Copyright - Sherman Library at Nova Southeastern University

Last month saw the release of the Department of Commerce's White Paper on Copyright.[ref]White Paper on Remixes, First Sale, and Statutory Damages[/ref] Specifically, the voluminous (107 page) report took up three specific issues:

Remixes, broadly defined to include all forms of combining copyrighted works, including "fan fiction."
The First Sale Doctrine, especially whether the doctrine should apply to digital goods.
Statutory Damages, including whether the penalties should be lessened or further guidelines established.

The most surprising element is that after all the ink has been spilled, the DOC finds no need to massively overhaul or amend the current copyright laws, with the notable exception of statutory damages. In sum, the DOC finds:

"[T]he record has not established a need to amend existing law to create a specific exception or compulsory license for remix uses,"[ref]Id. at 4[/ref] noting that one comment called it "a solution in search of a problem."[ref]Id. at 18[/ref]
"Amending the law to extend the first sale doctrine to digital transmissions of copyrighted works is not advisable at this time. We have seen insufficient evidence to show that there has been a change in circumstances in markets or technology, and the risks to copyright owners primary markets do not appear to have diminished."[ref]Id. at 4[/ref]
With regards to statutory damages, amend the copyright act to provide for a list of factors for Judges and juries to consider, expand the ability of a defendant to claim innocent infringement, and give to Courts more discretion to award statutory damages on other than a strict "per work" basis.[ref]Id. at 5[/ref]

I would agree with the DOC on the first two issues. On the issue of statutory damages, the DOC takes an incredibly strange and misguided approach, insisting that we should now consider the "defendant's ability to pay" rather than the harm caused by the defendant, a concept that is nearly unheard of in U.S. jurisprudence.

Remixes

The DOC gathered a bunch of things into the general category of "remixes." These include "mash-ups" sampling, "fan videos," photo-manipulation, "fan-fiction" and the like. The DOC starts with the statement that "[r]emixes make valuable contributions to society in providing expressive, political and entertainment content."[ref]Id. at 4[/ref] This rather bold statement is offered with no supporting facts (not even a footnote) and totally ignores the fact that these remixes start out by copying what someone else has already done, instead of creating new content themselves, which is what copyright is supposed to promote in the first place. The DOC report notes the problem with allowing unfettered remixes is that these uses will inevitably lead to the incorporation of works into hate speech (the example of using "Hey Jude" into an anti-Semitic creed is noted in a footnote).[ref]Id. at 9 footnote 44[/ref] Or, more recently, as the run up to the election has shown on numerous occasions, imagine that a candidate that you despise has now appropriated your song as their campaign theme song. Seems like I should have some control, should I not? As to the general question of remixes, there was this excellent comment: "[Y]ou can't get licenses for everything, but that's okay…There are a billion songs you can go get to create whatever you want to create. Why is my property so important to you that you can only do your creation with my property?"[ref]Id. at footnote 112[/ref] Later, there was this observation by the DOC: "[I]n cases involving multiple samples it can be particularly cost prohibitive and impractical to clear the necessary rights. A professor referred to a "royalty stacking problem" where a musical recording has a large number of samples and the cumulative demands for royalties from the different owners of these samples can exceed 100 percent of the remixer's revenues."[ref]Id. at 19[/ref] This leads the Electronic Frontier Foundation in commenting on the DOC report to trot one of its favorite bogeymen… "censorship." "Thus, the current regime of expansive rights for copyright holders, a lack of clear safe harbors for important speech activities, and astronomical statutory damages gives copyright owners the de facto power to censor remix."[ref]The Commerce Department Has Good Recommendations For Fixing Copyright Law - But More is Needed[/ref] As I have said numerous times on this blog, my speech is my speech. Copying my speech does not make it your speech. And you have no absolute Constitutional right to make my speech. Plus, according to the Constitution, I have the "exclusive right" in my "writings."[ref]United States Constitution, Article I, Section 8[/ref] So, no you don't have a right to take my speech in order to make it yours. Plus, if you have sampled so many different artists that the licensing fees exceed 100% of your revenues, the failure is not in the copyright laws, but instead is the logical consequence of your failure to do anything creative. Slapping together a bunch of segments you copied from other people's musical compositions does not make you Mozart. Yet, the EFF blathers on: "We explained [PDF] the chilling effect copyright has on important remix speech and suggested a clear and narrow delineation of copyright owners' ability to restrict derivative works like remixes… The Commerce Department panel did not discuss our recommendation in its comments." Well, it's no wonder that the DOC ignored you, because it seems that such a change to the copyright act would possibly be unconstitutional. First off, the granting clause in the Constitution says I am entitled to the "exclusive right," not the non-exclusive right like the EFF proposes. According to the Copyright Act, the right to control derivative works (which is what remixes are) is part of my exclusive rights under Section 106 (2). Now, if my exclusive right to control derivative works become a non-exclusive right, this would make my copyright much less valuable because unfettered "remixes" of my work would now compete with my licensed works. While I am not a constitutional lawyer, it seems to me that this government mandated reduction of my rights, causing financial injury, would be the sort of taking prohibited by the Fifth Amendment.[ref]In these, the regulation has not physically invaded or precipitated a total loss, or even been employed to gain undue leverage. Rather, regulation reduces, often significantly but not totally, the economic prospects for property, and an owner asks to be compensated. http://www.heritage.org/constitution/#!/amendments/5/essays/151/takings-clause[/ref] This quote from author Sharon Lee appeared in a previous blog post, but bears repeating: "We built our [artistic works]; they are our intellectual property; and they are not toys lying about some virtual sandbox for other kids to pick up and modify at their whim."[ref]The Second Answer[/ref] And finally there is this sobering point: "Songwriting is now the most heavily regulated of the creative arts. Seventy per cent of a songwriter's income comes from rates set by the government, rather than by the songwriters and publishers, on the free market."[ref]Will Streaming Music Kill Songwriting?[/ref] I fail to see how this is fair in an economy that is supposed to be governed by "free market" principles. Extending this unfairness by mandating a give-away of my property is untenable.

