Category: Law & Policy

To Err is Human: Unicolors v. H&M at the Supreme Court

The Supreme Court on Monday heard oral arguments in the copyright case Unicolors v. H&M Hennes & Mauritz, L.P., a lawsuit bogged down in tiresome and tangential details, but which is important for independent creators. And speaking of tangential details, I noticed that Justice Sotomayor inadvertently used the term “patent trolls” during her brief interaction with counsel, and the reason I mention this minor gaffe is to say that if a Justice of the Supreme Court can make an honest mistake while speaking about the law, so can legal laymen. And that point is at the heart of this case.

The administrative and legal factors underlying this case are as follows: 1) timely and valid registration with the Copyright Office is required to fully enforce an infringement claim in federal court; 2) copyrights claimed in Group registrations may not comprise both published and unpublished works in the same Group; and 3) a registration may be invalidated at trial if the registration applicant knowingly provided inaccurate information and the inaccuracy, if known by the Office, would have caused the registration application to be denied. With that, I will restate the summary of the case from an earlier post.

Unicolors makes original designs for use in textiles, and in 2015, a jury found that retailer H&M copied one of its designs and, thus, awarded Unicolors damages and legal fees for copyright infringement. On appeal to the Ninth Circuit, however, H&M argued that the relevant Group copyright registration should be invalidated because the Group comprising 31 designs, included 9 designs that Unicolors had “confined,” meaning that they were temporarily exclusive to certain customers. H&M argues, therefore, that Unicolors registered these 9 works in the Group knowing that they would not be “published” simultaneously with the other 22 designs. The Ninth Circuit agreed with H&M. It reversed the jury decision and remanded with an order that the Register of Copyrights be consulted as to whether Unicolors’s error, if known at the time of application, would have caused the Copyright Office to deny registration for the Group filing.

So, the big to do here is not Unicolors’s fate per se, but the independent creator who is likely to use Group registrations at the Copyright Office and file her own applications without the aid of counsel. As discussed in this post and this podcast with Steven Tepp, the possibility that a photographer, for example, will inadvertently mix published and unpublished works in a Group registration—and not know about it until some defendant in a claim seeks to invalidate the registration—is actually rather high. This exact circumstance is further aggravated by the fact that the legal meaning of “published” is not entirely settled for legal experts, let alone authors of works, and as Tepp points out, is not something the Copyright Office really needs to know at the time of registration.

“Ignorance of the law is no defense is an old principle,” stated Justice Kavanaugh at one point in response to H&M counsel, Peter Stris. “It’s got a lot less force in regulatory areas, number one. But it especially has less force when the statute itself…folds the legal portion in.” [citation omitted]. If I can summarize almost 90 pages of transcript down to a key point, that would be it. The important question in this case is whether the statutory intent of Section 411 of the Copyright Act allows for errors in law but not errors in fact when submitting information to the Copyright Office.

Misstatements of fact (e.g. author’s identity) are grounds for invalidating a copyright, while misstatements of law (e.g. whether a work is published or is a derivative work) do not automatically meet the standard of “knowingly” providing false information. Not just in copyright, but throughout many areas of law, the distinction between innocent error and fraud is an essential matter of justice. To Justice Kavanaugh’s point, none of us can lay claim to a defense that we don’t know that grand theft is illegal, but ignorance about the arcane and administrative practices of government agencies is not only forgivable but would be downright suspicious if it were not common among nearly all of us. Or to quote Justice Gorsuch, “….no human alive can probably understand the whole of this chapter.”

Although there was some discussion as to whether Unicolors itself, having ample resources, ought to have known better at the time it submitted its registration application, it sounded like the Court was not terribly persuaded by this line of argument. Justice Alito did ask Unicolors’s counsel Joshua Rosencranz what benefit his client gains by the Group registration, and the answer underscores the absurdity of the unforgiving standard for which H&M is arguing. “…under the Ninth Circuit’s theory, we saved $65,” Rosencranz replied. And there you have it. What company knowingly files incorrect information and knowingly risks invalidating its copyrights in order to save $65? It’s prima facie silliness.

