Copyright Law Blog: Exclusive Rights

Category Archives: Preemption

SDNY grants summary judgment on hot news claim

Shourin Sen - 25 March 2010 – 9:00 am

Filed under Misappropriation, Preemption

Barclays Capital Inc. v. Theflyonthewall.com, 2010 WL 1005160 (S.D.N.Y. 2010)

There was an order issued in the Southern District of New York (Cote, J.) in a case that merits very close watching. Theflyonthewall.com is a subscription based internet news service that aggregated and published investment recommendations and research from sixty-five investment firms along with investor orientated items. Brokerage firms created the research and recommendations, often at substantial cost, and distributed them to select investors as a means to drive trading.

Theflyonthewall obtained the stock recommendations of the investment management firms primarily via employee leaks. The President of Fly, however, testified that by 2009 “he was engaging in a ritualistic and labor-intensive process of “confirming” each Firm’s Recommendations from at least two and sometimes three independent sources before publishing them, still typically before the market opening.” Theflyonthewall.com had twenty-eight full time employees at the time of discovery and manually selected which stories to bring to the attention of its readers.

A group of four investment management firms brought suit (Lehman later dropped) for misappropriation of the time-sensitive recommendations contained in their equity research reports. The firms also brought a total of seventeen copyright infringement claims for the distribution, in each case, of a paragraph from the reports with attribution. In the action at bar, the investment firms moved for summary judgment on all claims. The copyright portion of the suit was resolved without a fight. The investment firms only pursued the minimum available statutory damages ($750 per work) along with attorneys’ fees, and Fly didn’t raise a fair use defense.

Misappropriation

The Court applied the five-factor test from National Basketball Association v. Motorola, Inc., 105 F.3d 841 (2d Cir.1997) and determined that the misappropriation claim was not preempted by the Copyright Act. Fly did not dispute the plaintiffs’ arguments that they (1) incurred substantial expense in generating their research reports and recommendations, and (2) that the information gathered was time-sensitive.

(3) Free-Riding

The Court’s analysis of free-riding was particularly interesting. Fly “vigorously” argued that it expended substantial energy aggregating the news. The Court found that “[t]o the extent that Fly add[ed] value through its collection and aggregation of information, . . . the value reflected in that act of aggregation d[id] not controvert the fact that Fly expend[ed] no effort to produce the Recommendations and d[id] not contribute to the underlying research and analysis process.”

Fly also argued that, because it no longer appropriated the recommendations from the investment firms’ research reports, but instead relied on third-parties, the recommendations were public knowledge. Fly pointed to the “frequent publication of the Recommendations by other news services, both mainstream and internet, in advance of Fly’s own publication of headlines and to the widespread discussion of the Recommendations in market chat rooms and “blast IMs,” among other sources.” The Court’s response:

The fact that others also engage in unlawful behavior does not excuse a party’s own illegal conduct. Although the practices of other potentially liable parties is highly relevant to the fashioning of equitable relief and will be considered below, the conduct of third parties is simply of no moment in finding Fly liable for hot-news misappropriation. Similarly, even if true, it is not a defense to misappropriation that a Recommendation is already in the public domain by the time Fly reports it. In [ International News Service v. Associated Press, 248 U.S. 215 (1918)], for example, AP’s news was already widespread and publicly available on the East Coast and was obtained by the defendant from public sources, and yet, the Court granted an injunction against INS’s further dissemination of news gained through those means. INS, 248 U.S. at 245-46; see also Bond Buyer, 267 N.Y.S.2d at 946 (enjoining defendant’s misappropriation of plaintiff’s bond-market reports even though they were already in the public domain).

(4) Direct competition

The Court found that Fly was in direct competition with the plaintiffs because “the Recommendations from those reports, [were] one of the “primary” businesses for each of the Firms.”

(5) Reduced economic incentives

The continued activities of Fly and similar actors, according to the Court, “would so reduce their incentive to invest the resources necessary to produce equity research reports that the continued viability of plaintiffs’ research business is and ‘would be substantially threatened’”; and that the “ability of the Firms to ‘monetize’ their research is critical to its continued production.”

Injunction

The Court enjoined Fly from distributing information from the research reports released when the market is closed for the later of either one half-hour after the opening of the New York Stock Exchange or 10:00 a.m. The Court further enjoined Fly from distributing recommendations issued while the NYSE is open for two hours after their release by the Firms. The Court included a provision that allowed Fly after a year to pursue the modification or vacating of the “injunction in the event that it can demonstrate that the Firms have not taken reasonable steps to restrain the systematic, unauthorized misappropriation of their Recommendations, for instance, through the initiation of litigation against any parties with whom negotiation proves unsuccessful.”

