Category Archives: Jurisdiction

9th Cir. provides gloss on work-for-hire analysis in case involving data conversion claim

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Shourin Sen - 14 April 2010 – 1:33 pm
Filed under Jurisdiction, Ownership

JustMed, Inc. v. Byce, 07-35861 (9th Cir. 2010), on appeal from JustMed, Inc. v. Byce, 05-cv-00333-MHW (D. Idaho 2010) (judge magistrate decision finding, inter alia,  conversion of data).

JustMed was a two man tech startup that was attempting to bring a hands-free digital voice larynx to market.  The defendant-counterclaimant was hired to revise and complete the source code for the product. The defendant began working full time on the code, and was paid in stock and not wages. The parties never entered an employment or independent contractor agreement (the company generally did not keep formal records other than a series of notebooks). The defendant also never filled out an I-9 employment verification or W-4 tax withholding form for much of the relationship, which lasted for a number of years. The company never issued the defendant a W-2 wage statement, withheld taxes, paid workers’ compensation or unemployment insurance, provided benefits, or reported the employment to the state. The defendant lived in a different state than the company and worked from home setting his own hours, and the company did not tell him how to spend his days.

The defendant was included in JustMed’s company profile brochure and had a business card. The defendant also updated the company website and attended conferences, marketing meetings, and demonstrations on behalf of JustMed.

The relationship between the owner of the company and the defendant soured when the defendant discovered a spreadsheet showing that there was a large disparity in the shares owned by him and by the President of the company, and when his finances became tenuous due to the lack of monetary payment. The company then collected tax paperwork from the defendant and issued three checks, which were never cashed. At that point, the defendant changed the copyright notice on the source code so it reflected his name, and deleted all copies of the source code from JustMed’s computers.

JustMed filed in state court alleging a series of state law claims including, among other things, conversion of the source code and misappropriation under the Idaho trade Secrets Act. The defendant removed to federal court asserting that the case required determination of ownership of the software under the Copyright Act, and later filed a counterclaim seeking a declaratory judgment that he owned the copyright in the source code.

Jurisdiction

The Ninth Circuit raised the issue of whether it had jurisdiction sua sponte. It’s important to remember, when accessing the court’s analysis, that the defendant’s counter-claim regarding copyright ownership does not impact jurisdiction. Courts look to the factual allegations underlying the well-pleaded complaint, and only the complaint, to determine whether a case arises under the federal Copyright Act. Holmes Group, Inc. v. Vornado Air Circulation Systems, Inc., 535 U.S. 826 (2002).

The Circuit found that JustMed was required to “prove it owned the source code to prevail on its trade secret and conversion claims, and that the ownership rights under the Copyright Act overlap with those constituting common law ownership.” The Circuit thus found that the allegations “directly implicate” and arise under the federal Copyright Act. This is an interesting extension of the findings in Community for Creative Non-Violence v. Reid, 490 U.S. 730 (1989), which the Circuit relied upon as precedent. CCNV was a dispute over copyright ownership. JustMed v. Byce, in contrast, was a dispute involving trade secret and common law (do we have a name for these?) rights in the data that was influenced by the issue of copyright ownership.

Work made for hire inquiry

The Circuit’s analysis of whether the work was made for hire also contained a substantive gloss on existing case law. Copyright usually vests in the author or authors of the creative work. The Copyright Act contains an exception to this general provision where, under 17 U.S.C. 201(b) (“works made for hire”),  “the employer or other person for whom the work was prepared is considered the author” and rightsholder. The Supreme Court found in CCNV that when “Congress uses the terms “employee,” “employer,” or “scope of employment,” it means to incorporate principles from the general common law of agency. Accordingly, “the hiring party’s right to control the manner and means by which the product is accomplished” is the central inquiry here. JustMed, Inc. v. Byce, 07-35861 (9th Cir. 2010) (citing CCNV, 490 U.S. at 740-4).

The Circuit found that the district court did not err in holding that the source code was a work made for hire. The Court noted that “as a small start-up company, JustMed conducted its business more informally than an established enterprise might. This fact can make it more difficult to decide whether a hired party is an employee or an independent contractor, but it should not make the company more susceptible to losing control over software integral to its product.” Among the Circuit’s more interesting findings:

JustMed’s treatment of Byce with regard to taxes, benefits, and employment forms is more likely attributable to the start-up nature of the business than to Byce’s alleged status as an independent contractor. The indications are that other employees . . . were treated similarly. Insofar as JustMed did not comply with federal and state employment or tax laws, we do not excuse its actions, but in this context the remedy for these failings lies not with denying the firm its intellectual property but with enforcing the relevant laws.

§411(a) does not restrict a federal court’s subject-matter jurisdiction, Supreme Court

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Shourin Sen - 3 March 2010 – 9:00 am
Filed under Jurisdiction, Registration, Supreme Court

On Tuesday, the Supreme Court reversed the Second Circuit and found that 17 U.S.C. 411(a) is merely a claim-processing rule, not a restriction on a federal court’s subject matter jurisdiction. I’ve discussed the background on this case a couple of times previously. The opinion was some of what I expected (very short, unanimous judgment, no ruling on whether district courts should or must dismiss an infringement claim brought on an unregistered work sua sponte, no discussion of the role of registration, no statement on the merits of the settlement) and some of what I didn’t expect (Thomas writing for the Court, joined by Roberts, Scalia, Kennedy and Alito, with a Ginsburg concurrence, joined by Stevens and Breyer.) Sotomayor recused herself from the case because she was the presiding district court judge in NY Times v. Tasini, the dispute underlying Reed Elsevier v. Muchnick.

