Reversal of fortune? public performance rights

March 26, 2014

There is currently a war between (i) internet broadcast stations that do not pay licensing fees for their transmitted programs and (ii) the program copyright owners. This conflict will soon be resolved when the U.S. Supreme Court interprets U.S. copyright law for a Second Circuit decision. In the meantime there is disagreement in the federal courts on whether certain technology for transmittal of unlicensed media violates exclusive public performance rights.

The case before the Supreme Court is American Broadcasting Co. et al [ABC] v. Aereo et al. [Aereo]. Aereo is a service that transmits broadcast television programs over the internet for a monthly subscription fee to its customers. Aereo’s antennas and remote hard drive create individual copies of each program which are then broadcast to customers. Consequently, Aereo’s technical systems provide the ability to view live television, pause/ record live television, and view of recorded programming with internet connected mobile devices. To implement this service, Aero owns antennae boards with thousands of individual antennas. The feed from a single antenna creates a copy of a specific program which is then transmitted to a requesting customer. No two users share the same single antenna simultaneously, even if more than one customer simultaneously watches or records the same program. Furthermore, a separate copy of a single program is created for each customer, and this copy is only accessible by that customer.

WNET, a party to the litigation, originally requested a preliminary injunction against Aereo’s internet broadcasts of its copyrighted works based upon infringement theories, especially the right to publicly perform (transmit) the works. The lower court denied the preliminary injunction, so WNET and other copyright owners filed an immediate appeal to the appellate court. The appellate court reviewed the factors for granting a preliminary injunction, based upon the alleged infringement of WNET’s public performance right under the U.S. Copyright Act. The court addressed the definition of ‘transmittal’ and concluded that it had previously resolved the public performance issue under the transmission provision in the Act. Under this previous interpretation the correct inquiry is whether (i) a transmission (ii) sent exclusively to a single person(iii) constitutes a public performance. The answer was no, because the potential audience of each transmission is a single user. Consequently, the appellate court affirmed the denial of a preliminary injunction, because there was no copyright infringement, and therefore WNET would not succeed on the merits of its lawsuit.

The copyright holder of the programs maintain that the underlying copyrighted WORK, and not the nature of the TRANSMISSION, is the basis on which public performance is resolved. Consequently, if Aereo creates more than one copy of the underlying work (in this case a program) then the electronic program is publicly performed and infringes WNET’s copyright in the program. According to this view, that each customer has a unique single copy is irrelevant, because the court properly looks at (i) a collection of unauthorized copies and (ii) not the manner in which they are sent to customers electronically. The underlying work approach has gained substantial judicial support outside the Second Circuit. For example, in Fox Television Stations, Inc. et al v. FilmOn X LLC a federal judge from the District of Columbia embraced the underlying work interpretation. She then granted a preliminary injunction against FilmOn X, a business that operates in a manner virtually identical to Aereo. Similarly, a California federal district has also adopted the underlying work interpretation against FilmOn X. The Ninth Circuit has postponed a decision on FilmOn X’s appeal from the California decision until the Supreme Court has the final say.

Who’s sorry now? copyright safe harbor

February 23, 2014

A recent appellate decision addresses circumstances that YouTube and Google initially perceived as small missteps in Viacom International, Inc. et al v. YouTube, Inc. and Google Inc, et al [hereinafter “Viacom” and “YouTube”]. The facts of this case are as follows. As is generally known, YouTube allows users to upload and view video clips free of charge to its website. However, the YouTube participant must agree not to submit works which the owners of works with copyright did not authorize.

Viacom’s position was that YouTube and Google were actually aware of specific infringing works on their website. To establish this knowledge, Viacom relied upon several documents that it obtained from YouTube. For example, a series of e-mails from one founder/executive of YouTube to another requested that infringing footage from prominent football associations be removed from the YouTube website. Nevertheless, the infringing material allegedly remained on the site. Viacom also relied upon another report from one YouTube founder to another founder that stated in relevant part: “We would benefit from pre-emptively removing content that is blatantly illegal and likely to attract criticism.” However, YouTube did no remove this content from the website on the premise that it would conduct a more thorough infringement analysis in the future. Unfortunately, this decision exposed YouTube to infringement liability in the interim.

