2d Cir: Copyright “first sale doctrine” applies only to U.S.-manufactured works

Last year in Omega S.A. v. Costco Wholesale Corp., the Supreme Court was set to decide whether the 9th Circuit correctly held that “first sale doctrine” under 17 U.S.C.§ 109(a)—which applies to copies “lawfully made under this title”—does not apply to items manufactured outside the United States unless they were previously imported and sold in the U.S. with the copyright owner’s permission. But dividing 4-4, it was able only to issue a non-precedential affirmance.

Today, a 2-1 majority of the 2d Circuit in John Wiley & Sons, Inc. v. Kirtsaeng, No. 09-4896 (Aug. 15, 2011), went a bit further than the 9th Circuit, holding that the § 109(a) defense applies, without conditions, only to domestically-manufactured works. The court believed that this reading comports better with a copyright holder’s right under § 602(a)(1) to prohibit the importation into the U.S. of copyrighted works acquired abroad. In other words, applying § 109(a) to works manufactured abroad would render § 602(a)(1) impotent in the majority of cases.

2d Cir. broadens copyright preemption as to state law “misappropriation of hot news” claims

Barclays Capital Inc. v. Theflyonthewall.com, Inc., No. 10-1372 (2d Cir. June 20, 2011), involved allegations that the uncovering and dissemination of financial firms’ daily securities trading recommendations constituted copyright infringement and the New York common law tort of misappropriation of “hot news.” Such a misappropriation claim was first accepted in the days of federal common law in Int’l News Serv. v. Associated Press, 248 U.S. 215 (1918) (“INS”), but really hasn’t gotten much traction since.

The defendant conceded copyright infringement. The only question on appeal was whether the misappropriation claim was preempted.

The panel majority’s decision turned on whether a five-part test set forth in a prior “hot news” case, NBA v. Motorola, Inc., 105 F.3d 841 (2d Cir. 1997), was dictum. In NBA, the Second Circuit held that the NBA’s misappropriation claim was preempted, but suggested that an INS-type misappropriation claim could survive preemption if it required an “extra element” beyond those required for copyright infringement. The NBA court posited a five-part test that it believed would characterize a non-preempted claim possessing such an extra element.

The panel majority characterized the NBA court’s five-part test as dictum. Instead, the panel majority compared the misappropriation claim itself to that involved in NBA and determined that they were alike in that (1) the plaintiffs in both cases “created” the news (as opposed to simply reporting it) and (2) defendants in both cases gave proper attribution to the respective plaintiffs for the news. The court contrasted this with the facts in the INS case, where the plaintiff was a news reporting service, not the “creator” of the news itself, and the defendant had taken credit for the report it obtained from the plaintiff. Since the plaintiffs’ claims in NBA and Barclays were alike in these respects (and unlike INS), the panel majority held that, like the claim in NBA, the plaintiffs’ misappropriation claims were similarly preempted.

The concurring judge would not have rejected the NBA court’s five-part test as dictum, but instead would have found preemption due to the failure of the plaintiffs to demonstrate one of the five parts of the NBA test (direct competition between the parties).

Second Circuit gets rid of presumption of irreparable harm in copyright injunction cases

The Second Circuit yesterday overruled prior precedent that provided for a presumption of irreparable harm in the preliminary injunction context in copyright cases. In Salinger v. Colting, No. 09-2878 (2d Cir. Apr. 29, 2010), the Second Circuit held that the Supreme Court’s decision in eBay, Inc. v. MercExchange, LLC, 547 U.S. 388 (2006)--in which the Supreme Court, in a patent case, rejected general or categorical rules favoring or disfavoring injunctions--was not limited to patent cases.

The new test for a preliminary injunction (in copyright cases in the Second Circuit) is now:

1. (a) likelihood of success on the merits; or

(b) sufficiently serious merits questions and the balance of hardships tipping decidedly in the movant’s favor;

2. a demonstration of likely irreparable harm;

3. consideration of the balance of hardships; and

4. confirmation that the public interest would not be disserved.

As to factor (2), the Court softened the blow to copyright holders, however, by hinting that courts could consider “historical tendencies” in past copyright cases in assessing the showing of irreparable harm. It will be interesting to see whether such “historical tendencies” will actually put litigants pretty close to where they were under the “presumption of irreparable” standard.

While the Court was careful to limit its holding to copyright cases, nothing I could find in the opinion suggested that the Second Circuit would not also extend eBay to trademark cases once the issue is squarely presented to it. However, in what might have been an instance of purposeful judicial foreshadowing, the Court noted that historically courts have tended to find “possible marketplace confusion” as an example of irreparable harm. Hmmm.

