Location Of Copyright Owner Insufficient For Personal Jurisdiction Over Defendants

The Second Circuit Court of Appeals held that a plaintiff’s economic losses were not enough to establish personal jurisdiction under New York’s long-arm statute.  Troma Entertainment, Inc. v. Centennial Pictures, Inc., et al., Case No. 12-1883-cv (2d Cir. September 6, 2013) (available here).  Troma Entertainment sued Defendants for copyright infringement under the Copyright Act and several New York state law claims.  Troma alleged that the lower court had personal jurisdiction over the Defendants under New York’s long-arm statute section 302(a)(3)(ii), which allows for personal jurisdiction over a defendant when the allegedly tortious conduct causes injury to a person or property within New York.  The lower court concluded that Troma had not shown an in-state injury and dismissed the case against Defendants-appellees Lance H. Robbins and King Brett Lauter.  Troma appealed.  On appeal, the Second Circuit affirmed, finding no personal jurisdiction.

Troma is a New York-based company that produces and distributes “controlled budget motion pictures,” such as the two spoof films titled “Citizen Toxie, Toxic Avenger Part IV,” created by Troma, and “Poultrygeist: Night of the Chicken Dead,” which Troma owns distribution rights (“the Movies”).  In 2009, Troma authorized defendant-appellee Robbins to represent Troma in negotiating a license to distribute the rights to the Movies with a German distributor.  The authorization was supposed to lapse after 30 days if no agreement was reached.  Troma believed that Robbins was unable to negotiate a deal at the end of the 30 days.  However, Robbins had conspired with co-defendant-appellee King Brett Lauter (“Lauter”) to enter into a distribution agreement with a German distribution company called Intravest Beteiligungs GMBH (“Intravest”).  Troma alleged that Robbins and Lauter falsely told Intravest they owned the rights to the Movies; purchased copies of the movies from Amazon.com and delivered the copies to Intravest; and kept the proceeds of the agreement without telling Troma.  However, none of these actions took place in New York.

In 2010, Troma discovered that Intravest was broadcasting the Movies in Germany, and in 2011 Troma sued.  Robbins and Lauter moved to dismiss for lack of personal jurisdiction.  The lower court held that the New York long-arm statute did not allow the court to exercise personal jurisdiction over Robbins and Lauter because Troma did not show that Robbins’s and Lauter’s actions caused injury in New York.  Troma had the opportunity to transfer the case to California, where personal jurisdiction over the defendants could have been exercised (because Robbins and Lauter allegedly created their plan in California), but declined the transfer.  As such, the lower court dismissed Troma’s case.

The Second Circuit had to determine whether the lower court was correct in holding that it could not exercise personal jurisdiction over Robbins and Lauter.  Troma argued that personal jurisdiction existed under section 302(a)(3)(ii), which confers personal jurisdiction over one who “commits a tortious act without the state causing injury to person or property within the state . . . if he . . . expects or should reasonably expect the act to have consequences in the state and derives substantial revenue from interstate or international commerce.”  N.Y. C.P.L.R. § 302(a)(3)(ii).  Thus, the issue was whether Robbins’s and Lauter’s actions caused such injury in New York.  Troma argued that their actions did cause such injury, because the actions resulted in a loss of sales and generalized harm to Troma’s exclusive distribution rights over the Movies.  However, the fact that Troma is a New York corporation is insufficient on its own to confer personal jurisdiction over Robbins and Lauter.

Troma’s argument rested mainly on the New York Court of Appeals’ decision in Penguin Group (USA), Inc. v. American Buddha (“Penguin II”), 16 N.Y. 3d 295 (2011).  In Penguin II, plaintiff Penguin Group alleged that defendant American Buddha infringed its copyrights of several books by uploading copies of the books to its Internet website free of charge.  On appeal, the Second Circuit certified a question to the New York Court of Appeals: “In copyright infringement cases, is the situs of injury for purposes of determining long-arm jurisdiction under N.Y. C.P.L.R. § 302(a)(3)(ii) the location of the infringing action or the residence or location of the principal place of business of the copyright holder?”  Id. at 34.  The Court of Appeals accepted the question but narrowed it to the specific situation of when a copyright infringement case involves the uploading of a copyrighted printed literary work onto the Internet.  The Court of Appeals held that the situs of injury was where the copyright owner was located.  The Court of Appeal’s decision rested on two factors.  “The first was the nature of the alleged infringement, viz., the uploading and making available of Penguin Group’s copyrighted works by means of the Internet. . . The second factor upon which the Court of Appeals rested its decision was ‘the unique bundle of rights granted to copyright owners.’” Troma, Slip Op. Pp. 10-11.

The holding in Penguin II is too narrow to control to Troma’s case.  While Penguin II dealt with a copyright infringement injury that was virtually impossible to localize (uploading and making available of copyrighted materials, free of charge, to anyone with access to the Internet), Troma does not allege any conduct that does not have a centralized locality.  Thus, the Second Circuit concluded that Troma’s case was a traditional commercial tort case in which the place where Troma’s business was lost of threatened influences the jurisdictional analysis.  Troma offered no evidence as to how New York would be such an influence.  “Troma is left, then, to rely on the Court of Appeals’ endorsement of the theory that out-of-state infringement may harm the bundle of rights held by a New York-based copyright owner in New York.”  Troma, Slip Op. P. 13.  However, this is only a theory of injury.  There is nothing in the Penguin II decision that would allow Troma to bypass the obligation to allege facts showing a direct New York-based injury.  Troma’s allegations of generalized harm to its distribution right were too speculative to support a finding of New York-based injury.  Instead, Troma’s alleged injury is simply economic losses, which are insufficient for personal jurisdiction.  As a result, the Second Circuit affirmed the dismissal of Troma’s case.

For Criminal Copyright Infringement You Must Know That Act Is Unlawful

The Ninth Circuit Court of Appeals in a criminal copyright infringement case found that “willfully” under the Copyright Act required actual knowledge of the illegality of the act, and to “knowingly” traffic counterfeit labels required knowledge that the labels were counterfeit.  U.S. v. Liu, Case No. 10-10613 (9th Cir. October 1, 2013) (available here).  Defendant Liu appealed his criminal conviction for copyright infringement and trafficking in counterfeit labels.  Liu’s company, Super DVD, commercially copied CDs and DVDs without permission from the copyright holders.  The Appeals Court vacated Liu’s convictions and remanded, finding that the lower court had improperly instructed the jury.

The issue was whether Liu acted “willfully” and “knowingly.”  “We hold that the term ‘willfully’ requires the government to prove that a defendant knew he was acting illegally rather than simply that he knew he was making copies. Similarly, to ‘knowingly’ traffic in counterfeit labels requires knowledge that the labels were counterfeit.” Liu, Slip Op. P. 3.  Liu’s commercial replication of the CDs and DVDs is different than an individual “burning” recorded content onto a blank CD or DVD.  Liu would take pre-recorded discs that had their content stamped onto them, which requires a molding machine and a stamper.  The creation of a CD stamper is called “mastering.”

