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The Court of Appeals of Georgia last week reversed the dismissal of a lawsuit for negligence and loss of consortium against Snapchat, Inc. alleging the social media giant’s controversial “speed filter” was a proximate cause of an accident that nearly took the plaintiff’s life.

The lawsuit alleges that on September 10, 2015, then 18-year-old Crystal McGee began accelerating in her father’s Mercedes on a highway outside Atlanta.  One of the three passengers in the vehicle, Heather McCarty, a co-worker of McGee’s, said she noticed McGee holding her phone as she drove and asked her to slow down.  McGee allegedly responded that she would decelerate once she reached 100 miles per hour to post her speed on Snapchat using the speed filter, which is a stylized speedometer that superimposes a tracked speed on a user’s picture to share with other Snapchat users.  Shortly after reaching 100 mph, the lawsuit claims McGee’s vehicle slammed into another car attempting to merge onto the highway.  Wentworth Maynard, then 21 years old, was a passenger in that car and suffered permanent brain damage.

Maynard and his wife sued Snapchat for negligence and loss of consortium.  They claimed Snapchat’s speed filter facilitated McGee’s reckless driving and that Snapchat knew the filter would likely distract drivers but created it anyway without including any warnings or safeguards.  The speed filter was introduced in 2013 and has potentially been linked to other accidents, including a fatal collision in Florida in which young drivers were allegedly using the filter minutes before the crash.

A Snapchat spokesperson issued a statement in response to Maynard’s suit affirming “we actively discourage our community from using the speed filter while driving, including by displaying a ‘Do NOT Snap and Drive’ warning message in the app itself.”  Snapchat also denied all of Maynard’s allegations and argued for dismissal claiming immunity under the Communications Decency Act (CDA).  The CDA shields interactive computer service providers from all liability arising from content created by third parties.

The trial court found the CDA applied and dismissed the suit, but a three-judge panel in the Court of Appeals of Georgia reversed.  Writing for the court, Judge William M. Ray II distinguished cases in which third-party content was said to have caused the harm and found, conversely, that Maynard’s claims stem from Snapchat’s alleged negligent creation of the filter and the foreseeable misuse of that filter by a third party – not from any third-party content.  Indeed, Ray noted no third-party content was ever posted in this case as McGee was unable to “snap” her speed before the accident occurred.

The case will now return to the trial court where the parties will litigate the merits of Maynard’s claims, which will likely be hotly contested.  McGee sued Maynard’s lawyers for defamation in April of 2017 alleging her phone was in her purse when the accident occurred and that she was never using Snapchat as Maynard’s suit contends.

Alarm bells rather than wedding bells are ringing in the insular but passionate world of romance novels as authors and publishers grapple with the question whether an author can claim exclusive rights to use “cocky” in book titles.

It started in early May, 2018. A self-published author named Faleena Hopkins obtained a registration for “cocky” as the the trademark for “a series of downloadable e-books in the field of romance.” Hopkins’s tomes include such titles as  Cocky Cowboy and Cocky Senator. Registration in hand, she sent cease-and-desist emails to other authors who had published books similarly titled.  Hopkins also reported the alleged infringements to Amazon, which removed a number of the titles from its Kindle e-book store.

Some of these authors  responded by re-titling their books. Jamila Jasper, for example, changed the title of her book from Cocky Cowboy to The Cockiest Cowboy to Have Ever Cocked. Hopkins’s campaign, not surprisingly, aroused intense emotions, and not only in the Twitterverse. Kevin Kneupper, an author and retired lawyer, filed a petition with the US Patent & Trademark Office (PTO) to cancel Hopkins’s registration. He is being supported in this by the Romance Writers of America (RWA), a nonprofit trade association. The RWA contacted Amazon to resume selling other writers’ Cocky titles, with some success.

Sniggering aside, this case actually raises a real trademark issue. Hopkins’s claim is, of course, that Cocky has been established as her brand–readers seeing Cocky in the title of a romance novel will identify it as one of her books. Her detractors claim that the word is simply descriptive of a particular subgenre of romance novels. For example, readers with a taste for historical “bodice-rippers” are guided by the cover and the title to their favored format. Likewise, lovers of medical romances will look for books with “doctor” in the title. So a reader who obtains fulfillment seeing a heroine break through the hero’s arrogant front would be aroused by a “cocky” title.

Whether a descriptive term can be protected as a trademark generally turns on the term’s “secondary meaning,” which is the extent to which an ordinary consumer would associate the term with a particular source. For example, one could argue that Star Wars is descriptive of a genre of space opera, but the term has unquestionably established secondary meaning. Secondary meaning is a factual question, usually established through consumer survey results. Hopkins’s challenge will be to establish that romance readers think of Cocky books as Hopkins books. The resolution is in the hands of the PTO.

 

 

John Simson writes:

The House of Representatives unanimously passed the Music Modernization Act last week by a vote of 415-0! Imagine our divided Congress passing anything with no opposition. This is actually not uncommon with music industry issues when the interests of both the major user companies and major owner companies align so there is little or no opposition.

U.S. Capitol Building, Washington, D.C.What exactly is the Music Modernization Act? The House version is the combination of three separate bills, two of which have been percolating for several years: The CLASSICS Act and the AMP Act. The CLASSICS Act will “fix” a major loophole in U.S. Copyright Law, the protection of pre-1972 recordings; the AMP Act will fix a smaller loophole in the Copyright Law as to how Music Producers, Remixers and Engineers get paid by SoundExchange. (We will discuss the specifics of these two parts of the bill in another post). The third piece of the MMA, its main driver and the reason why it is so critical to the music industry going forward is an overhaul of Section 115 of the U.S. Copyright Act, the compulsory license for the use of compositions. For those unfamiliar with copyright law, a “compulsory license” means that a user such as a record company can license a composition by paying the owner a license fee that is determined by statue without the necessity of negotiating directly with the owner. The reproduction of compositions on records and CDs is a compulsory license, referred to as a “mechanical license.”

A Brief History In Time

Over a decade ago, before Spotify, Apple, Tidal and most other on-demand services were operational, the Recording Industry Association of American (RIAA) and the National Music Publishers Association (NMPA) reached an agreement: for a nominal payment by the record companies to the publishers, the publishers would allow the development of on-demand services and wait and see to determine what fees should be charged for this new kind of service. Most important in this deal: the publishers received recognition that this use would be treated as a mechanical license, even though this does not necessarily follow from the nature of on-demand streaming. It is certainly true that a user of these services does have temporary reproductions on their devices, sometimes called tethered downloads because they are tethered to your subscription. On the other hand, were you to cancel your subscription, these reproductions disappear. They are also limited in that you cannot legally make copies of them as you would for a permanent download. However, this new recognition of a mechanical right in an on-demand stream was not accompanied by any major change in the section 115 Compulsory License that governs such mechanical reproductions.

What resulted was a disaster. Trying to shoehorn a new streaming mechanical into a 1909 law that was created for the reproduction of piano rolls, essentially one song at a time licensing, did not work. The 1909 law had adapted adequately to the transition from piano rolls to 78’s to LP’s and other limited media, with a limit of 15-20 compositions unless a box set where it might balloon to 60-80 titles. But the application of the law to on-demand streaming services that needed to license 30 million songs was impossible.

For streaming services, the task was daunting to obtain all of these licenses one at a time. The music industry had also undergone a fundamental change. For all past distributions of recordings, the record company stood as the gateway to the payment whether from retail establishments or from digital download services like iTunes. The record label would receive payment for the recordings as well as the for the compositions on behalf of music publishers and then pass through the publishing monies to the appropriate publishers or their representatives based upon the Section 115 licenses or other similar licenses they had negotiated. But this practice ended with on-demand streaming mechanicals. Record companies in their licenses with Spotify and others specifically required the service to license the publishers separately as they realized how great the burden would be to handle the mechanical royalty payments for the streaming services.

A Massive Problem to Solve

Over the years, the Harry Fox Agency (HFA) administered many of the Section 115 mechanical license agreements. Their agreement was a bit easier than the Copyright Office license. The Copyright Office license required monthly accountings while HFA’s was quarterly. But HFA never represented all works so attempting to get full coverage through HFA licenses was spotty at best. Over the years, they quoted 60-70% coverage but frequently couldn’t tell you which of your tracks wasn’t covered. Other services were also created to administer this right but the main problem persisted: there was no industry-wide database to inform a user where to go to get a license and the different services administering licenses were incomplete in their coverage. A user was at grave risk of infringement lawsuits for distributing unlicensed works.

Closeup of earbuds and smartphone

The MMA’s Proposed Solution

Long after the 1909 Act was enacted to govern the reproduction of compositions, another compulsory license for music was passed in 1995: the Digital Performance in Sound Recordings Act (DPRA). The DPRA provided a new license for non-interactive webcasters, satellite and cable services to stream sound recordings. This license provided that any service that wanted to stream could do so if they followed certain rules and provided payments and data. Section 114 of the Copyright Act which created this new compulsory license was also distinct from Section 115 in one major way: while Section 115 requires notice to the publisher 30 days in advance of distribution, Section 114 had no notice requirement at all. Any non-interactive service could stream any commercially released sound recording without prospect of being sued by the owner of the recording if the service provided data of what they were streaming and made payments based upon the terms of their license. The organization that was created to administer the Section 114 license is SoundExchange. (In full disclosure, I assisted in the development of SoundExchange at the RIAA in 2000 and served as its Executive Director from 2001-2010.)

In recognizing that Section 115 needed an overhaul to survive in the digital age, both users and owners got together and created a proposal to essentially mirror the Section 114 provisions removing the requirement of notice to publishers in advance of distribution: the result is that if this law passes, on-demand services can simply pay and provide data and be immune from lawsuits. Another “problem” with the current section 115 is that if a songwriter/publisher does not register their work with the Copyright Office AND an on-demand service sends a notice to the Copyright Office that they can’t find that songwriter/publisher, the service owes the songwriter/publisher NOTHING until they finally register their work. While the service has to pay a filing fee to the Copyright Office of roughly ten cents ($.10), the songwriter/publisher gets nothing! The updated law will fix that. Now, the on-demand service provider pays the new collecting society, to be created by the MMA for everything, and content owners claim against what is paid into the society.

One major striking difference between Section 114 and the proposed MMA is that there is very little language in Section 114 about the collecting society that could be formed by content owners. Section 114 did provide an anti-trust exemption to allow all content owners to create an “agent” or multiple agents to negotiate compulsory license voluntary rates with users, participate in Copyright Royalty Board (CRB) proceedings to set rates if voluntary negotiations failed and to collect and distribute payments to those entitled to royalties. Initially, the collective under Section 114 was subject to Copyright Office regulation but that role now falls under the auspices of the CRB.

Statutory language in the proposed MMA not only authorizes the creation of a new collecting society but sets forth in great detail many aspects of the organization’s structure, including the composition of the Board, composition of various committees, retention periods for undistributed royalties and much, much more. Where SoundExchange grew somewhat organically, this new collective is being created by statute.

Some outside groups have pushed back against the composition of the Board that would be created by the MMA to govern the collecting society. They don’t like that it is overwhelmingly controlled by music publishers with very few seats given to songwriters. They point to the SoundExchange Board which is an equal board between recording artists and record label representatives as evidence that this new organization needs more songwriter members; but they fail to point out that mechanical royalties unlike performance royalties, have always been paid directly to music publishers who recoup advances from these royalties and then split the money with their songwriters. Given this historical backdrop and practice, this is essentially a land grab by songwriters. (It should also be pointed out that songwriters seem to have no problem affiliating with BMI which has no songwriters on its Board of Directors!)

One issue that should be fixed in the MMA concerns “black box” money: those royalties collected that can’t be distributed, either due to the failure of a publisher or self-published songwriter to register with the new collective or due to bad data being supplied by the user. Currently, the legislation provides a three-year holding period and then a distribution proportionate to the overall market share of copyright owners. SoundExchange’s early experience with black box money is illustrative and leads to the conclusion that the new collective should wait at least five years to flush its undistributed royalties. It will take time for songwriters and independent publishers to get up to speed, to try and find their repertoire which may be poorly reported. It will take time for older songwriters and publishers to learn about these new developments. Congress may be passing new legislation which affects rights but Congress typically doesn’t expend any money to educate the community about these new rights and how they may be exercised.

Hopefully, the on-demand services that want this new legislation so badly that they are willing to pay the costs of running the collective, will highlight the changes on their services. While these services are primarily consumer-facing, it would be highly appropriate for them to send messages to songwriters and music publishers telling them about the new regime and how to ensure they are collecting their rightful share.

Hearings on the bill have begun in the Senate Judiciary Committee.

