Snapshot of Trademark and Copyright Suits Filed and Closed in the Eastern District of Virginia

Ever wonder about the five-year trend for the number of trademark and copyright actions filed in the U.S. District Court for the Eastern District of Virginia (the “Rocket Docket”), and what the numbers may say about the state of trademark and copyright litigation.  Mod Law did. 

Here are the annual numbers for trademark or copyright infringement actions filed in the Eastern District of Virginia during the period January 1 through June 8 and the percentage of those same cases that were closed by June 8 of the same year:

YEAR	Cases Filed by 6/8	Same Cases Closed by 6/8 (%)
2006	54	30
2007	53	21
2008	32	28
2009	53	15
2010	38	16

On average, the numbers show that 2010 was fairly low in terms of the number of cases filed.  Not a big surprise.  The numbers also show that, of those cases filed by June 8, significantly less cases were closed by June 8, 2010.  Hmm.  One reasonable interpretation of the data may be that trademark and copyright owners are choosing their battles more carefully.  Another, non-exclusive interpretation may be that legal battles involving trademark and copyright issues are more important to both plaintiffs and defendants, and thus both sides are less willing to lose or settle.  Perhaps less is more during the first half of 2010. 

Ninth Circuit Holds Copyrights “Registered” When Copyright Office Receives Completed Application, Widening Circuit Split

For some time, copyright owners have had to struggle with the requisite issue of whether a copyright is “registered,” for purposes of filing a copyright infringement suit, at the time the Copyright Office receives a copyright holder’s application (the “application approach”), or at the time the Copyright Office acts on the application and issues a certificate of registration (the “registration approach”).  The Court of Appeals for the Ninth Circuit recently addressed this issue in Cosmetic Ideas, Inc. v. IAC/InteractiveCorp, No. 08-56079, slip. op. (May 25, 2010), making it easier for copyright plaintiffs to advance their case in that jurisdiction.  In other jurisdictions, a split of authority exists: the Fifth and Seventh Circuits apply the application approach, the Tenth and Eleventh Circuits apply the registration approach, and district courts within other circuits apply both approaches. 

Is copyright registration a jurisdictional prerequisite to suit?

As an initial matter, the court quickly dismissed the notion that copyright registration is a jurisdictional prerequisite to suit.  The Ninth Circuit relied on the recent Supreme Court decision in, Reed Elsevier, Inc. v. Muchnick, No. 08-103, slip. op., _ U.S. _, 130 S. Ct. 1237 (2010), which held that a copyright holder’s failure to comply with Section 411(a)’s registration requirement does not restrict a federal court’s subject matter jurisdiction over infringement claims involving unregistered works.  (The Reed Elsevier decision is discussed in a prior Mod Law post.)

Is copyright registration an element of a copyright infringement claim?

Section 411(a) of the Copyright Act states, in relevant part, that “no civil action for infringement of the copyright in any United States work shall be instituted until pre-registration or registration of the copyright claim has been made in accordance with this title.”  17 U.S.C. § 411(a).   Unfortunately, the Copyright Act’s definition of the term “registration” in Section 101 does not shed any light on its meaning within the context of Section 411(a).  Moreover, the Ninth Circuit found that analyzing the language of the statute as a whole did not resolve the issue of whether a copyright should be considered “registered” under the application or registration approach.  The Ninth Circuit thus went beyond the plain meaning of the Copyright Act to determine which approach better carried out the purpose of the statute. 

The Ninth Circuit held that “receipt by the Copyright Office of a complete application satisfies the registration requirement of § 411(a),” based on the following findings: (1) the application approach avoids delay in litigation which could eventually proceed under the Act regardless of whether the Copyright Act accepts or rejects the application; (2) the application approach does not impair the goal of copyright registration to maintain a robust national register of copyrights; (3) the additional delay under the registration approach has a greater potential of causing a party to lose its ability to sue, due to the statute of limitations for copyright infringement actions; and (4) the application approach permits the processes of registration approval and litigation to proceed without any prejudice to the litigants or the Copyright Office, which may still have an opportunity to voice its opinion as to the registrability of a work during litigation. 

Perhaps one day, an authority higher than the Ninth Circuit will provide clarity on the issue for all litigants.  For now, copyright owners in the Ninth Circuit have one less obstacle to prosecuting their infringement actions without delay; other copyright owners still need to check the state of the law of jurisdictions in which an infringement suit is contemplated.  

Claims Involving Ownership of Comic Book Heroes Lacked Standing, Barred By Doctrine of Don’t Wait A Decade To Assert Rights

In Abadin v. Marvel Entm’t, No. 09-0715 (S.D.N.Y. Mar. 31, 2010), Judge Crotty of the U.S. District Court for the Southern District of New York dismissed an eight-count complaint filed on behalf of Stan Lee Media, Inc. shareholders against Marvel and Stan Lee, creator of several iconic comic book super heroes including Spider Man, Hulk, Iron Man, and X-Men.

