Top Gun: Maverick – A New Legal Dogfight Alleges the Sequel is an Unauthorized Derivative Work

Author: Alison Pringle

Top Gun: Maverick is the year’s highest-grossing film at the box office, but there is a copyright dispute brewing off the big screen. As audiences are aware, Top Gun: Maverick is the widely-anticipated sequel to 1986’s Top Gun, but it is likely less well known that the original film was inspired by an article. In 1983, California magazine published an article called “Top Guns” by Ehud Yonay, profiling pilots at San Diego’s Navy Fighter Weapons School in Miramar, then a naval air station and training base.

Weeks later, on May 18, 1983, Paramount secured the motion picture rights to “Top Guns” via an assignment of rights, and the credits in 1986’s Top Gun even included the following: “Suggested by Ehud Yonay’s article ‘TOP GUNS’ in California Magazine.” In 2012, Mr. Yonay passed away.

Fast forward to June 6, 2022, when Mr. Yonay’s widow and son filed a lawsuit against Paramount in the U.S. District Court for the Central District of California (ten days after the Top Gun Maverick’s US release). The Yonays argue they terminated Ehud Yonay’s assignment of rights by sending Paramount a statutory notice of termination and that the copyright in the “TOP GUNS” story reverted back to them on January 24, 2020. Their complaint alleges copyright infringement and seeks a judicial determination that Paramount does not have the rights to make a sequel based on either “Top Guns” or 1986’s Top Gun as derived from the original story. The Yonays also seek an injunction ordering Paramount be stopped from producing, exploiting, or distributing the sequel and any ancillary products.

Under 17 U.S.C. § 203(a), an author (or the author’s heirs) can terminate a copyright transfer or license upon the satisfaction of certain conditions. This section only applies if the transfer or license was granted on or after January 1, 1978 and if the work is not a work for hire. In order to terminate a transfer or license, the author must serve advance notice in writing. Such notice must comply with signature, content, form, service, and recording requirements under the statute and Copyright Office regulations. In theory, this section provides authors a potential option to renegotiate a grant or license by terminating the initial grant.

Section 203 limits the option to terminate for within a 5-year window beginning 35 years after the grant. The termination also cannot take effect until at least two years after written notice. Under this timeline, the Yonays served notice of termination on January 23, 2018, with an effective termination date of January 24, 2020.

While a termination does not affect a derivative work prepared pursuant to the initial grant (i.e. the original 1986 Top Gun) prior to termination, it does prevent preparation of new derivatives based on the original work. According to the Yonays’ complaint, the new sequel is derived from “TOP GUNS” but Paramount failed to re-acquire rights in the story prior to releasing Top Gun: Maverick. Paramount denies the sequel is derived from the original story.

Paramount and the Yonays also dispute whether Top Gun: Maverick was completed prior to January 24, 2020 (the termination notice’s purported effective date) and would thus potentially qualify as an authorized prior derivative work. Paramount announced plans for Top Gun sequel back in 2010 and reportedly filmed the sequel between 2018 and 2019 (the film’s release was delayed due to the COVID-19 pandemic), but post-production work reportedly occurred through 2020.

Time will tell whether Top Gun: Maverick is grounded or Paramount prevails.

About the author: Alison Pringle is an associate in Gordon Rees Scully Mansukhani’s Intellectual Property Practice Group. Her practice focuses on intellectual property and commercial litigation, with an emphasis on trademark, copyright, contract, technology, and privacy disputes. She also counsels clients on transactional intellectual property issues. Ms. Pringle’s biography can be found here.

Supreme Court Gives “Knowledge” New Meaning in Connection with Copyright Registrations

Author: Alison Pringle

When can a mistake excuse an inaccuracy in a copyright registration? According to the Supreme Court, a good-faith mistake of fact or law in a registration does not preclude a copyright owner from asserting a claim for infringement.

Under the US Copyright Act, copyright claimants must have a valid copyright registration before bringing a claim for infringement. If the registration contains inaccurate information, it can be determined invalid. However, while information provided in a copyright application should be accurate, the Copyright Act’s safe harbor provision in 17 U.S.C. 411(b)(1) provides that the registration is nonetheless valid unless “the inaccurate information was included on the application for copyright registration with knowledge that it was inaccurate.” (emphasis added.) Previously, courts had held that the statute only excused a good-faith mistake of fact, not a good-faith mistake of law.

The Court expanded this “knowledge” definition in 17 U.S.C. 411(b)(1) to a lack of either factual or legal knowledge through its recent ruling in Unicolors, Inc. v. H&M Hennes & Mauritz, L.P., 211 L.Ed.2d 586 (U.S. 2022).

Background of the Dispute

Unicolors is a textile company that offers fabrics with various artwork designs for use on garments. Unicolors then applies for copyright registrations over these designs. One such design was the “EH101” design—in 2011, Unicolors filed a single copyright application for EH101 and 30 other fabric designs and received a registration certificate.

H&M Hennes & Mauritz, L.P., an international clothing retailer, began selling a jacket and skirt combination in 2015 with a print called the “Xue Xu” design. Soon after, Unicolors brought copyright infringement claims against H&M in the Central District of California.

Unicolors EH101 Design

H&M Xue Xu Design

At trial, a jury found for Unicolors on its infringement claim. The jury awarded Unicolors $817,920 as a disgorgment of H&M’s profits and an additional $28,800 in Unicolors’ lost profits (later reduced to $266,209.33 on remittitur, plus Unicolor’s attorneys’ fees). H&M then moved for judgment as a matter of law on the grounds that Unicolors’ copyright registration was inaccurate and thus, by extension, Unicolors’ infringement claim failed as Unicolors had no valid copyright in the EH101 design.

H&M argued Unicolors violated Copyright Office Regulation 37 CFR §202.3(b)(4), which states a single registration covers multiple works if those works were “included in the same unit of publication.” As the copyright application at issue sought registration for 31 separate designs, H&M argued the designs needed to be included in the same unit of publication. However, the designs at issue were not first offered together. Instead, some designs were marketed publically while others were marketed only to a specific customer and withheld from Unicolors’ public showroom for several months. Thus, the registration contained inaccurate information.

Unicolors took the position that it was not aware the 31 designs it was registering together did not satisfy the Act’s requirement for a “single unit of publication” when it submitted its application.

Supreme Court Opinion

The Court held that if Unicolors “was not aware of the legal requirement that rendered information in its application inaccurate,” it therefore “could not have included that information in its application with knowledge that it was inaccurate.” The Court looked to other provisions of the Copyright Act and legislative history to support that “knowledge” in the context of 7 U.S.C. 411(b)(1)’s safe harbor provision means “actual, subjective awareness of both the facts and the law.”

In delivering the Court’s opinion, Justice Breyer made an illustrative analogy:

Suppose that John, seeing a flash of red in a tree, says, ‘There is a cardinal.’ But he is wrong. The bird is not a cardinal; it is a scarlet tanager. John’s statement is inaccurate. But what kind of mistake has John made? John may have failed to see the bird’s black wings. In that case, he has made a mistake about the brute facts. Or John may have seen the bird perfectly well, noting all of its relevant features, but, not being much of a birdwatcher, he may not have known that a tanager (unlike a cardinal) has black wings. In that case, John has made a labeling mistake. He saw the bird correctly, but does not know how to label what he saw.

Thus, the Court determined the difference between these two types of mistakes did not matter. Unicolors’ error was one of labeling (i.e., regarding the proper scope of the label “single unit of publication”). Therefore, the Court held that Unicolors’ registration was valid, and Unicolors satisfied this prerequisite for its infringement claim.

Future Implications

The impact of this ruling on copyright registrations and litigation remains to be seen, but it will have important implications for copyright applications, owners, and defendants alike. One side of the coin is reflected in the dissent, where Justice Thomas states, “The Court imposes an actual-knowledge-of-law standard that is virtually unprecedented except in criminal tax enforcement.” Generally, ignorance of the law is no excuse, but the Opinion expressly states that this principle “does not apply in this civil case concerning the scope of a statutory safe harbor that arises from ignorance of collateral legal requirements.”

On the other side of the coin, under the ruling, copyright owners appear to have more leeway to claim lack of knowledge regarding an inaccuracy in their registration applications. Nonetheless, any lack of knowledge must still be found to be in “good faith.” Willful blindness, or circumstantial evidence demonstrating an applicant was actually aware of inaccurate information, may continue to support a finding of actual knowledge.

