====== 1-203 ======

====== 1-205 ======

====== 1-207 ======

====== 1-215 ======

====== 1-219 ======

CONTENT LICENSE AGREEMENT

THIS LICENSE AGREEMENT (the “Agreement”) is made and entered into as of the _____ day of _______________, 2015 (the “Effective Date”), by and between _________________________ (“Licensor”), a __________ corporation having its principal place of business at _________________________________________________________, and _______________________________ (“Licensee”), a _____________ corporation having its principal place of business at ______________________________. WHEREAS, Licensor publishes magazines and other print publications relating to ______________________;

WHEREAS, Licensee is a media, entertainment and information provider that uses the Internet to provide entertainment, news and information;

WHEREAS, Licensee desires to obtain from Licensor the right to use and distribute certain content developed by Licensor as defined herein; and

WHEREAS, Licensor is willing to grant such rights to Licensee in accordance with the terms and conditions of this Agreement;

NOW, THEREFORE, in consideration of the terms and conditions set forth herein, the parties hereto hereby agree as follows:

====== 1-221 ======

====== 1-222 ======

A party may change its address by giving the other party written notice thereof in the manner set forth above.

====== 1-229 ======

PRODUCTION COMPANY, INC.
[address]

As of ________________, 2015

Ms. Jane Q. Owner
[address]

Dear Ms. Owner:

The following shall constitute the agreement between you (“Owner”) and Production Company, Inc., a _________ corporation (“Producer”), regarding the literary property entitled “The Book”, together with all ideas, themes, names, titles, plots, concepts, illustrations, descriptions, characters, characterizations, events and incidents contained therein or related thereto, and all versions and adaptations thereof and all copyrights and trademark rights relating thereto (all of the foregoing being collectively referred to herein as the “Property”):

====== 1-237 ======

If the foregoing terms and conditions are in accordance with your understanding of our agreement, kindly indicate your acceptance thereof by signing below.

====== 1-239 ======

LICENSE AGREEMENT FOR SUBSCRIPTION VIDEO ON DEMAND DELIVERY

This License Agreement for SVOD Delivery (“Agreement”) is entered into as of the ___ day of ________, 2017 (the “Effective Date”) by and between ______________________, a _________ corporation (“Licensee”) and __________________, a _________ corporation (“Distributor”).

Recitals

Licensee owns and operates a subscription entertainment service providing its members with access to motion pictures, television and other digital entertainment products (collectively, “Titles”).

Distributor is in the business of distributing certain Titles.

Licensee and Distributor desire to enter into an agreement whereby Distributor will grant Licensee a limited, nonexclusive license to distribute those Titles set forth in Schedule A, within the United States, its territories and possessions (the “Territory”), all in accordance with the terms and conditions set forth below.

Agreement

In consideration of the mutual promises contained herein and such other good and valuable consideration, the parties hereto agree as follows:

====== 1-250 ======

====== 1-251 ======

====== 1-257 ======

SCHEDULE A

Titles

====== 1-259 ======

SCHEDULE B

Source Material Requirements and Specifications

====== 1-261 ======

SCHEDULE C

Security Specifications

====== 1-263 ======

SCHEDULE D

License Fee Refund Percentage

====== 1-265 ======

2012 WL 2317364
Only the Westlaw citation is currently
available.
United States District Court,
C.D. California.

Alexandre SINIOUGUINE
v.
MEDIACHASE LTD., et al.

No. CV 11–6113–JFW (AGRx). | June 11, 2012.

Attorneys and Law Firms

Michael D. Anderson, Anderson and Associates, Pasadena, CA, for Plaintiff.

Shari Mulrooney Wollman, Mark S. Lee, Don Brown, Adrianne E. Marshack, Manatt Phelps and Phillips LLP, Los Angeles, CA, for Defendant.

Opinion

ORDER GRANTING MEDIACHASE, LTD., CHRIS LUTZ AND JULIE MAGBOJOS’MOTION FOR: (1) SUMMARY JUDGMENT ON PLAINTIFF’S COMPLAINT AND COUNTERCLAIMS; MEDIACHASE’SDECLARATORY RELIEF CLAIMS; AND (2)PARTIAL SUMMARY JUDGMENT ONMEDIACHASE’S COPYRIGHTINFRINGEMENT COUNTERCLAIMS [filed 4/23/12; Docket No. 77]

Honorable JOHN F. WALTER, District Judge.

*1 On April 23, 2012, Defendants Christ Lutz (“Lutz”), Julie Magbojos (“Magbojos”), and Mediachase, Ltd. (“Mediachase”) (collectively, “Defendants”) filed a Motion for: (1) Summary Judgment on Plaintiff’s Complaint and Counterclaims; Mediachase’s Declaratory Relief Claims; and (2) Partial Summary Judgment on Mediachase’s Copyright Infringement Counterclaims (“Motion”). On April 30, 2012, Plaintiff Alexandre Siniouguine (“Siniouguine”) filed his Opposition. On May 7, 2012, Defendants filed a Reply. On May 25, 2012, Siniouguine filed his Sur–Reply pursuant to the Court’s May 18, 2012 Order. On June 1, 2012, Defendants filed their Response to Siniouguine’s Sur–Reply.

Pursuant to Rule 78 of the Federal Rules of Civil Procedure and Local Rule 7–15, the Court found the matter appropriate for submission on the papers without oral argument. The matter was, therefore, removed from the Court’s June 11, 2012 hearing calendar and the parties were given advance notice. After considering the moving, opposing, and reply papers, and the arguments therein, the Court rules as follows:

Footnotes

====== 1-273 ======

====== 1-275 ======

Moving Ahead for Progress in the 21st Century Act, Pub.L. No. 112–141, § 100227(b), 126 Stat. 405, 943–44 (2012). To benefit from the FIRA, a claimant must prove possession of “eligible coverage.” Eligible coverage is “coverage” under a new or modified insurance contract that was purchased between May 1 and June 6, 2011, for property that was damaged by the Missouri River flood that commenced on June 1, 2011. The Hoddes purchased flood insurance on May 31, 2011, which was to become effective on June 30, 2011, due to the SFIP waiting period. After hearing of FEMA’s designation, rather than leave the SFIPs in place, on June 20, 2011, the Hoddes canceled the SFIPs and sought full reimbursement of their premiums. As such, the Hoddes were never actually covered for any flood loss. Nothing in the FIRA’s subsection (b)(1) describing the term “eligible coverage” includes insurance contracts voluntarily canceled by the insured before their effective date. Coverage, Black’s Law Dictionary (10th ed.2014) (including the definitions “[i]nclusion of a risk under an insurance policy” and “the risks within the scope of an insurance policy”). Upon cancellation of the SFIPs purchased on May 31, the Hoddes had no policy and hence no coverage for any flooding event.

The Hoddes argue that the FIRA is remedial legislation intended “to aid those persons who had purchased flood insurance” during the applicable time period and who suffered damage. Accordingly, they argue that the FIRA should not be construed to distinguish between those that kept the insurance and those that canceled it and received a refund of their premiums. They reason that “[i]f Congress intended to [exclude those that canceled the insurance], they could easily have done so by excluding policies that were cancel[ed].” Unfortunately, prematurely canceling the policy effectively placed the Hoddes outside the ambit of those persons who had purchased flood insurance. The FIRA does not contain language to reinstate the SFIPs that were canceled before they became effective.

III. Conclusion

Accordingly, we affirm the judgment of the district court.

