Tag Archives: Legal

United States Court Of Appeals Decision For Copyright Registration

After many years, the Ninth Circuit finally entered a decision in the Alaska Stock, LLC v. Houghton Mifflin Harcourt Publishing Company case.  Reversing the district court’s dismissal of Alaska Stock’s copyright infringement claim, the court definitively held that Alaska Stock had “successfully registered the copyright both to its collections and to the individual images contained therein” despite the fact that the name of the photographer and title of each component work was not included in the registration.

In doing so, the Court gave deference to the long-standing Copyright Office registration procedures that had been created in 1995 in conjunction with PACA.  Further, the Court specifically rejected the decisions in other courts that refuse to honor registrations because they fail to name all of the photographers and titles of each photograph in a collective work.

It is clear that the Ninth Circuit understood the repercussions of its decision.  In conclusion, the Court stated:

We are not performing a mere verbal, abstract task when we construe the Copyright Act. We are affecting the fortunes of people, many of whose fortunes are small. The stock agencies through their trade association worked out what they should do to register images with the Register of Copyrights, the Copyright Office established a clear procedure and the stock agencies followed it. The Copyright Office has maintained its procedure for three decades, spanning multiple administrations. The livelihoods of photographers and stock agencies have long been founded on their compliance with the Register’s reasonable interpretation of the statute. Their reliance upon a reasonable and longstanding administrative interpretation should be honored. Denying the fruits of reliance by citizens on a longstanding administrative practice reasonably construing a statute is unjust.

Uniloc and Patent Trolling

By Nancy Wolff, Esq., PACA Counsel

At the PACA 2013 Conference this October, we held a panel on patent trolls that are targeting this industry, and in particular, the Company Uniloc that alleges to have a patent on licensing images online and had targeted 4 companies in the micro stock space. Patent trolls are companies that purchase patents for the sole purpose of bringing claims against third parties. These cases are almost always brought in the Eastern District if Texas, which is a favorable jurisdiction for plaintiffs. Patent litigation is extremely expensive, and many companies will settle just to avoid costs. Many of these patent trolls acquire business method patents, which unlike inventions, merely describe a system for doing business and can be quite vague and overly broad. In the early days of the internet, many of these patents were issued as examiners did not have access to information regarding prior art in many industries.

On the  panel was Tamany Bentz, patent attorney from Venable, who represented Dreamstime, as well as Ellen Boughn,  who worked as an expert to provide information to the attorneys as to early online business practices in the industry. With  patent cases, you can attempt to invalidate a patent if you can establish prior art. Other defenses include showing how your process is different from the one described in the patent. (Dreamstime in fact settled with the plaintiff but Ellen’s report was apparently used by the other defendants. As noted below, those cases were dismissed with prejudice before any judicial ruling on the patent claim.)

The initial claims were brought against the following companies:

Former Defendants:
Dreamstime — settled
Inmagine — dismissed
RevoStock — dismissed
Depositphotos — dismissed

During the panel discussion,  it was recommended that PACA help be a source if business information, and that if other claims are brought by Uniloc or others, the industry collaborate together in order to defeat these claims. Since the meeting Uniloc has filed new patent claims in Texas against a numbers of other companies, listed below.

Getty, Corbis, iStockPhoto LP, Age Fotostock America Inc., SS SPV LLC, Envato PTY Ltd., Fotolia LLC., PhotoShelter, Inc., Photo Stock Plus, and VectorStock Media Limited

It may be helpful the join forces and share as much information as we are able to publicly, to discourage these claims.  PACA is willing to be the central point for collecting information.

Tamany has agreed to speak to any PACA member and can be reached below. We will continue to update members as we learn more about these filings.