About the author: Alison Pringle is an associate in Gordon Rees Scully Mansukhani’s Intellectual Property Practice Group. Her practice focuses on intellectual property and commercial litigation, with an emphasis on trademark, copyright, contract, technology, and privacy disputes. She also counsels clients on transactional intellectual property issues. Ms. Pringle’s biography can be found here.

SCOTUS to Review Intent Standard for Invalidation of Copyright Registrations

Author: Reid Dammann

Under the current version of the Copyright Act, registration of a copyright claim is not a condition of copyright protection. 17 U.S.C. § 408(a). However, a certificate of copyright registration is a prerequisite to bringing a civil copyright infringement action. See 17 U.S.C. § 411(a). By statute, a certificate of registration satisfies this prerequisite “regardless of whether the certificate contains any inaccurate information,” unless the following two-part test is met: “(A) the inaccurate information was included on the application for copyright registration with knowledge that it was inaccurate; and (B) the inaccuracy of the information, if known, would have caused the Register of Copyrights to refuse registration.” 17 U.S.C. § 411(b)(1).

Section 411(b)(2), in turn, requires that courts seek the advice of the Register of Copyrights before finding that a certificate of registration does not support an infringement action. Palmer/Kane LLC v. Rosen Book Works LLC, 188 F. Supp. 3d 347, 348 (S.D.N.Y. 2016) (“[C]ourts are in agreement that the provision is mandatory in nature[.]”) (citing DeliverMed Holdings, LLC v. Schaltenbrand, 734 F.3d 616, 623 (7th Cir. 2013) (“Instead of relying solely on the court’s own assessment of the Register’s response to an inaccuracy, the statute obligates courts to obtain an opinion from the Register on the matter.”)). In other words, a court must first obtain the Register’s guidance before finding that the provision of knowingly inaccurate information would have caused the Register to refuse registration. Although the statute by its terms requires a referral “in any case in which inaccurate information described under [§ 411(b)(1)] is alleged,” 17 U.S.C. § 411(b)(2), to protect against the potential for abuse inherent in this process, courts generally agree that they may first require the party seeking invalidation to establish as a factual matter that “(1) the registration application included inaccurate information; and (2) the registrant knowingly included the inaccuracy in his submission to the Copyright Office.” Palmer/Kane LLC, 188 F. Supp. 3d at 349.

Thus, before referring the issue to the Register, a court may determine whether the allegedly inaccurate information is, in fact, inaccurate. Where the factual record is insufficient to make such a determination, a court may choose to “await further factual development at the summary-judgment stage or at trial before issuing a referral.” King-Devick Test Inc. v. NYU Langone Hosps., 17-CV-930 (JPO), 2019 WL 3071935, at *9 (S.D.N.Y. July 15, 2019). If a court ultimately determines that a registration contains inaccuracies, the Register will then “advise the court whether the inaccurate information, if known, would have caused the Register of Copyrights to refuse registration.” 17 U.S.C. § 411(b)(2). The Court “must request a response from the Register before coming to a conclusion as to the materiality of a particular misrepresentation.” DeliverMed Holdings, LLC, 733 F.3d at 623-25 (discussing the “new procedure for courts confronted with a registration allegedly obtained by knowing misstatements in an application”).

Recently, the United States Supreme Court granted certiorari in Unicolors, Inc. v. H&M Hennes & Mauritz.1 In this case, Unicolors submitted thirty-one fabric designs to the U.S. Copyright Office, but indicated that all thirty-one designs were published as a bundle, presumably, to save fees. However, the Ninth Circuit has held that a collection of works may be registered under a single-unit registration only when the works were first published in a singular, bundled unit. Here, Unicolors testified at trial that some of the designs included in the single-unit registration were published to different customers at different times, so its submission of all thirty-one images as a “collection” contained known inaccuracies. The District Court did not request the Register of Copyrights’ insight because it held that invalidation required a showing at trial that Unicolors intended to defraud the Copyright Office—which was not shown. The Ninth Circuit remanded the case to the District Court on the grounds that the District Court erred by imposing an intent-to-defraud requirement for registration invalidation and erred in concluding that Unicolors’s application for copyright registration did not contain inaccuracies despite the inclusion of confined designs. The issue presented to the United States Supreme Court, is whether 17 U.S.C. § 411 requires referral to the Copyright Office where there is no indicia of fraud or material error as to the work at issue in the subject copyright registration.

As part of its argument, Unicolors asserts that the Ninth Circuit ruling creates a circuit split with the Eleventh Circuit, which holds that scienter is necessary. See Roberts v. Gordy, 877 F.3d 1024, 1029-30 (11th Cir. 2017) (holding that 411(b)(1) requires a showing of “intentional or purposeful concealment of relevant information” to render a registration invalid). Unicolors argues that the Eleventh Circuit in Gordy noted that the promulgation of the PRO-IP Act, which, according to the Gordy court, “amends section 411 of the Copyright Act to codify the doctrine of fraud on the Copyright Office in the registration process,” ostensibly reaching the opposite conclusion as the H&M panel. Id.

Unicolors argues that several opinions in the Ninth Circuit have implied that there is an intent-to-defraud requirement for registration invalidation. See L.A. Printex Indus., Inc. v. Aeropostale, Inc., 676 F.3d 841, 853-54 (9th Cir. 2012); see also Lamps Plus, Inc. v. Seattle Lighting Fixture Co., 345 F.3d 1140, 1145 (9th Cir. 2003) (stating that inaccuracies “do not invalidate a copyright… [unless] the claimant intended to defraud the Copyright Office by making the misstatement”) (quoting Urantia Found. v. Maaherra, 114 F.3d 955, 963 (9th Cir. 1997)); Three Boys Music Corp. v. Bolton, 212 F.3d 477, 486-87 (9th Cir. 2000).

Unicolors further argues that the Ninth Circuit’s supposed misinterpretation of 17 U.S.C. 411(b) contravenes legislative and administrative guidance, and that its position is in line with the relevant administrative and legislative bodies as well as the leading copyright treatise. According to Unicolors, these cited authorities correctly interpret that the PRO-IP Act codifies the doctrine of fraud on the Copyright Office. See U.S. Copyright Office, Annual Report of the Register of Copyrights, Fiscal Year Ending September 30, 2008 12–13 (2008) (“passage of the PRO IP Act strengthens the intellectual property laws of the United States” and specifically, “it amends section 411 of the copyright law to codify the doctrine of fraud on the Copyright Office in the registration process.”); see also U.S. Copyright Office, Annual Report of the Register of Copyrights, at 9 (2009) (Copyright Office further clarified that subsection (b) was added to section 411 “to create a new procedure for infringement actions [ . . . ] on issues that may involve fraud on the Copyright Office.”); 2 MELVILLE NIMMER AND DAVID NIMMER, NIMMER ON COPYRIGHT 7.20 (2018) (“[t]he legislative history for the PRO IP Act explains that the amendment aims to close the loophole whereby ‘intellectual property thieves’ argue ‘that a mistake in the registration documents, such as checking the wrong box on the registration form, renders a registration invalid and thus forecloses the availability of statutory damages’”).

Unicolors also contends that not only is there a split in the Eleventh Circuit, but also that there is a split in the Third Circuit because the Third Circuit requires an “intentional omission” of a material fact to invalidate, noting that “mere inadvertence,” is “insufficient.” See Mon Cheri Bridals, Inc. v. Wen Wu, 383 F. App’x 228, 232 (3d Cir. 2010) (citations omitted). Unicolors also posits that there is a further split in the Seventh Circuit, which has indicated, though not explicitly held, that 411(b)(1) requires a showing of fraud as well. In analyzing applicability of 411(b)(1), the Seventh Circuit in DeliverMed Holdings, LLC, 734 F.3d at 616, 625, fn.3, referred to the statutory provision as “the fraud on the Copyright Office inquiry” and weighed facts to determine if there was a knowing misrepresentation sufficient to seek to invalidation.

H&M’s position is that there is no circuit split, Roberts v. Gordy is an outlying case, and that this exact issue in this matter has already been presented to the United States Supreme Court, who previously denied certiorari. See Gold Value v. Sanctuary Clothing, 925 F.3d 1140 (9th Cir. 2019), cert. denied (no such intent-to-defraud requirement). Further, H&M argues that the statutory language is clear and that there is no need to consult legislative history. H&M argues that the plain meaning of the statute controls – stating “[a]s this Court has stated repeatedly, ‘when the meaning of the statute’s terms is plain, our job is at an end. The people are entitled to rely on the law as written, without fearing that courts might disregard its plain terms based on some extra-textual consideration.” Bostock v. Clayton County, Georgia, 140 S. Ct. 1731, 1749 (2020) (citing Carcieri v. Salazar, 555 U.S. 379, 387 (2009)). The express languge of 411(b) states only that the “inaccurate information was included on the application for copyright registration with knowledge that it was inaccurate[,]” and thefore, by the statutory plain terms, a higher degree of scienter—i.e., fraud—is not required. 17 U.S.C. § 411(b)(1)(A).