According to additional documents, a YouTube founder requested that the remaining two founders remove several Bud Light commercials that were posted without authorization from the copyright owners. However YouTube ultimately left these commercials posted on the YouTube website for at least an additional week which “can’t hurt.” In still another instance, YouTube reposted a space shuttle clip for which Turner Media owned the copyright. YouTube then decided that this space shuttle clip was of such popular interest that YouTube would remove it only when it had optimally benefited from the clip’s popularity and when You Tube was “better known.”

The appellate court concluded that only actual knowledge or awareness of specific instances of infringement will disqualify a service provider from the statutory safe harbor for copyright infringement liability. The federal appeals court also concluded that the United States Safe Harbor of the Digital Millenium Act requires that an internet service provider have actual knowledge or awareness of a specific infringing activity. The court then directed the lower court to determine whether these documents of the YouTube founders sufficiently evidenced that YouTube had actual knowledge or awareness of specific infringing material posted on their site. If so, then You Tube is liable for copyright infringement under the copyright statute.

One important lesson from this case is that is no such thing as “leaving it up for a while” on the mistaken belief that owners will ignore that works with copyright are posted without their authorization. Unfortunately, most businesses do not have the financial resources for this litigation, much less to pay damages for missteps similar to those of YouTube. Consequently, it is important for businesses and organizations with interactive websites to be extremely vigilant so unauthorized works are not posted in the first instance. If they are inadvertently posted and there is a complaint, then they should immediately be removed from the site pending a thorough investigation. For entities such as alumni organization interactive websites, posts from outside the university are ill-advised unless a knowledgeable person (i) continuously monitors the website; (ii) consistently screens all potential posted content; and (iii) immediately removes posted content upon receiving a complaint which initially appears legitimate.

©2014 Adrienne B. Naumann, Esq.
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Bummer! visual art fair use

February 3, 2014

In the U.S. world of copyright fair use, it is often difficult to predict how use of another’s work may haunt a client who incorporates that work without permission from the copyright owner. Without a doubt, the best practice is to remain abreast of court cases, especially for literary and visual arts, in all the federal appellate courts. One such case is Cariou v. Richard Prince et al [hereinafter ‘Cariou’ and ‘Prince’] in which the court concluded there was fair use of numerous copyrighted visual art works in their entirety.

As discussed in my previous articles, copyright fair use is not defined in the same manner as trademark and service mark fair use under U.S. federal law. There are several criteria in copyright law for determining whether unauthorized use of another’s works is properly characterized as fair use. One criterion is whether the unauthorized person’s contribution is sufficiently transformative of the original works that are incorporated. According to the law, to be sufficiently transformative this contribution must alter the expression, meaning or message of the original incorporated work.

In the current case, Cariou created numerous photographs of a tribe relatively isolated from western influences. He then published these photographs in a book which, however, did not enjoy a wide distribution. Thereafter Prince painted over Cariou’s photographs and produced numerous collages upon each painted over photograph. Prince then publicly displayed these collages exclusively as his own works. When Cariou sued for copyright infringement, Prince replied that his inclusion of the photographs was fair use. Because the photographs within Prince’s works were substantially altered and almost unrecognizable, the court concluded that most of the thirty contested photographs were sufficiently transformed to qualify as fair use. The court also found sufficient transformation, in part because Prince’s collages were provocative while the original photographs were serene portraits and landscapes.

The court next addressed whether the Prince’s works had a commercial or non-profit purpose. The court concluded that although Prince’s works were commercial, this factor was insignificant in view of the transformative nature of Prince’s visual art contributions to Cariou’s photographs. The court then addressed the effect of Prince’s collages upon the market for Cariou’s photographs. The court stated that whether Cariou’s photograph market was usurped depended upon (i) Prince’s target audiences (ii) the nature of Prince’s professional contacts and (iii) whether these persons were the same as those for Cariou’s original photographs. The court found no evidence that Cariou ever developed a market, use, license or secondary uses for his photographs that were similar to those of Prince. The court also concluded that the commercial success and distribution of Prince’s works depended upon an entirely different kind of collector from those of Cariou.