Comments:

I think many of us are eagerly anticipating a Second Circuit if not a Supreme Court opinion on the viability of hot news claims in the internet age. The Court’s order in this case was framed almost more like an arbitration decision than a federal court order. The Court appeared to strive for an injunction that the defendant’s could possibly abide by, and that wouldn’t be a target for appeal. So, this case may not end up being the vehicle that makes appellate law on misappropriation claims. If this case isn’t appealed, any site that aggregates financial news has a giant court-mandated target on it.

11th Cir. finds medical forms lack sufficient originality; rejects standard from Feist

Shourin Sen - 23 February 2010 – 9:00 am

Filed under Noncopyrightable Material, Originality, Preemption

Utopia Provider Systems, Inc. v. Pro-Med Clinical Systems, LLC, 2010 WL 569892 (11th Cir. 2010)

We’ve discussed this case previously in May and, on damages, in December. Utopia alleged, inter alia, that Pro-Med infringed its copyright in a series of charts for a physician to use to record a patient’s medical history and symptoms. The district court granted Pro-Med summary judgment on the copyright claim finding that the charts were not copyrightable subject matter. Utopia appealed.

Were the charts copyrightable subject matter

The Court looked to whether the headings on the forms were expected on similar medical templates and, secondly, to whether the terms actually conveyed information to the treating physician. The Court found that the medical forms called for “the same information that any responsible physician would ask a patient with the given ailment.” The Court further found that the “selection and arrangement of the terminology” did not convey information that was sufficiently original. The Court, thus, affirmed the district court’s finding that the medical forms did not constitute copyrightable subject matter.

The real fireworks in this case came in a footnote where the Court appeared to reject the “modicum of originality” standard from Feist in favor of a “conveys information” standard. Utopia argued that Feist modified the Eleventh Circuit standard announced in John H. Harland Co. v. Clarke Checks, Inc., 711 F.2d 966, 971 (11th Cir.1983) by specifying that compilations need only minimal creativity to be copyrightable; that compilations are copyrightable “so long as [choices as to selection and arrangement] are made independently by the compiler and entail a minimal degree of creativity.” Feist Pubs., Inc. v. Rural Tel. Svc. Co., Inc., 499 U.S. 340, 348 (1991). Stated the court:

Utopia ignores, however, that Feist dealt with how to resolve the tension between facts generally not being copyrightable and factual compilations being copyrightable. Feist held that a factual compilation may be copyrightable “if it features an original selection or arrangement of facts, but the copyright is limited to the particular selection or arrangement.” Id. at 350-51, 111 S.Ct. at 1290 (emphasis added). Feist did not imply in any way that the rule concerning the creativity in selection of facts was a standard that applied to anything but factual compilations or impacted the blank forms rule. While we note that the creativity in the selection of terms on the ED Maximus forms bears on whether the forms convey information, the “convey information” standard-not a creativity in selection or arrangement standard-still governs blank forms and was not altered by the Feist decision concerning factual compilations. Utopia’s argument that the selection and arrangement of terms in the ED Maximus templates show “extraordinary degrees of creativity and originality,” therefore, is relevant only to the extent that it shows the forms convey information.

The Court’s opinion also contained an interesting discussion of what it viewed as the Ninth Circuit misreading Eleventh Circuit precedence:

Some courts have adopted a “bright-line” rule regarding blank forms; that is, they hold that blank forms inherently do not convey information and are not copyrightable. The Ninth Circuit took this approach in Bibbero Sys., Inc. v. Colwell Sys., Inc., 893 F.2d 1104 (9th Cir.1990). The court rejected the argument that a blank form could satisfy the “convey information” test by containing possible categories of information, thus indicating which information was important. Id. at 1107. If categories of information were sufficient to “convey information,” according to the court, the copyrightability of blank forms would be “potentially limitless. All forms seek only certain information, and, by their selection, convey that the information sought is important. This cannot be what the Copyright Office intended by the statement ‘convey information’ in 37 C.F.R. 202.1(c).” Id.

The majority of circuits have rejected Bibbero ‘s bright-line approach. See, e.g,, Kregos v. Associated Press, 937 F.2d 700, 709 (2d Cir.1991) ( “[A]ll forms need not be denied protection simply because many of them fail to display sufficient creativity.”); Whelan Assocs., Inc. v. Jaslow Dental Lab., Inc., 797 F.2d 1222, 1242-43 (3d Cir.1986) (noting that the Third Circuit, “like the majority of courts that have considered this issue … ha[s] held that blank forms may be copyrighted if they are sufficiently innovative that their arrangement of information is itself informative”). Although the Ninth Circuit characterized the Eleventh Circuit’s approach in Clarke Checks as adopting the “bright-line” approach that blank forms cannot be copyrighted, the Ninth Circuit’s reading of Clarke Checks does not comport with our reading of it. Bibbero, 893 F.2d at 1107. The Clarke Checks court’s statement that “blank forms which do not convey information … are not copyrightable” does not indicate a view that blank forms cannot convey information. 711 F.2d at 971. Moreover, the court’s analysis went beyond identifying the check stub at issue as a blank form; the court analyzed whether it conveyed “information beyond that contained on previously existing check stubs,” indicating that it would be possible for a check stub, although a blank form, to convey information. Id. at 972. We therefore look to the “convey information” test to analyze whether ED Maximus is copyrightable, and do not end the analysis merely by labeling it a blank form.

First Circuit: Copyright Act does not preempt termination of license under NY contract law

Shourin Sen - 2 February 2010 – 9:00 am

Filed under Licensing, Music, Preemption, Termination

Latin American Music Co. v. American Society Of Composers Authors And Publishers, 2010 WL 324526 (1st Cir. 2010)

The First Circuit (Torruella, Baldock, Howard writing) addressed what is to my knowledge a novel issue concerning the requirement that a transfer of ownership must be in writing. Caballo Viejo, which translates to “Old Horse,” is a popular folk song in Venezuela. In September 1981, the composer of Caballo Viejo granted exclusive rights in the song to a predecessor of a predecessor of ASCAP. A predecessor of ASCAP (which obtained the rights from the predecessor of the predecessor, got that?) transferred exclusive rights in the song to a predecessor of Latin American Music Company in 1982. The contract between the predecessor of ASCAP and the predecessor of Latin American Music Company, which was formed in New York, did not specify a termination date, the conditions under which the exclusive license could be terminated, or the manner in which the license could be terminated.

A dispute arose between ASCAP and Latin American Music Company over copyright ownership. ASCAP claimed that it was the actual owner of the song because its predecessor had terminated the 1982 contract granting exclusive rights to Latin American Music Company. The only testimony presented at trial on the issue was a deposition of the president of ASCAP’s predecessor, stating that he had terminated the 1982 agreement with Latin American Music Company’s predecessor during a conversation with the counterparty’s president.

The First Circuit stated that New York law provides that an agreement of this type “remains in force for a reasonable time and is subject to termination upon reasonable notice. Italian & French Wine Co. of Buffalo, Inc. v. Negociants U.S.A., Inc., 842 F.Supp. 693, 699 (W.D.N.Y.1993) (“[W]ell-settled New York law [ ] provides that a contract with no stated duration is terminable only after a reasonable duration and after reasonable notice is given.”); see also Laugh Factory, Inc. v. Basciano, 608 F.Supp.2d 549, 556 (S.D.N.Y.2009); Rogers v. HSN Direct Joint Venture, 1999 U.S. Dist. LEXIS 12111, at * 3 (S.D .N.Y. Aug. 6, 1999).”

On appeal, Latin American Music Company argued that the Copyright Act preempted (conflict preemption) the New York State contract law default rule of termination; that the termination had to be in writing. Title 17 Section 204 of the Copyright Act provides:

(a) A transfer of copyright ownership, other than by operation of law, is not valid unless an instrument of conveyance, or a note or memorandum of the transfer, is in writing and signed by the owner of the rights conveyed or such owner’s duly authorized agent.

Latin American Music Company argued that since it had owned exclusive rights in the song, the termination of the agreement, without a writing, was an invalid transfer of ownership. Since there was no writing, according to Latin American Music Company, there was no transfer.

The Court found that Section 204 did not apply to terminations of copyright ownership under New York State Law:

Section 204, which requires a writing signed by the transferor, however, applies to the transfer or grant of copyright ownership, not to the termination of such a transfer or grant. [Latin American Music Company] cites no case suggesting otherwise, nor are we are aware of any such case. Moreover, extending-204 to the termination of copyright interests would lead to untenable results. A transferee of a copyright interest could effectively veto a lawful termination of that interest by refusing to reconvey that interest to the terminating party under-204. For example, in this case, [Latin American Music Company], the transferee, could have prevented [ASCAP's predecessor in interest] from terminating the exclusive license by simply choosing not to reconvey the license to West Side through either an instrument of conveyance, or a note or memorandum of transfer.

