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Cirque du Soleil’s Steel Dream is a Legal Nightmare for Justin Timberlake

by Katherine Imp

Cirque du Soleil sued Justin Timberlake last week, alleging that the singer, along with his writers, producers and recording company, “sampled” a portion of Cirque’s song, “Steel Dream” without permission on his 2013 song, “Don’t Hold the Wall”.

Before reading any further, listen to the first 20 seconds of “Steel Dream.” Now listen to Timberlake’s song, beginning at 4:04.

If you were on a jury, would you say that Timberlake and his team used a portion of Cirque’s song in “Don’t Hold the Wall”?

The answer is undoubtedly yes, even if the “Justin Timberlake fan” inside of you is telling you otherwise. Those 15-second tracks are nearly identical.

So can Timberlake and his team get out of this mess?

To answer that question, you first need to understand how “sampling” fits into US copyright law.

“Sampling” occurs when one artist takes a portion of another artist’s song and reuses it in a new song. Note, however, that sampling does not necessarily require use of a pre-existing recording.

Here, Cirque du Soleil has a copyright interest in the composition (codified in 17 U.S.C. § 102(2)) of “Steel Dream” and a second copyright interest in the sound recording (codified in 17 U.S.C. § 102(7)). Thus, even if Timberlake did not use Cirque’s pre-existing recording (that you just listened to on YouTube), he could still be liable for copyright infringement for use of the underlying melody or lyrics.

In the early days of hip hop, no one bothered to get a license to “sample” another artist’s work, but once the music business tanked, publishers and recording companies needed to find more ways to make money. Thus began the trend of requiring a license to “sample” the work of another artist and slapping a copyright infringement claim on anyone who refused to obey.

Under Section 106(2) of Title 17 of the United States Code, the owner of a copyright has the exclusive rights “to prepare derivative works based upon the copyrighted work.” The argument being made by publishers and recording companies (and Cirque du Soleil) is that “sampling” is a derivative work and thus protected under copyright law.

Timberlake now has three arguments he can make:

1. No Copyright Infringement

To establish infringement, Cirque du Soleil must prove that it has a copyright interest in “Steel Dream” and that Timberlake copied elements of the work that were original. “Copying” requires Cirque to prove that Timberlake’s song is “substantially similar” to Cirque’s song and that Timberlake had access to the song.

Timberlake could argue that the similarity is not substantial and that no one from his team saw the show or heard Cirque’s song prior to creating “Don’t Hold the Wall”.

2. Fair Use

17 U.S.C. § 107 allows one artist to use the copyright of another artist without permission in certain, limited situations. In determining whether a particular use is “fair”, courts will consider: the purpose of the use; nature of the copyrighted work; the amount used; and the effect the use has on the copyrighted work’s commercial success.

Timberlake would have to admit to using “Steel Dream” without permission, but could defend himself by arguing that the use was “de minimis” and did not hurt Cirque’s ticket and record sales.

3. De Minimis

Some courts have argued that “de minimis” is available as an alternative to fair use in cases where the violation is “so trivial that the law [should] not impose legal consequences.” Ringgold v. Black Entertainment Television, Inc., 126 F.3d 70 (2d Cir. 1997).

Timberlake could argue that the copyright infringement should be privileged because of the extremely limited use, the lack of harm on Cirque’s sales and the excessive cost of adjudication (a lawsuit like this could cost hundreds of thousands of dollars).

While these may seem like good arguments, courts have been hesitant to side with defendants. In Bridgeport Music, Inc. v. Dimension Films, 410 F.3d 792 (6th Cir. 2005), the court ruled that the defendant’s sampling of a two-second guitar chord constituted copyright infringement.

Getting back to my question above: Can Timberlake and his team get out of this mess? Unlikely.

The legal system around sampling is a complete disaster. According to Variety, Timberlake has had several copyright infringement claims filed against him just in the last year alone.

None of the courts want to be responsible for establishing a bright-line rule, and none of the publishers or recording companies want to force the courts to establish a bright-line rule (e.g., by suing the creator of Girl Talk, whose entire work is made up of sampling) for fear that the resulting rule will not be in their favor. And most artists don’t have the money to fight the legal battle so they pay the license fee or wait to get sued and then settle as quickly as possible.

All I can say is, I’m glad I’m not a musician in 2016.

Katherine Imp is a transactional entertainment attorney at Cummins & Associates, Ltd., specializing in production legal, film finance and intellectual property matters. Contact Katherine at @KatherineImp or kimp@cumminsassociates.com.

Disclaimer: The information in this column is intended for general information purposes only and should not be construed as legal advice.

To see the original post, and similar articles, check out Katherine Imp’s SCREEN Magazine column, Street Legal.

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The Case of the Copyrighted Sherlock: The Saga Comes to an End

by Michael Lovitz

In December 2013, the Federal District Court for the Northern District of Illinois issued its ruling in Klinger v. Conan Doyle Estate, Ltd., 2013 U.S. Dist. LEXIS 180493 (December 23, 2013), concerning the characters, character traits and other story elements from Sir Arthur Conan Doyle’s series of “Sherlock Holmes” stories, as published through four novels and fifty-six short stories, which focused on the well-known detective and his constant companion Dr. John Watson, along with other related characters and story elements (collectively, the “Canon”). The majority of the Canon’s stories were published prior to January 1, 1923 and in the public domain in the United States; however, the final group of ten short stories, collected and published in 1927 as The Case-Book of Sherlock Holmes (the “Ten Stories”), remain under copyright protection in the United States until the year 2022.

The declaratory judgment action was initiated by Leslie Klinger, a California attorney and one of the world’s leading authorities on the Canon. Klinger had written more than twenty books and numerous articles on the subject of the Canon, and had served as the technical adviser for Warner Brothers on their two recent Sherlock Holmes films. Klinger also authored an award-winning, three-volume, annotated collection of Sherlock Holmes books and stories entitled The New Annotated Sherlock Holmes, published by W.W. Norton in 2004 and 2005. Because the annotated edition republished the Ten Stories, Klinger and W.W. Norton voluntarily sought and obtained a license from Conan Doyle Estate, Ltd. (the “Estate”) for publication of the annotated edition.

