Letter from AmeriKat I: Good Day Sunshine (TMs and ©)

The AmeriKat has been watching the English public embrace the change of the season this week. On Friday she slinked outside for her midday patrol and perched on a bench in Gray's Inn, with the new Vogue in paw. (picture, left - the AmeriKat taking a much needed lunchtime Kat nap) Like spring flowers, once the temperature rises above a certain level the English bloom onto any stretch of grass available to them. A sea of students, solicitors, lawyers and miscellaneous office workers were scattered about in the sections of Gray's Inn grass that was unspoilt by any appearance of shade. Once modest workwear suits, worn by males and females alike, were stripped of any sweaters, cufflinks and buttons to expose as much square footage of skin as possible, laughter was echoing off the Inn's buildings, people were chatting with their neighbors, and a general feeling of calm settled throughout. The AmeriKat even spied some IP barristers from 11 South Square joining in on the emergence of spring. There is something about warmer weather in England that makes the general public a little less guarded than normal, in both physical appearance and mentality, which can only ever be welcome.

Louboutin sees red with Yves Saint Laurent

Someone who has seemed to let their guard down, in least where trade mark infringement claims are concerned, is Yves Saint Laurent who last Thursday was sued in Manhattan federal court by the one and only Christian Louboutin. Louboutin is famous for his footwear recognizable by the casual observer by its trade mark red sole. The story goes that one of Louboutin's customers was wearing an amazing red nail polish on her nails which Louboutin adored. She had the coveted nail color in her bag, took it out and Louboutin painted his first sole with the red nail polish. The violent red-lacquered sole would later become his signature maker's mark and would be granted a US trade mark in 2008 (picture, right - Louboutin's famous heel).

Louboutin is now alleging that since January Yves Saint Laurent America, a subsidiary of the Gucci Group, is selling their shoes with the same red sole in store throughout Manhattan. Louboutin's complaint argues that Yves Saint Laurent's use of the red sole is "likely to cause and is causing confusion, mistake and deception among the relevant purchasing public." Louboutin is claiming for $1 million in damages and an injunction to stop Yves Saint Laurent (picture, left) from manufacturing the shoes. Interestingly, Louboutin apprenticed with Yves Saint Laurent in the late 1980s before setting up his own brand.

The AmeriKat is curious, as any Kat should be, to know what evidence of actual confusion (as stated by the complaint to be occurring) Louboutin has. Unlike in the UK, under section 1114 of the Lanham Act US trade mark owners have to prove that the defendant's use of their mark confused consumers. In the Second Circuit, which includes New York, the factors for the test for confusion is that as laid down in the Polaroid Corp v Polarad Elecs. Corp (1961) case. The AmeriKat sets out these factors below with some comments in the IPKat's signature comment red:

1. The strength of the mark, i.e. the red soles - It is somewhat undeniable that Louboutin's red soles have indeed become well-recognized as a trade mark for his shoes in the market.
2. The degree of similarity between the two marks - Identical - in so far as they are both red outersoles
3. The proximity of the products and services - Identical - they are both shoes, being sold in the same stores, probably right next to or near each other
4. The likelihood that the senior user will "bridge the gap" into the junior user's product service line - if there even is a 'gap' it is very likely because they are competitors
5. Evidence of actual confusion between the marks - Always hard to come by, but perhaps Louboutin has some faithful customers who will be able to attest to some initial interest confusion?
6. Whether the Yves Saint Laurent adopted the mark in good faith
7. The quality of the Yves Saint Laurent's products - the AmeriKat would love to see Louboutin allege that YSL's products are of a lesser quality, but the fact that they are not and are side-by-side competitors actually makes it more difficult for YSL to squirm out of this one because there is more chance of there being actual, likely or initial-interest confusion.
8. The sophistication of the parties customers -If someone is in the market for $400-$4,000 shoes, one would think you would pay particular attention in knowing what shoe and from whom you were buying, however again, initial interest confusion may be the savior in this confusion battle.

Confusion, as any trade mark lawyer knows in the US and the UK, is notoriously difficult to prove. However, in the US and now thanks to Arnold J in the UK, initial interest confusion is probably the saving grace for Louboutin. Given that the price points of parties' products are so high and the sophistication of the intended consumers is so developed, any confusion present regarding the origin of the shoes on behalf of the consumer is likely to be remedied prior to purchase. What do readers think? Is this an easy fight for Louboutin or does Yves Saint Laurent have it in the (Neiman Marcus) bag?

