Source: https://www.lacba.org/sections/entertainment-and-intellectual-property-law/elips-section-newsletters/february-2012
Timestamp: 2019-04-22 13:58:37+00:00

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We are thrilled to present this inaugural issue of the Entertainment Law and Intellectual Property Section Entertainment Law Journal. The ELIPS section serves the Entertainment and IP law community. We wanted to provide a forum where issues of import to the ELIPS community could be raised and discussed. I would like to thank our editor, ELIPS executive committee member Jeffrey Mandell, of Mandell Mediation. Through his guidance and leadership the section has been able to provide useful information to our members. The Journal will feature practice profiles of leaders in our field, topical legal issues and case updates. The ELIPS Entertainment Law Journal also encourages submissions from our members. If you are interested in submitting an article of 750 – 1,000 words in length, please contact Jeff Mandell at jeff@MandellADR.com.
The ELIPS Entertainment Law Journal is part of our on-going effort to provide increasingly useful tools for our section.
We look forward to hearing from you and providing future editions of the Journal.
Welcome to the first edition of our new Journal. Our intent is to publish timely, original articles and features, written by and for busy lawyers who work at law firms, practice in-house, teach or who are otherwise professionally involved with entertainment, copyright, trademark and other sectors of IP (EIP).
Dominique Shelton, our Section Chair, provides a full briefing of the recent Montz decision. The case is seen by some as opening the door to bringing idea submission in state court, as breach of express or implied contract actions, rather than copyright enforcement cases subject to federal preemption.
Our Section invites all litigators and in-house counsel to vote in our new, Online Survey: How are you changing your approach or strategy, to deal with sustained pressure from both federal and superior courts to settle cases before they go to trial? What are other litigators doing? What do you think of about mediation and mediators? The survey is anonymous, and every participant in the 5-10 minute multiple choice Survey can sign up to receive a summary of the Survey's findings.
Alan Fried and Jesse Brody present 10 practice tips, for counseling advertising, new media and Internet sellers in the Digital Era.
Professor Jay Dougherty, of Loyola Law School, gives us an in depth look at the strategies used in the Supreme Court oral arguments in the Golan case, involving international copyright restoration. The article includes commentary on the Court's decision, announced last week.
Vivian Lee interviews and profiles Frederic Goldstein, General Counsel at the Los Angeles County Museum of Art. Fred discusses IP and other issues, facing one of the most important museums in America.
Invitation To Write For Us!
We're planning a number of additional features as we go forward, and to provide coverage for dealmakers and IP lawyers involved in issues beyond copyright. We invite you to write for us and get published.
We're looking for articles and features, from 750-1,500 words, on any EIP topic likely interest a segment, or all of our readers. The focus for all articles should be useful information for our Section members. Articles over 1,000 words will be an exception, so please aim for that as the upper limit, unless we agree otherwise. Entertainment law and practice articles are likely to get published very quickly. Authors retain the copyright to their articles, but they grant the Journal a 30-day exclusive license (commencing on the date the Journal issue is sent to all Section members.
Interested? I hope so. Please send me a one-paragraph description of what you would like to write for us. I'll let you know if it's right for us, or if another article already in the pipeline covers the same ground. If you wish, I will help you re-work your idea into something that we will publish. In any event, please include the words "Journal Idea" in the subject line of your email.
We look forward to hearing from you, and to publishing your work in the Entertainment and Intellectual Property Law Journal.
Montz – Breaking New Ground for Idea Submission Law after the U.S. Supreme Court Denies Cert.
Ideas are the back bone of the entertainment industry. Every day, thousands of ideas are submitted for movies, films, software, and technology. In order to engage with consumers, many studios and companies run digital/online promotions whereby users are encouraged to upload videos and writings containing ideas for new shows. As such, with the advent of new media and digital technologies, ideas are increasingly being submitted online or through mobile devices by third parties – unaffiliated with the studios who eventually will transform the ideas into copyrighted creative works.
When a particular idea becomes commercially successful, it is not uncommon for plaintiffs to file lawsuits for "idea theft." Until last fall, plaintiffs in California typically sought relief under state law (e.g., breach of express or implied contract) and the federal Copyright Act. When companies had not promised to pay for the use of a plaintiff's idea, they often successfully dismissed idea theft claims using a two pronged approach. First, companies argued that the state law claims were preempted by the Copyright Act. Second, entertainment studios often argued that idea theft claims are not sustainable under the Copyright Act because ideas are in the public domain and not subject to copyright projection. Plaintiffs on the other hand, successfully opposed motions to dismiss by arguing that their state law claims contained an "extra element"- beyond the protections provided by the Copyright Act. In Desny v. Wilder 46 Cal. 2d 715 (Cal. 1956), and Grosso v. Miramax Film Corp 383 F. 3d 965 (9th Cir. 2004) for example, the California Supreme Court and the Ninth Circuit respectively held that implied contract state law claims were not preempted where the plaintiffs alleged that the defendants promised to pay for the use of their ideas.
The Montz v. Pilgrim Films & Television Inc., No. 08-56954 2011 WL 1663119 (9th Cir. May 4, 2011) decision, the Supreme Court's subsequent November 7, 2011 decision to deny certiorari, a complaint recently filed in Los Angeles Superior Court and a decision currently pending before the Second Circuit are already changing the landscape for potential exposure to studios for idea theft claims where they have not expressly promised to pay for using the plaintiffs' ideas. At issue is whether plaintiffs may pursue state law claims for idea theft where the Copyright Act would provide no protection.