Tamany Vinson Bentz, Esq.
Venable LLP
t 310.229.9905
f 310.229.9901
2049 Century Park East, Suite 2100
Los Angeles, CA 90067

MICROSOFT’S 3-STEP PROCESS TO ONLINE THEFT

By Robert Henson, courtesy of Tall Firs Media, LLC

Microsoft, the world’s largest software maker and itself a massive consumer of image content for its products and services, has taken the bold step of promoting the theft of images online. Through its newly revamped Office product, Microsoft is replacing an image search functionality – one that routed the user to vetted sources for searching, transacting and integrating content into their online projects – with a general Bing search. While Microsoft is certainly free to remove one piece of Office functionality and push users onto the Bing platform, the methods of how it is doing so underscores a blatant disregard of intellectual property.

On Microsoft’s Office web page Images, it guides an Office user on the acquisition of images for use. Under “Use Bing to get images”, it outlines a three step process:

  1. Open Bing.com (and search for an image)
  2. Hover over your selected item…and Right click
  3. Click Save picture as…in the menu. Save image.

The message is clear: use Bing to download images for whatever intended use you might have. Microsoft does not attempt to educate the user on copyright, use rights or even how unauthorized use of images pulled from the web might expose the user to risks. It would seem that driving Bing traffic at the expense of content owners and generating volumes of orphaned works is far more important to Microsoft than architecting a solution where both parties might benefit from online search and use.

The unauthorized use of images has increased year over year, where it is now assumed that well over 85% of all images used online are done so illegally. Sites like Pinterest routinely expunge image metadata when users pin images, and despite attempts by Getty to monetize their collection by coupling Getty orphaned works with their rightful information, it’s a drop in the bucket considering the hundreds of millions – or billions – of images Pinterest hosts. Google is still the leader in generating orphaned works, and they’ve recently made greater strides in obfuscating information on the rightful owner of an image, while giving easier direct access of any online image from their search to users.

Microsoft, desperate to try and play catch up in the online search market, is brazenly throwing the content industry under the bus in the name of Bing. How it is educating the market on image use and consumption might very well be categorized as reckless, but more so ironic given that Microsoft is a corporation that vehemently defends its own intellectual property with extreme prejudice.

It’s not the lack of viable alternatives that accelerates unauthorized use, but lack of market education and general disinterest on behalf of search engines and social media platforms. What market education there is comes through the wellspring of Creative Commons, Electronic Frontier Foundation, and other entities that advocate for free and unfettered access to content, and are intent on rewriting the rules around content ownership and accessibility. Microsoft has joined in the chorus, with a clear full-throated voice.

 

Panoramic Images Copyright Claims Against Textbook Publishers Permitted To Proceed

By Nancy Wolff Esq., PACA Counsel

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Panoramic Images (Panoramic) successfully defeated two separate motions to dismiss copyright claims it brought against textbook publishers, McGraw-Hill Companies, Inc. (McGraw-Hill) and John Wiley & Sons, Inc. (Wiley) for uses of photographs in excess of license agreements. Both cases were in the Federal District Court of the Northern District of Illinois, in front of two different judges and in each instance the court upheld Panoramic’s compilation registration of photographs and refused to follow the line of cases that restricted these registrations to the compilation and not the underlying photographs, granting deference to the Copyright Office.

170 photographs were at issue in the action against McGraw-Hill. All licenses contained restrictions with limitations based on the number of copies, territory, image size, language, duration, and nature of the media exceeded the permitted uses. According to the complaint Panoramic provided McGraw-Hill with a list of limited licenses that it believed had been exceeded. When McGraw-Hill failed to respond, Panoramic instituted an action for direct and contributory copyright infringement. McGraw-Hill did not dispute the claims against them with respect to 69 of the images, but asserted that Panoramic lacked valid copyright registrations for 101 of the 170 photographs at issue.

