K&B Entertainment Law Comment KING  BALLOW LAW OFFICES Vol. 25, Number 12 EDITOR, THOMAS J. MOTZNY December 2011 © 2011 King  Ballow INFRINGEMENT EMPLOYMENT Obstruction of exploitation not copyright infringement Copying of copyrighted materials was multi-million dollar error for infringer by Patrick Ogilvy [email protected] The United States Court of Appeals for the Sixth Circuit has found acts preventing a copyright holder from commercially exploiting a copyrighted work, such as requesting that music retailers not offer the work for sale, do not constitute copyright infringement under the United States Copyright Act. by Patricia Kryder [email protected] A record producer for an independent record company wrote the music and lyrics for a song, which he then recorded with a country music artist. The artist and producer orally agreed that both would be co-authors of the sound recording they created. After receiving positive response for When an insurance agent left his job in 1991, he took with him certain sales materials belonging to his insurance brokerage employer. There were hundreds of pages of text in two binders describing various types of insurance coverage, exclusions, conditions, and similar matter. These binders had been prepared by employees of the former employer and they were subject to the employer’s copyrights. From 1992 until 2005, the former employee and his new employer made use of these materials in preparing insurance coverage proposals for presentation to their clients. The new employer hired a temporary employee see “obstruction,” page 4 see “dollar,” page 5 Who’s the owner? PARODY On or off the shelf, parody of a Christmas elf can be fair use by Andrew Coffman [email protected] The Elf on the Shelf is a popular children’s Christmas book sold in a box set with a plush toy elf doll. Since 2005, its publisher claims to have sold more the 1.5 million copies of the book and toy. The publisher owns registered copyrights in the elf doll and an image of an elf in a red Santa-like costume sitting on a shelf. The publisher also owns registered trademarks in the word mark “The Elf on the Shelf.” Further, the publisher possesses and uses the domain name www.elfontheshelf.com. The story in The Elf on the Shelf explains how Santa keeps track of who’s naughty and nice each year and the wishes of children through a series of “scout” elves. The friendly elves are dispatched via retail and are often used as a tool by parents to keep children in line. Naughty elf parodies “big brother” aspects of spy elves The Elf Off the Shelf tells a different but related story. The elf narrator, Horace, of this book describes himself as a discount elf also charged with helping Santa decide who has been naughty or nice. Horace drinks spiked eggnog, tries to make a “move” on Barbie, watches pornography and changes children’s wish lists in order to get presents he desires. The Elf Off the Shelf is marketed as a parody for adults. The Elf on the Shelf publisher brought suit seeking a preliminary injunction against The Elf Off the Shelf to halt sales. The publisher claims The Elf Off the Shelf violated its copyright. The Elf Off the Shelf defended on grounds that it was a parody of The Elf on the Shelf and any copying was protected by a fair use defense. Parody is a legally recognized and sanctioned form of fair use of an original copyright work. A work is a parody if its aim is to comment upon or criticize a prior work by see “elf” page 2 1 DAMAGES Statutorily limited: Damages limited to "per work" infringed by Seth Wilson [email protected] The Middle District of Tennessee ruled that when it comes to statutory damages available under the U.S. Copyright Act, a single statutory award is available for all infringements related to a single copyrighted work. A music publishing company sued a number of companies which contributed to karaoke versions of songs owned by the publisher. The publisher alleged that all of the named defendants together manufactured, reproduced, distributed, advertised, promoted and offered for sale illegal and unauthorized copies of compositions in the form of karaoke recordings in various formats, both digitally as downloads and as compact discs. In its complaint, the publisher listed a number of its songs multiple times as different acts of infringement. The karaoke companies challenged the complaint on the limited basis that the publisher was seeking damages on a "per infringement" basis, and not on a "per song" basis. The defendants therefore brought a Rule 12(c) motion for judgment on the pleadings to resolve this issue. The distinction between the “per infringement” and “per song” determination was the difference between allowing statutory damages for nearly 1,400 infringements versus 448 songs. Under the United States Copyright Act, copyright own- ers who are successful in showing infringement of their work are allowed to seek damages in the amount of compensation per “work” infringed. The