Three recent decisions re: architectural copyrights; a stolen domain name; and copyright/trade secret ownership in the employment context

While interesting, the following three recent decision don’t seem to warrant extended analysis, so here are the TV Guide summaries:

2d Circuit Throws Out Architectural Copyright Claim on 12(b)(6) Motion Based on Designs Appended to Complaint

Don’t plead yourself out of court. That may be the lesson of Peter F. Gaito Architecture, LLC v. Simone Dev. Corp., No. 09-2613-cv (Apr. 7, 2010). The plaintiff copyright owner alleged that a developer infringed his copyrighted plans, and attached depictions of the designs to its complaint. Assuming for purposes of argument that copying occurred, the Second Circuit compared the two designs for substantial similarity. Concluding that the depictions demonstrated that only general ideas and concepts—not protectable expression—was misappropriated, the court affirmed dismissal of the case. Of course, not attaching the depictions of the designs to the complaint would likely have only postponed the dismissal to the summary judgment stage, but it may have increased leverage for some kind of monetary settlement in the meantime.

9th Circuit Grapples with Conflict of Laws Issue in Domain Name Conversion Case

In an intensely-fact specific case involving a claim that the defendants converted the plaintiff’s domain name registration (replete with a bad guy in the PRC, an innocent purchaser for value defense, and a cameo appearance by Ralph Lauren), the 9th Circuit in CRS Recovery, Inc. v. Laxton, No. 08-17306 (Apr. 6, 2010), engaged in a lengthy discussion of the policies underlying the respective laws of Virginia and California to determine a tricky and potentially outcome-determinative choice-of-law issue.

9th Circuit Analyzes Employee/Independent Contractor Issue to Decide Who Owns Copyrights and Trade Secrets in Computer Software Source Code

In JustMed, Inc. v. Byce, No. 07-35861 (Apr. 5, 2010), the Ninth Circuit went through a lengthy, fact-intensive analysis of the often-litigated issue of whether the author of copyrightable material or creator of a trade secret was an employee or independent contractor of a company claiming that it owned the individual’s work. The case is interesting in that it seems to somewhat alter the traditional weighing of the factors relevant to that determination to fit the context of small, non-traditional, techie start up companies.

Second Circuit decision on copyright "fair use"

The Second Circuit recently issued a opinion discussing whether use of a few shrunk-down images of copyrighted concert posters in a historical coffee table book about the Grateful Dead violated copyright law.

In Bill Graham Archives v. Doris Kindersley Ltd., No. 05-2514-cv (2d Cir. May 9, 2006), the plaintiff noticed the use of its images in the book, which it found HARD TO HANDLE. It sued the defendant, and said THE RACE IS ON. Its complaint tried to take the book's publishers to SHAKEDOWN STREET using the copyright laws, but the defendant claimed fair use, and that was THE RUB. And once the district court analyzed the fair use factors, it said it LOOKS LIKE RAIN for the plaintiff, who was told on summary judgment to BEAT IT ON DOWN THE LINE, and ended up the LOSER in the district court.

At the Second Circuit, the EYES OF THE [copyright] WORLD were upon the court. Of the four "fair use factors" in 17 U.S.C. § 107, the Second Circuit focused primarily on "the purpose and character" of the defendants' use. The court held that the defendants' use of the work was "transformative," in that it used only a few images, in much-reduced size, and integrated them into a historical timeline and provided historical information about the concerts depicted in the posters. The court also noted that the plaintiff's works constituted only a very small portion of the challenged book, and that the defendants hadn't used the works in the advertising for the book. This was the most important factor, in the Second Circuit's view, and it had a RIPPLE effect on the THE OTHER ONEs (fair use factors, that is).

AROUND & AROUND the arguments went on the other three fair use factors. While the plaintiff got some GOOD LOVIN' on the creative nature of its work (the second fair use factor), the court held that its significance amounted to JACK STRAW in light of the importance of the first factor. The court also found that the "amount and substantiality" of the work copied was small, and that plaintiff's use of thumbnails didn't eat into the market for or value of the originals, which were not ever licensed in such a way.

Concluding that only a SHIP OF FOOLS would side with the plaintiff on this one, the Second Circuit said, IT'S ALL OVER NOW, leaving the plaintiff in the COLD RAIN AND SNOW. Its copyright claim looking like a BROKEDOWN PALACE, the plaintiff had to say, YOU WIN AGAIN, and ultimately ended up GOIN' DOWN THE ROAD FEELIN' BAD.

Since the court thought its legal analysis should NOT FADE AWAY, this opinion will be published.

Second Circuit copyright decision on statutory damages

The Second Circuit recently decided a case that raised the issue of how to count the number of statutory damage awards are available under section 504(c)(1) of the Copyright Act. In WB Music Corp. v. RTV Communications Group, Inc., No. 04-3890, 04-3892 & 04-3901 (2d Cir. Apr. 19, 2006), the defendant had sold seven CDs that infringed plaintiffs' copyrights in 13 songs. Section 504(c)(1) provides for one statutory damage award for each work that is infringed. The last sentence of section 504(c)(1) further provides that, for purposes of calculating statutory damages, all parts of a derivative work or compilation constitute one work.

The trial court thought that since the defendants' infringing CDs were compilations, that meant there were seven infringing works. The Second Circuit disagreed, holding that the last sentence refers to the copyrighted works, not the infringing works. Therefore, since the defendants infringed 13 different songs, they were on the hook for 13 statutory damage awards.