This could have been a landmark copyright case if the Court had delved into a description of copyright registration or tried to answer whether registration was a hard-line requirement or more malleable. The Court avoided these evaluations, wisely in my humble opinion, and constrained its background discussion and analysis. Registration plays such a foundational role on so many issues in copyright that dicta and ancillary findings probably would have been twisted in all types of ways downstream. It  seems better to leave play in the joints on many of the ancillary issues and push them to district and appellate courts, even if the outcomes will sometimes be inconsistent.

William & Mary Professor Scott Dodson on the civil procedure aspects of the case at Civ Pro and Federal Courts Law Blog. The majority and concurring opinion agreed that the two integral cases were Arbaugh v. Y & H Corp., 546 U. S. 500 (2006) and Bowles v. Russell, 551 U.S. 205 (2007). Both agreed that a passage from Arbaugh was controlling:

If the Legislature clearly states that a threshold limitation on a statute’s scope shall count as jurisdictional, then courts and litigants will be duly instructed and will not be left to wrestle with the issue. But when Congress does not rank a statutory limitation on coverage as jurisdictional, courts should treat the restriction as nonjurisdictional in character. Applying that readily administrable bright line to this case, we hold that the threshold number of employees for application of Title VII is an element of a plaintiff’s claim for relief, not a jurisdictional issue.” 546 U. S., at 515–516 (citation and footnote omitted). [Italics added.]

The majority opinion and concurring opinion, however, conspicuously differed in their quotations from Arbaugh. Justice Thomas, writing for the majority, did not include the “bright line” language from Arbaugh that I italicized above. Justice Ginsburg, concurring, embraced the phrase “bright line” in four different places.  Linguistics aside (but words matter) both the majority and concurring opinion seemed to apply the test from Arbaugh as the first and primary benchmark.

The second case both the majority and concurring opinion used prominently was  Bowles v. Russell, 551 U.S. 205 (2007). Justice Thomas characterized Bowles as standing for the proposition that “context, including this Court’s interpretation of similar provisions in many years past, is relevant to whether a requirement as jurisdictional.” Applying Bowles to Reed, the majority found that  §411(a)’s historical treatment was “jurisdictional,” and a “factor in the analysis,” but “not dispositive.” Found Justice Thomas, “The other factors discussed above demonstrate that §411(a)’s registration requirement is more analogous to the nonjurisdictional conditions we considered in Zipes and Arbaugh than to the statutory time limit at issue in Bowles.”

Justice Ginsburg, concurring, viewed Bowles as conflicting with Arbaugh, but found that it was possible to reconcile the case if it’s read as ” relying on a long line of this Court’s decisions left undisturbed by Congress.” Union Pacific R. Co. v. Locomotive Engineers and Trainmen Gen. Comm. of Adjustment, Central Region, 558 U. S. ___, ___ (2009) (slip op., at 13) (citing Bowles, 551 U. S., at 209–211).” Noted Ginsburg, “The same is true of our decision, subsequent to Bowles, in John R. Sand & Gravel Co. v. United States, 552 U. S. 130 (2008).”

Justice Ginsburg found that the judicial history interpreting 411(a) did not satisfy a Bowles analysis. Justice Ginsburg noted that the two hundred opinions on the topic were almost all “‘drive-by jurisdictional rulings’ thatshould be accorded ‘no precedential effect,’” Arbaugh, 546 U. S., at 511 (quoting Steel Co. v. Citizens for Better Envi-ronment, 523 U. S. 83, 91 (1998)); see Arbaugh, 546 U. S., at 511–513; ante, at 5–6.

So, it would appear that the majority and concurring opinions were distinguishable along a couple of fronts:

  • The majority opinion rejected the phrase “bright line” rule from Arbaugh to describe the case’s test, while the concurring opinion embraced it.
  • The majority opinion seemed to imply that all context (“context, including this Court’s interpretation of similar provisions in many years past”) should be taken into consideration under a Bowles analysis, while the concurring opinion could be read as limiting Bowles to narrowly applying only to long lines of Court decisions left untouched by Congress.
  • The majority opinion found that the historical legacy of 411(a) was that it was a jurisdictional requirement but that when all factors were considered, the provision did not restrict a federal court’s subject matter jurisdiction. The concurring opinion found that the cases interpreting 411(a) were merely drive-by jurisdictional rulings, and did not weigh in favor of a finding that 411(a) restricted a federal court’s subject matter jurisdiction.