The complaint consisted of the following eight causes of action: (1) copyright infringement; (2) violation of the Lanham Act; (3) breach of contract; (4) tortious interference with contract; (5) breach of fiduciary duty; (6) aiding and abetting breach of fiduciary duty; (7) constructive trust; and (8) accounting of profits. The dispute centered on Stan Lee’s 1998 transfer to Marvel of rights in many valuable comic characters, claiming shareholders of Stan Lee Media, Inc. owned such rights and had been harmed by the wrongful transfer.

At the outset, the court held the plaintiffs lacked standing to bring a derivative suit because the transfer of rights occurred in 1998 and plaintiffs did not acquire shares until 1999, more than a year after the purported illegal transfer. In addition, the applicable statute of limitations barred each claim, and the court worked laches and estoppel into some of its analysis.

This opinion drives home at least one principal point: “Plaintiffs cannot wait a decade to enforce their rights,” especially when the complaint acknowledges that “defendants’ violations have been open and notorious.”

Supreme Court Addresses Jurisdiction Over Unregistered Copyright Claims In Class Action

Earlier this month, the Supreme Court overturned a Second Circuit decision which held, sua sponte, that the district court lacked jurisdiction under 17 U.S.C. § 411(a) to certify a class asserting copyright infringement claims for both registered and unregistered works.

The underlying facts in Reed Elsevier, Inc. v. Muchnick, No. 08-103, slip. op. (U.S. Mar. 2, 2010) involve freelance writers who filed a class action for copyright infringement against publishers who reproduced their works electronically without first obtaining permission. These facts are similar to those in the New York Times v. Tasini case, in which the Supreme Court made it clear that copyright law does not permit publishers to make electronic reproductions of the works of freelance authors without first obtaining express permission. The difference in the Muchnick case is that the freelance writers consist of both authors of registered copyrights and unregistered copyrights.

Relying on the Tasini decision, the district court pressured the parties to reach a settlement addressing an appropriate royalty for the class plaintiffs. The parties did reach a settlement, which was approved by the district court, but some of the freelance authors who did not hold registered copyrights objected to the terms of the settlement, and so they appealed to the Second Circuit.

Without any prompting by the parties, the Second Circuit held that, pursuant to § 411(a), the district court lacked jurisdiction to certify the class or approve the settlement because the claims included unregistered copyrights. Section 411(a) states that “no action for infringement of the copyright in any United States work shall be instituted until preregistration or registration of the copyright claim has been made in accordance with this title.”

Although Section 411(a)’s registration requirement is a precondition to filing a copyright infringement claim, the Supreme Court held that a copyright holder’s failure to comply with that requirement does not restrict a federal court’s subject matter jurisdiction over infringement claims involving unregistered works. According to the Court, a statutory requirement is considered “jurisdictional” only if Congress clearly states that it counts as jurisdictional, and Section 411(a) does not clearly state that its registration requirement is jurisdictional.

As a result of the Court’s ruling, owners of unregistered copyrights are not completely sidelined in the infringement arena. True, they may be precluded from filing an infringement suit on their own; but they are not precluded from joining settlement negotiations or class actions. Indeed, the Court’s decision should revive the possible settlement with $18 million at stake.

Copyright Clash Over Image Searches: An Imperfect Means to a Pornographic End?

(This article was originally featured in Modern Practice, Findlaw’s Law and Practice Technology Magazine, in February 2006.)

Everyone knows that “Pornography” (content) and “Google” (a means to online content) have played major roles in driving the development of the Web and Internet law. It may come as little surprise, then, that these two forces were recently at odds in pleadings, briefs, and a district court decision involving a search engine’s right to display copyright protected images (1) as thumbnails, and (2) through in-line linking to third party websites.

Perfect 10 publishes adult content and owns thousands of copyright protected adult images available online. Google, the largest Internet search engine, provides an “image search” function, which displays thumbnail versions of images cached on Google’s servers and inline links to images stored and served by third party websites. Google’s image search makes it easy to find Perfect 10’s images online.

In a 12-count complaint, Perfect 10 claimed, inter alia, that Google directly, vicariously, and contributorily infringes Perfect 10’s copyrighted images by displaying and distributing them via Google’s image search function. Google argued that its use of Perfect 10’s images is protected under the fair use doctrine. On Perfect 10’s motion for a preliminary injunction, the U.S. District Court for the Central District of California held that the issues would likely be decided as follows: (1) Google’s in-line links to infringing copies do not constitute direct infringement; (2) Google’s display of thumbnails of Perfect 10’s copyrighted images does constitute direct infringement (not a fair use); and (3) Google is not secondarily liable for its in-line links or thumbnails.

