Ex©lusive Rights

The Supreme Court granted cert in Reed Elsevier v. Muchnick  yesterday.  Here’s a quick rundown on the case.

New York Times Co. v. Tasini:

Our story begins about a decade ago.  In New York Times Co. v. Tasini, six freelance authors brought a copyright infringement suit against a group of publishers including the New York Times, Newsday, Time and LexisNexis. The freelancers were hired as independent contractors to write articles for the news outlets.  The publishers licensed the articles to electronic databases such as LexisNexis.

17 U.S.C. 201(c) states the following:

“In the absence of an express transfer of the copyright or of any rights under it, the owner of copyright in the collective work is presumed to have acquired only the privilege of reproducing and distributing the contribution as part of that particular collective work, any revision of that collective work, and any later collective work in the same series.”

The freelancers claimed that, under 201(c), they only licensed their works for use as a contribution in newspapers and not in electronic databases.  In 2001, the Supreme Court agreed, finding that if  the publishers wanted to include the articles in electronic databases they needed to have had obtained specific authorization to do so.

Negotiations and settlement:

Following the ruling in Tasini, the National Writers Union brought a consolidated copyright class action against a group of forty publishers.  The sides engaged in four years of negotiations before reaching an industry-wide settlement.  The settlement divided the authors into three groups:

1. Category A: copyrights that were registered prior to any infringement;
2. Category B: copyrights that were registered after the infringing reproduction but before December 31, 2002;
3. Category C: copyrights registered after December 31, 2002 or not registered at all.

The settlement agreement then allocated damages per group:

1. Category A claimants received a flat fee;
2. Category B claimants received the greater of either a flat fee or a percentage of the original price of the work;
3. Category C claimants also received the greater of either a flat fee or a percentage of the original price of the work.  However, if the cost of all claims (plus the cost of notice, administration, and attorney’s fees) exceeded $18.5 million, then the amount paid to Category C claimants was reduced – potentially to zero.

The District Court approved the settlement under Rule 23.

The Second Circuit:

Objectors from Class C appealed the approval of the settlement on the grounds that it was inadequate and unfair to Category C claimants and that the disparate treatment of Category C claimants illustrated that named plaintiffs, who each possess at least some registered copyrights, did not adequately represent those absent class members who possess only unregistered copyrights.   The Second Circuit raised the issue of jurisdiction sua sponte: whether the S.D.N.Y. lacked subject matter jurisdiction to approve any settlement that includes a release of copyright claims for unregistered works.

17 U.S.C. 411(a) states in part:

[N]o action for infringement of the copyright in any work shall be instituted until registration of the copyright claim has been made in accordance with this title [17 U.S.C. Sects. 101 et seq.] [emphasis added]

The Defendants of the settlement argued that for federal question jurisdiction to arise under the Copyright Act, only one of the classes needed to have members who had registered.  Judges Ralph K. Winter, Jr. &  Chester J. Straub rejected this argument and found that each claim in a certified class must be registered for federal question jurisdiction to arise under 411(a).

Judges Winter & Straub  further held that the text of 411(a) precluded  the use of supplemental jurisdiction to grant jurisdiction to Class C.  Thus, the Second Circuit vacated the order approving the settlement.

Judge John M. Walker, Jr. dissented on the grounds that since “Congress passed § 411(a) to facilitate the enforcement of copyrights, . . . compliance with § 411(a) is a mandatory prerequisite to the accrual of a cause of action for damages, but not a prerequisite to the possession of constitutional standing.”  Judge Walker found that the suit fell “within the ambit of . . .  Denney v. Deutsche Bank A.G., 443 F.3d 253 (2d Cir. 2006), that not all members of a settlement-only class must possess a valid cause of action under the applicable law at the time of settlement.”

The cert petition:

The Defendants of the settlement argued for certiorari on three grounds:

• Broad releases are often necessary to achieve complex settlements; the power to settle cases necessarily entails the power to approve releases of claims beyond the approving court’s jurisdiction;
• There is tension between the Second Circuit’s decision and the Supreme Court’s expectation in Tasini that “[t]he parties (Authors and Publishers) may enter into an agreement allowing continued electronic reproduction of the Authors” works”;
• The settlement provides a strong public benefit.

Documents:

• Brief for the United States as Amicus Curiae Supporting Vacatur and Remand
• Merit Brief for petitioner Reed Elsevier Inc., et al.
• Merit Brief for Respondent Pogrebin, et al., in Support of Petitioner Reed Elsevier Inc., et al.
• Petition for Writ of Certiorari
• Response to Petition for a Writ of Certiorari
• Brief of Respondents in Support of Petitioners
• In re: Literary Works in Elec. Databases Litig., 05-5943-cv(L); 06-0223(CON) (2d Cir. Nov. 29, 2007)
• In re: Literary Works in Elec. Databases Litig. (2d Cir. Brief for Defendants-Appellees)
• In re: Literary Works in Elec. Databases Litig. (2d Cir. Brief for Objectors-Appellants)
• New York Times Co. v. Tasini, 533 U.S. 483 (2001)