On May 4, 2011, the Ninth Circuit, sitting en banc, ruled that an idea theft claim could proceed against Pilgrim Films & Television and NBC Universal under state law theories of breach of implied contract not to exploit an idea and breach of confidence. The Montz case involves a claim where the plaintiff (Montz) pitched an idea for a television series that would follow paranormal investigators conducting field investigations. He contends that the television series Ghost Hunters is based upon ideas he shared with the defendant studios via written treatments, videos and other materials. The parties agree that Montz's ideas were in tangible form (e.g., screen play, video and other pitch materials) that come within the subject matter of the Copyright Act. The studios argue this means the ideas are not protectable. Montz maintains the opposite.
"Montz does not allege that he sold the ideas embodied in his Ghost Hunters materials to Pilgrim and that Pilgrim simply failed to make good on its promise to pay. Instead, he alleges that Pilgrim used the ideas embodied in Montz's copyrighted material without his permission. Because the Copyright Act protects such equivalent rights, I respectfully dissent."
In their cert petition, the studios also argued that the Montz decision directly conflicts with Second and Fourth Circuit decisions that have held that implied promises to pay for use of entertainment ideas may not proceed under state law theories as they are preempted by Section 301 of the Copyright Act which provides for full preemption.
Under such a legal regime, film production and network companies face the chaotic prospect of having to meet conflicting federal and state standards on essentially the same question, a result the Copyright Act aimed to avoid. Studio and network ventures need stable law that does not unsettle expectations.
Although not mentioned in the Reply additional issues are raised for companies with national or multi-national operations in this digital age. What law will apply where a pitch meeting is taken in New York, and follow up (solicited) pitch materials are sent via email and the servers are located in Los Angeles. What if a pitch meeting takes place in New York, and the solicited pitch materials are sent via private communication via a social network such as Facebook or Twitter? What if the studio sponsors an online or mobile promotion where users are encouraged to upload their ideas to the studio's website…will "industry custom and practice" apply to require payment by the studios for those solicited ideas? Whether the plaintiff will be permitted to pursue an implied-in-fact state law claim could be determined on the basis of what geographic location is used to originate or send the digital data. Myriad other practical considerations are at play that may only be elucidated through future litigation. On October 19, 2011, the United States Supreme Court advised that the certiorari petition Conference had been scheduled for Friday November 4, 2011. On November 7, 2011, the Supreme Court denied certiorari. Since then new cases have been filed highlighting the potential application of Montz to online contests for idea submission, and a potential deepening split between copyright preemption analysis in the Ninth and Second Circuits.
While the "Weed Wars" case is pending, studios can anticipate additional lawsuits to be filed in 2012 directly in California state court under implied-in-fact theories, with no allegations of copyright infringement, whatsoever. After Montz, the question will be whether removal is possible in the first instance as a response (if no diversity exists) on copyright preemption grounds. It may be unlikely. However, this begs the question: Did the Ninth Circuit really mean to open the door to breach of implied contract claims for contest entrants in the myriad digital promotions that currently call for users to engage by submitting their ideas online or through social networks like Facebook and Twitter? Krabbe and other cases like it may shed light on the application of Montz to digital platforms.
Second, Muller's claim that copying can be inferred from an alleged "striking similarity" between the two works was ill-conceived from the outset... As a matter of law, there is no striking similarity between the Film and the Screenplay.
Third, to the extent there are similarities between the Film and the Screenplay, they are unprotectable.... The unprotectable nature of the alleged similarities remains unchanged, and Muller's effort to assert the reasonableness of his claims fails.
Muller v. Twentieth Century Fox Film Corp., 2011 U.S. Dist. LEXIS 98248, 6-8 (S.D.N.Y. Aug. 22, 2011)(awarding $432,077.45 fees to the defendants).
Also, although not on review by the Second Circuit, the Southern District of New York's opinion in Forest Park Pictures et al. v. Universal TV Network, 2011 U.S. Dist. LEXIS 50081 (S.D.N.Y., May 10, 2011) is noteworthy. The plaintiffs were comprised of a Los Angeles based production company and individuals affiliated with same. They claimed that they developed materials for a television show regarding a "concierge" doctor. The plaintiffs pitched their ideas to the USA Network, which is domiciled in New York. USA declined to develop the plaintiffs' proposal, but later made "Royal Pains," which also has a "concierge" doctor as the protagonist. Plaintiffs argued that California law should apply to the question of whether the plaintiffs' claims were preempted by the Copyright Act. The Southern District of New York disagreed. It held that preemption is a "federal question," so the court is obligated to apply the law of the Circuit where it sits – i.e., the Second Circuit. Relying upon Muller and other district court decisions in the Second Circuit, the Forest Park court held that the plaintiffs' complaint to receive compensation for the use of their ideas is equivalent to the Copyright Act, therefore the state law claims were preempted.
As set forth above, the United States Supreme Court's decision to deny certiorari in Montz, is arguably already having reverberations in the creative and business entertainment communities. Even though most companies do not take unsolicited pitches for fear of litigation, the practical effect of the perceived circuit split is that some companies may be even more reserved about the solicited pitches that are entertained. Also, for online/digital promotions soliciting user ideas, companies have begun including language in their rule terms to make clear that industry custom and practice will not transform the parties' intention that the studios will not pay for ideas in the public domain. Undoubtedly additional efforts will be taken to further document the intention of studios and technology companies not to pay for exploiting ideas shared in pitch meetings that would not be covered by the Copyright Act. Whether these efforts will be sufficient to prevent subsequent state law claims will be the subject undoubtedly of future litigation.
