“Torrent Wars” Article by Jeffrey Antonelli Published by ISBA

Have you been sued for downloading a movie using BitTorrent or a streaming service like PopcornTime?

This article describes “copyright trolling” litigation in movie download lawsuits by attorney Jeffrey Antonelli of Antonelli Law.

The article, Torrent Wars: Copyright trolls, legitimate IP rights, and the need for new rules vetting evidence and to amend the Copyright Act was published by the  Illinois State Bar Association’s Intellectual Property Section Newsletter.

For those who cannot view pdfs an excerpt is below.

Today, a program called BitTorrent is spurring a new wave of internet file sharing, and along with it an ocean of online copyright infringement. Those running the program post torrent files on immensely popular websites like the Pirate Bay. While filed to ostensibly catch and stop the online infringers, critics of this practice contend it is really about revenue. Consequently, the blogs on the internet came up with an addition to the English and legal lexicon: the copyright troll.

TO SETTLE OR FIGHT

It is no secret that litigation is expensive, and that fact is often used by plaintiffs as a factor in determining how much to demand in settlement. For an innocent defendant to choose not to pay a settlement of a few thousand dollars, and instead pay his or her attorney potentially tens of thousands of dollars or more in legal fees, clearly more than financial incentives must be at play. Often times, innocent defendants will pay a settlement of $2,000 or so rather than live through the ordeal of fighting a lawsuit and paying that amount of money many times over for legal defense. Yet sometimes innocent parties are sometimes so angered at being named that even after full disclosure by their counsel as to the costs of competent defense, they will decide to fight rather than to settle.

EVIDENTIARY PROBLEMS – THE FAILURE TO CONTROL FOR “FALSE POSITIVES” 

Courts, too, are cognizant of the fact that not all IP addresses point to an actual infringer. See, e.g., Digital Sin, Inc. v. Does 1-176, 279 F.R.D. 239, 242 (S.D.N.Y. 2012) (estimating that 30% of the individuals whose names were disclosed to plaintiffs did not download the copyrighted material). The court in SBO Pictures stated: “the ISP subscriber to whom a certain IP address was assigned may not be the same person who used the internet connection for illicit purposes.” Similarly, In re Bittorrent Adult Film Copyright Infringement Cases, the district court explained that ‘it is no more likely that the subscriber to an IP address carried out a particular computer function … than to say an individual who pays the telephone bill made a specific telephone call.” The court explained that due to the increasing popularity of wireless routers, it is even more doubtful that the identity of the subscriber to an IP address correlates to the identity of infringer who used the address.

THE NEED FOR A COURT SCREENING PROCESS

The writer believes that this unacceptably high incidence of identity theft, referred to in the computer science literature as “false positives”, poses a serious due process problem and some technological screening process must be used by the court prior to copyright plaintiffs being granted leave to issue Rule 45 subpoenas to the ISPs to identify the accountholder associated with the IP address. Somewhat analogous to the grand jury in criminal cases, this screening process would be a vetting of the technical evidence presented by the plaintiff just as a prosecutor must present evidence to a grand jury prior to an indictment being issued.

This court screening process can be added to Section 502 (Injunctions), Section 503 (Impounding and disposition of infringing articles) and Section 504 (Damages and profits) in a fashion similar to what the Maryland District Court has done with all cases filed by copyright plaintiff Malibu Media.  Maryland has appointed Professor William Hubbard, a member of the faculty at the University of Baltimore School of Law, who teaches copyright and intellectual property law, to serve as a Master in the Malibu cases. When a copyright lawsuit is filed by Malibu Media, procedures are followed to, inter alia, a) allow the Master to obtain information from the ISP, b) allow the Subscriber to provide the Master with information to enable the Master to make a preliminary recommendation whether a plausible claim for copyright infringement may be brought against the Subscriber, and c) for the Master to makes a recommendation that a factual basis exists, or does not exist, for Malibu to assert a plausible claim for relief against a Subscriber for copyright infringement.

Even aside from the allegations that some unethical attorneys may actually be “seeding” their own copyrighted works online to induce others to download the work and then be sued later, it is fundamentally unfair that innocent individuals and families are currently being subjected to the unnecessary worry and expense of being targeted by copyright trolls starting with the notice of subpoena from the ISPs, perhaps based on flimsy evidence. A court screening process, perhaps like the Maryland District Court’s Master, is a necessity to prevent the current troublesome number of innocent individuals and families from continuing to be subjected to claims of online copyright infringement.