Finally, the court addressed the nature of the copyrighted work. The court observed that visual art works that are published, such as Cariou’s, are less vulnerable to the fair use defense of an unauthorized user. Nevertheless, the court concluded that although Cariou’s work was published and creative, this fact was of limited importance because of the strong transformative element in Prince’s collages. Finally, the court considered the amount and substantive nature of Cariou’s photographs that were used in relation to Cariou’s copyrighted photographs as a whole. On this point the court concluded that in twenty of his works, Prince added sufficiently creative and original content to the photographs so it did not matter that he incorporated an entire photograph into each collage.

© 2014 Adrienne B. Naumann
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Gimme what ya got: patent infringement fees

January 26, 2014

In my last article I addressed a U.S. Congressional bill which would significantly change fee-shifting when a party brings a lawsuit for patent infringement. In partpiciular this legislation would broaden the circumstances under which a judge could award attorney fees to a party exonerated of patent infringement.

There are currently court rules and statutes for awarding attorney fees and/or costs in patent infringement cases to the accused infringer thereafter exonerated. For example  there are potential financial sanctions for (i) bringing a frivolous lawsuit (ii) vexatious conduct during the litigation and (iii) willful infringement and/or fraud in obtaining the patent. Moreover, recently in Kilopass Technology Inc. v. Sidense Corporation [hereinafter Kilopass and Sidense], the federal appeals court broadened the circumstances under which a judge may award attorney fees for an ‘exceptional case’ involving patent infringement.

Kilopass and Sidense are competitors in the memory markets, i.e., a market in which devices retain information after power to the device is removed. After Kilopass observed a Sidense patent application on-line, it retained a law firm to determine whether Sidense’s disclosed invention infringed Kilopass’ patented memory device. The first law firm required additional time for a final determination, as did the second firm Kilopass subsequently contacted. Kilopass then retained a third firm which determined that Sidense may infringe but it had not yet completed the investigation. Nevertheless, Kilopass immediately filed the patent infringement lawsuit against Sidense prior to this final determination. Sidense was subsequently exonerated and thereby became the prevailing party. However, the trial court did not award fees  to Sidense, apparently because there was no evidence that Kilopass actually knew that its  infringement claims were baseless.

To obtain fees under the patent statute, there must be both subjective and objective bad faith by the party that filed the patent infringement lawsuit (generally the patent owner). On appeal Sidense contended that the trial judge should have awarded attorney fees because the case was (i) brought in subjective bad faith and (ii) objectively baseless. The appeals court agreed that the trial judge did not permit a sufficiently wide scope of evidence to establish these two requirements. The court further concluded that contrary to the trial court’s position, subjective bad faith can be established by evidence of (i) reckless conduct (ii) under a totality of the circumstances. Furthermore, a patent owner’s misguided belief is not sufficient by itself to overcome a conclusion of subjective bad faith in view of objective evidence.

The appeals court then ordered the trial court to re-evaluate whether fees from Kilopass to Sidense are appropriate (i) using the correct legal standards under the totality of circumstances criterion and (ii) to include objective evidence of merits of the litigation to establish subjective bad faith of the patent owner. The court emphasized that there was no intent to (i) discourage filing of meritorious patent infringement lawsuits and (ii) even if a patent owner had a weak case, then attorney fees on that basis alone are inappropriate. However, the court did question whether the subjective bad faith requirement was necessary under the patent statute attorney fee award provision.

On a final note, one may query whether the pending Congressional bill is necessary when judicial remedies, such as those of this appellate decision,  increase the possibility of financial sanctions.
©2014 Adrienne B. Naumann
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A piece of work: House Bill 3309

December 26, 2013

The U.S. House of Representatives recently passed House Bill 3309[H.B.] proposing further changes to the United States patent statute. The provisions of greatest concern to most business people are the proposed additional requirements for filing of patent infringement lawsuits in the United States. Since the settlement of the Blackberry patent infringement litigation several years ago, some are concerned that fraudulent patent infringement lawsuits are gutting the financial resources of bona fide inventors and investors. Because of this long-simmering concern several bills have been introduced in Congress as a remedy, but H.B. 3309 is the first one to pass either the House or Senate.