Earlier posts on Reed Elsevier v. Muchnick:

  • Supreme Court grants cert in Reed Elsevier, et al., v. Muchnick, et al. (March 3, 2009)
  • Judge Posner weighs in on Reed Elsevier v. Muchnick (April 17, 2009)
  • Breaking News: Every pending copyright case lacks jurisdiction (May 20, 2009)
  • Merit briefs posted for Reed Elsevier v. Muchnick (May 27, 2009)
  • Solicitor General files amicus in Reed Elsevier arguing that 17 U.S.C. 411(a) is a rigid claim processing rule (June 17, 2009)
  • AIPLA files amicus in Reed Elsevier v. Muchnick (June 19, 2009)
  • Supreme Court docket roundup of copyright cases (June 30, 2009)
  • Copyright at the Supreme Court this week (Oct 5, 2009)
  • Supreme Court hears oral arguments in Reed Elsevier (Oct 8, 2009)
  • Form 19 and oral arguments in Reed Elesevier v. Muchnick (Nov 16, 2009)

Breaking news: Supreme Court overturns 2d Cir. in Reed Elsevier

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Shourin Sen - 2 March 2010 – 1:51 pm
Filed under Google Books Settlement, Jurisdiction, Registration, Supreme Court

Here’s the slip opinion. Thomas wrote the majority. Ginsburg concurred in part and concurred with the judgment, joined by Breyer and Stevens. A full discussion of the opinion will come tomorrow morning. (H/t Irv Muchnick.)

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Court finds that putting photos on the internet doesn’t make them U.S. works

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Shourin Sen - 14 October 2009 – 9:00 am
Filed under Jurisdiction, Publication, Registration

Moberg v. 33T LLC, 2009 WL 3182606 (D. Del. 2009)

There was a relatively important decision issued in the federal District of Delaware last week that addressed whether posting unpublished photos on the internet made them U.S. works. The Plaintiff was a Swedish photographer who put up a series of photos on a German art gallery’s website. The Defendant ran a site that offered customizable website designs for sale. According to the complaint, at some point in December 2007, the Defendant used some of the Plaintiff’s photos as stock images in some of its web designs. The Plaintiff sent the Defendant a cease-and-desist, and when it was partially ignored, it filed suit alleging copyright infringement and violation of the DMCA.

The fireworks

The Defendant moved to dismiss the copyright claim on the grounds that the Court didn’t have subject matter jurisdiction. The omnipresent, omnipotent Section 411(a) of the Copyright Act states that “no civil action for infringement of the copyright in any United States work shall be instituted until preregistration or registration of the copyright claim has been made in accordance with this title.” 411(a) essentially creates a two-tiered structure, requiring that copyright owners of U.S. works must register their works prior to bringing suit; but allowing copyright owners of foreign works to bring suit without registration.

The Plaintiff had brought suit sans registration on the theory that its works were not United States works since they were first published on a German website. The Defendant argued that the Plaintiff’s photos were United States works:

Defendants contend that plaintiff’s photographs, which were created undisputably outside the United States, are United States works because when they were posted on a German website, they were “published” simultaneously in Germany and in the United States. 17 U.S.C. § 101 (“[A] work is a ‘United States work’ only if-(1) in the case of a published work, the work is first published-… (B) simultaneously in the United States and another treaty party or parties, whose law grants a term of copyright protection that is the same as or longer than the term provided in the United States.” FN7). Defendants argue that it is “well settled that Internet publications are published everywhere simultaneously, regardless of the location of the server hosting the website.” (Def. Br. at 7.) Therefore, because the posting of a photograph on a website simultaneously “publishes” the photograph “everywhere,” including the United States, it is a “United States work,” and as such, it must be registered prior to filing suit for infringement.

I’m aware of only one previous case where a court considered whether distributing a work on the internet constituted a publication, Getaped.com, Inc., v. Cangemi. In the case the S.D.N.Y. found that posting a website on the internet constituted a publication. Getaped may be of limited precidential value because the court seemed to use the concepts of distribution and publication interchangeably.

Back to Moberg: The Court rejected the easier out (a finding that the Plaintiff’s distribution didn’t constitute a publication) and instead found that treating the photos as United States works, and not foreign works, would “pervert” U.S. copyright law and “would be contrary to the Berne Convention.” The Court, thus, found that regardless of whether posting a work on the internet constitutes a publication, if a foreign author puts a work up on a foreign website, it’s not a publication in the United States.

The Court first stated that it would be contrary to the purpose of the Berne Convention to hold that publishing a work on the internet “automatically, instantaneously, and simultaneously causes that work to be published everywhere in the world.”:

“The overarching purpose of the Berne Convention is to provide protection to authors whose works will be published in many countries.” Christopher Sprigman, Reform(aliz)ing Copyright, 57 Stan. L.Rev. 485, 544 (2004). “Berne’s proscription of mandatory formalities is a rational response to the difficulty of complying (and maintaining compliance) with differently administered formalities that may have been, absent the Convention, imposed in dozens of national systems, some with registries, some without, and none of which shares information.” Id. (explaining that “[e]vidence for this view can be found in the origins of the Berne Convention”). Thus, if the publishing of plaintiff’s photographs on the German website simultaneously caused them to be published in the United States, and such publication transformed the work into a United States work, plaintiff would be subjected to the very formalities that the Berne Convention eschews. To hold otherwise would require an artist to survey all the copyright laws throughout the world, determine what requirements exist as preconditions to suits in those countries should one of its citizens infringe on the artist’s rights, and comply with those formalities, all prior to posting any copyrighted image on the Internet.