First Sale Doctrine for Digital Goods

Normally, when one purchases a physical copy of a copyrighted work, you can do anything which re-publishes the work.[ref]17 USC 109[/ref] You can sell it, lend it or even give it away. However, some have said that this right should be extended to digital files, even though they are uniformly licensed, not sold.[ref]The Commerce Department Has Good Recommendations For Fixing Copyright Law - But More is Needed[/ref] In rejecting the call for the first sale doctrine to be made available for digital works, the DOC made these points:

In a market which is becoming dominated by streaming, there really is no need for a secondary market in digital goods.[ref]DOC White paper at 46[/ref]
The digital secondary market would soon destroy any remaining market for new sales, as the "used" copy is identical to the "new" copy.[ref]Id. at 51[/ref]
The "forward and delete" technology as proposed by companies like ReDigi is not a practical or workable solution as the proliferation of unauthorized further copies is inevitable.[ref]Id. at 53[/ref]

The last point is really the crux of the arguments. Digital goods are different precisely because of the ease and speed by which perfect copies can be made. While the decision in the ReDigi litigation with Capitol Records did not hinge on this point,[ref]Capitol Records LLC v. ReDigi, Inc., 934 F.Supp. 2d 640 Southern District of New York 2013[/ref] there is no getting around the fact that a digital re-sale market would kill the market for new digital copies of the works. The whole "forward and delete" scheme is a panacea that just will not work. This is because your computer does not forget anything or really delete anything. As my brother (he being the owner of a degree in computer science from Northwestern) once succinctly explained to me, your computer does not "delete" anything. It simply removes the "pointer" that tells the computer where to find it. That information stays there until such time as the computer over-writes it with new information. And until that time, it can still be recovered. And then there is the whole problem with back-ups. Is the digital file you just "sold" still present as a back-up file on a flash drive someplace? If it was, you could then upload it again and "sell" it again. And again. And again. And what about your peripheral devices? Just last weekend, I spent some time cleaning up my iTunes account, mainly deleting songs I didn't want anymore. So when I connected my iPod back up to the computer, my computer immediately noticed that there were songs on my iPod that were not in my iTunes library. The computer asked "do you want to add them to iTunes"? So, it would be very simple for me to "sell" the song out of my iTunes library, have the service delete it out of my iTunes library, and then recopy it back into my iTunes library from my iPod. Where I could sell it again. And again. And again. The whole idea that "First Sale" rights should be extended to digital files is a non-starter. Unless, of course, you want to kill the market for new copies and encourage copyright infringement.

Reforming Statutory Damages

If there is one area where the task force went off the rails it was in the area of "statutory damages." This is where, instead of actual damages, the copyright holder can request the award of a sum per work infringed, in the range of $750 to $30,000. The task force seems swayed by the incomplete, misleading and anecdotal recitations of the activities of both the "copyright trolls" and the poor file sharer. And once again, we are treated to the sad tale of Jammie Thomas-Rasset. And it goes like this: (Cue the sad violins) ""Jammie Thomas-Rasset, a home Internet subscriber and mother of four, was assessed $222,000 in statutory damages for sharing 24 copyrighted songs using the peer-to-peer software Kazaa—$9,250 per song."[ref]Collateral Damages: Why Congress Needs To Fix Copyright Law's Civil Penalties[/ref] Why in the world is the EFF mentioning that she is a mother of four? Does her ability to procreate somehow give her the moral high ground here? No, it's entirely irrelevant to the issues at hand. The real story is that JT-R had thousands of songs on her computer and covered up her infringement by destroying evidence and committing massive amounts of perjury. Here is the real story of JT-R:[ref]Capitol Records v. Thomas-Rasset 692 F.3d 889 (8th Circuit Court of Appeal) 2012[/ref]

Investigators found a KaZaA account under the name "tereastarr", which held 1,700 music files, at an IP address that was linked to Thomas-Rassett.
After getting a letter from the investigators about the "tereastarr" account, JT-R had her computer's hard drive removed and replaced with a new one, destroying the evidence contained on it.
She testified at trial that although "tereastarr" is the password she used for her email account, online shopping accounts, online dating account and her MySpace page, the KaZaA account by the exact same name was not hers.
Her attorney suggested that some unknown person had "spoofed" her account or that some "hacker" had lurked outside her window with a laptop and "framed her."
She also tried to blame a former boyfriend and her children.
A Juror commented, "She lied. There was no defense. Her defense sucked."[ref]RIAA Juror: 'We Wanted to Send a Message'[/ref]
The first jury awarded $9,250 for the 24 works at issue for a total of $222,000.
After a second trial, the second jury returned a verdict of $80,000 per work, for a total of $1,920,000.
After a third trial on the damages issue alone yielded a verdict of $62,500 per work, for a total of $1,500,000.
The record companies offered to settle the case for $25,000, which they offered to donate to charity. She refused.

