Copyright - Removal, Remand, Preemption and Second-Filed Actions (Ch 4,5, 7, 9)

In bringing a litigation related to copyright ownership, the question arises: what court do I belong in? Many practitioners comfortable with litigating in a local state court will likely seek to avoid federal questions and assert a state-law based claim in state court. Defendants, quickly spotting the copyright issue and seeking the benefits of federal law, both substantive and procedural, will want to get the case into federal court.

How does one get a case bounced from state court to federal court? The procedure is called removal. Read sections 1441 through 1453 of 28 U.S.C. and come right back to this post and you'll understand the basic process. Removal involves a defendant filing simultaneously very simple notices with the federal and state courts notifying the courts that you have moved the case. No court permission necessary, no motion, no application. I have described the circumstances under which removal is appropriate and provided forms in Chapter 9 of the Copyright Litigation Handbook (West 2006) titled "Removal from State Court and Preemption". Once you've made the filings, the state court judge has no power over the case, but any preliminary injunctive relief entered by the state court judge prior to removal will remain in place.

Let's say you are the plaintiff who filed the state court action. You believe that removal was improper. Your remedy is to make a motion to the federal judge who is now assigned to the case (the Clerk of the Court makes the assignment of a federal judge upon recieving the Notice of Removal). Your motion seeks a remand (that is, send it back to state court).

In most cases (not involving copyright), you can only remove a case to federal court if a federal question appears on the face of the complaint filed in state court. A defendant who has federal defenses is generally stuck in state court. Copyright is different. Most Circuit courts have explicitly adopted the "complete preemption test" based on 17 U.S.C. 301(a) (which provides that federal copyright law preempts state law). Essentially, even if the state court complaint doesn't have a copyright claim, the federal court, on the remand motion, will analyze in a two part test (1) whether the work is within the subject matter of copyright and (2) whether the rights granted under state law are equivalent to exclusive rights granted to a copyright owner.

Professor Patry's blog (No Pound of Copyright 12/27/2006) brought to my attention a Fifth Circuit case Pritchett v. Pound, --- F.3d ---, 2006 WL 3704859 (C.A. 5 (Tex.)) 12/18/2006. Professor Patry discusses the difficulties involved in determining accrual of statutes of limitations and takes issue with the 5th Circuit's analysis. When does a copyright ownership claim accrue? When does an infringement claim accrue? I discuss these issues at Chapter 4 of the Copyright Litigation Handbook.

But what I found interesting, mystifying and inspirational about the Pritchett case is that a plaintiff first went to state court seeking an accounting and royalties from sales of a book which plaintiff's deceased husband allegedly co-authored. Defendant sought and successfully obtained a remand based on the representation that "there was no ownership dispute and therefore no federal question". So the defendant was apparently stuck in state court. Apparently, the defendant simply ignored the remand and filed a second federal action seeking a declaratory judgment that defendant owned the copyrights. The original plaintiff (now the defendant) counterclaimed for an accounting. The "second-filed action plaintiff" won summary judgment on the declaratory judgment, which the 5th Circuit affirmed. Wow!

Practice Insight. The Pritchett case provides support for the proposition that one can simply ignore a remand and file a second declaratory judgment action in federal court. I discuss Cease and Desist Letters and Declaratory Judgment Actions in Chapter 5 of the Copyright Litigation Handbook. Second-filed actions usually arise where a would-be plaintiff is hit with a declaratory judgment action after an ill-advised cease and desist letter was sent to an inconvenient jurisdiction. Filing a second action under the Pritchett circumstances is a very bold move that paid off, perhaps because the record below (which I have not examined) was very sparse and the "second-action defendant" acquiesced by asserting counterclaims rather than moving for sanctions under Rule 11 of the Federal Rules of Civil Procedure.

Copyright Infringement Complaint: Selecting Defendants (Ch 6)

In a recent discussion of a major copyright infringement case with an attorney colleague, he expressed surprise that a corporate officer had been held personally liable for a copyright infringement that had been committed by a corporation.

Most of us in law school learn that the corporate shield will protect corporate officers from liability for most actions of officers, with possible exceptions such as liability for unpaid payroll, gross negligence or criminal activity. In the Copyright Litigation Handbook (West 2006), Chapter 6 deals with drafting a copyright infringement complaint. Section II covers drafting the caption and personal liability of corporate officers.