In 2003, federal agents executed a search warrant on Liu’s Super DVD warehouse.  The search resulted in the discovery of thousands of unauthorized DVDs and CDs.  Liu testified that Super DVD did manufacture copies of the movie “Crouching Tiger, Hidden Dragon” for a company called R&E Trading.  R&E had given Super DVD a stamper with the name “Tiger” on it, and it was only later that Liu realized R&E did not have the rights to duplicate the movie.  He denied knowledge and involvement in replicating the other works found in the warehouse.  Liu was charged with and convicted on three counts of criminal copyright infringement under 17 U.S.C. § 506(a)(1)(A) and 18 U.S.C. § 2319(b)(1), and one count of trafficking in counterfeit labels under 18 U.S.C. § 2318(a).  He was sentenced to four years in prison and three years of supervised release.

Liu requested a jury instruction mimicking the language of 17 U.S.C. § 506(a)(2), that “[e]vidence of reproduction or distribution of a copyrighted work, by itself, shall not be sufficient to establish willful infringement of a copyright.”  17 U.S.C. § 506(a)(2).  This language was not included in the government’s proposed jury instruction, although the government informed the lower court that it had no problem with Liu’s requested jury instruction.  The night before closing arguments, the lower court emailed out a draft of the jury instructions.  The next morning, the court stated that it made some unsubstantial changes to the jury instructions.  However, the Ninth Circuit determined that the changes were substantive.  For example, the court added a definition of the term “knowingly.”  The lower court defined “knowingly” as follows: “An act is done ‘knowingly’ if the Defendant is aware of the act and does not act through ignorance, mistake or accident. The government is not required to prove that the defendant knew that his act was unlawful. You may consider evidence of the Defendant’s words, acts, or omissions, along with all the other evidence, in deciding whether the defendant acted knowingly.”  Liu, Slip Op. P. 9.  The lower court did not allow objections to the jury instructions.

The Ninth Circuit noted that the term “willfully” is ambiguous.  “To infringe willfully could simply mean to intentionally commit the act that constitutes infringement. Alternatively, it could mean that the defendant must act with a bad purpose or evil motive in the sense that there was an intentional violation of a known legal duty.”  Liu, Slip Op. P. 12 (internal citations omitted).  Liu was charged with criminal copyright infringement, and therefore, the Ninth Circuit determined, “willful” infringement required the government to prove that Liu acted with knowledge that his conduct was illegal.  In other words, “willfully” infringing on a copyright under the Copyright Act § 506(a) means “voluntary, intentional violation of a known legal duty.” Cheek v. United States, 498 U.S. 192, 201 (1991) (internal quotation marks omitted).  The Ninth Circuit supported its reasoning by stating that in order to infringe a copyright, one must actually copy the protected work.  Thus, if willfulness under § 506(a) was met by an intent to copy, there would be no difference between criminal and civil copyright liability in most cases.

In this case, the parties agreed to include a jury instruction that evidence of a reproduction of a copyrighted work was not, by itself, sufficient to establish willfulness.  However, the lower court failed to include this language.  The lower court defined willful infringement but omitted the knowledge component, thereby instructing the jury to use the civil liability standard for copyright infringement and not the criminal liability standard.  The Ninth Circuit concluded that this error was not harmless.  Liu’s state of mind was critical to his criminal convictions.  As a result, the Ninth Circuit vacated Liu’s convictions and sentence for criminal copyright infringement, and remanded them to the lower court.

Liu also challenged the jury instructions on the count for trafficking in counterfeit labels, which required that Liu acted “knowingly.”  “Like ‘willfully,’ the word ‘knowingly’ is susceptible to more than one meaning in this context. It could mean either that the defendant knew that he was trafficking or that he knew that the labels were counterfeit. We hold that ‘knowingly’ in this context means the latter, and thus the government must prove that Liu knew the labels were counterfeit.”  Liu, Slip Op. P. 21.  The lower court’s jury instruction included a statement that instructed the jury that the government did not have to prove that Liu knew his act was unlawful.  Instead, the lower court instructed the jury that Liu only needed to know that he trafficked the counterfeit labels.  “This instruction was at best ambiguous as to whether Liu needed to know that the labels were counterfeit or merely needed to know that he trafficked in labels that later turned out to be counterfeit—a strict liability standard.”  Liu, Slip Op. P. 24.  As a result, the lower court’s error was not harmless.  The Ninth Circuit vacated and remanded Liu’s conviction and sentence for trafficking in counterfeit labels.

Mayweather Knocks Out Competition In Case For Copyright Infringement

The Fourth Circuit Court of Appeals held that speculative evidence was not enough to show a genuine issue of material fact relating to damages in a copyright infringement lawsuit.  Dash v. Mayweather, et al., Case No. 12-1899 (4th Circuit, September 26, 2013) (available here).  Anthony Dash sued Defendants Floyd Mayweather, Jr. (“Mayweather”), Mayweather Promotions, Mayweather Promotions LLC, Philthy Rich Records, Inc., and World Wrestling Entertainment, Inc. (“WWE”) for copyright infringement.  Dash argued that Mayweather Defendants violated his copyright by playing a variant of his copyrighted music during Mayweather’s entrance at two WWE events.  The lower court granted summary judgment in favor of Defendants and Dash appealed.  The Fourth Circuit affirmed.

In 2005, Dash created an instrumental musical track called “Tony Gunz Beat” (“TGB”).  Dash never received any revenue from any of his musical compositions.  In 2008, Mayweather, a famous boxer, entered into a contract with WWE to perform at Wrestlemania XXIV.  Mayweather chose to enter the arena to a song called “Yep.”  Mayweather’s manager told the WWE that Mayweather owned all of the rights to the song.  The song was played for around 3 minutes while Mayweather entered the arena.  Dash alleges that “Yep” added lyrics to TGB.  In 2009, Mayweather entered into another contract with the WWE to appear as a guest host.  “Yep” was played in connection with his appearance.

Dash alleges that he created TGB in 2005, however he did not file a copyright application until 2009.  Dash alleges that Defendants’ use of “Yep” at both WWE events violates his copyright in TGB.  Thus, this alleged infringement occurred after creation but before copyright registration.  The lower court separated the litigation into two sections: liability and damages.  The parties jointly moved for summary judgment regarding Dash’s entitlement to damages under § 504 of the Copyright Act (actual and profit damages).  Dash’s motion contained a report by expert Dr. Michael Einhorn (the “Einhorn Report”), which concluded that Dash’s actual damages were no more than $3,000 based on licensing fees paid to other copyright holders for use of songs at Wrestlemania XXIV.  The Einhorn Report concluded that (1) $541,521 of the WWE’s net profit from Wrestlemania XXIV was attributable to the use of TGB; (2) $480,705 of Mayweather’s net profits from his appearance at Wrestlemania XXIV was attributable to the infringing use; and (3) Dash should receive at least $1,019,226 in profit damages plus actual damages.  The lower court held that Dash was not entitled to damages because he failed to meet his burden of proof.

