21575590 – dolphins at sea

The Ninth Circuit issued an opinion last Friday that seems second nature. The court affirmed summary judgment for Wyland Galleries against marine wildlife artist Pieter A. Folkens, who claimed Wyland copied Folkens’s drawing of crossing dolphins in Wyland’s giclée titled “Life in the Living Sea.”  Folkens asserted Wyland created enough of the allegedly infringing prints to net over $4 million in sales.

Folkens published his black and white drawing in 1979, which depicts one dolphin swimming vertically and the other swimming horizontally.  Wyland, best known for its “whaling wall” murals displayed worldwide, created a color print in 2011 depicting three dolphins, aquatic plants, and other wildlife.  Two of the dolphins in Wyland’s work are crossing, but do so at different angles than those in Folkens’s drawing.  Folkens acknowledged the concept of crossing dolphins occurs in nature and cannot qualify for copyright protection.  Dolphin crossing is typical behavior since dolphins are social animals and often travel in groups.  However, Folkens argued his particular expression of the dolphins warranted protection and Wyland’s work was substantially similar to his depiction.

The Eastern District of California had awarded summary judgment for Wyland in 2016, holding natural positioning and physiology of animals are not protectable.  The Ninth Circuit affirmed this decision citing the principles set forth in Satava v. Lowry, which considered whether a life-like jellyfish sculpture in clear glass could be protected.  In that case, the court recognized ideas, “first expressed in nature, are the common heritage of humankind, and no artist may use copyright law to prevent others from depicting them.”  If this were not the case, the Court noted an artist could monopolize images of geese flying in a “V” as they migrate, a mother duck leading ducklings out of a pond, a hummingbird hovering over a flower as it sucks its nectar, bats hanging upside down in cave, and countless other scenes commonly found in nature.

The Court in the instant case acknowledged an artist may receive protection for how a wildlife scene is expressed, such as pose, attitude, gesture, muscle structure, facial expression, coat and texture.  However, any such protection is “thin,” which means the defendant’s work must be virtually identical to be held infringing.  The Court found this not to be the case here where Folkens’s work is a relatively basic drawing in black and white.  Conversely, Wyland’s print is in color and features numerous additional elements.  Wyland’s dolphins also do not have the same texture and skin tone as Folkens’s, which possess distinctive ripples.  That Folkens enlisted animal trainers to create the scene he captured is irrelevant, said the Court, because the scene is merely a recreation of what commonly occurs in nature.

Barring an appeal to the California Supreme Court, the Ninth Circuit’s decision brings this dolphin tale to a close.

Redbox and Disney have filed their briefs in preparation for argument, scheduled for February 5, on Disney’s motion for a preliminary injunction against Redbox’s alleged copyright infringement. The judge’s ruling could make new law on the meaning of a “copy” in the digital age.

The underlying facts are these: Redbox legally purchased “Combo Packs” of Disney movies. These included DVD and Blu-Ray discs as well as a code by which the purchaser could download a copy of the movie. Redbox unbundled the packs and sold the download codes to consumers.

As Disney anticipated in its original motion, Redbox’s principal defense relies on the first sale doctrine under copyright law, which allows someone who lawfully acquires a “copy” of a copyrighted work to sell or dispose of that copy. Redbox claims that a download code is legally indistinguishable from a physical copy such as a DVD. Just as the first sale doctrine permits it to rent DVDs through its ubiquitous red kiosks, it can resell the download codes on its website.

Disney asserts that the codes are not themselves copies of the films but rather keys to open up a copy. Therefore Redbox’s activities do not implicate the distribution right in the movies (which would be permitted under the first sale doctrine), but the reproduction right, which is infringed when Redbox’s customers make unauthorized copies by using the code.

One interesting consequence of Disney’s position is that its claims against Redbox can only be based on contributory rather than direct infringement of Disney’s copyrights. Since Disney’s position is that the codes are not “copies” of the movies (and thus outside the first sale doctrine), it cannot assert that Redbox is distributing or reproducing its copyrighted works. The direct infringers are the Redbox customers who use the codes. Redbox contributes to the infringement by selling the codes. This argument raises the further question whether consumers are, in fact engaged in infringing activity.

In order to establish this, Disney relies on the “shrink wrap license” that governs its sale of the codes. The Combo Packs are packaged and priced to be sold as a unit. The outside packaging of the Combo Packs states that “codes are not for sale or transfer”; similar language appears on the package insert containing the code. A consumer redeeming the codes on the Disney portal is likewise required to represent that he or she is “the owner of the physical product that accompanied the digital code at the time of purchase.” A customer buying a code would not see the first two of these warnings. Redbox used this fact to argue that Disney was trying to impose the terms of a license between Disney and Redbox on to its customers. Disney’s response is that the license terms to which customers agree before downloading a movie from the Disney portal are sufficient to create the underlying infringement on which Redbox’s contributory liability rests.

This lawsuit is one of a number of recent cases testing the status of links and download codes under copyright law. Playboy Entertainment Group has commenced litigation against a website that posted links to a third party site displaying every Playmate photo ever published. Although the content of the copyrights at issue in that case could not be more different from the family-friendly content of the movies at issue in the Disney-Redbox litigation, they both address the problem of defining what constitutes digital copying and distribution of copyrighted works.

Law concept: circuit board with copyright icon, 3d renderIn November of last year, a division of Walt Disney Company brought a lawsuit against Redbox. The Mouse now has kicked it up a notch by moving for a preliminary injunction.

One of the ways in which Disney markets its movies is in Combo Packs. These are bundles that include DVD and Blu-ray discs as well as digital download codes. The Combo Packs are packaged and priced to be sold as a unit. The outside packaging of the Combo Packs states that “codes are not for sale or transfer”; similar language appears on the package insert containing the code. A consumer redeeming the codes on the Disney portal is likewise required to represent that he or she is “the owner of the physical product that accompanied the digital code at the time of purchase.”

Redbox is best known for its automated cut-rate video rental kiosks outside drugstores and supermarkets. The lawsuit alleges that Redbox has purchased Disney Combo Packs, disassembled them and sold the digital download codes through its kiosks and directly on its website. The business issue this raises for Disney is that because Disney discounts the price of the code when sold in a Combo Pack, Redbox can resell the codes for less than the price of a digital download on iTunes or a similar site. In an effort to shut down Redbox’s practice, Disney has asserted claims for breach of contract and copyright infringement.

The breach of contract claim is predicated on the contention that Redbox accepted the prohibition on sale or transfer of the codes when it purchased and opened the Combo Packs. To this end, Disney cites numerous cases upholding the validity of “shrink-wrap licenses.”

The sale of the codes does not in itself infringe on the rights protected under copyright law; the actual infringement alleged by Disney occurs when the Redbox customer downloads and views the movie. But under the doctrine of contributory infringement, Redbox could be held liable if it knowingly induced or materially contributed to its customer’s infringing activities. To establish this point, Disney cites not only the sales themselves, but that they were promoted heavily by Redbox as “cheap” and a “smart buy.”

Interestingly, Disney’s preliminary injunction motion attempts to answer what it anticipates will be Redbox’s principal defense. Redbox carries on its main disc rental business under the “first sale” provisions of copyright law. The first sale defense provides that the lawful owner of a copy of a work may sell or otherwise dispose of its possession. This is why you can sell your secondhand books, CDs and DVDs without fear of liability, and why Redbox contends that it has unlimited rights to rent DVDs lawfully purchased from their copyright owners.

Disney argues that the first sale defense is inapplicable to resale of the download codes. That defense, it contends, applies only to the distribution of lawfully obtained copies of copyrighted works, whereas a digital download constitutes a reproduction of the work. Likewise, a download code is not a copy at all, merely a code permitting a user to download a copy subject to the posted terms of use.

Disney’s motion will prevail if the judge agrees that sales of the codes are causing it irreparable harm, and that it is likely to succeed on the merits. If the preliminary injunction is granted, it will bring an immediate halt to Redbox’s sales of the unbundled codes and likely lead to a quick resolution to the lawsuit as a whole.

You can read Disney’s full motion here.

The jury has spoken. After a saga worth of Homer, Comic-Con is a valid trademark.

The battle began when, the organizers of San Diego Comic-Con (SDCC), the 50-year old grandaddy of fan conventions, sued the producers of Salt Lake Comic Con for infringement. As we previously reported, the defendants struck back by asserting that comic con (no hyphen) had become a generic descriptor for comic book conventions, citing the scores of events around the country that describe themselves the same way.

The case took a curious turn when the trial judge issued a gag order against the defendants prohibiting them from taking their case to social media, bringing First Amendment issues into what was otherwise a straightforward trademark case. The Salt Lake crew challenged this order by seeking a writ of mandamus from the Circuit Court, which agreed with them and vacated the order.

The case went to trial in early December, with a verdict in favor of the San Diego Comic-Con. The jury found both that the plaintiff’s mark is valid and also that it was infringed. It determined, however, that the infringement was not willful, and awarded only $20,000 in damages rather than the $12 million demanded by the plaintiffs. Nevertheless, armed with a finding of validity, SDCC could be emboldened to take action against other comic book conventions.

The defendants, meanwhile, have not laid down their weapons. They’ve announced an intention to appeal the verdict and are also pursuing an petition before the US Patent and Trademark Office to cancel the rival mark.

 

37541052 – belchonock

It is not often that a court of law can issue a landmark opinion laden with profanity and sexual innuendos.  But last Friday, the United States Court of Appeals for the Federal Circuit seized the opportunity in a colorful decision holding the refusal of the United States Patent and Trademark Office (USPTO) to register street artist Erik Brunetti’s mark “FUCT” is an unconstitutional restriction of Brunetti’s right to free speech.

Brunetti and professional skateboarder Natas Kaupas created the “Fuct” clothing brand in 1990 and sought to register “FUCT” as a federal trademark in 2011.  In its refusal, the USPTO cited Section 2(a) of the Lanham Act which case law has interpreted to bar registration of a mark if a “substantial composite of the general public” would find it “immoral” or “scandalous.”  Brunetti then turned to the Trademark Trial and Appeal Board (TTAB) to no avail.

Since the enactment of the 1905 Trademark Act, the USPTO has had the power to refuse registration to marks deemed immoral, scandalous, deceptive, or disparaging.  This restriction was imported into the Lanham Act in 1946 and withstood a constitutional challenge in the 1981 case In re McGinley where the government successfully argued a refusal to register a mark does not implicate an applicant’s First Amendment rights because the applicant can still use the mark as he or she pleases, just without federal trademark protection.

Then came a game-changer when the U.S. Supreme Court decided the pivotal case In re Tam this June involving an Asian rock group who sought trademark registration of the racial slur “THE SLANTS” but was denied under the disparagement provision of Section 2(a).  In Tam, the Court found refusing to register “THE SLANTS” constituted an impermissible viewpoint-based restriction on speech and struck down the disparagement element of 2(a) as unconstitutional.

Judge Kimberly A. Moore of the Federal Circuit wasted little time affirming the TTAB’s finding that “FUCT” was an immoral and scandalous mark rooted in an “unmistakable aura of negative sexual connotations.”  However, Moore acknowledged that, although offensive and uncouth, an immoral and scandalous mark still conveys expression protected by the First Amendment and restricting registration on these grounds constitutes content-based discrimination.

The government conceded this but argued a form of intermediate scrutiny as set forth in the seminal Supreme Court case Central Hudson should apply because trademarks derive from a federal subsidy, involve a limited forum, and constitute commercial speech – arguments largely rejected in Tam.

Judge Moore was not persuaded and found the restriction fails even under intermediate scrutiny.  “In this electronic/Internet age, to the extent that the government seeks to protect the general population from scandalous materials, with all due respect, it has completely failed,” wrote Moore.  The Federal Circuit also found Section 2(a) was not sufficiently tailored enough to exclude, for example, only sexually explicit or obscene material, since “immoral” and “scandalous” are fatally ambiguous.  Moore noted how the subjective nature of Section 2(a) has caused a myriad of inconsistent registrations such as “BACKROOM MILF,” “MUTHA EFFIN BINGO”, and “FCUK” vs. the rejected marks “GOT MILF”, “F**K PROJECT” and Brunetti’s “FUCT.”

In the wake of Tam and Brunetti, critics are concerned that stripping the government’s ability to refuse registration to immoral and scandalous marks will poison the marketplace.  But Lincoln D. Bandlow, a partner in the Fox Rothschild LLP Los Angeles office who specializes in First Amendment and intellectual property matters, told the Los Angeles Daily Journal the market will keep scandalous marks in check.  “Market forces will tamp it down,” he said.  “There’s a lot of things people don’t say on television – not because people don’t want to hear it, but because sponsors don’t want to hear it.”  As for a truly obscene mark depicting sexual conduct, Bandlow added “then you’d have a scenario where you’d have material that’s not protected under the Miller test.”  Miller was the seminal 1973 case in which the Supreme Court held obscene materials do not enjoy First Amendment protection.

The government has ninety days from the entry of judgment to ask the Supreme Court for a writ of certiorari.  As of now, it appears the opinion is here to stay.

Bryan Golerkansky and Ryan Dunner, supervising senior associates at Green Hasson Janks, write:

With the new age of digital streaming and an abundant amount of on-demand content available for  24/7 consumption, many consumers have opted to stay at home on a Friday night binging on television series and movies as opposed to the traditional theater viewing experience.  One attempt to draw moviegoers back into theater seats is the creation of MoviePass, a low-fee subscription-based movie service which allows subscribers to use a mobile application and prepaid card to view one movie per day at participating locations.

Movie theater
Copyright: fergregory / 123RF Stock Photo

MoviePass, founded in 2011, was originally backed by investors such as True Ventures, AOL Ventures and Chris Kelly (former Chief Privacy Officer of Facebook). With an original price hovering around $50 per month, MoviePass initially had difficulties growing their subscriber base. In 2016, MoviePass hired Mitch Lowe as CEO, a previous executive at both Netflix and Redbox. Lowe identified the significant issues and began focusing on the pricing structure of the service. In July of 2016, MoviePass announced alternative subscription plans allowing subscribers to view two, three or unlimited movies per month with the lowest tier starting at $15 per month. Even with the new pricing model, the subscriber base had only reached 20,000 and MoviePass was still searching for a way to appeal to the masses.

In August 2017, analytics firm Helios and Matheson obtained a majority stake in MoviePass and brought a fresh business model to the company. Through their analytics background, they saw the true potential of using MoviePass to follow a platform, similar to Facebook, where the emphasis was on data collection and targeted advertising as opposed to high subscription fees. In the same year, monthly subscription fees for unlimited films were dropped to $9.95 as their priority was to increase the subscriber base. While this new price point has created a surge in new subscribers, it may also cause MoviePass to operate at a loss due to the fact that MoviePass must subsidize the difference between the full ticket price and the amount collected in monthly subscription fees. MoviePass has already anticipated such losses and is focusing on selling its users’ data to create additional revenue streams to offset potential losses. By accessing its users’ mobile files, pictures and offering users the ability to sync with their Facebook profiles, MoviePass will be able to offer major film studios the opportunity to measure the effectiveness of their movie marketing campaigns. To date, movie studios have the ability to promote their films through social media platforms, strategically targeting specific demographics, but do not have the ability to track who, within the targeted demographic, actually viewed the film. Another alternative plan to boost revenue is a potential launch of an online streaming service which was suggested by Lowe in a recent interview with CNBC. Currently the subscriber base is up to 600,000 and growing.

While the amount of subscribers has exponentially grown in 2017, MoviePass still has to overcome multiple challenges to ensure its success for the future. With approximately 90% of U.S. theaters participating in the subscription program, MoviePass is pressured to continue this rapid growth in order to keep exhibitors enticed and increase the overall sales of concessions, the main source of profit for exhibitors. Another reason MoviePass must increase its subscriber base is to obtain valuable user data that can be sold to movie studios in an effort to provide them with the tools to create more effective marketing campaigns at lower costs.

Assuming MoviePass changes the theater-going experience like Netflix transformed the way we consume content, the end result could be a real game changer. The exhibitors would see a spike in both ticket and concession sales, movie studios will receive additional theatrical revenue and actionable data to lower their marketing campaign costs, and ultimately profit participants should expect to share in higher theatrical revenue and lower overall marketing costs.

Will MoviePass be successful in revitalizing the traditional theater viewing experience or will the current shift to anywhere, anytime viewing continue? Only time will tell.


This post was originally published on the Green Hasson Janks Media Clips blog.

In another controversial move, the FCC has approved by a 3-2 vote the adoption of the ATSC 3.0 standard for broadcast TV, known as Next Gen TV. This IP-based standard will permit over-the-air broadcasters to offer Ultra High Definition signals and improve mobile transmission. Sounds good, right? Opponents cite two concerns.

Copyright: scanrail / 123RF Stock Photo

Using Next Gen TV, broadcasters will be able to track individualized viewing data to deliver targeted ads. This is a red flag for consumer and privacy advocates. Using language that sounds more sinister than was likely intended, one executive for Sinclair Broadcast Group praised the new standard’s ability to gather“perfect data” about consumers. “We’ll know where you are, who you are, and what you’re doing—just like you do now, just like everybody does now, the Internet does….”

The second big objection is that the change will impose unnecessary costs on consumers. Current televisions cannot receive Next Gen signals. The FCC imposed a five-year transition period during which broadcasters must simulcast using both the current and new standards. If they abandon the current standard after that period, broadcast consumers will be forced to buy new equipment.

A federal court on Monday held California’s State Insurance Compensation Fund has no obligation to cover a series of claims from three porn actors against Cybernet for allegedly causing them to contract human immunodeficiency virus (HIV) during film shoots in 2013.

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Cybernet, a San Francisco-based porn studio, was founded in 1998 and currently operates a series of adult-websites including Kink.com which primarily features content involving bondage, domination, sadism, and masochism (BDSM).  Actors John Doe, Cameron Adams and Joshua Rogers sued the company in 2015 for creating a dangerous and unsanitary work environment by failing to test performers for sexually transmitted diseases before each shoot, discouraging the use of condoms, and inviting random members of the public to participate in intimate group activities.  The actors further allege Cybernet intentionally misrepresented the shoots were safe by “requiring” the use of protection, subjected actors to physical assault without consent, and intentionally inflicted emotional distress by creating a situation where the spread of sexually transmitted diseases was virtually certain to occur.

After Cybernet demanded that its insurer, the State Fund, cover the actors’ tort claims, the State Fund fired back, arguing it already paid the actors medical expenses under California’s workers’ compensation system and owed no further duty.  U.S. District Court Judge for the Northern District of California Yvonne Gonzalez Rogers agreed and found the actors’ exclusive remedy for their negligence-based causes of action came within the workers’ compensation system.

Further, while the actors’ allegations of intentional misconduct were not necessarily relegated to workers’ compensation, Rogers found the insurance policy’s exclusion for “damages or bodily injury intentionally caused or aggravated by [Cybernet]” exempted claims of intentional torts.  Cybernet argued case law requires insurers to provide conclusive evidence demonstrating an exclusion of coverage applies and such evidence did not exist for a myriad of reasons, including the language of the policy itself which expressly covered “bodily injury by disease of an employee.”  Rogers was not convinced and cited precedent which indicated that even though an insurance policy can expressly cover a disease contracted on the job, claims that the employer intentionally caused or aggravated the disease are a different story.           

Cybernet has requested leave to file a motion for reconsideration.

Music festival and audienceFox associates Megan Center and Elizabeth Patton wrote a duo of posts for Fox’s advertising law blog Above the Fold examining a trademark dispute surrounding the term “Coachella.” The case relates to entertainment festivals not associated with the organizers of the well-known annual event in Indio, California. As Megan lays out in her post:

“Robert Trevor Simms (Simms) purported to create a film festival known as FILMCHELLA. Prior to filing for the injunction, Coachella Music Festival, LLC and Goldenvoice, LLC (collectively, Coachella) sent numerous cease and desist letters to Simms demanding that Simms change its name with no success. As such, Coachella was forced to file for a preliminary injunction to prevent Simms from using the terms, “Filmchella”, “Coachella for Movies” and “Coachella Film Festival” due to alleged trademark infringement. Coachella argued that Simms’ use of these terms will cause consumer confusion, dilution of its marks and other irreparable harm.”

The U.S. District Court for the Central District of California recently granted a preliminary injunction in the case to Coachella’s organizers. Elizabeth also provided an update yesterday on a flurry of motions filed by the parties in the case.

My partner Nancy Yaffe has just posted a blog with disturbing implications for California entertainment lawyers. As young practitioners we  all were taught that every agreement with a person providing services on a film or TV show must include a provision that the results and proceeds of the person’s services are a “work made for hire” under copyright law.  This language is as important for entertainment lawyers as the Prime Directive is for Capt. Kirk on Star Trek. It now appears that the California EDD takes the position that the presence of those four words in a contract creates a presumption that the service provider is an employee, not a contractor. The Department will take this position even if none of the other indicia of employment are present, and regardless of the plain intent and structure of the Copyright Act.

Law concept: circuit board with  copyright icon, 3d render

Producers can still obtain copyright ownership using assignment language, but this has drawbacks, including that the assignor can terminate the assignment after 35 years. This presents producers with a difficult choice. Proceed as usual and run the risk of being assessed for back taxes and penalties, or engage all cast and crew as employees, with the inconvenience and cost that can entail.

Read Nancy’s enlightening blog here.