Next the Court noted that if posting a work on the internet made a work a United States work, American citizens  could infringe foreign works without fear of retribution:

While not all Americans would exploit such an advantage, the misappropriation of intellectual property remains a significant problem and there is no principled reason why domestic users should be able to act with such impunity.

Finally, the Court found that such a finding would be contrary to the policy underlying U.S. copyright law:

Third, the United States copyright laws, in accord with the Berne Convention, provide for protection of foreign works in the United States without requiring the artists to undertake any formalities in the United States. See 17 U.S.C. § 408(a) (2000) (“[R]egistration is not a condition of copyright protection.”); Kuklachev v. Gelfman, 600 F.Supp.2d 437, 473 (E.D.N.Y.2009) (citing Muchnick v. Thomson Corp., 509 F.3d 116, 133 (2d Cir.2007)) (“Under the clear language of the statute, which refers only to ‘any United States work,’ foreign works originating in countries party to the Berne Convention need not comply with § 411.”); Cotter, supra, at 1743-44, (explaining that “U.S. copyright subsists in unpublished works … from the moment of creation, wherever those works happen to be created. Upon publication, … U.S. copyright continues to subsist in the work … if, “on the date of first publication, one or more of the authors is a national or domiciliary of the United States, or is a national, domiciliary, or sovereign authority of a treaty party, or is a stateless person, wherever that person may be domiciled”). The adoption of defendants’ point of view would be contrary to that law.

Notes:

The proposition that all works become U.S. works under the Copyright Act if they are first published on the internet is somewhat strange, but the outcome created by such a reading is hardly onerous. Expedited “special handling” of copyright registration takes at most two weeks and is the same cost as regular registration if litigation is looming, under the new regulations established by the Copyright Office.

Supreme Court hears oral arguments in Reed Elsevier

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Shourin Sen - 8 October 2009 – 9:00 am
Filed under Jurisdiction, Supreme Court

Reed Elsevier v. Muchnick, Oral Arguments (Oct. 7, 2009).

The Supreme Court heard oral arguments in Read Elsevier v. Muchnick yesterday. There were some questions, by Chief Justice Roberts in particular, on the overall merits of whether 411(a) is a jurisdictional requirement or merely a case processing rule. But a large portion of the arguments, if not the lion’s share, centered on the more narrow question of whether to frame 411(a) as a strict rule (which courts could raise sua sponte, and could not be waived by a defendant), or a common defense (which courts cannot raise sua sponte, and which could be waived by litigants).

Justice Ginsberg played a large role in the questioning to the extent that I would be somewhat surprised if she isn’t the author of the opinion. Many of Justice Ginsburg’s questions seemed to probe particulars on how to frame a decision, and not the broad questions of the dispute. As a side note, Justice Sotomayor, who was as an intellectual property practitioner before being appointed to the Southern District of New York, did not ask a question during the arguments. [Edit: SCOTUSBLOG brings word that Justice Sotomayor recused herself from the appeal. Justice Sotomayor presided over N.Y. Times v. Tasini, the dispute underlying Reed Elseveier v. Muchnick, when it was heard in the S.D.N.Y.]

Justice Ginsburg early on raised questions about the advantages and disadvantages of a hard-line case processing rule:

JUSTICE GINSBURG: Do you agree with the –with the government that it’s mandatory for the district court but prohibited to the court of appeals? The government has this hybrid where, because of the public purposes served by registration, not only can but the district court should raise the failure to register on its own, but then the government says once you have a final judgment in district court, it’s no longer open for the court of appeals to raise it on its own.

Do you agree with that or do you say it’s for the defendants to raise, and if they don’t raise it, too bad?

MR. SIMS [Ed: Mr. Sims represented the petitioner, arguing that 411(a) is a case-processing rule]: Justice Ginsburg, we certainly agree with the government with respect to the court of appeals. With respect to the district court, on the one hand, my clients don’t — are satisfied with the government’s position. On the other hand, as Justice Scalia’s decision, I think, in Day v. McDonough pointed out, the traditional default rule really is that defenses are up to defendants to raise.

But if the Court felt that the provision was important enough so that it wanted to impose on district courts the obligation of strict policing, I think it could. But as I say, I have been practicing copyright law for 25 years; I’ve never seen a defendant who either missed a defense or chose not to raise it.

In this particular kind of situation where there is no reason at all, I think, to suspect that defense counsel will not raise 411 whenever — none of the cases that Ms. Merritt raises for example, involve situations of waiver, where the issues weren’t raised until the court of appeals — I think that the Court can rely, frankly, on defendants and on the ability of district judges to nudge defense counsel when they need nudging.

Justice Ginsberg also pressed the advocate from the Solicitor General’s Office on whether a court should be able to raise registration sua sponte:

Ms. Anders: [411(a)] is not jurisdictional, but it should not be fully waivable. The provision does not speak to the power of the courts to decide cases and therefore it does not limit the court’s jurisdiction to adjudicate infringement suits.