§ 504(a) states that “an infringer of copyright is liable for either (1) the copyright owner’s actual damages and any additional profits of the infringer, as provided in subsection (b); or (2) statutory damages, as provided by subsection (c).”  17 U.S.C.  § 504(a).  “ The copyright owner is entitled to recover the actual damages suffered by him or her as a result of the infringement, and any profits of the infringer that are attributable to the infringement and are not taken into account in computing the actual damages.” 17 U.S.C. § 504(b).  First, the Fourth Circuit looked at whether Dash was entitled to actual damages under § 504(b), which is typically measured by the extent of injury caused to the copyrighted work’s market value at the time of infringement.  It is the copyright holder’s burden to prove the existence of a causal connection between the alleged infringement and loss of anticipated revenue.  The lower court concluded that Dash was not entitled to actual damages because he did not offer sufficient evidence to indicate the value of TGB.  Dash argues on appeal that the Einhorn Report provides evidence of TGB’s value, which is based on the $3,000 lost licensing fee.  Defendants moved for summary judgment regarding Dash’s damages, and thus had to show no genuine dispute as to the existence of any actual damages.  Defendants satisfied this requirement with Dash’s admission that he never received revenue from TGB.

The Fourth Circuit concluded that the Einhorn Report was too speculative to show actual damages.  First, the Einhorn Report failed to expressly conclude that TGB had a market value, instead it stated that Dash could have earned a maximum sum of $3,000 as a licensing fee.  This is not enough to establish that Dash was entitled to actual damages.  “The Einhorn Report’s failure to clearly state that TGB had a fair market value is notable in light of the fact that Dr. Einhorn was retained for the express purpose of evaluating the economic damages resulting from [Defendants’] alleged infringement of [TGB]. His omission of a clear statement of value suggests that he could not conclude, either with certainty or sound reasoning, that Dash would have been paid a licensing fee for [Defendants’] use of TGB.”  Dash, Slip Op. P. 27.  Even if the Einhorn Report had concluded that the use of TGB at the WWE events was of some value to Defendants, that evidence would still be too speculative to support Dash’s contentions that there was a genuine dispute regarding actual damages.  Further, Dash did not present any evidence that he ever received compensation for any of his works.

“Evidence of licensing fees paid to other artists for the use of other works may, in some cases, be sufficient to support the conclusion that a copyright holder would have been entitled to such a fee for the use of his work; however, such evidence may properly be rejected as a measure of damages if it is too speculative.”  Dash, Slip Op. P. 33.  Evidence of WWE’s licensing deals with other copyright holders can be sufficient if those licenses were based on a comparable use and on whether the work was comparable to TGB.  The WWE’s licensing deals were with well-known artists, and thus were too speculative and inapposite to be used to compare with Dash.  “[A]lthough the Einhorn Report acknowledged that ‘Yep’ was ‘a new derivative work based purportedly on [TGB],’ it failed to explain at all how this fact impacted the analysis of Dash’s actual damages claim.”  Dash, Slip Op. P. 40.  Thus, the Fourth Circuit affirmed summary judgment in favor of Defendants regarding actual damages.

Turning to profit damages, the Fourth Circuit noted that the lower court granted summary judgment in favor of Defendants because “it found that Dash had failed to present evidence that [Defendants’] revenues bore any causal link to the infringement.”  Dash, Slip Op. P. 50.  Dash had an affirmative duty to prove that the Defendants’ gross revenues were reasonably related to the alleged infringing use of TGB.  Thus, Dash had the burden to prove that the connection was at least hypothetically possible.  If Dash could prove a conceivable connection between the infringement and the claimed revenues, then his next step would be to prove a causal connection between the infringement and the level of Defendants’ revenues.  “In order to demonstrate a causal link, the plaintiff must show that the infringement could reasonably be viewed as one of the causes of the claimed revenues. In order to rebut a defendant’s evidence that the claimed revenues are not attributable to the infringement, the plaintiff must show that at least some portion of the revenues was actually generated by the infringement, rather than by other factors.”  Dash, Slip Op. P. 63.

The Fourth Circuit noted that many of the revenue streams claimed by Dash had no conceivable connection to the infringement because they involved revenues that customers and businesses paid to Defendants prior to discovering that “Yep” would be played.  Dash presented no evidence that the playing of “Yep” increased any of the WWE revenue streams.  Dash argued that he did not have to prove this, instead he argued that because the WWE broadcasts included “Yep,” the revenues from the events were derived exclusively from TBG.  If the infringement forms a significant part of the product generating the claimed revenue, then this can be enough to establish a causal link.  “However, when, as here, the infringing content forms only a small, incidental portion of the products that generated the claimed revenue streams, further evidence is necessary to link the claimed revenues to the infringement.”  Dash, Slip Op. P. 66.  As a result, the Fourth Circuit affirmed summary judgment in favor of Defendants regarding profit damages.

Elton John’s Song “Nikita” Is Not Copyright Infringement of Thematic Concepts In Natasha’s Song

The 7th Circuit Court of Appeals held that unprotectable elements of a song, when considered together, are not enough to support a claim of copyright infringement.  Guy Hobbs v. Elton John, Case No. 12-3652 (7th Cir. July 17, 2013) (available here).  Guy Hobbs sued Elton John for copyright infringement, alleging that John’s song “Nikita” was based upon Hobbs’ unpublished song “Natasha.”  John moved to dismiss, and the lower court granted the motion.  Hobbs appealed and the 7th Circuit affirmed the dismissal.

In 1982, Hobbs was romantically involved with a Russian waitress and was inspired to write a song entitled “Natasha” about a doomed romance between a man from the United Kingdom and a woman from Ukraine.  In 1983, he registered his copyright for the song in the United Kingdom and sent the song to several music publishers, including Elton John’s music publisher Big Pig Music, Ltd.  Hobbs was unable to publish his song.  In 1985, Elton John released his song “Nikita,” wherein the singer is from “the west” and describes a love for Nikita, whom he “saw…by the wall.”  Big Pig registered the copyright for “Nikita,” and listed Elton John on the registration.  Hobbs asserts that he saw the lyrics of “Nikita” in 2001 and sought compensation from Elton John, believing that “Nikita” infringed on his song “Natasha.”  When that failed, Hobbs sued for copyright infringement, citing to allegedly similar elements between the two songs.

Hobbs argued that a combination of these elements in “Natasha” constituted a unique expression entitled to copyright protection, and the similar elements in “Nikita” supported his claim of copyright infringement.  The lower court disagreed, finding that the elements were not entitled to copyright protection when considered alone or in a combination.  The lower court dismissed Hobbs’ entire action and he appealed.

On appeal, Hobbs relied solely on his “unique combination” of elements theory, arguing that the unique selection, arrangement, and combination of individually unprotectable elements in his song an be copyrightable.  The 7th Circuit disagreed, finding that even when the allegedly similar elements in the songs are considered together, the songs themselves are not substantially similar, and therefore Hobbs failed to state a claim for copyright infringement.  In order to establish a copyright infringement claim, Hobbs must prove (1) that he owns a valid copyright, and (2) that there was unauthorized copying of key elements of his song that were original.  The second element can be proved by Hobbs showing that Elton John had an opportunity to copy “Natasha” and that “Nikita” is substantially similar to “Natasha.”  Elton John admitted that Hobbs had a valid copyright in “Natasha” and that Elton had an opportunity to copy it.  Thus, Elton’s motion to dismiss rested on whether the two songs were substantially similar.