Stephanie LENZ, Plaintiff–
Appellee/Cross–
Appellant,
v.
UNIVERSAL MUSIC CORP.; Universal Music Publishing Inc.; Universal Music Publishing Group Inc., Defendants–Appellants/Cross–Appellees.

Nos. 13–16106, 13–16107.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted July 7, 2015.

Filed Sept. 14, 2015.

Amended March 17, 2016.

Background: User of internet posting website brought action alleging that copyright

holder made material misrepresentation by issuing takedown notification without proper consideration of fair use doctrine, in violation Digital Millennium Copyright Act (DMCA). The United States District Court for the Northern District of California, Jeremy D. Fogel, J., 2013 WL 271673, denied cross-motions for summary judgment, and parties filed interlocutory cross-appeals.

Holdings: The Court of Appeals, Tallman, Circuit Judge, held that:

Affirmed.

M. Smith, Circuit Judge, filed opinion concurring in part and dissenting in part.

1. Federal Courts 3604(4)

The Court of Appeals reviews de novo the district court’s denial of summary judgment.

2. Federal Courts 3604(4), 3675

When reviewing the district court’s denial of summary judgment, the Court of Appeals must determine whether the evidence, viewed in a light most favorable to the non-moving party, presents any genuine issues of material fact and whether the district court correctly applied the law.

3. Federal Courts 3604(4), 3675

On cross-motions for summary judgment, court of appeals evaluates each motion independently, giving the nonmoving party in each instance the benefit of all reasonable inferences.

4. Federal Courts 3546(3)

When evaluating an interlocutory appeal, the Court of Appeals may address any issue fairly included within the certified order because it is the order that is appealable, and not the controlling question identified by the district court; the Court may therefore address those issues material to the order from which appeal has been taken.

5. Statutes 1108, 1242

If statute’s language is clear, court may look no further than that language in determining statute’s meaning; court looks to legislative history only if statute is unclear.

6. Copyrights and Intellectual Property 67.3

Digital Millennium Copyright Act (DMCA) required copyright holder to consider whether potentially infringing material was fair use before issuing takedown notification of video posted on internet website. 17 U.S.C.A. §§ 107, 512(c)(3)(A)(v).

7. Copyrights and Intellectual Property 67.3

Fair use is an authorization under the law as contemplated by Digital Millennium Copyright Act (DMCA) provision requiring a takedown notification to include a “statement that the complaining party has a good faith belief that the use of the material in the manner complained of is not authorized by the copyright owner, its agent, or the law.” 17 U.S.C.A. § 512(c)(3)(A)(v).

8. Statutes 1181

When there is no indication that Congress intended specific legal meaning for

term, court may look to sources such as dictionaries for definition.

9. Copyrights and Intellectual Property 53.2

Anyone who makes fair use of work is not infringer of copyright with respect to such use. 17 U.S.C.A. § 107.

10. Copyrights and Intellectual Property img67.3

Copyright holder need only form subjective good faith belief that use is not authorized before issuing takedown notification pursuant to Digital Millennium Copyright Act (DMCA). 17 U.S.C.A. § 512(c)(3)(A)(v).

11. Copyrights and Intellectual Property 89(2)

Genuine issue of material fact as to whether copyright holder had subjective good faith belief that video posted on internet site was not fair use of its musical composition precluded summary judgment in holder’s favor in poster’s action alleging that copyright holder made material misrepresentation by issuing takedown notification, in violation Digital Millennium Copyright Act (DMCA). 17 U.S.C.A. § 512(c)(3)(A)(v), (f).

12. Copyrights and Intellectual Property 67.3

Willful blindness doctrine may be used to determine whether copyright holder knowingly materially misrepresented that it held good faith belief that offending activity was not fair use, in violation of Digital Millennium Copyright Act (DMCA). 17 U.S.C.A. § 512(c)(3)(A)(v), (f).

13. Copyrights and Intellectual Property 67.3

To demonstrate willful blindness, plaintiff asserting claim under Digital Millennium Copyright Act (DMCA) based on defendant’s alleged material misrepresentation that it held good faith belief that offending activity was not fair use must establish that: (1) defendant subjectively believed there was high probability that video constituted fair use, and (2) it took deliberate actions to avoid learning of this fair use. 17 U.S.C.A. § 512(c)(3)(A)(v), (f).

14. Copyrights and Intellectual Property 67.3

User of internet posting website failed to demonstrate that copyright holder was willfully blind as to whether her posting on internet site was fair use of its musical composition, for purposes of determining whether copyright holder acted in good faith when it issued takedown notification pursuant to Digital Millennium Copyright Act (DMCA), absent evidence suggesting that holder subjectively believed either that there was high probability that any given video might make fair use of composition or that her video in particular made fair use of song. 17 U.S.C.A. § 512(c)(3)(A)(v), (f).

15. Copyrights and Intellectual Property 87(.5)

Plaintiff may seek recovery of nominal damages under Digital Millennium Copyright Act (DMCA) for injury incurred as result of copyright holder’s material misrepresentation in issuing takedown notification. 17 U.S.C.A. § 512(f).

Kelly M. Klaus (argued) and Melinda LeMoine, Munger, Tolles & Olson LLP, Los Angeles, CA, for Defendants–Appellants/Cross–Appellees.

Corynne McSherry (argued), Cindy Cohn, Kurt Opsahl, Daniel K. Nazer, and Julie Samuels, Electronic Frontier Foundation, San Francisco, CA; Ashok Ramani, Michael S. Kwun, and Theresa H. Nguyen, Keker & Van Nest LLP, San Francisco,

CA, for Plaintiff–Appellee/Cross–Appellant.

Steven Fabrizio and Scott Wilkens, Jenner & Block LLP, Washington, D.C., for Amicus Curiae Motion Picture Association of America, Inc.

Jennifer Pariser, of Counsel, Recording Industry Association of America, Washington, D.C.; Cynthia Arato, Marc Isserles, and Jeremy Licht, Shapiro, Arato & Isserles LLP, New York, NY, for Amicus Curiae Recording Industry Association of America.

Joseph Gratz, Durie Tangri LLP, San Francisco, CA, for Amici Curiae Google Inc., Twitter Inc., and Tumblr, Inc.

Marvin Ammori and Lavon Ammori, Ammori Group, Washington, D.C., for Amicus Curiae Automatic, Inc.

Julie Ahrens and Timothy Greene, Stanford Law School Center for Internet and Society, Stanford, CA, for Amici Curiae Organization for Transformative Works, Public Knowledge, and International Documentary Association.

Catherine R. Gellis, Sausalito, CA, for Amicus Curiae Organization for Transformative Works.

Appeal from the United States District Court for the Northern District of California, Jeremy D. Fogel, District Judge, Presiding. D.C. No. 5:07–cv–03783–JF.

Before: RICHARD C. TALLMAN, MILAN D. SMITH, JR., and MARY H. MURGUIA, Circuit Judges.

Opinion by Judge TALLMAN; Partial Concurrence and Partial Dissent by Judge MILAN D. SMITH, JR.

TALLMAN, Circuit Judge:

ORDER

The opinion and dissent filed on September 14, 2015 and published at 801 F.3d 1126 are hereby amended. The amended opinion and dissent are filed concurrently with this order.

With these amendments, the panel has voted to deny Universal’s petition for panel rehearing and Lenz’s petition for panel rehearing. Judge Tallman and Judge Murguia have voted to deny Lenz’s petition for rehearing en banc, and Judge M. Smith has voted to grant Lenz’s petition for rehearing en banc.

The full court has been advised of the petition for rehearing en banc. No judge has requested a vote on whether to rehear the matter en banc. Fed. R.App. P. 35(b).