In a recent copyright infringement action, Riverdeep Interactive Learning, Ltd. v. MPS Multimedia, Inc., 2006 WL 3797962 (N.D. Cal.)(Slip Copy) 12/22/2006, a corporate officer was named personally as a defendant for copyright infringements seeking "damages against MPS and Chen for their knowing and willful infringement of RIL's copyrights." The allegations against the officer were contained in a single paragraph:

"Chen, as MPS' President and CEO, directs, controls and ratifies the actions of MPS including the unlicensed and unauthorized replication and distribution of Riverdeep software."

Mr. Chen brought a motion to dismiss pursuant to Rule 12(b)(6). He lost. The court accepted Plaintiffs argument that corporate officers "are personally liable for the corporation's copyright and trademark infringements when they are a 'moving, active conscious force' behind the corporation's infringement." (citing Novell, Inc. v. Unicom Sales, Inc., 2004 WL 1839117, *17 (N.D. Cal. 2004).

Practice Tip for Lawyers: Where an investigation reveals that there is sufficient evidence of copyright infringement to file a complaint, a plaintiff may include a very conclusory allegation such as the bolded text above to hold a corporation's top officer personally liable. Defendants who reflexively make 12(b)(6) motions should really think twice - not only may you lose, but your client may be tagged with your adversary's legal fees on the motion.

Postscript. The defendants brought a motion challenging federal subject matter jurisdiction pursuant to Rule 12(b)(1), raising a plausible argument that the case was a contract case that belonged in state court because it was a dispute between parties over a license agreement, rather than a copyright infringement case. The court engaged in the T.B. Harms analysis and rejected that argument. The defendant also brought a motion for a more definite statement under Rule 12(e) of the Federal Rules of Civil Procedure. He lost that, too. The court noted that the two instances in which a Rule 12(e) motion are proper are 1. when the claim is unintelligible or 2. where the complaint is so general that an ambiguity arises in determining the nature of the claim or the parties against whom it is being made." (citing Sagan v. Apple Computer, 874 F. Supp. 1072, 1077 (C.D. Cal. 1994).

Copyright Licensing Litigation - Motion in Limine and Summary Judgment (Ch 7,8, 14)

In Command Cinema Corp. v. VCA Labs, --- F. Supp.2d ----, 2006 WL 3357257 (S.D.N.Y.) 11/17/2006, a producer of adult films sued a film laboratory over loss of masters. Defendant VCA's motion to dismiss claims for conversion, breach of express contract and breach of implied contract was met with a cross-motion by Command Cinema for summary judgment on conversion. Simultaneously, VCA moved in limine to exclude evidence of Command's lost profits as a measure of damages and to preclude Command's claim for punitive damages. In a conference call, the court advised the parties that it was considering summary judgment on more claims than Command had requested and invited the parties to make additional submissions.

The court granted summary judgment on the breach of contract claims and dismissed claims that were duplicative or inconsistent with successful breach of contract claims (conversion, breach of implied contract). Simultaneously, the court granted in part and denied in part the Defendant's motion in limine. For one film, the court excluded evidence of lost asset value as a measure of damages, for another the court reserved the issue for trial but noted that the type of calculation - a comparison with comparable films - was "capable of determining damages with reasonable certainty." For both films, the court granted the motion in limine to the extent of precluding a request for punitive damages.

The action involves no claims under or citations to the Copyright Act. Command is a New York corporation and VCA is California-based, so the presumed subject matter jurisdiction would be diversity jurisdiction, but the opinion, which is supplemented by 105 endnotes, is silent on the jurisdictional question. Generally speaking, contracts involving copyrighted works do not belong in federal court unless they raise issues "arising under" the Copyright Act, or unless there is an independent ground for subject matter jurisdiction, such another federal question (28 U.S.C. Sec. 1331) or diversity jurisdiction (28 U.S.C. Sec. 1332).

Plaintiff copyright owner entrusted, pursuant to written contracts, Defendant laboratory with masters which were to be upgraded, duplicated as sub-masters and the original masters were to be returned to Plaintiff. Defendant returned the masters, which Plaintiff then destroyed. Following that, Defendant lost or misdelivered the sub-masters.