First, McGraw-Hill asserted that Panoramic should be barred from bringing an action on 52 photographs because they were registered as part of various compilations and collective works and that these registrations failed to list the title of each photograph with an individual author citing 17 U.S.C. §409(2)— that states an application must include the “author or authors” and “title of the work”. McGraw argued that the statute intends that each component of a collective work must individually be listed with an author and title and ignoring this requirement would render the law “meaningless,” allowing claimants to bring infringement suits on works that had not been individually registered, a mechanism that provides public notice of a work’s registration. McGraw-Hill relied on several recent cases to support this view, including Muench v. Houghton-Mifflin, Bean v. Houghton Mifflin, and Alaska Stock LLC v. Houghton Mifflin Harcourt Publ’g. Co., in which the courts determined that the plain language of §409 required each component photograph in a collective work to be listed with copyright registration in order for the plaintiff to bring an infringement action. In response, Panoramic noted that the United States has filed amicus briefs in support Alaska Stock and Bean, arguing that the Copyright Office has permissibly interpreted §409 to not require a registration application to identify the author of all claimed component works and that the court should defer to that interpretation. Panoramic also relied on Metropolitan Regional Info. Sys. V. American Home Realty Network Inc. a recent Fourth Circuit decision, which stated that §409 should not be interpreted to require that the copyright registrant identify each individual author and title in a collective work. Metropolitan further stated that reading §409 to mean that registration of a collective work also protects each component work is “more consistent with the statutory and regulatory scheme” because individually listing huge numbers of photographs would add excessive impediments to the registration process.”

The court rejected McGraw-Hill’s arguments concerning publication notice, pointing out that this apparent lack of notice did not prevent McGraw-Hill from knowing that Panoramic claimed copyright in the images and entering into licensing agreements with Panoramic. The court acknowledges that this is a developing issue in various district and circuit level courts and chooses to permit the action to continue, rather than barring the infringement suit at the pleadings stage. The court further states because the Seventh Circuit had not yet ruled on this issue, it preferred to grant deference to the Copyright Office’s reasonable interpretation of the statute, which “has directed that registration of a collective work “may cover (a) the collective work authorship, (b) any contribution created by the employee or other party commissioned by the author of a work made for hire, and (c) any other contributions that the claimant of the collective work obtained by transfer.” The Copyright Office further provides that where, as in this case, “the work being registered was created by a large number of authors, the application will be considered acceptable if it names at least three of those authors, followed by a statement such as ‘and [number] others.”

McGraw-Hill challenged the registration on an additional 49 of the photographs based on pending copyright registrations, and asserted that the action should not be permitted to proceed without a registration certificate from the Copyright Office. The court observed that there is a circuit split on the question of whether a pending copyright application is a sufficient basis for filing a copyright infringement suit (the application approach) or whether a copyright registration must be completed first (the registration approach). Courts that follow the registration approach urge that it follows the plain meaning of § 411(a), which states “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.” Advocates of the application approach contend that statute is ambiguous and permitting a claimant to bring a copyright infringement action on a work that has a pending application would better carry out the purpose of the statute by providing broad copyright protection without undue delay. The court found the application approach to be the most logical one following the Seventh Circuit case of Chicago Bd. of Educ. v. Substance, Inc., which stated that “although a copyright no longer need be registered with the Copyright Office to be valid, an application for registration must be filed before the copyright can be sued upon.”

Panoramic Images action against the publisher Wiley similarly alleged direct and contributory copyright infringement and common law fraud for exceeding the scope of the licenses. In addition to disputing the registrations based on compilation registrations and pending applications, Wiley brought a partial motion for dismissal arguing that litigation was improper because the arbitration clause in some of the license agreements precluded court proceedings.
Twenty photographs were at issue in the Wiley matter and as in the McGraw-Hill matter, limited licenses were issued to Wiley for use in in educational publications over the course of a number of years. The licenses expressly limited the number of copies, distribution area, language, duration, and media and Panoramic alleged that Wiley continually exceeded the limited grant of rights without securing additional permission. Further, it alleged that Wiley reproduced and distributed the photographs to third parties in the United States for profit, who translated the publications into different languages or published them in local adaptations or reprints all without Panoramic’s permission.