The First Circuit also found that 17 U.S.C. 203 did not preempt the transfer. The Court found that the section only applied to situations where an author or an author’s statutory heirs are terminating a grant.

Illinois Supreme Court finds that state criminal provision preempted as applied to post-’72 recordings

Shourin Sen - 1 December 2009 – 9:00 am

Filed under Preemption

People v. Williams, Docket No. 105453 (Ill. 2009)

The Illinois Supreme Court issued an interesting decision on November 19. The State of Illinois alleged that a Defendant [1] intentionally or knowingly offered for sale sounds recorded on CDs and DVDs without the consent of the owner of the master recording, and [2] failed to identify the manufacturer of the CDs and DVDs he offered for sale. 720 ILCS 5/16-7, 16–8.

To briefly review, the Copyright Act first granted performers exclusive rights in sound recordings on February 15, 1972. Before that date, if a performer wanted to bring suit for the unauthorized reproduction or distribution of a sound recording, her only option was to bring suit under a state provision or, perhaps, a state common law claim. See Metropolitan Opera Association, Inc., et al., and Columbia Records, Inc., v. Wagner-Nichols Recorder Corporation et al., 101 N.Y.S.2d 483 (1950). The Sound Recordings Act of 1971 only applies prospectively, and not to recordings published before February 15, 1972.

The first issue before the Illinois Supreme Court: Is a state claim for the illegal sale of post-1972 recordings preempted by the Federal Copyright Act?

Presumption against preemption

The Illinois Supreme Court first addressed whether there was a presumption against preemption. The Court cited Sprietsma v. Mercury Marine, 197 Ill. 2d 112, 117 (2001), rev’d on other grounds, 537 U.S. 51, 154 (2002), for the proposition that while there is “generally” a presumption that state police powers are not superseded by federal law, the presumption doesn’t apply if federal concerns predominate. The Court found that there was no presumption against preemption:

Because the question in this case is whether Congress has expressly preempted the field in an area where it unquestionably has always had at least shared concurrent jurisdiction (never mind the passage of an expressed preemption provision in 1976), and Illinois had not traditionally exercised authority in the area of sound recordings, we conclude that protection of sound recordings is more traditionally within the realm of federal protection in Illinois and . . . federal concerns predominate in this area. Accordingly, there is no presumption in favor of nonpreemption in this case.

Preemption

The Illinois Supreme Court loosely applied the Seventh Circuit’s extra element test and found that the Illinois criminal provision was expressly preempted, as applied to post-1972 sound recordings, by the Federal Copyright Act. See Baltimore Orioles, Inc. v. Major League Baseball Players Ass’n, 805 F.2d 663, 674 (7th Cir. 1986). The Court looked to the language of the Copyright Act; legislative history; other federal and state case law; and the findings of other state legislatures as evinced by how they have drafted criminal sound recording provisions.

First Amendment and overbreath

The Defendant next argued that Section 16-8 (which made it a crime for a person to profit in recordings if the labeling or packaging on the recording does not display the name and address of the manufacturer and the name of the performer) should be stricken because it was overbroad in violation of the First Amendment. The Illinois Supreme Court rejected the argument finding that section 16–8 could be applied constitutionally in most instances, and that the Defendant made no showing that the burden on protected speech was substantial as compared to the legitimate applications. The Court also rejected a due process challenge to the Statute.

Comments:

The Illinois Supreme Court made it explicitly clear in a couple of places that the Defendant only argued express preemption under 17 U.S.C. 301, and not implied preemption or conflict preemption (perhaps hinting that implied or conflict preemption could have played a role, if timely argued, in other places in the opinion.)

Commercial misappropriation, unjust enrichment, breach of non-exclusive license claims held not preempted by the Copyright Act

Shourin Sen - 22 June 2009 – 9:09 am

Filed under Preemption, Registration

Salestraq America, LLC v. Zyskowski, 2009 WL 1652146 (D. Nev. 2009)

The plaintiff compiled content about residential property in the greater Las Vegas area. The content contained information on seventeen thousand proprieties, including floor plans, measurements, architectural features, as well as general highlights about the property. The plaintiff distributed the content via a subscription website and monthly CD-ROMs.