Hobbs listed six similar elements between the two songs: “(1) A theme of impossible love between a Western man and a Communist woman during the Cold War; (2) References to events that never happened; (3) Descriptions of the beloved’s light eyes; (4) References to written correspondence to the beloved; (5) Repetition of the beloved’s name, the word ‘never,’ the phrase ‘to hold you,’ the phrase ‘I need you,’ and some form of the phrase ‘you will never know;’ and (6) A title which is a one-word, phonetically-similar title consisting of a three-syllable female Russian name, both beginning with the letter ‘N’ and ending with the letter ‘A.’” Hobbs, Slip Op. Pp. 10-11.  However, Hobbs’ argument had two flaws.  First, the Copyright Act does not protect general ideas, it only protects the specific expression of an idea.  Second, the Copyright Act does not protect “incidents, characters or settings which are as a practical matter indispensable, or at least standard, in the treatment of a given topic.” Incredible Techs., Inc. v. Virtual Techs., Inc., 400 F.3d 1007, 1012 (7th Cir. 2005).  In examining the two songs, the 7th Circuit concluded that Hobbs’ first 4 alleged similarities are expressed differently in the two songs, and the remaining 2 similarities are commonplace in popular love songs.

First, Hobbs argued that both songs tell the story of a doomed romance between a Western man and a Communist woman separated by the Cold War.  However, this idea is expressed differently in the songs, with each song telling a different story.  In “Natasha,” the man and woman are together for a short time before they are forced apart, but in “Nikita” the two never meet.  The second, third, and fourth elements reach similar results.  “While it is true that ‘Natasha’ and ‘Nikita’ both contain references to unfulfilled desires or events that never occur, what matters is that the particular ways that each song expresses these concepts are dissimilar.”  Hobbs, Slip Op. P. 13.  For example, in “Natasha,” there is “the freedom [the woman will] never know,” while in “Nikita” the woman could “never find a warmer soul to know.”  This is the same with how the songs reference the woman’s eyes and written correspondence between the lovers; while both songs have these elements, they are expressed in different ways.

The fifth and sixth elements are expressed in similar ways in both songs.  “While these similar elements are present at the level of expression, they are also rudimentary, commonplace, standard, or unavoidable in popular love songs. Repetition is ubiquitous in popular music. . . And, as the district court observed, the United States Copyright Office’s Registered Works Database reveals that numerous works share the titles ‘Natasha’ and ‘Nikita.’” Hobbs, Slip Op. P. 14.  Thus, even with these similarities, the songs are not substantially similar.  As a result, the 7th Circuit affirmed the dismissal of Hobbs’ case.

Copyrighted Court Document Can Be Used In Related Litigation Without Liability

The Second Circuit Court of Appeals in New York held that an authorization to use a document in litigation creates an irrevocable implied license for any party in that action to use the document for the duration of that litigation.  Unclaimed Property Recovery Service, Inc. v. Kaplan, Case No. 12-4030 (2d Circuit, August 20, 2013) (available here).  Plaintiffs Unclaimed Property Recovery Service, Inc. (“UPRS”) and Bernard Gelb sued Defendant Norman Kaplan, an attorney, for copyright infringement.  UPRS allowed Attorney Kaplan’s clients to file a legal complaint and exhibits that were written by Gelb and claimed that Attorney Kaplan’s later amendments of Gelb’s original legal documents infringed UPRSs’ copyrights in the original documents.  The Second Circuit held that UPRSs’ authorization to Attorney Kaplan to use such documents in other litigation matters gave an irrevocable authorization to all parties in the litigation to use the documents.  As such, the Second Circuit dismissed the case.

UPRS and Gelb were plaintiffs in a class action lawsuit and Attorney Kaplan was the UPRS’ attorney.  UPRS and Gelb allege that Gelb conduced research on the allegations in the class action complaint; located and obtained Powers of Attorney from several of the class action plaintiffs; hired Attorney Kaplan to represent the class; wrote the Amended Class Action Complaint (“First Complaint”); and compiled 305 pages of accompanying exhibits (“First Exhibits”).  Gelb also alleged that they have copyrights to the First Complaint and First Exhibits.  Attorney Kaplan filed the First Complaint and First Exhibits, the case was dismissed, and Kaplan appealed.  While the appeal was pending, Attorney Kaplan ceased representation of UPRS and Gelb, but remained as counsel for some of the other class action plaintiffs.  New counsel for UPRS and Gelb moved to withdraw the entirety of the pending appeal and it was granted with respect to UPRS and Gelb, but not for the other plaintiffs.  Shortly after, Gelb and UPRS received federal copyright registrations for the First Complaint and First Exhibits.  The appeal continued without Gelb and UPRS and the court vacated the dismissal of the case, giving the remaining class action plaintiffs an opportunity to file an amended complaint.  Attorney Kaplan filed a Second Amended Class Action Complaint (“Second Complaint”) and accompanying exhibits (“Second Exhibits”).  Many portions of the Second Complaint and Second Exhibits were identical to the First Complaint and First Exhibits.

UPRS and Gelb sued Attorney Kaplan, claiming that Kaplan infringed their copyrights when he copied portions of the First Complaint and First Exhibits into the Second Complaint and Second Exhibits.  The lower court dismissed the action, holding that Attorney Kaplan had an irrevocable implied license to file an amended version of the First Complaint and First Exhibits.  UPRS and Gelb appealed to the Second Circuit.  The Second Circuit framed the issue as “whether the holder of a copyright in a litigation document who has authorized a party to a litigation to use the document in the litigation may withdraw the authorization after the document has already been introduced into the litigation and then claim infringement when subsequent use is made of the document in the litigation.”  Unclaimed Property Recovery Service, Slip Op. Pp. 4-5. The Second Circuit held that this authorization extended to “all present and future attorneys and to the court, an irrevocable authorization to use the document in the litigation thereafter.”  Id., Slip Op. P. 5.

The Second Circuit noted that if a copyright holder had the ability to withdraw authorization for the use of documents in litigation that would not only prevent the litigants from proceeding with the case, but it would also prevent the courts from performing their function.  As such, the needs of the courts to function prevails over a copyright holder’s interests and the authorization becomes irrevocable as to the participants in the litigation for purposes of that litigation.

Gelb and UPRS gave Attorney Kaplan authorization to use and file the First Complaint.  “Consequently, when the author of a complaint authorizes a party to file that complaint, the authorization is not limited to the right to submit the document to the clerk’s office; instead, the author has permitted the party to establish a legal action based on the complaint. Concomitant with that authorization is the authorization to depend on the complaint for the purposes of litigation-and to use the complaint during motion practice, discovery, trial, and appeal.”  Unclaimed Property Recovery Service, Slip Op. P. 7.  This authorization includes incorporating all or parts of the complaint into an amended complaint.