Nine of the 20 photographs were licensed by Panoramic’s distributor Getty Images through a series of Master License agreements that contained arbitration clauses. The court noted that a motion to dismiss was not the appropriate vehicle under which to enforce an arbitration clause, and a party must seek a stay under §3 of the Federal Arbitration Act. The court reviewed the arbitration provision and noted that it provided a “carve-out” option to litigate in court and that Panoramic may exercise its right to litigate in court, as it was “standing in Getty’s shoes”. Further, because Wiley’s reply brief did not address the scope and effect of the arbitration carve-out, it forfeited its ability to compel arbitration arising from the Getty Images agreements.

Similarly to the McGraw-Hill case, the court reviewed the current circuit split on whether “preregistration or registration” is required for purposes of filing a copyright and ultimately favored the application approach. The court preferred this approach because it avoided unnecessary delay by keeping claimants in “legal limbo,” waiting for their applications to be approved prior to bringing a legal action.

With respect to certain photographs that were registered as part of compilations, rather than individually, the court again referred to a split among district courts, and just as the court in the McGraw case, it looked to the Fourth Circuit’s in Metropolitan Regional Information Systems, stating that “where, as here, the copyright holder of a registered compilation owns the components at issue in a copyright suit, the registration suffices to permit filing of a suit.” The court stated that because the case was only at the pleading stage, it would permit Panoramic to proceed with its claims, but specifically stated that Wiley should be permitted to renew this argument later, if another Appeals Court departs from the Fourth Circuit.

There is still no new news from the Ninth Circuit on the appeal in Alaska Stock and Bean which was argued more than 2 years ago. It is clear that subsequent courts are more comfortable in giving deference to interpretation of section 409 by the Copyright Office, upholding the form of copyright registrations recommended to the industry by the Copyright Office.

Other courts depart from the view of the Fourth Circuit.

Sculptor granted royalties in Gaylord v. United States

by Nancy Wolff, PACA Counsel

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In the most recent ruling in Gaylord v. United States, the United States Court of Federal Claims determined the proper amount of damages due Frank Gaylord, (“Gaylord”) the sculptor who created “The Column” portion of the Korean War Memorial, from the United States Postal Service (USPS) for its unauthorized depiction of “The Column” on a commemorative stamp issued in 2003. [This case has been the subject of much litigation, as the District Court found that the stamp was a fair use of the underlying sculpture; the decision was then reversed on appeal and the stamp use found to be infringing of the Memorial; the initial amount of damages was capped at $5000, or reasonable license fee; this determination was reversed and set back to the lower court to determine the appropriate amount of actual damages under the Copyright Act. Statutory damages were not available in this case.]

Specifically, the United States Court of Appeals for the Federal Circuit vacated the award of $5,000, as it failed to adequately calculate the fair market value of a hypothetical license because it only considered what the USPS had previously paid for similar licenses. To properly calculate the fair market value, it directed that the Claims Court examine whether different license fees were appropriate for three categories of infringing goods identified in the 2010 opinion: (a) stamps used to send mail, (b) unused stamps purchased by collectors, and (c) commercial merchandise featuring an image of the stamp.

The Claims Court determined that Gaylord was entitled to total compensation of $684,844.94, concluding that a 10% running royalty rate “accurately captures the fair market value of a license to Gaylord’s copyright.” The court based its calculation according to the likely terms assuming Gaylord and the USPS had negotiated a price for a license on July 27, 2003—the date on which the stamp was released.

Turning to the three categories of infringing goods suggested by the Federal Circuit, the court first established that no damages were awarded for stamps used to send mail because of the difficulty involved in determining whether consumers purchased the commemorative stamps because it featured an image of “The Column” or simply because they needed stamps.