Intent-to-defraud requires that one willfully deceives, with intent to induce another to alter position to the other’s injury or risk. This could come in the form of an intentional misrepresentation, negligent misrepresentation, concealment, or a false promise. Courts generally provide that fraud requires a misrepresentation, knowledge that the misrepresentation is false, intent to deceive, justifiable reliance by the victim, and resulting damages, so it is plain to see that a decision by the United States Supreme Court in this matter effectively determines whether it will be more difficult to invalidate a copyright registration in future copyright litigation.

About the author: Reid Dammann is a partner in Gordon Rees Scully Mansukhani’s Intellectual Property Practice Group. His practice focuses on litigation matters involving copyright, trademarks, trade secrets, and patents, with a particular emphasis on software. Mr. Dammann is a registered patent attorney with an advanced dual degree in Computer Science and Electrical Engineering. Mr. Dammann’s biography can be found here.
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1 959 F.3d 1194 (9th Cir. 2020)

An NFT Called “Copyright Infringement”

Author: Hannah Brown

This story begins in 1982, when Andy Warhol met Jean-Michel Basquiat. Warhol and Basquait, two famous and successful artists, agreed to collaborate on an exhibition. In 1985, photographer Michael Halsband went to dinner with Basquait, which led to Halsband agreeing to photograph the poster for Basquait and Warhol’s collaborative to be titled “Paintings.”1 Halsband then took this famous picture of Warhol and Basquait on July 10, 1985:

This photo has been referred to as “perhaps one of the most iconic portraits of the two artists.”2

Fast forward to 2019, and enter New York artist CJ Hendry. Hendry is known for her realistic and incredibly detailed drawings. Hendry created an illustration based on Halsband’s photograph. Halsband sent Hendry a cease and desist letter, claiming copyright infringement.3 Halsband demanded that Hendry destroy her work. Complying, Hendry spray-painted over the piece. A screenshot of Hendry’s Instagram story shows the final result:

In fact, Hendry recorded herself spray-painting over the image with black paint:4

But, where things get really interesting is what Hendry did next. She turned the video into an NFT, or non-fungible token, and explained infra, and put it up for auction. The NFT was titled “Copyright Infringement.” As of April 16, 2021, the NFT was listed for sale at $6,685 at SuperRare.com.5 A search of SuperRare’s website shows Hendry’s NFT is no longer for sale on the site. How much the NFT sold for, if at all, is unknown.

Before diving into the issue of NFTs and Hendry’s video, the first issue is, did Hendry infringe Halsband’s work with her drawing of the photo? The answer is likely yes. Hendry creates incredible and realistic drawings. A quick look at her Instagram account shows her true talent and the realistic and detailed art that she can create with (what appears to be) colored pencils.

While an image of Hendry’s drawing of Halsband’s photograph is not available on her Instagram account, the below screenshot of her Instagram story gives us an idea of what it must have looked like:

It appears Hendry more or less reproduced the photograph in her drawing. A copyright of a work of art may be infringed by reproduction of the object itself. Home Art Inc. v. Glensder Textile Corp., 81 F.Supp. 551 (S.D.N.Y. 1948) (oil painting reproduced in scarf); Leigh v. Gerber, 86 F.Supp. 320 (S.D.N.Y. 1949) (painting reproduced by publication without consent in a magazine).

After receiving the cease and desist letter, Hendry took to Instagram to express her frustration with Halsband and his legal team, saying that she looks up to Halsband, and wondering how her drawing could not be seen as a compliment to him and his work. As noted above in her Instagram post, Hendry notes she was never going to sell the piece and was never going to profit off of it. However, a person can be liable for copyright infringement even if they have not gained profits from the infringing work. A plaintiff may recover statutory damages “whether or not there is adequate evidence of the actual damages suffered by plaintiff or of the profits reaped by defendant,” Harris v. Emus Records Corp., 734 F.2d 1329, 1335 (9th Cir. 1984), “‘to sanction and vindicate the statutory policy’ of discouraging infringement.” Peer Int’l Corp. v. Pausa Records, Inc., 909 F.2d 1332, 1336 (9th Cir. 1990) (quoting F.W. Woolworth Co. v. Contemporary Arts, Inc., 344 U.S. 228, 232 (1952)).6

Hendry could argue that her work was fair use of Halsband’s photograph under 17 U.S.C. § 107. In analyzing fair use, courts consider: (1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and (4) the effect of the use upon the potential market for or value of the copyrighted work. Id. But, as noted, Hendry did not take this issue to court and did not fight Halsband’s claim with a fair use defense. Instead, she destroyed the work and sold the video of her doing so as an NFT.

A brief explanation of an NFT is helpful. NFT stands for non-fungible token. NFTs are digital files, for example videos or digital art, and the buyer of the NFT gets to claim that they own the original digital work.7 NFTs are called “non-fungible” because they are unique, original, and cannot be interchangeable (unlike dollars bills or Bitcoin currency.) Your first thought may be: why would anyone ever pay for a digital work that they could download for free? You’re not alone in this thought, and as one author put it: “If all of this sounds bizarre, that’s because it is. The idea of paying for the symbolic ownership of a digital image that lives somewhere on the web and can be captured on a screenshot or right-click-download within seconds, is so alien it seems either idiotic or ironic.”8 But there is certainly a market for them, with videos and tweets selling for hundreds of thousands or millions of dollars.9

This leads to two other questions: (1) Does Hendry’s video of her painting over her drawing created using Halsband’s photograph, constitute copyright infringement? and (2) Can Hendry then copyright that video/NFT?

The answer to the first question is: maybe. While certainly Hendry’s video of her spray painting over her work is original content, it is likely that the video contains, at least in part, an image of Halsband’s copyrighted photograph (see the image above showing the drawing as Hendry begins to paint). However, it is also possible that her use of the photograph in the video as a whole was de minimis. “For an unauthorized use of a copyrighted work to be actionable, the use must be significant enough to constitute infringement.” Newton v. Diamond, 388 F.3d 1189, 1192–93 (9th Cir. 2004). “Even where there is some copying, that fact is not conclusive of infringement. Some copying is permitted. In addition to copying, it must be shown that this has been done to an unfair extent.” West Publ’g Co. v. Edward Thompson Co., 169 F. 833, 861 (E.D.N.Y.1909). If Hendry created a lengthy video of the spray painting, and the photograph was only in a small portion of that video, it is possible that this would not constitute infringement if her use of the photo was minimal when looking at the video as a whole.

The answer to the second question is: the NFT likely meets the criteria for copyrightability, but Halsband would probably object to the NFT becoming copyrighted. To be copyrightable, a work must be original and fixed in a tangible medium of expression. Hendry’s video of herself is original content (non-fungible literally means original and unique). But, the video would include Halsband’s copyrighted image. A copyright including another copyrighted image could lead to issues. Indeed, Hendry even titled her work “Copyright Infringement”!

In an analogous situation: a person cannot copyright a video of themselves if that video contains another’s copyrighted song. You may have heard of Nathan Apodaca, better known as 420Doggface208, or the man who went viral while skateboarding, drinking juice, and listening to Fleetwood Mac. Apodaca attempted to mint the video of himself as an NFT. But, because the video contained copyrighted material, i.e. the song, Stevie Nicks allegedly would not agree to Apodaca creating an NFT featuring her song.10

In fact, Halsband probably could have objected to Hendry making the video into an NFT, and profiting off of it, in the first place, due to use of his photograph. Halsband had sent Hendry a cease and desist letter already, and nothing would have stopped him from doing so again, this time requesting she desist from selling the NFT in an auction. Certainly, the point of Hendry’s NFT was to destroy what Halsband deemed an infringing work, and the NFT contained an image of that work. But, as noted above, Halsband may lose due to the de minimis defense.