Need for Congress to address issues with Google Books lawsuit, Pallante says

The AmeriKat has been quiet about the Google Books Settlement, which some may find unusual considering how much she followed and wrote about the litigation (see previous reports here). In fact she even predicted when District Judge Denny Chin (picture, left) was going to issue his damning judgment (just ask @garethdickson). There is little she wishes to say right now about Judge Chin's judgment other than, in her opinion, it was the correct determination given that the revised settlement seemed even worse than the first and again did not adequately address the issue of orphan works, and Google could have saved itself a lot of bother had it been an "opt-in" class than an "opt-out" (albeit probably not as profitable). However, the issue spotlighted how important the issue of digitization of works is in copyright, be it literary or artistic.

Maria Pallante (picture, right), acting Register of Copyrights, feels the same. Last week she told an event hosted by the US Chamber of Commerce that lawmakers need to address the issue of whether the digitization of literary works should be a benefit for the public or become a profit-making endeavour. As reported by the Dow Jones Newswire, Pallante stated that

"The first issue is really, is mass digitization a national goal that Congress feels legislation is warranted for, and if so, for what beneficiaries."

She also stated that

"It isn't that universal libraries aren't important, but there's a difference between universal libraries and universal bookstores."

With orphan works are back where we started, says the AmeriKat, why can't the US government just once and for all pass a bill like the Shawn Bentley Bill? It would allow for digitization of orphan works, but if and when the owner came forward a reasonable royalty would be payable under statute provided the user undertook a reasonable search. Does it need to be more complicated than this? Of course, the problem encountered is that once that copy is digitized the person who digitized it can arguably exclude other digitized copies of the same book being made - thus some of the arguments against Google in the Google Books case. As long as it is clear that the mere digitization of a literary or artistic orphan work does not mean that the digitizer can exclude others from making their own digitized versions of the work, then such problems should not be encountered. But then again, how can this be done but by legislation?

More in Part II.

Letter from AmeriKat: American lawyers love expensive watches, ABA amicus brief confirms

Last week signaled a week of new beginnings. The nation's children, decked out in their crisp white shirts and shiny schools shoes, returned to school. The workforce dragged their now-tanned heels back to their paper-covered desks and the AmeriKat happily started her first week at her new law firm. The first week back, be it at a new job or a new school year, always includes a flurry of new information, names and procedures to assimilate and very soon 5 days can feel like 50. (picture, left - the AmeriKat not quite getting around to polishing an apple for her new partners) But despite the newness of the environment and the people swirling about her, the AmeriKat found comfort in some old friends' faces - that of her IP and media text and statute books taking up residence on her new desk. The AmeriKat's firm and colleagues may have changed and she may not know what form goes with what client, but thankfully, IP has (mostly) stayed the same.

American Bar Association - a friend of copyright owners in Costco v Omega case

Another old friend that has come to comfort is the American Bar Association (ABA).

Last Tuesday the ABA filed an amicus curiae brief with the US Supreme Court in support of Omega in a case to be heard before the Supreme Court concerning the "first sale" doctrine in relation to copyright goods manufactured and distributed abroad (see original AmeriKat report here). Back in April, the Supreme Court granted Costco a writ of certiorari in the case of Costco Wholesale Corp v Omega SA and will now have the task of deciding whether when a copy is made and distributed abroad it is done so lawfully under section 109(a) and is therefore exempt from the copyright owner's exclusive right to control the importation of copies of its work into the US under section 602.

The case concerns an original 2004 action brought by Omega (part of The Swatch Group Ltd.) against Costco. Costco had sold watches, including the Omega Seamaster, that they had obtained from a New York-based third-party. Omega owns a US Copyright for an engraved emblem of a globe on the back of the Seamaster watch. Costco sold these watches for $1,299 - $700 less than Omega's suggested retail price. Omega argued that Costco had infringed US copyright law and sought to impose limits on the price Costco could sell the watches. Costco won in the first instance, but lost on appeal. The Court of Appeals for the Ninth Circuit held that that copyright owners did have the right to control the manner in which their goods are imported and sold in the US irrespective of the first-sales doctrine (a.k.a. the exhaustion rule) enshrined in section 109(a) because this section did not apply to goods manufactured abroad. The Court of Appeals decision relied substantially on section 602(a) of the Copyright Code which deals with infringing importation of copies.

The crux of the issue before the Supreme Court is the wording of the section 109(a) exception and its relation to section 602. Section 602(a)(1) of the Copyright Act sets out the general prohibitions against importation of copyright works into the US without the authority of the copyright owners that have been acquired outside the US. Section 109(a), which embodies the "first-sale doctrine", provides an exception to this prohibition whereby an owner of a particular copy of a copyright work "lawfully made under this title" is entitled without permission of the copyright owner to sell the copy. To benefit from the exception goods have to be "lawfully made under this title" which the Appeals Court held meant to be "lawfully made in the US" and since the watches were made overseas, Costco could not benefit from the exception. But some argue that the meaning of this phrase remain unresolved - cue Costco.