Next, the Court determined that Gaylord was entitled to a 10% running royalty on revenues collected by the USPS for unused stamps purchased by stamp collectors. The court arrived at this figure because Gaylord demonstrated at trial that he collected a 10% royalty for past licenses of “The Column” for various collectibles. The court further noted that calculation of Gaylord’s damage award should consider the fact that the USPS had “strong financial incentive to enter into a license with Gaylord,” noting that commemorative stamps sold to collectors “represents nearly pure profit for the USPS.” The court referred to a survey produced by the USPS that showed the Korean War Memorial stamp was in the “top 25% of its class of a 37-cent commemorative stamp with respect to projected retention value.” The court also stated that the USPS decided to print 86 million Korean War Memorial stamps, when the average print-run for commemorative stamps is 50-60 million stamps. Applying the 10% royalty rate to the USPS’s profits of $5.4 million, the court determined that Gaylord was entitled to $540,000.

The court also awarded Gaylord a 10% running royalty rate applied to the $330,919.49 the USPS received on merchandise featuring images of the Korean War Memorial stamp, determining that he was entitled to $33,092.

Finally, the court awarded Gaylord an additional prejudgment interest of $111,752.94 (based on a delay compensation interest factor of 19.5%), which was to be added to any damages assessed by the court.

In sum, Gaylord’s combined damages—which included $540,000 from USPS profits on unused stamps, $33,092 on USPS profits on merchandise, as well as a prejudgment interest of $111,752.94—totaled $684,844.94. The calculation was based on what the price of a license would have been had the USPS negotiated with Gaylord for use of “The Column,” a 10% running royalty rate, applied to unsent stamps purchased by collectors and on merchandise sold containing the image.

This case is interesting as the court rejected as a measure of damages the past licensing model used by USPS- a flat license fee- for material that was equivalent to merchandise. A royalty model is more customary when licensing artwork for products such as puzzle, posters and paper goods and was consistent with the artist’s licensing model. In other words, the court did not limit damages to the way in which the infringing party previously licensed work but looked to how the artist would have licensed the artwork if he had negotiated with USPS in 2003.

[The stamp was initially issued a decade ago, and as a side note it’s interesting to see how many millions of stamps were published. With the decrease in regular mail, it is unlikely that any artist would see royalties this high on the use of a contemporary stamp absent extreme popularity of the subject.]

Marshall Thompson vs. Getty Images (US), Inc. (N.D. Ill. 2013)

by Nancy Wolff, PACA Counsel

Marshall Thompson vs. Getty Images (US), Inc. (N.D. Ill. 2013)

Getty Images successfully defeated a claim by Marshall Thompson, singer and sole living member of the “Chi-Lite”, alleging that the online posting of his photo for possible licensing, was a violation of his right of publicity under Illinois Right of Publicity Act (IRPA), despite a contrary ruling (in a factually similar case) in Illinois in 2007.

Right of publicity laws, unlike federal copyright law, vary from state to state. Some states publicity/privacy law is based on common law (cases) solely, others have enacted statutes. State laws are not consistently drafted, nor interpreted. IRPA “prohibits the use of an individual’s identity for commercial purposes without his written consent.” At issue is whether or not there has been a “commercial purpose” requiring consent. In general, uses which are considered “editorial” in nature, used to illustrate a subject of newsworthy or social interest, do not require consent of the subject depicted, or a model release. Images used for advertising or commercial purposes, however, require releases of the subjects depicted. This practice is consistent with the First Amendment which favors freedom of expression over privacy, and what is considered a commercial purpose under state law should be interpreted in a manner that avoids running afoul of the First amendment and chilling speech.

IRPA defines a commercial purpose as ‘the public use or holding out of an individual’s identity (i) on or in connection with the offering for sale or sale of a product, merchandise, goods, or services; (ii) for purposes of advertising or promoting products, merchandise, goods, or services; or (iii) for the purpose of fundraising.” Thompson asserted that under IRPA Getty Images “used his photos to promote the sale of a product, i.e., his photos,” and “Getty [Images] conduct made his photos available for commercial use,”.