Universal’s petition for panel rehearing is DENIED. Lenz’s petition for panel rehearing or rehearing en banc is DENIED. No future petitions for panel rehearing or petitions for rehearing en banc will be entertained.

OPINION

Stephanie Lenz filed suit under 17 U.S.C. § 512(f)—part of the Digital Millennium Copyright Act (“DMCA”)—against Universal Music Corp., Universal Music Publishing, Inc., and Universal Music Publishing Group (collectively “Universal”). She alleges Universal misrepresented in a takedown notification that her 29–second home video (the “video”) constituted an infringing use of a portion of a composition by the Artist known as Prince, which Universal insists was unauthorized by the law. Her claim boils down to a question of whether copyright holders have been abusing the extrajudicial takedown procedures provided for in the DMCA by declining to first evaluate whether the content qualifies as fair use. We hold that the statute requires copyright holders to consider fair use before sending a takedown notification, and that in this case, there is a triable issue as to whether the copyright holder formed a subjective good faith belief that the use was not authorized by law. We

affirm the denial of the parties’ cross-motions for summary judgment.

At the time Lenz posted the video, Universal was Prince’s publishing administrator responsible for enforcing his copyrights. To accomplish this objective with respect to YouTube, Robert Allen, Universal’s head of business affairs, assigned Sean Johnson, an assistant in the legal department, to monitor YouTube on a daily basis. Johnson searched YouTube for Prince’s songs and reviewed the video postings returned by his online search query. When reviewing such videos, he evaluated whether they “embodied a Prince composition” by making “significant use of … the composition, specifically if the song was recognizable, was in a significant portion of the video or was the focus of the video.” According to Allen, “[t]he general guidelines are that … we review the video to ensure that the composition was the focus and if it was we then notify YouTube that the video should be removed.”

Johnson contrasted videos that met this criteria to those “that may have had a second or less of a Prince song, literally a one line, half line of Prince song” or “were shot in incredibly noisy environments, such as bars, where there could be a Prince song playing deep in the background … to the point where if there was any Prince composition embodied … in those videos that it was distorted beyond reasonable recognition.” None of the video evaluation guidelines explicitly include consideration of the fair use doctrine.

When Johnson reviewed Lenz’s video, he recognized Let’s Go Crazy immediately. He noted that it played loudly in the background throughout the entire video. Based on these details, the video’s title, and Lenz’s query during the video asking if her son liked the song, he concluded that Prince’s song “was very much the focus of the video.” As a result, Johnson decided the video should be included in a takedown notification sent to YouTube that listed more than 200 YouTube videos Universal believed to be making unauthorized use of Prince’s songs.⁸ The notice included a “good faith belief” statement as required by 17 U.S.C. § 512(c)(3)(A)(v): “We have a good faith belief that the above-described activity is not authorized by the copyright owner, its agent, or the law.”

After receiving the takedown notification, YouTube removed the video and sent

Lenz an email on June 5, 2007, notifying her of the removal. On June 7, 2007, Lenz attempted to restore the video by sending a counter-notification to YouTube pursuant to § 512(g)(3). After YouTube provided this counter-notification to Universal per § 512(g)(2)(B), Universal protested the video’s reinstatement because Lenz failed to properly acknowledge that her statement was made under penalty of perjury, as required by § 512(g)(3)(C). Universal’s protest reiterated that the video constituted infringement because there was no record that “either she or YouTube were ever granted licenses to reproduce, distribute, publicly perform or otherwise exploit the Composition.” The protest made no mention of fair use. After obtaining pro bono counsel, Lenz sent a second counter-notification on June 27, 2007, which resulted in YouTube’s reinstatement of the video in mid-July.

Universal incorrectly asserts that Lenz must demonstrate she incurred “actual monetary loss.” Section 512(k) provides a definition for “monetary relief” as “damages, costs, attorneys[’] fees, and any other form of monetary payment.” The term “monetary relief” appears in § 512(a), (b)(1), (c)(1), and (d), but is notably absent from § 512(f). As a result, the damages an alleged infringer may recover under § 512(f) from “any person” are broader than monetary relief.¹⁰Cf. United States v. James, 478 U.S. 597, 605, 106 S.Ct. 3116, 92 L.Ed.2d 483 (1986) (“Congress’ choice of the language ‘any damage’ … undercuts a narrow construction.”), abrogated on other grounds by Cent. Green Co. v. United States, 531 U.S. 425, 121 S.Ct. 1005, 148 L.Ed.2d 919 (2001). Because Congress specified the recovery of “any damages,” we reject Universal’s contention that Congress did not indicate its intent to depart from the common law presumption that a misrepresentation plaintiff must have suffered a monetary loss. See Keene Corp. v. United States, 508 U.S. 200, 208, 113 S.Ct. 2035, 124 L.Ed.2d 118 (1993) (“Where Congress includes particular language in one section of a statute but omits it in another, it is generally presumed that Congress acts intentionally and purposely in the disparate inclusion or exclusion.” (quotation omitted)).

Lenz may seek recovery of nominal damages due to an unquantifiable harm suffered as a result of Universal’s actions.¹¹ The DMCA is akin to a statutorily created intentional tort whereby an individual may recover nominal damages for a “knowingly material misrepresent[ation] under this section [512].” 17 U.S.C. § 512(f); cf. Memphis Cmty. Sch. Dist. v. Stachura, 477 U.S. 299, 305, 106 S.Ct. 2537, 91 L.Ed.2d 249 (1986) (“We have repeatedly noted that 42 U.S.C. § 1983 creates a species of tort liability in favor of persons who are deprived of rights, privileges, or immunities secured to them by the Constitution. Accordingly, when § 1983 plaintiffs seek damages for violations of constitutional

rights, the level of damages is ordinarily determined according to principles derived from the common law of torts.” (quotation and citations omitted)).

“In a number of common law actions associated with intentional torts, the violation of the plaintiff’s right has generally been regarded as a kind of legal damage in itself. The plaintiff who proves an intentional physical tort to the person or to property can always recover nominal damages.” 3 Dan B. Dobbs et al., The Law of Torts § 480 (2d ed. 2011). The tort need not be physical in order to recover nominal damages. Defamation, for example, permits the recovery of nominal damages:

W. Page Keeton et al., Prosser and Keeton on Torts § 116A, at 845 (5th ed. 1984). Also, individuals may recover nominal damages for trespass to land, even though the trespasser’s “presence on the land causes no harm to the land [or] its possessor….” Restatement (Second) of Torts § 163 & cmts. d, e (1965).

The district court therefore properly concluded in its 2010 order:

Lenz v. Universal Music Corp., No. C 07– 3783 JF, 2010 WL 702466, at *10 (N.D.Cal., Feb. 25, 2010). Relying on this opinion, the Southern District of Florida held the same. Hotfile, 2013 WL 6336286, at *48 (“[T]he Court observes that the quantity of economic damages to Hotfile’s system is necessarily difficult to measure with precision and has led to much disagreement between the parties and their experts. Notwithstanding this difficulty, the fact of injury has been shown, and Hotfile’s expert can provide the jury with a non-speculative basis to assess damages.”).

We agree that Lenz may vindicate her statutorily created rights by seeking nominal damages. Because a jury has not yet determined whether Lenz will prevail at trial, we need not decide the scope of recoverable damages, i.e., whether she may recover expenses following the initiation of her § 512(f) suit or pro bono costs and attorneys’ fees, both of which arose as a result of the injury incurred.

AFFIRMED. Each party shall bear its own costs.

M. SMITH, Circuit Judge, concurring in part and dissenting in part:

I concur in all but Part IV.C of the majority opinion. However, I disagree with the majority’s conclusion that “whether Universal’s actions were sufficient to form a subjective good faith belief about the video’s fair use or lack thereof” presents a triable issue of fact. Universal admittedly did not consider fair use before notifying YouTube to take down Lenz’s video. It therefore could not have formed a good faith belief that Lenz’s video was infringing, and its notification to the contrary was a knowing material misrepresentation. Accordingly, I would hold that Lenz is entitled to summary judgment.

I agree with the majority’s conclusion that § 512(c)(3)(A)(v) requires copyright holders to consider whether potentially infringing material is a fair use before issuing a takedown notice. As the majority explains, a takedown notice must contain “[a] statement that the complaining party has a good faith belief that use of the material in the manner complained of is not authorized by the copyright owner, its agent, or the law.” 17 U.S.C. § 512(c)(3)(A)(v). Because fair use of copyrighted material is not an infringement of copyright, such use is “authorized by … the law.” See id. § 107. Therefore, in order to form “a good faith belief that use of the material in the manner complained of is not authorized by … the law,” § 512(c)(3)(A)(v), a party must consider the doctrine of fair use. I also agree with the majority that § 512(f) provides a party injured by a violation of § 512(c)(3)(A)(v) with a right of action for damages, including nominal damages.

However, I part ways with the majority on two issues. First, I would clarify that § 512(f)’s requirement that a misrepresentation be “knowing[ ]” is satisfied when the party knows that it is ignorant of the truth or falsity of its representation. Second, I would hold that Universal’s actions were insufficient as a matter of law to form a subjective good-faith belief that Lenz’s video was not a fair use.

As the majority explains, we have previously held in Rossi v. Motion Picture Ass’n of Am. Inc. that “the ‘good faith belief’ requirement in § 512(c)(3)(A)(v) encompasses a subjective, rather than objective, standard.” 391 F.3d 1000, 1004 (9th Cir.2004). Rossi reasoned that a subjective

standard comported with § 512(f)’s requirement that actionable misrepresentations be “knowing[ ]”, and ultimately held that liability under § 512(f) requires “a demonstration of some actual knowledge of misrepresentation on the part of the copyright owner.” 391 F.3d at 1005.

Universal urges us to construe Rossi to mean that liability attaches under § 512(f) only if a party subjectively believes that its assertion is false. But under long-settled principles of deceit and fraudulent misrepresentation, a party need only know that it is ignorant of the truth or falsity of its representation for its misrepresentation to be knowing. For example, in Cooper v. Schlesinger, 111 U.S. 148, 155, 4 S.Ct. 360, 28 L.Ed. 382 (1884), the Supreme Court explained that “a statement recklessly made, without knowledge of its truth, [is] a false statement knowingly made, within the settled rule.” ¹³ Similarly, under the common law, “[a] misrepresentation is fraudulent if the maker … knows or believes that the matter is not as he represents it to be, … [or] knows that he does not have the basis for his representation that he states or implies.” Restatement (Second) of Torts § 526 (emphasis added).¹⁴

One who asserts a belief that a work is infringing without considering fair use lacks a basis for that belief. It follows that one who knows that he has not considered fair use knows that he lacks a basis for that belief. That is sufficient “actual knowledge of misrepresentation” to meet the scienter requirement of § 512(f). See Rossi, 391 F.3d at 1005. Thus, to be held liable under § 512(f), Universal need only have failed to consider fair use, and known that it had failed to consider fair use.

I respectfully disagree. The Copyright Act explicitly enumerates the factors to be considered in assessing whether use of copyrighted material is fair. 17 U.S.C. § 107. Universal’s policy was expressly to determine whether a video made “significant use”—not fair use—of the work. Nothing in Universal’s methodology considered the purpose and character of the use, the commercial or noncommercial nature of the use, or whether the use would have a significant impact on the market for the copyrighted work.¹⁵See § 107. There

is therefore no disputed issue of fact: Universal did not consider fair use before issuing a takedown notice.

Moreover, Universal knew it had not considered fair use, because § 107 explicitly supplies the factors that “shall” be considered in determining whether a use is fair. Id. I see no reason in law or logic to excuse copyright holders from the general principle that knowledge of the law is presumed. See United States v. Int’l Minerals & Chem. Corp., 402 U.S. 558, 562–63, 91 S.Ct. 1697, 29 L.Ed.2d 178 (1971) (holding that the use of the word “knowingly” did not evince a legislative intent to “carv[e] out an exception to the general rule that ignorance of the law is no excuse”). As explained above, that is sufficient in my view to conclude that Universal’s takedown notice was a knowing misrepresentation.

Based on Rossi’s holding that a subjective good-faith belief in infringement is sufficient to satisfy § 512(c)(3)(A)(v), 391 F.3d at 1005, the majority disagrees. But the majority’s reading of Rossi would insulate from liability any subjective belief in infringement, no matter how poorly formed. Rossi did not abrogate the statutory requirement that the belief be held in good faith. I would therefore hold that a belief in infringement formed consciously without considering fair use is no good-faith belief at all. See Cooper, 111 U.S. at 155, 4 S.Ct. 360 (holding that such a belief

is a knowing misrepresentation). And to assert in good faith that a use is not fair, a party must consider the statutory elements of fair use set forth in § 107. Merely evaluating whether a use is “significant” is not enough.

The majority’s unfortunate interpretation of § 512(f) would permit a party to avoid liability with only the most perfunctory attention to fair use. Such a construction eviscerates § 512(f) and leaves it toothless against frivolous takedown notices. And, in an era when a significant proportion of media distribution and consumption takes place on third-party safe harbors such as YouTube,¹⁶ if a creative work can be taken down without meaningfully considering fair use, then the viability of the concept of fair use itself is in jeopardy. Such a construction of § 512(f) cannot comport with the intention of Congress.

* * *

In sum: Universal represented that it had formed a good-faith belief that Lenz’s video was an infringement of copyright— that is, that the video was not fair use. Because Universal did not actually consider the factors constituting fair use, its representation was false—a misrepresentation. Because those factors are set forth in § 107 (and § 107 expressly states that a fair use “is not an infringement of copyright”), Universal’s misrepresentation was knowing. And because there is no further

disputed issue of fact concerning liability, I respectfully dissent.

Robert P. MOSIER, as Receiver for Private Equity Management Group Inc. and Private Equity Management Group, LLC and their subsidiaries and affiliates, Plaintiff–Appellant,
v.
STONEFIELD JOSEPHSON, INC.,
CPAs, a California corporation,
Defendant–Appellee.
No. 13–56453.
United States Court of Appeals, Ninth Circuit.

Argued and Submitted Oct. 23, 2015. Filed Feb. 23, 2016.

Background: Court-appointed receiver for company, which former directors and managers allegedly used to defraud investors in Ponzi scheme, brought action against accountants, asserting claims for professional negligence, aiding and abetting wrongful conversion, and unjust enrichment, based on allegations that accountants’ reports and related conduct materially misrepresented company’s financial condition, allowing company management to prolong scheme. The United States District Court for the Central District of California, Philip S. Gutierrez, J., 2013 WL 4859635, entered summary judgment in accountants’ favor. Receiver appealed.

Holdings: The Court of Appeals, Stephen S. Trott, Senior Circuit Judge, held that:

Affirmed.

