On December 17, 2011, Senator Harry Reid (D-Nev.) introduced a "cloture" motion to "bring to a close" the debate on the motion to allow the PROTECT IP Act (S. 968) to be considered on the floor of the Senate, about which Senator Wyden has been successful so far in placing "on hold."
To the non-Washington-insiders among us (myself included), a "cloture motion" is an archaic expression that requires definition. According to Black's Law Dictionary (West 6th ed. 1991), a cloture is a "legislative rule or procedure whereby unreasonable debate (i.e., filibuster) is ended to permit vote to be taken." The term filibuster is defined as "tactics designed to obstruct and delay legislative action by prolonged and often irrelevant speeches on the floor of the House or Senate." Id.
According to the Congressional Record, the cloture vote is scheduled for January 24, 2012, beginning at 2:15pm. Congr. Rec. S8783 (Dec. 17, 2011) ("Mr. REID. Mr. President, I ask unanimous consent that the cloture vote on the motion to proceed to S. 968 occur at 2:15 p.m. on Tuesday, January 24--that is the day after we start the session--and that the mandatory quorum under rule XXII be waived. . . . The PRESIDING OFFICER. Without objection, it is so ordered.").
Immediately after the cloture was introduced, Senator Wyden again expressed his intent to filibuster the bill. Press release, Dec. 17, 2011 ("Therefore, I will be working with colleagues on both sides of the aisle over the next month to explain the basis for this wide-spread concern and I intend to follow through on a commitment that I made more than a year ago, to filibuster this bill when the Senate returns in January.").
On December 12, 2011, Representative Lamar Smith, chairman of the House Committee on the Judiciary, introduced a "Manager's Amendment" to the pending Stop Online Piracy Act (H.R. 3261), in advance of a scheduled hearing and markup session before the Committee on December 15 and 16, 2011. On December 14, he issued a press release challenging the opposition that had garnered significant press attention. In it, he denounced the opposition, claiming that it is either mistaken about the actual contents of the bill or that its complaints are simply outdated because of the changes made in the Manager's Amendment.
With regard to Google, one of the loudest opponents of both the PROTECT IP Act and SOPA, Chairman Smith stated, "In August, Google paid half a billion dollars to settle a criminal case because of the search engine giant's active promotion of foreign rogue pharmacies that sold counterfeit and illegal drugs to U.S. patients. Their opposition to this legislation is self-serving since they profit from doing business with rogue sites that steal and sell America's intellectual property."
Webcasts for the hearing and markup sessions may be found in the Committee's hearing notices, although news reports indicate that the first session ran a "marathon" twelve hours, so be prepared for the long session. Tamlin Bason, "Rep. Lamar Smith Delays SOPA Markup, Will Consider a Hearing on DNS Blocking," 83 BNA Patent Trademark & Copyright Journal 261 (Dec. 23, 2011) (subscription access required). Draft transcripts are available for both the December 15 (459 pages) and December 16 (58 pages) sessions. An additional markup session originally scheduled for December 21, 2011, was postponed "due to House schedule" (presumably referring to the recess taken on December 20.) A summary of the proposed amendments and vote count can also be found on the Committee's hearing page.
Clarifies that the bill does not require that users of a targeted website be directed or redirected to another site;
Establishes a "kill switch" that would allow an ISP to decline to carry out any court order that it finds would "impair the security or integrity of the system" – thus protecting the security and integrity of the DNS (domain name system);
Applies only to foreign websites;
Adds new savings clauses – a) providing no duty to monitor illegal activity on a provider's network or service; b) does not impose a technology mandate on any party; and c) leaves all DMCA safe harbors in place for intermediaries;
Removes the pre-suit notification provision to "encourag[e] parties to engage in voluntary, completely market-based solutions;"
Removes language in the private right of action that provided liability in cases of willful blindness or engaging/facilitating in the infringement/counterfeiting;
Limits the definition of intermediaries that could be subject to this bill;
Provides that ISPs cannot be ordered to block a subdomain;
Provides that search engines would be allowed to continue to deliver links to any legitimate subdomains or portions of the site that do not infringe; and
Clarifies that the ISPs may only be required to take measures that they determine are the "least burdensome, technically feasible, and reasonable."
People in the IP community have asked why the DMCA (Digital Millenium Copyright Act) can't simply be applied to seek takedowns of infringing/counterfeiting sites such as these. Chairman Smith answered that question in a December 15 public statement about the necessity for legislation such as the Stop Online Piracy Act:
"While the DMCA helps, it only applies in limited circumstances:
It provides no effective relief when a rogue web-site is foreign-based and foreign-operated like PirateBay - the 89th most visited site in the U.S.;
It doesn't protect trademark owners and consumers from counterfeit and unsafe products like fake prescription medications available on legitimate-appearing but unlicensed "online pharmacies";
It doesn't assist copyright owners when foreign rogue sites are devoted to the theft of intellectual property on a massive scale;
And, finally, it does nothing to address the use of intermediaries such as payment processors and Internet advertising services that are employed by criminals to fund illegal activities."
Chairman Smith indicated at the close of the December 16 session that he may entertain additional markup sessions, but as Congress is now in recess, these sessions will likely be scheduled after the next session begins on January 17, 2012.
The Judiciary Committee's "Rogue Websites" page has some interesting links to various articles demonstrating support for SOPA and various summaries and fact sheets about the bill. The page does not purport to be an unbiased recitation of commentary to date about SOPA (for instance, it does not catalog the various positions articulated in opposition to the bill), it provides a useful one-stop-shop for statements in support that may not be available together elsewhere.
On December 8, 2011, a group of Senators and Representatives proposed an alternative bill aimed at combating foreign websites that engage in counterfeiting or infringement of U.S. trademarks or copyrights. The new bill, entitled "The Online Protection and Enforcement of Digital Trade Act" (the OPEN Act) was launched by U.S. Senators Cantwell, Moran, Warner and Wyden and U.S. Representatives Chaffetz, Campbell, Doggett, Eshoo, Issa, Lofgren and Polis. (Senator Wyden had previously announced his intent to block any request for unanimous consent to consider the currently-pending PROTECT IP Act in the Senate, but has proposed this bill as an alternate.)
What's so unusual about this bill? It's not currently available on Thomas.gov, although a recent press release available on Sen. Wyden's website has identified the bill as having been "introduced." [Searches of Thomas.gov indicate that the bill will be numbered S. 2029 and will be available once received from the Government Printing Office.] Instead, the current text of the bill can be accessed through a website called http://www.keepthewebopen.com/. Visitors to the site can create an online profile and submit suggestions for improvement of the bill. At the site, in big red letters is a button inviting users to "PARTICIPATE" and the press release announcing the launch of the website describes it as "providing an unprecedented opportunity for members of the public and stakeholders to participate in the legislative process."
The bill sponsors explained that this bill is intended to place jurisdiction over policing imports into the U.S. from these foreign web sites back in the hands of the International Trade Commission (ITC), thereby allowing this process to use already existing ITC procedures instead of creating new frameworks – thus potentially increasing due process protections and consistency of rulings among the arbiters. The bill also authorizes the dramatic increase of staffing in the ITC in order to permit it to absorb the new responsibilities.
Here's how it would work: a U.S. rights holder who believes that a particular web site violates its rights may submit a complaint to the ITC, which will launch an ITC investigation into the operation of the site. If the ITC determines that the site indeed qualifies as an "Internet site dedicated to infringing activities," it may generate a cease and desist order directing that the site stop its infringing activities. This order can then be served on financial transaction providers or Internet advertising services. The ITC will also submit its determination, the record upon which it is based, and any cease and desist order that it generates to the President, who may "disapprove" of the determination and cease and desist order, causing the order to be terminated. [These provisions were present in a version of the bill available on http://www.keepthewebopen.com/ as of December 28, 2011.]