Direct Liability

To determine whether Google’s in-line links and thumbnails directly infringed Perfect 10’s copyrights, the court first had to determine whether Google’s activities constituted a public display or distribution of Perfect 10’s images. To do so, the court applied the “server test.” Under the server test, “the website on which content is stored and by which it is served directly to a user, not the website that inline links to it, is the website that ‘displays’ the content.”

Since third party websites, not Google, stored and served the Perfect 10 images to which Google provided in-line links, Google did not display such images. By creating and storing thumbnails of Perfect 10’s images on Google’s servers, however, Google did display such images. Thus, the court held that Perfect 10’s claim of direct infringement based on Google’s in-line links would likely fail, whereas its claim based on Google’s thumbnails would likely prevail.

The court also found that Google did not publicly distribute copies of Perfect 10’s images by in-line linking since Google was not involved in the transfer of any files—again, the third party websites were doing all the work. Although Google may distribute the thumbnails, the court found that Google’s distribution would likely be a fair use and that the issue was moot anyway since it already found that direct infringement was likely based on a violation of Perfect 10’s display right.

The most interesting aspects of this case, however, are found in the fair use analysis; not because the analysis is groundbreaking, but because of how the court distinguishes Kelley v. Aribasoft, 336 F.3d 811 (9th Cir. 2003) (finding fair use of thumbnail images). Analyzing fair use of a copyrighted work involves examining the following factors:

1. the purpose and character of the use;
2. the nature of the copyrighted work;
3. the amount and substantiality of the portion of the work used; and
4. the effect of the use upon the potential market for the copyrighted work.

The court found that two things set this case apart from the Kelly decision. First, Google’s use of thumbnails was far more commercial than the search engine’s use of thumbnails in Kelly. The fact that Google may increase user traffic and advertising revenue from its image search was not so significant since Google does not directly profit from use of Perfect 10’s images.

The court was persuaded, however, by Perfect 10’s evidence showing third-party websites that serve infringing content and receive and display AdSense ads from Google. Google’s AdSense program allows third party websites to carry Google-sponsored advertising and share revenue that flows from the advertising displays and click-throughs. Thus, the court believed that the connection between Google’s use of Perfect 10’s images and Google’s bottom line was much stronger here.

Second, Google’s use of thumbnails harms Perfect 10’s potential market for smaller images. After filing suit, Perfect 10 entered into a licensing agreement with another company for the sale and distribution of Perfect 10 reduced-size images for download to and use on cell phones. The court reasoned that since users of Google’s image search can download thumbnails of Perfect 10’s copyrighted images for free, they will be less likely to buy them from Perfect 10’s licensee. On these bases, the court found that Google’s thumbnail use was much more commercial and harmful than the use in Kelly. Thus, Google’s fair use defense failed.

Secondary Liability

Perfect 10 failed to introduce evidence showing that Google users directly infringe its copyright protected images. So the court only addressed Google’s secondary liability vis-a-vis direct infringement by the third party websites. In analyzing whether Google was contributorily liable, the court assumed (without deciding) that Google had actual knowledge of direct infringement (the first element) since it ultimately determined that Google did not materially contribute to direct infringement (the second element). In short, the court found that Google did not materially contribute to direct infringement because the infringing third-party websites existed before Google’s image search and would continue to exist were it shut down.

Perfect 10’s claim of vicarious liability also failed. Although Google, through its AdSense program, benefits financially (the first element) from the third party display of Perfect 10’s images, it does not have the right and ability to control infringing activity taking place on third party websites. As a result, Perfect 10 would be unlikely to succeed in proving that Google can be held secondarily liable.

Conclusion

The upshot is that Google’s “loss” at the preliminary injunction stage may not be all that significant to Web based activities for a few reasons. First, using thumbnails is not per se copyright infringement—The Ninth Circuit’s decision in Kelly still holds true. The nuance that the district court focused on here was whether the search engine enjoyed a direct financial benefit as a result of displaying thumbnails that infringe another’s work. The district court found that Google did benefit a little too directly, but the Ninth Circuit may view things differently if (when) this decision is appealed.

Second, in-line linking is still okay. A website that merely points to other information, stored and served on another party’s website, should be able to avoid direct infringement liability. Had the district court taken a different approach, every in-line link would be subject to potential liability. Third, search engines are not going to be held vicariously liable simply for facilitating the discovery of information —even if that information turns out to be infringing. There has to be an additional element such as the right and ability to control the infringing environment. Obviously, search engines cannot remove all infringing content from the Web.

In sum, the vitality of Web does not appear in jeopardy as a result of the district court’s decision, even if it holds on appeal. In addition, the development of Internet law does not appear stunted. Perhaps a new branch is growing from traditional fair use analysis, but on that branch each case will really bend on the relatedness of commercial benefit from the specific use in question.