The Trump Admin's Advice to Supreme Court in Copyright Case Is a True Mind-Bender

From The Hollywood Reporter by Eriq Gardner

The Trump Administration has finally weighed in on copyright, a subject as contentious*** as healthcare or immigration. On Thursday, the Acting Solicitor General advised the U.S. Supreme Court that even though a lower appeals court made a "significant legal error" in a dispute over a YouTube clip of a toddler dancing to Prince's 1984 hit, "Let's Go Crazy," the high court should pass on a review.

The case focuses on whether Universal Music made a misrepresentation when issuing a takedown notice to YouTube. Representing the owner of video, mother Stephanie Lenz, the Electronic Frontier Foundation has been in court for about a decade on this issue. In September, 2015, the 9th Circuit Court of Appeals ruled that copyright owners must consider fair use before sending takedowns, but wrote that if a copyright holder forms a subjective good faith belief that allegedly infringing material does not constitute fair use, that's enough to shield the copyright holder from misrepresentation liability under the Digital Millennium Copyright Act. That left neither side truly happy, so petitions came from both for a high court review.

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SoundExchange, Inc. v. Muzak LLC

This case pits SoundExchange, a nonprofit entity, charged with the responsibility of collecting royalties for performing artists and copyright owners of music, against Muzak, a company that supplies digital music channels to satellite television networks who, in turn, sell to subscribers. SoundExchange sued Muzak under the Copyright Act in district court, claiming that Muzak underpaid royalties owed. The district court dismissed SoundExchange’s complaint. (From the point of view of classic administrative law, the Register of Copyrights, to which we normally are obliged to defer, plays a rather unusual role.) Although the case is close – the controlling statute is dreadfully ambiguous – we conclude that SoundExchange has the better position, and therefore reverse the district court.

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Mavrix Photographs, LLC v. LiveJournal, Inc.

Digital Millennium Copyright Act

The panel (1) reversed the district court’s holding, on summary judgment, that the defendant was protected by the safe harbor of the Digital Millennium Copyright Act from liability for posting the plaintiff’s photographs online and (2) vacated a discovery order.

The panel held that the safe harbor set forth in 17 U.S.C. § 512(c) would apply if the photographs were posted at the direction of users. The defendant, a social media platform, posted the photographs after a team of volunteer moderators, led by an employee of the defendant, reviewed and approved them. The panel held that whether the photographs were posted at the direction of users depended on whether the acts of the moderators could be attributed to the defendant. Disagreeing with the district court, the panel held that the common law of agency applied to the defendant’s safe harbor defense. Because there were genuine factual disputes regarding whether the moderators were the defendant’s agents, the panel reversed the district court’s summary judgment and remanded the case for trial. The panel also discussed the remaining elements of the safe harbor affirmative defense. If an internet service provider shows that the infringing material was posted “at the direction of the user,” it must then also show that (1) it lacked actual or red flag knowledge of the infringing material; and (2) it did not financially benefit from infringements that it had the right and ability to control. The panel held that to fully assess actual knowledge, the fact finder must consider not only whether the copyright holder has given notice of the infringement, but also the service provider’s subjective knowledge of the infringing nature of the posts. The panel held that to determine whether the defendant had red flag knowledge, the fact finder would need to assess whether it would be objectively obvious to a reasonable person that material bearing a generic watermark or a watermark referring to the plaintiff’s website was infringing. When assessing the service provider’s right and ability to control the infringements, the fact finder should consider the service provider’s procedures that existed at the time of the infringements and whether the service provider had “something more” than the ability to remove or block access to posted materials.

Finally, the panel vacated the district court’s order denying discovery of the moderators’ identities.

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Maloney v. T3Media, Inc.