In some respects, this bill follows the main tenets of the PROTECT IP Act and the Stop Online Piracy Act and adopts some of its structure, with a major difference being the use of the ITC as arbiter over the allegations made against the allegedly infringing website, instead of the myriad federal district courts across the country. (Additional differences are summarized in this chart.) The theory seems to be that the ITC is used to disputes over IP claims, and therefore would be an appropriate judge of the presence of infringing or counterfeiting content – where not all district courts and district court judges are experienced in intellectual property disputes.
In the past several weeks, several major legislative proposals have been introduced in both the House and the Senate to provide additional anti-counterfeiting enforcement tools for law enforcement and private rights holders alike. Two of these bills – the PROTECT IP Act (S. 968) and the Stop Online Piracy Act (H.R. 3261) – have already been discussed in detail in this blog. (See posts under the Online Piracy tag.)
Details about the remaining legislative proposals follow (listed chronologically):
Contains provisions relating to coordinating IP rights enforcement, enhancing training in the Treasury Department and amending 19 U.S.C. § 1526 (Tariff Act; Merchandise Bearing American Trademark) to expand prohibitions on importation, exportation and transshipment of counterfeit or pirated goods.
Of particular note are the following provisions:
Coordination of IP Rights Enforcement (Subtitle B)
Requires coordination of CBP and ICE IP enforcement efforts through a new Director of IP Rights Enforcement (within the U.S. Department of the Treasury) (§ 111)
Regulatory and Policy Improvements re Combating Counterfeiting and Piracy (Subtitle C)
Allows CBP to set up regulations about making information and samples of seized goods available to IP owners for purposes of inspection and analysis. (§ 123)
Creates a system to identify "low risk importers" who could be subject to reduced inspections by CBP. (There would be a self-certification and third-party verification process put in place.) (§ 125)
Creates a "watch list" database of participants in import, export and transshipment process "whose activities [CBP] determines merit special scrutiny at ports of entry because of the risk of importation or transshipment of goods that violate" IP rights or exclusion orders. (The Secretary of the Treasury will have 180 days from enactment to develop a plan to implement the database.) (§ 126)
Provides that civil fines imposed by 19 U.S.C. § 1526(f) may not be mitigated, dismissed or vacated except in extraordinary cases or when ordered by the court. (§ 127)
New Legal Tools for Border Enforcement (Subtitle E)
Amending 19 U.S.C. § 1526 (Tariff Act) to apply the definition of counterfeiting that comes from the crimes code (18 U.S.C. § 2320) and to provide for enhanced penalties for counterfeiting (§ 141)
Makes conforming amendments to copyright law to include "exports and transshipments" along with imports as regulatable conduct (§ 141(b)).
Enhances the requirements for declarations required under the Tariff Act (§ 142)
Permits the seizure and forfeiture of devices designed to circumvent intellectual property rights protections (§ 143)
Administrative Provisions (Subtitle F)
Requires establishment of an advisory committee to provide advice to the Secretary of the Department of Treasury, to CBP and ICE on all matters involving the enforcement of import safety standards and IP rights by CBP and ICE (§ 151)
Requires the advisory committee to submit an annual report describing the operations of the Committee in the past year and set forth any recommendations about the enforcement of import safety standards and IP rights by CBP and ICE (§ 151).
Allows for staffing enhancements at both CBP and ICE (§§ 152 and 153)
Title II – Increased Penalties for Certain Unfair Trade Practices
Expands the exclusion orders. In addition to banning the importation of certain goods into the U.S. this provision also provides that the Secretary of State shall deny a visa to the U.S. and the Secretary for Homeland Security shall exclude from the U.S. "any alien that is an officer or member of the board of directors of the person that violated this section or an exclusion order under this section." (§ 201)
Enhances penalties for each day on which the importation or sale of counterfeited goods occurred (19 U.S.C. § 1337(f)) from "$100,000 or twice [the domestic value of the articles entered or sold on such day in violation of the cease and desist order]" to "$500,000 or three times [the same domestic value]." (§201(b))
Amends the Trade Secrets Act to explicitly allow U.S. Customs and Border Patrol to share suspected counterfeit materials with rights holders in order to determine authenticity.
Specifically, these bills provide:
if U.S. Customs and Border Protection ("CBP") suspects a product of being imported or exported in violation of 15 U.S.C. § 1124, the Secretary of Homeland Security would be authorized to "share information on, and unredacted samples of, products and their packaging and labels, or photos of such products, packaging and labels, with the rightholders (sic) of the trademark suspected of being copied or simulated, for purposes of determining whether the products are prohibited from importation under that section." § 601(1).
Further, once items are seized by CBP under 17 U.S.C. § 1201(a)(2) or (b) (both relating to devices allowing users to circumvent digital rights management information), the Secretary of Homeland Security is "authorized to share information about, and provide samples to affected parties, as to the seizure of material designed to circumvent technological measures or protection afforded by a technological measure that controls access to or protects the owner's work protected by copyright under such title." § 601(2).
Both of these provisions are made "subject to applicable bonding requirements."
Under current law, these materials could not be disclosed for any purpose to rights holders.
Current Status of Each Bill:
The Senate Bill was referred to the Committee on Finance on November 15, 2011. Senator Coons' remarks in introducing the Bill appear in the Congressional Record at pages S7594-7596.
The House Bill was referred to the House Committee on Ways and Means, Committee on the Judiciary and Committee on Financial Services for consideration. No hearings have yet been announced.
National Defense Authorization Act for Fiscal Year 2012 – introduced in the Senate on November 15, 2011 as S. 1867 (H.R. 1540 in the House). (Text of the current version of the Senate bill as passed has not been published yet.)
The majority of this Bill has nothing to do with counterfeiting, and in fact is an appropriations bill relating to military spending.
Among other provisions, this Amendment adds the following requirements:
Secretary of Homeland Security shall "establish a risk-based methodology for the enhanced targeting of electronic parts imported from any country . . ." (§ 848(b)(1) – S7966).
If CBP "suspects a product of being imported or exported in violation of section 42 of the Lanham Act [15 U.S.C. § 1124], and subject to applicable bonding requirements, the Secretary of the Treasury is authorized to share information appearing on, and unredacted samples of, products and their packaging and labels, or photographs of such products, packaging and labels, with the rightholders of trademarks suspected of being copied or simulated, for purpose of determining whether the products are prohibited from importation pursuant to such section." (§ 848(b)(2) – S7966).
Amends 18 U.S.C. § 2320 by adding provisions relating to military goods or services such that
If a qualifying offense is committed (by trafficking or attempting to traffic in goods or services and knowingly uses a counterfeit mark, the use of which is likely to cause confusion, to cause mistake or to deceive), AND
The good or service "malfunctioned, failed or was compromised" AND
Could reasonably be foreseen to cause serious bodily injury or death, disclosure of classified information, impairment of combat operations or other significant harm to a member of the Armed Forces or to national security AND
The offender had knowledge that the good or service was falsely identified as meeting military standards or is intended for use in a military or national security application;
THEN the following penalties will apply:
Maximum fines increased from $2 million to $5 million or maximum sentence is increase from no more than 10 years to no more than 20 years, or both (for individuals)
For subsequent offenses, individuals would be subject to fines up to $15 million, imprisoned for not more than 30 years, or both.
Or, if the offender is other than an individual, the maximum fine remains at $15 million.
For subsequent offenses, non-individual offenders would be subject to a fine of up to $30 million.
Sentencing Commission required to determine whether Federal Sentencing Guidelines should be amended to reflect the "intent of Congress that penalties for such offenses be increased for defendants that sell infringing products to, or for the use by or for, the Armed Forces" or law enforcement or "for use in critical infrastructure or in national security applications." § 848(f)(2).
This Bill did not provide a definition for "counterfeit electronic part," instead requiring the Secretary of Defense to provide such definition. § 848(g)(1).