The defendant allegedly signed up for the plaintiff’s service and then began to offer the content on a competing subscription website. The plaintiff brought claims for copyright infringement, violation of the Computer Fraud and Abuse Act, and a series of state law claims including commercial misappropriation, unjust enrichment, and breach of a nonexclusive license.

Preemption of state law claims

The defendant moved to dismiss claims for commercial misappropriation, unjust enrichment, and breach of a nonexclusive license on the basis that the claims were preempted by 17 U.S.C. § 301(a). The Court cited the Ninth Circuit’s holding in G.S. Rasmussen & Associates, Inc. v. Kalitta Flying Serv., Inc. for the proposition that while a state law claim for improper copying is preempted, a claim for improper use of the content is not preempted:

In the present case, [The Plaintiff's] state claims allege, not only that Defendants copied the [it's content], but also that Defendants used the Murphy IP for their own commercial benefit in violation of state law. Thus, under Rasmussen, [The Plaintiff's] allegations change the nature of its state claims so that they are qualitatively different from a copyright infringement claim. [The Plaintiff's] state claims are therefore not preempted by the Copyright Act.

The Court didn’t explicitly address the claim for breach of a nonexclusive license but held that it wasn’t preempted. The Court also addressed a registration and CFAA issues.

“Backwards-looking” registration

The defendant moved to dismiss the copyright claim on the grounds that the court lacked jurisdiction because the registration was defective. The defendant argued that plaintiff failed to comply with Section 411(a) because it had registered a 2008 version of its content, but not the 2007 version that the plaintiff alleged was infringed. The court found that the plaintiff’s registration of the 2008 derivative work satisfied the Section 411(a) for purposes of bringing suit on the 2007 version of the work because the allegedly infringed preexisting content was included in the registration.

This situation is essentially the reverse of the forward-looking registration we saw in Facebook v. PowerVentures a couple of weeks ago. Facebook registered an older version of its website but brought suit for infringement of the current version. In both backwards-looking and forwards-looking registration situations, a plaintiff’s infringement claim can only extend as broadly as the content incorporated in the registration.

Violation of the Computer Fraud and Abuse Act

The Plaintiff claimed that the Defendant breached the CFAA because while it had obtained a license to access the Website, it exceeded its “authorized access by copying content from the Website and using that content for Defendants’ commercial use.” This court distinguished situations where a person misuses information that was properly accessed from situations where a person exceeds their authorized access to obtain restricted info, and granted the Defendant’s motion to dismiss:

There is a crucial difference between misusing information properly accessed and exceeding one’s authorized access to obtain restricted information. This case falls into the former category, as SalesTraq acknowledges in its complaint that Defendants paid to access the content on SalesTraq’s Website. ( See id. ¶ 20); see also U.S. Bioservices Corp. v. Lugo, 595 F.Supp.2d 1189, 1192 (D.Kan.2009) (“[A]ccess to a protected computer occurs ‘without authorization’ only when initial access is not permitted, and a violation for ‘exceeding authorized access’ occurs only when initial access to the computer is permitted but the access of certain information is not permitted.”).

Conversion claim for website fails because of lack of ownership, implied contract

Shourin Sen - 27 May 2009 – 9:00 am

Filed under Preemption

Conwell v. Gray Loon Outdoor Marketing Group, Inc., 2009 WL 1409477 (Ind. 2009)

The Supreme Court of Indiana addressed a fun little copyright case last Tuesday. The story goes like this: Piece of America sold novelty packages that included one-square-inch parcels of land in each of the fifty states. The company approached Gray Loon to design and host its website. Gray Loon submitted a proposal that contained language stating that it was its “philosophy that clients have purchased goods and services from us and that inherently means ownership of those goods and services as well.” Grey Loon completed the design at a cost of $8,500, which Piece of America paid in full. The parties never executed a contract.

About a year later, Piece of America requested that Gray Loon make substantial changes. Gray Loon didn’t submit a proposal for the revisions, but completed the work, which it billed at $5,224. Three months went by without payment or assurances of payment for either the revisions or the hosting fee. Gray Loon informed Piece of America that if it didn’t receive payment, it would take the site offline, and it eventually followed through.

Gray Loon filed suit for non-payment, and Piece of America countersued for conversion, claiming Grey Loon had taken from it the pre-revision version of its website.

Analysis of the conversion claim:

Indiana law states that a person can bring a civil action against a “person who knowingly or intentionally exerts unauthorized control over property of another.” Ind.Code § 35-43-4-3 (2008).

According to the Court, Gray Loon’s stated philosophy of client ownership didn’t “carry the weight and certainty required by the Copyright Act,” and the “formalities of copyright ownership transfer were clearly not met, inasmuch as the proposal-the only document purporting to grant [Piece of America] any ownership interest in Gray Loon’s intellectual property-was not signed as required by § 204.”

Thus, the Court found that Piece of America’s claim failed because it only owned a non-exclusive license, not a copyright (emphasis mine):

While copyright transfer requires a signed writing, one incidence of ownership that may be transferred without a writing is a “nonexclusive license,” a creation fashioned by courts for situations in which parties intended to transfer a copyright, but failed to do so in writing. Such a license can be granted orally or implied from the conduct of the parties. Effects Assocs., Inc., 908 F.2d at 558; 3 Nimmer on Copyright § 10.03[A], at 10-36. “Nonexclusive licenses do not constitute transfer of ownership rights and do not come within the purview of copyright law. Rather, they simply permit the use of a copyrighted work in a particular manner. An implied nonexclusive license is granted when (i) a person (the licensee) requests the creation of a work; (ii) the creator (the licensor) makes that particular work and delivers it to the licensee; and (iii) the licensor intends that the licensee copy and distribute his work. See Effects, 908 F.2d at 558-59.” Holtzbrinck Publ’g Holdings, L.P. v. Vyne Commc’n, Inc., 2000 WL 502860 *4 (S.D.N.Y.2000).

What POA had was a nonexclusive license. Piece of America, the licensee, requested the creation of a website. Gray Loon, the creator/licensor, made and “delivered” the work to the licensee. As a nonexclusive licensee, POA never had ownership of the site under copyright law. POA purchased a non-exclusive license, which we might read as granting it rights to use the site as its own. This conclusion makes short work of POA’s conversion claim. Because the website actually did not belong to POA, it cannot bring a claim for conversion. Furthermore, even if POA had owned the website, Gray Loon did not commit conversion. It performed the work-including hosting the site-at POA’s request. When POA did not pay, Gray Loon discontinued its hosting service and refused to hand over a copy of the site. Because this contingency was not addressed by the proposal, the common law of contract applies, not conversion.

Notes:

[Edit, edit, edit] I usually write these summaries at night. Sometimes when I look at them in the morning, I get that “What?!” sensation. This is one of those circumstances. This case is deserving of more analysis than was located here previously, and I’ll return to the opinion later in the week.

Scranton newspapers denied motion for remand to state court because of complete preemption

Shourin Sen - 16 March 2009 – 8:45 am

Filed under Jurisdiction, Misappropriation, Preemption

On March 6, Judge A. Richard Caputo of the federal district court in Scranton, Pennsylvania issued a decision that addressed complete preemption (which is different than the preemption set forth in 17 U.S.C. 301). The Scranton Times and the Times Partner published newspapers in Scranton, Pennsylvania. Wilkes-Barre Publishing Company published a daily newspaper in Wilkes-Barre, Pennsylvania.

Wilkes-Barre began publication of a “Scranton Edition” of it’s daily newspaper which contained obituaries. The Scranton Times and Times Partner alleged that, for a period of five days, Wilkes-Barre copied obituaries from their newspapers and/or websites.

The Scranton Times and the Times Partner filed a complaint in the Court of Common Pleas of Lackawanna County stating claims for misappropriation, unfair competition, conversion, fraud, breach of contract, tortious interference with existing business relations, and unjust enrichment. Wilkes-Barre removed the case to the federal district court in Scranton.

Complete preemption

The Scranton Times and the Times Partner filed a motion to remand the case to the Pennsylvania Court of Common Pleas on the grounds that the federal court didn’t have jurisdiction because the Plaintiffs didn’t bring any federal claims. The Court rejected this argument on the doctrine of complete preemption:

“A state claim which is ‘really one of federal law’ may be removed to federal court because ‘it is an independent corollary of the well-pleaded complaint rule that a plaintiff may not defeat removal by omitting to plead necessary federal questions in a complaint.’ ” “The Supreme Court has held that a state cause of action is ‘really’ a federal cause of action which may be removed to federal court if the “federal cause of action completely preempts … the state cause of action.” Goepel v. National Postal Mail Handlers Union, 36 F.3d 306, 310 (3d Cir.1994) (quoting Franchise Tax Board v. Construction Laborers Vacation Trust, 463 U.S. 1, 24 (1983)). [some citation omitted]

The Court found that while the Plaintiffs’ claims made no mention of federal copyright law, they “may not defeat removal by omitting to plead necessary federal questions” in their complaint. The Court then determined that the state law claims for misappropriation, unfair competition, tortuous interference with business relations and unjust enrichment were completely preempted by the Copyright Act. Thus, the Court found that it had subject matter jurisdiction over the four claims.