But unlike the slew of other amici who are mostly supporting Costco, ABA is supporting the copyright owner in this case - Omega. The AmeriKat is intrigued as to their reasoning behind the ABA's allegiance in this case and is curious to see if it was a strategical/political or a legal reason to explain their support.

This ABA amicus comes primarily by way of their Section of Intellectual Property Law (IPL Section) which they gleefully taut as the "world's largest organization of intellectual property professionals, with approximately 25,000 members" and include those who represent "copyright owners" and "users of works of authorship". The IPL Section's Copyright Task Force monitor judicial developments and develop policies of special importance, including whether to file amicus briefs. Other sections of the ABA, including the International Law and Litigation Sections supported the adoption of what is now known as Resolution 109 which urges the Supreme Court to exclude the first-sale doctrine to the importation of goods embodying a copyright work that were not manufactured in the U.S.

The ABA's argument is two-fold - that the Ninth Circuit Court of Appeals judgment was consistent with statutory interpretation and that the judgment is consistent with the application of the Quality King case. (picture, left - the only "Quality King" the AmeriKat knows of) The ABA argue that "lawfully made under this title" means Title 17 of the US Code in which the Copyright Act is codified and is thus more naturally referred to as being "made under" US copyright law. If "lawfully made under this title" meant "lawfully made anywhere in the world" and not just in the U.S., then section 602 which deals with a copyright owner's right to control importation of copies acquired outside the US would be essentially redundant. The ABA argues in support of this conclusion that the long-standing presumption that the "country's proscriptive and prescriptive competence ends at its own borders" as held in American Banana Co v United Fruit Co (1909) supports the view that "lawfully made under this title" is restricted to goods manufactured in the U.S. Indeed, they argue, copyright itself has been consistently interpreted as subject to the presumption of territoriality and restricted within US borders.

The second prong to the ABA's argument is that the Ninth Circuit's decision is consistent with the Quality King case (the case where Justice Stevens seemed to indicate that "lawfully made under this title" did mean "lawfully made in the US"). The Quality King case analyzed the status of Section 602 copies that were made in the US, left the country, then came back, i.e., "round trip". The Court in Quality King did not therefore need to construe the phrase "lawfully made under this title" because the copies had been made in the US. However, in illustrating their holding the Court distinguished between copies "lawfully made" under the US Copyright Act from those made under the law of some other country. For example where a copyright owner divided distribution rights between UK and US publishers, the copies made in the UK would not be copies "lawfully made under this title" for the purposes of Section 109(a).

The ABA argues that the Ninth Circuit was therefore correct in construing that British copies were "made" in another country and not "made under" Title 17 and, in similar circumstances, Costco could not benefit from the section 109 exception because the watches were not made in the US.

If the Supreme Court finds favor with this argument the consequences for the buyers and sellers of goods in the secondary market or "gray market", such as Costco, Amazon and eBay are huge. Gray market buyers argue that copyright owners usually sell their goods to foreign distributors at a discount price and all they are doing is then buying these goods from the distributors at a similar price. Why should they then be penalized as a result of a manufacturer's decision to sell their product at a discount price and further why should US copyright law allow copyright owners to have a second bite of the cherry?

The practical effect of such a Supreme Court decision may be to see US consumers paying higher prices for goods than that of their foreign counterparts and copyright owners being able to price-discriminate without any threat of recourse. In addition, US based manufacturing operations may be relocated to outside the "nation's borders" so that copyright owners can benefit from greater control for goods imported into the U.S. Whichever way you slice it, this case will have a lasting effect on the consumer retail industry, not only in the U.S. but overseas as well.

Given the consumer interest at stake, why did ABA side with Omega? The AmeriKat does not know and in fact finds it slightly surprising that the ABA put their head above the parapet so strongly in favor of copyright owners. It may be interesting to know the proportion of ABA members who represent copyright owners, to those who represent gray market buyers/consumers. If the ABA has these statistics, the IPKat would love to seem them.

Letter from AmeriKat: August Bits 'n Bobs

The AmeriKat will be taking advantage of the quiet August month in litigation to have a break for the next two weeks. Save for a massively important IP event to occur in the meantime, she will be scampering back to her weekly Letter in early September.

