Troy & Schwartz Attorneys-At-Law

This blog discusses the case of Lombardo, et al. v. Dr. Seuss Enterprises, LP, U.S. District Court, Southern District of New York, No. 16-09974,  where the Court held on September 15, 2017 that the defendant’s play, “Who’s Holiday,” was a fair use parody of Dr. Seuss’s classic book “How the Grinch Stole Christmas.”

Background on Fair Use & Parody

Fair use is a legal doctrine that promotes freedom of expression by permitting the unlicensed use of copyright-protected work in certain circumstances.  The doctrine is codified in Section 107 of the U.S. Copyright Act and states as follows:

Notwithstanding the provisions of sections 106 and 106A, the fair use of a copyrighted work, including such use by reproduction in copies or phonorecords or by any other means specified by that section, for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright. In determining whether the use made of a work in any particular case is a fair use the factors to be considered shall include—

(1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;

(2) the nature of the copyrighted work;

(3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and

(4) the effect of the use upon the potential market for or value of the copyrighted work.

Although not specifically referred to in the statute, parody, sometimes referred to as a spoof, send-up, take-off, or lampoon, is a work created to imitate, make fun of, criticize, or comment on the original work. Who can forget the Carol Burnett show’s parody of a scene from Gone with Wind, truly one of the funniest moments in television history?

Many may believe that parodies are generally “funny, light-hearted take-offs” on a previous work.  However, this is not always the case.  The U.S. Supreme Court addressed the issue of fair use parody in the 1994 case of Campbell, et al.  v. Acuff-Rose Music, Inc.   The defendant had created a rap version of the 1964 rock classic, “Oh, Pretty Woman” by Roy Orbison & William Dees.   The Court opined that the rap song’s words can be taken as a “comment on the naivete of the original of an earlier day, as a rejection of its sentiment that ignores the ugliness of street life and the debasement it signifies.”

The Court defined parody as form of art that represents the tension between a known original and its parodic twin such that the parody has to be able to use enough of the original to be recognizable to the audience.  The result must be a creative transformation from the original.

Acuff-Rose owned the copyright to the song “Oh, Pretty Woman.”  The manager of the band 2 Live Crew had sought permission to record its version of the song but Acuff-Rose, as was its right as the copyright owner, refused to grant permission.   The band subsequently recorded the rap song and in doing so, did give credit for Pretty Woman to Orbison, Dees, and Acuff-Rose.

Although the Court held that the defendant’s version was a parody, under the fair use doctrine, the defendant still had to prove to the satisfaction of the lower courts that: 1) it had not taken any more of the original than necessary to make the point of the parody; and 2) that the parody had not harmed the market for the original song or the potential market for new versions that Acuff-Rose as the copyright owner may license.

The Court did emphasize that parodies in general, will rarely substitute for the original work, since the two works serve different market functions. While Acuff-Rose found evidence of a potential “derivative” rap market in the very fact that 2 Live Crew recorded a rap parody of “Oh, Pretty Woman” and another rap group sought a license to record a rap derivative, the Court found no evidence that a potential rap market was harmed in any way by 2 Live Crew’s parodic rap version. In fact the Court found that it was unlikely that any artist would find parody a lucrative derivative market, noting that artists “ask for criticism, but only want praise.”

The case settled so it’s not clear just how the lower court would have ruled on the remaining two issues.

Is It Fair Use Parody or a Derivative Work?

When the lyrics to a song, for example, are changed, the result could be a derivative work under U.S. copyright law.  The right to prepare derivative works is one of the exclusive rights of the copyright owner (e.g., turning a play script into a motion picture screenplay – the screenplay being a derivative of the play script.)

Fair use does not apply to derivative works.   Courts may struggle in a parody case to determine whether to classify the allegedly infringing work as fair use (no permission needed from the copyright owner to create the parody) or a derivative work (permission needed to avoid infringement).  There are no bright-line rules and each case must be evaluated on its own merits. Generally, to win the fair use argument, the work must be seen as sufficiently transformative of the underlying work.

The Holding in Lombardo, et al. v. Dr. Seuss Enterprises, LP (Note 1)

The allegedly infringing work was a play entitled “Who’s Holiday” which Dr. Seuss Enterprises, LLP argued infringed its copyrights to the late Dr. Seuss’s works, specifically “How the Grinch Stole Christmas.”  As many of the readers of this blog will recall, Dr. Seuss’s (Note 2) play is about a grouchy, cave-dwelling monster named Grinch who decides to end Christmas in Who-Ville, but has a change of heart after being interrupted by Cindy Lou, an endearing young girl.

Lombardo’s play also has a character by the name of Cindy Lou but here Cindy Lou is an adult woman struggling with various addictions after spending time in prison for murdering the Grinch who was once her husband and fathered her daughter.

The Lombardo court concluded that “Who’s Holiday” was a fair use parody because the playwright had turned the saccharine depictions in Dr. Seuss’s work into an object of ridicule where green beasts impregnate women, paparazzi “run wild” and citizens get high on “Who Hash” to avoid life’s daily hassles.  According to Judge Hellerstein, Lombardo’s play, although coarse and vulgar, lampoons the utopian society depicted in the original work: society is not good and sweet, but coarse, vulgar, and disappointing.  “The play would not make sense without evoking the style and message of “Grinch” for which there be no object of the parody.  Whether the play’s parody of “Grinch” is effective, or in good taste, is irrelevant.”