The Federal Rules of Civil Procedure allow a plaintiff to file an amended complaint.  UPRS and Gelb failed to show any legal support for the concept that the author of a complaint may use copyright law to interfere with the litigation process by allowing the filing of a complaint but then forbidding creation and filing of an amended version of that complaint.

Even if Gelb and UPRS had valid copyrights in the First Complaint and First Exhibits, they cannot use copyright law to prohibit the filing of the Second Complaint and Second Exhibits.  “A holding in favor of UPRS and Gelb would encourage sharp litigation practices, undermine the attorney-client relationship, and limit the district court’s ability to manage its cases.”  Unclaimed Property Recovery Service, Slip Op. P. 8.

The Second Circuit was careful to limit its findings: “Our decision today is based on the particularities of the facts before us. . . We merely hold that, because UPRS and Gelb authorized the class action plaintiffs to file the First Complaint and First Exhibits as the foundation of [the class action lawsuit], UPRS and Gelb may not use copyright law to prohibit those class action plaintiffs (or their attorney) from continuing to use the First Complaint and First Exhibits in the context of that litigation.”  Unclaimed Property Recovery Service, Slip Op. P. 10.

Click-On Terms Of Use (TOS) Creates Valid Assignment For Copyright Infringement

The 4th Circuit held that an agreement to transfer ownership of a copyright in a photograph found in a website’s “click-on approved” Terms of Use (“TOS”, sometimes called Terms of Use “TOU”) was a valid assignment of the copyright.  Metropolitan Regional Information Systems, Inc. v. American Home Realty Network, Inc., Case Nos. 12-2102, 12-2432 (4th Cir. July 17, 2013) (available here).  American Home Realty Network, Inc. (“AHRN”) and Metropolitan Regional Information Systems, Inc. (“MRIS”) compete in the real estate listing business.  MRIS offers a fee-based online listing service to real estate brokers and agents, and AHRN takes listing data from online databases, such as MRIS, and makes the listing data directly available to consumers.  MRIS sued AHRN for copyright infringement for AHRN’s unauthorized use of MRIS’s materials.  The lower court entered an injunction against AHRN, prohibiting AHRN from displaying MRIS’s photographs on AHRN’s website.  AHRN appealed and the Fourth Circuit affirmed.

MRIS offers its service (the “MRIS Database”) to real estate brokers and agents in several states in exchange for a subscription fee.  The subscribers can upload their real estate listings to the MRIS Database.  According to the TOS-TOU, upon uploading the photo, the subscriber assigns the photo copyright to MRIS.  The assignment of the copyrights is included in the TOS-TOU, and the subscriber must accept the TOS-TOU before submitting a photograph.  MRIS affixes the copyright symbol © on all photographs on the MRIS Database, and registers the MRIS Database with the Copyright Office each calendar quarter.  AHRN runs a national real estate search engine and referral business and collects its data from a variety of sources, including the MRIS Database.  AHRN expressly states that it did not create any of the data on its website.

MRIS sent AHRN a cease and desist letter in November 2011.  AHRN offered to enter into a licensing agreement with MRIS, but MRIS rejected the idea.  In March 2012, MRIS filed suit against AHRN.  MRIS then moved for a preliminary injunction to prevent AHRN from using MRIS’s photographs while the lawsuit was pending.  The lower court granted the injunction and AHRN appealed.  While the appeal was pending, the lower court modified the injunction to prevent AHRN from using MRIS’s photographs but not the compilation or textual elements found on the MRIS Database.  AHRN appealed the modification of the injunction.

On appeal, AHRN argued that MRIS failed to show a likelihood of success on its copyright infringement claims because (1) MRIS’s copyright registration for the MRIS Database did not properly register its copyrights for the individual photographs; and (2) MRIS does not have copyright interests in the photographs because the subscribers’ electronic agreement to the TOS-TOU failed to transfer the rights.

A “compilation” is “formed by the collection and assembling of preexisting materials or of data that are selected, coordinated, or arranged in such a way that the resulting work as a whole constitutes an original work of authorship.” 17 U.S.C. § 101.  Under the Copyright Act, a “compilation” can receive copyright protection.  This copyright protection is independent from protection given to the compilation’s individual components.  Here, the MRIS Database is a “collective work” because it is made up of individual copyrightable components (the photographs), and thus, MRIS does not need to own the copyrights in the photographs to register the copyright for the MRIS Database.  AHRN argued that MRIS’s copyright registrations of the MRIS Database do not protect the photographs themselves because MRIS did not identify the names of the creators and titles of the individual photographs.  The Court disagreed, stating that under the Copyright Act, MRIS’s copyright registration of the MRIS Database as an automated database was not required to include such information.  The Court found that MRIS owned the copyrights to the individual photographs before MRIS filed the copyright registration for the MRIS Database.  Requiring a registrant to individually list each author of a preexisting work in a collective work would be inefficient and would impede the registrant’s ability to receive copyright protection.

The Court noted that in August 2012, the Copyright Office promulgated a final rule amending the regulations governing the deposit requirement applicable to databases primarily composed of photographs.  This new rule stated that “when a registration is made for a database consisting predominantly of photographs, and the copyright claim extends to the individual photographs
themselves, each of those photographs must be included as part of the deposit accompanying the application.” Final Rule, Deposit Requirements for Registration of Automated Databases That Predominantly Consist of Photographs, 77 Fed. Reg. 40268, 40270 (July 9, 2012).  However, this was not in effect at the time of MRIS’s registrations at issue in this case and therefore has no effect on the appeal.  Thus, MRIS’s identification of the photographs as preexisting works satisfied the Copyright Act’s requirements, and MRIS was not barred from asserting copyright infringement.

The Court then turned to the merits of MRIS’s copyright infringement claim.  “MRIS must prove two elements to establish copyright infringement: (1) ownership of a valid copyright; and (2) AHRN’s copying of constituent elements of the work that are original.”  Metropolitan Regional Information Systems, Inc., Slip Op. P. 21.  AHRN did not appeal the second element, so the Court only examined whether MRIS owned valid copyrights of the photographs on the MRIS Database.  In order to validly assign the rights of the photograph to MRIS, the assignment had to be in writing and signed by the subscriber assigning the rights to MRIS.  However, this requirement was meant to help resolve ownership disputes between the copyright authors (the subscribers) and the assignee (MRIS), and not between a third party (AHRN) and the assignee (MRIS).