A little known fact about the AmeriKat that rarely surfaces during her legal work is that she plays the piano. Since the very elementary phases of her kittenhood she has enjoyed marching her paws up and down the keyboard for hours to Gershwin, Chopin and Beethoven. There was and still is nothing the AmeriKat loves more then grabbing a stack of brand new unseen sheet music and sight-reading pieces for hours. This ability to sight-read anything frustrated her teachers as it inevitably meant the AmeriKat spent less time practising one piece than reading them all, but it was unstoppable guilty pleasure. In the earlier days of the Internet she would try to find sheet music available on-line but there was little there of interest. In the rare instance music was available, the hollow printouts lacked the soul of the thickly bounded music books that the AmeriKat so enjoyed.

Don't steal this sheet! - Apparently things have progressed since the days the AmeriKat tried to find sheet music on-line. Although not breaking news, some food for thought recently came to the AmeriKat's attention via National Public Radio on this issue. NPR recently reported on the issue of sheet music piracy after Tony Award-winning songwriter, Jason Robert Brown, engaged in conversations with members of a peer-2-peer network who were sharing his sheet music. This followed his discovery of around 4,000 individuals offering his sheet music up for the taking. Brown estimates that about one-third of his income comes from the sale of his sheet music and called the discovery of the 4,000 individuals an "epidemic". Brown wrote to 10% of the "epidemic" asking them to stop sharing his music - all of whom reportedly agreed. He published the correspondence on his blog, including the exchange with an individual known as Eleanor who engaged the composer with an economic justification for the file-sharing, i.e., one instance of piracy can result in more exposure for the artist and thus more business.

A Stanford Law School fellow in IP, Alex Feerst, wrote to Brown following the exchange and says that the music publishing industry, like the recording industry, is living in the past:

"The existing copyright law directs a lot of money to the middlemen in this question. In the past, that was appropriate, because printing music, distributing music, pressing CDs - these are expensive, have been done on a large scale and they cost money. Now that the costs have really gone down, because of the Internet, those types of costs need to re-examined. And the best thing that could happen to enrich artists, by passing more along to them, and to empower consumers, to have lower prices and choice over how they want to interact with this art."

NPR reports that in doing so Brown could obtain $3.99 per song instead of the $1.50 he gets now. But Brown told NPR that he liked the support he gets from a large music publisher and ASCAP. Economic justifications for stealing sheet music may be weak, but, says the AmeriKat, what is the economic justification for the support that comes at a cost to an artist of $2.49 per song? Will Brown ever see a return on that money in his lifetime?

Barbie better watch her back, Bratz is back - IPKat readers may have been following the fight between Barbie and Bratz (here and here) where in brief, Barbie sued Bratz for copyright infringement last year and won. The injunction to stop selling the Bratz dolls and to transition the line to Mattel was finally overturned at the end of July. Now last Monday, the owners of Bratz, MGA Entertainment, filed a counterclaim alleging that Mattel conducted an elaborate corporate espionage scheme in which Mattel employees, including general counsel Robert Normile and their attorneys from Quinn Emanuel, engaged in a racketeering conspiracy in order to gain access to MGA's private showrooms to obtain confidential information of Mattel's competitor's plans. (picture, left - Did Barbie's expertise as a Secret Agent come in handy during the alleged espionage?) According to Am Law Litigation Daily, Quinn Emanuel partner Michael Zeller said that MGA's recent claims were "second-rate tactics by desperate lawyers" that "won't survive the pleading stage." To read more about this hilarious new suit, see this article in Corporate Counsel.

PepsiCo stops stealth drinking - Two weeks ago, the world's largest snack-food manufacturer, PepsiCo, sued two Connecticut manufacturers for trade mark infringement for their "camouflage beer can wraps." The wraps, produced by Outrageous Ventures and PrankPlace.com, disguise the alcoholic beverage contained within with their mimicking of PepsiCo's Pepsi and Mountain Dew labels. PepsiCo said that the association of the Pepsi and Mountain Dew marks with illicit alcohol consumption is "abhorrent" and likely to "upset" consumers. Millions of frat-boys disagree...

Material Girl gets sued - According to Hollywood gossip site, TMZ, Madonna and her daughter's "Material Girl" clothing line (picture, right) is allegedly facing trouble and not just from the fashion police. Clothing company, L.A. Triumph, has allegedly file a trade mark infringement law suit against Madonna claiming she misappropriated the "Material Girl" trade mark that they claim to have been using on their clothing line since 1997. Madonna's song "Material Girl" was released in 1985. For more information see this article in CNN.