Status: S. 1867 as amended was agreed to in the Senate by a vote of 93-7 on December 1, 2011.
Amends 18 U.S.C. § 2320(a) to double the maximum fine to be assessed for trafficking in "counterfeit drugs" (defined under the Food, Drug and Cosmetic Act, 21 U.S.C. § 321(g)(2) to the following: 1) $4 million for individual defendants; and 2) $10 million for "persons other than individuals" (e.g., entities of any sort, including corporations, companies, associations and organizations).
Both bills provide that repeat offenses incur increased penalties of $8 million, with a 20 year prison term (individuals) and $20 million (entities), respectively.
Differences between the House and Senate Bills
The Senate Bill recommends increasing the maximum prison sentence of 20 years, and mandates that the U.S. Sentencing Committee re-evaluate the recommended sentences for all counterfeiting crimes.
The House bill recommends that the prison sentence be increased to "life or any term of years." The House bill does not direct any evaluation by the Sentencing Commission.
Current law provides that these limits are 1) $2 million with a maximum prison sentence of 10 years for individuals; and 2) $5 million for entities. Repeat offenders incur a maximum fine of $5 million and 20 years imprisonment for individuals, and $15 million for entities. 18 U.S.C. § 2320.
Current Status of Each Bill
The Senate Bill is scheduled to be considered by the Senate Judiciary Committee on December 8, 2011, at 10:00am in SD-226. (Hearing notice is here – with a link to the webcast, when it's prepared.)
The House Bill has been referred to the House Committee on the Judiciary, but a hearing has not yet been scheduled.
Clearly, both houses of Congress have "counterfeiting" on the mind, and it will be interesting to see where these various proposals go. Of course, only if one can keep up.
This is the second in a series, discussing the two new Bills proposed in Congress to deal with online pirates and counterfeiters. (View the first article relating to the PROTECT IP Act here.)
On October 26, 2011, Representative Lamar Smith introduced the Stop Online Piracy Act (H.R. 3261) ("SOPA"). Other sponsors of the Bill upon its introduction were Ranking Member John Conyers, IP Subcommittee Chairman Bob Goodlatte, Rep. Howard Berman, Rep. Marsha Blackburn, Rep. Mary Bono-Mack, Rep. Steve Chabot, Rep. Ted Deutch, Rep. Elton Gallegly, Rep. Tim Griffin, Rep. Dennis Ross, and Rep. Lee Terry.
The Bill followed several public hearings this year alone (one in the Senate and two in the House), each focused on the problems created by unfettered counterfeiting and piracy, including by foreign web sites, of U.S. rights holders' marks and copyrighted works and aimed at crafting mechanisms to combat that significant loss in U.S. income.
SOPA proposes two additional sections that were not included in the PROTECT IP Act. First, it provides "savings clauses" that mandate that this bill should not be construed to enlarge or diminish the legal obligations or liabilities imposed by 1) the First Amendment; or 2) copyright law (Title 17 of the U.S. Code). Notably absent is a similar provision relating to trademark law (Title 15 of the U.S. Code).
Second, it provides a new mechanism to require qualifying plaintiffs seeking to initiate a private action against the piratical/counterfeiting web site to provide pre-suit notification to certain Internet intermediaries. (More on this is below, in the section on the private right of action.)
The SOPA provides for injunctions against any continued activities by an owner of a domain name used by an Internet site found to be engaging in prohibited activities. Under the Attorney General's cause of action, this site must be a "foreign infringing site" while under the private right of action, this site must be "dedicated to the theft of U.S. property." There are different tests for each type of site that must be analyzed separately. Once an order is obtained declaring the Internet site in question to qualify for action under this Bill, the order can be served upon the owner, operator or registrant of the site, but also upon certain Internet intermediaries requiring them to stop doing business with these sites.
Under the private right of action section, qualifying plaintiffs must provide pre-suit notification (which recipients are required to act on within 5 days), followed by a formal complaint and a motion for an injunction. This pre-suit notification can only be provided to two of the four intermediaries: Internet advertisers or payment network providers.
ATTORNEY GENERAL'S ACTION (Section 102)
The U.S. Attorney General may only obtain injunctions against "foreign infringing sites," which are: 1) "U.S.-directed sites used by users in the United States," 2) have owners/operators who: traffic in counterfeit or illicit labels, or counterfeit documentation/packaging; commit criminal copyright infringement; traffic in counterfeit goods or services; or steal trade secrets in violation of the Economic Espionage Act; and 3) would be subject to seizure if they were domestic.
Once the Attorney General obtains an injunction against a site deemed to be a foreign infringing site, it may serve the injunction order on service providers (i.e., domain name registrars), Internet search engines (called "information location tools" under the PROTECT IP Act), payment network providers (i.e., MasterCard, Visa or PayPal, called "financial transaction providers" under the PROTECT IP Act), and Internet advertising services (i.e., Google or Yahoo!) requiring that they prevent access by subscribers located within the U.S., prevent the site from being served as a direct hyperlink in a search result, refuse to process payments from users of the site, or decline to distribute advertising to U.S.-based Internet users.
PRIVATE RIGHT OF ACTION (Section 103)
The most notable difference between the PROTECT IP Act and SOPA is the pre-suit notification requirement in order to invoke a private right of action. Under SOPA, a qualifying plaintiff must provide advanced notification to the designated agent of a payment network provider or Internet advertising service before filing suit. The payment network provider and Internet advertising service then has 5 days in which to disable payment transactions from U.S. users or refuse to deliver advertising relating to the Internet site in question to U.S. users.
There is a counter-notification system that allows a defendant to accept jurisdiction in a U.S. court and then to proceed to litigation. If no counter-notification is received, the qualifying plaintiff may simply file suit against the registrant (although if he/she cannot be located, the qualifying plaintiff may take action directly against the web site in an in rem action).
Private rightsholders can obtain injunctions against either foreign or domestic sites, but may only serve the resulting court orders on payment network providers and Internet advertisers as well as the owner, operator or registrant of the domain name – and only after the notification/counter-notification process has been completed.
Some immunity is provided to insulate these Internet intermediaries from liability for certain voluntary enforcement efforts. Monetary damages against either the intermediary or the web site owner/operator/registrant are not available, and monetary sanctions are not available if an intermediary ignores the initial court order and continues doing business with the site named in the court order.
This notification provision mirrors closely § 512 of the Digital Millennium Copyright Act (DMCA), but leaves out certain safe harbors that had been carefully negotiated as part of the drafting of the DMCA over a decade ago. For this reason alone, many copyright practitioners, copyright owners, educators and businesses have opposed the introduction of SOPA, claiming that the bill as currently drafted undermines the protections that have been part of copyright law for the last decade. Some have also claimed that the notification provisions fail to impose certain safeguards that could prevent frivolous litigation or blatantly baseless claims – yet still require the intermediaries to disable access within 5 days of receipt of the notification, perhaps leading to the irreversible loss of income and consumer goodwill by a U.S.-based commercial web site engaged in legitimate operations.
ADDITIONAL PROVISIONS (Title II)
SOPA also provides that unauthorized streaming of copyrighted works qualifies as a crime under Title XVIII, and provides enhanced criminal penalties for such infringement. The Bill also contains provisions relating to inherently dangerous goods (such as military counterfeits) and counterfeit pharmaceuticals. It also mandates the appointment of additional foreign service officers to aid in the enforcement of U.S. intellectual property rights around the world.
STUDY REQUIRED (Section 106)
Under SOPA, the Register of Copyrights, working together with other agencies, is required to issue a report on "the enforcement and effectiveness of this title and on any need to amend the provisions of this title to adapt to emerging technologies." (Note that the Director of the U.S. Patent and Trademark Office is not included specifically – although participation is implied because it would be one of the "other agencies" – in the development of the study.) This report is due to the judiciary committees of both the House and the Senate within two years of the enactment of this legislation.