THE NEED TO AMEND THE COPYRIGHT ACT

Most people seem to agree that the average consumer who wrongfully obtains a copyrighted work should be subjected to the risk of being punished by a monetary fine. However, none of these BitTorrent copyright cases involve people attempting to redistribute the work for a profit. It seems incredibly unfair to subject consumers who are alleged to have downloaded a single movie or song on the internet for private viewing or listening purposes to be exposed to a potential $150,000 statutory damages award, plus attorneys fees as provided in Section 504(c)(2). In order to present the potential for a proportional remedy for non-profiteering copyright infringement by a consumer, the writer suggests amending the Copyright Act to a maximum of $5,000 statutory damages where willfulness is demonstrated, and $500 if willfulness is not demonstrated.

Suggested Changes to the Copyright Act:

Change Section 504(c)(1)’s text from “an award of statutory damages for all infringements involved in the action, with respect to any one work, for which any one infringer is liable individually, or for which any two or more infringers are liable jointly and severally, in a sum of not less than $750 or more than $30,000 as the court considers just” (italics added) to “an award of statutory damages for all infringements involved in the action, when no monetary gain was intended by the infringement with respect to any one work, for which any one infringer is liable individually, or for which any two or more infringers are liable jointly and severally, in a sum of not less than $750 or more than $500 as the court considers just.” Change Section 504(c)(2)’s text to “In a case where the copyright owner sustains the burden of proving, and the court finds, that infringement was committed willfully, the court in its discretion may increase the award of statutory damages to a sum of not more than $150,000. However, if no monetary gain was intended by the infringement, the court may only increase the award of statutory damages to a sum of not more than $5,000.”

This cap on damages for non-profit-motivated copyright infringements may reduce the number of the more frivolous copyright trolling lawsuits and, at the very least, reduce the settlement amounts paid by those innocent defendants who just don’t want to deal with a lawsuit down from thousands of dollars, to just hundreds of dollars.

For the full article, and for more information about subpoena defense, please visit the Antonelli Law website.

 

Hinging on the Definition of “Orderly”: Copyright Holder Faces Losing Option to Enforce Registered Work

The 7th Circuit Court of Appeals recently vacated a judgment against a sculptor in which copyright protection for one of her works was denied based on the form of her application. In a decision from Chief Judge Easterbrook, the district court’s ruling was vacated and the case was remanded for further consideration on the issue of whether the copyright registration was “orderly.”

In Neri v. Monroe, artist Quincy Neri designed a 60-piece glass-blown sculpture titled “Mendota Reflection” for Linda Hughes. Hughes had hired several contractors to perform renovations to the foyer of her condominium. The sculpture was hung from the ceiling and a lighting specialist was hired to assist with the installation. A photographer was retained to document the entire renovation project. The architecture firm, lighting designer and photographer all posted pictures of the project on their individual websites, some of which included the sculpture. Images of the sculpture were also used in an application for an architectural award. Neri opposed all of these uses citing her copyright registration.

A copyright automatically issues when a work exists in a fixed medium, but litigation to enforce a copyright cannot be undertaken unless a valid registration exists. Neri filed a received a valid registration from the Copyright Office and thus, claimed the right to enforce it.

U.S. Magistrate Judge Stephen Crocker of the Western District of Wisconsin dismissed Neri’s case stating that she lacked a valid copyright. Neri’s copyright application was filed as a work in a collection of works. In order to qualify as a collection, the submission must be in an “orderly form.” Neri’s copyright application contained a booklet of photos. Some loose photographs, among which was a picture of this particular sculpture, accompanied the booklet but were not inserted into it. The district court’s decision to dismiss Neri’s case turned on the determination that her submission was inadequate as a collection because it was not “orderly.”

In the decision issued on August 12, 2013, Chief Judge Easterbrook pointed out areas of concern in the case. “We have found several discussions of registration under §202.3(b)(4)(i)(B), but none of these tackles the ‘orderly form’ question.” The booklet and additional photos were not entered into evidence, so they were not directly viewed by the district judge nor were they available to the judges considering the case on appeal adding an additional level of complication to the case. Neri asserted in her argument before the appellate panel that a photograph of the sculpture in question was present in the booklet submitted with her copyright application. He also discussed the difficulty in determining whether or not “Mendota Reflection” referred to a specific work or a series of works without adequate visual evidence.

The defendants also claimed that Neri was not the actual author of the sculpture. She decided what colors and shapes would be used, decided the positioning of each piece and provided molten glass as needed to complete the work. But, she hired a glass blower to create around 60 of the glass pieces used in the sculpture. Easterbrook shot down this argument stating that “defendants might as well say that the typesetter owns a book’s copyright or that the members of an orchestra who play a new composition using their own interpretations of the score become the music’s authors.” While Neri’s copyright covered the entire resulting work, the glass blower may have a claim to any features that he added to the work.