With NFTs becoming more and more popular and profitable, this leads to an important piece of advice for anyone looking to create an NFT: consider whether your NFT is using another’s intellectual property. This could be use of a copyrighted image or even a song within the NFT. There does not appear to be any intellectual property requirements for creating an NFT; the creator does not have to certify that their work is completely their own creation.11 There is no agency needed to “approve” or “register” the NFT like is done when one seeks to register a copyright or trademark. It is important for creators of NFTs to review their work to ensure it is their original content, or that they have the permission from the author of the work, and that nothing they are putting online will get them in trouble.

About the author: Hannah Brown is an associate and member of Gordon Rees Scully Mansukhani’s Intellectual Property Practice Group, specializing in trademark, copyright, and patent litigation. She is a former law clerk to the Hon. Janis Sammartino and Hon. Cynthia Bashant of the U.S. District Court, Southern District of California.
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1 https://www.swanngalleries.com/news/photographs-and-photobooks/2020/06/the-making-of-a-portrait-michael-halsbands-photograph-of-andy-warhol-and-jean-michel-basquiat/
2 https://www.swanngalleries.com/news/photographs-and-photobooks/2020/06/the-making-of-a-portrait-michael-halsbands-photograph-of-andy-warhol-and-jean-michel-basquiat/
3 https://hypebeast.com/2021/4/cj-hendry-copyright-infringement-nft-auction-superrare-release
4 https://hypebeast.com/2021/4/cj-hendry-copyright-infringement-nft-auction-superrare-release
5 https://hypebeast.com/2021/4/cj-hendry-copyright-infringement-nft-auction-superrare-release
6 This would be different if Hendry were fighting a criminal copyright infringement claim. To prevail on an allegation of criminal copyright infringement, a plaintiff must establish “infringement, that the infringement was willful, and that it was engaged in for profit.” Mattel, Inc. v. MGA Ent., Inc., 782 F. Supp. 2d 911, 1042 (C.D. Cal. 2011) (quoting United States v. Bily, 4066 F. Supp. 7266, 733 (E.D. Pa. 1975)).
7https://www.theverge.com/22310188/nft-explainer-what-is-blockchain-crypto-art-faq
8 https://www.wired.com/story/nfts-boom-collectors-shell-out-crypto/
9 .
10 https://www.lamag.com/article/nft-law-copyright/
11 https://help.foundation.app/en/articles/4742869-a-complete-guide-to-minting-an-nft#:~:text=Mint%20your%20NFT%3A%20Confirm%20that,the%20same%20with%20your%20wallet.

Is Fair, Fair? A Look into the Supreme Court’s Landmark Decision in Google v. Oracle

Author: Ross Kirkbaumer

After a decade of back-and-forth battles in the district and circuit courts, the Supreme Court ruled that Google’s copying of Sun Java’s API was fair use, reversing the Federal Circuit’s ruling that Google’s copying was not a fair use.[1]

Facts

Google obtained a startup firm by the name of Android, Inc. with the goal to develop a software platform for smartphones. Google wanted the Android platform to be “free and open, such that software developers could use the tools found there free of charge.”

During this time, programmers were familiar with using a programming language known as Java created by Sun Microsystems (“Sun”) on its Java SE platform. Google began speaking with Sun about possibly licensing the entire Java platform for the Android smartphone technology, but negotiations were halted, and Google started building a new platform.

Since programmers were already familiar with Java, Google copied around 11,500 lines of code from the Java SE platform so that programmers would be able to easily work with the Android platform. The 11,500 lines of code were part of tool called an Application Programming Interface (“API”).

Specifically, Google copied the “‘declaring code,’ instructions that describe pre-written programs in Java.”[2] According the Court, “[W]ithout that copying, programmers would need to learn an entirely new system to call up the same tasks.”

Fair Use

Under the Copyright Act, 17 U.S.C. § 107:

“[T]he fair use of a copyrighted work . . . for purposes such as criticism, comment, news reporting, teaching . . . scholarship, or research, is not an infringement of copyright. In determining whether the use made of a work in any particular case is a fair use the factors to be considered shall include—

(1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;

(2) the nature of the copyrighted work;

(3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and

(4) the effect of the use upon the potential market for or value of the copyrighted work.

The Majority Decision

With Justice Breyer delivering the opinion for the majority, the Court decided not to take up the issue of whether the lines of code were copyrightable stating that “purely for argument’s sake . . . the entire Sun Java API falls within the definition of that which can be copyrighted.” As discussed below, the Court held that the four factors above weighed in favor of fair use.

First Factor

The Supreme Court stated that the copied declaring code “embodies a different form of creativity,” highlighting the fact that Sun’s intent was to attract programmers and to make its API “open.” Additionally, the Supreme Court contrasted the declaring code from computer programs by explaining the declaring code’s significance “lies in its efforts to encourage programmers to learn and to use [Sun Java’s API] so that they will use (and continue to use) Sun-related implementing programs that Google did not copy.”

Accordingly, the Court concluded that “the declaring code is, if copyrightable at all, further than most computer program[s] . . . from the core of copyright.” Because of this, the nature of the declaring code weighed in favor of fair use.

Second Factor

By examining the purpose and character of the work, the Court stated that Google’s purpose of using the Sun Java API was to create new products by expanding the use and usefulness of the Android-based smartphones. The Court explained that “[T]o the extent that Google used parts of the Sun Java API to create a new platform that could be readily used by programmers, its use was consistent with that creative ‘progress’ that is the basic constitutional objective of the copyright itself.”

The Court emphasized that the jury during the district court proceeding heard a variety of ways in which re-implementing an interface can further the development of computer programs: (1) shared interfaces are necessary for different programs to speak to each other; (2) re-implementation of interfaces is necessary if programmers are able to use their acquired skills; (3) reuse of APIs is common in the industry; (4) Sun had used pre-existing interfaces in creating Java; and (5) Sun executives thought that widespread use of the Java programming language would benefit the company.

Since the purpose and character of Google’s copying was transformative, this factor weighed in favor of fair use.

Third Factor

With respect to the third factor, the Court contemplated whether the 11,500 lines of code should be viewed in isolation or as one part of the greater whole. The Court noted that Google did not copy the lines of code because of their creativity or beauty, but because programmers had already learned to work with Sun Java API’s system and it would have been incredibly difficult to attract programmers to build its Android smartphone system without the lines of code.

The Court ultimately held that “Google’s basic objective was not simply to make the Java programming language usable on its Android systems. It was to permit programmers to make use of their knowledge and experience using the Sun Java API when they wrote new programs for smartphones with the Android platform.” Therefore, the substantiality factor weighed in favor of fair use.

Fourth Factor

For this particular factor, the Court pointed out that it must consider the amount of money that Oracle might lose, the source of the loss, and the public benefits the copying will likely produce.

With respect to the amount of money lost, the Court explained that the jury could have found that Google and Android did not harm the actual or potential markets for Java SE. The Court noted that based on the evidence, Sun was poorly positioned to succeed in the mobile phone market and there was evidence that Android and Java SE were operating in two distinct markets.

In addressing the source of the loss, the Court stated that Google’s copying helped it make “a vast amount of money” and enforcement by Oracle could have given Oracle “a significant share of these funds.” The Court, however, affirmed this sub-factor weighed in favor of Google because the “source of Android’s probability ha[d] much to do with third parties’ . . . investment in Sun Java programs.”

In discussing the public benefits, the Court noted strongly that Oracle’s enforcement would risk harm to the public because the enforcement could have inhibited “creative improvements, new applications, and new uses developed by users who have learned to work with that interface.”

Since all four factors weighed in favor of fair use, the Supreme Court reversed the Federal Circuit’s decision against Google.

What About Justices Thomas & Alito?

In the dissenting opinion,[3] Justice Thomas did not understand why the majority avoided the principal question of whether declaring code is protected by copyright law. According to Justice Thomas, declaring code is copyrightable.

Additionally, Justice Thomas opined that the Federal Circuit was correct in determining that the harm Google cause to Oracle was overwhelming because “Google eliminated the reason manufacturers were willing to pay to install the Java platform,” and “Google interfered with opportunities for Oracle to license the Java platform to developers of smartphone operating systems.”

Impact of Google’s Victory

While the Supreme Court hailed Google as the victor, the jury is still out with respect to who benefits most from this decision. Professor Johnathan Barnett from the University of Southern California, Gould School of Law stated that “the devaluation of IP rights under rulings such as Google v. Oracle is likely to discourage investment by (and in) the inventors, artists, and entrepreneurs who stand at the foundation of a robust innovation economy.”[4] Chicago-Kent College of Law professor Lori Andrews asserts that the Court’s decision was “good news for developers looking to further interoperability of programs” and can have potential benefits for consumers.[5] Further, the Copyright Alliance believes that the decision “‘has the potential’ to broaden the fair use doctrine, something that would open the door to greater unauthorized use of copyrighted material,” and possibly more lawsuits.[6]

A copy of the Court’s opinion can be accessed here.