NOTORIOUS INFRINGERS (Section 107)
SOPA also provides that the Intellectual Property Enforcement Coordinator ("IPEC") shall "conduct an analysis of notorious foreign infringers whose activities cause significant harm to holders of intellectual property rights in the United States." The IPEC shall "solicit" public input "and give consideration to the views and recommendations of members of the public." The IPEC shall provide the results of this analysis to the judiciary committees of both the House and the Senate within six months of enactment of this bill.
This report shall include the following:
(1) An analysis of notorious foreign infringers and a discussion of how these infringers violate industry norms regarding the protection of intellectual property.
(2) An analysis of the significant harm inflicted by notorious foreign infringers on consumers, businesses, and intellectual property industries in the United States and abroad.
(3) An examination of whether notorious foreign infringers have attempted to or succeeded in accessing capital markets in the United States for funding or public offerings.
(4) An analysis of the adequacy of relying upon foreign governments to pursue legal action against notorious foreign infringers.
(5) A discussion of specific policy recommendations to deter the activities of notorious foreign infringers and encourage foreign businesses industry norms that promote the protection of intellectual property globally, including addressing—
(A) whether notorious foreign infringers that engage in significant infringing should be prohibited by the laws of the States from seeking to raise capital United States, including offering stock to the public; and
(B) whether the United States Government should initiate a process to identify designate foreign entities from a list of notorious foreign infringers that would be prohibited raising capital in the United States.
·Floyd Abrams, a First Amendment expert who testified on his own behalf
·Kent Walker, Senior Vice President and General Counsel for Google
·Christine Jones, Executive Vice President and General Counsel for the GoDaddy Group.
Chairman Lamar Smith's prepared remarks were published at the end of the hearing. A webcast of the hearing is available on the Senate Judiciary Committee's site. HOUSE HEARING TO CONSIDER MODIFICATIONS TO BILL
The House Committee on the Judiciary also held a third hearing to consider the Bill on November 16, 2011, which lasted about three and a half hours. The webcast is still available on the Committee on the Judiciary's web site. The witnesses were:
Paul Almeida, President, Dept. of Professional Employees, AFL-CIO
MasterCard was thanked repeatedly for its voluntary efforts at combating these criminals. Google was frequently lambasted for what the various legislators described as Google's participation in the counterfeiting system for its own financial gain.
The overall take-away from the session was that the efforts to involve various Internet intermediaries in the enforcement of U.S. intellectual property rights were a good start. Legislators asked the panelists for recommendations of specific fixes to the current bill, noting that the more participation by affected industries or businesses in the drafting process, the better the bill would end up being. For instance, Rep. Goodlatte asked Google, through Ms. Oyama, its Policy Counsel, to work with the technology committee to help fix the bill rather than referring broadly to alleged technical problems that the bill created.
He and others lamented the broad challenges to the bill that merely complained that the bill would "break the Internet" without providing any specifics about how it would be broken so that the Congressmen could address those issue. The congressmen overwhelmingly agreed that they did not want to break the Internet, but requested specific details so that they could redraft where appropriate and avoid any disruption to service.
It remains to be seen how the bill will be amended, but it seems as if the legislators are intent on "getting it right" before the bill is enacted so that the dual goals of the bill are effectuated: 1) enforcing U.S. intellectual property rights against erosion by criminals (both foreign and domestic) and 2) ensuring that due process of law and other U.S. constitutional rights are not abrogated by the effort. At the conclusion of the hearing, Chairman Smith indicated that a new version of the bill would be introduced as soon as possible, and would take into account the testimony given during the hearing as well as other comments received to date.
This is the first in a series, discussing the two new Bills proposed in Congress to deal with online pirates and counterfeiters.
On May 12, 2011, Senator Leahy introduced the PROTECT IP Act (S. 968 as reported), aimed at creating additional tools to combat rampant online infringement and counterfeiting. With some amendments, this Bill rocketed through the Senate Judiciary Committee, achieving unanimous bipartisan approval on May 26. The Bill was immediately placed on "hold" by Senator Wyden. It is unclear when or under what conditions the hold may be lifted, but this Bill still garners strong bipartisan support.
The Bill followed several public hearings this year alone (one in the Senate and two in the House), each focused on the problems created by unfettered counterfeiting and piracy, including by foreign web sites, of U.S. rights holders' marks and copyrighted works and aimed at crafting mechanisms to combat that significant loss in U.S. income. It does not purport to fix all of the problems in this area and instead only addresses only the "worst of the worst" offenders.
The PROTECT IP Act provides for injunctions against any continued activities by an owner of a domain name used by an Internet site "dedicated to infringing activities" (or its registrant or operator). This order can be served upon the owner, operator or registrant of the site, but also upon certain Internet intermediaries requiring them to stop doing business with these sites.
ATTORNEY GENERAL'S ACTION (Section 3)
The U.S. Attorney General may only obtain injunctions against "nondomestic" domain names, but may serve the resulting orders on information location tools (i.e., search engines), operators (i.e., domain name registrars), financial transaction providers (i.e., MasterCard, Visa or PayPal), and Internet advertising services (i.e., Google or Yahoo!) requiring that they omit these sites from search results, block access to the site, refuse to accept payment from users of the site, or decline to distribute advertising to U.S.-based Internet users.
PRIVATE RIGHT OF ACTION (Section 4)
Private rightsholders can obtain injunctions against either domestic or nondomestic domain names, but may only serve the resulting court orders on financial payment processors and Internet advertisers as well as the owner, operator or registrant of the domain name.
Some safe harbors are provided to insulate these Internet intermediaries from liability for certain voluntary enforcement efforts. Monetary damages against either the intermediary or the web site owner/operator/registrant are not available, and monetary sanctions are not available if an intermediary ignores the initial court order and continues doing business with the site named in the court order.
SENATE HEARING PRIOR TO INTRODUCTION OF BILL
The Senate Judiciary Committee held a public hearing entitled, "Targeting Websites Dedicated to Stealing American IP" on February 16, 2011. The witnesses were (hyperlinks lead to prepared statements submitted in support of the hearing, as available from the Senate Judiciary Committee):
Representatives for both Google and Yahoo were invited to attend, but declined to appear. At the end of the hearing, Senator Leahy announced that a new version of what had been introduced in the prior term as the Combating Online Infringement and Counterfeits Act (S. 3804) ("COICA") would be reintroduced during the current Congressional term.
SENATE JUDICIARY COMMITTEE ISSUED REPORT After Sen. Wyden placed his hold on the Bill (by announcing that he would oppose any attempt to move the Bill to a floor vote under a unanimous consent), Sen. Leahy issued a committee report explaining the Bill and its purpose. S. Rep. 112-39 (issued July 22, 2011).
No further action has yet been taken on this Bill, but because a companion Bill (the Stop Online Piracy Act, H.R. 3261) has been introduced in the House, we may see some activity on the Senate's version shortly.
The short answer is: as soon as possible after you learn about potential infringement.
In the current economy, some trademark owners may be reluctant to incur litigation costs or to pursue enforcement actions against potential infringers, when they believe the cost of pursuit might outweigh the potential value of a license agreement or a settlement with the other party.
If trademark owners delay enforcing legitimate rights, however, they risk losing the ability to enforce their rights because of the delay. There are risks associated with a decision to not enforce the rights against a particular infringer, or to delay enforcement (generally). In other words, the trademark owner's claims could be dismissed for failing to take corrective action promptly.
There are three basic doctrines that result in a loss of enforcement ability, if they are alleged successfully: acquiescence, laches and/or waiver. These three doctrines usually appear as affirmative defenses to an infringement lawsuit when trademark owners try to sue a specific infringer.