The defendants also claimed that they assisted in making decisions concerning the colors used and the placement of the pieces within the sculpture, giving them a joint authorship argument. Neri denied the claim and the appellate panel did not attempt to resolve this issue.

The 3-judge panel discussed on appeal whether the other parties could assert a “fair use” defense as to their own involvement with the installation of the sculpture. Easterbrook pointed out that the architectural firm and the lighting designer would have a difficult, maybe impossible time, of trying to document and display their own participation in the renovation without also displaying the sculpture or other aspects of the area that they were not directly responsible for creating. This argument will likely be revisited by the district court.

For more information:

Stan Lee Media, Inc. Loses Copyright Infringement Case Against Disney

Stan Lee’s comic book characters have been widely known for years and their notoriety has only increased in recent years with Disney’s active filmmaking ventures.

Stan Lee Media, Inc. (“SLMI”) filed a suit in US District Court of Colorado on October 9, 2012 claiming copyright infringement of various characters owned by SLMI. The company claimed $5.5 billion in damages for movies, media and merchandising featuring various characters including Iron Man, Spider Man, X-Men, and the Avengers, each of which appeared in movies from 2010-2012 netting large profits.

Stan Lee, the creator of hundreds of comic book characters, transferred his rights in his creations to Stan Lee Entertainment, Inc. in October 1998. The company later transferred its rights to Stan Lee Media, Inc. (a Delaware corporation) which subsequently transferred to Boulder Capital Opportunities, Inc. (renamed Stan Lee Media, Inc.). (While Mr. Lee was involved with the company at its inception, he has not been a part of Stan Lee Media, Inc. in over a decade. He has been a party to several rounds of litigation involving the company.)

In November 1998, only a few weeks after Lee’s agreement with Stan Lee Entertainment, Inc., he also made an agreement to transfer the rights in these characters to Marvel Enterprises, Inc. (Lee claimed that the plaintiff had materially breached their contract, giving him the ability to transfer the rights to another party). Marvel later transferred its rights to Disney, the defendant in this case.

Since 1998, Stan Lee Media Inc. has engaged in several lawsuits concerning the “1998 Agreement” and ownership of these characters in district courts in New York, California, and Colorado. All of these actions have been unsuccessful. Judge William J. Martinez, of the U.S. District of Colorado, again ruled against the plaintiff on September 5, 2013.

Disney made four main arguments in this case. It contended that the court did not have personal jurisdiction over Disney, the plaintiff was unable to prove ownership of the copyrights because it was barred from doing so based on issue preclusion (resulting from previous litigation), the plaintiff’s copyright infringement claim was barred by the statute of limitations, and the amended complaint submitted to the court failed to plead sufficient facts to state a claim for copyright infringement.

Judge Martinez specifically addressed the arguments concerning personal jurisdiction and issue preclusion and ultimately dismissed the case.

Stan Lee Media, Inc. attempted to argue that personal jurisdiction in Colorado existed because at least one of Disney’s subsidiaries is incorporated in the state. This is called the agency or alter ego theory because the named defendant is not actually incorporated in the state. The court did not take the time to fully discuss this issue because it eventually dismissed the case on other grounds, but it pointed out that holding or parent companies enjoy corporate existence that is separate from any subsidiaries.

Judge Martinez ruled that Stan Lee Media, Inc. was precluded from re-litigating this case, based upon the 1998 Agreement, due to the fact that it had already been litigated on several occasions. He cited previous cases from the Southern District of New York and Central District of California, each of which involved interpretation of the same 1998 Agreement and each of which ruled against the plaintiff. While the plaintiff argued that the issues in the previous cases were not identical to the issue presented in this case, the judge disagreed and thus the issue of ownership was precluded from being re-litigated.

Plaintiff cannot state a claim for copyright infringement without first having ownership of a valid copyright. In this case, Stan Lee Media, Inc. was unable to adequately prove ownership. In most cases, the plaintiff is allowed to amend the complaint at the judge’s discretion, but Judge Martinez called this proposition “futile” and refused to allow amendment.

Stan Lee Media, Inc. filed a Notice of Appeal in this case on Oct. 2, 2013.

For more information:

  • Case 1:12-cv-02663-WJM-KMT
  • Lee v. Marvel Enters., 765 F. Supp. 2d at 456
  • Stan Lee Media, Inc. v. Lee, 2012 WL 4048871, at *7.
  • Abadin v. Marvel Entertainment, Inc., 2010 WL 1257519, at *7.