The Court had to determine whether the act of clicking “yes” to MRIS’s TOS-TOU prior to uploading the copyrighted photographs was a signed, written transfer of rights to MRIS.  Congress passed the E-Sign Act, which allows an electronic signature to have legal effect.  An electronic signature is “an electronic sound, symbol, or process, attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record.” 15 U.S.C. § 7006(5).  Further, the E-Sign Act does not limit, alter, or affect requirements imposed by statutes, regulations, or laws “other than a requirement that contracts or other records be written, signed, or in nonelectric form[.]” Id. § 7001(b).  Thus, the E-Sign Act was intended to limit, affect, or alter the written and signed agreement requirements of the Copyright Act.  “To invalidate copyright transfer agreements solely because they were made electronically would thwart the clear congressional intent embodied in the E-Sign Act.”  Metropolitan Regional Information Systems, Inc., Slip Op. P. 28.  As a result, the Court found that the subscribers had validly conveyed their rights in the photographs to MRIS.  As such, MRIS was likely to succeed on its claims of copyright infringement against AHRN.  The Court affirmed the injunction.

First Circuit Finds $22,500 Is A Fair Amount Of Statutory Damages For Each Willful Copyright Infringement

The First Circuit affirmed a $675,000 statutory damages award for copyright infringement, finding no violation of the defendant’s right to due process.  Sony BMG Music Entertainment, et al. v. Tenenbaum, Case No. 12-2146 (1st Cir. June 25, 2013) (available here).  Sony sued Tenenbaum for statutory damages and injunctive relief stemming from Tenenbaum’s illegal download and sharing of copyrighted music on peer-to-peer networks.  A jury awarded Sony $675,000 in statutory damages and Tenenbaum appealed, arguing that the damages amount violates his constitutional right to due process of the law.  The First Circuit disagreed with Tenenbaum and affirmed the award.

From 1999 to 2007, Tenenbaum illegally downloaded and shared thousands of copyrighted songs.  He knew his conduct was illegal and ignored warnings from his family, his college, and recording companies.  In 2007, Sony sued Tenenbaum under the Copyright Act for thirty copyrighted works.  Tenenbaum originally lied about his activities, but admitted to distributing as many as five thousand songs at trial.  The jury found that his actions were willful and awarded Sony $675,000, which is $22,5000 for each of the thirty songs.  The Copyright Act permits statutory damages between $750 and $150,000 for each willful violation.  17 U.S.C. § 504(c).  Tenenbaum moved to reduce the award, arguing remittitur and violation of due process.  The lower court ignored the remittitur issue and reduced the amount of the award to $67,500.  The lower court relied on BMW of North America, Inc. v. Gore, 517 U.S. 559 (1996), where the Supreme Court held that an excessive award of punitive damages can violate due process.  Sony appealed the reduction, and the First Circuit held that the lower court applied the wrong standard.  Instead, the lower court should have applied the standard in St. Louis, I.M. & S. Ry. Co. v. Williams, 251 U.S. 63 (1919), where the Supreme Court considered the constitutionality of an award of statutory damages.  On remand, the lower court reinstated the original award amount of $675,000.  Tenenbaum appealed the amount of the award, arguing due process violations.

To start, the First Circuit determined the correct standard for reviewing the constitutionality of an award of statutory damages under the Copyright Act.  The Williams case held that a statutory damage award violates due process only “where the penalty prescribed is so severe and oppressive as to be wholly disproportioned to the offense and obviously unreasonable.” Williams, 251 at 66-67.  The Gore case discussed when punitive damages violate due process.  As such, the lower court in this case correctly applied the Williams standard because the jury awarded Sony statutory damages.

Second, the Court considered the constitutionality of the award against Tenenbaum.  The purpose of statutory damages is to provide the plaintiff with reparation from the injuries caused and to discourage wrongful conduct.  Sony presented evidence of loss of value of the copyrights, loss of income and profits, and job cuts.  “The evidence of Tenenbaum’s copyright infringement easily justifies the conclusion that his conduct was egregious. Tenenbaum carried on his activities for
years in spite of numerous warnings, he made thousands of songs available illegally, and he denied responsibility during discovery.”  Tenenbaum, Slip Op. P. 8.  As such, the First Circuit found that $22,500 per infringement, which is only 15% of the maximum award for willful violations and less than the maximum award for non-willful violations, complies with constitutional due process.  The First Circuit affirmed the $675,000 amount of damages.

Tampa Arena’s Violation Of Implied License For Photos Not Copyright Infringement

The District Court held that an implied license to use photographs on a Facebook page was a good defense to a copyright claim.  Davis v. Tampa Bay Arena, Ltd., Case No.: 8:12-cv-60-T-30MAP (M.D. Fla. June 27, 2013) (available here).  Plaintiff Davis, a professional photographer, sued Defendant Tampa Bay Arena (“Arena”) for copyright infringement.  Arena moved for summary judgment and the Court granted it.

In 1996, Davis and Arena entered into a verbal agreement for Davis’s services wherein Davis would shoot photos on an event-by-event basis.  Until around 2000, Davis photographed all of Arena’s events.  In 2000, Davis created a written agreement, which granted Arena a limited use of the photographs, including “rights to reproduce the images for newsletter, advertising, display prints, broadcast, and the [Arena] web site.”  The agreement stated that Davis retained ownership of all the images.  However, the agreement stated that Arena would allow Davis the right to use the images from Arena’s events in his portfolio and web site, but that Davis would not sell photographs without Arena’s permission.  When Davis used digital cameras, he would back up all the images onto CDs.

In 2007, the parties entered into a second agreement that was almost identical to the first, except it increased Davis’s fee and allowed Arena to use the images on posters without Davis’s permission.  In 2009 or 2010, Arena created a Facebook page and posted Davis’s pictures on the page.  The Facebook page was used by Arena as advertising.  Davis originally objected to the use of his photos, but then allowed Arena to use the photos only if they were low-resolution versions, gave Davis photo credit, preserved the metadata showing Davis’s ownership, and protected the photos from unauthorized copying by third parties.  After Arena agreed, Davis began helping Arena post the photos by giving several staff members of Arena log in and passwords to his photo-server.  If Arena violated the agreement, Davis would send an email detailing the violation.

Davis argued that in 2011, he complained about the use of his photos on Facebook.  He discovered that third parties could download his photos from Facebook.  Davis thought that if he stopped Arena from posting the Facebook photos that he would lose his job as event photographer.  Arena promised to amend the agreement to fairly compensate Davis for the Facebook usage.  However, they were unable to reach an agreement.  In mid-2011, Davis’s attorney sent Arena a letter requesting return of all hard copy original images and negatives in possession of Arena and demanding that Arena seek permission to use future photographs.  Arena only returned a few negatives to Davis.  Davis sued for copyright infringement.  Arena moved for summary judgment.

Arena “argues, in part, that it is entitled to summary judgment on Davis’ copyright
claim because Davis granted [Arena] an implied license to post his images to [Arena]’s Facebook page. The Court agrees that, taking the record in a light most favorable to Davis, the non-movant, it is undisputed that Davis granted [Arena] an implied license to post his images to the Forum’s Facebook page.”  Davis, Slip Op. P. 11.  An implied license is created when “(1) a person (the licensee) requests the creation of a work, (2) the creator (the licensor) makes that particular work and delivers it to the licensee who requested it, and (3) the licensor intends that the licensee copy and distribute his work.” Thornton v. J Jargon Co., 580 F. Supp. 2d 1261, 1281 (M.D. Fla. 2008).  Here, Davis took photographs of Arena’s events, created log in and passwords for Arena’s staff, and never threatened to sue for copyright infringement if Arena did not take down the Facebook photos.

