Category: Intellectual Property

SAS v. WPL Litigation is of Great Importance to the Smallest Creators

Software companies SAS Institute of the U.S. and World Programming, Ltd. (WPL) of the UK have been litigants for more than a decade. By all accounts, WPL presents as a bad actor which lazily cloned SAS’s world-class analytics software. But before weighing the facts necessary to consider claims of IP infringement, the Federal Circuit Court of Appeals must first overturn the errors of copyright law applied by a Texas District Court, lest those holdings further weaken the already tentative position of independent rightsholders.

Presumption of Validity

I’ve spent a lot of time recently talking about formalities in U.S. copyright law (particularly with regard to the Unicolors and Valancourt cases), and it is recognized by those who care about indie creators that certain mechanisms in our copyright system already disadvantage entrepreneurial rightsholders. The individual or small-business creator can hardly be blamed for smirking at the fact that copyright attaches automatically to a work upon fixation, when that statutory provision barely vests her with any real power to enforce her rights. Enter the inducement to register.

The primary incentive to timely registration of works with the Copyright Office is that it allows the copyright owner to obtain statutory damages and legal fees upon successful litigation of an infringement claim. But another essential inducement to registration is the “presumption of validity,” meaning that a court will presume at the outset that the work at issue is properly a subject of copyright protection based solely on its having been issued a valid registration by the Copyright Office.

The reason the presumption of validity is critical, and decades-long precedent, is that it correctly places the burden on the defendant to prove a lack of copyright in the work(s) used, if non-copyrightability is to be presented as a defense. The district court in SAS reversed this principle, placing the burden on the plaintiff to prove copyrightability of register works at trial, and then aggravated this error by engaging in an extraordinary copyrightability analysis of its own design it named a “Copyrightability Hearing.”

Not only was the hearing itself an attempt to plough new ground by this court, but its analysis was improper, citing certain features of the work (e.g. open source), which do not inherently raise copyrightability questions, and then arrived at the untenable logic that the protection of a whole work may be undermined simply because it contains unprotectable elements.

Undermining Copyrightability Itself

As noted in my first post about this case, arguably all works contain unprotectable and protectable elements, and I cited the motion picture as a highly complex combination of such elements which are assembled to compose the finished movie. Among the copyright registrations made for the project will be the motion picture as a single unit, comprising its many parts—protectable original, protectable sublicensed, and unprotectable common elements—under a single title.

Imagine the cost and time if the owner of the motion picture were required to re-prove at trial the copyrightability of the entire film through analysis of the various components and then prove that the arrangement and use of those components is sufficiently original for copyright to attach in the first place. And that’s before proceeding to trial of an infringement claim.

Now, imagine that burden is borne by the independent illustrator, photographer, writer, or music composer, if this district court’s abrogation of the “presumption of validity” were allowed to stand. “The plaintiff would face the insurmountable task of proving a negative—that all of his work is not in the public domain or not an idea,” states the amicus brief filed by Copyright Alliance.

The opportunities for independent creators to enforce their copyrights are already hamstrung by the authors’ limited resources and our overly bureaucratic system. As a result, the overwhelming majority of American creators of works do not participate in the U.S. copyright system. And that is presumably what the copyright detractors want to see.

It is no surprise that those who scorn the existence of copyrights—either because weak protection is in their financial interest or because they are disciples of the Tao of Lessig—have endorsed the district court’s findings in SAS. Because if one hopes to further erode the rights of individual creators, or, perhaps, even industrial creators, enshrining this court’s rulings as precedent would be a very effective means to achieve that end.

Courts outside the Second and Ninth Circuits can be unpredictable when it comes to copyright law; but here, the Texas district court’s novel approach might fairly be described as eccentric, if not downright misguided. For the sake of creators much smaller and more vulnerable than SAS, the Federal Circuit must reverse that court’s multi-faceted errors of law before this case can proceed to the merits of the actual claim.

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

Apple Class Action Suit Reprises the “Digital First Sale” Conversation

I asked the question in 2014:  are we confused by the “Buy” button when we purchase digital media? And the issue is raised again in the class action suit against Apple earlier this year, which alleges that consumers are unsure enough about what it means to “buy” digital goods that online retailers should be held responsible for misleading us. The foundation of the lawsuit argues that the word Buy implies irrevocable access to the thing (e.g. a movie or game) being purchased and, therefore, Apple is engaged in deceptive practice when its Terms of Service state that the platform reserves the right to terminate accounts.

More broadly, legal scholars like Professor Aaron Perzanowski of Case Western University School of Law look beyond the possibility of deception by a retailer, arguing that the nature of ownership in the digital age has changed so dramatically that legislative action may be required. In a recent podcast inspired by the Apple litigation, Perzanowski told Sonny Bunch that a “soft” remedy to address confusion would be a requirement that online retailers of digital media provide better transparency about the limitations that may apply to buying digital goods.