Acquiescence occurs when a trademark owner exhibits some measure of agreement or implied consent to a potential infringer's use of a substantially similar mark. See, e.g., Profitness Phys. Ther. Center v. Pro-Fit Orthopedic and Sports Phys. Ther. P.C., 314 F.3d 62, 67 (2d Cir. 2002) ("The elements of acquiescence are: (1) the senior user actively represented that it would not assert a right or a claim; (2) the delay between the active representation and assertion of the right or claim; and (3) the delay caused the defendant undue prejudice.") (internal quotations omitted); Bunn-o-Matic Corp. v. Bunn Coffee Service, Inc., 88 F. Supp. 2d 914, 925 (C.D. Ill. 2000) ("To establish acquiescence, Bunn-NY must show that Bunn-IL by word or deed conveyed its implied consent to Bunn-NY's use of the Bunn mark."). This implied consent can come in the form of refusing or declining to file suit against a specific infringer or failing to otherwise object to an infringing use of the mark.
Laches is defined as "neglect to assert a right or claim which, taken together with lapse of time and other circumstances causing prejudice to adverse party, operates as bar in court of equity." Black's Law Dictionary. In other words, the delay caused harm to the defendant, and thus bars the owner's ability to sue the defendant for infringement.
In order to get a case dismissed successfully under a laches theory, a defendant is not required to prove any intent to consent to the defendant's specific use. Bunn-o-Matic Corp. v. Bunn Coffee Service, Inc., 88 F. Supp. 2d 914, 925 (C.D. Ill. 2000) ("Laches does not require proof of intent. . . . To prove laches, Bunn-NY must show (1) an unreasonable lack of diligence by the party against whom the defense is asserted and (2) prejudice arising therefrom."). Compared to acquiescence, where a defendant must show implied consent of a trademark owner, "laches implies a merely passive consent." Profitness Phys. Ther. Center v. Pro-Fit Orthopedic and Sports Phys. Ther. P.C., 314 F.3d 62, 67 (2d Cir. 2002) (citations omitted).
Finally, a defendant can assert that a trademark owner waived its right to sue for infringement in this specific case. Wavier generally requires "the intentional relinquishment of a known right." U.S. v. King Features Entm't, 843 F.2d 394, 399 (9th Cir. 1988). However, waiver is harder to prove than either acquiescence or laches because "it involves not sleeping on one's rights but intentionally relinquishing them." RE/MAX Int'l, Inc. v. Trendsetter Realty, LLC, 655 F. Supp. 2d 679, 711 n.12 (S.D. Tex. 2009). It also requires supporting evidence that "so clearly" indicates an intent to relinquish a known right that any other reasonable explanation is simply excluded. Allstate Fin. Corp. v. Dundee Mills, Inc., 800 F.2d 1073, 1075 (11th Cir. 1986).
Failure to oppose a junior user's similar trademark or simply failing to enforce one's own trademark rights in a timely manner can result in an inability to pursue infringement remedies against others. It can result in consumer confusion about the source of goods or services provided in connection with the similar marks, and undermine the value of the trademark owner's brand.
Because trademark owners necessarily have invested money and resources in developing their brands, and the consumer's good will associated with those brands, it's good practice to ensure that some enforcement mechanism is in place to protect these valuable assets. Trademark owners generally should avoid positioning themselves in any way that causes these defenses to become viable means to dismiss the lawsuit they've chosen to pursue.
(Note that there may be many reasons why enforcement of a trademark at a particular time should or should not be undertaken, each of which should be reviewed carefully with your attorney(s) in the context of the circumstances presented.)
The House issued a press release today to announce the Bill's introduction. I haven't had time to review the Bill in detail yet, but will post an update when available about the contents of the bill and differences from the Senate's version.
My prior posts about the PROTECT IP Act, including hearings held by both the Senate and the House can be found here.
The PSB&N Trademark and Copyright group has just launched its new website and blog, with an eye toward providing an information source on recent developments in the trademark, copyright and unfair competition fields. Of particular note are the primers describing the trademark application process in the U.S. and in foreign markets. Bios for the group and the site contributors are available. The group's blog, Beyond Confusion, can be separately accessed and you can subscribe directly to receive updates as they become available.
And, yes, this is my firm and my department, so I'm personally quite pleased about the new site. We hope you'll visit.
In a word, no. Ideas are not copyrightable. Instead, the way that such ideas are expressed can be subject to copyright protection, to registration in the Copyright Office, and to enforcement against infringers.
The Copyright Act provides that copyright protection exists "in original works of authorship fixed in any tangible medium of expression, now known or later developed, from which they can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device." 17 U.S.C. § 102.
Now, what is an "original work of authorship" for practical purposes? There are several specifically defined options for this definition – including literary works, motion pictures, works of visual arts, sound recordings, and architectural works. For purely practical purposes, these means that books, screenplays, scripts, musical lyrics and arrangements, recordings of musical or dramatic performances, paintings, sculptures, photographs, and the like can be "works of authorship."
Another key hurdle in determining whether you have a copyrightable work is to ensure that it is "fixed in a tangible medium of expression." While an original dance performance qualifies as "an original work of authorship," if it's not recorded in some tangible medium (DVD, CD, videotape, 16mm film, etc.) it can't be protected under the Copyright Act. (Theoretically, perhaps it also can't be copied exactly.) The Copyright Act explains that a work is "fixed" for these purposes "when its embodiment in a copy or phonorecord, by or under the authority of the author, is sufficiently permanent or stable to permit it to be perceived, reproduced, or otherwise communicated for a period of more than transitory duration." 17 U.S.C. § 101.
Copyright exists at the moment of creation – unlike patents, registration of the right is not required in order to have the right exist. However, the Act requires that copyrights must be registered before the owner has standing to file suit against an infringer. 17 U.S.C. § 411(a) (". . . no civil 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"). Some courts have interpreted this requirement to permit suit after the application has been filed, while others require that the owner wait until a Certificate of Registration has been issued by the Copyright Office before filing suit. (The Copyright Office provides some additional reasons why you should register your copyrights with the Office.)
Even if you overcome these two hurdles ("original work of authorship" and "fixed in a tangible medium of expression"), there are other requirements for obtaining and maintaining registration that are not covered in this brief note. If you have specific questions, you can find some answers on the Copyright Office's site, but if not, you should consult with a practitioner in this area to review and discuss your circumstances.
Timelines, Inc., has filed suit in the Northern District of Illinois against Facebook, seeking to enjoin the launch of its new product, which it has marketed under the name "Timeline." Plaintiff Timelines owns three federally registered trademarks on which it bases its suit: "TIMELINES" (Reg. No. 3,684,074); "TIMELINES.COM" (Reg. No. 3,764,134) and a graphic depiction of the word TIMELINES (Reg. No. 3,784,720). Each of these trademarks has been registered in Class 42 for: "Providing a web site that gives users the ability to create customized web pages featuring user-defined information about historical, current and upcoming events; and application service provider, namely, managing web sites of others in the fields of historical, current and upcoming events." (Emphasis added).
In its Complaint, Plaintiff Timelines alleges that around September 23, 2011, it learned that Facebook was planning to launch a service called Timeline – and make it available as early as October 1 – which is described at https://www.facebook.com/about/timeline. (ECF No. 1, Complaint, ¶ 8; Pacer access required to access this document). (The link to Facebook's explanation of its new Timeline product was active when I checked it this afternoon, but perhaps it will disappear (or be "inaccessible") during the pendency of the lawsuit – particularly if a temporary restraining order (TRO) is issued.) Plaintiff Timelines alleges that "this service is identical or nearly identical to what Timeline offers" (id.), that Facebook knew it was causing confusion (id. ¶ 9) and that Facebook has now disabled access to Plaintiff Timelines' own Facebook page (id. ¶ 10).
