within those three years. In essence, the calculation incorrectly reflected the discovery rule as an equitable extension and not the rule of accrual.” 6In simpler terms, for purposes of the Copyright statute under the “discovery rule,” the three-year term runs from when the suit is filed and looks backward. Did the Plaintiff know, or with the exercise of due diligence, reasonably know, or should have known about the infringement more than three years from the date of filing of the lawsuit?And (in the words of Frank Zappa) here’s the crux of the biscuit: does the sophistication of the Plaintiff matter at all in assessing the “should have known” portion of the test? The answer is no.“In the context of the Copyright Act’s three-year limitations provision, the discovery rule is the rule of accrual, not an equitable tolling or estoppel doctrine. The discovery rule is not an exception to the injury rule that only applies to some infringement claims; it is not a benefit for which only some plaintiffs qualify. Rather, ‘the discovery rule, not the injury rule’ determines, in the first place, when a copyright infringement claim accrues.” 7“This ‘sophisticated plaintiff’ rationale has no mooring to our cases. First, to the extent this rationale arose out of treating the discovery rule as an equitable doctrine for which only some plaintiffs in some circumstances will qualify, it is wrong. As already noted, because we have previously determined that the discovery rule is Congress’s intended rule of accrual for civil actions under the Copyright Act, it is the rule in every such action and not an equitable exception to the injury rule.” 8“Second, to the extent the district court’s rationale recognizes the discovery rule as one of accrual, but nevertheless suggests different rules of accrual for different plaintiffs—the discovery rule for copyright holders not sophisticated in detecting and litigating infringements, but the injury rule for copyright holders who are—it also is wrong. We have never understood the Copyright Act to employ different rules of accrual for different plaintiffs. The Supreme Court has made clear that the Act’s “clock is a singular one.” 9“Third, even if the district court’s ‘sophisticated plaintiff’ rationale is merely a presumption that sophisticated plaintiffs can discover infringements immediately or nearly so, such that the date of earliest diligent discovery would always be the date of injury (or approximately so), the rationale remains flawed. A plaintiff’s ‘sophisticated’ nature does not automatically relieve a defendant of her burden to plead and prove a Copyright Act limitations defense… A sophisticated plaintiff may well discover an infringement sooner than their less practiced neighbor. But the answer to the discovery question turns on due diligence—the fact-intensive inquiry of the copyright holder’s efforts to discover the infringement. An overly simplified ‘sophisticated plaintiff’ presumption is antithetical to the nature of the task.” 10And there you go. Equal protection under the law.Notes:Michael Grecco Productions Inc. v. RADesign, Inc. 2024 WL 3836578, 2d Cir. Court of Appeals 2024 ↩Google Search Processed a Billion DMCA Takedowns in Four Months ↩Michael Grecco Productions Inc. at 2 ↩Id. at 4 ↩Id. ↩Id. ↩Id. ↩Id. at 5 ↩Id. ↩Id. ↩...