award of statutory damages can be significantly more than the actual damages suffered by the copyright owner, and do not require the stringent amount of proof to obtain actual damages. The level of statutory damages allowed under the Copyright Act range from a sum not less than $750 to not more than $30,000 per “work” infringed. If the copyright owner can show willful infringement, they can be entitled to damages up to $150,000 per work. If a defendant can show that they were not aware and had no reason to believe they were infringing on the copyright, statutory damages may be reduced to $200 per work. Statutory damages are only available for works that are either registered with the U.S. Copyright Office before infringement, or within three months of publication. Here the distinction of whether “work” under the Copyright Act meant a per infringement basis or a per song basis could mean the difference of more than $28.5 million in possible damages. The court found substantial caselaw to back up their proposition that the “work” in the Copyright Act meant an see “infringed,” page 4 from “elf,” page 1 appropriating elements of the original in creating a new artistic work. The court found The Elf Off the Shelf was a parody. Horace highlights the perceived absurdity of a “big brother” type of elf reporting on small children as depicted in The Elf on the Shelf. “Extremes”- By definition, going to extremes means going way out of range, or going out of bounds. The original extremes were places in the early Middle Ages. From the Latin word extremus, the extremes were areas of land set just beyond the boundary of town, designated solely for the socially outcast. As this area was situated as far from the center of town as possible, extremes became synonymous with living way out of bounds due to one’s behavior being way out of line. Parody provides a defense to copyright infringement In determining whether a parody is entitled to a fair use defense, courts look to four factors: the purpose and character of the work; the nature of the copyrighted work; the amount and substantiality of the portion used; and the effect on the market value of the original work. The fact The Elf Off the Shelf was a parody combined with its transformation of the copyrighted work by un-romanticizing the elf, its creation of a new creative work by adding to the copyrighted material, and its lack of effect on the market value of the original work allowed a finding that the work was a fair use. Based on the possibility of a finding of fair use, the court denied the publishers of The Elf on the Shelf’s request for a preliminary injunction. Reprinted with permission of Scribner, an imprint of Simon & Schuster Adult Publishing Group from I DIDN’T KNOW THAT by Karlen Evins. Visit www.karlenevins.com. Copyright © 2011 by Karlen Evins 2 COPYRIGHT Diaper dispute gets messy by Jennifer Romeo [email protected] In a copyright infringement suit involving a diaper design, the copyright owner of “diaper jeans” claimed the manufacturer of Huggies “jeans diapers,” ripped off his idea of making diapers resemble jeans. The diaper manufacturer argued they did not infringe on the diaper copyright because “the designs themselves are not substantially similar” and “the only commonality is that both designs attempt Jennifer Romeo to express the idea of a diaper that is supposed to look like jeans.” The copyright owner argued he was not trying to protect the common elements of jeans but rather the creative idea of diapers designed to resemble jeans and further argued “the ‘aesthetic appeal’ of both parties’ concepts are essentially the same.” In a similar case, the copyright owner of “toe socks” mistakenly believed she obtained an exclusive right in toe socks and later brought a copyright infringement suit against a party selling and manufacturing toe socks. In dismissing her case, the court explained “in this case we have encountered no difficulty in distinguishing between the idea and expression of the idea.” Aside from a substantial similarity argument, another possible way to succeed on a copyright claim in cases involving a design idea, such as the diaper jean design or toe sock design, the copyright owner could argue the alleged infringer produced, manufactured, sold or distributed the copyright owner’s drawings of the product. Here, the diaper copyright owner made no such claim even though he submitted a copy of diaper jeans artwork to the Huggies manufacturer. While the copyright owner of “diaper jeans” specifically complained the Huggies manufacturer “created, displayed, and distributed unauthorized reproductions of Plaintiff’s copyrighted work, as well as unauthorized derivatives of the work,” the copyright owner failed to establish copyrightable elements of his design were copied. Interestingly, the copyright owner did not raise a trade dress claim under the Lanham Act. It is well established copyright protection must be fixed in