The Alleged “Troll Problem” in this Story

A group of 12 legal scholars filed an amicus brief in support of H&M on the grounds that if Unicolors were to prevail, the precedent set would exacerbate the “copyright troll problem.” But the brief stumbles over reality right out of gate, when it declares, “The copyright registration process underpins the modern copyright system. Maintaining the integrity of the registration process, particularly in light of the emerging threat posed by copyright trolls, requires adherence to the registration requirements.”

Aside from the fact that there is no clear evidence that we face an “emerging threat posed by copyright trolls,” abusive litigation in any area of law does not necessarily inform the construction or application of the law itself but is properly addressed through rules of civil procedure and/or bar ethics rules. Nevertheless, the professors’ brief argues that the Court should apply H&M’s legal standard for “knowing error” as a precedent that would mitigate against trolling in general.

The brief asserts two reasons for its position:  1) that the stricter standard for accuracy makes more work for putative copyright trolls; and 2) the possibility of invalidating registrations based on application filing error provides respondents with a defense against trolls. On the second point, I will note that the cost of discovery to arrive at that defense is likely higher than any settlement (just or unjust) the alleged troll is seeking. On the first point, even copyright skeptic Justice Breyer stated empathy for the legit author beavering away at his work and committing a filing error in contrast to alleged trolls about whom he said, “If there is one group of people that it’s going to be tough to make out a claim that they didn’t really know the law, it will be the real copyright trolls because they stay abreast of everything.” In other words, trolls don’t amend the scope of copyright law, but those complaining about them appear to be doing just that.

More broadly, let’s not overstate the registration process as the “underpinning of the system.” As it stands, the U.S. registration process is confusing, bureaucratic, and as we see emphasized in this case, bogged down in certain formal requirements that are not strictly necessary to the process. No other democratic nation with rich copyright systems maintains formalities akin to ours, and many of our formalities are relics of history, serve the purposes of the collection at the Library of Congress, and are testaments to our legislative stodginess.

Compliance with registration formalities is a bargain made by the copyright owner in exchange for the ability to fully enforce her rights, but we should not heap too much praise upon what amounts to a clerical process which is at least as bureaucratic as obtaining a driver’s license and, arguably, less necessary to the purpose at hand. As such, to the extent that Unicolors in this case stands in the shoes of all creators of works, the Court must find as a matter of justice that the statutory interpretation advanced by Unicolors maintains the consequences of lying without disturbing the principle that error is still human.

Photo by: colinn

Trump Claims “Absolute Immunity” in Eddy Grant Copyright Suit

When I wrote about the Grant v. Trump copyright case on October 1, I was wrong about one thing:  that Team Trump would quickly settle the matter as a relative storm in a teacup within the legal tornadoes swirling around the ex-president. But I should know better. Because of course the law works in mysterious ways in Trump’s mind, including one important theory he continues to advance against all claims civil and criminal—namely, that having attained the presidency, he is henceforth immunized against all liability for the rest of his life.

After failing to obtain a dismissal in musician Eddy Grant’s copyright infringement claim against Trump and the campaign, Trump’s answer filed on October 18 asserts five affirmative defenses including “absolute presidential immunity.” Yes, Donald Trump throws this expression around like he’s flinging holy water at vampires because he has never quite shown that he understands the distinction between the office and the office holder. In a Lawfare article explaining why the former president should not be immunized against civil suits arising out of the Jan. 6 insurrection, Dayna Zolle writes, “The Supreme Court has stated that the president’s power to act ‘must stem either from an act of Congress or from the Constitution itself.’”

As a matter of law, there is a separation between the official duties of an incumbent and his reelection campaign. West Wing fans may remember that Sorkin’s President Bartlett was such a stickler for this rule that he refused to call potential campaign donors from within the Oval Office. And although Trump has consistently tried to erase the line between campaigning and governing, he has no reason to expect that any court will be persuaded that the use of “Electric Avenue” by Trump for President was encompassed within the “outer perimeter” of the official duties of then President Trump.