But, because of this phrase and mandatory language, the requirement should be strictly enforced whenever the defendant asserts it, and because the requirement serves important public interest that are independent of the concerns of the parties to any individual suit –

JUSTICE GINSBURG: So your position is that the district court really should have dismissed this case at the outset?

MS. ANDERS: I think that, in the ordinary case, the district court should — when — when the defendant waives the requirement, which would be the rare case, when the defendant doesn’t assert it. When the defendant waives the requirement, the district court should consider whether accepting that waiver would undermine the public interest behind 411.

Now, in this particular case, it may not have been an abuse of discretion for the district court to consider those interests and decide that here it would have been acceptable to accept the defendant’s waiver and permit the resolution to go forward because, in this case, the periodicals that — that are involved — the works at issue were primarily already in the possession of the Library of Congress, because they had been registered as — the periodicals themselves had been registered.

So the Library’s interest is not as strongly implicated here. In addition, this is a case in which there was going to be settlement, so the Court wasn’t going to need to adjudicate the copyright claims and therefore the opportunity for the register’s views to be taken into account was less important.

More questioning from Justice Ginsburg on the topic:

JUSTICE GINSBURG: You were candid to say that this is in a hybrid category, that the government was taking an intermediate position. Do you know of any other provision where the district court has an obligation to raise the question on its own motion that is yet not jurisdictional?

MS. ANDERS: I believe this Court has recognized that waiver doctrines in general are discretionary, and so, particularly in the area of res judicata, the Court has recognized in the Plaut v. Spendthrift Farm and Arizona v. California that the Court has some discretion to enforce res judicata on its own motion.

JUSTICE GINSBURG: Very, very limited. I think Arizona didn’t say any time there’s — there’s a preclusion plea, the Court can raise it on its own.

MS. ANDERS: That’s correct. I think also the plain error rule presupposes that there are some errors that the district court has a responsibility to correct on its own, even though neither party has brought the error to its attention. So in other words, the district court has the obligation to issue a legal ruling that neither party has asked for, and I think that kind of regime is appropriate here because the public interest at issue, the Library’s interest and the interest in the public record of copyright, those don’t depend on the defendant’s litigation decisions — they shouldn’t depend on the defendant’s particular strategic decisions within a particular case.

Justice Scalia delivered a pithy line, evincing some reticence towards framing 411(a) as a rule that courts could raise sua sponte:

JUSTICE SCALIA: But how — how would we get to hold what — what you say is the law? It seems, to me, once we decide it’s not jurisdictional and once we agree with you, that it doesn’t — at least in this case — didn’t have to be raised sua sponte by the district court.

That’s the end of the case, and so why do we have to engage in the further discussion, well, ordinarily, the district court must raise it on its own and — you know, and, if it doesn’t ordinarily –you know, the appellate court should.

Why do we have to get into that?

MS. ANDERS: I don’t think you have to get into it, Justice Scalia. I think –

JUSTICE SCALIA: Which means we shouldn’t.
(Laughter.)

Justice Ginsburg also raised Perfect 10, inc. v. Amazon.com, inc, 508 F.3d 1146 (9th Cir. 2006), and similar cases, where courts have found that they have jurisdiction to issue an injunction even if a plaintiff has not registered her work:

JUSTICE GINSBURG: Do they — if they are just suing, not for money but for an injunction, do they have to register before bringing an injunction suit?

MS. JONES MERRITT [Ed. Professor Merritt was appointed by the Court to represent the Second Circuit's judgment]: Yes, Your Honor, they do. In order to bring any action — if the injunction is based on infringement. So we’re — if the plaintiff brings an action for infringement and the remedy they seek is an injunction, then the copyright must be registered first.

There are some cases in the lower courts in which we have a plaintiff who has a longstanding pattern of infringements that a particular defendant has been engaged in against that plaintiff. The Owen Mills case is an example. A local photography studio was upset because a photo duplicating shop kept copying their copyrighted photographs. They entered an action for infringement, had registered several of the photographs.

The Court issued an injunction that covered future works as well, but those were all works within the same judicial controversy. So an injunction could reach further than a single registered work as long as we are talking about one single controversy.

In this case we don’t have an injunction, we have damages, and we have thousands of different controversies. As the Court knows the class action rules do not change the substantive law or the rules of — of jurisdiction. We have here thousands of different controversies that have been aggregated for convenience under rule 23(b)(3), but the court must have jurisdiction over each of those controversies. Or if we take the alternative route of Hallstrom, the hybrid approach, and we say that this is a mandatory requirement. Congress has been quite clear about this mandatory requirement, and that mandate must be satisfied with respect to every controversy in this class action.

Copyright at the Supreme Court this week

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Shourin Sen - 5 October 2009 – 9:00 am
Filed under Academia, Complete Preemption, Importation, Jurisdiction, News, Registration, Supreme Court

This is big week for copyright at the Supreme Court. The Court will hear oral arguments in the twenty-year legal saga Reed Elsevier v. Muchnick on Wednesday. On that note, Emily M. Bass, the attorney who represented one of the two plaintiff groups in Tasini, has passed along word about an article she has posted at SSRN. The abstract:

‘Catch 411:’ Does Section 411 of the Copyright Act Restrict the Subject Matter Jurisdiction of Federal Courts Over Copyright Actions?