a tangible medium of expression, in no case does copyright protection extend to an idea. “Unlike a patent, a copyright gives no exclusive right to the art disclosed: protection is given only to the expression of the idea not the idea itself.” Here, not only did the copyright owner lose on his copyright infringement claim, but the court found his complaint to be “plainly objectively unreasonable” awarding the Huggies manufacturer attorney's fees and costs. Diaper jeans vs. jeans diapers Unfortunately for the copyright owner, his copyright does not confer the protection he claimed. The copyright does not give the copyright owner the right to exclude others such as Huggies from manufacturing diapers that resemble jeans. Instead, the copyright “protects the much narrower right to exclude others from producing ‘substantially similar’ versions of diaper jeans.” In comparing the colors, pattern, stitching color, pockets and the fly, the court found “not only are the diapers not substantially similar, they are substantially different.” For example, the “diaper jeans” design comes in two patterns, flat white or flat light blue, while Huggies “jeans diapers” comes in one pattern, distressed blue denim. Jennifer R. Romeo is an attorney in the Intellectual Property Section of King & Ballow. Mrs. Romeo received her law degree from Hofstra University School of Law. While in law school, she pursued a concentration in Intellectual Property Law. Mrs. Romeo received her undergraduate degree from St. John’s University, where she graduated cum laude with a bachelor’s degree in Communications and minors in Business and Music. Mrs. Romeo is a writer for King & Ballow’s Entertainment and Employment Comment newsletters. Before joining King & Ballow, she was a legal affairs intern at EMI Music and a paralegal at a boutique New York firm, specializing in commercial and transactional work. Mrs. Romeo is admitted to practice law in Tennessee. 3 from "obstruction,” page 1 blog on page entitled, “WARNING!!! Illegal music being sold on my page,” accusing the independent record company of unethical activity and asking her fans not to purchase the songs. The artist also contacted several digital music stores, including Apple’s iTunes, which were selling the two songs, and informed the companies that the independent record company did not have the rights to offer the songs for sale. Both iTunes and IODA removed the songs from their digital music stores, and IODA terminated its distribution agreement with the independent record company. Soon after, the independent record company and its producer sued the artist and Muzik Mafia for copyright infringement, among other claims. the song, the artist and the producer began working on another song, for which the producer wrote the music and both co-wrote the lyrics. The two recorded this second song, and the artist included both songs on a demo she used to shop herself to record companies as a recording artist. The artist soon signed a publishing deal with a music publishing company and a management deal with Muzik Mafia, who is well known for breaking country artists such as Gretchen Wilson and Big & Rich. Under the publishing deal, the artist assigned her copyright ownership in the songs to the publishing company. After the artist signed with Muzik Mafia, the independent record company entered into several deals to commercially distribute the recordings of the two songs, including deals with retailer CD Baby’s online store and several digital music distribution stores. The independent record company also featured the songs on its MySpace page and its own website. Muzik Mafia sought to prevent this exploitation of the songs by sending a cease-and-desist letter to the independent record company and an email to members of the music industry entitled “Illegal Activity,” accusing the independent record company of illegally selling the artist’s music. An agent of Muzik Mafia also contacted CD Baby, demanding the removal of the artist’s works from its website. Though CD Baby followed up with the independent record company and ultimately determined to continue selling the songs, CD Baby had made the songs unavailable for purchase for a period of time while it was investigating the dispute. About a year later, the independent record company began using a company called IODA for the digital distribution of the two songs. Using this company allowed the independent record company to place a digital store on the artist’s MySpace page. In response, the artist posted a No basis for infringement The independent record company alleged that Muzik Mafia and the artist infringed its copyrights in the two songs by taking steps to prevent the commercial exploitation of those songs, including the email, cease-and-desist letter, and contact with CD Baby, IODA, and iTunes. The court rejected this attempt to “grossly expand” claims for copyright infringement, finding attempts to create barriers to a copyright holder’s ability to fully exploit copyrights simply did not fall within the gambit of the Copyright Act. Instead, infringement lies only where there is improper copyright or use of a work without permission of the author. Neither of these situations was present here. In fact, the independent record company specifically conceded neither the artist nor Muzik Mafia had engaged in unauthorized copying, but rather had prevented the independent record company from so copying. Therefore, the court found the artist and Muzik Mafia did not infringe the independent record company’s copyrights in the two songs. from “infringed,” page 2 individual song, not an individual act of infringement. The court also found that statutory damages should be limited to one award per infringed work whether the judge or jury eventually determined there to be joint and several or individual liability with respect to a given work. This means that if it is determined that the defendants in this action acted together when infringing a particular work into a karaoke version of the song, the statutory damages is limited to one award per each song for all of the defendants. In the alternative, if it is determined that a defendant was acting in their individual capacities, and not together with other defendants, when infringing a particular work, then the publisher could obtain one statutory damage award from each individual defendant per each song infringed. Feedback If you have any questions on the cases or regulations mentioned in the articles, please feel free to contact the editor, Thomas Motzny, at [email protected]. 4 from "dollar,” page 1 to type the contents of the two huge binders into a word processing program so that the text could be electronically referenced and easily copied into new documents. The language in the two binders was used in more than 800 sales proposals prepared for more than 300 clients over the course of thirteen years. When the former employer found out about the use of these materials in 2005, a lawsuit was filed under the U.S. Copyright Act. Although the Copyright Act has a three year statute of limitations, the District Court for Eastern Pennsylvania ruled that the statute of limitations was tolled until the employer learned of the copyright infringement or with reasonable diligence could have learned of the infringement. The Copyright Act permits the recovery in an infringement action of either statutory damages, or actual damages and any additional profits of the infringer. The company asserted their rights to the profits of the infringer that were attributable to the infringement, which required proof of the gross revenues over the course of the relevant time period, and then to establish the connection between the infringement, and the profits sought. The company proved gross commissions of about $32 million, and a jury found the necessary causation, and awarded more than $19 million in damages. In addition, the jury found that the company could not have discovered the infringement before 2002. The district court judge set aside the jury’s verdict and held a second trial limited to damages that had arisen within three years of the commencement of the action. The second jury entered a verdict in excess of $1.5 million. Both parties appealed to the Third Circuit, which concluded that the company could not have discovered the infringement before 2002. The Third Circuit remanded the case to the district court, which reinstated the jury verdict for more than $19 million in damages. The infringers appealed again to the Third Circuit arguing that the jury’s verdicts shocked the judicial conscience and the prejudgment interest was improper. The Third Circuit held that the accrual of the cause of action occurred at the moment at which each of its component elements came into being, and that the federal discovery rule then operated to toll the running of the limitations period. Prejudgment interest, however, could be awarded from the initial accrual date. Applying this holding to the facts, the Third Circuit concluded that the copyright infringement claim accrued in 1992, when the first infringement took place. The limitations period was then tolled until the company discovered the infringement in 2004. Therefore, the district court’s assessment of prejudgment interest beginning in 1992 was within its discretion and was upheld by the Third Circuit. Entertainment Comment is published monthly by the law firm of King & Ballow, Nashville, Tennessee, and San Diego, California. The materials contained herein have been abridged from laws, court decisions and administrative rulings and should not be construed as legal advice on specific subjects. Additions and/or deletions to King & Ballow’s e-mailing list should be e-mailed to [email protected]. Professional educational courses for CLE credit are also available online at www.kingballowlearning.com. 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