Sunday, December 02, 2007

Freelancers, Unregistered Copyrights and Electronic Database Litigation

Freelancers suffered a very tough blow in the Second Circuit's decision In re Literary Works in Electronic Databases Copyright Litigation, --- F.3d---, 2007 WL 4197413 (2d Cir. 2007). Dissents in the Second Circuit are fairly rare, but the Second Circuit's former Chief Judge John M. Walker, Jr. wrote a fairly thorough dissent.

In 2001 the U.S. Supreme Court decided New York Times v. Tasini, 533 U.S. 483, 488 (2001) which held that section 201(c) 0f the Copyright Act does not permit publishers to reproduce freelance works electronically when the publishers lack specific authorization to do so. In the wake of that decision, the In re Literary Works litigation was commenced as a class action to vindicate the rights of freelancers whose works were taken without their permission. After years of heated negotiation, the parties agreed to a class settlement. The settlement Classes were divided into subclasses A, B and C. Subclass A consisted of freelancers who had registered their copyrights (see my post of yesterday on advantages of registration). Subclass B registered after infringement, but before December 31, 2002. Subclass C never registered their works.

As discussed in my post of yesterday: for a U.S. copyright owner, registration is a prerequisite for commencing litigation. As the In re Literary Works decision sets forth: Class A is entitled to statutory damages and attorneys fees. Class B to actual damages. Class C .. well.... there's the rub.

The Defendants claimed that Class C (unregistered copyrights) were practically worthless. So a group of objectors (holders of unregistered copyrights) objected to the class settlement, which was likely to leave next to nothing or nothing for the Class C. Watch out what you ask for: the objectors brought the issue of the court's jurisdiction to the fore, and the Second Circuit scuttled any settlement in favor of the unregistered copyright holders. Why? They had not registered.

It seems that all of the parties spend a lot of time arguing the meaning of Section 411 of the Copyright Act, which makes it a requirement that registration to occur for a federal court to have jurisdiction. To dig into the highly technical nuances of the argument, it appears to me that the dissent makes the most sense: Section 411 doesn't create the pre-existing rights and should be treated solely as an enforcement mechanism.

And in the end, the result is not only unfair, but it renders Tasini a pyrrhic victory. As In re Literary Works states: "this jurisdictional failure likely affected more than 99 percent of the claims at issue."

Why unfair? Well, freelancers (a.k.a. ink-stained wretches) traditionally beat deadlines by minutes, turned in their work, got some beer money, and lived hand-to-mouth. They owned their work, and maybe, just maybe, someday they'd turn it into a book. Of course they owned their copyright, and when they saw "Copyright New York Times" they knew that the Old Gray Lady had taken care of the formalities of registration for them.

But in a case called Morris Business Concepts, Inc., 259 F.3d 65 (2d Cir. 2001) and in a decision denying a petition for rehearing 283 F.3d 502 (2002), all of that was taken away. Why? It was held that the newspaper owns the "collective copyright" but that if a freelancer wanted to consider a copyright registered, it would have to file a separate registration to indicate that all of the rights had not been transferred to the publisher. So every time the ink-stained wretch turned in a story, he or she was also supposed to file a registration with the Copyright Office.

Clearly, 99% of the freelancers did not have that understanding. They were relying on the publisher's registration.

So when we look at the In re Literary Works decision, the "unregistered copyrights" that were settled and under discussion were copyrights claimed by freelancers in registered collective works. Since copyright is an area of "complete preemption", this is clearly an area in which Congress intended to legislate - and whether the publisher's re-publication of a story without permission is deemed a breach of contract or a copyright infringement, it seems that there is sufficient grounds for litigation over whether it is a state or federal claim to permit a federal court to exercise supplemental jurisdiction over it in the settlement context. As Judge Walker correctly noted, there is certainly a "case or controversy" to give the freelancers standing in the constitutional sense.

As Judge Walker correctly noted, "... a plaintiff alleging copyright infringement has suffered an injury-in-fact whether or not he has registered his copyright." Professor Patry's lively discussion and link to the decision.

No comments: