Monthly Archives: March 2013

Entertainment Law Update Podcast Ep. 39 – Holmes, Zorro and the Tin Man walk into a bar…

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In this Episode:

  • Ed Sullivan intro of Jersey Boys is fair use
  • Kirtsaeng – First Sale has extraterritorial effect
  • Sherlock Holmes copyright questions
  • and more…

 

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U.S. Supreme Court: Foreign Produced copies are subject to First Sale Doctrine

Supreme Court Ruling protects student's right to sell foreign purchased copies for profit.

On March 19, 2013, the U.S. Supreme Court, in an opinion by Justice Breyer, ruled that foreign-made copies of works protected under the U.S. Copyright Act are subject to the “First Sale Doctrine”. The decision comes as a blow to U.S. publishers and other content creators who wish to exercise greater control over distribution (and pricing) of works they own.

What is the First Sale Doctrine?

The First Sale Doctrine is a provision of U.S. Copyright law (17 U.S.C., Section 109(a)) which gives the owner of a lawfully produced copy of a copyrighted work may freely dispose of that copy. This includes the right to re-sell the copy.

Thus, the creator of a work, the owner of the copyright gets to sell each copy once. After copies are in the chain of commerce, the copyright holder can no longer exercise control over how they're transferred, sold or traded between consumers.

(computer software makers have attempted to address this through shrink-wrap and click-wrap licensing arrangements, but have found limited success when Courts have been asked to determine whether software is “sold” or “licensed” – see, e.g., Vernor v. AutoDesk)

Wiley Publishing v. Kirtsaeng

When Supap Kirsaeng, a native of Thailand came to the U.S. to study, he discovered that the text books he was using were far more costly in their U.S. Editions than the exact same books he could purchase in his home country and elsewhere abroad. Like any saavy entrepreneur, he had family and friends overseas purchase quantities of such books, which he then sold on ebay, turning a neat six-figure profit.

When Wiley Publishing, the copyright owner of the works in question learned of this, it, predictably, sued. At trial, a jury awarded Wiley $600,000, and Kirtsaeng appealed.

Wiley's argument was that the First Sale Doctrine only applies to works originally made and sold within the U.S. (i.e., under U.S. Copyright Law). This notion is supported, Wiley claimed, by the existence of other provisions in copyright law designed to allow copyright holders to control imports.

Kirtsaeng argued that the law's wording has no such geographic limitation, and spoke of a “parade of horribles” if the First sale doctrine were to be expanded as the plaintiff's proposed.

The Court's ruling

The Justices voted 6-3 in favor of Kirtsaeng's position. In his lengthy opinion, Justice Breyer held that “the first sale doctrine applies to copies of a copyrighted work lawfully made abroad.” Explaining further, the opinion states that “to interpret [the statute] geographically would mean that anyone who buys a bumper sticker in Canada, Europe or Asia couldn't display it in America” or that “a teacher could not use a copy of a film during class if the copy was lawfully made in Canada, Mexico, Europe, Africa or Asia.”

The Dissenting View(s)

The Justices dissenting in the case were Ginsburg, Kennedy and Scalia, who view the “parade of horribles” envisaged by Kirtsaeng's counsel and adopted by the Court as “largely imaginary”, and unlikely to manifest in the real world. They go on to warn that the ruling has fundamentally reduced the significance of the Copyright Act's illegal importation clause.

Conclusion

The case has obvious ramifications for the publishing industry, but also for the music, film, and technology industries, all of which depend on the ability to protect their intellectual property. An MPAA spokesperson is quoted expressing concern that the decision will hinder U.S. Businesses' ability to compete overseas, and will harm the U.S.' long-term economic interests.

Entertainment and I.P. Lawyers are divided on whether the Court has held correctly. If you are the owner of intellectual property assets, such as motion pictures, books, or other content, you'll want to examine this ruling's ramifications for yourself.

It's not, however, time to panic. The First Sale Doctrine applies only to lawfully manufactured copies. (i.e., those made under a license). It does not permit unauthorized copies to be made or distributed, nor does it limit the rights of public display or performance. Ultimately, then, the Court's ruling will have little or no impact on the right of a copyright owner to pursue bootleggers and other infringers. Even those who import their goods into the U.S. Anti-Counterfeiting law remains strong in that arena.

What do you think?

Did the Supreme Court come to the right conclusion?

Will this ruling have the dire impact on U.S. Content Industries that Wiley and the MPAA predict?

Should Congress step in to clarify the law, possibly altering the operation of the First Sale Doctrine?

Share your thoughts in the comments!

 

Jersey Boys’ use of Ed Sullivan Clip is fair use

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Jersey Boys' use of Ed Sullivan Clip is fair use

Last week, in an interesting (and rare) theatre law case,  the 9th Circuit Court of Appeals affirmed a district court's judgment in favor of the company producing the Broadway hit musical  Jersey Boys.  SOFA Entertainment, Inc., owner of the Ed Sullivan Show footage had sued Broadway Producers , Dodger productions, Inc.,  over the show's use of a 7-second clip from a January 1966 episode in which Sullivan introduced the pop singing group.

The Court, in its ruling expressed skepticism over the plaintiff's position, and conducted the usual fair use analysis

Four Fair Use Factors:

Purpose and Character of the alleged infringing use.

Interestingly, the 9th circuit followed the trend of courts in such case to focus this examination on whether the use was “transformative,  holding that it was, since the use was incorporated into the musical as a “historical anchor”  pointing to “an important moment in the band's career

The Nature of the Copyrighted Work

On this second factor, the Court rejected SOFA's claim that Sullivan's “trademark gesticulation and style” were themselves entitled to copyright protection, going on to hold that it was actually “doubtful” that the brief clip is entitled to copyright protection. (a point with which I disagree and find troubling.  The court didn't need to go this far to reach its ultimate conclusion.)

The Amount and Substantiality of the Portion Used

Here is where SOFA's case really falls apart.  In fact, the plaintiff even conceded that the clip used was not quantitatively significant, but instead argued that it included “one of the central and most beloved parts of the Ed Sullivan Show”.  The Court didn't buy it, holding that the footage didn't contain any “qualitatively significant expression”.

Impact on the Market for the Original

The court kept it brief, finding that this factor favored a finding of Fair Use because  “Jersey Boys is not a substitute for the Ed Sullivan Show”, essentially ignoring the argument that SOFA's business is founded on obtaining fees for licensing content from its extensive library.  (Sofa had presented almost no evidence on this point in its pleadings).

Award of Attorney Fees

The Court also affirmed the district court's order granting attorneys' fees to Dodger.  The Court found that SOFA should have known that it had little chance of success.

This case, though straying a bit from current copyright jurisprudence, does seem to continue the trend toward requiring copyright owners to consider carefully before pursuing questionable  claims.

Read the full opinion here.

 


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The Royalty Pool

What is the Royalty Pool? Correction:  ( a typographic error in the mathematics has been corrected below since the original publication of this article) One of the most confusing terms in theatrical production agreements is the discussion of the “Royalty Pool”. This provision in most Broadway and Off-Broadway production contracts, and increasingly in other commercial… Continue Reading

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