A representative provision from the bill is intended to discourage what is allegedly a skyrocketing flurry of frivolous patent infringement lawsuits: the court’s discretionary award of attorney fees and litigation costs to the prevailing (winning) entity or person after the litigation terminates. The court may award the attorney fees incurred by the winning person, as well as the costs of the litigation, unless (i) the position and conduct of the losing parties was substantially justified, or (ii) special circumstances otherwise make such an award unjust. Another provision prohibits the unilateral offer of settlement by a person bringing the infringement lawsuit as follows: such a person automatically becomes non-prevailing party under most circumstances. The purpose of this last provision is apparently to stifle what is considered exhortion, i.e., the litigation will continue against a hapless accused infringer unless the accused infringer pays the entity a large financial amount to end the litigation.

Furthermore, disclosure by the person or entity bringing the suit must specify the following:
1. The assignee of the disputed patent(s), that is, the person(s) or entity (s) that own the patents and who are not necessarily the inventors;
2. Any entity or person who can sublicense or enforce the patent(s);
3. Any other persons or entity with a financial interest in the patent(s) and
4. The ultimate parent entity of any specific assignee.
However, a person with a direct financial interest does not include (i) ownership of an equity interest in the party bringing the lawsuit (ii) unless this person can control the patent infringement litigation.

An “interested party” is defined in the bill as an owner(s) of the patent(s) (that is, an assignee(s)) with a right to enforce or sublicense the patent. With respect to “awarded attorney fees and costs” there is also a bill provision designated “joinder of interested parties.” Under this provision, imagine that a non-prevailing party (i.e., person or entity that loses the patent infringement lawsuit they originally brought) cannot pay the attorney fees and costs. Under the proposed new law, the court may require an interested party to pay this award if the non-prevailing party has no substantial interest in the patents other than bringing the lawsuit. This language appears to target entities that allegedly (i) accept rights to patents exclusively for litigation, and thereafter (ii) file infringement actions against defendants even if these actions are not legally justified. In these instances apparently the person who has assigned the patent to the litigating entity solely for bringing a lawsuit becomes financially responsible for the award of attorney fees and costs to the litigations. However, the court will not order an interested person to pay these fees if the interested party renounces ownership or direct financial interest in the patents.

©Adrienne B. Naumann
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All’s fair in love and copyright

December 8, 2013

In my last article I addressed U.S. copyright fair use analysis in Associated Press (AP) v. Meltwater. A federal district court found Meltwater liable for copyright infringement in part because (i) it copied exact excerpts from AP’s documents (ii) for which other media related businesses paid AP a licensing fee. However, in Authors’ Guild et al v. Google, Inc. another court found Google established a valid fair use although Google copied entire books word for word without permission from or compensation to the authors.

In dispute was Google’s Library Project, and for which Google scanned twenty million fiction and non-fiction volumes verbatim and in their entity. Participating libraries can download digital copies of scanned books if the hard copy of the book originated from a particular library source. Furthermore, members of the public could search these scanned volumes by using Google’s “snippets” of original text from each book. However, (i) Google does not allow each page of a volume to be entirely available by snippets and (ii) ten percent of the pages of each book are unavailable for search.

Not surprisingly, authors of scanned volumes still under U.S. copyright filed an infringement lawsuit against Google. Also not surprisingly, Google’s defense has consistently been that Google’s scanning of these works in their entirety is fair use. Fair use is a defense to copyright infringement under the U.S. copyright statute, and so the federal district court judge addressed fair use criteria to resolve whether Google had improperly copied these books. He first concluded that the character and purpose of the scanned volumes was transformative because (i) of the comprehensive word index Google created from the scanned volumes and (ii) the books were physically changed from paper to electronic versions for research purposes.

The judge next reviewed whether Google copied these particular books for commercial purposes. He concluded that Google’s for profit business status was not determinative, because Google’s scanning benefited the public and libraries whose books were scanned. He also concluded that Google’s scanning was not commercial because Google did not (i) sell book snippets or (ii) otherwise display ads for sale of Google’s online versions of these particular books. The court then held that the nature of the works, which were primarily non-fiction, weighed in favor of Google because (i) non-fictional book are more vulnerable to a defense of fair use than fiction and (ii) the books were previously published and therefore already available to the public.