1. Accountants 10.1

Corporations and Business Organizations 1852

In order for court-appointed receiver for company, which former directors and managers allegedly used to defraud investors in Ponzi scheme, to prove that accountants’ alleged misrepresentation of company’s financial condition was proximate cause of harm to company, as required to prevail, at summary judgment stage, on its professional negligence and aiding and abetting of conversion claims against accountants, receiver was required to prove that investors reasonably relied on accountants’ audits.

2. Accountants 10.1

Former directors and managers for company, which was allegedly used to defraud investors in Ponzi scheme, knew of and participated in the fraud, and thus could not have relied on truth of accountants’ allegedly fraudulent representations of company’s financial condition, in its audits, as required for court-appointed receiver for company to prevail, at summary judgment stage, on its professional negligence claim against accountants, based on

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We encourage you to submit comments through the Federal eRulemaking Portal at http://www.regulations.gov. If your material cannot be submitted using http://www.regulations.gov, contact the person in the FOR FURTHER INFORMATION CONTACT section of this document for alternate instructions.

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Documents mentioned in this notice, and all public comments, are in our online docket at http://www.regulations.gov and can be viewed by following that Web site’s instructions. Additionally, if you go to the online docket and sign up for email alerts, you will be notified when comments are posted or a final rule is published.

List of Subjects in 33 CFR Part 117

Bridges.

For the reasons discussed in the preamble, the Coast Guard proposes to amend 33 CFR part 117 as follows:

PART 117—DRAWBRIDGE OPERATION REGULATIONS

■ 1. The authority citation for part 117 continues to read as follows:

Authority: 33 U.S.C. 499; 33 CFR 1.05–1; Department of Homeland Security Delegation No. 0170.1.

■ 2. Revise § 117.635 to read as follows:

§117.635 Keweenaw Waterway

The draw of the US41 bridge, mile 16.0 between Houghton and Hancock, shall open on signal; except that from April 15 through December 14, between midnight and 4 a.m., the draw shall be placed in the intermediate position and open on signal if at least 2 hours notice is given. From December 15 through April 14 the draw shall open on signal if at least 12 hours notice is given.

Dated: July 12, 2016.

J.E. Ryan,

Rear Admiral, U.S. Coast Guard, Commander,Ninth Coast Guard District.

[FR Doc. 2016–17544 Filed 7–22–16; 8:45 am]

BILLING CODE 9110–04–P

LIBRARY OF CONGRESS

Copyright Royalty Board

37 CFR Part 385

[Docket No. 16–CRB–0003–PR (2018–2022)]

Determination of Rates and Terms for Making and Distributing Phonorecords (Phonorecords III)

AGENCY: Copyright Royalty Board, Library of Congress.

ACTION: Proposed rule.

SUMMARY: The Copyright Royalty Judges publish for comment proposed regulations that set rates and terms applicable during the period beginning January 1, 2018, and ending December 31, 2022, for the section 115 statutory license for making and distributing phonorecords of nondramatic musical works.

DATES: Comments and objections, if any, are due no later than August 24, 2016. ADDRESSES: The proposed rule is posted on the agency’s Web site (www.loc.gov/crb) and on the web at Regulations.gov (www.regulations.gov). Interested parties should submit electronic comments via email to crb@loc.gov. Those who chose not to submit comments electronically should see How to Submit Comments in the SUPPLEMENTARY INFORMATION section below for physical addresses and further instructions.

FOR FURTHER INFORMATION CONTACT: Kimberly Whittle, Attorney Advisor, by telephone at (202) 707–7658, or by email at crb@loc.gov.

SUPPLEMENTARY INFORMATION:

Background

Section 115 of the Copyright Act, title 17 of the United States Code, requires a copyright owner of a nondramatic musical work to grant a license (also known as the “mechanical” compulsory license) to any person who wants to make and distribute phonorecords of that work, provided that the copyright owner has allowed phonorecords of the work to be produced and distributed, and that the licensee complies with the statute and regulations. In addition to the production or distribution of physical phonorecords (compact discs, vinyl, cassette tapes, and the like), section 115 applies to digital transmissions of phonorecords, including permanent digital downloads and ringtones.

Chapter 8 of the Copyright Act requires the Copyright Royalty Judges (Judges) to conduct proceedings every five years to determine the rates and terms for the section 115 license. 17 U.S.C. 801(b)(1), 804(b)(4). Accordingly, the Judges commenced the current proceeding in January 2016, by publishing notice of the commencement and a request that interested parties submit petitions to participate. See 81 FR 255 (Jan. 5, 2016).

The Judges received petitions to participate in the current proceeding from Amazon Digital Services, Inc.; Apple, Inc.; American Society of Composers, Authors and Publishers (ASCAP); Broadcast Music, Inc. (BMI); Church Music Publishers Association; David Powell; Deezer S.A.; Digital Media Association (DiMA); Gear Publishing Co; GEO Music Group; Google, Inc.; Music Reports, Inc.; Nashville Songwriters Association International; National Music Publishers Association; Harry Fox Agency; Omnifone Group Limited; Pandora Media, Inc.; Recording Industry Association of America, Inc. (RIAA); Rhapsody International, Inc.; Songwriters of North America; Sony Music Entertainment; SoundCloud Limited; Spotify USA Inc.; Universal Music Group (UMG); and Warner Music Group (WMG).

The Judges gave notice to all participants of the three-month negotiation period required by 17 U.S.C. 803(b)(3) and directed that, if the participants were unable to negotiate a settlement, they should submit Written Direct Statements no later than October 3, 2016. On June 15, 2016, the Judges received a motion stating that several participants ¹⁷ had reached a partial settlement “among a significant portion of the sound recording and music publishing industries” regarding the rates and terms under Section 115 of the Copyright Act for physical phonorecords, permanent digital downloads, and ringtones for 2018– 2022 rate period and seeking approval of that partial settlement. See Joint Motion to Adopt Partial Settlement, Docket No. 16–CRB–0003–PR (2018– 2022) at 1 (June 15, 2016) (Motion).

The settlement proposes “that the royalty rates and terms presently set forth in 37 C.F.R. Part 385 Subpart A should be continued for the rate period at issue in the Proceeding, with one minor conforming update, namely, that an outdated cross reference in section 385.4 regarding statements of account be updated, and that the continued rates

should apply to “Subpart A Configurations made and distributed by or on behalf of UMG and WMG” and, in the Judges’ discretion, to other licensees. Motion at 3.

Section 801(b)(7)(A) of the Copyright Act authorizes the Judges to adopt rates and terms negotiated by “some or all of the participants in a proceeding at any time during the proceeding” provided they are submitted to the Judges for approval. This section provides that Judges shall provide notice and an opportunity to comment on the agreement to (1) those that would be bound and (2) participants in the proceeding that would be bound by the terms, rates, or other determination set by the agreement. See section 801(b)(7)(A). The Judges may decline to adopt the agreement as a basis for statutory terms and rates for participants not party to the agreement if any participant objects and the Judges conclude that the agreement does not provide a reasonable basis for setting statutory terms or rates. Id.

If the Judges adopt rates and terms reached pursuant to a negotiated settlement, those rates and terms are binding on all copyright owners of musical works and those using the musical works in the activities described in the proposed regulations.

Proposed Adjustments to Rates and Terms

In publishing the parties’ proposed rates and terms, the Judges are making the requested change in the cross reference because it is clearly outdated. The text of the section it refers to merely says “reserved.” In addition, the Judges propose adding the dates of the five-year period to the “General” section in order to specify the applicable dates of the rates and terms.