Applicable Rules of Procedure. Defendant's motion to dismiss was brought under Rule 12(b) of the Federal Rules of Civil Procedure. The cross-motion for summary judgment was brought under Rule 56. Motions in limine may be brought any time including during trial, usually under procedures governed by local rules or a judge's individual rules.

Practice Tip for Lawyers. Both parties wisely focused on the relevant issues: breach of contract and the scope of damages. Apparently after being warned by the judge of a possible grant of summary judgment, Defendant's lawyer made a motion in limine that reduced Defendants' potential liability and increased the chances for settlement. A motion in limine is a powerful tool to preclude or get evidence admitted prior to trial that should be seriously considered at the early stages of litigation.

Jeff Koons: Copyright Infringement and Fair Use (Ch 8, 12)

On October 26, 2006 the Second Circuit decided the case Blanch v. Koons, --- F.3d ---, 2006 WL 30406666 (2d Cir. 2006). Professor Patry's discussion of the case is here. The Second Circuit affirmed the district court's grant of a summary judgment motion in favor of an artist, Jeff Koons, who had used a portion of a photograph from a fashion magazine in a large collage that he sold to the Guggenheim Museum for $2 million. Plaintiff complained of copyright infringement. Defendants moved for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure on the affirmative defense of "fair use." The "fair use doctrine" has been codified at 17 U.S.C. Section 107.

Fair Use Doctrine. 17 U.S.C. Section 107 provides "the fair use of a copyrighted work . . . 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.

The fact that a work is unpublished shall not itself bar a finding of fair use if such finding is made upon consideration of all the above factors." (emphasis supplied).

Applicable Rule of Procedure. Rule 56 of the Federal Rules of Civil Procedure (the "FRCP") governs motions for summary judgment. Rule 56(b) provides that a defendant may "at any time" move with or without supporting affidavits with or without supporting affidavits for summary judgment. Advisory Committee Notes to the FRCP amendments made in 1946 show that the rule was permitted to permit a defendant to move immediately, without waiting to assert an answer. The Rule 56 language that was deleted in 1946 required a defendant to wait until after it served an answer.

In Blanch v. Koons, the Second Circuit noted that although the "fair use" defense is a mixed question of law and fact, it has on a number of occasions resolved fair use determinations at the summary judgment stage where there are no genuine issues of material fact.

Practice Tip for Lawyers: Fair use cases require a careful analysis of the four factors enumerated in 17 U.S.C. Section 107. Spend some time reading the cases cited by the Second Circuit. As you may note, much of the material to be submitted to a court to analyze in support of or against a fair use defense is pretty much available at the beginning of a litigation. Courts take artists "reasons" for taking or using a work extremely seriously, along with discussions of actual and potential markets. Much of the rest is essentially eyeballing the work and forming some fairly subjective opinions. The Second Circuit quoted the reason WHY Koons used the image at length including the following "By using an existing image, I also ensure a certain authenticity or veracity that enhances my commentary - it is the difference between quoting and paraphrasing - and ensure that the viewer will understand what I am referring to." The bolded language is mine, and presents a powerful argument for copying someone else's work of visual art (or even music) that will be persuasive to judges. At the outset of a case turning on fair use, consider skipping discovery and simply putting together thoughtful and detailed affidavits to move under FRCP 56. As in Blanch v. Koons, you may just get rid of the case.

To purchase the Copyright Litigation Handbook (West 2006), please go here and use OFFER NUMBER 523571.

Constitutional Challenges to Copyright: A Litigation Explosion

Constitutional challenges to copyright have been rare over the 200-plus year history of copyright legislation in the United States. According to the panelists at yesterday's Columbia Law School symposium "Constitutional Challenges to Copyright" - the challenges to the constitutionality of copyright that started 10 years ago - are not likely to abate.

I recently received an inquiry from a potential client. A couple of eighty-something grandparents in Texas were getting sued because their sixteen-year old grand-daughter had apparently downloaded music without their knowledge. Their internet account activity had been subpoenaed without their knowledge in the Southern District of New York. The amounts involved put them in fear of losing their house.

This was not the first time my office received a call like this and I'm sure it won't be the last. But the civil and criminal penalties accompanying copyright infringement, together with a deep clash in cultural values caused by technological and economic change ensure that the constitutionality of copyright protections will continue to be a hot-button topic. The Columbia symposium, organized by Professor June Besek - provided a valuable resume of where we've been and a roadmap of where the future is likely to go.

The fiercest debate arose over the "public domain" - with Professor Chris Sprigman of the University of Virginia facing heat from publishing industry skeptics from the audience over his contention that the "public domain" had a constitutional grounding. Sprigman said he believed that the Dastar v. Twentieth Century Fox Film Corp., 539 U.S. 23 (2003) was one of the most important decisions for copyright, given its affirmation of the public domain and the right to use public domain works without attribution. When Sprigman advanced an "implied" public domain theory created in 1789 when the first Copyright Act was adopted, the audience was practically shouting. Heady stuff!

In Chapter 12 of Copyright Litigation Handbook, I wrote "Public domain works are works that may be used without payment, without attribution, and without permission." I cited Dastar, a unanimous decision written by Justice Scalia for that proposition. I recall that my editor asked me why I was citing a Lanham Act case for a basic copyright proposition. I responded that it was the only place I could find it! The Supreme Court's statement of the public domain is ethically horrifying to academics, because it "legalizes" plagiarism. But it should be studied carefully, because at least one panelist used "plagiarism" as a synonym for "copyright infringement". I can use a public domain translation of Aristotle as my own quite legally. My failure to attribute the quote, however, would correctly subject me to the academic and ethical charge of plagiarism.

I suspect that the theoretical underpinnings of the public domain may be grounded in the Eleventh Amendment and the basic common law proposition that you are free to copy anything that the law does not forbid you to copy or to communicate in any ways not prohibited by law. Poetry was near to the hearts of our Founding Fathers and I doubt they expected that a poet would expect compensation for a poetry reading, which was a popular pastime. Today's rappers have a different set of expectations.

To purchase the Copyright Litigation Handbook (West 2006), please go here and use OFFER NUMBER 523571.

Defense of Equitable Estoppel in Copyright Litigation (CLH Ch 12)

Last weekend's visit to the Sagamore for the annual meeting of the New York State Bar Association's IP Law Section was well worth it. My publisher West arranged for a book signing. Special thanks to Debra Resnick of FTI Consulting, Joyce Creidy of Thomson Compumark, Marc Lieberstein of Pitney Hardin and Cathy Teeter of NYSBA for the warm welcome and the kind patronage. The Copyright Litigation Handbook t-shirts were a big hit, and several bar associations expressed interest in having me speak to their members.

On September 21, 2006, Judge Cedarbaum in the Southern District of New York made an interesting decision involving Ian Fleming's Chitty Chitty Bang Bang. Legislator 1357 Ltd v. Metro-Goldwyn-Mayer Inc., 2006 WL 2709783. Fleming wrote it just before he died. Before he died, he assigned the publishing and film rights to it to separate trusts, but the story was not published prior to his death. Later, a film was based on this short story. A film based on a copyrighted work is known as a "derivative work".

Judge Cedarbaum's decision decides fascinating issues of whether the short story was "posthumous" and interpretes the Copyright Act's provisions on heirs recapturing copyrights. Professor Patry has discussed those elements of the decision here. I would like to focus on that portion of the opinion discussing the defense of equitable estoppel. My recently-published Copyright Litigation Handbook discusses equitable estoppel in Chapter 12 "Answer and Defenses". Judge Cedarbaum carefully distinguishes between the defenses of laches and estoppel and notes that it is an open question whether or not the defense of laches is available in the Second Circuit.

Overview: Rule 12(b)(6) of the Federal Rules of Civil Procedure (FRCP) requires that certain defenses be asserted in the answer to a complaint, except for certain defenses that may be asserted in a motion, at the option of a pleader. Rule 8(c) of the FRCP provides the checklist of such defenses and specifies estoppel. The motion for partial summary judgment before Judge Cedarbaum was made under FRCP 56 which requires the court to examine all admissible evidence to determine whether "there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." (citations omitted).