The Court further found that it had supplemental jurisdiction over the state law claims of conversion, fraud and breach of contract that weren’t completely preempted.

Misappropriation

The Scranton Times and the Times Partner brought a claim for misappropriation under INS v. AP. Judge Caputo “agree[d] with” the Second Circuit’s holding in National Basketball Association v. Motorola, Inc.,105 F.3d 841 (2d Cir.1997) that “only a narrow ‘hot news’ misappropriation claim survives preemption for actions concerning material within the realm of copyright.” Thus, the Court turned to the extra elements that allow a misappropriation claim “styled on” AP v. INS to survive preemption:

(i) the time-sensitive value of factual information,

(ii) the free-riding by a defendant, and

(iii) the threat to the very existence of the product or service provided by the plaintiff.”

The Court found that Scranton Times and the Times Partner satisfied the (i) time sensitive element because the time and place of funeral services are time sensitive. The Court further found that the allegations made in the complaint that the Wilkes-Barr Publishing Company copied the death notices found in Plaintiffs’ publications into its own newspaper-satisfied the (ii) “free-riding” element.

In regards to the (iii) threat to the very existence of the product or service, the Court found that Plaintiffs’ hadn’t alleged that the use of their obituaries for five days threatened the existence of their publications:

The Court acknowledges that these statements certainly allege that the Defendant caused Plaintiffs some actual loss during the five (5) day period of alleged plagiarism activity, along with speculative future losses in terms of goodwill, customer loyalty, and business relationships. The Court does not, however, find that Plaintiffs have alleged that Defendant’s activities have threatened the existence of their publications or has compromised or provided reduced incentive for Plaintiffs to continue collecting obituaries and printing them for public distribution.

Documents

The Scranton Times, L.P. et al v. Wilkes-Barre Publishing Company, 08 cv 02135 ARC, 2009 WL 585502 (M.D. Pa. March 15, 2009)

Associated Press v. All Headline News: A gem of a choice of law issue that wasn’t addressed; attribution as trademark infringement

Shourin Sen - 23 February 2009 – 8:43 am

Filed under Choice of Law, Preemption, Unfair Competition

Associated Press v. All Headline News Corp. et al, 08 cv 00323 PKC, 2009 WL 382690 (S.D.N.Y. Feb. 17, 2009).

I finally have had the chance to work through Judge Caste’s order from this past Tuesday in Associated Press v. All Headline News. The facts in this case are relatively straightforward. AP alleged that All Headline News, a Florida corporation, collected their stories from the internet, and either rewrote or copied them in full. AP brought suit for copyright infringement, and violations of the DMCA (17 U.S.C. § 1202), Lanham Act, and New York common law.

All Headline News filed a motion to dismiss the New York state misappropriation claim on the grounds that the Court should apply Florida unfair competition law, which they alleged doesn’t recognize misappropriation. AP argued the reverse: Florida state unfair competition law recognizes misappropriation and, regardless, the Court should apply New York state law.

Judge Caste applied New York State choice of law rules, which establish a two step evaluation:

Determine whether there is an actual conflict between the laws of the jurisdictions involved; and if there is,
The law of the jurisdiction having the greatest interest in the litigation should be applied.

The Court punted on the question of whether Florida unfair competition recognizes misappropriation and assumed conflict, finding that neither party had “persuasively demonstrated” that Florida would or wouldn’t recognize the claim.

Moving on to which jurisdiction had the “greatest interest,” the Court looked to NY tort law that states that when a defendant’s allegedly tortuous conduct arises in one jurisdiction and the injury occurs in another, the location of the tort is the place “where the plaintiff suffered the injury sued upon.” Thus, because AP was headquartered in NY and suffered injury in NY, the Court found that NY law should apply.

The Court denied the motion to dismiss finding that the Second Circuit has “unambiguously” held that misappropriation, brought under NY unfair competition law, is not preempted by the Copyright Act.

The gem of a choice of law issue that wasn’t addressed

So far so good, right? I’m not certain. This wouldn’t affect the outcome, but it appears to me the wrong choice of law issue was briefed.