This commentary examines an issue that will soon be argued before the United States Supreme Court: whether 17 U.S.C. §411′s registration requirement restricts the subject matter jurisdiction of the federal courts over copyright infringement actions. The Second Circuit found that courts lack jurisdiction to adjudicate claims alleging the infringement of unregistered works. The issue of whether courts have jurisdiction over such claims is of tremendous importance: The U.S.’s collective intellectual product is perhaps its greatest asset. Since unregistered works are as susceptible to mass electronic infringement as registered works, and arguably much more numerous, a decision affirming the Second Circuit would deny the country effective means of defending key IP. This commentary examines the statutes involved, arguments that have been made and the Second Circuit Opinion. It poses four solutions to §411′s supposed jurisdictional conundrum and concludes that federal courts unquestionably possess jurisdiction over unregistered claims.

I will post a longer writeup tomorrow that I have been sitting on for the last couple of months. The post will look at how complete preemption should color our view on whether registration is a jurisdictional requirement. I know what all of you (or at least six of you) are thinking: the only way to kick a discussion of obscure jurisdictional issues up to eleven is to talk about complete preemption. It’s like adding bacon.

Today may be the day we hear whether the Supreme Court will grant cert in Omega SA et al v. Costco Wholesale Corporation. The Supreme Court has in the past released cert decisions for cases they consider during their fall long conference on the following Monday. The appeal was scheduled for conference on September 29, so that would put today as the date we would be likely to hear.

Costco filed a supplemental brief on September 28 (that addressed the S.D.N.Y.’s September 25 decision in Pearson Education, Inc. v. Ganghua) so the cert decision could be delayed.

Court finds it has jurisdiction to hear counterclaim seeking a declaratory judgment of noninfringement after granting plaintiff’s request for dismissal of copyright claim

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Shourin Sen - 23 June 2009 – 9:00 am
Filed under Jurisdiction

Optimal Markets, Inc. v. FTI Consulting, Inc., 2009 WL 1704665 (N.D. Cal. 2009)

There was a fun civil procedure issue addressed in the Northern District of California last Wednesday. The Plaintiff provided software for electronic auctions. The Defendants were two of the Plaintiff’s former employees who were employed by a rival company at the time of the suit. The Plaintiff brought a claim for, among other things, copyright infringement. The Defendants filed counterclaims including one for a declaratory judgment of noninfringement.

The Plaintiff moved to voluntarily dismiss its copyright claim, and argued that the dismissal would result in a lack of subject matter jurisdiction because the rest of its claims were based on state law. Thus, the Plaintiff moved for dismissal of the case with the intention of refiling in state court.

Federal Rule of Civil Procedure 41(a)(2) provides that “[i]f a defendant has pleaded a counterclaim before being served with the plaintiff’s motion to dismiss, the action may be dismissed over the defendant’s objection only if the counterclaim can remain pending for independent adjudication.”

The Plaintiff first asked the Court to dismiss its claim for copyright infringement without prejudice.  After the Defendants argued that the Court would still have federal jurisdiction under their counterclaims for a declaratory judgment of noninfringement, the Plaintiff expressed a willingness to dismiss the claim with prejudice on the condition that it wasn’t considered an adjudication on the merits. In the alternative, the Plaintiff asked the Court to dismiss the claim without prejudice but stated that it would be willing to covenant not to sue on the copyright claim.

The Court rejected these two suggestions, noting that a dismissal with prejudice is “tantamount to a judgment on the merits,”  Zenith Ins. Co. v. Breslaw, 108 F.3d 205, 207 (9th Cir.1997), and that even if Plaintiff’s covenant not to sue on the copyright claim eliminated the copyright controversy between the parties, the Court still had jurisdiction over Defendants’ counterclaims because they were compulsory; the counterclaims were derived from the same common nucleus of operative facts and remained pending, with or without the Plaintiff’s infringement claim. The Court dismissed the Plaintiff’s claims without prejudice and allowed the counterclaims to proceed.

Why is this case fun?

It’s hornbook law that a federal court doesn’t have jurisdiction to hear a case when a plaintiff files a complaint and then voluntarily amends the complaint removing the claim or claims over which the court had original jurisdiction. Rockwell Int’l Corp. v. United States, 127 S.Ct. 1397, 1409 (2007). And federal jurisdiction cannot rest exclusively on a counterclaim. Holmes Group, Inc. v. Vornado Circulation Systems, Inc. 535 U.S. 826 (2002). A federal court may, however, assert jurisdiction over a case where a plaintiff brings a claim over which the court has original jurisdiction, which the court later dismisses. F.R.C.P. 1367(c)(3).

For the Court in Optimal Markets v. FTI Consulting, Inc. to meet it’s obligations under 41(a)(2) (not to deprive the Defendants the opportunity to adjudicate their counterclaim) and under Rockwell (a federal court has no jurisdiction if a plaintiff amends its complaint removing all claims that would provide a basis for original jurisdiction), it had to dismiss the copyright claim, and not just allow the defendant to amend it’s complaint removing the claim. Civil procedure fun!