For context, Plaintiff Timelines explains that its own website has averaged approximately 97,000 visitors per month in 2011 and that it has "invested several million dollars into its business and has taken swift action to protect its Marks." (Id. ¶¶ 24, 27).
Plaintiff Timelines alleges trademark infringement (§ 1114) based on likelihood of confusion deriving from a false implication of sponsorship or affiliation, and willful infringement, all resulting in claimed immediate and irreparable harm, leaving Timelines without an adequate remedy at law. (Id. ¶¶ 33-39). It also alleges false designation of origin (§ 1125), which it claims will improperly suggest a relationship between Timelines and Facebook and "destroy the source-identifying function and goodwill that Timelines has cultivated in its TIMELINES marks." (Id. ¶ 43). Again, Timelines makes a claim of willful infringement on this second count. Timelines also seeks relief under state consumer fraud laws and the uniform deceptive trade practices act. (Id. ¶¶ 48-59).
Plaintiff Timelines seeks temporary, preliminary and permanent injunctive relief to prevent Facebook from using TIMELINE or TIMELINES or anything confusingly similar as well as money damages and "any other relief the Court deems just." (Id. ¶ 12). It seeks attorneys' fees, court costs, compensatory damages, exemplary damages, Facebook's profits, treble damages based on the willful infringement claim, and punitive damages pursuant to the consumer fraud claims. (Id. Prayer for Relief). It also seeks publication of corrective advertising and a written accounting by Facebook within thirty days of the entry of the order detailing the "manner and form" in which Facebook complied with the order.
There may be a typo in the Complaint – in the Prayer for Relief, Timelines requests "That Facebook recover its costs of court" – which makes no sense, so they must have meant to request "That Timelines recover its costs of court." (Id. at page 11).
Plaintiff Timelines also filed its motion for TRO today, along with a memo of law in support. ECF Nos. 7 & 8, Civil Action No. 11-6867 (N.D. Ill.) (Pacer access required to access these documents). In its motion for TRO, it specifically requests that Facebook be prevented from using these trademarks, from launching the service using these trademarks, and be required to distribute corrective advertising to dispel the "false and misleading impression" caused by Facebook's promotional materials to date. ECF No. 7. (In other words, it only seeks a TRO to prevent further damage caused by Facebook's alleged actions – any monetary damage claims will be handled at a later point in this case.)
In a prior series of posts (see "fictional characters" category), I wrote about a so-called unauthorized sequel to J.D. Salinger's classic Catcher in the Rye that the trial court ordered enjoined from publication. The publisher took the case on appeal, and the appellate court overturned that decision, ruling that the injunction could remain in place for ten days after the entry of the remand order. Salinger v. Colting, No. 09-2878 (2d Cir. April 10, 2010) (copy available on FindLaw). Following stipulated extensions of the injunction, the case finally settled for undisclosed terms.
In a "Permanent Injunction and Final Order on Consent" filed on December 14, 2010, the Southern District of New York entered a permanent injunction against the manufacture, publication, distribution, shipment, advertisement, promotion, sale or other dissemination of the book – "or any portion thereof" – in the U.S. Salinger et al. v. Colting, writing under the name John David California, et al., Civil Action No. 09-5095, ECF No. 55 (Pacer access required). The parties also agreed to forego any appeals, thereby suggesting that unless one of the parties violates the settlement agreement, we will not be seeing this particular title on U.S. shores while the Agreement is in force. (A quick Internet search reveals that the book remains available in certain markets overseas.) The Order also requires the clerk of court to close this case.
This agreed-upon settlement means that despite defendants' victory in the appellate court, there must have been some risk remaining that they might lose at trial. Because the terms of the settlement were undisclosed, one can only speculate that this risk must have been significant enough to balance the expense they already incurred in producing the book, including publicity and advertising, and not receiving sales revenues for it. Perhaps the risk of monetary damages (17 U.S.C. § 504) or fee shifting (awarding attorneys' fees and costs to the prevailing party – 17 U.S.C. § 505) prompted the decision.
The U.S. Trade Representative today released a request for public comment regarding its Special 301 Out-of-Cycle Review of Notorious Markets. 76 Fed. Reg. 184 (published Sept. 22, 2011). In its summary of the request, the USTR explained:
"In 2010 the Office of the United States Trade Representative (USTR) began publishing the notorious market list as an 'Out of Cycle Review' separately from the annual Special 301 report. This review of Notorious Markets ('Notorious Markets List') results in the publication of examples of Internet and physical markets that have been the subject of enforcement action or that may merit further investigation for possible intellectual property infringements. The Notorious Markets List does not represent a finding of violation of law, but rather is a summary of information that serves to highlight the problem of marketplaces that deal in infringing goods and which help sustain global piracy and counterfeiting. USTR is hereby requesting written submissions from the public identifying potential Internet and physical notorious markets that exist outside the United States and that may be included in the 2011 Notorious Markets List.
The first Out-of-Cycle review of Notorious Markets was published in February 2011, following a similar request for public comments, and is available on the USTR site. The 2011 Annual Report (published in April 2011 with country reports and a watch list) is also available.
The deadline to respond with comments is October 26, 2011. Specifically, the USTR is looking for detailed information about potential markets "where counterfeit or pirated products are prevalent to such a degree that the market exemplifies the problem of marketplaces that deal in infringing goods and help sustain global piracy and counterfeiting." Id. ¶ 2a. If possible, the USTR would like to see location of the market, principal owners/operators (if known), types of products sold, distributed or otherwise made available, volume of traffic of the website (such as the Alexa ranking), and any known enforcement activity against it (including any requests for takedown of infringing content and the site's response). Id. ¶ 2b.
The USTR will maintain a docket of public comments received about these markets, which will be open for public inspection, except for certain confidential business information, pursuant to 15 C.F.R. § 2006.13. This docket should be available here. (My apologies in advance if this link doesn't work – there were no comments posted when I tested it, but I think the link will be active soon. As an alternative, visit http://www.regulations.gov/, search for public submission and enter "USTR-2011-0012" in the Keyword or ID field.)
The Senate Judiciary Committee's Subcommittee on Antitrust, Competition Policy and Consumer Rights will hold a public hearing on September 21, 2011 at 2:00pm (Eastern) in the Dirksen Senate Office Building, Room 226. The hearing is entitled, "The Power of Google: Serving Consumers or Threatening Competition?" The witness list has not yet been posted.
It appears the hearing will be simulcast over the web, through a link provided in the notice.
According to an opinion issued earlier this summer by the U.S. Court of Appeals for the Third Circuit (N.J.), removing the photographer's credit from a magazine copy of his photograph before re-using it can qualify as "copyright management information" for purposes of determining whether a defendant has violated the Digital Millennium Copyright Act ("DMCA"), particularly 17 U.S.C. § 1202. Murphy v. Millennium Radio Group, No. 10-2163, 2011 U.S. App. LEXIS 11984 (3d Cir. June 14, 2011). Note that this opinion did not conclude whether or not the infringement occurred – just whether the removal of the photographer's credit information that appeared in the "gutter" of a magazine could qualify as actionable removal of copyright management information under the DMCA. A determination of the substantive liabilities in this case has yet to be made.
Plaintiff Peter Murphy, a professional photographer, was hired in 2006 by New Jersey Monthly magazine to take the photograph of Craig Carton and Ray Rossi, two radio show hosts, who were to be named "best shock jocks" in an upcoming article. The photograph was risqué (showing Carton and Rossi "standing, apparently nude," behind the radio station's sign). Murphy retained copyright in the photo.
After the magazine was published, an employee of the radio station scanned the image (without the caption explaining the award or the gutter credit naming Murphy as the photographer) and posted it to the radio station's web site and to another site. The radio station's web site invited visitors to alter the image and submit it to the radio station for feedback. The radio station posted 26 of these alterations on its web site. At no time did the radio station or the hosts obtain Murphy's permission to use the original or an altered version of the photo.