The court then addressed the amount and substantial nature of the works that were scanned by Google. The court acknowledged that Google scanned the full text of all twenty million books verbatim. However, the court discounted this fact because Google limits the amount of text displayed and otherwise accessible during a search.

Finally the court addressed the effect of Google’s scanning on the potential market and value of the authors’ works. The court found in favor of Google, because few persons would invest time and energy to accumulate sufficient snippets to create an entire book. He also observed that without certain pages and snippets being accessible, searches would improve book sales through links to Google’s research site. Nevertheless, I predict in any appeal of this decision that the Authors’ Guild will contend that (i) even research engines that benefit the public (ii) nevertheless must compensate persons whose works provide the benefit.
© 2013 Adrienne B. Naumann
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What’s yours is mine: copyright fair use

November 18, 2013

Business people may hear the phrase “fair use” quite often in the future because of the electronic media explosion. If a business engages in diverse occupations, such as but not exclusively, writing, media reporting, publishing, computer programming or visual arts, the business owners should be aware of the convoluted contours of this slippery term. For example, in the United States the legal requirements of fair use for trademarks are completely different from fair use of works containing copyright. For trademarks and service marks, the primary question is generally whether a registered logo is being used to (i) merely describe an item, or (ii) ‘glom onto’ and financially benefit from the good will of the true mark owner. On the other hand, the United States copyright fair use doctrine provides criteria by which a person or entity who can legitimately copy a portion of a work under certain exceptions to infringement.

To qualify for the fair use defense to copyright infringement in the United States, one must look to judicial decisions for (i) how each kind of copyrightable work can be copied in part without liability and (ii) how the criteria vary in the federal appellate courts. Nevertheless, most courts look at: (i) transformation of the portion of the copied work; (ii) quality and quantity of the work copied and (iii) the financial benefit to the copier and financial detriment to the author and owner of the work. In this context, ‘transformation’ means that the portion of the work was so substantially changed by the subsequent user that the original work was no longer apparent.

In the media business a recent case from a federal New York court is The Associated Press v Meltwater U.S. Holdings, Inc. [“AP” and “Meltwater” respectively]. In this decision the facts were that AP (i) is owned by well over thousand newspaper in the United States and (ii) produces between 1,000 and 2,000 news articles daily. Each of AP’s thirty-three articles at issue in the lawsuit was written by AP reporters. Furthermore, AP’s license agreements with clients for its news content comprise more than $ 75 million of AP annual gross revenue. Meltwater markets its services to communications and public relations professionals (i) to assist in locating “identification of their business in media, press releases and research” and (ii) for information on general news developments. In this particular instance Meltwater’s excerpts of each of AP’s thirty-three articles were sent to Meltwater’s customers. These excerpts were gleaned from Meltwater’s searches of AP’s licensee’s sites and there were at least 22,297 excerpts from AP’s registered articles.

Meltwater contended that it had transformed the AP material in its written excerpts, but the court concluded to the contrary on this point. In fact the court found that Meltwater had copied many excerpts and lead lines from AP’s articles verbatim. The court also concluded that permitting Meltwater to avoid paying AP’s licensing fee provided (i) an unfair financial advantage over competitors that paid licensing fees and (ii) AP was financially disadvantaged by losing licensing fees. The court further noted that although Meltwater contended that its customers proceeded to access the bona fide full text of AP’s articles, there was actually no evidence for this position. Based in part upon this lack of evidence, the court concluded that Meltwater was merely a substitute for news sites licensed or operated by AP. The court also rejected Meltwater’s position that the entire reproduction of a copyrighted work is fair use if a search engine (such as Meltwater, according to Meltwater’s position) provides a reprinted version.

The court finally concluded that the amount and portions of AP’s work copied by Meltwater, did not qualify qualitatively and quantitatively for the fair use defense. The court then held that Meltwater had no legitimate fair use defense whatsoever. Because this case was high stakes financially for the parties, it would be interesting if (i) it is appealed and (ii) on what basis.

© 2013 Adrienne B. Naumann
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