Davis argued that the issue was the scope of the implied license.  In other words, Davis argued that he opposed Arena’s use of his photos, and attached conditions to its ability to use is photos on Facebook.  However, “even assuming that Davis attached conditions to [Arena]’s use of his images on Facebook, the record is clear that these conditions were covenants, not condition precedents to the granting of the implied license.”  Davis, Slip Op. P. 13.  As a result, Davis had a breach of contract claim against Arena, not a copyright infringement claim.  “In this case, the record is clear that despite the conditions Davis may have placed on [Arena]’s use of his images on its Facebook page, Davis did not withdraw his permission to allow [Arena] to use his images on Facebook even after Davis was placed on notice numerous times during the parties’ relationship that [Arena] was not complying with the conditions.”  Davis, Slip Op. Pp. 15-16.  As a result, the Court granted Arena’s motion for summary judgment on Davis’s claim of copyright infringement.

No Copyright Safe Harbor Under DMCA for ISPs for Pre-1972 Sound Recordings

The highest State Court in New York held that the Digital Millennium Copyright Act (“DMCA”) safe harbor protections do not apply to pre-1972 sound recordings.  UMG Recordings, Inc. v. Escape Media Group, Inc., Case No. 100152/10, 9099 (NY App. Div. 1, April 23, 2013) (available here).  Plaintiff UMG Recordings (“UMG”) appealed the lower court’s denial of its motion to dismiss Defendant Escape Media Group’s (“Escape”) affirmative defense under the DMCA which alleged that the DMCA safe harbors do not apply to recordings made before 1972.  On appeal, the Court reversed the lower court and agreed with UMG that the DMCA does not provide a safe harbor protection for sound recordings before 1972.

Escape developed, owns, and operates GrooveShark, which is an online music streaming service.  Users of GrooveShark upload audio files to an archive maintained on Escape’s servers and other users can search and stream recordings from Escape’s servers.  GrooveShark has some procedures in place to prevent copyright infringement, such as licensing agreements with several large-scale owners and licensees of sound recordings.  The DMCA offers safe harbor protections to operators of internet services, commonly referred to as “ISPs”.  UMG owns copyrights to many songs uploaded to GrooveShark, many of which were recorded prior to 1972.  That year, 1972, is significant because the Copyright Act was amended in 1972 to extend federal copyright protection only to recordings “fixed” on or after February 15, 1972.

UMG sued Escape for copyright infringement.  Escape asserted the safe harbor protections under the DMCA.  UMG moved to dismiss Escape’s safe harbor defense, arguing that the DMCA could not apply to the pre-1972 recordings because that would conflict with § 301(c) of the Copyright Act, which states that nothing in the Act would “annul” or “limit” the common-law copyright protections to any pre-1972 sound recordings.  See 17 U.S. C. § 301(c) (“[w]ith
respect to sound recordings fixed before February 15, 1972, any rights or remedies under the common law or statutes of any State shall not be annulled or limited by this Title until 2067”).  The lower court denied UMG’s motion, holding that “although § 301(c) is an anti-preemption provision ensuring that the grant of federal copyright protection did not interfere with common-law or state rights established prior to 1972, that section does not prohibit all subsequent regulation of pre–1972 recordings.”  UMG, Slip Op. Pp. 6-7.

On appeal, UMG argued that if the DMCA gave Escape safe harbor protection for the pre-1972 recordings, that protection effectively repealed § 301(c) of the Copyright Act.  UMG described § 301(c) as creating “reverse preemption” of state law copyright remedies.  In other words, Congress was not permitted to trample on the state of common-law copyright laws.  UMG also argued that the lower court ignored the DMCA’s provision that a copyright infringer is anyone who violates any of the Copyright Act exclusive rights found in sections 106 through 122 and, because these sections refer to works fixed after February 15, 1972, a copyright infringer is not entitled to the DMCA safe harbor protections on works fixed before February 15, 1972.  Escape argued that any references in the DMCA to copyrights and infringement are generic terms and that Congress did not intend to limit the DMCA’s reach to works covered by the Copyright Act.  Escape also argued that the “DMCA does not annul or limit any of UMG’s rights in the pre-1972 recordings, because, notwithstanding the DMCA’s safe harbor provisions, UMG still retains its common-law rights in those works, such as the ability to exploit the works, license them and create derivative works.”  UMG, Slip Op. P. 11.

The Court looks at the intent of the legislature in enacting the DMCA.  “Initially, it is clear to us that the DMCA, if interpreted in the manner favored by defendant, would directly violate section 301(c) of the Copyright Act. . . were the DMCA to apply as defendant believes, that right to immediately commence an action would be eliminated. Indeed, the only remedy available to UMG would be service of a takedown notice on defendant.”  UMG, Slip Op. P. 13.  In order for Escape’s argument to prevail, the Court would have to conclude that Congress intended to modify § 301(c) when it enacted the DMCA.  However, there is nothing suggesting that this was Congress’s intent.  “Congress explicitly, and very clearly, separated the universe of sound
recordings into two categories, one for works ‘fixed’ after February 15, 1972, to which it granted federal copyright protection, and one for those fixed before that date, to which it did not. Defendant has pointed to nothing in the Copyright Act or its legislative history which prevents us from concluding that Congress meant to apply the DMCA to the former category, but not the latter.”  UMG, Slip Op. P. 14.

The Court rejected Escape’s contention that the purpose of the DMCA would be “thwarted” if it was determined not to apply to pre-1972 recordings.  “The statutory language at issue involves two equally clear and compelling Congressional priorities: to promote the existence of intellectual property on the Internet, and to insulate pre-1972 sound recordings from federal regulation. As stated above, it is not unreasonable, based on the statutory language and the context in which the DMCA was enacted, to reconcile the two by concluding that Congress
intended for the DMCA only to apply to post-1972 works.”  UMG, Slip Op. P. 16.  The Court therefore reversed the dismissal of UMG’s motion.

Who Owns The Ghost Rider – Appeal Clouds Marvel’s Copyright Claim

The Second Circuit Court of Appeals in New York overturned a summary judgment order, finding material disputes as to Marvel’s claim of copyright ownership of the Ghost Rider superhero.  Gary Friedrich Enterprises, LLC, and Gary Friedrich v. Marvel Characters, Inc., et al., Case No.: 12-893-cv (2d Cir. June 11, 2013) (available here).  Friedrich sued Marvel for copyright infringement, alleging that he was the creator of the comic book character Ghost Rider.  The lower court dismissed his complaint and awarded damages to Marvel on its counterclaim for copyright infringement.  The lower court held that Friedrich had assigned any rights he retained in the renewal term of the 1972 Ghost Rider copyrights to the predecessor of Marvel in a 1978 work-for-hire contract.  On appeal, the Second Circuit vacated and remanded the case, finding ambiguity in the contract and genuine disputes of material fact.