AIPLA files amicus in Reed Elsevier v. Muchnick

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Shourin Sen - 19 June 2009 – 8:52 am
Filed under Jurisdiction, Registration, Supreme Court

The American Intellectual Property Law Association filed an amicus brief in Reed Elsevier on June 8.  The AIPLA’s brief appears to act, to a certain extent, as the opposition brief to the Department of Justice’s filing that we discussed on Wednesday.  Both the AIPLA and the Solicitor General argued that 411(a) is a claim processing rule and not a jurisdictional requirement.  But the central reach of the AIPLA’s brief is that the 411(a) shouldn’t be read rigidly as to bar claims from proceeding before the Copyright Office grants or rejects a registration application. Indeed, the AIPLA’s brief takes an additional step and forwards that a plaintiff shouldn’t even need to mail a registration before filing suit:

What is less clear is from the text and legislative history of the statute is whether Section 411(a) permits a copyright owner to file an infringement action before the Copyright Office has acted to either issue or deny a certificate of registration, or even before the copyright owner has filed an application.

Although courts are divided on the question, the correct view is that the registration requirement is akin to a procedural condition precedent to prosecuting a lawsuit that may be satisfied “along the way.” This broader view of the requirement conforms to general proposition argued by Judge Walker in his dissenting opinion below that the registration requirement is more of a “claims processing rule.” The narrow view of the requirement improperly introduces a subject matter jurisdiction character into the statute by measuring compliance with the requirement only at the moment the action is commenced.

Documents

Brief of American Intellectual Property Law Association as Amicus Curiae in Support of Petitioners

Prior writings on Reed Elsevier v. Muchnick

Solicitor General files amicus in Reed Elsevier arguing that 17 U.S.C. 411(a) is a rigid claim processing rule

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Shourin Sen - 17 June 2009 – 1:42 am
Filed under Jurisdiction, Supreme Court

The Solicitor General filed an amicus brief in Reed Elsevier v. Muchnick last week advocating that the Second Circuit’s decision should be vacated and remanded. The brief first argues, similarly to the petitioners and respondents, that the registration requirement set forth in 17 U.S.C. 411(a) is a processing rule and not a jurisdictional requirement. But the section of the brief is somewhat perfunctory.

It appears, instead, that the primary reach of the brief is to advocate for the Supreme Court to interpret 411(a) as a rigid requirement: That courts should raise the issue of registration sua sponte and refuse to adjudicate suits where a plaintiff has failed to comply with 411(a). After an extensive factual introduction lauding the merits of registration, the brief’s first argument that 17 U.S.C. 411(a) doesn’t limit a federal court’s jurisdiction is six pages in length, while the section arguing that the Court should interpret 411(a) as a rigid rule runs twice that.

The Solicitor General, however, noted that 411(a) shouldn’t be read so rigidly to bar “industry-wide settlements” involving non-registered works.  This is important because if the Supreme Court were to read the 411(a) as a hardline requirement then, even if the registration provision isn’t a jurisdictional requirement, the parties’ settlement could potentially be barred.  The SG addressed the issue in the brief’s final page:

Under the circumstances of this case, the inclusion within the plaintiff class of individuals who had not registered their copyrights provides no sound basis for vacatur of the district court’s judgment on appeal. An industry-wide settlement is unquestionably in the public interest because it recognizes freelance authors’ copyright rights while ensuring the public availability of their works—a key concern of the Copyright Act. See Fogerty v. Fantasy, Inc., 510 U.S. 517, 527 (1994) (“[C]opyright law ultimately serves the purpose of enriching the general public through access to creative works.”); New York Times Co. v. Tasini, 533 U.S. 483, 505 (2001). The parties determined that a global settlement of all possible claims—including those based on currently unregistered works (which could be registered in the future)—was necessary in order to guarantee the availability within the electronic archives of all of the newspaper and magazine contents at issue. The parties then invested substantial time and resources, all of which would be rendered nugatory by enforcement of Section 411(a)’s registration requirement at this late stage.

There’s a lot going on in the brief and it’s definitely worth a read in its entirety. For example, you know people who advocate reading 411(a) as requiring a decision by the Copyright Office before bringing suit got a kick out of footnote 14:

Section 411(a) requires the plaintiff to possess a registration certificate, to have been refused registration, or to have preregistered, at the time the suit is commenced. Although some courts have held that Section 411(a)’s precondition to suit is satisfied by simply filing an application for registration, see, e.g., Apple Barrel Prods., Inc. v. Beard, 730 F.2d 384, 386-387 (5th Cir. 1984), those decisions are contrary to Section 411(a)’s plain text, and therefore incorrect . . .

The brief also illustrates how the upcoming opinion could either have a relatively narrow footprint outside of global settlement situations or fundamentally change many aspects of copyright litigation, depending on how the Supreme Court describes the registration process. If the opinion is written broadly, it could influence the following types of questions that we’ve addressed in the past few months:

  • How much deference should a court grant the Copyright Office’s determination that a work has sufficient originality?;
  • Should a plaintiff be barred from bringing suit on a copyright claim until after the Copyright Office has addressed a registration application, or should a plaintiff be able to proceed immediately after filing?;
  • Should courts grant architectural depictions filed as “Architectural Works” the exclusive rights granted under the Act to “Architectural Plans,” and vice versa?;
  • Should a determination by the Copyright Office that a work merits registration be taken into account when accessing whether a plaintiff’s suit is objectively unreasonable for purposes of awarding attorneys’ fees?