Klinger served as co-editor on an anthology containing new and original short stories written by contemporary authors that were inspired by, and featured various characters and story elements from, the Canon. The Random House Publishing Group published the anthology, entitled A Study in Sherlock, in 2011. While preparing the anthology for publication, Klinger and Random House were contacted by the Estate’s agent who asserted exclusive rights in a number of (unspecified) elements of the Canon and demanded that Klinger and Random House enter into a license agreement with the Estate or face litigation for infringement of the Estate’s rights. Although Klinger refused these demands, Random House did enter into the requested license on behalf of itself and Klinger, and published the anthology in October 2011.

The popularity of A Study in Sherlock led Klinger and his co-editor to prepare a second anthology of new and original stories, entitled In the Company of Sherlock Holmes (the “2d Anthology”), and they contracted with Pegasus Books, an independent trade publisher whose books are distributed by W.W. Norton, to publish the new book. Prior to publication of the 2d Anthology, Pegasus was contacted by the Estate’s agent, again demanding that Pegasus and Klinger enter into a licensing agreement, under an implied threat of an infringement action if a license were not to be obtained from the Estate. The Estate requested the new license be on the same terms as the previous agreement with Random House. However, Klinger and Pegasus declined to enter into a license agreement, stating that the 2d Anthology would not contain any story elements or characters introduced in the Ten Stories, but rather only characters and story elements from the Canon that were already in the public domain. The Estate responded and invited “reasonable counter-proposals,” but also advised Klinger and Pegasus:

If you proceed instead to bring out [In the Company of Sherlock Holmes] unlicensed, do not expect to see it offered for sale by Amazon, Barnes & Noble, and similar retailers. We work with those company’s [sic] routinely to weed out unlicensed uses of Sherlock Holmes from their offerings, and will not hesitate to do so with your book as well.

As a result of the Estate’s threats, Pegasus refused to finalize its contract with Klinger to publish the 2d Anthology.

Klinger brought his declaratory judgment action in February 2013 in the federal district where the Estate’s agent was located (the northern district of Illinois), based on the demands and threats made by the Estate and its agent. The Complaint asked the Court to determine, inter alia, the copyright status of a list of specific characters, character traits, dialogue, settings, artifacts, and other story elements in the Canon. The Estate did not respond to the Complaint and so the Court entered a default against the Estate on June 25, 2013. The Court then permitted Klinger to proceed with the filing of either a motion for summary judgment or a motion for default judgment in order that the issues raised in the Complaint get a full adjudication.

Klinger’s Motion for Summary Judgment noted that all of the pre-1923 works were in the public domain, including the novel A Study in Scarlet, in which Holmes and Watson are first introduced, and argued that all of the story elements contained in the 2d Anthology had first appeared in those pre-1923 public domain works. Klinger relied upon the well-established judicial rule that the length of protection for a character or other story element begins when they are first used in a work of authorship, and that the re-use of a character or story element does not extend their copyright protection, noting the following quote from Nimmer on Copyrights:

“What of the situation where an author has used the same character in a series of works, some of which works subsequently enter the public domain, while others remain protected by copyright? Clearly anyone may copy such elements as have entered the public domain, and no one may copy such elements as remain protected by copyright.”

1 Nimmer, supra, §2.12, p. 2-178.30, 2-178.30(1), 2-178-31, citing, inter alia, National Comics Publications, Inc. v. Fawcett Publications, 191 F.2d 594 (2d Cir. 1951). Nimmer also posits that this rule applies equally where the same characters appear both in works that have passed into the public domain and works that remain under copyright protection:

The more difficult question is this: may the character depicted in all of the works be appropriated for use in a new story created by the copier? Assuming the character to be sufficiently developed as to be protectable, arguably such conduct would constitute an infringement of those works that remain in copyright. The better view, however, would appear to be that once the copyright in the first work that contained the character enters the public domain, then it is not copyright infringement for others to copy the character in works that are otherwise original with the copier, even though later works in the original series remain protected by copyright.

 

1 Nimmer, supra, §2.12, p. 2-178.31, citing, inter alia, Columbia Broadcasting Sys., Inc. v. DeCosta, 377 F.2d 315 (1st Cir.), cert. denied, 389 U.S. 1007, 88 S. Ct. 565, 19 L. Ed. 2d 603 (1967).

 

“Just as the copyright in a derivative work will not protect public domain portions of an underlying work as incorporated in the derivative work, so copyright in a particular work in a series will not protect the character as contained in such series if the work in the series in which the character first appeared has entered the public domain.”  1 Nimmer, supra, §2.12, p. 2-178.31, citing, inter alia, Siegel v. Warner Bros. Entm’t Inc., 690 F. Supp. 2d 1048, 1059 (C.D. Cal 2009). As a result, Klinger argued that he should be free to create and exploit new derivative works based on any characters and story elements appearing in those works that had entered the public domain. Finally, Klinger took the position that the story elements contained in the Ten Stories were not eligible for copyright protection, on the grounds that they were merely events, not characteristics, and that copyright protection does not extend to ideas, plots, dramatic situations, or events.

Not surprisingly, the Estate did finally appear in the proceeding once the Summary Judgment Motion had been filed, and filed a response in opposition to the Motion wherein it took the position that the literary characters of Sherlock Holmes and Dr. Watson were not fully created or disclosed in 1887’s A Study in Scarlet novel, but rather were only completed in the final copyrighted stories in which they appeared. During the interim, the characters were developed and shaped by the author, who was continually making changes (both positive and negative) to the characters, their attributes, dimensions, backgrounds and relationships. By way of example, the second marriage for Dr. Watson resulted in him moving out of Baker Street, causing his relationship with Holmes to be substantially altered when Holmes is left to live alone, also altering the characters themselves. Additionally, the Estate noted that the stories featuring the pair were not written in purely chronological order, as the Ten Stories are set at various points earlier in the two characters’ lives.

The Estate also argued that Klinger’s attempt to analogize the current situation, where the Sherlock Holmes stories were an original series of works, to Prof. Nimmer’s views pertaining to characters used in derivative works, was faulty, taking the position that the stories in the Canon were not derivative works under the statute. The Estate additionally argued that because the development of the Holmes and Watson characters was non-linear, it would be impossible to make new uses of those characters without invading the copyrighted character developments contained in the Ten Stories. Finally, the Estate argued that a ruling whereby the pre-1923 story elements and characters would be free for public use, while the further delineations of the characters and story elements retain their protected status should pertain only to two-dimensional “flat” characters and not complex, three-dimensional characters such as Holmes and Watson, and expressed concern that ruling only those increments of expression added by the Ten Stories would be barred from use during the remaining copyright term would have the practical effect of dismantling the characters into a public domain version and a copyrighted version.

The Court agreed with Klinger, ruling that only those story elements and characteristics first appearing the Ten Stories would retain protected status under the copyright law, and the pre-1923 story elements were free for public use. Noting that the Estate’s proposed distinction would run counter to prevailing case law, the Court remarked that adopting the Estate’s position would “extend impermissibly the copyright of certain character elements of Holmes and Watson beyond their statutory period, contrary to the goals of the Copyright Act.” In a case of first impression within the 7th Circuit, the court found that application of the “incremental expression test” was appropriately applied to literary sequels and literary series, and that the Canon consisted of subsequent works “based upon material from a pre-existing work, Sir Arthur Conan Doyle’s first Sherlock Holmes story.” These subsequent works therefore met the definition of derivative works, making the incremental expression test applicable.

The Court, however, disagreed with Klinger on the issue of whether the story elements contained in the Ten Stories were susceptible to copyright protection. Specifically, the Court found that a number of the story elements contained in the Ten Stories comprised characters, character traits and storylines, all of which are copyrightable increments of expression, and were thus protected under copyright. As a result, any stories to be included within the 2d Anthology could not include or incorporate any of the incremental expressions contained in the Ten Stories absent a license from the Estate.

The Estate appealed the district court ruling, and in its briefs focused on two alternate grounds.  The first ground was that the district court lacked subject matter jurisdiction because there was no case or controversy between the parties, and that Klinger’s suit was premature.  The second ground was that, if there were jurisdiction, the Estate was entitled to judgment on the merits because, in the case of a complex literary character appearing in an author’s series of works (such as Sherlock Holmes and Dr. Watson), whose full complexity is not revealed until a later story, remains under copyright until such later story falls into the public domain.  As a result, the Estate argued, the fact that the early stories in which such complex characters appeared are in the public domain does not permit the less-than-fully “complexified” versions of the characters from the early stories to be copied, even if those early stories are themselves in the public domain.

The 7th Circuit, in a ruling handed down May 22, 2014, affirmed the district court ruling and finding against the Estate on both grounds.  First, the Court noted that the Estate had made clear to Klinger that it would seek to prevent the 2d Anthology from being sold through Amazon and other big book retailers “implicitly threatening to sue the publisher, as well as Klinger and his co-editor, for copyright infringement if they defied its threat.”   It was this twin threat – to block distribution of the book and to sue for copyright infringement – that created an actual controversy, rather than a mere potential controversy, and was thus sufficient to merit the bringing of the declaratory judgment action and for the district court to assert (and retain) jurisdiction over the case.

As to the merits of the case, the Court affirmed the ruling of the district court, focusing on the issue of whether copyright protection in a fictional character can be extended beyond the expiration of the copyright because “the author altered the character in a subsequent work” and noting that they could not find any basis in statue or case law for extending a copyright beyond its expiration:

We cannot find any basis in statute or case law for extending a copyright beyond its expiration. When a story falls into the public domain, story elements — including characters covered by the expired copyright — become fair game for follow-on authors, as held in Silverman v CBS Inc., 870 F.2d 40, 49-51 (2d Cir. 1989), a case much like this one.

The Court further noted that the Silverman court also ruled that “a copyright affords protection only for original works of authorship and, consequently, copyrights in derivative works secure protection only for the incremental additions of originality contributed by the authors of the derivative works.” Id. at 49 (emphasis added). Using examples from Shakespeare (Sir John Falstaff) and the Star Wars movies, the Court explained that simply because a later work may provide a fuller, more rounded portrayal of the character does not justify extending the expired copyright of the flatter character from the first works in which they appear. As the Court explains:

From the outset of the series of Arthur Conan Doyle stories and novels that began in 1887 Holmes and Watson were distinctive characters and therefore copyrightable. They were “in-complete” only in the sense that Doyle might want to (and later did) add additional features to their portrayals. The resulting somewhat altered characters were derivative works, the additional features of which that were added in the ten late stories being protected by the copyrights on those stories. The alterations do not revive the expired copyrights on the original characters.

Finally, the Court expressed concern that the Estate’s position could have the negative effect of encouraging authors to write stories involving their earlier characters in an effort to create a perpetual (or near perpetual) copyright protection for characters, such extension not only beyond the limits fixed by Congress but also in violation of the copyright clause of the Constitution.

 

 

Michael Lovitz is a partner at Bowen Hayes & Kreisberg, where he practices all aspects of intellectual property law, including copyright, trademark, unfair competition, trade secrets, portfolio management, and licensing and transactional matters.

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A Primer on Open Source Licenses & the Creative Commons

by Joseph D. Poole

In the last fifty years, with ever increasing speed, computers have changed the way we do business, listen to music, watch television, interact with each other socially, and the way we look at the world in general. At the core of this technology is code or software that tells ever more complex machines to do ever more complex things. The reason this complexity continues to increase is that none of this code is created in a vacuum.

In some cases, the code is so rudimentary that it is not protectable by copyright or patent.[1] However, just as a word or phrase is not subject to copyright, but a book or even an article in a magazine is, so too is more advanced software protected by intellectual property rights. But just as books are made of smaller chunks (i.e. words and sentences that individually may not be protected), code is often based on the code that came before it. The major difference is that code is (far more so than a book) comprised of mathematic formulas. It is more analogous to compare code to contracts, in which the language has a functional purpose.

As programs exponentially grew in complexity over the years, it was not feasible to recreate every aspect of code from binary or basic. “Reinventing the wheel,” as it were, was just as unrealistic and impractical in the programming sense as it is in the legal sense.[2] Thus, programmers sought ways to legitimately use libraries of code created by themselves and others and to share those libraries. In some cases, this was done within a single company, but as start-up software companies rose and fell, libraries that would survive the dangerous life cycle of the turbulent dotcom/dotbomb era were required. Software developers and designers also saw the advantages of efficient bug detection via software libraries, adhering to the mantra that “given enough eyeballs, all bugs are shallow.”[3]

Enter the open source movement: Software for everyone! However, authors of code generally do not want to give away all of their copyright to their works; they merely want to give others access to their works, and they use licenses to do so. The term “open source software” is generally used for any source code made available via license to study, change, and distribute the software at no cost to anyone and for any purpose.[4]

There are many licenses that fall within that definition. Not all of these licenses are created equally however. The largest variance between them is the degree to which they practice “copyleft” as opposed to “permissive” principles.  “Copyleft” is a term used to describe the requirement that “if changes are made to a program’s code, and the changed program is distributed outside an organization, the source code containing the changes must likewise be distributed.” Permissive licenses do not require the modified source code to be distributed or contributed back to the open-source community. Below is a discussion of some of the more common open source licenses, and how the code and the content contained in certain programs are treated differently.

OPEN SOURCE LICENSES

The most common open source licenses that this article will be examining are GPL, LGPL, BSD, Apache, and MIT. GPL is the most “copyleft,” followed by LGPL, but the others are far more permissive. Until recently, GPL was the most widely used open-source license. However, that is changing and now the open-source community has shifted largely to permissive licenses. The most popular community open source projects in recent years have used permissive licenses. Whether “copyleft” or permissive, open-source licensing does require proper attribution (showing where the code came from). How that attribution must occur depends on the license.

  • GNU General Public License (“GPL”)/AGPL GPL is a “viral” license in that any source code that interacts with code distributed under a GPL license must similarly be distributed under a GPL license. A developer can copy, modify, distribute, and even sell the code. However, as they are required to offer the code for free and clearly display the GPL license permitting others to use the code for free, it is unlikely that a developer under a GPL license would ever receive an asking price for the code itself.[5] One way around this is to distribute the GPL licensed software as a service. Affero GPL or AGPL is a variation of GPL designed to shore up this loophole, making it even more “copyleft” than GPL licenses.
  • GNU Lesser General Public License (“LGPL”) LGPL is usually used for software libraries. The software that uses the libraries does not need to be redistributed under the GPL or LGPL licenses, however, any changes to the software of the libraries themselves must be released under and LGPL license. This license is a key shift from the strict “copyleft” licenses AGPL and GPL to something that developers can use on commercial projects without being forced to distribute the source code of those projects under GPL licenses.
  • BSD Licesnes BSD covers a family of permissive open-source licenses, but two stand out: the New BSD License/Modified BSD License, and the Simplified BSD License/FreeBSD License. Both allow developers to use the source code and distribute it without requiring them to distribute the underlying source code. The main difference between the New BSD License and the Simplified BSD License is where the attribution must occur. Both require attribution in the source code files and the documentation for the program, but the New BSD License restricts the use of contributors’ names for endorsement of the derived work without the contributors’ specific provision, and the Simplified BSD license does not. There is also a four clause BSD license that requires attribution in all marketing materials of the program (including every ad and commercial), but that license is no longer widely used.
  • Apache Licenses Apache licenses are used in such open-source license projects as OpenStack, Hadoop, and Android. They are not as simple as BSD, and cover many terms that simpler licenses do not. For example, Apache licenses clearly identify a term and territory (perpetual and worldwide), identify use of the code as fee and royalty free, notify that the license is non-exclusive, and that the grant is irrevocable. Furthermore, Apache licenses attempt to address certain patent issues that other licenses do not.
  • MIT License The MIT license, by contrast, is one of the shortest licenses, and consequently one of the broadest. It is used in such open-source projects as JQuery, Hudson/Jenkins, and nodejs. Essentially, as long as you give proper attribution, you can use MIT licensed code for whatever you want. This makes it a very easy license to use for developers who want to contribute code that can be used on commercial projects.

CREATIVE COMMONS

Open-source licenses are designed to address code, not media. Images, sound, and animation would not be able to properly handle the attributions required under open-source licensing. However, there are many communities that share the same open-source spirit in desiring to share their creative works with others for their use. The Creative Commons (“CC”) thus offers a variety of licenses specifically designed to allow creators to allow their creative works to be used by others. Generally all CC licenses require attribution. Additionally, there are three factors that can be modified, depending on the rights a creator wants to grant or restrict:

  • Share Alike. A work with a “Share Alike” CC license allows for modification of the work and the creation of derivatives, but those derivative works must be licensed under the same license. This is a viral license that follows the work and its derivatives, akin to the “copyleft” licenses discussed above. However, as CC licenses are modular, Share Alike does not in and of itself prevent commercial use.
  • Non-Commercial. A work with this restriction cannot be used for commercial purposes. The CC have attempted to define what a non-commercial use is, identifying commercial uses as those that are “primarily intended for or directed toward commercial advantage or private monetary compensation.” There is also a report published by the CC to help clarify what does and what does not count as commercial.
  • No Derivative Works. This restriction prevents subsequent users from modifying, remixing, tweaking, or otherwise changing the work. If a creator is concerned that their work could be misused, then this restriction makes sense. Share Alike and No Derivative Works are mutually exclusive restrictions, as Share Alike applies exclusively to derivative works.

CC licenses are not designed for software, and generally should not be used for software. However, they do provide plain English and full legal versions of their licenses which allows them to be easily used and understood. This makes them very useful for the collaborative creative projects that have been taking the new media sphere by storm. For those who want to combine creative works and coding, proper use of creative commons licenses separate from the open-source licenses for the underlying code should allow creators to properly protect or distribute their works as they see fit.


[1] See 17 U.S.C. § 102 (defining copyrightable subject matter); 35 U.S.C. §§ 101-103 (defining patentable subject matter as something novel, useful, and non-obvious); see also In re Comiskey, 499 F.3d 1365, 1376-77 (Fed. Cir. 2007) (identifying abstract ideas as non-patentable subject matter).

[2] The equations that make up a section of code have a specific purpose, just as legal language does. The major difference is that altering the terms of a contract is part of the nature of contract drafting (via varying levels of negotiations between two parties), whereas altering code is not as natural; code is often created by a single programmer or team with a common purpose.

[3] Raymond, Eric S., The Cathedral and the Bazaar 30 (1999) (“Linus Law”).

[4] St. Laurent, Andrew M. Understanding Open Source and Free Software Licensing 4 (O’Reilly Media 2008).

[5] See Cameron Chapman, A Short Guide to Open-Source and Similar Licenses, Smashing Magazine (March 24, 2010).

 

Joseph D. Poole is a Los Angeles based attorney working in the areas of intellectual property law and entertainment law.

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Sony, Microsoft, and the Erosion of the First Sale Doctrine

by Mark Humphrey

During the Sony Corp. keynote address at the Electronic Entertainment Expo (E3) in June, the electronics giant made waves with a video clip titled “Official Playstation Used Games Instructional Video.” Created to explain how sharing games would work on the company’s forthcoming Playstation 4 (PS4) video game console, the video appeared ready to show a multi-step process. But within 22 seconds, the clip was over and the message clear – sharing games with friends on the PS4 was as simple as handing a game disc from one person to another. The crowd exploded in cheers.

The clip was in response to missteps made by Microsoft, Sony’s chief competitor, in unveiling its Xbox One console that same week. Microsoft announced that once a consumer purchased a game and played it on his or her console, the same copy would not be playable on a different console because it ­­would be digitally identified with the original user’s machine. The machine would also require a persistent internet connection in order to “verify” the console every 24 hours. This was to prevent consumers from selling games back to stores like Gamestop, which would then sell them at marked up but still discounted prices to other consumers – a practice that generates billions in annual revenue for these stores.

Microsoft’s gambit was a disaster. Analysts crowed that Sony “won” E3 in part because of its used games position. Many media outlets declared Xbox One dead on arrival if it featured such technology. The situation became so dire that Microsoft quickly backpedaled and scrapped the technology. It remains to be seen how damaging this will prove in the long run.

Such a situation arose because companies like Microsoft have both more and less control over their intellectual property than ever before. On one hand, IP in digital formats can be easily pirated absent protective measures. But technological and legal changes simultaneously give companies a great deal of power to control their products that didn’t exist just a few years ago.

Traditionally, the first sale doctrine has allowed someone who obtains title to a copy of a work to sell, lend, or lease it however he or she wishes, without the original copyright owner’s permission. But when the doctrine was created in 1908, it was concerned with the idea that first sale protection did not kick in until someone had obtained ownership over a physical copy. This made sense for decades, because IP was embodied in objects ranging from books and cassettes to DVDs and video game cartridges.

Yet as IP has increasingly become digitized, considerations that made sense for decades have become somewhat irrelevant. Streaming media, for instance, does not implicate first sale at all, simply because no physical copies change hands. When a movie or song ends, the consumer turns off his or her device as if he or she just watched a broadcast or listened to the radio. Any concept of “ownership,” as it is popularly understood, is not relevant in a streaming context.

Conversely, in digital downloading, the reproduction right is necessarily implicated when transferring a digital copy. First sale rights thus inescapably conflict with one of the key rights granted by copyright law. This is a twist that could not have been anticipated when the first sale doctrine was created over 100 years ago – and one that has not been completely resolved despite decades of debate and analysis.

Attempts to use contract law to limit the scope of first sale rights have also affected the doctrine’s modern applicability. In cases like Vernor v. Autodesk, courts have found that content creators can easily place restrictions on purchased products that transform outright sales into limited licenses and inhibit the consumer’s ability to freely distribute or even use something he or she purchased.

In each scenario, the first sale doctrine has limited relevance at best. As time goes on and technologies like streaming become the norm, the doctrine may be infrequently invoked, at best. It is thus the attorney’s job to properly advise clients on how best to protect IP without antagonizing consumers and making the same mistakes that Microsoft made at E3.

Just because restrictive means of protecting IP exist, that doesn’t necessarily mean that it’s in a client’s best interest to use them. For instance, if a client is selling a physical video game, the Vernor v. Autodesk decision allows it to create licensing agreements using a simple “cookbook recipe.” This test asks whether (1) the copyright owner specifies that the user is a licensee; (2) the copyright owner significantly restricts the user’s ability to transfer the software; and (3) the copyright owner imposes notable use restrictions.

Using this checklist, an attorney could draft an agreement stating that users may only install software on one computer or play a game on one machine, or could perhaps create an agreement stating that users are unable to transfer the software to anyone else, even if they have a physical copy in hand. But even though this is a potential option, is such stringent content protection really in the client’s best interest?