About the author: Ross Kirkbaumer is an associate and member of Gordon Rees Scully Mansukhani’s Intellectual Property Practice Group. His practice focuses on intellectual property enforcement and litigation. His bio can be found here.
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[1] Justices Breyer, Roberts, Sotomayor, Kagan, Gorsuch, and Kavanaugh ruled in favor of fair use while Justices Thomas and Alito dissented. Justice Amy Coney Barrett did not take part in the consideration of the decision.
[2] Steven Tepp, Google v. Oracle Perspective: Google’s Android ‘Cheat Code’ was to Copy Oracle’s Code, IPWatchdog https://www.ipwatchdog.com/2020/08/05/google-v-oracle-perspective-googles-android-cheat-code-copy-oracles-code/id=123789/.
[3] Justice Thomas filed the dissenting opinion, in which Justice Alito joined.
[4] Johnathan Barret, Have tech platforms captured the Supreme Court?, The Hill https://thehill.com/opinion/judiciary/548813-have-tech-platforms-captured-the-supreme-court.
[5] Madeleine Carlisle, How Google’s Big Supreme Court Victory Could Change Software Forever, Time https://time.com/5952718/google-oracle-supreme-court/.
[6] Ted Johnson, Supreme Court Rules For Google Over Oracle In Closely Watched “Fair Use” Copyright Case; Industry Groups Express Concerns Over Impact On Content Protection, Deadline https://deadline.com/2021/04/google-supreme-court-oracle-motion-picture-association-1234727628/.

A Positive Shift: The Music Modernization Act and Gaining Better Access to Royalty Payments

Author: Ross Kirkbaumer

Signed into law on October 11, 2018 the Orrin G. Hatch–Bob Goodlatte Music Modernization Act (“MMA”) was enacted “to address many of the ancient inequities in our copyright laws that stand between music creators and fair compensation.”1 The bipartisan bill finally recognized the need for the law to catch up with the music industry in the digital age. Recording Industry Association of America President Mitch Glazier stated that “[t]he public policy rationale for the bill’s reforms was demonstrable,” adding that “[t]he gaps or inequities in the laws we were seeking to change were obvious, glaring and indefensible.”2

Title I of the MMA was designed to better improve licensing and royalty payments for songwriters. Before the MMA, digital music providers (“DMPs”) such as Spotify, Apple Music, and Tidal served a notice of intention to obtain a compulsory song-by-song license to either the copyright owner or to the Copyright Office (the “Office”) if the owner was not identified. Instead of going through this process, the MMA now authorizes a blanket licensing system for DMPs to make and distribute downloads or interactive streams of music. These blanket licenses will be administered by a mechanical licensing collective (“MLC”). The purpose of the MLC is to “receive notices and reports from DMPs, collect and distribute royalties, and identify musical works and their owners for payment.”3 A digital licensing coordinator (“DLC”) was designated by the Office to represent licensees (the DMPs) in royalty proceedings.

Since the blanket licenses cannot be given until January 1, 2021, the MMA includes rules and regulations for DMPs during this “transition” period. During this period, DMPs seeking to obtain a compulsory license must continue to do so on a song-by-song basis and DMPs must also serve a notice of intention if the copyright owner is known. If the copyright owner is not known, however, the DMPs do not need to obtain a compulsory license as long as the DMPs, using good faith and commercially reasonable efforts, continue to search for the identity of the copyright owner. If the owner is still unknown on the first day of 2021, then the digital music provider must transfer the royalties to the MLC. This process is referred to by the Office as the limited liability exception.

In order to be eligible for the limitation on liability, one of three scenarios must occur. First, if the DMPs are successful in identifying and locating the copyright owner, they must provide statements of account and pay the royalties to the copyright owner. In the second and third scenarios, the DMPs are not able to locate and identify the copyright owner by the end of the calendar month in which the work was first used. If this is the case, the DMPs must accrue and hold the royalties. If the copyright owner is identified before the blanket license is available, the DMPs must pay the copyright owner the royalties. If the copyright owner is still not identified by January 1, 2021, the DMPs must transfer the royalties to the MLC along with a cumulative statement of account that includes information that would have been provided to the owner had the DMPs knew of the identity of the owner.4

When the transition period rule was publicized, the Office stated that “[t]he intent of the legislation does not signal to the [O]ffice that it should be overhauling its existing regulations during the transition period before the blanket license becomes available.”5 When the Office provided the opportunity for public comments, both the MLC and DLC responded.

The MLC recommended that the cumulative statements of account provided by the DMPs should be delivered at the end of the transition period instead of the pre-existing monthly statements. The MLC also proposed that the statements include additional information including per-play allocations, information about matched shares of a musical work where unmatched shares for the work are reported, information about any applicable earned interest, and information about any claimed or applied deductions or adjustments to the aggregate accrued royalties payable. The DLC claimed that the Office is restricted and cannot require DMPs to provide additional information since it is impractical for DMPs to provide such information and doing so went against the requirements of the MMA. The Office agreed with the MLC, stating that it is “necessary and appropriate to require DMPs to provide additional information to aid the MLC in fulfilling its statutory duty to identify and locate the copyright owners of unmatched works and pay the royalties due to them.”6

The DLC proposed that DMPs should not be required to accrue any royalties that are required to be paid to copyright owners pursuant to any agreements entered into prior to January 1, 2021. The DLC argued that because some DMPs will be required to pay some amount of accrued unmatched royalties to publishers with whom they have direct deals, it will create a conflict between the pre-existing agreement and the MMA. The MLC countered the DLC’s proposal, claiming that it conflicted with the MMA’s requirement that all royalties of the unmatched work be transferred to the MLC. The Office stated that this issue may be best resolved by determining whether a given agreement constitutes a valid license; if the work is matched, then it does not need to be reported to the MLC. Additionally, the Office stated the issue may be better resolved by the relevant parties looking at the language of the agreement rather than a blanket rule given by the Office. While admitting that the issue is nuanced and complicated, the Office declined the DLC’s proposal.

The last day for the public to provide comments on the proposed changes to the transition period transfer and reporting of royalties was on August 17, 2020. GRSM will provide relevant updates regarding the Office’s decision.

About the author: Ross Kirkbaumer is an associate in the Seattle office of Gordon Rees Scully Mansukhani and a member of the firm’s Intellectual Property Practice Group. With a background in intellectual property enforcement, Mr. Kirkbaumer’s interests include copyright and trademark litigation as well as anti-counterfeiting enforcement.
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1 House Introduces Comprehensive Music Licensing Reform Legislation, Sound Exchange https://www.soundexchange.com/news/house-introduces-comprehensive-music-licensing-reform-legislation/.
2 Mitch Glazier, The Music Modernization Act: An Industry Speaking With One Voice (Guest Column), Variety https://variety.com/2018/biz/news/music-modernization-act-guest-post-1202957944/.
3 Musical Works Modernization Act, Copyright.gov https://www.copyright.gov/music-modernization/115/.
4 Music Modernization Act Transition Period Transfer and Reporting of Royalties to the Mechanical Licensing Collective, 85 Fed. Reg. 43,518 (July 17, 2020).
5 Id.
6 Id. at 43,519.

SDNY: Instagram Sublicense Protects Against Liability for Embedding of Public Posts

Author: Kara Kaplan

As is the case for most social media networks, photos and videos can be shared in seconds and thousands of users can view the same image or video within the first few moments after clicking the post. And, in a matter of minutes, that new funny photo or quarantine workout can be shared with hundreds of followers.

So, how are intellectual property rights being protected in the chaos of evolving social media? More specifically, what is the effect on your intellectual property rights if you have a public profile? In a recent decision, Sinclair v. Mashable Ziff Davis, LLC and Mashable, Inc., No. 18-CV-790 (KMW), 2020 U.S. Dist. LEXIS 64319, at *2 (S.D.N.Y. Apr. 13, 2020), the United States District Court for the Southern District of New York ruled that a photographer’s public Instagram post could be used on other websites, without her prior approval, as a result of Instagram’s Terms of Use.

Copyright & Instagram – Terms of Use

Instagram is one of the most popular social media platforms to date. It allows members to access and share photographs or videos. Accounts can be either private or public. Private accounts require the account holder’s permission to follow the account and see posts or stories. Public accounts do not, and posts are readily available for anyone to see.