Litigation and transactional practitioners advising companies on copyright and idea theft issues should pay close attention to Muller, Krabbe, and other idea theft claims filed this year in the aftermath of Montz. These subsequent decisions could very well determine whether and under what circumstances new ideas will be considered for development into copyrighted works - nationwide.
*Dominique Shelton is a partner in the Intellectual Property department of Edwards Wildman. Ms. Shelton also chairs the Entertainment & IP Law Section of the Los Angeles County Bar.
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On Jan. 18, 2012, the Supreme Court issued is much anticipated judgment in a case challenging the Constitutionality of 17 U.S.C. §104A, which "restored" copyright to millions of foreign works and granted federal copyright to pre-1972 foreign sound recordings. As the Court previously did in Eldred v. Ashcroft, upholding the Constitutionality of the 1998 Copyright Term Extension Act that extended all existing copyrights for 20 years, it exhibited great deference to legislative decisions as to the extent of copyright, notwithstanding the Constitutional language that appears to limit legislative power to grant copyrights in order to "promote the progress" of knowledge and only "for limited times". The plaintiffs, orchestra leaders and others who had relied on the public domain status of various foreign works, argued that, unlike the CTEA, the restoration statute removed works from the "public domain". The Court rejected their arguments. According to the majority, Congress can accord copyright protection in circumstances that do not elicit the production of new works of authorship—it is the system of protection generally that must promote progress. The government argued here that it benefits U.S. authors for the U.S. to more rigorously comply with its copyright treaty obligations, even if the new law did not elicit creation of new works (or accord any protection to U.S. works). Because the restored foreign copyrights would not last any longer than they would have had they not entered the public domain in the first place, the statue did not violate the Constitutional "limited times" restriction any more than the CTEA did. Perhaps more significantly, the Court "clarified" the class of copyright legislation that would "alter the traditional contours of copyright" and thus be subject to First Amendment scrutiny. Clearly, copyright laws "abridge speech," in a sense. In Eldred, the Court had rejected a First Amendment challenge except in cases where legislation "alters the traditional contours" of copyright. This was because copyright law contains its own "internal" protections of free speech interests, namely the exclusion of copyright protection for "ideas" and the "fair use" defense that permits the use of another's copyrighted expression in some situations, e.g. for purposes of commentary or parody. A panel of the 10th Circuit Court of Appeals earlier in the development of this case had interpreted the USSC's language such that a law that removed works from the public domain would also "alter the traditional contours of copyright". After all, the traditional "contour" of copyright protection is that works receive protection until they enter the public domain, but can thereafter be freely used by anyone. In the new decision, the Court "clarified" that only legislation that impacted the denial of copyright for ideas or limited fair use would "alter traditional contours" and require stricter First Amendment scrutiny.
Justices Breyer and Aliton dissented. Essentially, they argued that copyright laws must, and historically have, only been justified by a utilitarian rationale—that they elicit creation of new works for the ultimate benefit of society. Removing existing works from the public domain does not elicit any new creation, and also impacts free speech interests of the public. Hence, they argued, such a law should be scrutinized to see that it served some important copyright-related purpose. Even if solidifying the U.S. position in the international copyright system is important, the treaties actually permit less restrictive alternatives than the approach chosen by the legislature. Encouraging dissemination of works (rather than creation of new works), which the majority argued would promote knowledge, could be argued to authorize Congress to remove the Bible from the public domain, according to the dissenters. They concluded that the restoration statute exceeded Congress' power under the Constitution.
See below for a longer commentary regarding the history of the case and the oral argument before the Supreme Court last Fall.
Recent extensions of copyright have generated much controversy. Some of these controversies have led to important judicial decisions (up to the Supreme Court level) concerning Congress' power to legislate in the copyright arena and the interplay between copyright laws and freedom of speech and expression. Most challenges have failed, with the courts signaling a judicial deference to Congress. In the most recent battle, Golan v. Holder, plaintiffs who have relied on the public domain status of certain foreign works challenged a law that restored copyright to those works. Assertions that the restoration exceeded Congressional power were fairly routinely rejected at the lower court levels after the U.S.S.C.'s decision in Eldred v. Ashcroft, 537 U.S. 186 (2003) (affirming the 1998 Term Extension Act), but a claim that restoration violated the First Amendment seemed to have some traction. The Supreme Court accepted cert in Golan, and recently heard oral argument. In Eldred, the Court had said that a law that altered the "traditional contours" of copyright law would be subject to First Amendment scrutiny, and one 10th Circuit panel in Golan had held that the restoration statute would be subject to such scrutiny. The district court on remand held that the restoration statute failed First Amendment scrutiny, but that decision was reversed by another 10th Circuit panel. One might have expected the oral argument to focus on related unsettled issues, such as the level of scrutiny and requirements for its satisfaction, which would have added clarity and certainty in future disputes regarding the relationship between copyright laws and the First Amendment. Unfortunately, in this author's view, the plaintiffs spent most of the oral argument beating the dead horse of Congress' copyright legislative power and missed an opportunity to persuade the Court on appropriate First Amendment scrutiny. That might have led the Court to find that the restoration statute did not satisfy scrutiny, for example, and that there should have been more protection for "reliance parties" who had developed businesses utilizing public domain foreign works. It is of course still possible that the Court in its decision will address those issues. The decision, which will determine the U.S. copyright status of thousands of foreign works, will presumably be issued sometime in 2012. Below is a more detailed review of the case and the U.S.S.C. oral argument.
On October 5, 2011, the U.S. Supreme Court heard oral arguments in the most recent case challenging the constitutionality of a provision of the Copyright Act added in 1994 by the Uruguay Rounds Agreement Act ("URAA") that "restored" copyright to certain foreign works that had lost their U.S. copyright through a failure to comply with formalities. That section, §104A, also granted federal copyright to certain foreign sound recordings first fixed before Feb. 15, 1972, and provided for copyright in certain foreign works whose origin is a foreign country whose works are not subject to U.S. copyright, when the U.S. enters into copyright relations with that country.
Members of the Berne Convention are required under Article 18 to protect works of other countries when they become Berne members. New members are supposed to extend that protection to works that existed prior to the treaty relationship, as long as the works' terms would not have expired under the new member's law and the works' terms have not expired in their source country. The U.S. failed to do anything about this when it adhered to the Berne Convention in 1989, but as it saw that some foreign countries were refusing to grant retroactive protection to U.S. works and pushed to bring copyright into the larger world trade system and its enforcement mechanisms through the TRIPs agreement, Congress finally acted to comply with its own international obligations in part by enacting the restoration statute.
Members have flexibility in determining the conditions under which they will accord such retroactive protection. An important issue in according copyright to works previously unprotected is how to balance the interests of the "new" copyright owner with existing interest of persons who have relied on the prior "public domain" status of the works prior to that time. In fact various countries strike that balance in a variety of ways. The U.S. statute gives "reliance parties" a year to sell-off inventory after they receive notice (or a type of constructive notice) of the restored copyright, and, if the reliance party had created a derivative work prior to the enactment of the URAA (or prior to a country entering into treaty relations with the U.S.), that reliance party may continue to exploit the derivative work thereafter, subject to paying "reasonable compensation."
This statute has been disputed by a group of orchestra conductors, educators, performers, film archivists and motion picture distributors, who relied for years on the free availability of these works in the public domain, which they performed, adapted, restored and distributed without restriction, for many years. Their challenge to the restoration statute is perhaps one aspect of the larger attack against a variety of extensions of copyright protection, one prior part of which resulted in the Supreme Court's decision in Eldred v. Ashcroft, which upheld the constitutionality of the Copyright Term Extension Act. Many similar arguments have been made in the Golan case. To oversimplify somewhat, one challenge is that Congress does not have the power under the Constitution's "copyright clause" to take works out of the "public domain" (or, in the Eldred case, to keep them from entering the public domain when they previously would have), because it violates the "limited times" restriction on Congressional copyright power and does not "promote the progress" of knowledge. Another is that removing works from the "public domain" violates the First Amendment's freedom of speech clause.
There has been a long chain of decisions leading to the Golan case in the U.S.S.C. (this is the third Attorney General to be the named defendant). In the first decision, the District Court of Colorado in 2004 rejected both of the plaintiffs' arguments, finding that the Copyright Clause does not categorically preclude Congress from removing material from the public domain and there is a rational basis for doing so—attempting to promote possible U.S. authors' interests abroad by protecting foreign authors here and complying with the Berne Convention. It also found that there were no First Amendment concerns implicated. The 10th Circuit heard the appeal, and affirmed that the restoration statute did not exceed Congressional power, but that "restoring" works to copyright from the public domain altered the "traditional contours of copyright", and therefore, according to the U.S.S.C.'s Eldred decision, should be subjected to First Amendment scrutiny. On remand, the District of Colorado considered whether the statute was "content neutral" or "content based" and the appropriate level of scrutiny. It decided that the law was a content neutral regulation of speech, subject to "intermediate scrutiny". That requires that it advances an important governmental interest unrelated to the suppression of speech, and that it doesn't burden substantially more speech than necessary to further that interest. The government had asserted three important interests furthered by the restoration statute: (1) compliance with Berne, (2) protecting U.S. authors abroad, and (3) correcting "historical inequities" in the treatment of foreign authors who have lost copyrights through failure to comply with U.S. formalities. The district court this time around found that complying with Berne is an important government interest, but that the second asserted interest is merely tied to the first (and that there was little support that U.S. granting foreign works stronger protection here would actually benefit U.S. authors abroad) and that there is no important U.S. government interest in protecting foreign authors. As to the First Amendment, the district court this time found that there is an important First Amendment interest in public domain works' use, and that the statute burdened more of that "speech" than necessary to achieve Congress' goal of compliance with Berne.
On appeal, a different 10th Circuit judge reversed. This time it focused on the asserted interest of "protecting American copyright holders' interests abroad", which it found to be substantial. It reasoned that granting stronger protection to foreign authors here (and correspondingly less protection to reliance parties) would further that interest, because the assertion is that foreign countries will reciprocate as to U.S. works restored to copyright abroad. Since that furthers the asserted interest, the statute is not overbroad.
The U.S.S.C. accepted cert on both issues: 1. Does the Progress Clause of the United States Constitution prohibit Congress from taking works out of the Public Domain? 2. Does Section 514 violate the First Amendment of the United States Constitution?