California Anti-SLAPP Statute / Copyright Act

The panel affirmed the district court’s order granting T3Media’s special motion to strike, pursuant to California’s anti-SLAPP statute, the action brought by plaintiffs/former student-athletes Patrick Maloney and Tim Judge, alleging that T3Media exploited their likenesses commercially. Plaintiffs alleged that T3Media exploited their likenesses by selling non-exclusive licenses permitting consumers to download photographs from the National Collegiate Athletic Association’s Photo Library for non-commercial use. Plaintiffs asserted statutory and common law publicity-right claims and an unfair competition claim under California law. The California anti-SLAPP statute, Cal. Civ. Proc. Code § 425.16, was enacted to allow for early dismissal of meritless first amendment cases aimed at chilling expression though litigation.

Section 301 of the federal Copyright Act adopted a twopart test to determine whether a state law claim was preempted by the Act; first, whether the subject matter of the state claim fell within the subject matter of copyright, as described in 17 U.S.C. §§ 102 and 103; and second, if so, whether the rights asserted under state law were equivalent to the rights contained in 17 U.S.C. § 106.

At step one of the Copyright Act test, the panel held that the subject matter of the state law claims fell within the subject matter of copyright. Specifically, the panel held that a publicity-right claim may proceed when a likeness is used non-consensually on merchandise or in advertising; but where a likeness has been captured in a copyrighted artistic visual work and the work itself is being distributed for personal use, a publicity-right claim is little more than a thinly-disguised copyright claim because it seeks to hold a copyright holder liable for exercising his exclusive rights under the Copyright Act. The panel concluded that plaintiffs’ publicity-right claims and the derivative Unfair Competition Law claim challenged control of the artistic work itself, and accordingly, the subject matter of the state law claims fell exclusively within the subject matter of copyright.

At step two, the panel held that the rights plaintiffs asserted were equivalent to rights within the general scope of copyright.

The panel concluded that plaintiffs’ state law claims were preempted by section 301 of the federal Copyright Act because plaintiffs sought to hold T3Media liable for exercising rights governed exclusively by copyright law. The panel further held that plaintiffs could not demonstrate a reasonable probability of prevailing on their challenged claims; and the district court did not err in granting the special motion to strike, and dismissing without leave to amend.

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Unicolors, Inc. v. Urban Outfitters, Inc.

The panel affirmed the district court’s judgment in favor of the plaintiff in a copyright infringement case involving fabric designs.

Affirming the district court’s summary judgment in favor of the plaintiff on the issue of copyright infringement, the panel held that the district court did not err in its application of the subjective “intrinsic test.” The panel held that where the extrinsic similarity of two works is so strong that the works are near duplicates save for superficial differences, the district court may properly conclude that no reasonable jury could find that the works are not substantially similar in their overall concept and feel. The panel also held that it was permissible to infer copying in this case, even absent evidence of access.

The panel held that the district court did not err in concluding, on summary judgment, that the plaintiff had validly registered a fabric design as part of a collection. Affirming the district court’s judgment after a jury trial on the issues of willful infringement and damages, the panel held that substantial evidence supported the jury’s verdict because the evidence showed that the defendant acted with reckless disregard for the possibility that the fabric it sampled was protected by copyright.

The panel addressed additional issues in a concurrently filed memorandum disposition.

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Flo & Eddie v. Sirius XM Radio

Defendant-Appellant Sirius XM Radio, Inc., appeals from the November 14, 2014 and December 12, 2014 orders of the United States District Court for the Southern District of New York (McMahon, J.) denying its motions, respectively, for summary judgment and for reconsideration in connection with Plaintiff-Appellee Flo & Eddie, Inc.’s copyright infringement suit. Flo & Eddie, Inc. v. Sirius XM Radio, Inc., No. 13-cv-5784 (CM), 2014 WL 7178134 (S.D.N.Y. Dec. 12, 2014) (denial of motion for reconsideration); Flo & Eddie, Inc. v. Sirius XM Radio, Inc., 62 F. Supp. 3d 325 (S.D.N.Y. 2014) (denial of motion for summary judgment). We previously concluded that the appeal raised a significant and unresolved issue of New York law that is determinative of this appeal: Is there a right of public performance for creators of pre-1972 sound recordings under New York law and, if so, what is the nature and scope of that right?

We certified this question to the New York Court of Appeals. Flo & Eddie, Inc. v.Sirius XM Radio, Inc., 821 F.3d 265 (2d Cir. 2016). The Court of Appeals accepted certification and responded that New York common law does not recognize a right of public performance for creators of pre-1972 sound recordings. Flo & Eddie, Inc. v. Sirius XM Radio, Inc., 2016 WL 7349183 (N.Y. Dec. 20, 2016).

In light of this ruling, we REVERSE the district court’s denial of Appellant’s motion for summary judgment and REMAND with instructions to grant Appellant’s motion for summary judgment and to dismiss the case with prejudice.

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Antonick v. Electronic Arts, Inc.

The panel affirmed the district court’s judgment as a matter of law in favor of Electronic Arts, Inc., in a diversity action seeking unpaid royalties pursuant to a contract, arising from alleged copyright infringement.

Plaintiff Robin Antonick developed the computer code for the original John Madden Football game for the Apple II computer, which was released by Electronic Arts. Electronic Arts subsequently released Madden games for Sega Genesis and Super Nintendo for which plaintiff received no royalties under a 1986 contract.

Concerning plaintiff’s Sega claims, the panel held that the plaintiff did not provide sufficient evidence of copyright infringement because neither the source code used for Apple II Madden nor Sega Madden was in evidence. The panel also rejected plaintiff’s argument that Electronic Arts’s postverdict Fed. R. Civ. P. 50(b) motion for judgment as a matter of law regarding the intrinsic test for copyright infringement should not have been considered.

Concerning plaintiff’s Super Nintendo claims, the panel held that the district court did not err in dismissing plaintiff’s derivative work claims because the Apple II and Super Nintendo processors were not in the same microprocessor family, as defined by the parties’ contract. The panel also affirmed the district court’s conclusion that the jury could not have determined plaintiff’s damages from the alleged breach of contract to a reasonable certainty. The panel further held that, even if the district court erred, there was no harm, because plaintiff’s failure to introduce any source code precluded a finding that Super Nintendo Madden was a derivative work.

Finally, the panel held that plaintiff offered no evidence of purported damages arising from plaintiff’s claim that Electronic Arts used development aids to create nonderivative works without seeking a negotiated license.

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In re: Rearden, LLC

The defendants in the underlying case, Rearden LLC, Rearden MOVA LLC, MO2, LLC, and MOVA, LLC, petition for a writ of mandamus to challenge the district court’s order compelling them to produce allegedly privileged documents. We conclude we have jurisdiction to decide their petition. We further conclude that petitioners’ arguments fail to carry the high burden required on mandamus to overturn the district court’s discovery determination. We therefore deny their petition.

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Cortes-Ramos v. Sony Corp. of America

Luis Adrián Cortés Ramos ("Cortés") appeals from the dismissal of his contract and intellectual property claims against a variety of companies affiliated with Sony Music Entertainment ("Sony"). The dispute concerns an original song and music video that Cortés submitted to Sony as part of a songwriting contest sponsored by Sony. The District Court dismissed all of Cortés's claims. It did so on two grounds: that the claims were subject to mandatory arbitration under the Federal Arbitration Act, and that Cortés failed to allege facts sufficient to support his claims under Fed. R. Civ. P. 12(b)(6). Because Cortés has not appealed the ruling that his claims must be arbitrated, we affirm the order compelling arbitration.

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Loomis v. Cornish

The panel affirmed the district court’s summary judgment in favor of the defendants in a copyright infringement case. Will Loomis, composer of the song “Bright Red Chords,” alleged that the defendants stole a two-measure vocal melody and used it as the theme for the verse melody in their hit song “Domino.” The panel held that Loomis did not put forth any potentially admissible evidence to establish that the Domino songwriters had access to Bright Red Chords, either on a chain-of-events theory or a widespread-dissemination theory. Accordingly, he failed to establish copyright infringement.

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