In the past, it has been generally understood that in order to avoid copyright infringement, you should obtain permission prior to re-posting or sharing an image, story or video on social media platforms. However, the court in Sinclair concluded that Plaintiff’s claims against Mashable, who re-posted Sinclair’s public Instagram post containing a photograph on Mashable.com, failed as a matter of law and granted Mashable’s motion to dismiss even though Mashable did not have direct authorization from Sinclair for the re-post.

Plaintiff Stephanie Sinclair is a gender and human rights photographer known for her visual expressions of those issues around the world. In this case, Sinclair claimed she owns an exclusive United States copyright in the image titled “Child, Bride, Mother/Child Marriage in Guatemala,” a photograph she took herself and posted to her public Instagram page.

Defendant Mashable, an entertainment and media website, contacted Sinclair and sought a license for that photograph to use in an article for publication on its website. Sinclair was offered $50 for licensing rights. She declined the offer. Mashable posted the article and used Sinclair’s photograph anyway. Sinclair demanded the photograph be taken down, Mashable refused and the lawsuit ensued.

Mashable filed a motion to dismiss the operative complaint, on the primary grounds that it was a sublicensee of Instagram, who granted Mashable sublicensing rights for the re-post. The court agreed, holding that Mashable’s re-post of the photograph was authorized pursuant to a valid sublicense from Instagram.

It is well-recognized that a copyright owner may license her rights to works. And where those licenses permit sub-licenses, the copyright owner cannot bring an infringement lawsuit against that sublicensee. United States Naval Inst. v. Charter Commc’ns Inc., 936 F. 2d 692, 695 (2d Cir. 1991).

Here, the Court reasoned that when Sinclair created an Instagram account, she agreed to Instagram’s Terms of Use. Instagram’s Terms of Use state that all users, including Sinclair, “grant to Instagram a non-exclusive, fully paid and royalty-free, transferrable, sub-licensable, worldwide license to the Contract that you post on or through [Instagram], subject to [Instagram’s] Privacy Policy,” which details the difference between a public and private account.

The important and relevant difference in this case, and between a private and public account, is Instagram’s API. The API allows public posts to be searchable, subject to use, and enables users to embed public content on their websites. Ultimately, because Sinclair posted “Child, Bride, Mother/Child Marriage in Guatemala” on her public Instagram page, she agreed to permit websites, including Mashable, to embed her photograph to its website. According to Instagram’s Terms of Use, such websites are Instagram’s sublicensees.

Sinclair’s rejoinder was that the user agreements are “circular,” “incomprehensible,” and “contradictory;” but the Court disagreed and ruled in favor of Mashable, citing precedent where many similar types of terms of use are upheld as enforceable agreements. The Court stated, “by posting the Photograph to her public Instagram account, [Sinclair] made her choice. This Court cannot release her from the agreement she made.” This case certainly is neither the first nor the last to arise as a result of an Instagram post. Critics argue that this ruling could be detrimental to the creative individuals who rely upon social media exposure for business promotion and growth, while proponents laud the ruling as furthering the social nature of social media platforms like Instagram—i.e., to share content among users.

About the author: Kara Kaplan is an associate in Gordon Rees Scully Mansukhani’s Intellectual Property Practice Group. Her practice focuses on transactional and litigation matters involving copyrights, trademarks, and trade secrets. Ms. Kaplan’s biography can be found here.

Who Owns the Ink?

Author: Jill Ormond

U.S. copyright laws provide creators the rights to (1) reproduce a work, (2) prepare derivative works, (3) distribute copies of the work, (4) publicly perform the work, and (5) publicly display the work. 17 U.S.C. § 106.

Questions related to these rights arise when an artist creates a tattoo either from his/her design or with input from the client and then inks the tattoo on the client. What rights does the artist retain? Do any of the rights pass to the tattoo recipient? If so, what rights pass? With the increasing popularity of tattoos inked on people including celebrities who frequently appear in public and whose images are reproduced, these questions are becoming legal questions for courts to consider. Most recently, the United States District Court Southern District of New York considered these issues in Solid Oak Sketches, LLC (“Solid Oak”) v. 2K Games, Inc. and Take-Two Interactive Software, Inc. (“Take-Two”), Case No. 16-CV-724-LTS-SDA. See March 26, 2020 Memorandum Opinion and Order.

Solid Oak obtained exclusive copyright licenses from tattoo artists for five tattoos the artists inked on professional basketball players Eric Bledsoe, LeBron James, and Kenyon Martin. One tattoo was based on a photograph provided by a player, the other tattoos included traditional tattoo images (grim reaper, flames, basketball, stars, script, and numbers). Each was created with input from the player. The license agreement was done after the designs had been inked on the players. The rights Solid Oak licensed were not for the application of the tattoos to a person but for use in a clothing line that never came to fruition. According to the case record, Solid Oak’s owner testified that before moving forward with selling apparel he would “need permission from the players . . . to not infringe on their right of publicity.”

Take-Two is a video game developer that annually releases a basketball simulation video game that includes realistic renderings of NBA teams and players. Take-Two licenses its rights to depict the logos, uniforms, and players’ likenesses in their video games from the NBA. Solid Oak alleged that Take-Two infringed its copyrights by including the five tattoos on NBA players Eric Bledsoe, LeBron James, and Kenyon Martin appearing in its video games. After licensing the tattoo designs from the artists, Solid Oak sought to impose an obligation on the NBA players and the video game developer working with them to obtain permission from, and pay license fees to, Solid Oak because the players were realistically depicted with their tattoos in video games.

After years of discovery, experts, motions, and analysis, Defendants moved for summary judgment arguing four points. Take-Two’s initial argument was its use of the tattoos was de minimis because the tattoos were but a “fractional, fleeting part” of the game “‘creating realism’ but no more noticeable than a simulated player’s nose shape or hairstyle.’”

Take-Two next contended that its use of the tattoos was authorized by an implied license because both the tattoo artists and players understood when the tattoos were inked the players had the right to display and recreate the tattoos as part of the player’s likeness. Take-Two supported this argument with declarations from each of the tattoo artists. Also supporting this argument, Defendants established that the players gave the NBA the right to license their likeness. The NBA in turn licensed the right to the players’ likenesses to Take-Two.

Take-Two’s third argument was that judgment should be granted on its counterclaim because its use of the tattoos constituted fair use with each of the four factors—“(1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and (4) the effect of the use upon the potential market for or value of the copyrighted work”—weighing in its favor.

Finally, Take-Two argued Solid Oak’s infringement claim failed because it could not establish ownership of a valid copyright since the tattoos were not independently created by the author. Instead, it presented evidence that the tattoos were copies of pre-existing works or included common elements of tattoos.

The court found Take-Two’s de minimis argument persuasive considering the average game play is unlikely to include the players with tattoos, and even when the players were included, the display of the tattoos was so small and indistinct that they could not be identified or observed. The court also noted that the tattoos were not featured in the game’s marketing materials.

Take-Two’s argument that it had an implied license for use of the tattoos because the tattoos were part of the players’ likenesses was also well-taken. Citing Weinstein Co. v. Smokewood Entm’t Grp., LLC, 664 F.Supp.2d 332, 344 (S.D.N.Y. 2009), the court concluded that an implied non-exclusive license would exist “where one party created a work at the other’s request and handed it over, intending that the other copy and distribute it.”. The court noted that the undisputed facts supported a reasonable inference that the tattoo artists necessarily granted the players nonexclusive licenses to use the tattoos as part of their likenesses, and did so prior to any grant of rights in the tattoos to Plaintiff.

Lastly, the court determined Take-Two was entitled to judgment as a matter of law on its counterclaim because the uncontroverted evidence demonstrated that all four fair use factors weighed in favor of Take-Two and its use of the tattoos constituted fair use. Take-Two’s originality argument was considered by the court when reviewing the nature of the copyrighted work factor instead of invalidating Solid Oak’s copyright.

What’s Next?

The Southern District’s ruling could have an impact on similar cases involving the reproduction of tattoos. IP practitioners can take note of the court’s findings not only with litigation concerning tattoos but also when drafting licenses and right of publicity agreements involving tattoos and clearing rights for creative projects.

About the author: Jill Ormond is a partner in Gordon Rees Scully Mansukhani’s Intellectual Property Practice Group. Her practice focuses on litigation and transactional matters related to the entertainment industry, including film, animation, gaming, music, live performance and literary. Ms. Ormond’s biography can be found here.