At oral argument, Tony Falzone on behalf of the plaintiffs initially focused on the broader question of whether the Constitutional copyright clause empowers Congress to remove works from the public domain at all. Justice Ginsburg immediately engaged in questioning him on this assertion, asserting that a foreign composer should be able to receive the same term of protection as a domestic one without violating the "limited times" restriction, and Falzone arguing that a term of "zero" is a "limited time" and that once it is set, it cannot Constitutionally be revised. Twenty-three pages of Falzone's twenty-seven pages of oral argument transcript reflect argument over this aspect of the case, largely with Justice Ginsburg. Justice Sotomayer challenged the plaintiffs' position that Congress has never removed material from the public domain, noting that the first U.S. federal copyright law did that. Justice Kennedy initiated a discussion about the extent of the plaintiffs' claims as to the inviolate nature of the public domain (he seemed to forget the name of the Court's Eldred decision). Justice Roberts inquired as to how the plaintiffs' argument could apply when Congress elects to protect previously unprotected categories of material, such as it did with "architectural works". Falzone seemed to assert that to the extent applied to existing works, such protection would not be Constitutional because it would not satisfy the "promote the progress of science" limitation. Justices Sotomayer and Roberts engaged in questioning this proposition, seeming to argue that the restoration would give incentives to foreign authors, satisfying at least the minimal "incentive" effect apparently required. For a moment, the discussion seemed to shift to the First Amendment arguments, but quickly returned to the question of whether the statute provided "incentives" and therefore satisfied the "promote progress" requirement, which Justice Breyer seems to doubt (as he argued in his dissent in Eldred as to prior existing works). To this author, the plaintiffs failed to reach their much more supportable argument, that the restoration statute fails to satisfy First Amendment scrutiny.
In its argument, the government initiated discussion about whether the prior law had set the term for foreign works at "zero". Justice Alito immediately asked whether Congress could grant copyright to works whose term had expired (an issue not required to be addressed in Eldred). Donald Verrilli, the Solicitor General, seemed to argue that it could, but that there were "limits," such as that only "authors" can be accorded protection, which led to problems for him, as the Justice Alito pointed out that the restoration statute can give copyright to works when the author is long dead. Verrilli then argued trade policy: that Congress was motivated by a desire to commit to international standards under Berne, and protect U.S. copyright owners against infringement abroad. Justice Scalia said he did not find that an "appealing argument"—a treaty cannot expand the Constitutional powers granted Congress. Justice Breyer (who dissented in Eldred and in the past has argued for minimal copyright protections) engaged Verrilli in an argument as to whether Congress could give copyright protection where it would not elicit production of works, saying that here, "there is no benefit given to anything at all that is not already created." Justice Roberts then shifted to the First Amendment issues, stating "there is something at least at an intuitive level appealing about Mr. Falzone's First Amendment argument" (presumably the ones in the Briefs, since oral argument had essentially not reached that discussion). Verrilli argued that the government had removed material from the public domain in the past by adding new subject matter to copyright protection, and if that triggers First Amendment scrutiny, then any exercise of copyright power would do so. He argued that the only laws that would "alter the traditional contours of copyright," which the Court in Eldred had said would trigger scrutiny, would be a law extinguishing fair use or providing exclusive rights in ideas. Justice Kennedy took issue with that proposition, attempting to refocus the discussion on the level of scrutiny. Verrilli claimed that the law would satisfy "intermediate scrutiny" (which the lower courts had found to be the appropriate level of scrutiny), but again asserted that intermediate scrutiny should not apply, unless a law "alters the traditional contours of copyright," which in his view would be limited to the extreme cases described previously. Justice Roberts then questioned whether this law would satisfy even "rational basis" scrutiny, where the government interest is "vanishingly small" and the law limits free speech rights. Justice Breyer mentioned that millions of works could be affected and use prohibited, but Justice Ginsburg jumped into the discussion to point out that only works as to which notice of intent to enforce is given. Verrilli then diverted the discussion back to the historical question as to whether Congress can ever restore copyright to works in the public domain, arguing that history shows that it can and has—a claim that the Court seemed to favor during the plaintiffs' argument. Justice Alito asked if that only showed that Congress could do so "when there is an enormous interest…the establishment of the uniform copyright system at the beginning of the country." The Court then allowed General Verrilli to speak uninterrupted for the remaining four pages of his argument about other examples purporting to support the claim that the Court should defer to the legislature, including its judgment in how to "make a transition into full participation in an international system."
In his rebuttal argument, Mr. Falzone said he had four points to make, including that granting copyright where Congress has previously "set the term at zero" violations the "limited times" restriction, and that the statute cannot "promote progress". Justice Ginsburg again challenged him on these points. Finally, Falzone attempted to make his First Amendment argument, stating that the burden imposed is "remarkable." Justice Ginsburg asserted that all of that "rides on accepting your argument that zero is a limited time." Falzone claimed that the First Amendment argument is independent of the "zero term" claim, arguing with Justice Ginsburg as to whether or not the statute was required by Berne or TRIPs. He concluded with a statement that seems to attempt to draw upon some Justices' reluctance to allow U.S. rights to be limited because of foreign law, saying "If the government can get around First Amendment limits by signing a treaty…then the First Amendment is defined only by the perceptions, the complaints and frankly the imagination of foreign countries. That can't be the way it works."
It was disappointing to see that most of the oral argument focused on an issue seemingly resolved by the Court in the Eldred decision (although admittedly the restoration statute goes beyond the CTEA in granting copyright to works in which there was no protection in the U.S. prior to the statute). This strikes me as an argument the plaintiffs will lose, assuming the Court persists in its deference to Congress where there is some minimal "rational basis" for a statute. The last three lower court decisions had focused almost exclusively on the First Amendment problems with the statute, and one would have expected the plaintiffs to energetically argued that the asserted interest—that foreign countries might someday give more protection to U.S. authors if the U.S. gives their authors strong protection here—is far too remote to justify depriving reliance parties of their First Amendment rights to use public domain speech. Instead, the argument seemed to be cabined almost entirely to a broad claim that Congress can never grant copyright to works not previously protected, which strikes this author as more than was necessary to win this case, and not likely to be endorsed by the Court. It will be exciting to see the outcome, and, in particular whether the Court endorses the government's claim for an extremely narrow articulation of what type of law would "alter the traditional contours of copyright protection." If the Court does not accept that characterization, one hopes for some explanation of the relevant level of First Amendment scrutiny should apply, how strong the evidence supporting the purported government interest must be, and how narrowly a law must be tailored when works are "removed" from the public domain. And perhaps we will receive some clarification of the relative importance of trade policy concerns in determining domestic intellectual property rights. If one had to guess based on the oral argument, it seems possible that Justice Breyer would want to reverse, based on the lack of incentives to create, that Justice Scalia might be moved to reverse based on his position that an international treaty does not justify limiting U.S. rights, Justice Roberts focusing on the possible overbreadth of the statute and Justice Alito finding that Congress alters the traditional contours of copyright when it removes material from the public domain and possibly applying a more demanding First Amendment scrutiny when that occurs. Of course, ultimately, the Court remains inscrutable on these points and we will await the final judgment.
The Content: The content of a sales promotion needs to be cleared with respect to intellectual property and other rights arising out of the materials used, as well as with regard to the substance of the claims being made.
The Claims: An advertising message is deceptive if it contains a statement or omits material information that is likely to mislead a reasonable consumer and is material or important to a consumer's decision to buy or use the product or service. A statement may also be deceptive if the advertiser does not have a reasonable basis to support its claim.
There is no word that is more important in advertising lexicon than the word "free". Advertisers who claim something is "free" must ensure they can support the claim with evidence that product cost is not otherwise being covered in charges assessed to consumers.
The Channel & Industry: A marketer must consider what channels will be used to transmit the message to the consumer and the industry in which the marketer conducts its business. Which governing laws apply and which enforcement bodies control depend upon the channels used to market the message. Also, there are a myriad of additional requirements applicable to specific regulated industries such as food, alcoholic beverages, drugs, tobacco, telecommunications, financial services and products, gambling, automobiles, gasoline and health care.
Sweepstakes, Contests & Prize Promotions: The first step is to structure your promotion to ensure it is not an illegal lottery. It is not uncommon for people to use the terms "sweepstakes" and "contests" interchangeably without realizing that distinct legal differences exist between them. Next, ensure that there are official rules made available for the promotion and you include mandatory material disclosures on all advertising of the promotion (including on the entry form). Also, make sure you don't need to register and/or bond your promotion, which is required in certain states. Finally, obtain a release from winners.
E-mail & Mobile: CAN-SPAM governs the sending of commercial e-mails, which requires, in part, that the e-mail identifies the sender, the subject line accurately reflects the contents of the message, the sender provides the recipient the ability to opt-out of receiving future commercial e-mails from the sender, and that the sender maintains and scrubs against a "suppression list" of prior opt-outs. CAN SPAM violations have resulted in expensive settlements with the FTC and consumers can bring e-mail marketing claims if deception is alleged. The TCPA, telecom carrier rules and the Mobile Marketing Association Guidelines govern the sending of text messages and e-mails to mobile domain addresses. Companies must satisfy notice and express advance consent requirements before sending a commercial text message. TCPA violations have spawned many class actions lawsuits resulting in tens of millions of dollars in settlements paid by advertisers that failed to fully comply.
Product Endorsements & Testimonials: Companies that are involved in encouraging a message about their products/services in traditional and non-traditional media (e.g., Twitter, blogs, etc.), even if the speaker is a consumer or a celebrity, the company will be responsible for the message and for taking reasonable efforts to ensure that those it activates to spread the word about the company disclose any material connections to the advertiser, such as employment, payment or being the recipient of samples or other things of value.
User-Generated Content: Beware that having consumers submit videos to your website may violate the rights of others or include negative content about the sponsor's brand, product or service. To the extent UGC will be published on the company's web site, it may be possible to take advantage of certain protections afforded web operators under two federal laws, the CDA and DMCA, from some but not all types of content-related infringement and tort claims. Each law has its own set of requirements to qualify for the protection. A company runs the risk of losing protection under these laws depending upon the degree of involvement they have with the UGC. Also, many countries outside of the U.S. have not enacted similar safe harbors for web sites and internet service providers.
IT & Data: Technology has enabled advertisers to track consumers with precision and more effectively communicate with and service them as a result. However, the issues of notice, consent and choice, protection from intrusion into sensitive areas, and the need to secure data to prevent identity theft and other potential harms have become the focus of the press, regulators and elected officials. As a result, consumer data privacy and security has become the consumer class action issue of the moment, sucking hundreds of advertisers into expensive lawsuits. A variety of laws and self-regulatory schemes already address consumer data privacy and security and a number of additional measures are working their way through state and federal legislatures. Companies need to understand their consumer data practices, reflect them in understandable policies that are effectively communicated to the public, give consumers meaningful choice and protect the security of the data. In the age of outsourcing, companies need to ensure that their vendors and contractors are complying with the companies' policies, providing adequate safeguards, defending and indemnifying the company and maintaining adequate and appropriate insurance.
The last decade has seen technology change the ways entertainment and media companies can interact with consumers in ways hardly imagined. The results can be beneficial to both the company and consumers, but consumers also face real risks and burdens as a result. Companies need to weigh the benefits and risks of proposed advertising and sales schemes and campaigns and be aware of the changing regulatory landscape that is evolving as technology advances. Further, the most important asset a brand has is its consumer goodwill. New marketing and sales approaches that consumers appreciate build goodwill, but those that are perceived as misleading, unfair or too intrusive can harm the brand.
Alan Friel is a partner, and Jesse Brody is Counsel, at the international law firm of Edwards Wildman Palmer LLP, in its Los Angeles office. They may be reached at AFriel@EdwardsWildman.com and JBrody@EdwardsWildman.com respectively.
Fredric Goldstein currently serves as the Vice President of Administration, General Counsel, and Secretary of the Los Angeles County Museum of Art (LACMA). For more information about LACMA's visiting hours, current exhibitions, and permanent collection, please visit www.LACMA.org.
Q: Can you tell us about your educational background and career path?
A: I graduated from the University of Michigan with a degree in Comparative Literature, and earned my law degree from Yale Law School. I began my career at Wachtell, Lipton, Rosen & Katz's New York office as a corporate and securities lawyer. Over the span of a decade, I honed my drafting and negotiation skills working on a variety of financial transactions, including leveraged buyouts, financings, and workouts, and further advising for-profit corporations on governance issues and fiduciary responsibilities.
After becoming and working as a partner at Wachtell for a few years, I wanted to switch gears and rebalance my life. As a result, I seized an opportunity to move in-house and serve as the Senior Vice President and General Counsel of Phoenix House Foundation. Phoenix House is a non-profit provider of substance abuse treatment and education, which, at the time, had programs in ten states and an operating budget of approximately $100 million.
Q: What was the most significant change you experienced from moving from a private sector transactional position to an in-house position?
A: As a transactional attorney, I was hired to work on deals with a specific skill set and knowledge base. As general counsel, I became more of a generalist dabbling in everything from real estate, tax, employment, and even policy matters. Moving in-house, I realized that as general counsel, you can't become an expert in every area of law that you practice. You also have to deal with the business client in a different way than a private transactional lawyer who is hired to work on a specific deal: you have to work collaboratively with business people with a long-term perspective.
Additionally, for most in-house lawyers, the type of organization one works for will also present specific legal issues that are unique to the organization. For example, due to Phoenix House's specific task of rehabilitating substance-addicted individuals, I dealt with various privacy, housing, health, and criminal justice issues. I also began working on the legal matters specifically pertaining to non-profit organizations, including non-profit governance, tax-exempt financing, and philanthropic issues during my time at Phoenix House.
Q: How did you end up making the move from Phoenix House to LACMA?
A: After eleven years at Phoenix House, I ended up having to relocate from New York to Los Angeles in February 2005 when my then-partner, and now husband, was offered a position as a philosophy professor at Cal State University, Los Angeles. I really liked being in-house and in a non-profit environment, so tried to look for a position in another non-profit institution, but preferably for a cultural organization because I had been with a social services organization for over a decade and wanted a new challenge. This opportunity presented itself and I took on the role of General Counsel at LACMA.
Q: What kind of matters do you deal with on a daily basis?
My day-to-day work spans a wide assortment of legal issues concerning labor, real estate, tax-exempt finance, trusts and estates, construction, non-profit corporate governance, and land use matters. With respect to art, I negotiate loans, acquisitions, gifts and sales of art, exhibition agreements, and provenance issues, and also work on related intellectual property and policy issues.
Over the past seven years, my role has expanded as I have taken on various other managerial responsibilities, in addition to my role as General Counsel, including becoming the Vice President of Administration and the Secretary to the Board of Trustees, and also overseeing the Risk Management, Rights & Reproductions, Human Resources, and Finance departments.
Q: What are LACMA's goals as an organization?
A: One of LACMA's primary goals as an educational institution and encyclopedic museum is, to the extent it can with respect to third-party intellectual property rights, to make LACMA's collection available to the world, scholars, students, and the public, and make it available in as many ways as possible, whether it be through traditional means such as exhibitions, print catalogues, etc., or emerging technologies, including e-publishing, social media and the internet. The Museum strives to make its encyclopedic collection available to the public for people to form their own conclusions, and to potentially manipulate and utilize public domain works in new ways. Realizing this mission, however, involves challenging legal questions and issues.
Q: Can you give our readers an example of a challenging I.P. question or issue you are currently dealing with or have dealt with recently?
A: Specifically, one particular project that LACMA is currently exhibiting through our website—the "Image Library" —illustrates some of the challenges involved in furthering the Museum's mission with respect to existing copyright laws. The LACMA Image Library provides high-resolution images of works in LACMA's collection that the Museum believes to be in the public domain, and makes these images available for download, free of charge, and without restriction. However, making the determination that these images are in fact in the public domain can be an arduous and almost impossible task for institutions like LACMA with limited time and financial resources. At some point, figuring out when a painting was first published, whether it was published with a proper copyright notice, whether it was published in the United States, or even whether it was properly renewed or is entitled to restoration under the Berne Convention becomes an impossible task because of the lack of information available and the cost involved. As a result, not all of LACMA's 100,000 pieces in its collection can make an appearance in LACMA's Image Library: currently, 2,000 works have cleared the public domain analysis allowing them to be freely distributed through the Image Library, with more than 20,000 additional images of public domain works in line for publication.
In addition to the Image Library, the Museum is trying to make LACMA's collection as widely available for public viewing purposes as possible through other means. For example, through LACMA's "Reading Room," the Museum makes numerous LACMA Catalogs published since the 1960s available for viewing on its website. LACMA holds copyrights in these catalogues as compilations, and there is no evidence that anyone who contributed essays or works of art to these catalogs prohibited the reproduction of the works, as part of the compilation, on the Internet. Pursuant to a risk assessment and an analysis under current copyright case law, LACMA decided to publish these catalogs utilizing a controlled online PDF format to advance the Museum's educational mission, but restricting viewers from printing or downloading images. It's as if the viewer can come into the Museum and view the catalogs, but from the comfort of their own computers. At the end of the day, LACMA must balance the risks involved with fulfilling its mission to make its vast collection of works available for the public's enjoyment and edification against the issues involved with fair use and intellectual property matters.
Q: Can you tell us about other aspects of your job that you enjoy?
A: I really enjoy the work that advances the purposes the Museum, including the more art-centric tasks of managing the legal and financing issues raised by large-scale installations that have transformed the LACMA campus, like Chris Burden's Urban Light, and the forthcoming Levitated Mass installation by Michael Heizer. I also like working on the challenging intellectual property issues that arise in furthering the Museum's educational mission.
Additionally, I enjoy the government and community-relations component of my position. LACMA recently contracted with the City of Los Angeles to provide conservation efforts for the Watts Towers, and we are very much involved with the planning for the metro station that we hope will be operational on the corner of Wilshire and Fairfax by the end of this decade. I also find it challenging and rewarding to work on governance issues covering a wide array of matters with the Museum's Board of Trustees.
On the policy side, I work with other museum administrators across the nation to discuss various policy and legislative matters, such as issues surrounding cultural property, the United States' implementation of the UNESCO Convention, and even the National Stolen Properties Act. Earlier this year, I worked with other museums and the U.S. State Department regarding Russia's decision to withhold temporary loans of artworks to American museums due to fears that these works might be seized following a judgment by a United States District Court providing restitution of religious manuscripts seized by the Soviet Union before and immediately after World War II.
Q: Do you believe one needs a background or interest in the arts to work as the general counsel of a large art institution like LACMA?
A: Prior to joining LACMA, I did not practice art law and did not really know how the art world did business. But for me, when I was considering this General Counsel position, I had significant experience in three of the four critical areas that I think are required to do the job: transactional, in-house, and non-profit;the fourth leg being the legal issues raised specifically by the work of the museum in the context of the art world. At the time, I had been out in the world practicing law for twenty-two years drafting, negotiating, and running teams of people. I had also been in-house counsel for over a decade and acquired experience with board and governance issues. I was also aware of non-profit specific matters dealing with finance, a little real estate, and non-profit tax issues. I was a competent generalist in these three areas. There were, however, areas about how the art world did business and intellectual property issues that I did not know much about. That part of it was new, but that is what made the job exciting and challenging for me: learning the culture, how the art world did business, and so on.
While there is no rule of thumb, I think this actually turned out to be the right approach for me. The Museum didn't need another curator or program person; it needed a general counsel who was interested in practicing law. It is important to love art and care about the museum's larger educational mission, but being General Counsel is not about art per se, knowledge of art per se or, least of all, about taste. It is so much more important that one enjoys the practice of law.
The point is that, while this job includes what some have called "art law," it is much more about being a corporate lawyer for an art museum, a non-profit institution, a board of trustees, and a corporation that has finance, employment, tax issues, real estate, and a host of other issues, interests, projects and concerns. I spend a lot of time doing things that are not art related. Fortunately, I really enjoy the legal work.
Enactment of Uruguay Round Agreements Act Sec. 514--which grants copyright protection to works protected in their country of origin but lacking protection in the United States--did not exceed Congress' authority under the Copyright Clause. First Amendment does not inhibit the restoration of copyrights authorized by Sec. 514.
Under Civil Code Sec. 3344(a), an injured party may recover either the amount of damages specified in the statute or actual damages, whichever is greater, as well as profits from the unauthorized use.
Digital Millennium Copyright Act's safe harbor provision for service provider who infringes upon a copyright "by reason of the storage at the direction of a user" applied to service provider who employed an automated process that automatically processed user-submitted content and recast it in a format that was readily accessible to other users. Merely hosting a category of copyrightable content, such as music videos, with the general knowledge that one's services could be used to share infringing material, is insufficient to meet the actual knowledge requirement under the act. Service provider's general knowledge that it hosted copyrightable material and that its services could be used for infringement also was insufficient to constitute a "red flag." A service provider must be aware of specific infringing material to have the ability to control that infringing activity within the meaning of the act. Service provider's general right and ability to remove materials from its services is, alone, insufficient.
Statutory warranty described by Commercial Code Sec. 2312(3)--which states: "Unless otherwise agreed a seller who is a merchant regularly dealing in goods of the kind warrants that the goods shall be delivered free of the rightful claim of any third person by way of infringement or the like but a buyer who furnishes specifications to the seller must hold the seller harmless against any such claim which arises out of compliance with the specifications"--was not breached as a matter of law where there was evidence from which jury could find either that buyer had failed to prove the merit of third-party infringement claims against buyer or that these claims had had no "significant and adverse effect" on buyer's ability to use seller's products. Where plaintiff buyer not only prayed for attorney fees in its complaint but attempted to establish that the purchase order contained the terms of the parties' contracts, and where this purchase order included an attorney fee provision, prevailing defendant was entitled to attorney fees under Civil Code Sec. 1717.
Linear Technology Corp. v. Tokyo Electron, Ltd.
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