Decision: Plaintiffs moved for partial summary judgment. Defendants resisted, based on a defense of laches. The court found that defendant's laches arguments raised instead a "genuine issue of disputed fact" (and therefore a potentially valid defense of equitable estoppel) due to representations by plaintiffs after Fleming's death and lengthy delay in filing the action, as well as defendants' good-faith belief that plaintiffs viewed them as the owners of the film rights in the Work. The court noted that the defense of equitable estoppel applies when "the party to be estopped had knowledge of defendant's infringing conduct, and either intended that his own conduct be relied upon or acted so that the party asserting the estoppel has a right to believe it was so intended. Additionally, the defendant must be ignorant of the true facts and must rely on plaintiff's conduct to his detriment." Additionally "[u]nlike laches, equitable estoppel can be used to prevent a plaintiff from recovering prospective as well as past damages." (citations omitted).

The court contrasted a line of case law permitting equitable estoppel in copyright cases with a line of cases rejecting laches as the equitable equivalent of a statute of limitations, and noting a three-way split in the various circuits on whether and how the laches defense is available, together with a discussion of the Second Circuit cases showing that the Second Circuit hasn't reached the question.

Practice Tip for Lawyers: Judge Cedarbaum's opinion provides a strong hook for defendants who can present solid evidence that they have published believing in good faith that they were entitled to do so. It also serves as a warning to defendants in copyright litigation that careful pleading of defenses is essential. At least in the Second Circuit, equitable estoppel may provide the most powerful defense.

To purchase the Copyright Litigation Handbook (West 2006), please go here and use OFFER NUMBER 523571.

New York State Bar Association IP Law Section Book Signing

The New York State Bar Association IP Law Section has invited me to its annual meeting at the Sagamore Hotel on Lake George to do a book signing. My publisher, West has sponsored the coffee break, and I'll be signing books and meeting and greeting there. You can find the meeting program, which runs from October 12-15 here. Auspiciously, my very first book signing is scheduled on Friday the 13th. West will be raffling off an Ipod to celebrate the occasion, so make sure to stop by and say hello.

The IP Law Section has over 2,000 members and is one of the fastest-growing sectors of the New York State Bar Association, so this is quite an honor. The program looks diverse and stimulating, so I look forward to picking up my 9.5 CLE credits while enjoying the foliage.

I plan to visit other bar associations and trade organizations to give CLE programs and member education programs. I welcome invitations to speak or to participate in a panel.

If you can't make the book signing, you can still order the Copyright Litigation Handbook directly from West here. Please use OFFER NUMBER 523571.

Copyright Litigation Handbook - Summary of Contents

My new book: Copyright Litigation Handbook covers the following topics:

Ch 1. Copyright Law: A Litigation Perspective
Ch 2. The Client Interview and Initial Investigation
Ch 3. The Copyright Office: A Litigation Perspective
Ch 4. Calculating Dates Prior To Commencing Litigation
Ch 5. Cease and Desist Letters and Declaratory Judgment Actions
Ch 6. Drafting the Infringement Complaint
Ch 7. Copyright Ownership and Licensing Litigation
Ch 8. Motions Attacking the Complaint
Ch 9. Removal from State Court and Preemption
Ch 10. Class Actions
Ch 11. Injunctions and Seizures
Ch 12. Answers and Defenses
Ch 13. Discovery
Ch 14. Evidence and Experts
Ch 15. Jury Instructions
Ch 16. Damages and Profits
Ch 17. Costs and Attorneys Fees

The appendices include the Copyright Act, the Federal Rules of Civil Procedure and the Federal Rules of Evidence and a number of forms. It's a paperback meant to be kept deskside or tossed in a briefcase to bring to the courtroom or conference room as a quick reference for client counseling or finding answers for the litigator under time pressure.

When ordering it here, please use Offer number 523571.

Copyright Litigation Handbook - Available For Purchase

Copyright Litigation Handbook(2006) is now available for purchase through Thomson West online by clicking here. My full author bio is available here. Please use the OFFER NUMBER 523571 when ordering, or when you ask your law firm's librarian to pick up a copy.

I hope that purchasers of the work will give me constructive feedback to enable me to better serve readers of future editions. I plan to post on developments in copyright litigation here and to share some thoughts on the Federal Rules of Civil Procedure, the Federal Rules of Evidence and litigation tactics and strategy.