Nevertheless, the fact that the absolute immunity defense was even presented in Grant reprises the discussion I began in my first post about this case, when I asked whether unlicensed uses of works for political messages should tilt away from fair use under factor one in deference to the copyright owner’s speech rights. Because regardless of the legal veil that exists between a campaign and an office holder, that separation is muddier in the lingua franca of politics in general. And this is one reason why Trump in particular provoked an unprecedented number of musical artists to demand that he not use their songs at his rallies.

Although Trump is wrong as a matter of law about his eternal immunity, it is true that campaigns are about official policy, even if they are not official acts—especially campaigns by incumbents. Thus, to the extent that a Trump 2020 rally was an extension of the administration, that is all the more reason why songwriters or artists have an inherent moral right to assert their non-participation, if that’s how they feel. As Mick Jagger told the BBC about demanding that Trump stop using “You Can’t Always Get What You Want,” to close rallies, “It’s a funny song for a play-out song—a drowsy ballad about drugs in Chelsea. It’s kind of weird.”

The weirdness of Donald Trump notwithstanding, moral rights is a subject of IP law, which is more explicitly codified in various copyright statutes around the world than in the U.S. The one exception is the section of the American statute called VARA (Visual Artists Rights Act), which includes certain prohibitions against destruction of visual works and/or uses of those works in ways that may harm the artist’s reputation.

Moral rights encompass those aspects of copyright which are intertwined with the author’s identity, and although the U.S. is not strictly a moral rights jurisdiction, I would argue that the essence of those protections is baked into the exclusive rights under §106 because the author does not need a reason to reject a license to use a work. Simply disapproving of a proposed use—including the possibility that the author hates the breathing guts of a political figure—is sufficient grounds to deny the would-be user a license. And the rightsholder need not explain himself.

Further, if Trump were correct that campaigning is coextensive with governing, then unlicensed uses of works would be tantamount to compelled speech—at least in principle—because the campaign related conduct would meet the standard of state action necessary to implicate the First Amendment. Whether the use of music at a rally or synched with a video would be considered using the speech of the author(s) without permission is arguably a case-by-case consideration. But music is an especially powerful medium in this regard. When a sound recording is played at an event to animate a crowd into action which the artist passionately opposes, the offense may be deeply personal and has nothing to do with the economic utility of the artist’s copyrights.

So, I doubt Trump’s immunity answer in this case will do him any good, and perhaps the campaign will ultimately settle with Grant since the damage award would still be a tiny slice of the Trump defense fund pie chart. But even the folly of the argument contains a little slice of truth—that the boundary between campaign and official conduct by an elected official is often hazy and semipermeable. But if that is relevant at all, it is grounds to afford authors greater, not lesser, protection against involuntary participation through uses of their expressive works for political purposes.

What’s in the Box? Counterfeits and Online Marketplaces

In March, Senators Durbin and Cassidy introduced the INFORM Consumers Act, legislation meant to provide us with greater transparency when shopping through large online marketplaces, which is to say Amazon. In a co-authored editorial in Roll Call, the senators state:

It is well documented that third parties are selling massive amounts of counterfeit, stolen and unsafe consumer products on online marketplaces. The Office of the U.S. Trade Representative reported last year that the “rapid growth of e-commerce platforms has helped fuel the growth of counterfeit and pirated goods into a half trillion dollar industry.” Also last year, the Department of Homeland Security stated that such trafficked goods “threaten public health and safety, as well as national security.”

At this point, we probably all have a pretty good intuition that when we order various goods from Amazon, the source of the product may be questionable. If it’s a phone case for ten bucks, there’s probably no great risk, but as Senators Durbin and Cassidy note, if it’s a carbon-monoxide detector that doesn’t work, that’s another matter. Thus, the INFORM Act proposes to mandate a verification process for online marketplaces to certify some degree of legitimacy and accountability by third-party sellers through the collection of bank, tax ID, and physical address information. Any third-party sellers that fall out of compliance would have to be banned from the marketplace, and the process would be enforced by the USTR.