Will the Hallmark Crown be Tarnished? North Pole City Files Trademark Infringement Suit Against the Greeting Card Company

DKG Enterprises, Inc., a company that runs a store called North Pole City in Oklahoma City, filed a trademark suit in the Western District of Oklahoma on Sept. 9, 2013 against Hallmark Cards, Inc. and Hallmark Licensing, LLC.

North Pole City has been in existence in Oklahoma City since the early 1990s and primarily engages in selling holiday merchandise. It claims to be one of the largest Christmas merchandise stories in the county. It has also sold products online since 1995 and can be found at northpolecity.com. The trade names “North Pole City” and “North Pole City Gifts & Collectibles” were registered with the Oklahoma Secretary of State in 1997.

Hallmark, a Missouri corporation, recently released plans to launch a new product line for Holiday 2014 called “North Pole City.” Hallmark Licensing filed 12 trademark applications on June 6, 2013 for various products including a series of fictional books, stationery, greeting cards, wrapping paper, aprons, mittens, socks, music boxes, watches, 3-D goggles, production of motion pictures, Christmas tree ornaments, illuminated outdoor ornaments and candles.

Plaintiff claims that there is a strong likelihood of confusion between its products and those that will be produced by Hallmark and seeks a declaratory judgment. It points out that the names are “substantially and confusingly” similar and that the products are being marketed in the same geographic location, which could confuse customers. It argues that this is an infringement of their trade name under the Lanham Act and allowing these products to be marketed under the name “North Pole City” will irreparably damage plaintiff’s mark. Plaintiff also makes claims of unfair competition and false, misleading and deceptive trade practices by the defendant.

Plaintiff asks in its complaint for preliminary and permanent injunctive relief. If granted, this would stop the defendant from using the name immediately as well as prevent the use in the future.

The final claim for relief cited in plaintiff’s complaint is for an “equitable accounting from the Defendants for any and all sales and/or profits derived by Defendants from said actions, infringement and Defendants’ other unlawful acts related to Defendants’ use of ‘North Pole City’ trademark and/or trade name.”

Plaintiff does not claim to have a federally registered mark that would fall under the protections provided by the Lanham Act § 1115(a). Common law rights may be available to plaintiff, however they may only be recognized in the geographical region where the party exercising the common law rights has a presence. In this instance, Plaintiff’s enforcement of its common law rights could be limited to Oklahoma.

No answer to the complaint has been filed to date.

For more information:

  • Case 5:13-cv-00967-M
  • Lanham Act, 15 U.S.C. § 1051 et seq.

Capitol Records v. ReDigi: The First Sale Doctrine and MP3s

The Southern District Court of New York has granted summary judgment in favor of the copyright holder in Capital Records v. ReDigi regarding the reproduction and distribution rights, essentially holding that consumers cannot resell their legally purchased MP3s. Summary judgment was denied regarding infringement of the plaintiff’s performance rights.

The opinion by Judge Richard J. Sullivan begins by specifically noting at the outset that the issues in this case are “narrow, technical, purely legal.” The court found that (1) ReDigi infringed upon Capitol Records’ rights of reproduction and distribution, and (2) ReDigi could not benefit from the fair use defense or the first sale doctrine.

ReDigi is a music resale website that allows users to sell mp3s originally purchased from iTunes or other ReDigi users; the ReDigi receives a fee on every transaction. The website validates the mp3s to ensure that the user has not retained copies on his computer. Once a file is validated, ReDigi “migrates” it to its “Cloud Locker,” or remote server. It is this migrating process that was at issue in the case. Plaintiff Capitol Records asserts that the process “necessarily involves copying,” and thus constitutes infringement. Defendant ReDigi, asserts that the process is “analogous to a train,” with pieces or packets being moved from one location to another, so that the data exists only in one place at a time.

The Court specifically focused on the reproduction right, noting that the Copyright Act address the creation of new material object, rather than the creation of an additional object, and thus rejecting ReDigi’s argument. The Court found that “ReDigi’s service by necessity creates a new material object when a digital music file is either uploaded to or downloaded from the Cloud Locker.”

The Court also found that ReDigi was not entitled to benefit from the fair use defense regarding the reproduction and distribution rights. The Court agreed with Plaintiff Capitol Records’ assertion that uploading and download incident to sale are not covered by the fair use defense. Finally, the Court found that ReDigi could not benefit from the first sale doctrine.

For more information:

“Capitol wins digital records lawsuit vs ReDigi start-up,” April 1, 2013, http://www.reuters.com/article/2013/04/01/us-capitolrecords-redigi-lawsuit-idUSBRE9300GB20130401

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