Consumer expectations relating to use and ownership differ widely depending on the type of media implicated. Degrees of ownership can be viewed as a sliding scale – the more tangible the media, the more of an expectation the consumer has that he or she should be able to do what he or she wants with it.

For example, if a client sells digital downloads, the consumer will most likely be receiving a revocable license with some form of digital rights management in place.  The client will be able to control use of the copy and prevent possible piracy. The client may also be able to take punitive action against consumers violating licensing agreements and terms of service, perhaps by canceling accounts and remotely wiping purchased copies from consumer devices. Indeed, companies from Amazon to Apple have such provisions written into their licensing agreements, warning consumers that their content can be remotely deleted at the company’s behest. The few times that such action has been undertaken, however, public outcry has been swift and vicious. Clients risk using such measures at substantial cost to their reputations.

However, when the item in question is a physical copy, the consumer’s expectation of ownership is at its strongest. Harkening to the origin of the first sale doctrine, the consumer traditionally expects to be able to do what he or she wants with something held in hand. In this scenario, draconian licensing restrictions must be even more carefully considered. Perhaps it’s because the consumer is suddenly holding a partially or entirely useless object due to licensing restrictions, but regardless, consumers do not take kindly to being told that they cannot use their physical property how they wish. Consumers certainly realize they can’t do certain things, like make illegal copies. But it’s news to them when they’re told they can’t lend or sell something they purchased. Microsoft’s fiasco is the paramount example of this. Consequently, an attorney should counsel a client against implementing drastic or unprecedented protections when a physical copy is involved, or at the very least, encourage the client to consider the very real cost of alienating consumers.

As mentioned earlier, none of this is implicated with streaming. And really, this appears to be where IP is headed in the next decade. Traditional notions of “sharing” and “ownership” may completely fall away in the next decade. At that point, attorneys will have new issues to deal with. The public performance right, for instance, could even replace the reproduction right as the popularly viewed linchpin of copyright law.

In the meantime, copyright is in a strange transition period where physical IP, streaming media, and downloaded content coexist in the same ecosystem. Moreover, longstanding norms like the first sale doctrine no longer uniformly apply. Ultimately, technology and the law appear headed for a convergence, giving more power than ever to content creators and distributors. Attorneys would do well to counsel their clients, in the interim, to not overreact to change and risk alienating and losing consumers.

That is certainly something that Microsoft executives and attorneys, fresh off their own overreach, ruminate about as the Xbox One’s November 22 release date approaches.

 

Mark Humphrey is a recent graduate of Southwestern Law School.

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Technology’s Impact on Fashion Law, and the Basics of the Innovative Design Piracy Act

by Victoria Watkins, Esq.

The fashion industry has never been so impacted by technology as it is today.  With technology advancing at warp speed, the ease of sharing information has quickly increased. Now, sitting front row at a fashion show not only provides a great seat, but it also provides one with the opportunity to take pictures of the garments – photos that can instantly be sent to an artist who can use them to prep knock-off garments for immediate manufacturing.  These knock-off garments could be on their way to the rack before the media coverage of the fashion show is over.  This “runway-to-rack” method, which is often employed by fast-fashion brands that are popular with young shoppers, is a detriment to the designers showing their upcoming designs; the fast-fashion brand can get the knock-off garments on the market faster, leaving the original work to look like a copy.

Opinions are split regarding this complex relationship between high fashion and low-cost, ready-to-wear fashion.

Some believe that there is no competition between high fashion brands and ready-to-wear fast-fashion brands because of the separation of buyers; consumers will decide what they want to buy at high fashion prices, and what they deem fast-fashion worthy.  So for example, having a knock-off version of a Chanel dress sold at Forever 21 will hurt no one, because the Chanel shopper would never buy the Forever 21 version of the dress, and the Forever 21 shopper would never buy the Chanel version of the dress.  Thus, neither Chanel nor Forever 21 is injured by the availability of the knock-off dress in the market, and both make their desired profits (but this is not how the Chanel designer would see it). 

Others believe that the availability of a knock-off garment is hugely detrimental to the high fashion brand that originated the garment’s design; the creator’s name in the market will be adversely affected by the confusion that may be caused by the existence of the knock-off (this is especially common when the creator is a rising designer).  The knock-off can result in brand dilution and the devaluation of the high fashion brand’s trademarks.

Because fashion design misappropriation is so quick and easy in this age of technology,  and because the profits from counterfeits are in the billions, designers must vigilantly monitor their creations in order to protect them from misappropriation.  Designers can utilize copyright to protect their patterns, prints, and ornamental designs (such as original belt buckle designs), and can utilize patents to protect their processes (utility functions, like stone washing jeans).   But the best form of protection for fashion designers today is actually trademark.  Trademarks never expire as long as they are being used in the market, and they show their protective nature to consumers at every point of public encounter.  A properly-utilized trademark notifies consumers of the source of the goods and of the quality they should expect from the goods.  Proper and consistent use of a brand’s trademark will help consumers spot fakes.  Placing the brand with its trademark in the appropriate channels requires heavy vigilance, particularly today, in the era of the “instant internet.”  With technology acting as both a friend and foe of designers, trademarks can be a key to keeping products from being copied.

Recently, there has been an effort to expand the applicability of copyright protection in the fashion industry.  Just this past September, U.S. Senator Charles Schumer filed the Innovative Design Piracy Act (IDPA).  This bill is a successor to prior efforts to offer federal copyright protection to unique fashion designs.  The aim of the IDPA legislation is to protect designers (high fashion designers, as well as those who are just starting out) from the Chanel/Forever 21 situation discussed earlier.  The IDPA legislation would offer three years of protection for fashion designs meeting a high bar of creativity.  While opponents of the IDPA legislation claim that this kind of copyright protection would lead to a flood of litigation, proponents claim that it would work to combat the billion-dollar counterfeit fashion industry.  Surely there’s great benefit in the latter. 

