Trade Secrets Claim Results from Copyright Infringement Investigation

nexTUNE, a Washington corporation, provides digital music services to businesses and individuals.  Over a period of more than six years, nexTUNE developed music delivery technologies that it considered trade secrets.  EMI Music is a major music company.  EMI sent nexTUNE a cease and desist letter, which accused nexTUNE of copyright infringement.  EMI then requested information about nexTUNE’s music services in connection with its investigation of nexTUNE’s claim that a statutory license covered nexTUNE’s use of EMI’s copyrighted sound recordings.  nexTUNE agreed to provide the information requested, on the condition that it be kept confidential.  nexTUNE’s president met with EMI’s outside counsel, Buck McKinney and Christopher Harrison, in Austin, Texas, and provided the requested information.  In a phone conversation before the meeting, McKinney agreed to keep the information confidential.  At the meeting, nexTUNE’s president recognized Harrison as someone who was working for a nexTUNE direct competitor and had previously worked for other nexTUNE’s direct competitors.

nexTUNE sued EMI, McKinney and Harrison in the Western District of Washington, alleging non-infringement of EMI’s copyrights (a federal law claim) and misappropriation of trade secrets (a state law claim).  Harrison moved to dismiss the trade secret misappropriation claim against him for lack of personal jurisdiction (FRCP 12(b)(2)) and failure to state a claim upon which relief can be granted (FRCP 12(b)(6)).  McKinney moved to dismiss the trade secret claim against him for lack of subject matter jurisdiction (FRCP 12(b)(1)) and lack of personal jurisdiction.  EMI moved to dismiss the trade secret claim against it for lack of subject matter jurisdiction and failure to state a claim upon which relief can be granted.  The district court granted Harrison’s motion to dismiss for lack of personal jurisdiction, but denied McKinney’s motion.  The district court granted McKinney’s and EMI’s motions to dismiss for lack of subject matter jurisdiction without prejudice and with leave to amend the complaint.  EMI’s motion to dismiss for failure to state a claim was granted and the claim dismissed without prejudice.

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South Park WWITB Video Fair Use, Rules Seventh Circuit

Was South Park’s video version of What What (In The Butt) a fair use of Brownmark’s original viral video version of What What (In The Butt)?  The district court thought so.  It made its decision based on South Park Digital Studios’ (SPDS) Fed.R.Civ.P. 12(b)(6) motion, comparing the two videos without considering other evidence.  Brownmark appealed to the Seventh Circuit Court of Appeals, arguing that the district court could not base its decision in a Rule 12(b)(6) motion on an affirmative defense. 

In a Rule 12(b)(6) motion, the defendant argues that the plaintiff failed to state a claim upon which relief can be granted.  Fair use (17 U.S.C. §107) is an affirmative defense, meaning that establishing the defense nullifies a claim of copyright infringement.  Brownmark argued that it is improper procedure for a district court to consider the defendant’s affirmative defense in a motion addressing the sufficiency of the plaintiff’s complaint.  The Seventh Circuit affirmed the district court’s ruling on both the procedural issue and the fair use issue, stating that the South Park video “is clearly a parody of the original WWITB video, providing commentary on the ridiculousness of the original video and the viral nature of certain YouTube videos.”  (Opinion pdf page 10).

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