Fox is a major broadcast television network, broadcasting such shows as Glee, Bones and The Simpsons. Fox owns the copyrights to the television shows airing on its network. Dish Network is the third-biggest television service provider in the country. Dish has had a contract to retransmit Fox’s content since 2002. Dish’s current set-top box with digital video recorder (DVR) and video on demand capabilities is called the “Hopper.” One of the Hopper’s features is “AutoHop,” which allows users to automatically skip commercials. AutoHop is available only to users that have recorded programming using Dish’s PrimeTime Anytime service and is normally available the morning after the live broadcast. AutoHop does not delete the commercials, so that users can still access them if they want to see them. Dish technicians create the AutoHop feature by watching Fox’s primetime programming to mark the beginning and end of the commercial breaks.
Fox sued Dish in federal court, alleging copyright infringement and breach of contract. The district court denied Fox’s motion for a preliminary injunction. The district court ruled that Fox did not demonstrate a likelihood of success on most of its copyright infringement and contract claims. Although the district court found that Dish likely both breached the contract and infringed Fox’s reproduction rights in making its quality assurance copies, the district court ruled that Fox failed to establish that it would likely suffer irreparable harm resulting from the quality assurance copies and therefore held that Fox was not entitled to an injunction. The Ninth Circuit Court of Appeals affirmed the district court’s decision.
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Chara Curtis, Cynthia Aldrich, and Alfred Currier wrote and illustrated three children’s books, How Far to Heaven?, Fun Is a Feeling and All I See is a Part of Me. The copyrights on the books are registered. Illumination Arts, Inc. (IAI) published the books under a publishing contract, beginning in 1989. IAI paid royalties until September 30, 2009. After that IAI stopped paying regular royalties, making only one subsequent royalty payment. The authors demanded that IAI resume paying royalties. When IAI still failed to pay royalties, the authors terminated the publishing contracts with IAI and requested to buy the books in inventory. IAI refused to sell the inventory books to the authors. Prior to the authors’ contract termination, IAI made the books available to consumers in electronic form, even though it was not authorized to do so under the publishing agreements. IAI continued to make copies of the books, sell the books and display them online after the authors terminated the publishing contract, despite the authors’ demands to cease such activities.
The authors filed a lawsuit against IAI and its successor, Illumination Arts Publishing, LLC (IAP) in federal court in the Western District of Washington. The authors alleged breach of contract and copyright infringement and sought an injunction against IAI and IAP. This post addresses only the copyright issues. In the authors’ first motion for summary judgment, the district court held IAI, IAP and two of their officers directly liable for copyright infringement and for willful copyright infringement. The district court granted the authors’ motion for a permanent injunction and ordered the defendants to return all infringing copies of the books to the authors. The authors’ second motion for summary judgment, and the subject of the rest of this post, asked the district court to award the authors $150,000 for each work infringed, the maximum statutory damages for willful copyright infringement. (17 U.S.C. §504(c)(1)-(2)).
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This case highlights the importance of separating license grants by the type of intellectual property (IP) right granted and clearly identifying the royalty rates and rights associated with a particular type of IP. In other words, trademark, copyright and patent rights should be granted in separate sections of an agreement and the rights and obligations associated with each should be clearly identified. Otherwise, the copyright and trademark rights, which could continue indefinitely or at least extend beyond our lifetimes, will end when the patent expires. In most instances, patents expire twenty years from the date of the patent application.
In Kimble v. Marvel Enterprises, Inc., the Ninth Circuit recently applied the U.S. Supreme Court’s ruling in Brulotte v. Thys Co., to hold that because the patent royalties in the agreement between Kimble and Marvel were not separated from the non-patent royalties, Marvel’s obligation to pay royalties under the agreement ended when Kimble’s patent expired on May 25, 2010. Brulotte held that “a patent licensing agreement requiring a licensee to make royalty payments beyond the expiration date of the underlying patent was unenforceable because it represented an improper attempt to extend the patent monopoly.” (Opinion pdf page 3). Brulotte has been widely criticized as depriving the patent holder of the benefit of her bargain by preventing her from agreeing to receive a lower rate of royalties over a longer period of time, instead of a higher rate of royalties over a shorter period of time. In Kimble v. Marvel, the Ninth Circuit felt compelled to apply Brulotte, even though it considers the reasoning in that case to be flawed.
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Apple entered the e-book market in April 2010, shortly after the launch of its iPad. Amazon launched the Kindle e-reader in 2007 and by 2009, had established a $9.99 price point for e-books. Amazon sold almost 90% of all e-books. The book publishers did not like the $9.99 price, because they thought it was eating into the sales of their hardcover books, threatening the existence of brick and mortar bookstores and threatening their business model. Apple did not like the $9.99 price, because it didn’t want to adopt a low price strategy. From December 2009 through January 2010, Apple met with the top publishers, the Big Six Publishers, to find a way to change Amazon’s $9.99 e-book price point. The result was five of the Big Six Publishers entering into agency agreements with Apple. The agency agreements gave Apple a 30% commission, set a $12.99 to $14.99 price range for e-books and gave Apple MFN status. The MFN clause guaranteed that Apple’s e-book prices would be the lowest retail price in the marketplace and effectively forced the publishers to require all of their distributors, including Amazon, to sign an agency agreement in which the publishers would control the retail prices of books they published. Apple controlled e-book prices at the retail level.
The U.S. Department of Justice (DOJ) filed an antitrust lawsuit against Apple and the five book publishers on April 11, 2012. The book publishers settled and the case proceeded to a bench trial against Apple alone. The district court ruled that the plaintiffs showed by “compelling direct and circumstantial evidence that Apple participated in and facilitated a horizontal price-fixing conspiracy. As a result, they have proven a per se violation of the Sherman Act.” (Opinion pdf page 120).
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In the latest development in The Authors Guild v. Google book saga, the Second Circuit Court of Appeals ruled that the district court’s certification of the class was premature in light of Google’s assertion of a fair use defense and the absence of a ruling by the district court on the substance of Google’s fair use defense. The Authors Guild filed this suit in 2005, alleging that Google infringed authors’ copyrights by scanning and indexing more than 20 million books and making snippets of books available to the public as search results. The district court rejected an amended proposed class settlement agreement (ASA) on March 22, 2011. My post entitled Google Book Settlement Rejected – For Good Reason discusses the district court’s decision.
After the district court rejected the ASA, the plaintiffs moved to certify a proposed class of “all persons residing in the United States who hold a United States copyright interest in one or more Books reproduced by Google as part of its Library Project, who are either (a) natural persons who are authors of such Books or (b) natural persons, family trusts or sole proprietorships who are heirs, successors in interest or assigns of such authors.” (Opinion pdf page 3). The district court granted the motion to certify the class. Google appealed the district court’s ruling certifying the class, arguing that its fair use defense might moot the litigation and that the plaintiffs do not fairly and adequately protect the interests of the class.
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