Greater copyright protection for fashion designs would help curb the online knock-off market, as many retailers of knock-offs would be quickly hit with $5,000 – $10,000 penalties.  Designers could more easily monitor and protect their designs, especially once awareness about the IDPA and its provisions became widespread.  As of now, the IDPA bill has reached the U.S. Senate floor and it could see a vote before the end of this Legislative Session.  It would then face a hearing and vote in the House of Representatives.

As technology continues to make our lives easier in many ways, it works just as fast at presenting challenges in many facets of life, leisure, and business.  In a world where we’re all connected instantly, savvy fashion lawyers who are familiar with the benefits and detriments of technology and social media are more crucial to the fashion industry than ever.

 

Victoria Watkins is a legislative attorney for the City of Chicago.  She also writes B.A.F.F.L.E.D., a lifestyle blog, highlighting fashion, law, entertainment, beauty, and so much more.

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An Overview of Fashion Law in the United States and Brazil

By Mina Kaway

Despite the perception that the fashion industry is an industry based solely on inspirations and trends, intellectual property law plays a vital role in this competitive and profitable industry by ensuring the exclusivity of fashion designs. Intellectual property can protect fashion in a vast array of forms (from the trademark of the brand to the apparel design, fabric prints, and embellishments) that together shape a fashion brand.  In actuality, fashion law’s foundation is in intellectual property law, a field of law that protects and encourages creativity and innovation.

This article will provide an overview of fashion law by comparing key points in the fashion law of the United States and Brazil, two large countries with very creative and lucrative fashion industries, but where the legal systems do not explicitly afford protection to fashion designs, leaving fashion houses and designers to rely on complex legal strategies when seeking to protect their creations.

The Inadequacy of Patent and Copyright Protection

Brazil and the United States have similar patent law systems, and in theory, patent law  could be an option for protecting fashion in both countries.  However, the high standards of the novelty test and the functionality criteria present in both countries’ patent systems prevent the fashion industry from utilizing patent laws frequently or effectively.

When it comes to copyright law, both Brazil’s and the United States’ legal systems afford copyright protection to drawings, jewelry, photographs, and fabric prints, but not to the appearance of an article of apparel.  This is primarily because clothing normally fails the non-functionality test.  In the United States, where fashion law is more developed, the Innovative Design Protection Act (IDPA) currently being discussed in the U.S. Congress aims to extend copyright protection to fashion designs.  If the U.S. Congress approves the IDPA bill, it will be a significant milestone for fashion law not only in the United States, but worldwide, as it will most certainly be an important paradigm for the development of fashion law in other countries such as Brazil.

Trademark Protection

Due to uncertainties and a lack of copyright and patent law provisions that specifically protect fashion designs, fashion houses in both the United States and Brazil tend to primarily rely on trademark law for protection.  In United States and Brazil, trademarks have a duration of ten years and can be renewed for the same term indefinitely, which makes trademark protection quite attractive to fashion companies.  A trademark can be applied to all garment pieces in a collection and can even extend to footwear, accessories, cosmetics, and fragrances (in contrast, seeking protection for each new design in a collection, every season, would be time and cost prohibitive for a fast paced industry like the fashion industry).  This explains why, in the fashion industry, the identity of the product (the brand) is often more important than the product itself.

The main difference between Brazilian and American trademark law is in the establishment of a trademark.  Whereas in the United States, a trademark is established by use in commerce, regardless of whether it is registered (although registration is highly recommended), in Brazil the Industrial Property Law (IPL) states that the ownership of a mark is acquired by means of a validly granted registration, and proof of use in commerce will only be necessary in the event of a forfeiture request by a third party.  Nevertheless, the Brazilian IPL does provide a few exceptions to the registration rule.  The right of prior use establishes that any person who in good faith has, at the date of priority or of the application, been using an identical or similar mark for at least six months in Brazil, to distinguish a product that is identical, similar, or akin, is entitled to a preferential right to registration.  Brazilian law also grants special protection to well-known marks in their field of activity, independently of whether they have been previously filed or registered in Brazil.

At this point we may wonder: if patent and copyright law are not practical options for protecting fashion, and if trademark law does not protect a garment itself, but rather the identity of the fashion house, how can fashion law actually protect an article of apparel? The answer is: trade dress.

Trade Dress

Despite being the most difficult form of intellectual property to secure (due to the non-existence of any kind of “trade dress certificate”), trade dress is the form of intellectual property that is utilized most frequently by fashion lawyers trying to protect fashion articles.

In the United States, to obtain trade dress protection for a piece of apparel, the fashion lawyer must demonstrate that the product in question has secondary meaning – in other words, that consumers undoubtedly associate the product in question with that specific company or designer.  This product-company association can be proven through sales numbers, advertising and promotional materials, and budgets.  Establishing secondary meaning is usually easier for well-established companies, as opposed to new and independent designers.

In Brazil, the concept of trade dress has historically primarily been utilized to protect store layouts and concepts (i.e. franchising), as well as product packaging.  However, an important landmark court decision in 2008 granted for the first time trade dress protection to the designs of a children’s clothing company after the designs were blatantly copied by a competitor.  It is relevant to note that Brazilian law does not provide specific provisions regarding trade dress, and does not explicitly require proof of secondary meaning.  Nevertheless, the Brazilian IPL unequivocally prohibits a company or a person from using fraudulent means to divert, for its own or for a third party’s benefit, a competitor’s clientele.  Accordingly, it is through unfair competition mechanisms, such as the above, that Brazilian fashion lawyers have to seek trade dress protection.

Final Thoughts

Although it is clear that fashion law is much more developed in the United States (where it is already included in some law school curriculums and where a bill drafted specifically to protect fashion designs is currently being discussed in Congress), Brazilian attorneys and law students are increasingly recognizing the relevance of fashion law, a specialized field that caters to the specific needs of a complex and valuable industry.


Mina Kaway is an intellectual property attorney, specializing in fashion law, and the author of the blog Fashion Law Notes.  She has a Bachelors degree in Law (LL.B) from the Santa Catarina Federal University, in Florianópolis, Brazil; a Master degree (M.A.) in International and Intellectual Property Law from the Graduate Institute of International and Development Studies (IHEID), in Geneva, Switzerland, with the dissertation “The International Protection of Fashion.”  She is a member of the Innovation, Intellectual Property and Enforcement against Piracy Commission of the Brazilian Bar Association, state of Santa Catarina, and a member of the International Trademark Association (INTA).

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A Primer on “Idea Theft” Claims in Film and Television

by Azita Mirzaian

Allegations of “idea theft” are fairly common in the creative world.  Perhaps one of the most common “idea theft” scenarios is the situation in which a creator pitches an idea for a film or television show to a potential producer, collaborator, or investor, and later learns that this person took the idea and ran with it, cutting the creator out of the equation entirely.  In these situations, the jilted creator wants to pursue all possible legal remedies against the “idea thief,” but due to the particular nature of copyright law (and due to preemption), it can often be difficult to determine what remedies are available to the creator.

The key thing to remember is that U.S. copyright law protects expressions of ideas, not ideas themselves; ideas are generally free to be used, expressed, re-used, and re-expressed.  If ideas were copyrightable, then people would be suing one another left and right for copyright infringement, artistic expression would be restricted and hindered, and society would be worse off – courts and legislators recognize this, and this is why they have generally maintained that people cannot hold protectible property interests in their ideas.  So the protections of U.S. copyright law are of little use to the jilted creator who wants to go after an “idea thief.”

Further complicating matters is the fact that Section 301(b) of the Copyright Act states that federal copyright law preempts common law claims or state law claims in situations in which the claims or rights being asserted are “equivalent to any of the exclusive rights within the general scope of copyright.”  In other words, if the rights that the creator is claiming were violated are essentially the same as those covered by copyright law, then federal copyright law applies and the creator cannot bring separate common law or state law claims.  This seems to leave our jilted creator in a difficult situation.

However, there are some limited instances in which the victims of “idea theft” can bring viable legal claims against their “idea thieves” under contract law.

In the 1956 case Desny v. Wilder, the California Supreme Court recognized that, in these types of situations, a creator may have an implied contractual right to compensation that is independent of any kind of copyright claim he or she may have.  In Desny, a screenwriter submitted his idea for a movie to a producer and made it clear that he expected to be paid if the producer used the idea.  When the producer later used the idea but refused to pay the screenwriter, the screenwriter filed a suit.  The Court in Desny held that in a situation in which a creator submits an idea or material to a producer and makes it clear that he or she expects compensation for the use of the idea or material, there is an implied contractual right to compensation.  The creator may recover compensation for the disclosure of his or her idea if (1) before or after disclosure of the idea, the creator has obtained an express promise to pay, or (2) the circumstances preceding and attending the disclosure of the idea, together with the producer’s conduct and knowledge of the circumstances, indicate the existence of an implied promise to pay. Desny v. Wilder (1956) 46 Cal.2d 715, 738.

To survive preemption by copyright law, a common law claim or state law claim must allege an “extra element” that changes the nature of the action.  Grosso v. Miramax (2004) 383 F.3d 965, 968.  A Desny claim survives preemption by copyright law because it is actually a claim for the breach of the express or implied promise to pay for the communication of an idea, and not a claim for the use (or misuse) of an idea that was communicated – it “transforms the action from one arising under the ambit of the federal statute to one sounding in contract.”  Id.  By contrast, a claim for unjust enrichment is essentially equivalent to a claim for copyright infringement, and is therefore preempted by copyright law.  Montz v. Pilgrim Films & Television, Inc. (2011) 649 F.3d 975, 977.  Similarly (and somewhat noteworthy for attorneys who are framing claims for their creator clients), a claim for breach of implied contract, where the implied contract is an agreement to not violate the creator’s exclusive rights to use and authorize use of his or her work, is essentially equivalent to a copyright claim and is therefore preempted by copyright law.  Montz v. Pilgrim Films & Television, Inc. (2010) 606 F.3d 1153, 1157.

Desny claims provide a critical form of protection for creators and have remained viable under California law for nearly six decades now.  Montz v. Pilgrim Films & Television, Inc. (2011) 649 F.3d 975, 977.  In other states, however, the law is not as settled (for example, see the 2nd Circuit case Forest Park Pictures v. Universal Television Network, Inc. (2012) 683 F.3d 424, 434).

To establish a Desny claim in California, the creator must be able to show (1) that he or she prepared the work/idea/pitch; (2) that he or she disclosed it to the recipient party for sale; (3) that the recipient party, knowing that the disclosure was offered for sale and knowing the conditions on which the disclosure was made, voluntarily accepted and used the disclosed materials; and (4) that the disclosed work/idea/pitch had a reasonable value.  Desny v. Wilder (1956) 46 Cal.2d 715, 744; Faris v. Enberg (1979) 97 Cal. App. 3d 309, 318; Grosso v. Miramax Film Corp. (2004) 383 F.3d 965, 967.

In reality, it is often difficult for a creator to definitively establish all of the elements of the Desny claim (especially the third and fourth elements).  For this reason, if a creator in the entertainment industry is looking to pitch an idea to potential producers, collaborators, or investors, the most prudent course of action is to obtain an express promise to pay (preferably in writing) for the disclosure and use of the idea prior to the disclosure of the idea.  However, given the fast-paced realities of the entertainment industry, creators can often encounter difficulties in trying to obtain such express promises.  In such situations, creators can rest easy knowing that, given the proper circumstances, the Desny claim has got them covered.

Azita Mirzaian is an associate attorney at Pierce Law Group LLP, where she practices with a focus on entertainment law, intellectual property law, and contractual disputes.  Her areas of interest include copyright matters, trademark matters, and right of publicity matters.

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