The MMA is a long overdue fix to the problems of Section 115 and while it won’t cure all of them it is an important step in the right direction.

John Simson is counsel in the firm’s Entertainment Department, based in its Washington, D.C. office.

By: Self-portrait by the depicted Macaca nigra female; rotated and cropped by David Slater. [Public domain], via Wikimedia Commons
The Ninth Circuit dropped the curtain last week on nearly three years of litigation waged by People for Ethical Treatment of Animals (PETA) against wildlife photographer David Slater in the infamous “Monkey Selfie” case by declaring that monkeys do not have standing to sue for copyright infringement.

In 2011, Slater left his camera unattended on the island of Sulawesi, Indonesia when a crested macaque named Naruto grabbed the camera and took several photographs of himself.  A few years later, Slater published the pictures online and drew the ire of PETA, which filed a complaint in 2015.  PETA alleged Slater infringed Naruto’s copyrights in the photos and claimed it could adequately defend Naruto’s rights as the macaque’s “next friend.”  The law allows “next friends” to sue on behalf of others if the individual they represent lacks capacity to prosecute his or her own case.

The district court dismissed the action on the grounds that monkeys do not have standing to sue under the Copyright Act.  PETA appealed, but after participating in oral argument, entered into a settlement agreement with Slater whereby PETA would withdraw its appeal in exchange for Slater donating a portion of the profits earned from the pictures to charities that protect crested macaques in Indonesia.  Nevertheless, Naruto was not named a party to the settlement and the Ninth Circuit did not take kindly to PETA resolving the matter without its “next friend.”

“In the wake of PETA’s proposed dismissal, Naruto is left without an advocate, his supposed ‘friend’ having abandoned Naruto’s substantive claims in what appears to be an effort to prevent the publication of a decision adverse to PETA’s institutional interests,” wrote Judge Carlos Bea who sarcastically added that Naruto should consider suing PETA for breach of fiduciary duty.  “Puzzling, while representing to the world that ‘animals are not ours to eat, wear, experiment on, use for entertainment, or abuse in any other way’ PETA seems to employ Naruto as an unwitting pawn in its ideological goals,” Bea argued.

Notwithstanding the settlement agreement, the Ninth Circuit issued an opinion.  It found Naruto, as the alleged owner of the photographs, technically had Article III standing since he suffered a concrete and particularized economic harm that could be redressed by the court.  However, the Ninth Circuit found the Copyright Act only authorizes humans and legal entities to sue for infringement since it does not expressly permit otherwise.  The court also reasoned the Act’s language referencing an author’s “children,” “grandchildren,” and “widow/widower” implies humanity as animals cannot marry or produce heirs entitled to property by law.

Jeff Kerr, general counsel for PETA, disagrees.  “Naruto should be considered the author and copyright owner, and he shouldn’t be treated differently from any other creator simply because he happens to not be human,” Kerr said in an interview with Time.

PETA has not yet decided whether it will appeal the ruling to the United States Supreme Court.  As for Naruto, he could not be reached for comment.

The digitization of content is forcing courts to take a fresh look at basic copyright concepts. The Disney v. Redbox case that I’ve recently blogged on addressed whether a digital download code is a “copy” of a work. Now a New York District Court has taken up the meaning of “display” in a case that could have big consequences for the way news outlets do business.

A photographer named Justin Goldman snapped a candid photo of New England Patriots quarterback Tom Brady with Boston Celtics general manager Danny Ainge. Goldman posted the photo on Snapchat, whence it went viral, including on Twitter. The defendant news outlets, including Breitbart, Time and the Boston Globe, embedded the tweets together with the photo in stories concerning whether Brady was assisting the Celtics to recruit a player named Kevin Durant. Goldman sued for copyright infringement. The defendants moved for summary judgment on the ground that they had merely linked to an image hosted on Twitter’s servers and did not themselves maintain copies.

Judge Katherine Forrest rejected this position. In her view, the location of the server on which an image is stored is merely a technical distinction that is not relevant to whether the copyright owner’s display right was infringed. Judge Forrest acknowledged that this view is contrary to the position of the 9th Circuit, but held that it is supported by Supreme Court precedent and the language and legislative history of the Copyright Act.

This decision does not necessarily mark the end of the road for the news organizations, however, In response to their plea that a loss would “cause a tremendous chilling effect on the core functionality of the web,” the judge stressed that they still have strong affirmative defenses. A fair use argument is always available, particularly to straight news organizations. The judge also raised the possibility that Goldman had released the photo into the public domain by posting it to Snapchat in the first place.