The court examined the manner in which Getty Images offered images for licensing to determine if its practice violated Illinois law. It noted that Getty Images posts low-resolution, watermarked images online, to enable users to easily determine which images they may want to license. Getty Images then charges users a license fee. Images without model release are identified for “editorial use[s] only.”

The court held that the display of images is not a commercial purpose, as the “statute’s commercial purpose requirement does not prohibit the mere sale of someone’s photograph. Rather, the IRPA prohibits the use of an individual’s image to promote or entice the purchase of some other product than the photograph itself.” Here, there is no “other product” besides the photograph itself. “Getty Images does not use Thompson’s photographs in connection with an offer to sell or a sale of some other product, merchandise, good, or service as contemplated by the statute.” The only “product” being sold, is the license to use that particular photograph. In its discussion of IRPA, the Illinois House of Representatives provided some examples of the type of commercial uses that the IRPA was designed to cover, including “the unauthorized use of an individual’s picture on the back of a … bus indicating that he endorsed a particular kind of hair tonic and an ad by a food establishment stating that its cheeseburger was endorsed by the Speaker of the House.”

The court also rejected Thompson’s argument that Getty Images should be held liable for any unauthorized commercial use by its customers, “as it would extend liability too far and chill speech protected by the First Amendment.” The court noted that Getty had no knowledge of its customers’ impermissible uses. If Getty Images licenses a photo to Customer A for editorial use, and Customer A impermissibly licenses the image to be used on a coffee mug, Getty Images would not be held liable.

Importantly, the court declined to follow the state appellate court’s 2007 ruling in Brown v. ACMI Pop Div.,). In that case, James Brown sued Corbis alleging that the offering of images for license on the internet violated his rights of publicity under IRPA. The court initially found Corbis conduct noncommercial but later reversed itself and concluded that Corbis was using Brown’s image to sell a “product” (the photo) and that was sufficient under IRPA. Here, the district court believed that the reasoning used by the state court “contradicts the plain language and purpose of the statute as interpreted by this Circuit’s case law and informed by legislative history.” The broad reading of IRPA, under Brown, according to this court, would “extend liability too far.” In other words, the “product” must be something other than the photo itself.

Conclusion
This decision reverses one of the most troubling state court decisions involving an interpretation of state publicity law, and the difficulty state courts have in determining what is a “commercial purpose” under state right of publicity statutes. Although the Supreme Court of the US has said that a profit motive does not remove First Amendment protection, the fact that a license fee is earned from the sale of an image used for editorial purposes, continues to confuse some courts. As the business of licensing images today requires the display of images online, it is critical that courts understand the distinction between a commercial use by an end user and merely previewing images for possible image licensing and do not convert an entire business model into state law publicity violation. Otherwise, media outlets that depend on image licensing for content will ultimately be deprived of sources in such states.

PACA’S ROLE IN ADVOCATING FOR THE INDUSTRY

For this reason PACA has been actively following legislation in states that are considering enacting or expanding existing right of publicity statutes, to make sure that any language proposed is clear as to what uses require consent in order to avoid the expensive litigation required in cases brought by the likes of James Brown and Marshall Thompson. PACA is currently working with a lobbyist in Massachusetts to insure that a proposed descendible right of publicity law does not interfere with image licensing. Getty Images has been supporting PACA in this effort with the lobbyist. We have been working with the proponents of the bill to add specific language to protect image licensing. Similarly, we have written the legislature in NY, NH and MD on behalf of PACA when there have been attempts by states to expand their right of publicity law. While state legislatures may read newspapers and magazines, in print or online, they do not realize that there is an industry behind the scenes making these images available to the media via licensing. Statutes will protect the end product, the magazine, newspaper, news broadcast, but not the act of licensing. Our role is to explain the industry and its importance of making images available online for possible use without risk of litigation.