The choice of law issue at play isn’t whether a state recognizes misappropriation, but whether the federal courts in a particular jurisdiction have found that misappropriation is preempted. Presumably, every state’s unfair competition tort would recognize misappropriation. If Florida doesn’t recognize misappropriation, it’s not because their tort of unfair competition doesn’t reach the claim. Instead, it would be due to the fact that the Eleventh Circuit has ruled that the claim is preempted by copyright law. Whether a state has a tort for misappropriation is really a question of federal law, not state law.

Would the Second Circuit be forced to apply the Eleventh Circuit’s interpretation of federal law if it was different? I would assume that the answer is no. It would appear to me that, regardless of whether the Court applied Florida or New York state unfair competition law, the question of whether a misappropriation claim is preempted, should fall on the Second Circuit’s interpretation of the Copyright Act.

These types of fed courts issues aren’t my strong suit. (Which can be seen in my analysis of Nicholson v. Shafe. After sleeping on it, I think there’s a lot more to the case than I first thought.) If anyone has comments on this issue, I’d love to hear them.

Attribution as trademark infringement

The AP brought a couple of creative claims in their complaint, one of which may be of particular interest. The AP claimed that All Headline News infringed their trademark, under section 32 of the Lanham Act, by attributing them when All Headline directly copied parts of a story. (E.g., “[a]ccording the Associated Press.”) AP alleged that by doing this, All Headline News mislead readers into believing that their stories were issued by AP. Judge Caste dismissed the claim.

Documents

Associated Press v. All Headline News Corp. et al, 08 cv 00323 PKC, 2009 WL 382690 (S.D.N.Y. Feb. 17, 2009)

S.D.N.Y. grants Paramount’s motion to dismiss in suit over use of pinball machine in "What Women Want"

Shourin Sen - 6 January 2009 – 8:07 pm

Filed under Preemption

Robert Pritikin, the man who composed the rice-a-roni jingle, has generated a fair amount of press recently. Priikin claimed that the use of Hitler’s Globe in Valkyrie, Tom Cruise’s recently released blockbuster, infringed his copyright in the work. The claim, of course, is frivolous, given that Pritikin isn’t the author of the Globe, only the owner of the tangible item. Though, Pritikin appears to know exactly what he’s doing. He recently put the Globe up for sale, and as Techdirt pointed out, there is probably no better way to generate interest. On the general subject of claiming copyright in an item depicted in a film, the S.D.N.Y. granted motion to dismiss in a similar suit this past week.

In Gottlieb Development LLC, v. Paramount Pictures Corporation, 08 civ 2416 DC (S.D.N.Y. Dec. 29, 2008), the distributor of the “Silver Slugger” pinball machine alleged that Paramount’s use of one of their machine in the movie “What Women Want,” sans permission, constituted copyright and trademark infringement, a violation of N.Y. State Deceptive Trade Practices, and common law unfair competition and unjust enrichment. Paramount used the “Silver Slugger” in the background of a scene where Mel Gibson and Helen Hunt brainstormed new ways to market products to women.

Judge Chin granted Paramount Pictures’ motion to dismiss on all claims. In regards to copyright infringement, the Court found that the use of the Slugger sporadically, for seconds at a time, in a three and a half minute scene was de minimis as a matter of law. Judge Chin distinguished the current suit from Ringgold v. Black Entm’t T.V. Inc., 126 F.3d 70, 75 (2d Cir.1997), where a poster was shown nine times (1.86 to 4.16 seconds at a time, for a total of 26.75 seconds) during a five-minute scene at the end of a television episode. Further, Judge Chin noted that in Ringgold there was a “qualitative connection between the poster and the show” that was lacking in Paramount’s use of the Silver Slugger.

In regards to the Lanham action, the Court found that Gottlieb failed to allege facts to suggest that Paramount’s use of its trademark would likely cause confusion, or that Paramount’s use was motivated by ill-intent to free-ride on Gottlieb’s good will. Gottlieb’s counsel forwarded the creative argument that its “business reputation will be injured by any association of its products with the actor Mel Gibson and his purported anti-Semitic beliefs.” The Court, however, rejected as “absurd” the idea that consumers would “think less” of Gottlieb because of the brief shots of the Slugger and Gibson.

The Court dismissed the New York General Business Law Section 349 Deceptive Trade Practices claim, and found that Gottlieb failed to allege any facts that showed either harm to the public interest or material deception. Judge Chin found that the unfair competition and unjust enrichment claims were preempted.

Counsel: