Changing Software Vendors: Can Leaving Old Software On Your Computer Be Copyright Infringement?

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Quantum Systems Integrators, Inc. v. Sprint Nextel Corp., 2009 WL 1931196 (4th Cir. July 7, 2009) deals with a company changing software vendors. In this case, Sprint stopped using Quantum's software. After entering into a settlement agreement, a number of Sprint's computers inadvertently were left with copies of Quantum's software on them. When Sprint employees rebooted the computers, Quantum's software was automatically loaded into the RAM. Sprint employees didn't realize that the Quantum software was being loaded and didn't actually use it. Quantum received messages from the computer showing that its software was being accessed.

After a jury trial, the district court awarded $69,000 for eight infringing computers and almost $400,000 in attorneys fees. For each computer, the jury awarded the license fee ($8,700 for each computer). The Fourth Circuit found that the district court properly rejected Quantum's attempt to obtain a portion of Sprint's profits, holding that Quantum had failed to sustain its burden of proof that any of Sprint's profits were "reasonably related to" the automatically generated RAM copies. The court also rejected Sprint's argument that it did not engage in "volitional" copying, finding that the RAM copies satisfied the fixation requirement and that since the computers were Sprint's the case was not analogous to a passive ISP or third party that does not have control over what passes through its system.

The Fourth Circuit upheld the award of actual damages but remanded for a determination of the reasonableness of the attorneys fees, noting Quantum's "minimal success" and the apparently disproportionate amount of attorneys fees awarded, in line with its case law applying Fogerty v. Fantasy Inc., 510 U.S. 517 (1994).

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German and Other Foreign Heirs in New York: Standing To Sue Clarified in Andrew Lloyd Webber Picasso Case

Schoeps v. Andrew Lloyd Webber Art Foundation, N.Y.L.J. August 14, 2009 courtesy Amlawdaily here. The heirs of Paul von Mendelssohn-Bartholdy suffered a setback in New York's Appellate Division, First Department when the court found that Julius Schoeps, a German heir seeking the return of an artwork taken from Mendelssohn-Bartholdy under duress during Nazi rule in Germany.

Nazis looted tens of thousands of artworks by forcing Jews to "sell" the works and "paying" the money into blocked accounts that would be stolen by the Nazis or forced Jews to pay confiscatory foreign exchange rates of up to 96% if they wanted to flee Nazi Germany. So for example if a Jew wanted $4 in U.S. currency, he would have to pay $100 worth of Reichsmarks to obtain it.

Schoeps, an heir under German law of Mendelssohn-Bartholdy, commenced an action in New York without complying with Section 13-3.5 of New York's Estates Powers and Trusts Law ("EPTL") titled "Action or proceeding by foreign personal or other legal representative.

The problem is that in Germany and certain other countries, there is no such thing as an "estate" in the sense that we know it here. Heirs may become so by operation of law and may not have letters of administration as is the practice in common law jurisdictions. For heirs inheriting in such jurisdictions, the practice is to either obtain letters in New York or obtain an affidavit from a foreign legal expert and the heirs themselves swearing to their legal entitlement in that foreign jurisdiction.

In Schoeps v. The Museum of Modern Art, 594 F. Supp.2d 461 (S.D.N.Y. 2009), Mr. Schoeps got a much better result based on the opinion of a foreign legal expert that Judge Rakoff took into account.

As I outlined in my speech at the Prague Conference on Holocaust-Era Assets in June (view video here), many legal obstacles arise for heirs pursuing artworks looted in the Nazi era. It is tough legal work, not for the faint of heart. And unfortunately, apart from some excellent works published in the past there is very little scholarly historical work in this area (a recent exception is Martin Dean's excellent Robbing the Jews: The Confiscation of Jewish Property in the Holocaust, 1933-1945 (Cambridge 2008). There is almost no legal scholarship in this area (I took the foreign exchange example above from Dean's book).

The world's greatest robbery is hiding behind the world's greatest murder.

Our current court system - in decisions around the country -- seems to consider that six million Jews gave up their belongings "voluntarily" for next to nothing and seems to ignore postwar German and Austrian laws (drafted by the Allies) nullifying such transactions.

Although it appears that Mr. Schoeps did not encounter an insurmountable hurdle (the requirement of an affidavit of a foreign legal expert), in no other context do owners of stolen property find such a hard time getting it back. As I argued in Prague, if someone steals your car, you call the police. When a Jew wants stolen art back, the rules seem to change, and the cops don't have the education or the interest to cope with the problem.

Nazi Looted Art in U.S. Museums: Amb. Stuart Eizenstat's Call for a US Commission

Ambassador Stuart E. Eizenstat was appointed by Secretary of State Hillary Clinton to lead a delegation to the Prague Conference on Holocaust-Era Assets. Eizenstat was the principle architect of the 1999 Washington Conference on the same topic. He authored the book Imperfect Justice and has been instrumental in achieving international solutions that afford restitution to Holocaust victims.