The Beat Goes On - and So Do the Royalty Payments

The late Sonny Bono now adds his name to another chapter of copyright law. The first, of course, was the Sonny Bono Copyright Term Extension Act, The Shocking Truth Behind the Passage of the Sonny Bono Copyright Extension! (Is That It's Not Really Shocking) which extended copyright protections for an additional 20 years. Now, his name gets attached to a very novel copyright fight: can the copyright termination provisions of Section 304 trump the terms and conditions of a State marital property settlement agreement? The facts of the case are simple and largely not in dispute. Sonny Bono was half of the very popular 1960's musical group "Sonny and Cher,"[ref]Wikipedia - Sonny Bono[/ref] who in the 1970's had their own TV Variety Show.[ref]Wikipedia - Sonny Bono[/ref] After their divorce, Cher became the far more popular and successful of the duo and is better known to modern audiences than Sonny. Indeed, Cher is so popular that she is now legally known only as "Cher" as the headings to this case indicate.[ref]Cher v. Mary Bono LA Cv21-08157 JAK (RAO) U.S. District Court for the Central District of California (Slip Opinion)[/ref] Sonny went into politics before dying in a skiing accident in 1998.[ref]Wikipedia - Sonny Bono[/ref] The epitaph on his gravestone is "And the Beat Goes On," a nod to Sonny and Cher's 1967 hit single "The Beat Goes On."[ref]The Beat Goes On (Sonny & Sher song)[/ref] As a result of their 1978 divorce, Sonny agreed that Cher would continue to receive "an undivided 50% interest" in the continuing royalties derived from sales and performances of their songs, less an administrative fee.[ref]Cher v. Mary Bono LA Cv21-08157 JAK (RAO) U.S. District Court for the Central District of California (Slip Opinion)[/ref] In 2016, Sonny's widow Mary Bono served termination notices under section 304(c) of the Copyright Act to reclaim ownership of Sonny copyrights on "various music publishers to which Sonny had granted a transfer or license of copyright in musical compositions that had authored or co-authored."[ref]Id. at 2[/ref] When the termination notices took effect, Mary stopped paying the royalties to Cher and in 2021 informed her that she no longer was entitled to any further royalties under the Marital Settlement agreement.[ref]Id. at 2-3[/ref] Cher sued in 2021 for declaratory judgement that "the notice of termination does not affect her royalty rights or approval rights under the [Marital Settlement Agreement]."[ref]Id. at 9[/ref] Both sides moved for summary judgement. On May 29, 2024, the District Judge sided with Cher, ruling that the MSA entitled Cher to a royalty stream, not necessarily an ownership interest in the copyrights themselves to which Section 304(c) termination would apply. "Consequently, Plaintiff's rights under the MSA are linked to the musical compositions and Sonny's corresponding property interests. Because in granting the royalty and approval rights at issue, the MSA did not refer to a "grant of a transfer or license" of the underlying copyrights, Plaintiff's rights under the MSA arise solely under state law. Further, because section 304(c) expressly provides that it "in no way affects rights arising under any other Federal, State, or foreign laws" (Citation Omitted) the Notice of Termination cannot affect Plaintiff's contractual right to receive financial compensation in exchange for the release and permanent discharge of any and all claims arising out of her marital relationship with Sonny. Notwithstanding the plain language of the MSA, Defendant argues that, under 17 U.S.C. § 304(c)(5), "[t]ermination of the grant may be effected notwithstanding any agreement to the contrary, including an agreement to make a will or to make any future grant," and the MSA constitutes such an "agreement to the contrary." (citation omitted) However, the only rights that are terminable under section 304(c) are copyright grants. (citation omitted). Therefore, an "agreement to the contrary" under section 304(c)(5) is only a "contractual device that purports to divest" authors and successors of the right to "terminate copyright assignments." (citation omitted) Because the MSA does not refer to the underlying copyrights, it did not affect the ability of Sonny's heirs to terminate the copyrights. Therefore, it is not an "agreement to the contrary."[ref]Id. at 10-11[/ref] In rendering this decision, the Judge has side-stepped one of the more thorny issues of copyright law: marital community property. Under the laws of States that recognize "community property," all assets acquired during the marriage belong equally to the parties to the marriage. This would include all copyrights to works created by one of the spouses during the marriage. So here, absent an agreement, Cher would be a 50% owner of all of Sonny's copyrights due to the laws of community property. What the MSA agreement did was merely formalize this into an agreement where Sonny would keep 100% of the ownership of the copyrights, subject to Cher's right to receive 50% of all future income. If the Judge were to side with Mary Bono, it would mean that parties to a divorce proceeding could agree to a similar arrangement, only to have one party renege on that agreement years later, using the Copyright Act termination provisions of section 304. "The MSA … assigned to Plaintiff a right to the "contingent receipts ... from musical compositions and interests therein" in exchange for the release of "any and all claims ... arising out of the marital status of the parties." (citation omitted) Consequently, the conclusion "that an author-spouse in whom a copyright vests maintains exclusive managerial control of the copyright but that the economic benefits of the copyrighted work belong to the community while it exists and to the former spouses in indivision thereafter ... is consistent with both federal copyright law and [California] community property law and is reconcilable under both."[ref]Id. at 11[/ref] So, the beat goes on – and so do the royalty payments....

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