In 1972, Marvel published the first comic book featuring the Ghost Rider, a superhero with a flaming skull for a head.  Friedrich alleged that he conceived the Ghost Rider character, the related characters, and the origin story, and that he owns the renewal rights.  Marvel acknowledged that Friedrich did offer his ideas, but argued that the Ghost Rider characters and story were the result of a collaborative effort with Marvel personnel and resources, and therefore Marvel owned the renewal rights.  The lower court granted summary judgment in favor of Marvel on the ownership issue, finding that Friedrich had assigned all of his renewal rights to Marvel under a 1978 work-for-hire-contract.

According to Friedrich, the Ghost Rider comic evolved over the years and he presented the written synopsis of the origin story to the then-publisher of Marvel comics.  Marvel agreed to publish the story in its series dedicated to testing out new superheroes in exchange for Friedrich assigning over his rights to the Ghost Rider characters.  There was no discussion of renewal rights and there was no written contract.  Friedrich alleged that he supervised the entire production of the comic book.  The final product was published in 1972, with a copyright notice for Marvel, and stating that it was conceived and written by Friedrich.  At the same time, Marvel advertised Ghost Rider in another comic book, and the advertisement acknowledged that Friedrich had “dreamed the whole thing up.”  Ghost Rider was a success and Friedrich wrote several stories for the comics on a freelance basis until 1978.
Under the 1976 Copyright Act, a work created outside the scope of employment was a work-for-hire only if the parties had an express written agreement to that effect.  17 U.S.C. § 101.  Therefore, in 1978 (when the 1976 Copyright Act took effect), Marvel required Friedrich to sign a work-for-hire agreement (“the Agreement”).  Friedrich was told that the Agreement only covered future works.  Friedrich received nothing for signing the Agreement, and after signing it was never approached by Marvel for additional freelance work.  The initial copyright term for Ghost Rider expired at the end of 2000.  In 2001, the renewal copyright term would have vested in Friedrich as the original author of Ghost Rider in accordance with the Copyright Act.  However, Marvel exploited the Ghost Rider character after 2000 by publishing reprints of the first comic, creating new issues of the comic series, selling Ghost Rider toys, placing Ghost Rider cameos in video games, releasing a Ghost Rider movie, and a Ghost Rider video game.  Friedrich notified Sony Pictures, the producer of the Ghost Rider movie, of his rights.  Marvel notified Friedrich that Ghost Rider was a work-for-hire but sent him royalty checks for the republication of the original comic.  In 2007, Friedrich filed for and received a Renewal Copyright Registration to the original comic and Ghost Rider, and assigned the rights to his company, Plaintiff Gary Friedrich Enterprises, LLC.

On appeal, Friedrich argued that the Agreement did not include the renewal rights of the 1972 Ghost Rider.  The renewal term of a copyright is “not merely an extension of the original copyright term but a ‘new estate . . . clear of all rights, interests or licenses granted under the original copyright.'” P.C. Films Corp. v. MGM/UA Home Video Inc., 138 F.3d 453, 456-57 (2d Cir. 1998) (quoting G. Ricordi & Co. v. Paramount Pictures, Inc., 189 F.2d 469, 471 (2d Cir. 1951)).  Thus, while an author can assign his renewal rights during the initial copyright term, there is a strong presumption against this conveyance unless there is an express assignment of the renewal rights.

The Second Circuit thus had to determine the intent of Friedrich and Marvel when Friedrich signed the Agreement.  The Second Circuit looked at the language of the Agreement and found the Agreement to be ambiguous.  For instance, the language of the Agreement was murky as to (a) whether the Agreement covered works already created, or only future Ghost Rider works; and (b) whether renewal rights were conveyed because there was no explicit reference to such rights.  As a result, the Second Circuit found that the Agreement did not overcome the strong presumption against the conveyance of renewal rights.

Next, the Second Circuit looked at extrinsic evidence to determine the intent of Marvel and Friedrich.  (1) The Agreement was a standard work-for-hire contract that Marvel sent to all of its freelance artists in 1978.  (2) Friedrich signed the Agreement believing that it would only cover future freelance work and was not paid for signing the agreement.  (3) The Second Circuit noted that Marvel could not make Ghost Rider a work-for-hire after it had already been created.

“Given that context, it is doubtful the parties intended to convey rights in the valuable Ghost Rider copyright without explicitly referencing it.”  Friedrich, Slip Op. P. 30.  Therefore, there was a genuine issue of fact.  Summary judgment was improper.

Marvel also argued that Friedrich’s claim was barred by the Copyright Act’s three-year statute of limitations.  The statute of limitations begins running when a reasonably diligent plaintiff would have notice of the existence of a right to sue.  Friedrich filed his lawsuit against Marvel on April 4, 2007, meaning that Marvel would have had to repudiate Friedrich’s claim of ownership of the renewal rights before April 4, 2004.  However, there were genuine factual disputes as to whether Marvel repudiated Friedrich’s claim of ownership.  First, Marvel repeatedly and publicly recognized that Friedrich created the work.  Second, Marvel did not register a copyright for the original comic or for Ghost Rider until after Friedrich filed this action.  Third, there was also a dispute as to whether Marvel privately repudiated Friedrich’s claim in its communications with Friedrich before April 4, 2004.  Fourth, the only evidence that Marvel intended for Ghost Rider to be a work-for-hire was in Marvel’s letter dated April 16, 2004 to Friedrich.  Fifth, “there is a genuine dispute as to whether Marvel’s exploitation of the Ghost Rider copyright during the renewal term, without paying royalties, implicitly repudiated Friedrich’s claim to ownership.”  Friedrich, Slip Op. P. 38.  Sixth, the Second Circuit noted that Marvel’s use of Ghost Rider was intermittent, and several of its uses occurred before the renewal term started.  Seventh, Marvel paid Friedrich royalties for the republication of the original comic, suggesting a possibility that Friedrich could have received royalties for the Ghost Rider movie.

Friedrich cross-appealed the lower court’s decision denying his claim of authorship.  First, the Second Circuit noted that the Copyright Act only protects expression, not ideas.  Second, even though the 1976 Copyright Act requires an express agreement that a work is a work-for-hire, Ghost Rider was created before 1978 (before the 1976 Copyright Act took effect) and therefore is governed by the 1909 Copyright Act.  The 1909 Copyright Act did not require an express agreement for a work to be work-for-hire.  The Second Circuit found material disputes as to the creation of Ghost Rider.  The Second Circuit construed the facts in Marvel’s favor, because Friedrich was the party seeking review on appeal, and found that under Marvel’s fact pattern Friedrich had nothing more than an uncopyrightable idea for a motorcycle-riding superhero.

The Second Circuit vacated the lower court’s summary judgment in favor of Marvel because of the ambiguous Agreement, the genuine dispute of material facts regarding the parties’ intent to assign the renewal rights, the timeliness of Friedrich’s claim, and the authorship of Ghost Rider.  The case was remanded back to the trial court to determine who owns the Ghost Rider and its multi-media royalty stream.