In the event the Judges determine not to adopt the proposed regulations for all copyright owners of musical works licensed under section 115 for the making or distributing of physical or digital phonorecords, the parties have proposed the following revised definition of licensee¹⁸, which would make the rates in the partial settlement applicable only to “Subpart A Configurations made and distributed by or on behalf of [licensees] UMG and WMG”:

Licensee is Capitol Christian Music Group, Inc., Capitol Records, LLC, UMG Recordings, Inc., Warner Music Inc., any of their respective successors, and any entity controlling, controlled by, or under common control with any such entity, when it has obtained a compulsory license under 17 U.S.C. 115, and the implementing regulations, to make and distribute phonorecords of a nondramatic musical work, including by means of a digital phonorecord delivery.

The Judges solicit comments on whether they should adopt the proposed regulations, including the change in the cross reference, as statutory rates and terms relating to the making and distribution of physical or digital phonorecords of nondramatic musical works for the participants that submitted the Motion. In addition, the Judges seek comment on whether they should apply the rates and terms in the partial settlement to all copyright owners and licensees and whether they should specify the five-year period in the regulation.

Comments and objections must be submitted no later than August 24, 2016.

How To Submit Comments

Interested members of the public must submit comments to only one of the following addresses. If not commenting by email or online, commenters must submit an original of their comments, five paper copies, and an electronic version in searchable PDF format on a CD.

Email: crb@loc.gov; or

Online: http://www.regulations.gov; or

U.S. mail: Copyright Royalty Board, P.O .Box 70977, Washington, DC 20024– 0977; or

Overnight service (only USPS Express Mail is acceptable): Copyright Royalty Board, P.O. Box 70977, Washington, DC 20024–0977; or

Commercial courier: Address package to: Copyright Royalty Board, Library of Congress, James Madison Memorial Building, LM–403, 101 Independence Avenue SE., Washington, DC 20559– 6000. Deliver to: Congressional Courier Acceptance Site, 2nd Street NE., and D Street NE., Washington, DC; or

Hand delivery: Library of Congress, James Madison Memorial Building, LM–401, 101 Independence Avenue SE., Washington, DC 20559–6000.

List of Subjects in 37 CFR Part 385

Copyright, Phonorecords, Recordings.

Proposed Regulations

For the reasons set forth in the preamble, the Copyright Royalty Judges propose to amend 37 CFR part 385 as follows:

PART 385—RATES AND TERMS FOR USE OF MUSICAL WORKS UNDER COMPULSORY LICENSE FOR MAKING AND DISTRIBUTING OF PHYSICAL AND DIGITAL PHONORECORDS

■ 1. The authority citation for part 385 continues to read as follows:

Authority: 17 U.S.C. 115, 801(b)(1), 804(b)(4).

§385.1 [Amended]

■ 2. Section 385.1(a) is amended by adding “, during the period January 1, 2018, through December 31, 2022” after “17 U.S.C. 115”.

§385.4 [Amended]

■ 3. Section 385.4 is amended by removing “§ 201.19(e)(7)(i)” and adding “§ 210.16(g)(1)” in its place.

Dated: July 19, 2016.

Suzanne M. Barnett,

Chief Copyright Royalty Judge.

[FR Doc. 2016–17437 Filed 7–22–16; 8:45 am]

BILLING CODE 1410–72–P

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 63

[EPA–HQ–OAR–2011–0817; FRL–9949–45– OAR]

RIN 2060–AS98

National Emission Standards for Hazardous Air Pollutants for the Portland Cement Manufacturing Industry

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

SUMMARY: The Environmental Protection Agency (EPA) is proposing to amend the National Emission Standards for Hazardous Air Pollutants for the Portland Cement Manufacturing Industry. In the “Rules and Regulations” section of this Federal Register, we are publishing a direct final rule, without a prior proposed rule, that corrects an inadvertent error and temporarily revises the testing and monitoring requirements for hydrochloric acid (HCl) due to the current unavailability of a calibration gas used for quality assurance purposes. If we receive no adverse comment, we will not take further action on this proposed rule.

DATES: Written comments must be received by August 24, 2016. ADDRESSES: Submit your comments, identified by Docket ID No. EPA–HQ–

====== 1-295 ======

KeyCite Yellow Flag - Negative Treatment

Distinguished by Kennedy v. Gish, Sherwood & Friends, Inc., E.D.Mo., November 5, 2015

804 F.3d 202
United States Court of Appeals,
Second Circuit.

The AUTHORS GUILD, Betty Miles, Jim Bouton, Joseph Goulden, individually and on behalf of all others similarly situated, Plaintiff-Appellants, Herbert Mitgang, Daniel Hoffman, individually and on behalf of all others similarly situated, Paul Dickson. The McGraw-Hill Companies, Inc., Pearson Education, Inc., Simon & Schuster, Inc., Association of American Publishers, Inc., Canadian Standard Association, John Wiley & Sons, Inc., individually and on behalf of all others similarly situated, Plaintiffs,
v.
GOOGLE, INC., Defendant-Appellee.

Docket No. 13–4829–cv. | Argued: Dec. 3, 2014. | Decided: Oct. 16, 2015.

Synopsis

Background: Authors of published books under copyright brought putative class copyright infringement action against internet search engine, claiming that search engine’s project which made digital copies of books submitted by major libraries, and allowed the public to search the texts of the digitally copied books and see displays of snippets of text, infringed on authors’ copyrights. Following rejection of proposed settlement, 770 F.Supp.2d 666, and vacatur of class certification, 721 F.3d 132, the United States District Court for the Southern District of New York, Chin, J., 954 F.Supp.2d 282, granted summary judgment to search engine under fair use doctrine. Authors appealed.

Holdings: The Court of Appeals, Leval, Circuit Judge, held that:

[1] first fair use factor, the purpose and character of the use, supported finding search engine’s activities were protected by fair use;

[2] second fair use factor, the nature of the copyrighted work, supported finding search engine’s activities were protected by fair use;

[3] third fair use factor, amount and substantiality of the portion used in relation to the copyrighted work as a whole, supported finding search engine’s activities were protected by fair use;

[4] fourth fair use factor, the effect of the use upon the potential market for or value of the copyrighted work, supported finding search engine’s activities were protected by fair use;

[5] search engine’s activities did not usurp authors’ right to produce derivative works;

[6] there was no evidence that search engine’s creation of digital copies exposed the books to the risk that hackers might gain access and make the books widely available; and

[7] search engine’s provision of digital copies to participating libraries that already owned the books did not infringe on authors’ copyrights.

Affirmed.

West Headnotes (20)

Attorneys and Law Firms

*206 Paul M. Smith, Jenner & Block LLP, Washington, DC (Edward H. Rosenthal, Jeremy S. Goldman, Anna Kadyshevich, Andrew D. Jacobs, Frankfurt Kurnit Klein & Selz PC, New York, N.Y., on the brief), for Plaintiff– Appellants.

Seth P. Waxman, Wilmer Cutler Pickering Hale and Dorr LLP, Washington, D.C. (Louis R. Cohen, Daniel P. Kearney, Jr., Weili J. Shaw, Wilmer Cutler Pickering Hale and Dorr LLP, Washington D.C & Daralyn J. Durie, Joseph C. Gratz,

Durie Tangri LLP, San Francisco, CA, on the brief), for Defendant–Appellee.

Before: LEVAL, CABRANES, PARKER, Circuit Judges.