She appealed. Here's what the Eighth Circuit Court of Appeals had to say: ""Thomas-Rassett's willful infringement and subsequent efforts to conceal her actions certainly shows ‘a proclivity for unlawful conduct.'" "The evidence against Thomas-Rassett demonstrated an aggravated case of willful infringement by an individual consumer…"[ref]Capitol Records, Inc. v. Thomas-Rassett, 692 F.3d 899 Eighth Circuit Court of Appeals (2012)[/ref] What kind of idiot turns down an offer of settlement that is barely 10% of what has already been awarded against you? And, remember, the 24 files that ultimately went to trial were the ones they could conclusively prove, because she destroyed her hard drive in an effort cover up her actions. Hmm. An "aggravated case of willful infringement." Now do you still feel sorry for her? "The Task Force proposes a new clause in subsection Section 504(c)526 as follows: FACTORS TO CONSIDER -- In making any award under this subsection, a court shall consider the following nonexclusive factors in determining the appropriate amount of the award: (1) The plaintiff's revenues lost and the difficulty of proving damages. (2) The defendant's expenses saved, profits reaped, and other benefits from the infringement. (3) The need to deter future infringements. (4) The defendant's financial situation. (5) The value or nature of the work infringed. (6) The circumstances, duration, and scope of the infringement, including whether it was commercial in nature. (7) In cases involving infringement of multiple works, whether the total sum of damages, taking into account the number of works infringed and number of awards made, is commensurate with the overall harm caused by the infringement. (8) The defendant's state of mind, including whether the defendant was a willful or innocent infringer. (9) In the case of willful infringement, whether it is appropriate to punish the defendant and if so, the amount of damages that would result in an appropriate punishment. When calculating the total award, all of these factors should be weighed holistically, in the context of the entire case, to ensure that the overall award is appropriate."[ref]DOC White paper at 87-88[/ref] I have a different perspective. I have spent a lot of time in Court, and no, not just because I am an attorney. In between music school and law school, my day job was being an "in court clerk," assisting the Judges by marking in the evidence, and swearing in witness and jury members. I have seen hundreds of jury and non-jury trials. Sorry to tell you this, but virtually all measure of damages are speculative. Take your average car accident. The past medical bills are easy enough to prove. But what about necessary medical treatment in the future? What will that cost? Well, we will have to speculate a little bit. And what of the pain and suffering caused by the injuries? What is that worth? Well, I guess we'll have to speculate a little more. The process of assessing damages by its very nature will lead to inconsistent results. There is nothing that will smooth that out. Back to Jammie Thomas-Rassett. You want to avoid statutory damages? OK. How much money did the record companies lose by having her file share over 1,700 songs? Tough to say if you don't know how many times the songs were "shared." Even if it was technically possible to find that information out, we'll never really be sure because she destroyed the evidence. Is that number of supposed "actual damages" any more certain than the level of statutory damages that were awarded? And in all the trials I watched, the defendant's inability to pay was never made an issue. As a matter of fact, it was prohibited from being asserted. This is because the issue is "what was the damage caused," not whether you have the current ability to make it right. Do you really think that Bernie Madoff is going to be able to pay back all those people he defrauded? If he can't, should this reduce the amount he should owe? This is what the DOC is proposing. The citation the DOC makes in support of this proposition concerns punitive damages, not ordinary damages.[ref]Id. at 91 FN547[/ref] Punitive damages and ordinary damages are two vastly different concepts, and should not be treated as being alike. But what about the "copyright trolls"? This decision was handed down February 8, 2016 against often accused "copyright troll" Malibu Media.[ref]Malibu Media v. Doe U.S. District Court for the Northern District of Illinois 2016 WL 464045[/ref] What was notable was not that Malibu Media lost a summary judgment decision (usually the defendants don't show up), but that they agreed to let the Defendant proceed anonymously as a "John Doe" and agreed in advance to only seek the minimum statutory damages of $750 per work infringed.[ref]Id. at FN 2[/ref] Also notable was the case against pirate site Movie Tube,[ref]Paramount Pictures et al v. Does U.S. District Court for the Southern District of New York 2016 WL 10013786[/ref] where in the case of clear liability for willful infringement, and a default by all the Defendants, the Court only awarded $75,000 per work infringed, or half of the maximum amount. Every day, I read the copyright decisions that are handed down, and all of the concerns of the DOC seem to me to be already taken into account by the Judges in assessing the proper level of statutory damages. As this court stated: "To determine the appropriate amount of statutory damages, courts must consider the following factors: "(1) expenses saved and profits reaped by the infringer; (2) revenues lost by the plaintiff; (3) the strong public interest in insuring the integrity of the copyright laws; and (4) whether the infringement was willful and knowing or innocent and accidental." In determining the just amount of statutory damages, "[t]he defendant's conduct is the most important factor."[ref]Kennedy v. Credtigo, LLC United States District Court for the District of New Jersey 2016 WL 492757[/ref] One additional proposal by the DOC that does seem to have merit and is gaining steam is for the creation of a "copyright small claims court." "Finally, the Task Force supports the creation of a streamlined procedure for adjudicating small claims of copyright infringement and believes that further consideration should be given to the proposal of the Copyright Office to create a small claims tribunal.581 The proposal would provide for a cap on awards of statutory and actual damages, limited discovery and counterclaims, assertion of all relevant defenses (including fair use), optional attorney representation, and awards of costs and fees against frivolous litigants."[ref]DOC White paper at 99.[/ref] So, all in all, a fairly reasonable and even-handed approach by the Department of Commerce.

Recent Posts

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....

The Good, the Bad and the Strange of the Department of Commerce's White Paper on Copyright

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