While the legislation strikes me as a good step toward demanding some accountability from the online marketplace, the platforms’ control over the display of information may yield results that are more translucent than transparent, but time will tell. Further, I believe Congress and other governing bodies around the world should be more aggressive with Amazon in particular.

One reason a platform like Amazon provides such fertile opportunity for counterfeiters is that we tend to shop on the platform quickly while looking at two things:  a photograph and a price. The photograph is easily deceptive, and only when the price seems unrealistically low do we, perhaps, pause to wonder whether there is any deception afoot. All that text, including the meaningless name of the seller, is probably ignored most of the time.

If this describes the habits of millions of consumers, it seems the task at hand is to require Amazon et al do far more to prevent counterfeits from trading on their platforms in the first place. And, of course, one way to achieve that end is to make Amazon or WalMart or Target liable for harm resulting from the transaction of dangerous products. Liability does wonders for cleaning up corporate conduct; in fact, it is often the only thing that does. Amazon et al would say that this is too burdensome, but is it? Durbin and Cassidy write:

… Amazon and the powerful online marketplace lobby say our bill is too onerous. They say that they already do a great job of policing who is selling what from where on their websites and that the best solution is to leave the status quo in place.

Reality couldn’t be further from the rosy picture painted by these companies. We need to take stronger steps to both prevent illicit sales on online marketplaces and to make sure bad actors are held accountable. As The Wall Street Journal recently reported, law enforcement investigators say they struggle to obtain information from Amazon about shady sellers on their marketplace. 

What’s interesting about that reference to Amazon’s opacity and uncooperative posture, if you read the recent story byAditya Kalra and Steve Stecklow for Reuters, is that it seems that one of the “shady sellers” operating on Amazon is Amazon. Because, of course, there are two sides to the counterfeiting narrative—potential harm to consumers and certain economic harm to legitimate manufacturers.

Though it probably comes as little surprise to many, documents obtained by Reuters investigators show that Amazon, at least in India, has been using its proprietary data to track certain brand trends, replicate (knock-off) those attributes in its own house brands, and then ensure that is house brands appear in search results above the same brands they copied. Kalra and Secklow write:

In sworn testimony before the U.S. Congress in 2020, Amazon founder Jeff Bezos explained that the e-commerce giant prohibits its employees from using the data on individual sellers to help its private-label business. And, in 2019, another Amazon executive testified that the company does not use such data to create its own private-label products or alter its search results to favor them.

But the internal documents seen by Reuters show for the first time that, at least in India, manipulating search results to favor Amazon’s own products, as well as copying other sellers’ goods, were part of a formal, clandestine strategy at Amazon – and that high-level executives were told about it.

So, not only should Amazon’s extraordinary data-driven advantage disqualify it from becoming a counterfeiter on its own marketplace, but having demonstrated its effectiveness at doing so, we should also conclude that it has the resources to comply with the INFORM Act, and a lot more. If Amazon has the ability to track specific sizing trends in a brand of men’s shirts for the purposes of copying the products and undercutting the brand’s market, surely it has the ability to connect a few data points to keep products like counterfeit smoke and carbon-monoxide detectors off its pages. Again, Kalra and Stecklow write:

The 2016 document stated a goal: offer Amazon’s own goods in 20% to 40% of all product categories on Amazon.in within two years. Amazon would achieve profitability in its private-brand business by ‘only launching products that will provide more margin than comparable reference brand products’.

We get it. When Amazon calls proposals like the INFORM Act “burdensome” this is shorthand for the fact that they like making money better than they like spending it. No kidding. But as the senators also note, Amazon seems to have plenty of money to burn on rocket fuel. So, it can probably bear the “burden” of protecting buyers and sellers on its platform.