Opinion

LEVAL, Circuit Judge:

This copyright dispute tests the boundaries of fair use. Plaintiffs, who are authors of published books under copyright, sued Google, Inc. (“Google”) for copyright infringement in the United States District *207 Court for the Southern District of New York (Chin, J.). They appeal from the grant of summary judgment in Google’s favor. Through its Library Project and its Google Books project, acting without permission of rights holders, Google has made digital copies of tens of millions of books, including Plaintiffs’, that were submitted to it for that purpose by major libraries. Google has scanned the digital copies and established a publicly available search function. An Internet user can use this function to search without charge to determine whether the book contains a specified word or term and also see “snippets” of text containing the searched-for terms. In addition, Google has allowed the participating libraries to download and retain digital copies of the books they submit, under agreements which commit the libraries not to use their digital copies in violation of the copyright laws. These activities of Google are alleged to constitute infringement of Plaintiffs’ copyrights. Plaintiffs sought injunctive and declaratory relief as well as damages.

Google defended on the ground that its actions constitute “fair use,” which, under 17 U.S.C. § 107, is “not an infringement.” The district court agreed. Authors Guild, Inc. v. Google Inc., 954 F.Supp.2d 282, 294 (S.D.N.Y.2013). Plaintiffs brought this appeal.

Plaintiffs contend the district court’s ruling was flawed in several respects. They argue: (1) Google’s digital copying of entire books, allowing users through the snippet function to read portions, is not a “transformative use” within the meaning of Campbell v. Acuff–Rose Music, Inc., 510 U.S. 569, 578–585, 114 S.Ct. 1164, 127 L.Ed.2d 500 (1994), and provides a substitute for Plaintiffs’ works; (2) notwithstanding that Google provides public access to the search and snippet functions without charge and without advertising, its ultimate commercial profit motivation and its derivation of revenue from its dominance of the world-wide Internet search market to which the books project contributes, preclude a finding of fair use; (3) even if Google’s copying and revelations of text do not infringe plaintiffs’ books, they infringe Plaintiffs’ derivative rights in search functions, depriving Plaintiffs of revenues or other benefits they would gain from licensed search markets; (4) Google’s storage of digital copies exposes Plaintiffs to the risk that hackers will make their books freely (or cheaply) available on the Internet, destroying the value of their copyrights; and (5) Google’s distribution of digital copies to participant libraries is not a transformative use, and it subjects Plaintiffs to the risk of loss of copyright revenues through access allowed by libraries. We reject these arguments and conclude that the district court correctly sustained Google’s fair use defense.

Google’s making of a digital copy to provide a search function is a transformative use, which augments public knowledge by making available information about Plaintiffs’ books without providing the public with a substantial substitute for matter protected by the Plaintiffs’ copyright interests in the original works or derivatives of them. The same is true, at least under present conditions, of Google’s provision of the snippet function. Plaintiffs’ contention that Google has usurped their opportunity to access paid and unpaid licensing markets for substantially the same functions that Google provides fails, in part because the licensing markets in fact involve very different functions than those that Google provides, and in part because an author’s derivative rights do not include an exclusive right to supply information (of the sort provided by Google) about her works. Google’s profit motivation does not in these circumstances justify denial of fair use. Google’s program *208 does not, at this time and on the record before us, expose Plaintiffs to an unreasonable risk of loss of copyright value through incursions of hackers. Finally, Google’s provision of digital copies to participating libraries, authorizing them to make non-infringing uses, is non-infringing, and the mere speculative possibility that the libraries might allow use of their copies in an infringing manner does not make Google a contributory infringer. Plaintiffs have failed to show a material issue of fact in dispute.

We affirm the judgment.

All Citations

804 F.3d 202, 116 U.S.P.Q.2d 1423

Footnotes

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- F.3d ——, 2014 WL 2726187 (C.A.7 (Ill.))

(Cite as: 2014 WL 2726187 (C.A.7 (Ill.)))

H

Only the Westlaw citation is currently available.

United States Court of Appeals,
Seventh Circuit.
Leslie S. KLINGER, Plaintiff-Appellee,
v.
CONAN DOYLE ESTATE, LTD., Defendant-Appellant.

No. 14-1128.
Argued May 22, 2014.
Decided June 16, 2014.

Background: Editor of anthology of stories written by modern authors inspired by Sherlock Holmes character brought action against author’s estate seeking declaratory judgment that he was free to use material in Sherlock Holmes stories and novels that were no longer under copyright. After estate defaulted, the United States District Court for the Northern District of Illinois, Rubén Castillo, Chief Judge, 2013 WL 6824923, entered summary judgment in editor’s favor, and estate appealed.

Holdings: The Court of Appeals, Posner, Circuit Judge, held that:

(1) actual controversy existed, and

(2) editor was free to use material in Sherlock Holmes stories and novels that were no longer under copyright.

Affirmed.

West Headnotes

[1] Declaratory Judgment 118A 236

118A Declaratory Judgment

118AII Subjects of Declaratory Relief

118AII(M) Copyrights

118Ak236 k. In General. Most Cited Cases

Actual controversy existed in action by editor of anthology of stories written by modern authors inspired by Sherlock Holmes character against author’s estate seeking declaratory judgment that he was free to use material in Sherlock Holmes stories and novels that were no longer under copyright, and thus federal courts had jurisdiction over action, even though anthology had not yet been completed or published, where estate had threatened to block anthology’s distribution by major retailers and to sue for copyright infringement if editor did not pay licensing fee, publisher was unwilling to publish anthology without license, and case presented only question of law. U.S.C.A. ConstArt. 3, § 2, cl. 1; 28 U.S.C.A. § 2201(a).

[2] Copyrights and Intellectual Property 99 33

99 Copyrights and Intellectual Property

99I Copyrights

99I(A) Nature and Subject Matter

99k33 k. Duration. Most Cited Cases

Copyrights and Intellectual Property 99 38

99 Copyrights and Intellectual Property

99I Copyrights

99I(B) Scope

99k35 Scope of Exclusive Rights; Limitations

99k38 k. Distinct Portions of Work; Compilations and Derivative Works. Most Cited Cases

====== 1-338 ======

Editor of anthology of stories written by modern authors inspired by Sherlock Holmes character was free to use material in Sherlock Holmes stories and novels that were no longer under copyright, even though author’s ten last Sherlock Holmes stories remained under copyright protection, where stories under copyright were derivative from earlier stories, and only incrementally added to character’s development.

[3] Copyrights and Intellectual Property 99 33

99 Copyrights and Intellectual Property

99I Copyrights

99I(A) Nature and Subject Matter

99k33 k. Duration. Most Cited Cases

When story falls into public domain, story elements, including characters covered by expired copyright, become fair game for follow-on authors.

[4] Copyrights and Intellectual Property 99 38

99 Copyrights and Intellectual Property

99I Copyrights

99I(B) Scope

99k35 Scope of Exclusive Rights; Limitations

99k38 k. Distinct Portions of Work; Compilations and Derivative Works. Most Cited Cases

Freedom to make new works based on public domain materials ends where resulting derivative work comes into conflict with valid copyright.

Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 13 C 1226—Rubén Castillo, Chief Judge.Jonathan L. Kirsch, Law Offices of Jonathan Kirsch, PC, Los Angeles, CA. John A. Leja, Scott M. Gilbert, Polsinelli PC, Chicago, IL, for Plaintiff–Appellee.

Benjamin Allison, Sutin Thayer & Brown, Santa Fe, NM, William Frederick Zieske, Zieske Law–Fine Arts Legal, Woodstock, IL, for Defendant–Appellant.

Before POSNER, FLAUM, and MANION, Circuit Judges.

POSNER, Circuit Judge.