SCOTUS Redefines State “Piracy”

Author: Alison Pringle

The Supreme Court recently ruled in favor of keeping state governments immune from copyright infringement lawsuits in Allen v. Cooper (Case No. 18-877). The decision affirmed the Fourth Circuit’s dismissal of a videographer’s infringement claim against the state of North Carolina.

The Shipwreck Footage in Dispute

The copyrighted material at issue involved footage of wreckage from the Queen Anne’s Revenge, famed pirate Blackbeard’s ship that ran aground off North Carolina’s coast in 1718. Videographer Frederick Allen spent over a decade creating videos and photos of the ship’s underwater excavation. Allen later registered copyrights in the works.

The dispute began when North Carolina used Allen’s footage as part of an online marketing campaign. The State hosts frequent Blackbeard-festivals and its Maritime Museum features artifacts from the Queen Anne’s wreckage. The State used Allen’s works to promote its Blackbeard-related tourism.

Lower Court Rulings

Allen sued for monetary damages after the State posted his photos of the shipwreck online allegedly without payment or permission.

North Carolina argued sovereign immunity precluded Allen’s suit against the State and moved to dismiss. The District Court for the Eastern District of North Carolina refused to dismiss Allen’s claims but the Fourth Circuit reversed, finding Congress had not abrogated the States’ immunity from copyright infringement suits.

The Supreme Court affirmed by ruling Congress lacked a valid constitutional basis to abrogate North Carolina’s sovereign immunity under existing legislation. The ruling required a deep dive into constitutional interpretation and congressional power.

Congressional Action and Constitutional Limitations

Generally, under Eleventh Amendment sovereign immunity, federal courts cannot hear lawsuits brought by individuals against a non-consenting state. However, a court may permit such suits if: (1) Congress has enacted “unequivocal statutory language” abrogating the States’ immunity from suit;1 and (2) a constitutional provision allows Congress to encroach on the States’ sovereignty.2

In the early 1990’s, Congress passed two acts abrogating the States’ sovereign immunity with respect to copyright and patent litigation via the Copyright Remedy Clarification Act (“CRCA”)3 and “Patent Remedy Act” (“PRA”)4—fulfilling the first prong for abrogation based on unequivocal statutory language.5 The remaining issue for the Allen Court was whether Congress had the power to abrogate the States’ immunity from copyright infringement suits via the CRCA.

The Court considered two constitutional provisions that would arguably allow Congress to pass such legislation: Article I, Section 8 and Section 5 of the Fourteenth Amendment.

Congress Lacked Authority to Abrogate State Immunity Under Article I, Section 8

Article I, Section 8, Clause 8, also known as the Constitution’s “Intellectual Property Clause,” gives Congress the power to grant copyrights and patents.6 Under this Clause, copyright holders are entitled to certain “exclusive” rights in their creations and generally have the right to exclude others from using their works without permission.

Allen argued the Intellectual Property Clause should be construed as granting Congress the power to pass legislation abrogating the States’ sovereign immunity as to copyright lawsuits. Allen contended the Intellectual Property Clause could not provide an “exclusive” right to copyright holders if government infringers could pillage their works with immunity. According to Allen, it was “antithetical” to allow any government to infringe the rights Congress has secured:

When states infringe the exclusive federal rights that Congress is charged with securing, Congress can make states pay for doing so.7

The Court rejected this argument under precedent from Florida Prepaid v. College Savings Bank, determining that Article I did not confer such power on Congress.8

In Florida Prepaid, the Court ruled Congress lacked the power to abrogate State immunity from patent litigation pursuant to the Intellectual Property Clause. Thus, the Intellectual Property Clause could not support the PRA. The Allen Court extended its Florida Prepaid ruling with respect to the CRCA: Congress could not use its Article I powers to circumvent the limits sovereign immunity places upon federal jurisdiction. In delivering the Allen opinion, Justice Elena Kagan stated:

[T]he power to ‘secur[e]’ an intellectual property owner’s ‘exclusive Right’ under Article I stops when it runs into sovereign immunity.

With the Intellectual Property Clause negated as a potential source of Congressional authority for the CRCA, the Court next turned to the Fourteenth Amendment.

The CRCA Exceeded Congress’s Authority to Abrogate State Immunity Under the Fourteenth Amendment

The Fourteenth Amendment’s Due Process Clause provides that no State shall deprive any person of life, liberty, or property without due process of law.9 As the Court acknowledged in Allen, copyrights are a form of property.

Section Five of the Fourteenth Amendment authorizes Congress to enforce the commands of the Due Process Clause by creating legislation limiting the States’ authority. Thus, Congress can abrogate the States’ sovereign immunity under this clause. However, this abrogation must be “congruent and proportional” to the Fourteenth Amendment injury.10 In other words, Congress must only create remedies that are a proportionate response to the constitutional rights at issue.

The Allen Court ruled the CRCA exceeded Congress’s Section Five authority because it went too far in abrogating sovereign immunity for any and every infringement suit.

The Court looked to the nature and extent of State copyright infringement at the time of the CRCA’s passing in relation to the scope of Congress’s response. The Court found the CRCA’s broad abrogation of immunity was disproportionate where Congress identified only twelve instances of State-instigated copyright infringement. Further, of those twelve instances, only two constituted willful infringement (i.e. sufficient to raise a constitutional issue.).11 In the Court’s view, these examples did not identify a serious constitutional problem justifying complete abrogation of States’ sovereign immunity against infringement claims.

The Court emphasized that, like the PRA, the CRCA was overly broad where it did not set any limits on abrogation. For example, neither statute confined abrogation to suits alleging willful infringement or infringement authorized by state policy. Rather, both the PRA and CRCA impermissibly “exposed all States to the hilt—on a record that failed to show they had caused any discernible constitutional harm (or, indeed, much harm at all).”

Consequently, the Court ruled the CRCA failed the “congruence and proportionality” test. Evidence of Fourteenth Amendment injury supporting the CRCA was “exceedingly” slight and the CRCA’s “indiscriminate scope” was too out of proportion to any due process problem.

Can States Now Use Copyrighted Material Without Permission and With Impunity?

The Allen ruling presents uncertainty for copyright holders who fear States can now use their works without permission and consequence. For example, as the ruling stands, States can theoretically upload and use copyrighted movies and music onto government websites. As Justice Breyer posited to North Carolina’s counsel during oral argument:

What the state decides to do with its own website, charging $5 or something, is to run Rocky, Marvel, whatever, Spider-Man, and perhaps Groundhog Day, all right? Now, great idea. Several billion dollars flows into the treasury. Okay? Now, if you win, why won’t that happen?12

The future of copyright law as it pertains to States is indeed unclear. However, as the Court noted in its opinion, States generally respect copyright law and intentional infringement is uncommon.13 Additionally, while States are currently immune from infringement suits for monetary damages, copyright holders may still seek an injunction against an individual state employee responsible for the infringement under Ex Parte Young, 209 U.S. 123 (1908). Further, any third parties who facilitate or participate in state-sponsored infringement cannot expect immunity.

The Court also suggested States might be subject to private infringement suits in the future. Justice Kagan invited Congress to create new legislation addressing State copyright infringement that, unlike the CRCA, is narrowly tailored and designed to redress or prevent unconstitutional conduct, stating:

That kind of tailored statute can effectively stop States from behaving as copyright pirates. Even while respecting constitutional limits, it can bring digital Blackbeards to justice.

Read the Court’s opinion in its entirety here.

Alison Pringle is an associate in Gordon Rees Scully Mansukhani’s Intellectual Property Practice Group. Her practice focuses on intellectual property and commercial litigation, with an emphasis on trademark, copyright, contract, technology, and privacy disputes. She also counsels clients on transactional intellectual property issues. Ms. Pringle’s biography can be found here.
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1 Seminole Tribe of Fla. v. Florida, 517 U. S. 44, 54 (1996)
2 Kimel v. Florida Bd. of Regents, 528 U. S. 62, 78 (2000)
3 Any State “shall not be immune, under the Eleventh Amendment [or] any other doctrine of sovereign immunity, from suit in Federal court” for copyright infringement. 17 U. S. C. § 511(a)
4 Also known as the “Patent and Plant Variety Protection Clarification Act”
5 17 U.S.C. § 511(a); 35 U.S.C. § 296(a)
6 “The Congress shall have power … to promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.” Article I, § 8, cl. 8.
7 Transcript of Oral Argument heard November 5, 2019, p. 3:11-14
8 527 U.S. 627 (1999)
9 Amendment XIV, § 1
10 City of Boerne v. Flores, 521 U.S. 507, 520 (1997)
11 In Florida Prepaid and Allen, the Court defined an unconstitutional infringement as “intentional conduct” for which there is no adequate state remedy.
12 Transcript of Oral Argument heard November 5, 2019, p. 36:17-37:2
13 Copyright Office, Copyright Liability of States and the Eleventh Amendment 103 (1988) (Oman Report)

SCOTUS Grants Google’s Cert Petition in Oracle API Dispute

Author: Mary E. Csarny

On November 15, the Supreme Court granted certiorari in Google v. Oracle, indicating potential resolution on the contentious litigation that has been dubbed Silicon Valley’s “Lawsuit of the Decade.”i On January 6, 2019, Google filed its Petitioner Brief, with Respondent Oracle’s brief due next month.