But a more robust solution, Perzanowski argues, would be to amend the first sale doctrine of the U.S. Copyright Act; and it will surprise exactly no readers that I could not disagree more. The complaint against Apple provokes some interesting discussion but does not recommend even looking at copyright law, let alone changing it. For one thing, the claim may fail on the facts because purchasers of digital media from Apple are able to download those files and store them on their own devices. Hence, the “account revocation” argument may not hold up very well as the trial proceeds.

Digital First Sale

The first sale doctrine, originating as judge-made law in 1908, holds that once a copy of a work has been legally obtained, the copyright owner’s interest in that copy is extinguished. Thus, you may do what you want with your physical copies of books, movies, etc., except, of course, make other copies. Perznowski and other copyright critics allege, however, that digital purchasing is uncertain for consumers and that one remedy is to broaden the first sale doctrine to apply to digital copies.

Perzanowski and others argue that a “digital first sale” doctrine would be a way of, “Restoring genuine ownership,” and allege that the copyright owners “don’t like it because it creates pressure and competition.” Neither statement is quite true. In answer to the second statement, as the courts held in the ReDigi case, allowing a trade at internet scale in “used” digital works would not create a secondary competitive market but rather an alternative primary market in which used-goods prices are exchanged for material that is “used” in name only. (For a deeper dive, see posts here and here.)

But as to the notion of “restoring genuine ownership,” that may seem rational at first blush, but less so when we take a half a step back and consider precedent that would give meaning to the word restore in that statement.

What Does Buy Mean To Us?

While I understand why Perzanowski and others assert that the word buy implies a sense of permanent retention of the items we purchase, this isn’t always true. In fact, it’s hardly ever true.

Most of what we buy is consumed and replenished, and this includes various forms of media. In my lifetime, innovations just in the mechanics of listening to music have produced at least six major changes, rendering at least two forms of media (cassettes & 8-tracks) obsolete and relegated another two (vinyl and CDs) to niche products. For home viewing of filmed entertainment, the average VHS was trashed years ago, while stacks of DVDs are either gathering dust or have been sold for a few quarters at yard sales. And who knows how many paperbacks have been donated or destroyed in the last half century.

In fact, it is only the physical books on our shelves—especially the well-made clothbound books—that remain both intact and unaffected by technological obsolescence, and none of the changes that have occurred indicate that there was any deceit on the part of producers or retailers when we originally bought those older media. Meanwhile, the need to purchase a great deal of media today is obviated by subscription models that allow both streaming and download of large catalogues.

So, it may be true that digital life is changing the nature of ownership, but not because contemporary technologies have added unprecedented transience to our media products. On the contrary, the means by which we experience most digital media today (i.e. via multiple networked devices, rather than with specialized, individually owned physical objects) actually makes the current era the first in which consumers have good reason to expect indefinite access to their media purchases. What has changed, of course, is the nature of potential obsolescence.

For instance, if we download and store music files now, but those same files won’t play on computer devices in ten years, that would be a lack of continuity rather than a true disruption like the CD, which offered experiential changes compared to the formats it replaced. Hence the safer storage option may be to leave purchased titles in the online retailer’s cloud, which places the burden on Apple et al to maintain continuity of access—and they are presumably motivated to do so. In the other instance in which a 2032 device does not play a 2022 file, nothing in copyright law is going to alleviate that potential concern, though it is worth noting that we are still using many “old” file types like MP3.

No Reason to Expand First Sale Doctrine

Those who advocate expanding the first sale doctrine to encompass digital files often allude to hypothetical scenarios that are either too narrow or too off-topic to justify legislative action. For instance, Perzanowski referred in that podcast to the possibility that a copyright owner might one day try to prevent the inheritance of a computer device containing copies of works that were legally acquired by the benefactor. I would describe this hypothetical as an attempt to conjure a narrative that sounds like new legal territory but really isn’t.

The likelihood that such a claim would be attempted by a rightsholder, let alone succeed, is too speculative and uncommon to warrant prophylactic legislation, especially when the law, as it exists, already seems to answer the question presented. State probate law secures the right to bequeath a computer or hard drive to a beneficiary, and copyright’s first sale doctrine, though it does not explicitly encompass digital files, does state “copy.” Hence the transfer of specific “copies” stored on a device is not so exotic that the courts would be unable to imagine how the transfer would fit within the intent and function of the first sale exception.

Meanwhile, if there is any barrier (and there probably is) to inheriting accounts, perhaps that issue is worth addressing, but copyright is only tangentially implicated in that discussion. If a case can be made that our kids should be allowed to inherit our iTunes or Amazon accounts, or perhaps transfer our purchases to their accounts, that debate can be had, and perhaps some party can show enough potential harm to justify a legislative remedy. But again, any legislative response to that question may be very slow in contrast to market changes in which consumers increasingly don’t click on Buy buttons at all.

I cannot say whether millions of consumers feel instinctively misled by the word Buy in these transactions, but I can say that I have owned some of the digital music files purchased through iTunes for over fifteen years, which is already competitive with both my long-discarded cassettes and my rarely-accessed CDs. And none of that ownership means much because, as subscriber, I can stream or download everything in the catalog. So, I suppose we could ask whether buy is a euphemism for “long-term rental”? Perhaps. But in the grand scheme, that is kind of what it means to “own” most things.