In the PBS video linked to below, Eizenstat calls for the U.S. to create a commission of experts to rule on ownership issues and decries U.S. museums that are asserting "technical defenses" such as statutes of limitations against Holocaust victims and their heirs.
Check out http://www.pbs.org/newshour/art/blog/2009/07/conversation-stuart-eizenstat.html

For the full text of what came out of the Prague Conference, known as the Terezin Declaration, click here.

Nazi Looted Art at Oberlin College and Other U.S. Museums: Prague Conference on Holocaust-Era Assets

In late June I was invited to speak on a panel of legal experts on artwork looted by the Nazis. My topic was legal obstacles to the recovery of stolen artworks.

The image you see here is of an artwork by the artist Egon Schiele called Girl with Black Hair. Every major Schiele expert in the world - Jane Kallir, Eberhard Kornfeld and Rudolph Leopold - has said that this artwork came from Fritz Grunbaum's collection. Yet Oberlin College refuses to return it - or even to share their research or conclusions about where they believe it came from. Oberlin's website shows that the work mysteriously surfaced in Switzerland in 1956 - and stops there.

U.S. museums and liberal arts institutions concealing the origins of their artworks is one of the biggest obstacles to researchers being able to restitute artworks to the Jews and other Nazi persecutees from whom they were stolen. As Holocaust victims and their descendants die, U.S. museums simply wait, knowing that they have stolen artworks in their collections. In his 2006 testimony to Congress, AAMD Director James Cuno estimated the number of potentially Nazi-looted works in U.S. museums at "tens of thousands".
It is astonishing that U.S. museums can engage in this Holocaust denial and feel no backlash. Shame on Oberlin College. Its Dean should be tossed out on his ear.
Amb. Stuart Eizenstat supports a U.S. Art Restitution Commission. Good for him, and not a moment too soon.
You can find my full speech in Prague at the link below.

http://artstolenfromfritzgrunbaum.wordpress.com/category/speech-at-holocaust-conference/live-recorded/
Disclosure: I represent the heirs of Fritz Grunbaum, a Jewish cabaret performer who was murdered by the Nazis at Auschwitz.

The Federal "Discovery" Rule: Can you sue for infringements occuring more than three years ago?

In Graham v. Haughey, --- F.3d ---, 2009 WL 1564223 (3d Cir. June 5, 2009), the Third Circuit considered the question of whether a victim of copyright infringement may sue for infringements that occurred over three years prior to the commencement of the lawsuit.

At issue is the federal "discovery" rule for accrual of an action versus the "injury" rule. I discuss this distinction in Chapter 5 of my Copyright Litigation Handbook (West 4th Ed. 2009). I was pleased to see that the Third Circuit discussed the cases that I had cited on this conflict (by the way, this fourth edition of Copyright Litigation Handbook just shipped last week).

The question is whether a cause of action for copyright infringement "accrues" when the infringement takes place (the "injury" rule) or whether it accrues when the victim, exercising reasonable diligence, discovers the infringement (the "discovery" rule). Most circuits have ruled that the federal discovery rule applies. But some district courts in the Second Circuit, relying on a powerfully-reasoned decision by Judge Kaplan in Auscape Intern. v. National Geographic Soc., 409 F. Supp.2d 235 (S.D.N.Y. 2004), have applied the "injury" rule.

To illustrate: under the injury rule, a court would either dismiss or grant summary judgment on a pleading that alleged infringements over three years prior to the action being filed.

Under the discovery rule, a court would permit equitable defenses such as tolling for fraudulent concealment and factfinding to determine whether a plaintiff could have, did, or should have discovered infringements over three years old prior to filing suit.

These rules relate to "accrual" of the action. The statute of limitations is always three years under 17 U.S.C. 507(b).

Graham v. Haughey determined that the "discovery" rule applies and that the plaintiff could sue on infringements that occurred over three years prior to the commencement of the action. Graham v. Haughey digs into the legislative history and consists of a point-by-point refutation of the Auscape decision. It also has an excellent discussion of issues relating to burdens of proof on damages, the nexus neccessary for damages to be attributable to copyright infringement, and the role of a judge in reviewing a jury verdict of copyright infringement.

Graham's facts are interesting because the infringement was committed by an ex-employee. The new employee used the infringing documents to generate millions in profits, but the publications were in proposals kept confidential by both the infringer and the recipient of the proposals for many years. After these secret transactions were finally revealed, the copyright owner sued and obtained a jury verdict in excess of $16 million.

This case involved an ex-employee breaching a contract not to retain or use copyrighted materials, so is an important cautionary tale for both new employers who don't want millions in liabilities and old employers who wish to protect their materials.

This is the odd case where a "publication" was not "public".

The Third Circuit remanded on apportionment issues.

Graham's counsel David J. Wolfsohn of Philadelphia's Woodcock Washburn (who was successful on the appeal and is pictured above) informs me that the matter is in abeyance pending Haughey's cert petition (due Sept 3). Haughey was represented by Floyd Abrams of Cahill Gordon & Reindell.