Background

As followers of this litigation will recall, Oracle sued Google in 2010, alleging Google’s use of the Java programing language and declarations (specifically 37 Java APIs) in building the Android platform amounted to copyright and patent infringement.ii A victory for Oracle would not only result in significant damages for unpaid royalties, but also impact the future of API use. At the District Court, a jury determined Google did infringe the copyright as to the compilable code for the 37 Java API packages, and then deadlocked on the issue of whether the use constituted fair use. The jury found no copyright infringement as to the documentation for the Java API packages, but found infringement as to one snippet of code. However, on the issue of copyrightability of the APIs generally (which was simultaneously tried to the presiding District Court judge), Judge William Alsup concluded that APIs were not copyrightable in the first place as a matter of law.iii The jury found no patent infringement.

On appeal, the Federal Circuit considered the Copyright Act’s legislative history explaining that literary works subject to copyright protection include computer programs to the extent that the expression of original ideas is distinguished from the ideas themselves.iv The Federal Circuit reversed, holding that the structure, sequence, and organization of an API is copyrightable and remanded on the issue of whether Google’s use was a permissible fair use.v Following this reversal, Google filed its first petition for writ of certiorari, with the Supreme Court’s inviting the U.S. Solicitor General to express the United States’ views regarding whether the petition should be granted. The Court denied the petition in accordance with the Solicitor General’s position that no review was necessary.

On remand from the Federal Circuit, a jury determined Google’s use of the 37 Java APIs was protected by the fair use doctrine. Oracle appealed and the Federal Circuit overturned the jury verdict holding that, as a matter of law, Google’s use was not protected by the fair use doctrine.vi

Google’s second and current petition for a writ of certiorari raises two issues: (1) Whether copyright protection extends to a software interface; and (2) whether, as the jury found, the petitioner’s use of a software interface in the context of creating a new computer program constitutes fair use.

What’s Next

When viewed alongside its June 2019 grant of certiorari in Georgia v. Public Resource Org., Inc.vii concerning the copyrightability of legislative annotations in light of the government edicts doctrine, the Supreme Court’s grant of certiorari may indicate a willingness to re-examine copyrightability. The Court’s 21st century copyright jurisprudence has generally favored strengthening protections for copyright holders.viii Indeed, its initial refusal to grant Google’s first petition for certiorari following the Federal Circuit’s holding that APIs are copyrightable at least passively reinforced a broad approach to copyrightability.

The Court’s most recent copyright decisions rely on textualist reasoning and were both unanimously decided. It upheld the lower court’s reliance on the plain text of 17 U.S.C. § 411(a) requiring “registration” (rather than application for registration) to occur before commencing an infringement suit in Fourth Estate Public Benefit Corp. v. Wall-Street.com, LLC, et al.I,ix and limited the statutory damages for copyright infringement to those six categories of costs provided in the federal statute authorizing district courts to award costs in Rimini Street, Inc., et al. v. Oracle USA, Inc., et al.x Although the present matter does not present so obvious a conclusion as Fourth Estate and demands a more technical analysis than required in Rimini Street, the Justices’ textualism in both cases instruct followers of this matter to give particular credence to the parties’ textual arguments. Although much of the narrative surrounding this litigation has focused on the practical impact on technology and innovation,xi the litigants focus briefing on the Copyright Act’s text and judicial interpretation. Google’s petition for certiorari cites the Copyright Act’s exclusion of “method of operation[s]”xii and the correlating legislative history arguably demonstrating Congress’ intent “‘to make clear that the expression adopted by the programmer is the copyrightable element in a computer program’ while ‘the actual processes or methods embodied in the program are not within the scope of the copyright law.’”xiii Oracle, too, presents at least one textualist argument, pointing out that the Copyright Act covers “literary works,” defined as works “expressed in words, numbers, or other verbal or numerical symbols.”xiv

The Court’s last attempt to consider whether innovation in the software space was entitled to copyright protection ended in deadlock,xv but the court has since replaced six justices who appear willing to reface this challenge. Justice Kavanaugh has entered the fray of copyright jurisprudence by authoring the recent Rimini Street, Inc. decision and before his appointment Justice Gorsuch faced the issue of copyrightability of new technologies in the 10th Circuit, where he faced the issue of whether a party held a valid copyright on digital models.xvi He drew guidance from prior Supreme Court reasoningxvii regarding the copyrightability of photographs, finding instructive the Court’s application of copyrightability standards to the new technology of the day.xviii Justice Gorsuch’s conclusion in Meshwerks, that digital models can possess the originality required to be fully protectable in copyright but the particular digital models were not copyrightable might predict his approach to the copyrightability issue in Google v. Oracle.xix

No matter the outcome on the copyrightability and fair use questions raised in Google’s petition, the decision in this case is a much anticipated resolution to the decades-long dispute and could mark a new beginning for the use of software interfaces.
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i Ward, Aaron “Google v. Oracle: Silicon Valley Braces for ‘Lawsuit of the Decade’ as Google Petitions for Cert to decide API Copyrightability” Jolt Digest (March 13, 2019). https://jolt.law.harvard.edu/digest/google-v-oracle-silicon-valley-braces-for-lawsuit-of-the-decade-as-google-petitions-for-cert-to-decide-api-copyrightability.
ii Oracle America, Inc. v. Google Inc., 3:10-cv-03561-WHA (N.D. Cal. Aug. 12, 2010).
iii Oracle Am., Inc. v. Google Inc., 872 F. Supp. 2d 974 (N.D. Cal. 2012).
iv Oracle Am., Inc. v. Google Inc., 750 F.3d 1339, 1354 (Fed. Cir. 2014).
v Id., 1381.
vi Oracle Am., Inc. v. Google LLC, 886 F.3d 1179, 1210 (Fed. Cir. 2018).
vii Georgia v. Public.Resource.Org, Inc., 139 S. Ct. 2746 (June 24, 2019).
viii See “Institutional Fracture” Minnesota Law Review 102:803, 820-821 (2017).
ix Fourth Estate Public Benefit Corp. v. Wall-Street.com, LLC, et al., 139 S.Ct. 881 (2019)
x Rimini Street, Inc., et al. v. Oracle USA, Inc., et al, 139 S. Ct. 873 (2019).
xi See Hardy, Quentin “Oracle-Google Dispute Goes to Heart of Open-Source Software” NY Times (May 19, 2016) (https://www.nytimes.com/2016/05/20/technology/oracle-google-dispute-goes-to-heart-of-open-source-software.html); Liptak, Adam “Supreme Court to Hear Google and Oracle Copyright Case” NY Times (Nov. 15, 2019) (https://www.nytimes.com/2019/11/15/us/supreme-court-google-oracle.html).
xii 17 U.S.C. 102(b)
xiii Supreme Court Docket No. 18-956, Petition for a Writ of Certiorari p. 17 (citing H.R. Rep. No. 1476, 94th Cong., 2d Sess. 56-57 (1976); S. Rep. No. 473, 94th Cong., 1st Sess. 54 (1975)).
xiv Supreme Court Docket No. 18-956, Brief in Opposition, p. 13 (citing 17 U.S.C. 102(a); 101).
xv Lotus Dev. Corp. v. Borland Int’l, Inc., 516 U.S. 233 (1996)
xvi Meshwerks, Inc. v. Toyota Motor Sales U.S.A., Inc., 528 F.3d 1258 (10th Cir. 2008)
xvii Burrow-Giles Lithographic Co. v. Sarony, 111 U.S. 53, 58 (1884)
xviii Id., 1263.
xix Id. 1266.