There’s a certain logic to Judge Forrest’s conclusion that the viewer’s experience of a photo is the same whether the defendant has copied it to its own server or linked to someone else’s. On the other hand, a central feature of Twitter and other social media platforms is that posts can be readily shared. The ecosystems of these platforms could be seriously disrupted if every shared post is regarded as a new publication for copyright purposes. Courts and possibly Congress will be working for the next several years to draw the appropriate lines.

In a closely watched copyright lawsuit, the Second Circuit reversed the District Court’s finding of “fair use” and upheld Fox News’ claim that the TVEyes service infringed its copyrights. This decision has broad implications for the manner in which video clips and text summaries are used in today’s fast-paced and interconnected digital media.

Illustration of scissors on video player, symbolizing video editing icon/clipsIn brief, TVEyes operates a comprehensive subscription-based media-monitoring service that (i) records essentially all television broadcasts on 1,400 channels on a 24/7 basis, (ii) copies the closed-captioned content that accompanies the recorded broadcasts, and (iii) uses that content to make a text-searchable database. TVEyes subscribers can run searches that return a list of video clips containing the searched terms. Each clip runs for 10 minutes and begins shortly before the search term appears in the clip. Thus, a TVEyes’ subscriber can search for a particular product, political candidate, hot-button issue (e.g., the NRA), etc. and retrieve all clips that mention the product, individual or issue that is the subject of the search.

Fox News sued TVEyes for direct copyright infringement based upon its copying and distributing Fox’s copyrighted content without a license. Because the recorded broadcasts were indisputably copyrighted and unlicensed, TVEyes’ defense turned on application of the four-factor “fair use” defense codified in Section 107 of the Copyright Act. Under this test, the following factors are considered individually and collectively in determining if the use is fair: (i) the purpose and character of the use, (ii) the nature of the copyrighted work, (iii) the amount and substantiality of the portion used in relation to the copyrighted work as a whole, and (iv) the effect of the use upon the potential market for the copyrighted work.

The first factor typically turns on whether the challenged use somehow transforms the copyrighted work. In a ruling that met with sharp disagreement in a concurring opinion, the majority ruled that the TVEyes service was “at least somewhat transformative” because it enabled its clients (i) to view all Fox programming over the prior 32-day period that concerned the topic of their search without needing to watch Fox on a 24/7 basis for the entire period, and (ii) to watch the video clips at a time and place that was convenient for them, and not when they aired on Fox. Unfortunately for TVEyes, this is the only fair use factor found to work in its favor.

After noting that the second factor (“the nature of the copyrighted work”) rarely plays a significant role in fair use determinations, the Second Circuit ruled that it played “no significant role here.” The Second Circuit then turned to the third and fourth factors.

The Court ruled that the third factor – the amount of the copyrighted work used – “clearly favored” Fox because TVEyes made available “virtually the entirety of the Fox programming that TVEyes viewers want to see and hear.” The Court reasoned that “given the brevity of the average news segment on a particular topic” providing TVEyes users with ten-minute clips likely conveyed to them “the entirety of the message conveyed by Fox to authorized viewers of the original.” The Second Circuit contrasted this to Google’s actions – which were found to constitute fair use – in Authors Guild v. Google, Inc., 804 F.3d 202 (2d Cir. 2015) (“Google Books”). In that case, Google made unlicensed text-searchable copies of millions of books for which searches retrieved “snippets” of the books containing the search terms. Unlike TVEyes’ 10-minute video clips, these “snippets,” according to the Second Circuit, “abbreviated to ensure that it would be nearly impossible for a user to see a meaningful exposition of what the author originally intended to convey to readers.”

Finally, after reaffirming that the fourth fair use factor is the single most important element of the fair use analysis, the Court found that Fox had the “much stronger point.” This factor focuses on whether the challenged work constitutes a competing substitute for the original or its derivative so as to deprive the copyright owner of significant revenues that, instead, flow to the unauthorized copier. The Second Circuit found that TVEyes’ service undercut Fox’s ability to profit from developing and licensing searchable access to its copyrighted broadcasts to third parties. In making this finding, the Court pointed to TVEyes’ success as evidence that the market for searchable clips was worth millions of dollars before concluding that TVEyes was usurping a market that properly belonged to Fox.

The Second Circuit remanded the case to the District Court with instructions to enjoin TVEyes from making available to clients the ability to watch the 10-minute clips retrieved from TVEyes’ client search requests. Significantly, Fox did not challenge and the injunction does not apply to TVEyes’ search database. As such, there may remain an opportunity for TVEyes to combine its database with a retrieval and access component that does not flunk the third and fourth fair use factors. To accomplish this, TVEyes would likely need to construct a system far more like the one that did pass fair use muster in Google Books. However, because the “snippets” approved in Google Books were radically different from the 10-minute clips upon which TVEyes built its business, whether TVEyes would have the interest and ability to pursue such a redesign is far from clear.

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

Law concept: circuit board with copyright icon, 3d renderRedbox scored a win in its copyright dispute with Disney as a federal district court judge refused to award the studio a preliminary injunction against Redbox’s sale of digital download codes.

Disney’s complaint was that Redbox was purchasing “Combo Packs” of Disney movies, which include a DVD, Blu-Ray disc and digital download code, opening the packages and selling its components separately. This, Disney claimed, encouraged consumers to violate the terms of copyright licenses set forth on printed inserts in the Combo Packs and warnings on the download websites Disney Movies Anywhere and RedeemDigitalMovies, which purport to restrict use of the codes to owners of the physical discs.

Redbox had thrown up two defenses to Disney’s copyright claim. First, that the download codes are equivalent to the physical discs under the first sale doctrine. Second, that Disney was guilty of “copyright misuse.”

The parties’ briefing focused primarily on the applicability of the first sale doctrine. This provides that once a copyright owner sells a particular copy of a work, such as a book, it cannot prohibit the buyer from subsequent sales or transfers of that copy. Redbox contended that the paper slip bearing the download code constituted a particular copy of the movie no less than the DVD and Blu-Ray discs in the Combo Packs. Disney conceded that the first sale doctrine applied to the DVD and Blu-Ray discs in the Combo Packs, but maintained that the download codes were not copies of the movies at all, but only keys by which consumers could then create copies of the work on their own computers. The court sided with Disney on this issue, holding that no “copy” existed at all until the consumer activated the code and downloaded the movie.

Somewhat surprisingly, despite the attention paid by the parties to the issue, the court held that the first sale doctrine was not applicable to the case because Disney’s misuse of copyright was sufficient to tip the scales in Redbox’s favor. The copyright misuse doctrine furnishes a defense to an infringement claim when a copyright owner is found to be leveraging its limited monopoly under copyright to obtain benefits outside the scope of the copyright monopoly. In one leading case, for example, the owner of a copyrighted medical coding system attempted obtain an unfair advantage over competitors by conditioning licenses of its system on a promise that the licensees would not use competing systems.

In Disney’s case, the court held that it was a misuse of copyright for it to try to link its legitimate right to restrict transfers of the download codes to a waiver of consumers’ conceded right to transfer the physical discs. The license agreements for digital downloads of the Disney movies on the RedeemDigitalMovies requires redeemers to represent that the are currently “the owner of the physical product that accompanied the digital code at the time of purchase.” Similarly, the terms of use on the Movies Anywhere website only allow registered members to “enter authorized . . . Digital Copy codes from a Digital Copy enabled . . . physical product that is owned by [that member].” The court viewed these conditions as overreaching, stating, “Thus, Combo Pack purchasers cannot access digital movie content, for which they have already paid, . . . unless they forego their statutorily-guaranteed to distribute their physical copies of that same movie as they see fit.”

The court also rejected Disney’s breach of contract claim against Redbox. The outside of the Combo Pack box contained the notice “Codes are not for sale or transfer.” This, Disney claimed, established a binding contractual obligation on Redbox not to resell the download codes. Although the court acknowledged that notices printed on packaging can create enforceable obligations, it held that the notice on the Combo Packs was insufficient to do so.

This case presents an interesting takeaway. Although Disney prevailed on the first sale issue, which both parties apparently believed would be determinative, it lost on more mundane issues going to the wording of its license terms. It’s possible that with clearer and narrower drafting Disney will be able to accomplish its goal of preventing resale of download codes. In the meantime, even without a preliminary injunction in place, Disney could continue to pursue this case to trial.

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.