When Murphy found out about this use, his attorney sent a cease and desist letter to the radio station, demanding that the infringing use cease. Shortly thereafter, Carton and Rossi featured Murphy in one of their radio shows in which they allegedly recommended that listeners avoid doing business with him because "he would sue his business partners" and suggested that he was gay (despite his self-identification as a heterosexual married man with children of his own).
This lawsuit ensued. Murphy sued the radio station and the two hosts (collectively referred to in the opinion as "Station Defendants") for copyright infringement under the Copyright Act, violations of § 1202 of the DMCA, and defamation under NJ law. After denying Murphy's requests for additional discovery relating to his defamation claim, the Trial court ultimately granted the Station Defendants' motion for summary judgment, which dismissed all of Murphy's claims.
Murphy appealed, arguing that "by reproducing the Image on the two websites without the [magazine] credit identifying him as the author, the Station Defendants violated the Digital Millennium Copyright Act." Id. at 9. In turn, the Station Defendants argued that the § 1202 cause of action could not survive because the gutter credit was not an "automated copyright protection or management system" – in essence claiming that the activity proscribed by § 1202 was limited only to digital information embedded within the work, not to any information that appeared "near the Image" in question. Id. at 10, 19.
Trial Court's Opinion
In its opinion granting the Station Defendants' summary judgment motion (Summary Judgment Opinion, ECF No. 43, Mar. 31, 2010), the trial court concluded that a "photography credit in the gutter of a print magazine . . . was in no way a 'component of an automated copyright protection or management system'" as required by an earlier case in the same court (IQ Group, Ltd. v. Wiesner Publ., LLC, 409 F. Supp. 2d 587 (D.N.J. 2006)). Moreover, it opined that "the fact that a [magazine] employee used a software program to compose the page and insert the gutter credit does not bring this case into the scope of the DMCA." Summary Judgment Opinion, ECF No. 43 at 6-7. Specifically, "[t]he DMCA should not be construed to cover copyright management performed by people, which is covered by the Copyright Act, as it preceded the DMCA; it should be construed to protect copyright management performed by technological measures of automated systems." Id. at 7 (citations omitted).
Murphy appealed claiming numerous errors in the trial court's opinion, among them that the court erred when it determined that § 1202 required the tampering with electronic copyright management information.
This appears to be a case of first impression. Murphy v. Millennium Radio Group, No. 10-2163, at 10-11 (3d Cir.). In its opinion vacating the trial court's opinion and sent the case back for further proceedings, the appeals court focused its analysis of the DMCA issue largely on the issue of whether "the definition of 'copyright management information' should be restricted to the context of 'automated copyright protection or management systems'" as defendants argued, and as the trial court opined. Id. at 12.
Remember that this case involves a photograph copied from its paper form – not an electronic image. Indeed, the radio station employee created the scanned copy (without copying the gutter credits or the caption that the magazine prepared). Thus, the image that the Station Defendants copied was not in electronic form when the copy was made.
However, is a digital image required in order to invoke the DMCA? Both the Station Defendants and Murphy agreed that "whatever CMI is, it is not necessary for it to be digital. For example, they concede that a bar code printed in ink on a paper label might be CMI." Id. at 17 n.11. Their dispute focuses on whether the CMI must function "in connection with an electronic or automated copyright protection or management system" or whether it can appear in a variety of forms. Id. at 17 n.12.
The appellate court's opinion focuses a great deal on the statutory construction of § 1201 of the DMCA (which requires the "circumvention of technological measures" – a phrase that does not appear in § 1202). In addition, the court noted that § 1202 explicitly defines copyright management information to include information 'conveyed in connection with copies . . . of a work . . . including in digital form . . . ." In addition, nothing about the statute indicates that § 1201 and § 1202 have to be interpreted as interrelated. "Instead, to all appearances, § 1201 and § 1202 establish independent causes of action which arise from different conduct on the part of defendants, albeit with similar civil remedies and criminal penalties." Id. at 13.
Ultimately, the appellate court concluded that "a cause of action under § 1202 of the DMCA potentially lies whenever the types of information listed in § 1202(c)(1) – (8) and 'conveyed in connection with copies . . . .of a work . . . including in digital form' is falsified or removed, regardless of the form in which the information is conveyed." Id. at *22 (emphasis added). This essentially means that copying a work appearing in hard copy form by transforming it into a digital version – but omitting any credit details that appeared with the work in its hard copy form, can qualify as the basis for a cause of action under § 1202.
Further Activity in the Case
Note that this appeal only addressed whether the gutter credit information could qualify as "copyright management information," thus permitting an application of § 1202 to the analysis. It does not address whether or not other aspects of the DMCA claim can be met, as this claim was not presented to the appellate court for consideration. It remains to be seen whether plaintiff's claim on this cause of action can survive after this initial victory.
The appeal also addressed the copyright infringement and defamation claims, as well as the trial court's cursory analysis of both in its Summary Judgment Opinion. Without going into detail here, the appellate court concluded that the trial court erred in finding that the Station Defendants' use of the unaltered photograph constituted fair use (Id. at 20-27) and in declining to permit discovery into the defamation claim (Id. at 28-30). Both of these decisions were vacated and the case has been remanded for further proceedings.
The next scheduled event on the trial court's docket – now that the case has been remanded to the lower court for further proceedings – is a status conference set for September 14, 2011. ECF No. 56, Aug. 31, 2011. It appears that during a Rule 16 scheduling conference held on August 30, the parties mentioned pending settlement discussions, as correspondence sent to the court indicates that additional discussions will be held on September 9. Id.
Under U.S. law, a defendant can avoid liability in copyright infringement case if what he or she distributed was a copy of the work that was obtained legitimately. 17 U.S.C. § 109(a). In other words, once you purchase a paperback copy of a book, you may sell your copy of that book at any price you determine is fair without violating the copyright owner's exclusive rights to distribute its works. This is called the "first sale doctrine." This defense is generally described as follows: "the owner if a particular copy . . . lawfully made under this title . . . is entitled, without authority of the copyright owner, to sell or otherwise dispose of the possession of that copy . . . ." Id. There is a separate provision for sound recordings and computer programs, but it is not applicable here. See generally 17 U.S.C. § 109(b).
According to the Second Circuit, this defense is only available when the work at issue was made in the U.S. John Wiley & Sons, Inc., No. 09-4896-CV at 16 ("In sum, we hold that the phrase 'lawfully made under this Title" in § 109(a) refers specifically and exclusively to works that are made in territories in which the Copyright Act is law, and not to foreign-manufactured works.").
Facts of the John Wiley & Sons Case
In John Wiley & Sons, the defendant, Supap Kirtsaeng was a Thai student who first attended Cornell University, and then moved to California to pursue a doctoral degree. Between 2007 and September 2008, Kirtsaeng allegedly funded his educational expenses by receiving foreign edition textbooks from his family and friends in Thailand, and then selling them on commercial sites such as eBay. He reimbursed his family and friends for their acquisition and shipping costs and kept the profits for himself. Apparently, Kirtsaeng received about $1.2 million in revenue, a fact he tried to withhold from the jury as unduly prejudicial (see below). Id. at 7. In his defense of the lawsuit that followed, Kirtsaeng claimed that he had sought advice from friends in Thailand and on the Internet (using "Google Answers") to determine that his actions would be lawful. (Factual discussion appears in the opinion in pages 4-5).