Document:

Prior writings on Reed Elsevier v. Muchnick:

An adept decision addressing the copyright registration backlog

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Shourin Sen - 5 June 2009 – 9:00 am
Filed under Copyright Office, Jurisdiction, Registration

Tri-Marketing, Inc. v. Mainstream Marketing Services, Inc., 2009 WL 1408741 (D. Minn. 2009)

I’ve spent a couple of posts over the past few weeks discussing how courts are dealing with the registration backlog at the Copyright Office. To briefly review, due to what appear to be temporary troubles implementing a new electronic registration system, the backlog for paper registration at the Copyright Office has grown from six to eighteen months. There was a decision issued on May 19 by Judge Donovan W. Frank from the federal district court in St. Paul that adeptly dealt with this issue. Tri-Marketing and Mainstream Marketing are telemarketing companies that generate leads for the insurance industry.  Tri-Marketing alleged that Mainstream infringed its copyright in its website. Here’s the relevant passage dealing with the registration backlog (emphasis mine):

TRI operates a website that provides information about its business and allows for the purchase of its services. TRI updated its website in both 2004 and 2007. On April 3, 2008, TRI sought copyright registration for both the 2004 and 2007 websites by delivering a deposit of both websites, two corresponding Form TX applications, and two $45 fees to the Copyright Office. Bolder Calls updated its website in November 2005 and again in December 2007. According to TRI, Bolder Calls copied elements of TRI’s 2004 and 2007 websites. TRI notified Bolder Calls of its alleged infringement on February 19, 2008.

Why is this paragraph particularly notable? As we encountered in Facebook v. Power Ventures, the primary situation where a court risks running into a mudstorm by allowing a case to proceed after a copyright registration is filed, but before the Copyright Office has issued a ruling on the registration, occurs when there is a dispute about what rendition of a work is underlying an infringement claim.  This situation seems to me to arise most often with websites, where a plaintiff can make many amendments in a short period of time. To give a hypo for this problem, let’s say around the time a copyright holder files a registration for a website, she makes twenty different changes to the website. All of the versions of the website would of course be granted copyright, but the copyright owner can only bring suit for the portions of the work that she has registered. Without being able to resort to a copyright registration to see exactly what rendition of the website is underlying the claim, there is no way for the litigants or the tribunal to be sure of the boundaries of the suit.

So back to Tri-Marketing, Inc v. Mainstream Marketing Services: The Plaintiff claimed infringement of a website, the type of work that may cause trouble if the Court were to allow the case to proceed before the Copyright Office has issued a decision. By noting that all of the versions of the website were included in the registration application, the Court discounted the possibility that the suit would proceed without the parties being sure of the breadth of the copyright claim.

A second reason I like the above paragraph is that the Court didn’t shy away from the fact that the registration was filed thirteen months prior to the decision.  This is an important piece of information, I think, if this case were to head for appeal. The Court found that since there was no Eighth Circuit precedent directly on point, the interests of justice and judicial economy favored letting the litigation proceed sans Copyright Office determination:

The Court recognizes the split of authority on this issue and notes that it is aware of no Eighth Circuit case directly on point. After reviewing the relevant and persuasive case law and the reasons supporting the two separate approaches, this Court endorses the “application approach” to federal jurisdiction over copyright claims. First, the language used in Action Tapes by the Eighth Circuit suggests that it would adopt the application approach. See Action Tapes, 462 F.2d at 1013 (“However, the copyright owner may not sue for infringement under the federal Copyright Act until the owner has delivered ‘the deposit, application, and fee required for registration …’ ”). Second, the application approach promotes the interests of justice and judicial economy. See, e.g., Int’l Kitchen Exhaust Cleaning Assoc., 81 F.Supp.2d at 72. Because TRI alleges that it has properly delivered the deposit, application, and fee required for the registration of the asserted copyrights, the court finds that it has subject matter jurisdiction over TRI’s copyright claims.

In related news

The Copyright Office this past Friday issued a press release concerning its processing time.  This strikes me as a prudent move that allows courts to take judicial notice of an official release when determining whether to allow a claim to proceed without a copyright office determination.

Copyright Office Improves Processing Time and Service

A recent Washington Post article focused on the lengthy processing times the Copyright Office is experiencing in wake of its transition from a paper-based to an electronic processing environment. The Copyright Office is working diligently to improve processing times and service to the public in general. To clarify, current processing times by filing method are as follows:

  • E-Service with Electronic Deposit:  5 months for 90% to be completed; 33% completed in 2.5 months
  • E-Service with Physical Deposit: 6.5 months for 90% to be completed; 33% completed in 3 months
  • Paper Claims: 18 months for 90% to be completed; 33% completed in 12 months

You can save money and time and help us improve our services by filing claims online via eCO. Please visit www.copyright.gov for more information.