The Lombardo opinion mirrors the Supreme Court’s opinion in the Campbell case in that transformation of a work with “nice, heart-warming” themes into provocative, even vulgar themes, can be fair use parody under copyright law.   Dr. Seuss Enterprises accused the playwright of exploiting the characters and themes of “Grinch” because he was too lazy to try “working up something fresh.” This argument failed to sway the Judge Hellerstein because of the “transformative” nature of the play.

Take-Home Points

Anyone contemplating creating a work by “adjusting” the themes, characters, etc. of an underlying work owned by another needs to have a good understanding of fair use parody.   The two decisions discussed above favored the defendants.  Yet, in Campbell, the defendant had actually sought the copyright owner’s permission to record the rap version.  Furthermore, the band had given the original song writers and current copyright owners credit for the original song.  These actions show a good faith attempt to recognize the original songwriters and current owners.   Whether these actions played any role in the reversal by the Supreme Court of the appellate court’s decision favoring Acuff-Rose is not known.   Acuff-Rose also could have chosen to enter into an agreement with the band to license out its “derivative work” rights as the copyright owner to 2 Live Two.   That is, derivative rights can be licensed.   A copyright owner, however, is not obligated to enter into any licensing agreement whatsoever.

Regarding the Lombardo case, the play at issue is clearly targeted to adult audiences and involves themes completely different from those Dr. Seuss’s beloved children’s book.  If Lombardo’s play, on the other hand, had simply turned Cindy Lou into the consummate brat who undergoes her own transformation prior to Christmas to help save Christmas, then it is highly unlikely that such a play would not have met the transformative threshold for establishing fair use parody.  The commentator will hazard a guess that the book will continue to be a favorite for generations to come and most will remain unaware of the parody play.  Parodying a beloved work can also be a turnoff for audiences or consumers where the parody is full of dark themes relative to the original work.

Please note that the U.S. Copyright’s website provides summaries of decisions involving fair use from the appellate courts of the federal circuit and the U.S. Supreme Court.  This website can be a useful for starting point for those considering creating a parody of an underlying work.

Note 1.  As of the date of this blog, the opinion may only be accessed through Pacer.

Note 2.  Dr. Seuss’s full name was Theodor Seuss Geisel.  He adopted the pen name Dr. Seuss.

© 2017 by Troy & Schwartz, LLC

WE THANK YOU FOR READING THIS BLOG.  HOWEVER, THE FOREGOING IS NOT LEGAL ADVICE AND IS PRESENTED FOR INFORMATIONAL PURPOSES ONLY.   IF YOU ARE CONTEMPLATING ANY ACTION THAT MAY HAVE LEGAL CONSEQUENCES, YOU SHOULD CONSIDER CONSULTING WITH AN ATTORNEY OF YOUR CHOOSING.

Ownership as the Result of a Work Made For Hire

Copyright law seems deceptively simple compared to patent and trademark law.  Where copyright law can get particularly complicated for the unwary, however, is in the area of copyright ownership.  Under U.S. law, the creator or author of the work is the owner of the copyright.  But what happens if the work was created by and employee in the scope of his/her employment or by an independent contractor who was hired or commissioned to create the work?

Regarding an employer-employee relationship, the work is generally treated as a work made for hire wherein the employer (and not the employee) is deemed the author and owner of the work.  The forms for federal registration of a copyrightable work include a section addressing ownership secured on the basis of a work made for hire.

Regarding an independent contractor relationship, the work may qualify as a work made for hire providing two conditions are met pursuant to the Copyright Act (Act).  First, the work must fall into one of the nine enumerated types of works specified in the Act.  Second, the independent contractor and the hiring party must have both signed an agreement agreeing that the work to be created is a work made for hire.  If these two requirements are met, the hiring party is deemed as the owner of the work created by the independent contractor.   17 U.S.C. § 101, et. seq.

Note the difference between works made for hire by an employee versus those made by an independent contractor.  In the latter case, the type of works qualifying as work made for hire are limited by statute and a written agreement is required.

Why the Distinction Between and Employee and an Independent Contractor Is Important

Take the scenario of software developers who are often hired as independent contractors by startup companies.   Software can be copyrighted, but software is not one of the enumerated types of works qualifying as a work made for hire work by Independent Contractors.  Therefore, even with a written agreement stating that the software is to be designated as a work made for hire, the hiring company will not actually own the copyright to the developed software under the work made for hire doctrine even though the software developer (Independent Contractor) was paid to create the software.   That is, the software developer may well still be the owner of the software despite the work made for hire agreement.   On the other hand software development companies such as Microsoft Corporation that have employees dedicated to developing software are the owners/authors of any copyright-related rights in the software under the work made for hire doctrine.   See the U.S. Copyright Office Records for Microsoft Corporation’s registered copyrights where Microsoft is listed as the author of the work as the result of an employer work made for hire.

Copyright ownership issues as they relate to Independent Contractors may remain hidden and only arise when: 1) a business is being sold and the sale involves intellectual property (IP) assets such as copyrights; or 2) in a copyright infringement lawsuit.    The buyer of IP assets will want assurance that the IP assets are indeed owned by the seller so that they may be effectively assigned to the buyer by a written instrument signed by the seller and the buyer.   A deal could fall through if the seller cannot prove to the buyer’s satisfaction that it – the seller – is the owner of the copyrights and therefore has the right to transfer ownership to the buyer.

A defendant in a copyright infringement lawsuit may be able to use “lack of ownership” as a defense if the work was created by an independent contractor and the work does not qualify as a work made for hire under the Copyright Act.  That is, ownership remains invested in the Independent Contractor and plaintiff does not own the copyright it claims is being infringed.

Ensuring the Legally Sufficient Transfer of a Copyright by an Independent Contractor

What steps can be taken to ensure the proper transfer of copyright-related rights from an Independent Contractor?  Where the work(s) to be created clearly fall into one of the nine (9) enumerated classifications specified within the copyright statute, the Independent Contractor and the hiring party need to sign an agreement wherein the work(s) to be created is designated as a work made for hire with all associated copyright-related rights belonging to the hiring party.

Copyright ownership can also be transferred by an assignment of rights and by operation of law (e.g., as the result of a probate proceeding).  For my clients, I include an assignment of rights provision within all work made for hire agreements with Independent Contractors as a precaution to cover the situation where the created work may be found to not qualify as a work made for hire.  Thus if for whatever reason the work should not qualify as a work made for hire because, e.g., it does not fall into one of the nine enumerated categories, the hiring party would still own the copyright as the result of the creator’s assignment of rights to the hiring party.  17 U.S.C. § 101;  17 U.S.C. § 201(d)(1).  Any such assignment needs to be clear as to the rights being conveyed and the nature of the underlying works.  For a good discussion of how important an assignment of rights provision may be where the work made for hire conveyance to an Independent Contractor fails, see Capital Concepts, Inc. v. Mountain Technology Corp., et al., WL 6761880 (W.D. Va. 2012).

THE ABOVE IS FOR INFORMATION ONLY AND DOES NOT CONSTITUTE LEGAL ADVICE.

© Troy & Schwartz, LLC

On April 29, 2015 in Home Legend, LLC v. Mannington Mills, Inc., et al., the United States Court of Appeals for the Eleventh Circuit held that the lower district court had wrongly concluded that a design feature of the appellate’s laminate flooring product was not subject to copyright protection.   According to the Eleventh Circuit, the design is protectable under copyright law as a derivative work.   In general, derivative works “enjoy” a lesser degree of copyright protection than an original creative work.  The decision is instructive for its review of copyright law in general.

The copyright at issue was for a laminate wood product manufactured with décor paper known as “Glazed Maple” and sold by Mannington Mills.   The décor paper was a huge digital photograph depicting stained and apparently time-worn maple planks.    By including the décor paper as part of the laminated wood product, Mannington Mills’ (“Mannington”) laminate flooring planks had the appearance of genuine, worn maple wood planks.

The worn maple effect was achieved using hand tools to introduce surface imperfections into real smooth-milled white maple planks to make the planks appear aged and well-worn.  Then other steps including staining with different stain colors and stain shades were carried out to add effects like shadowing, simulated mineral streaks, and dark spots that were not present on the raw maple planks.   Slip opinion at 4.

Certain planks that best mimicked the sought-after rustic look were subsequently selected for scanning with a high-resolution digital scanner.    The digital images were further touched up, and eventually fifteen (15) plank images were selected as representing the “best of the best.”   The selected images were printed into a single 120” by 100” digital image to provide the Glazed Maple design.  It is this image that constitutes the décor paper through which the laminate flooring appears as worn and rustic maple wood planks.

The United States Copyright Office registered the copyright for the design in November, 2010.   In 2012, Mannington requested that Home Legend, a competitor, stop selling laminate flooring products with designs that were “virtually identical in every respect” to the copyrighted Glazed Maple Design.   Home Legend then sought a declaratory judgment that the copyright was invalid.  Mannington counterclaimed for copyright infringement and moved for a preliminary injunction.   The district court denied the injunction motion and eventually granted final summary judgment in favor of Home Legend.   Slip Opinion at 7.

Copyright Law and Originality

The district court had opined that the Glazed Maple design was not original enough to be copyright eligible.    It is axiomatic that to qualify for copyright protection, a work must be original.  The Eleventh Circuit emphasized that originality is not novelty and that the U.S. Supreme Court has noted that ‘ “the requisite level [for copyright protection] is extremely law; even a slight amount will suffice.”  Slip Opinion at 8 citing Feist Publ’ns v. Rural Tel. Serv. Co., Inc., 499 U.S. 340, 345 (1991).      The Eleventh Circuit further emphasized that Mannington did not merely scan raw wooden planks whether new ones or worn ones.  Instead, its employees “imagined what a deeply stained maple floor might look like after years of wear, and then used stain, paint, hand tools, and digital retouching to express their concept first on wood and then as digital images.”   Slip opinion at 10.

A tenant of copyright law is that ideas themselves are not copyrightable; the idea must be fixed in a tangible medium of expression.   17 U.S.C. § 102(a).   The Eleventh Circuit  concluded that the expression of the idea [in a tangible medium] was a product of creativity, “not a slavish copy of nature.”   Slip opinion at 11.   The location and character of the added marks and stains rendered Mannington’s contributions creative enough to meet the low bar of copyrightable originality under Feist.

 Copyright Law & Compilations

The Eleventh Circuit also found that even if copyright law did not protect the altered individual plank images, the Glazed Maple Design also represents a protectable compilation expressing original selection and creative coordination of elements.   Slip Opinion at 13.    Under 17 U.S.C. § 103, a compilation, even of uncopyrightable elements, is eligible for copyright protection so long as there is some minimal level of creativity.   Here, Mannington’s selection and arrangement of the final fifteen selected planks that best represented its conception of an aged and rustic floor and it believed looked best together showed originality sufficient to exceed the low bar required for copyright protection.  Slip Opinion at 14 citing Feist at 348.

Copyright Law and Product Functionality

Functional elements are generally not copyrightable and in this way copyright protection is similar to design patent protection.  Copyright law provides protection for pictorial and graphic works including “two dimensional  . . . works of applied art.”   Slip opinion at 15 citing 17 U.S.C. § 101 of the Copyright Act of 1976.  The district court had concluded that: 1) the laminate floor incorporating the copyrighted Glazed Maple Design would not be marketable if its functional elements were separated from the artistic elements; and 2) the 2-D artwork would not be marketable in and of itself.  Slip opinion at 15.

The Eleventh Circuit opined that the district court’s conclusion was based on conjecture and not on evidence.  Mannington had argued that the Glazed Maple design had no other purpose than serving as a decorative element.  The design did not have any other function, e.g., the function of hiding wear to the floor as the district court had opined.  Indeed the laminate floor had a separate “wear layer.”

Furthermore, Home Legend sold flooring decorated with an identical copy of Mannington’s Glazed Maple design.    Therefore the design itself could be separated from Mannington’s flooring and used by others, in this case by Home Legend.   As such, it had value and the “only obstacle to Mannington demanding payment for the use of its design on other flooring is the district court’s ruling that Mannington lacks copyright rights in its design.  Slip opinion at 15.

U.S. Copyright Law anticipates situations where a decorative design could be part of a functional product by stating:  “to receive copyright protection, the pictorial [or] graphic . . . features [of a useful article] are copyrightable only if, and only to the extent that, such design incorporates pictorial [or] graphic features that can be identified separately from and are capable of existing independently of, the utilitarian aspects of the article.”   Slip opinion at 16 quoting 17 U.S.C.  § 101.  Under the Eleventh Circuit ‘s case law, “separability means that the design is either physically severable from the utilitarian or conceptually severable.”

The Court held that the design applied by Mannington to the flooring was both physically and conceptually severable from the actual flooring.   This conclusion is consistent with the actual manufacturing process of laminate flooring where the interchangeability of the paper designs in the manufacturing process necessarily means that the design and flooring to which Mannington applies it are physically separable objects.   Therefore the design meets the requirements for copyright protection under 17 U.S.C. § 101.

Home Legend further argued that copyright protection was not proper because Mannington had copyrighted a process for making the design.   The Eleventh Circuit noted that the original copyright only protected the specific 2-D digital artwork design that Mannington registered.    Slip opinion at 18.

Copyright Law and Derivative Works

The Court held that Mannington’s design met the requirements for copyright protection from creativity to non-functionality even though the copyright protection is not particularly strong.  This is because the design is associated with uncopyrightable features of each plank – such as the shape of the plank and the shape of natural underlying wood grain.- which are both in the public domain    Thus, if Mannington had simply taken digital images of the original maple wood planks, without more, and incorporated those images into the laminate wood flooring, copyright protection would not have been available.  The Court was careful to point out that Mannington had “transformed the elements found in nature and those dictated by utility – that is, the raw [real] maple planks – into the expression of the rustic floor idea.”  Slip opinion, note 2.

The Court classified the design as a derivative work.   Under case law,  “a creative work s entitled to the most protection, followed by a derivative work and finally by a compilation.”  Slip opinion at 19.   As a derivative work, the copyright protection extends only to identical or near-identical copies of the Glazed Maple Design.   An example of copyright infringement would be where the alleged infringer had made digital photographs of Mannington’s design and used the “verbatim” design or made trivial color alterations in the design. Given the low level of threshold creativity associated with copyright law, another person who develops his own laminate flooring designs based on his own expression would not be violating Mannington’s copyright in its Glazed Maple flooring.     

What is the take home point from the decision?  Copyright protection may be available in situations not typically associated with such protection.  Before filing for a registered copyright in such situations, care should be taken to determine if the product’s “copyrightable” feature will meet the requirements for copyright protection – a modicum of originality and non-functionality.      Where the copyright is based on a natural product, copyright protection also requires that the product is not merely a “slavish copy” of existing natural structures such as stones, rocks, wood, etc.   Slip opinion, note 2.    Here, Mannington had created a design based on the creative input/vision of its employees.    Finally, copyright protection of even derivative works can provide a competitive advantage to the copyright owner by allowing the copyright to take legal steps to protect the copyright from infringement.

THE FOREGOING IS FOR INFORMATIONAL PURPOSES ONLY AND NOT LEGAL ADVICE.  YOUR READING OF THIS BLOG DOES NOT CONSTITUTE ANY ATTORNEY-CLIENT RELATIONSHIP WHATSOEVER.  IF YOU ARE CONTEMPLATING AN ACTION THAT MAY HAVE LEGAL CONSEQUENCES, YOU SHOULD CONSULT WITH AN ATTORNEY OF YOUR CHOOSING.

© 2015 by Troy and Schwartz, LLC

Over the course of my legal career, I have been asked whether ideas are protected under copyright law.  The answer is no.  Section 102(b) of the Copyright Act codifies the prohibition on copyright ideas:  “In no case does copyright protection for an original idea work of authorship extend to any idea, procedure, process, system, method of operation, concept, principle, or discovery, regardless of the form in which it is described, explained, or embodied in such a work.”

Courts have gotten involved in addressing disputes involving alleged copyright infringement of ideas from early on in our jurisprudence.  See e.g., the 1879 U.S. Supreme Court case of Baker v. Selden.   The most recent case in the “idea” area of copyright law is Smith v. Roger Goodell and the NFL, E. Dist. La., case no. 14-1010,  where the court granted the Defendants’ Motion to Dismiss on 12(b)(6) grounds.  The opinion is instructive for its discussion as to why ideas are not protectable under copyright law and also delves into the complex area of antitrust law because of the Plaintiff’s attempt to invoke an antitrust claim at the 12th hour.   The opinion also provides insight into how not to draft a complaint.

The Smith Plaintiff sought damages in the amount of over $10 million for alleged infringement of her registered copyright of a non-dramatic work.  The work was entitled “Fantasy Football Parade Extravaganza” and consisted of a twenty (20) page booklet describing what the Plaintiff claimed represented unique strategies for marketing the New Orleans Saints football team.

In April, 2005, the Plaintiff sent several unsolicited proposals to executives and owners to the Saints’ organization describing various strategies for increasing game attendance and gaining a corporate sponsor for the Louisiana Superdome, both for the goal of leading the team to an NFL championship.  The Plaintiff subsequently obtained copyright registration of the work on January 1, 2006.   Copyright registration with the U.S. Copyright Office is a prerequisite for commencing a lawsuit in federal court concerning copyright infringement.   Click here to link to a previous blog on copyright registration.

In May 2014, the Plaintiff filed a complaint alleging that the Defendants engaged in unfair trade practices and unfair competition by using her unique literary body of works as their own, thus causing irreparable damages.  The NFL Commissioner and the NFL were a named as Defendants because, according to the Plaintiff, they came into possession of her ideas once they were submitted to Saints’ executives.  Slip opinion at 12.   She further claimed that the NFL and the New Orleans Saints are joint venture partners and for all practical purposes constituted a single entity according to the decision in American Needle, Inc. v. New Orleans Saints, 496 F. Supp. 2d 941, 943 (2007). Hence the Defendants were “valid” defendants according to the Plaintiff.

In their motion to dismiss, the Defendants argued that the Plaintiff’s ideas, contexts, and unique strategic characteristics written in her booklet are not protected by copyright law.  Copyright protection extends to the actual specific expression of the facts and ideas contained within the booklet, a tangible medium of expression, but not to the underlying facts or ideas themselves.  Slip opinion at 3.

Additionally, the Defendants argued that the Plaintiff did not plead any factual allegations as to how the booklet itself was infringed by the NFL or the Commissioner.  Generally copyright infringement involves copying, distributing, and/or reproducing the copyrighted work without the authorization of the copyright owner.    The Plaintiff’s complaint did not name an infringing work by the NFL or the Commissioner or even allege that the two Defendants actually had access or knowledge of the booklet.   Slip opinion at 9.

As for the non-copyright infringement claims, the Defendants argued that the Copyright Act preempts the Plaintiff’s state law claims which the Defendants logically characterized as a claim under Louisiana’s Unfair Trade Practices Act (LUTPA) although the Complaint never actually referenced the statute.  Under the preemption doctrine as it relates to federal copyright law, state claims may be dismissed from consideration providing certain conditions are met.  Accordingly, the case will then continue with the federal copyright infringement claim, or if the copyright claim is dismissed, then state law claims preempted by federal copyright law will generally also be dismissed.   Slip opinion at 4-5.

The Plaintiff at the last minute also attempted to state a claim for relief under one of the U.S. antitrust statutes.

Motions to dismiss are often filed by Defendants but more often than not are not granted.  This is because on a motion to dismiss, asserted claims are liberally construed in favor of the plaintiff and the pled facts are taken as true.   Slip opinion at 10 citing Leatherman v. Tarrant Cnty. Narcotics Intelligence & Coordination Unit, 507 U.S. 163, 164 (1993).   Generally, the complaint must have enough factual matter to raise a reasonable expectation that discovery will reveal evidence as to each element of the asserted claims.  Slip opinion citing Lorman v. U.S. Unwired, Inc., 565 F.3d 228, 257 (5th Cir. 2009).

The Smith Court granted the Defendants’ motion to dismiss for the following 4 reasons:

 1.     Copyright law does not protect ideas but rather protects the expression of ideas.   In addition, the accuser must identify the accused work within the complaint so that the copyrighted work can be compared with the alleged infringing work.  Otherwise, a pleading does not plausibly establish that infringement may have occurred.  Slip opinion at 11 citing numerous decisions by the Fifth Circuit Court of Appeals.   The Plaintiff did not identify an infringed work nor allege specific activities infringing such as copying and distribution of the copyrighted booklet.   In addition, she did not demonstrate that any of the allegedly copied material was in fact subject to copyright protection under the Copyright Act.   Because her copyright claim appears to be based entirely on the Defendants’ alleged use of the booklet’s ideas and strategies, the district court opened that she does not have a claim for copyright infringement.  Slip opinion at 12.

 2.   The Plaintiff had not pleaded any facts permitting a reasonable inference that Defendants proceeded to appropriate the unsolicited ideas she submitted to the Saints.  The pleaded facts were based on mere speculation.  Slip opinion at 12.  It is noted that a Saints’ executive had sent the Plaintiff a letter stating that both the Saints and the NFL had procedures for the submission of unsolicited proposals.   Slip opinion at 2.

