Textbook Publishers’ Copyright Litigation Strategy Implodes in Bankruptcy Court

Textbook publishers Pearson EducationCengage Learning and The McGraw-Hill Companies filed suit against an individual for copyright infringement when, without authorization, that individual sold the publishers’ college textbook solutions manuals on the Internet.  The publishers probably could have stopped the infringing activities by sending a cease and desist letter.  Instead, the publishers sought to make an example of the infringer by filing a lawsuit in the Southern District of New York.  The publishers’ plan backfired when the litigation expenses overwhelmed the alleged infringer’s resources and he filed for bankruptcy in Minnesota, where he resides.

The bankruptcy court judge struck the publishers’ demand for a jury trial, awarded the publishers the minimum in statutory damages even after finding willful infringement of the publishers’ copyrights and denied the publishers’ motion for attorney’s fees.  The district court affirmed the bankruptcy court’s decision.  The Eighth Circuit Court of Appeals likewise affirmed the bankruptcy court’s decision.  On appeal to the Eighth Circuit, the publishers argued that they should have had a jury trial to determine damages and that they should have been awarded their attorney’s fees of more than $90,000.

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Apple and Publishers Get Political Support in DOJ Case

This post is a follow-up to my post, E-book Pricing the Emphasis of DOJ Suit Against Apple and Book Publishers.  In that post, I discussed the DOJ’s factual allegations and the ways in which Apple and the book publishers allegedly violated U.S. antitrust law.  Senator Charles E. Schumer recently weighed in with his Wall Street Journal editorial, Memo to DOJ:  Drop the Apple E-Books Suit.

Senator Schumer makes two major points; 1) that a single firm, such as Amazon, should not be allowed to control access to books and 2) that traditional industries confront many challenges in adapting to the Internet economy and industries that adapt to the transition to digital platforms should be supported.  He believes that publishers’ adoption of the agency pricing model to make e-book sales work for them is an adaptation to digital platforms that should be supported. 

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“Untenable” Negligence Claim Dismissed In Action Alleging Copyright Piracy

Liberty Media Holdings, LLC (Liberty) brought suit for copyright infringement against Cary Tabora and Schuyler Whetstone for allegedly using BitTorrent to pirate a motion picture, Corbin Fisher’s Down on the Farm.  Tabora is alleged to have let his roommate, Whetstone, use Tabora’s Internet connection to pirate copyrighted content.  Liberty asserted direct copyright infringement, contributory copyright infringement and negligence claims against Tabora.  The district court for the Southern District of New York granted Tabora’s motion to dismiss Liberty’s complaint for failure to state a claim upon which relief can be granted.

Section 301 of the Copyright Act preempts “all legal or equitable rights that are equivalent to any of the exclusive rights within the general scope of copyright as specified by section 106 …and come within the subject matter of copyright as specified by sections 102 and 103 ….”  State law causes of action are preempted when the works are the type protected by the Copyright Act and the state law protects a right equivalent to an exclusive right protected by copyright law.  Negligence is a state law cause of action.

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Intercollegiate Broadcasting Prevails in Challenging the Constitutionality of the Copyright Royalty Judges Statute

Intercollegiate Broadcasting System, Inc. is an association of webcasters who use the Internet to transmit digitally recorded music on high school and college campuses, analogous to a closed circuit campus radio station.  Since the digital transmissions are “performances” under the Copyright Act, the copyright owners of the songs are entitled to receive royalty payments.  The Copyright Act provides a statutory license for webcasting:  17 USC §114(d)(2), (f)(2)-(3).  If the webcasters and the copyright owners (or the owners’ clearinghouse) cannot agree on licensing terms, Copyright Royalty Judges (CRJs) determine reasonable terms and rates for royalty payments.  The Copyright Act, Sections 801 – 805, describes the functions and duties of the CRJs.

Intercollegiate challenged the constitutionality of the CRJs on the basis of Article III, judicial power, and Article II, §2, cl. 2, Appointments Clause, violations.  The U.S. Court of Appeals for the District of Columbia Circuit ruled that the current form of the CRJ provisions do violate the Appointments Clause, art. II, §2, cl. 2.  The D.C. Circuit corrected the violation by invalidating and severing the portions of the statute that restrict the Librarian of Congress’ ability to remove the CRJs.  Because the form of the CRJs that made the rate decision leading to Intercollegiate’s challenge violated the Constitution, that rate decision was vacated and the case was remanded to the CRJs.

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Forest Park’s Breach of Contract Suit Over USA Network’s “Royal Pains” Not Preempted by Copyright Act

Forest Park Pictures pitched its idea for a television show it called “Housecall” to USA Network.  Forest Park created and submitted written materials and made an oral presentation to USA Network about a doctor who treats medical patients who cannot pay, gets expelled from the medical community for doing that, then becomes a “concierge” doctor to rich and famous people in Malibu, California.  Communication between Forest Park and USA Network about Housecall ended after a few exchanges. 

About four years later, USA Network aired its own television show called “Royal Pains,” about a doctor who gets expelled from the medical community for treating patients who cannot pay, then becomes a concierge doctor to rich and famous people in The Hamptons on Long Island, New York.  Forest Park sued USA Network for breach of contract.  The district court dismissed Forest Park’s suit, holding that it was preempted by the Copyright Act.  The Second Circuit Court of Appeals vacated and remanded, holding that the Copyright Act did not preempt Forest Park’s claim and that the complaint alleged an enforceable state law contract.

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