Harry Potter can't protect you now - Last week Warner Brothers filed an action in Switzerland to stop the trade mark registration and use of "Harry Popper" for condoms. The imagery includes the use of Harry Potter style glasses and a wand being wielded by the prophylactic (click here to see the image). The Harry Popper brand was launched in 2006 and has already been successfully challenged in other jurisdictions including Germany and Austria. For more information see these articles in The Hollywood Reporter and Telegraph.

Oracle sues Google - US software company, Oracle, filed a copyright and patent claim against Google two weeks ago in California alleging that Google's android mobile phone operating system infringe seven of its patents. These patents were acquired by Oracle after it acquired Sun Microsystems this past January. Google says they have yet to be served with the court documents. For more information see this article in Wired.

And now for something different - Courtsey of @Ivoryblossom comes a hilarious little tale of rudimentary trade mark infringement. The AmeriKat would hate to ruin it for you, so asks you to click here.

Letter from AmeriKat - Hot News - too hot to handle?

The AmeriKat spent Saturday clearing away her belongings from bookshelves and tables in preparation of the painting that will take place in her flat next week. Readers may recall that in May, her flat was flooded after a neighbor's pipe burst turning her flat into Noah's Ark. Two months later and the painters are finally due to cover up the water-stained ceiling and resulting fissures in the walls. (picture, left, the AmeriKat taking a paw to painting) A fresh coat of paint can do wonders to a room - transforming a once dull and fading space, to a new and brightened environment. But despite attempts to freshen or fix some things in life, their inherent flaws will always show through no matter how many coats of paint you apply.

Hot News - So Hot Google can't touch it?

An industry and profession who have been inventing new ways to mask the cracks in their failing business model is the newspaper industry. A month ago the Federal Trade Commission published a "Discussion Draft" paper that against a backdrop of their importance to a democratic society, discussed the dire state of the newspaper industry, citing a loss of 45% of their advertising revenue since 2000. The paper proposed that additional intellectual property rights be employed to support claims from the traditional press against news aggregators. Readers may recall that last June Judge Posner also suggested that copyright law could be employed to rescue the newspaper industry (see previous AmeriKat post here).

News aggregators, for those unfamiliar with the term, aggregate links, headlines, and introductory sentences of newspaper articles in a one-stop style shop. The user clicks on their chosen link directing them to the original source material. For example, when you type in "Paul octopus World Cup" in Google News, it will aggregate or list all news articles that refer to those keywords. Some say that news aggregators infringe copyright, while others suggest that the doctrine of fair use rescues aggregators from a finding of copyright infringement. Although not a case strictly involving a news aggregator, a 9th Circuit federal court held that Google's use by way of the reproduction, distribution and display of thumbnail images and headings from copyright works was fair use in the Perfect 10 case. The four fair use factors were employed, but the court placed special reliance on the first factor, i.e., the purpose and character of the use, including whether the use is commercial or non-profit in nature. It seems odd that for the court to place so much reliance on this because surely, Google, as a commercial entity driven by ad revenue, could not rely solely on this factor. The court, however, said that the thumbnails were "highly transformative" because "a search engine provides social benefit by incorporating an original work into a new work, namely, an electronic reference tool." Although arguably highly transformative, says the AmeriKat, surely the commercial nature of the use trumps the transformative nature? Unfortunately, besides the Perfect 10 case, there has yet be a case to have reached judgment of a US court that deals head-on with the issue of whether a news aggregator's use is infringing or falls within the ambit of fair use.

If this story took place in the UK, that is where the story would end. However, in the US, the doctrine of "hot news" muddies the intellectual property waters. Copyright protects the expression of facts or ideas, not the facts or ideas themselves. However, the hot news doctrine in the US actually protects the facts of news. The 1918 Supreme Court case of International News Services v Associated Press originated this doctrine based on common law misappropriation principles in that breaking news was to be considered a "quasi property" right. Justice Pitney, in giving the majority decision, developed the doctrine of misappropriation in the news. According to his judgment a news organization has gathered news “at the cost of enterprise, organization, skill, labor and money” and therefore has a limited proprietary interest in it against a competitor.

Despite that the original federal common law that underlies the 1918 Supreme Court decision is no longer binding, several subsequent cases have reformulated the hot news doctrine. The result has meant that although federal copyright law does not recognize protection of "hot news", state law can protect "hot news". The Second Circuit Court of Appeals did not define the limits of the protection, but nevertheless restated the elements of the hot news doctrine in the NBA v Motorola case in 1998 as the following:

1. The claimant generates or collects information at cost or expense
2. The value of said information is highly time-sensitive
3. The defendant's use of the information free-rides off the claimant's efforts in collecting it
4. The defendant's use of the information is in direct competition with the claimant's use of it
5. The ability of other parties to free-ride off the claimant's efforts would reduce the incentive to produce it or the quality of the information would be threatened.

Now, with newspaper revenues dwindling and a reported loss of more than 40,000 jobs to the US newspaper industry in 2009, it is unsurprising that proponents of the hot news doctrine are demanding that the doctrine be enshrined in the Copyright Act. Proposals have included the encouragement of the development of state law doctrines, one one end, to the enshrinement of protection in the Copyright Act, at the other extreme. The reasoning for both proposals being that with the enshrinement of the protection in state and federal laws would result in the newspaper industry's content being protected and the industry thus be saved.

However, hasty measures and amendments to a centuries-old copyright system that itself was derived from the UK's Statute of Anne, makes the AmeriKat's fur bristle. At the extreme, by amending the Copyright Act one must necessarily be incredibly cautious in drafting a provision that protects news (something that will inevitably be in the public domain in a matter of minutes/days), but also allows for competition from competing news organizations. Without a perfectly drafted provision, costs of litigation and related disputes will rise. And its the very issue of costs, be it in production, overheads or libel litigation, that is thorn in the newspaper industry's paw. Surely, this is not the solution the industry could then possibly support?

Another suggestion in the report was that the fair use doctrine be narrowed so that "routine copying of original content done by a search engine in order to conduct a search (caching) is copyright infringement not protected by fair use." Other suggestions were that, at the very minimum, the way in which the fair use doctrine applies to aggregators should be clarified. But following such a suggestion through, if news aggregation did not benefit from the fair use defence and was thus copyright infringement, the way in which we search for news would radically change. The AmeriKat herself is a keen user of Google News. For example, searching for articles on this very topic resulted in a variety of sources from WSJ, New York Times, BBC, etc by way of the Google News tab - a news aggregator. A normal Google search of this topic resulted in a hodge-podge of topical, as well as irrelevant sources. Thus, a key question recognized by the FTC report was whether a limit on the fair use doctrine would necessarily restrict "the public's ability to find and access information on the web without comprehensive search engines".

The final suggestion in the IP section of the proposal was that of a more extensive licensing system, including statutory or compulsory licensing scheme, such as the ones that operate for phonorecords or jukeboxes (the Copyright Act is dating itself here), be employed. One of the FTC's workshop participants suggested that the federal copyright law be amended to create a "content licence fee" to be paid by every ISP on each customer account it provides. The copyright owners would then submit data of their site downloads and hits to the Copyright Office who would then be in charge of distributing the licence fees. (picture, left - the type of machine the Copyright Office may use to calculate license royalties) But a compulsory licence system in effect taxes access to information. Not only does a tax sits uneasily with the First Amendment, but its practical implications could be too complicated as to be practical.

Last week, Google, wrote a 20 page response to the FTC draft proposals. The AmeriKat is admittedly critical of Google in the field of copyright, however, she agrees with their response. Like Google, the AmeriKat is unsure how the cause of the failing business model of the traditional print media became the responsibility of copyright laws. Are news aggregators really to blame? The AmeriKat thinks not and neither does Google. As Google wrote:

"[T]he current challenges faced by the news industry are business problems, not legal problems, and can only be addressed effectively with business solutions"

Google then quotes the former editor of the now defunct Rocky Mountain News - John Temple (picture, below) - who stated last year:

"Being a great newspaper isn't enough in the Internet era. You have to know what business you're in. We thought we were in the newspaper business. . . If newspapers would spend more time trying to understand their customers instead of focused on their own internal issues...they're more likely to be successful. That's a hard switch for traditional manufacturing operations like newspapers to make"

The AmeriKat could not agree more. The FTC's and some traditional media outlets proposals are not proposals to save journalism, but are instead proposals to save the newspaper industry - an industry whose business model is entrenched in a different era. Copyright laws are not built and should not be manipulated to protect the very thing they were never meant to be protect, ie., facts, in a last-ditch attempt to save an outmoded business model. If anyone assumes that it is fierce proprietary protection, be it through pay-walls or copyright laws, that will inevitably save the newspaper industry, one need only point to the Times loss of 66% of its online readership following its disappearance behind the pay-wall. But if it is a business problem that is killing our traditional press, what is the Internet solution that will inevitably save it?

Breaking News: Google wins $1 billion summary judgment against Viacom and Premier League

Yesterday, Judge Louis Stanton of the Southern District of New York granted summary judgment for Google in two cases brought separately by Viacom and the Premier League. Judge Stanton held that general knowledge of copyright infringement, no matter how widespread and blatant, was not enough for YouTube not to benefit from the Safe Harbour provisions of the Digital Millennium Copyright Act. The IPKat sets out in detail the reasoning of the court in its brief 30-page (double-spaced, mind you) decision.

Readers will recall from various IPKat and AmeriKat reports (found here), that the complaints centered on the plaintiffs’ copyrighted content being uploaded onto YouTube by third-party users and YouTube, once notified, not doing enough to remove the infringing content or preventing future infringements. YouTube sailed into the DMCA’s Safe Harbour provisions which state that under Section 512(c)(1) a service provider:

“shall not be liable for monetary relief or other equitable relief, for infringement of copyright by reason of the storage at the direction of a user of material that resides on a system if the provider:

(A) (i) – does not have actual knowledge that the material or activity using the material on the system or network is infringing; or

(ii) – is not aware of facts or circumstances from which infringing activity is apparent (the "red flag test"); or

(iii) – upon obtaining knowledge or awareness expeditiously removes it; AND

(B) – does not receive a financial benefit directly attributable to the infringing activity; AND

(C) – upon notification of claimed infringement it responds expeditiously to remove the material”

In December, Viacom wrote to Judge Stanton stating their intent to file a motion for summary judgment. In March of this year, around 200 pages of summary judgment motions from both parties were filed (see AmeriKat’s report on both motions here and here).

The question to be decided in the summary judgment was whether the statutory phrases under Section 512(c)(1)(A)(i) and (ii) meant that general awareness of infringements (which were claimed by the plaintiffs to be widespread and common), or actual or constructive knowledge of specific and identifiable infringements of individual items was required for a service provider to fall foul of the Safe Harbor provisions. To determine this question the court had delve into first the legislative history of the DMCA and then the case-law.

Legislative Consideration

Senate Judiciary and House Committee Reports were cited at length in Judge Stanton's decision. The Reports specified that Section 512 was intended to limit a service providers’ liability dependent on their “applicable knowledge”. At paragraphs 44-45/53-54 of the Reports, that knowledge standard was met either by actual knowledge or awareness of facts from which infringing activity is apparent. The Reports went on to state that Section 512(c)(1)(A)(ii) could be described as a “red flag test”. Such a test meant that a service provider “need not monitor its service or affirmatively seek facts indicating infringing activity” to benefit from the exception.

The “red flag test” was proposed to be a test of two halves: First, the test is one of subjectively determining whether the service provider was aware of the facts in question and then objectively determining if the infringing activity would have been apparent to a reasonable person operating under similar circumstances. The Reports go on to discuss the notification requirements, i.e., notice and take down procedure under the DMCA. The Reports state that the copyright owner “must provide information that is reasonably sufficient” and clear “to identify and locate the allegedly infringing material” to the service provider. If the notification is not sufficiently clear and does not comply with Section 512(c)(3), then the service provider may benefit from the limited liability of the Safe Harbor. The Reports repeatedly emphasized the need of the copyright owner to specify the infringing material and activity. As such Judge Stanton held that the sections 512(c)(1)(A)(i) and (ii) meant that the knowledge that a service provider must have to foul foul of the Safe Harbor is

“knowledge of specific and identifiable infringements of particular individual items. Mere knowledge of prevalence of such activity in general is not enough. That is consistent with an area of the law devoted to protection of distinctive individual works, not libraries. To let knowledge of a generalized practice of infringement in the industry, or of a proclivity of users to post infringing materials, impose responsibility on service providers to discover which of their users’ postings infringe a copyright would contravene the structure and operation of the DMCA.”

Judge Stanton said that this standard of knowledge was consistent with the Perfect 10 case which placed the burden of indentifying copyright infringement under the DMCA on the copyright owner, not the service provider. Further, he stated, that the DMCA itself explicitly states at Section 512(m)(1) that the Act should not be construed to condition the enjoyment of a “safe harbour” on a “service provider monitoring its service or affirmatively seeking facts indicating infringing activity”. To illustrate the apparent efficiency of the DMCA notification procedure Judge Stanton stated that when Viacom sent a notice to YouTube about 100,000 infringing videos, YouTube had removed almost all of them the next day.

Case-Law Consideration

Turning to case-law, Judge Stanton cited UMG Recordings v Veoh (2009) which concluded that “if investigation of ‘facts and circumstances’ is required to identify material as infringing, then those facts and circumstances are not ‘red flags’.” This was a further reason why Judge Stanton held that “awareness of pervasive copyright infringing, however flagrant and blatant, do not impose liability on the service provider.”

Interestingly, Judge Stanton went on to cite Tiffany v eBay (2010) (first a summary judgment trade mark case later confirmed by the Court of Appeals) by stating in that case Judge Sullivan held that such generalized knowledge possessed by eBay that some portion of Tiffany goods being sold on its website might be counterfeit was insufficient to impose upon eBay an affirmative duty to remedy the problem. Judge Sullivan held that eBay would have to have knowledge of specific instances of actual infringement to be held contributory liable. As readers may recall, the Court of Appeals agreed. Practitioners will find it interesting, if not useful, that the court was prepared to use trade mark cases to inform the requisite knowledge required in a DMCA case.

Just over two sides of the judgment were devoted to the discussion of the Grokster case (MGM v Grokster, 2005) - a case that was heavily relied upon by Viacom in their summary judgement - and its ‘progeny’ - Arista Records v Usenet (2009), Columbia Pictures v Fung (2009), and Arista Records v Lime Group LLC (2010). The Grokster Court had held that one is liable for the consequent acts of third-party infringement if they “distribute a device with the object of promoting its use to infringe copyright”. YouTube had said that they did not exist “solely to provide the site and facilities for copyright infringement.” [Note YouTube’s use of the word ‘solely’, a word that did not appear in Grokster, as far as this Kat is aware]. Judge Stanton went only so far as to state that Grokster-type cases were not ones of a service provider who furnishes a platform for users to post and access materials, of which the service provider is unaware. The facts of these cases were different. Therefore, he indicated that the Grokster cases were of little relevance in relation to application of the DMCA provisions.

Other Considerations

Judge Stanton went on to consider the plaintiffs’ claim that the display of videos on YouTube fell outside the DMCA protection as it was not “storage” of the material. Judge Stanton held that this construed the term “storage” too narrowly, especially in light of the definition of “service provider” in Section 512(k)(1)(B). This definition included “an entity offering the transmission, routing, or providing of connections for digital online communications.” This was supported by the Veoh case which held that the transmission of online communications was included in the term “storage”.

Another argument advanced by the plaintiffs was that YouTube could not benefit from the Safe Harbor because they financially benefited (picture, right - Viacom's view of YouTube?) from the infringing material being uploaded on the site. Readers may recall that during the mud-slinging of late last year and earlier this year, the disclosure documents alluded to YouTube/Google actively uploading infringing content to YouTube to increase site traffic themselves and doing nothing about infringing material once there. Judge Stanton referred back to the knowledge criteria and stated that under Section 512(C)(1)(B) a service provider must not receive a financial benefit directly attributable to the infringing activity, in a case in which the service provider has the right and ability to control such activity...”. Judge Stanton held that the “right and ability to control” the activity requires item-specific knowledge of it. Therefore, he held that without such specific knowledge, YouTube did not fall foul of this section.

The final two pages of Judge Stanton’s judgment was a hodgepodge of how YouTube’s conduct in respect of terminating user accounts after receiving two DMCA notices, not removing similar infringing material as set out in a DMCA notice and other apparently virtuous activities was reasonable and did not restrict their enjoyment of the Safe Harbor.

What's Next?

The IPKat is incredibly impressed with what a glowing report this summary judgment seems to have been for YouTube and Google’s activities. Google and YouTube are obviously delighted. Via their official Blog they have stated that:

"This is an important victory not just for us, but also for the billions of people around the world who use the web to communicate and share experiences with each other. We’re excited about this decision and look forward to renewing our focus on supporting the incredible variety of ideas and expression that billions of people post and watch on YouTube every day around the world."

Considering the mass of documents that Viacom had disclosed which seemingly evidenced YouTube’s own uploading of infringing content, the IPKat wonders why little hay was made of these documents. Unfortunately, several of the discovery documents in the case were redacted, so one wonders if this alleged smoking gun may not have been the pistol Viacom wanted it to be. The IPKat especially finds this interesting because Judge Stanton specifically distinguished the case of Fung, where the defendant was an admitted copyright thief, with this case. Google, whose overworked PR machine has managed to keep a somewhat squeakily clean image (picture, left - a product that Google perhaps may be using?) in never knowingly promoting copyright infringement on their website obviously helped in this determination.

In any event, this case is not over. It would be unrealistic for Viacom to relinquish the fight after presumingly millions in legal fees and the vested interests of many copyright conglomerates at stake. According to this report, Viacom are set to appeal the summary judgment.

So following this decision, the take home lesson for copyright owners wanting to get infringing material off YouTube or any other service provider's site is to draft your DMCA notice with a high degree of specificity and to actively police websites for your copyright works. For service providers, know nothing - but once you do, act fast.

Judge Stanton's summary judgment found here.