The commentator notes that the opinion does not reflect on these procedures, but one may reasonably presume that submitters are required to complete forms as part of the submission package.  The forms most likely state that the unsolicited submission does not establish any legal relationship between the team/NFL and the submitter.   Such forms would be intended to protect the team and the NFL from lawsuits stemming from unsolicited proposals.   It is not clear whether the Plaintiff ever re-submitted her booklet in accordance with the procedures.   For an interesting case that discusses the problems NFL teams face with unsolicited proposals see Grubb v. NFL Properties, Inc., et al., 901 F. Supp. 36, U.S. Dist. Ct. Mass., Oct. 23 1995 (granting summary judgment to the defendants.  Plaintiff had alleged that the Patriots had used his copyrighted logo which he submitted for their consideration upon learning that the team was going to change its logo.).  Most companies and organizations do not want to receive unsolicited information, ideas, proposals, etc.

3.    Regarding the preemption argument by the Defendants, the Court did not address this issue presumably because the Complaint did not allege a violation of a specific state statute (in this case the Louisiana Unfair Trade Practices Act – LUTPA).  The Complaint simply alleged that:  The Defendants continues [sic] to infringe on FFPE’s copyrights by continuing to engaged [sic] unfair trade practices, and unfair competition by use [the booklet’s] unique literary body of works as their own, thus causing irreparable damages to its owner.  Slip opinion at 2013.

The Defendants had logically presumed that with this wording, the Plaintiff was bringing a claim under the LUTPA.  The Complaint was devoid of a reference to any particular statute, whether state or federal.  The LUTPA requires the plaintiff to prove “some element of fraud, misrepresentation, deception, or other unethical conduct.”   The Plaintiff failed to plead any facts establishing that the NFL and the Commissioner had any knowledge of the Plaintiff’s copyrighted booklet or that they violated her rights under the LUTPA unethically or fraudulently.   As we shall see below, the Plaintiff had apparently intended this wording to invoke a claim for relief under antitrust law.   Slip opinion at 13.

4.   In her opposition to the Defendants’ motion to dismiss (and not the Complaint), the Plaintiff sought relief under the Federal Trade Commission Act.  This statement attempted to “carry” the Plaintiff’s claim into the area of antitrust law.  The Court noted that her allegations did not reveal an antitrust injury and that she provided no facts or arguments from which the Court could determine whether she had a right to relief above a speculative level.   Slip opinion at 13-14.

It is also puzzling as to why the Plaintiff attempted to bring in an antitrust claim.   It may be that this “late-in-the-game” claim was brought to try and overcome dismissal of the unfair trade practices claim on preemption grounds.  The Plaintiff’s antitrust allegation may have stemmed from some general knowledge by the the Plaintiff about the American Needle, Inc. v. New Orleans Saints, 496 F. Supp. 2d 941, 943 (2007) case which she had actually invoked to justify bringing in the NFL and the NFL commissioner as defendants.   The American Needle case, on appeal from the Seventh Circuit, was eventually heard by the U.S. Supreme Court in American Needle, Inc. v. National Football League, et. al., 130 S. Ct. 2201 (2010).

This antitrust case originated when American Needle, Inc. challenged the NFL’s decision to award an exclusive apparel license to Reebok for all NFL teams and alleged that the licensing agreement violated antitrust laws.   The NFL had argued that it was a single entity acting on behalf of the 32 NFL teams and there incapable of conspiring to restrain trade under Section 1 of the Sherman Act.  The Supreme Court rejected the NFL’s defense but did find that the relation between the teams and the NFL was not a per se violation of the Sherman Act.  The evaluation of the alleged antitrust violations stemming from the exclusive licensing agreement between the NFL and Reebok was the subject of a “Rule of Reason” analysis for violations of Section 1 of the Act.   The case was remanded for consideration of the antitrust claims under a Rule of Reason analysis to the N. Dist. of Illinois where the style of case is American Needle, Inc. v. New Orleans Saints, et al.  The district court refused to grant the NFL’s motion for summary judgment on April 4, 2014 and the case continues.

The Plaintiff’s opposition to the Defendants’ motion to dismiss, however, did not reference the Sherman Antitrust Act nor provide any updated information on the American Needle line of cases but instead invoked that Federal Trade Commission Act (Clayton Act).  Slip opinion at 13.  It is not clear if this reference to both Acts is a typo because the Federal Trade Commission Act is a separate and distinct act from the Clayton Act.  That is, the Clayton Act is not another name for the Federal Trade Commission Act.   The Clayton Act was passed in 1914 to give more enforcement teeth to the older Sherman Antitrust Act.    It is intended to regulate general practices detrimental to fair competition including price discrimination, ting agreements, and exclusive dealing contracts.   It also covers issues related to decreased competition resulting from acquisitions and mergers.   Based on the purpose behind the three (3) acts and the wording of her Complaint of “unfair trade practices and unfair competition,” it would appear that the Plaintiff meant to invoke the Federal Trade Commission Act.  See the link for specific information on the three Acts.

The Smith Complaint made no reference to any actions by the Defendants that could even be loosely construed as having any semblance to illegal restraint of trade activities or activities related to curbing fair competition.  In addition, the Plaintiff made no allegations that she was a member of the relevant market and therefore had proper standing to bring an antitrust claim.   Slip opinion at 13.   The court accordingly also dismissed the supposed antitrust claim.

In conclusion, this case is a reminder that ideas themselves are generally not subject to copyright protection under the Copyright Act.  By way of example, books involving a woman detective such in Agatha Christy’s Miss Marple detective novels or Sue Grafton’s Kinsey Malhone novels are protected by copyright laws, but the idea of a woman detective novel is not protectable.   Anyone is free to study copyrighted work, learn the underlying idea, and then use the idea in his/her own work.  What copyright law does protect is the unauthorized copying, usage, or paraphrasing of the copyrighted work itself.  Determining whether a work has been infringed by a different but allegedly similar work (e.g., a song with very similar words to a previous work) is not an easy exercise.  As Judge Learned Hand stated in Peter Pan Fabrics, Inc. v. Martin Weiner Corp., 274 F.2d 487 (2d Cir.1960), “Obviously no principle can be stated as to when an imitator has gone beyond copying an ‘idea’ and has borrowed its ‘expression.’ ”

As a practical matter, the Complaint in this case was clearly deficient in meeting even basic pleading requirements.  Although courts are required to accept all “well-pleaded facts” as true, a court is not required to accept legal conclusions as true.  Slip opinion at 10 citing Ashcroft v. Iqbal, 556 U.S. 662, 677-78 (2009).  Proper pleading may have allowed continuation of the lawsuit providing the claims were not thrown out on copyright law preemption grounds.   Furthermore, plaintiffs are often given the chance to amend their complaints.  In this case, the district court found that amendment of the Complaint would be an exercise in futility and therefore dismissed the lawsuit in its entirety.

THE FOREGOING IS NOT LEGAL ADVICE, NOR SHOULD YOU CONSIDER IT AS SUCH.  IT IS FOR INFORMATIONAL PURPOSES ONLY.  WHEN CONSIDERING AN ACTION WHICH HAS LEGAL CONSEQUENCES, YOU SHOULD CONSULT WITH AN ATTORNEY OF YOUR CHOOSING.

Copyrighted by Troy & Schwartz, LLC.  All Rights Reserved.

Even where a defendant in a copyright infringement case is found guilty of copyright infringement, the plaintiff may not receive an award of attorneys’ fees under the Copyright Act.    In the recent case of HarperCollins Publishing, LLC  v.  Open Road Integrated Media, LLP,  the United States District Court of the Southern District of New York declined to award the plaintiff any attorneys’ fees whatsoever under section 505 of the Copyright Act.  A close reading of the decision suggests that the Court found the amount of attorneys’ fees sought by the plaintiff, namely over one million dollars, to be unreasonable especially when weighed against the actual damages in the case and that this is the underlying reason for refusing to award attorneys’ fees.

Some background on the copyrighted work and previous proceedings before the Court is warranted to better understand the decision. The copyrighted work at issue in Open Road was the acclaimed children’s novel, Julie of the Wolves, by Jean George.  Ms. George had entered into a publishing contract in 1971 (1971 contract) with Harper & Row, the plaintiff’s predecessor in interest.   In 2010, Open Road contacted Mrs. George with the proposition of publishing an e-book edition in exchange for a 50% royalty.    Ms. George invited HarperCollins to match Open Road’s offer, but HarperCollins declined to publish an e-book edition on such royalty terms.  The 50% rate was two times the royalty rate generally paid by Harper Row for e-book editions.  Mrs. George subsequently entered into a publishing contract with Open Road, and the e-book edition was released in 2011. It is noted that copyright-related rights can last for decades including after the author has passed away.

HarperCollins sued Open Road for copyright infringement arguing that the e-book was within the scope of the 1971 contract and that HarperCollins therefore had sole rights in any e-book edition.  The opinion is instructive because it acknowledges  “the recurring problem of how to interpret the scope of old copyright agreements in light of later-developed technologies.”  In finding that Open Book had indeed infringed HarperCollins’ copyright, the Court noted that Paragraph 20 of the 1971 contract had stated:

Anything to the contrary herein notwithstanding, the Publisher shall grant no license without the prior written consent of the Author [Ms. George] with respect to the following rights in the work:  use thereof in storage and retrieval and information systems, and/or whether through computer, computer-stored, mechanical or other electronic means now or known or hereafter invented.   Court’s emphasis.

In a March 17, 2014 opinion, the Court noted that the language in Paragraph 20 encompassed a forward-looking reference to e-book editions with the wording “now known or hereafter invented,” and found that HarperCollins had the exclusive right to license third parties to publish e-book version of Julie of the Wolves, subject to Ms. George’s approval.   Accordingly, Open Road had infringed HarperCollins’ (as the successor in interest) copyright.   The Court encouraged the parties to enter into a remedies settlement agreement after granting summary judgment to HarperCollins on the issue of liability.

A short time later the parties then attempted to negotiate a settlement wherein Open Road hoped to acquire a license to continue publishing the e-book.    At the time, Open Road had not yet stopped selling the e-book edition.  HarperCollins advised Open Road that it was not interested in a license and that HarperCollins would like Open Road to stop selling the book.   Open Road continued to market the book on-line until June 2014 or for several months after the Court’s “infringement” opinion of March 2014.   In late May, HarperCollins filed a motion for remedies including a permanent injunction and attorneys’ fees.

Open Road’s failure to comply with the Court’s March 2014 opinion by stopping all sales and marketing of the e-book edition until its failure to comply was called to the Court’s attention caused the Court to grant the permanent injunction requested by HarperCollins. As a result of Open Road’s continuing infringing activities, the Court found that there is “at least a reasonable likelihood of future infringement absent an injunction.”   Additionally the Court found that a permanent injunction would not disserve the public interest of having access to creative works.   Indeed another premise of copyright law is that “the public has a compelling interest in protecting copyright owners’ marketable title to their work.”   Slip opinion at 10.   Interestingly, Open Road apparently had the right to publish its e-book edition outside of the United States and Canada.   Note 10 of Slip Opinion.

The Court then went on to determine monetary awards in the form of damages and attorney fees.  Under the Copyright Act, the Court may award up to $150,000.00 in statutory damages for willful infringement and attorneys’ fees.   The Court found that Open Road’s infringement was willful as a matter of law at least after March 17, 2014 and awarded statutory damages in the amount of $30,000.   The Court based this amount on the “economic significance of this case” where the profit to Open Road from its infringing activity was less than $20,000.00.   Slip opinion at 15.    At first blush, this award may appear to be a pittance for willful infringement.   Although a damages award may be based on the revenue lost by the copyright owner, the Court noted that HarperCollins had conceded that its lost revenue, if any, would be difficult to quantify.    In addition, a higher award may well have been awarded by the Court had it found that the willful infringement had occurred for more than a few months.  Slip opinion at 15.

In addition to damages, HarperCollins’ sought an award of attorneys’ fees for over a million dollars which was seventy percent (70%) of the sum billed by its outside counsel.   The Copyright Act authorizes a Court “in its discretion to award a reasonable attorneys’ fees to the prevailing party.”   In reaching its conclusion that HarperCollins was not entitled to such an award, the Court relied on the objective unreasonableness test in making its determination.  This test was used to determine whether Open Road’s conduct in view of the 1971 contract was objectively unreasonable, i.e.,  “[was] clearly without merit or patently devoid of a legal or a factual basis.”  Slip opinion at 18.

HarperCollins argued that Open Road’s position that the 1971 contract was devoid of electronic rights was objectively unreasonable because of the Court’s own finding that the 1971 Contract was unambiguous with respect to HarperCollins’ electronic rights.   Slip opinion at 18.  The Court’s opinion disposed of HarperCollins’ argument by stating that “[o]ur reticence to characterize the losing position as objectively unreasonable is informed by the fact that this dispute arose in the context of a developing, and still somewhat uncharted, area of copyright law. “   Slip opinion at 18.   The Court further found that Open Road’s defenses were neither frivolous nor improperly motivated.  Slip opinion at 19.

Despite the Court’s reliance on the objectively unreasonable test to find that an award of attorneys’ fees was not warranted, it is apparent from the last few paragraphs of the opinion that the Court found the sought-after attorneys’ fees of over one million dollars in the context of the economic significance of the case to be vastly excessive.   This well may the real reason why the Court declined to award any fees at all.   If it had concluded that attorneys’ fees were warranted under the objectively unreasonable test, the Court makes it very clear that it would have reduced the fee for a number of reasons including the fact that HarperCollins could have but refused to match the royalty offer to Ms. George made by Open Road.   Had HarperCollins done so, “there would have been no disproportionately costly litigation.”  Note 15 of slip opinion.

The case was closely watched in the book publishing industry.   Even HarperCollins’ counsel opined at oral argument that the Court’s decision will likely have a ripple effect beyond the immediate parties, “both within a publishing house like HarperCollins and amongst other trade and other publishers.”   Yet the decision provides no guidance as to other digital rights disputes concerning the interpretation of publishing contract language.  The 1971 contract at issue was found to be unambiguous with respect to its “forward looking” language which, as the Court stated, “captured” or included the e-book edition of Julie of the Wolves.   It is noted that the drafter of the 1971 contract anticipated that the technology of the publishing world may well change during the “lifetime” of the copyright which would cover many decades and incorporated appropriate language into Paragraph 20 of the 1971 contract to try and effectively cover that possibility.    Interestingly the Court relied on this wording to both: 1) favor the plaintiff (granting of the permanent injunction as a result of willful infringement); and 2) disfavor the plaintiff (by refusing to find that Open Road’s conduct was objectively unreasonable and therefore attorneys’ fees to the plaintiff were not warranted).

Regarding the attorneys’ fees aspect of the case, the take-home point may well be that, prior to asking for attorneys’ fees, particularly where the fees are clearly disproportionate to the damages value of the case, the plaintiff should evaluate just what constitutes a reasonable attorneys’ fee under the Copyright Act and previous court decisions.   Even though in this case the Court found that Open Road’s conduct was not objectively unreasonable and therefore not subject to any award of attorneys’ fees whatsoever, one cannot help but wonder what would have happened had the sought-after attorneys’ fees been considerably less.   As the Court stated, “in calculating reasonable attorneys fees’ we are mindful that while parties to a litigation may fashion it according to their purse, it is not necessarily appropriate to require the losing party to wholly compensate the prevailing party for its approach to the litigation.”   Note 15 of slip opinion where Court cites previous decisions.  Perhaps the outcome would have been different had the Court found that the period of willful infringement had been for a considerably longer period of time and/or HarperCollins’ could have proven substantial revenue loss more in line with the sought-after award of attorneys’ fees.

THE FOREGOING IS FOR INFORMATIONAL PURPOSES ONLY AND NOT LEGAL ADVICE.  YOUR READING OF THIS BLOG DOES NOT CONSTITUTE ANY ATTORNEY-CLIENT RELATIONSHIP WHATSOEVER WITH TROY & SCHWARTZ, LLC.  IF YOU ARE CONTEMPLATING AN ACTION THAT MAY HAVE LEGAL CONSEQUENCES, YOU SHOULD CONSULT WITH AN ATTORNEY OF YOUR CHOOSING.

© 2014 by Troy and Schwartz, LLC