Complaint & Trial
On September 8, 3008, the textbook publisher, John Wiley & Sons, filed suit in the federal district court in Manhattan (Southern District of New York) claiming copyright infringement (17 U.S.C. § 501) and trademark infringement (15 U.S.C. § 1114(a)) under federal law, and unfair competition under New York state law. John Wiley & Sons sought preliminary and permanent injunctive relief under 17 U.S.C. § 502(a) and statutory damages under 17 U.S.C. § 504(c). At trial, the jury found Kirtsaeng "liable for willful copyright infringement of all eight works and imposed damages of $75,000 for each of the eight works." Id. at 8. Kirtsaeng appealed to the U.S. Court of Appeals for the Second Circuit (the "Second Circuit"), alleging that the judge erred in (1) finding the "first sale defense" not to apply to this situation; (2) in not instructing the jury that the "first sale doctrine" constituted a complete defense to the claims and (3) allowing certain evidence to be introduced regarding his gross receipts, which he claimed to be improper and unduly prejudicial.
On appeal, the Second Circuit considered both Quality King Distr., Inc. v. L'anza Res. Int'l, Inc. (523 U.S. 135 (1998)) and Omega S.A. v. Costco Wholesale Corp. (541 F.3d 982 (9th Cir. 2008)) as potential precedent, and found both to be inapposite. Quality King dealt with works that were made in the U.S. for export to other countries, being returned to the U.S. and sold without authorization by the copyright owner. In that case, in a concurring opinion, Justice Ginsberg explained, "This case involves a 'round trip' journey, travel of the copies in question from the United States to places abroad, then back again" and explicitly noted that "we do not today resolve cases in which the allegedly infringing imports were manufactured abroad." Id. at 11 (citing Quality King Distr., Inc. v. L'anza Res. Int'l, Inc., 523 U.S. 135, 154 (1998)). As a result, the Second Circuit concluded that Quality King did not address precisely the situation posted by the John Wiley case, although its analysis could be borrowed for guidance about what the Supreme Court might do were this issue squarely presented before it.
The Second Circuit also considered a recent decision from the Ninth Circuit, Omega S.A. v. Costco, for the proposition that the first sale doctrine (§ 109(a)) "does not apply to items manufactured outside of the United States unless they were previously imported and sold in the United States with the copyright holder's permission." Id. at 12 (citing Omega S.A., 541 F.3d at 990). This case had been appealed to the U.S. Supreme Court, which affirmed the judgment by an equally divided panel (with Justice Kagan recused). In other words, four of the nine justices voted to overturn the opinion, but without a majority of votes, the opinion was essentially affirmed.
In reaching its ruling, the Second Circuit conceded that the statutory text was simply "utterly ambiguous." Id. at 15. The phrase "lawfully made under this title" could mean any of the following: "(1) 'manufactured in the United States,' (2) 'any work made that is subject to protection under this title,' or (3) lawfully made under this title had this title been applicable.'" The last two meanings would have supported Kirtsaeng's position, but the court explained, "these definitions, like Wiley's, are at best merely consistent with a textual reading of § 109(a)" but are not mandated by the statute. Id.
Following its analysis, the Second Circuit concluded that it was most appropriate to "adopt an interpretation of § 109(a) that best comports with both § 602(a)(1) and the Supreme Court's opinion in Quality King." Id. (Section 602(a)(1) provides that unauthorized importation into the U.S. of works that were acquired outside the U.S. constitutes infringement.) The Second Circuit explained that the "mandate of § 602(a)(1) . . . would have no force in the vast majority of cases if the first sale doctrine was interpreted to apply to every work manufactured abroad that was either made" under definition number 2 ("subject to protection under Title 17") or 3 ("consistent with the requirements of Title 17 had Title 17 been applicable") above. Thus, the only definition that could apply – and still allow § 602(a)(1) to have any teeth – must be definition number (1) ("manufactured in the U.S.").
In reaching this conclusion, the Second Circuit also distinguished the Omega v. Costco decision by finding that it was based largely on Ninth Circuit precedent that has not been widely adopted by other appellate courts.
As to the remaining bases for appeal, the Second Circuit held that it "could not conclude that the District Court plainly erred in declining to give Kirtsaeng's proposed jury instruction" and "we see no reason to conclude that the District Court's decision [regarding admission of evidence of Kirtsaeng's gross revenues] was improper under Rule 403(b)." Id. at 18, 20.
Accordingly, all three of Kirtsaeng's arguments failed and he lost the appeal.
The Honorable J. Garvan Murtha, a Vermont district court judge sitting by designation, filed a dissenting opinion, basically concluding that "the first sale doctrine should apply to a copy of a work that enjoys United States copyright protection wherever manufactured." Id. at 1 (dissent). As in the majority opinion, the dissent focused on the "lawfully made under this title" phrase, and noted a circuit split over the interpretation of this phrase. One definition (as articulated by the majority) adopted the "legally manufactured . . . within the United States" construct. Id. at 2 (dissent). The other (to which Judge Murtha subscribed) "refers not to the place a copy is manufactured but the lawfulness of its manufacture as a function of U.S. copyright law." Id. at 3 (dissent).
Judge Murtha described his disagreement rather plainly:
A U.S. copyright owner may make her own copies or authorize another to do so. 17 U.S.C. § 106(1). Thus, regardless of place of manufacture, a copy authorized by the U.S. rightsholder is lawful under U.S. copyright law. Here, Wiley, the U.S. copyright holder, authorized its subsidiary to manufacture copies abroad, which were purchased and then imported in to the United States.
Id. (dissent) at 3. Under this construct, therefore, the first sale doctrine should apply to exempt Kirtsaeng from liability for copyright infringement for distributing these valid copies of a U.S. copyrighted work that he acquired lawfully before further selling them.
Judge Murtha further supported his position by relying on the initial Supreme Court case that articulated the first sale defense, in which the Court held that the "defendant-retailer's sales of a copyrighted book for less than the price noted on the copyright page was not a copyright violation." Id. at 4 (dissent) (citing Bobbs-Merrill Co. v. Straus, 210 U.S. 339, 341 (1908)). "The purchaser of a book, once sold by authority of the owner of the copyright, may sell it again, although he could not publish a new edition of it." Id. at 4-5 (dissent) (citing Bobbs-Merrill Co., 210 U.S. at 350). Thus, the copyright owner cannot control the terms of subsequent sales, if the initial sale was authorized.
In sum, Judge Murtha pointed to the Supreme Court's lack of guidance as to its views of the Ninth Circuit's "imperfect solution" in the Omega case because at least four justices "did not agree the Quality King dicta [by Justice Ginsberg, cited above] directly addresses [this issue] or constitutes the Court's current view." Id. at 8 (dissent). In his view, they would have overturned the Omega decision, which was upheld only because it was not overturned by a majority of votes of the justices. Thus, while this is a "close call," it should have been decided the other way -- that the first sale doctrine applies to foreign manufactured copies. Id.
Given the circuit split articulated by the dissent, the statutory text's "utter ambiguity" as conceded by the majority and the Supreme Court's narrow upholding of the Ninth Circuit's opinion in the Omega case, it is possible that this issue may see further consideration by the Supreme Court. This, of course, assumes that either Kirtsaeng further appeals or another case with similar facts is presented for the Supreme Court's consideration – and that the Supreme Court grants certiorari.
Until then, future litigants should consider whether the John Wiley & Sons case operates as binding precedent to their case or whether under the facts and circumstances presented, the first sale doctrine (despite foreign manufacture of the works at issue) could act as a defense to claims of copyright infringement for the subsequent sale of a validly obtained copy.
I am an IP attorney practicing with Eckert Seamans Cherin & Mellott in their IP practice in the Philadelphia ofice. You can also follow me on Twitter: @PaTMLawyer. PLEASE NOTE: ALL OF THE VIEWS EXPRESSED IN THIS BLOG ARE MINE ALONE, AND DO NOT NECESSARILY REFLECT THE VIEWS HELD BY OTHER ATTORNEYS IN THE FIRM.
Please be advised that nothing in this blog constitutes legal advice. It is merely an analysis of some of the issues raised by particular events or statutory developments. If you have particular concerns that you wish to have addressed, please contact a lawyer directly so that your specific circumstances can be evaluated.