*1 Arthur Conan Doyle published his first Sherlock Holmes story in 1887 and his last in 1927. There were 56 stories in all, plus 4 novels. The final 10 stories were published between 1923 and 1927. As a result of statutory extensions of copyright protection culminating in the 1998 Copyright Term Extension Act, the American copyrights on those final stories (copyrights owned by Doyle’s estate, the appellant) will not expire until 95 years after the date of original publication—between 2018 to 2022, depending on the original publication date of each story. The copyrights on the other 46 stories and the 4 novels, all being works published before 1923, have expired as a result of a series of copyright statutes well described in Societe Civile Succession Guino v. Renoir, 549 F.3d 1182, 1189–90 (9th Cir.2008).

Once the copyright on a work expires, the work becomes a part of the public domain and can be copied and sold without need to obtain a license from the holder of the expired copyright. Leslie Klinger, the appellee in this case, co-edited an anthology called AStudy in Sherlock: Stories Inspired by the SherlockHolmes Canon (2011)—“canon” referring to the 60 stories and novels written by Arthur Conan Doyle, as opposed to later works, by other writers, featuring characters who had appeared in the canonical works. Klinger’s anthology consisted of stories written by modern authors but inspired by, and in most instances depicting, the genius detective Sherlock Holmes and his awed sidekick Dr. Watson. Klinger didn’t think he needed a license from the Doyle estate to publish these

stories, since the copyrights on most of the works in the “canon” had expired. But the estate told Random House, which had agreed to publish Klinger’s book, that it would have to pay the estate $5000 for a copyright license. Random House bowed to the demand, obtained the license, and published the book.

Klinger and his co-editor decided to create a sequel to A Study in Sherlock, to be called In the Company of Sherlock Holmes. They entered into negotiations with Pegasus Books for the publication of the book and W.W. Norton & Company for distribution of it to booksellers. Although the editors hadn’t finished the book, the companies could estimate its likely commercial success from the success of its predecessor, and thus decide in advance whether to publish and distribute it. But the Doyle estate learned of the project and told Pegasus, as it had told Random House, that Pegasus would have to obtain a license from the estate in order to be legally authorized to publish the new book. The estate didn’t threaten to sue Pegasus for copyright infringement if the publisher didn’t obtain a license, but did threaten to prevent distribution of the book. It did not mince words. It told Pegasus: “If you proceed instead to bring out Study inSherlock II [the original title of In the Company of Sherlock Holmes ] unlicensed, do not expect to see it offered for sale by Amazon, Barnes & Noble, and similar retailers. We work with those compan[ies] routinely to weed out unlicensed uses of Sherlock Holmes from their offerings, and will not hesitate to do so with your book as well.” There was also a latent threat to sue Pegasus for copyright infringement if it published Klinger’s book without a license, and to sue Internet service providers who distributed it. See Digital Millennium Copyright Act, 17 U.S.C. § 512(i)(1)(A). Pegasus yielded to the threat, as Random House had done, and refused to publish In the Company of Sherlock Holmes unless and until Klinger obtained a license from the Doyle estate.

*2 Instead of obtaining a license, Klinger sued the estate, seeking a declaratory judgment that he is free to use material in the 50 Sherlock Holmes stories and novels that are no longer under copyright, though he may use nothing in the 10 stories still under copyright that has sufficient originality to be copyrightable—which means: at least a tiny bit of originality, Feist Publications, Inc. v. Rural Telephone ServiceCo., 499 U.S. 340, 345, 111 S.Ct. 1282, 113 L.Ed.2d 358 (1991) (“at least some minimal degree of creativity … the requisite level of creativity is extremely low”); CDN Inc. v. Rapes, 197 F.3d 1256, 1257, 1259–60 (9th Cir.1999).

The estate defaulted by failing to appear or to respond to Klinger’s complaint, but that didn’t end the case. Klinger wanted his declaratory judgment. The district judge gave him leave to file a motion for summary judgment, and he did so, and the Doyle estate responded in a brief that made the same arguments for enlarged copyright protection that it makes in this appeal. The judge granted Klinger’s motion for summary judgment and issued the declaratory judgment Klinger had asked for, thus precipitating the estate’s appeal.

The appeal challenges the judgment on two alternative grounds. The first is that the district court had no subject-matter jurisdiction because there is no actual case or controversy between the parties. The second ground is that if there is jurisdiction, the estate is entitled to judgment on the merits, because, it argues, copyright on a “complex” character in a story, such as Sherlock Holmes or Dr. Watson, whose full complexity is not revealed until a later story, remains under copyright until the later story falls into the public domain. The estate argues that the fact that early stories in which Holmes or Watson appeared are already in the public domain does not permit their less than fully “complexified” characters in the early stories to be copied even though the stories themselves are in the public domain.

But jurisdiction first. Article III of the Constitution limits the jurisdiction of federal courts to cases or

controversies (terms that appear to be synonyms), which is to say to actual legal disputes. It would be very nice to be able to ask federal judges for legal advice—if I do thus and so, will I be subject to being sued and if I am sued am I likely to lose and have to pay money or even clapped in jail? But that would be advisory jurisdiction, which, though it exists in some states and foreign countries, see, e.g., Nicolas Marie Kublicki, “An Overview of the French Legal System From an American Perspective,” 12 Boston University Int’l L.J. 57, 66, 78–79 (1994), is both inconsistent with Article Ill’s limitation of federal jurisdiction to actual disputes, thus excluding jurisdiction over merely potential ones, and would swamp the federal courts given these courts’ current caseload, either leaving the judges little if any time for adjudicating disputes or requiring that judges’ staffs be greatly enlarged.

*3 [1] So no advisory opinions in federal courts. Declaratory judgments are permitted but are limited—also to avoid transgressing Article III—to “case[s] of actual controversy,” 28 U.S.C. § 2201(a), that is, actual legal disputes. Had Klinger had no idea how the Doyle estate would react to the publication of In the Company of Sherlock Holmes, he could not have sought a declaratory judgment, because he would not have been able to demonstrate that there was an actual dispute. He could seek advice, but not from a federal judge. But the Doyle estate had made clear that if Klinger succeeded in getting his book published the estate would try to prevent it from being sold by asking Amazon and the other big book retailers not to carry it, implicitly threatening to sue the publisher, as well as Klinger and his co-editor, for copyright infringement if they defied its threat. The twin threats—to block the distribution of the book by major retailers and to sue for copyright infringement—created an actual rather than merely a potential controversy. This is further shown by the fact that Klinger could have sued the estate for having committed tortious interference with advantageous business relations by intimidating his publisher.

So he’s been injured and seeks a judicial declaration that the conduct by the Doyle estate that caused the injury violated his legal rights because the threat was based on a groundless copyright claim. Only if Klinger obtains the declaration will he be able to publish his book without having to yield to what he considers extortion.

Compare the more common example of a suit by an insurance company seeking a judicial declaration that it has no obligation to defend or indemnify its insured. The company prefers to seek declaratory relief rather than waiting to be sued by the insured and defending against the suit because if it lost that suit it might be ordered to pay punitive damages. This case is similar. Klinger doesn’t want to publish his book before his controversy with the Doyle estate is resolved, for if he does he’ll be facing the prospect not only of being enjoined from selling the book but also of having to pay damages if the estate sues him for copyright infringement and wins. Even if the book’s sales turn out to be modest, and actual damages (as measured by losses of sales by competing editions licensed by the estate) therefore small, the estate would be entitled, for each copyrighted work infringed, to up to $30,000 in statutory damages and up to $150,000 if the court determined that Klinger had infringed the estate’s copyrights willfully. 17 U.S.C. §§ 504(c)(1), (2). Anyway he can’t publish his book; his publisher is unwilling to take a chance on publishing it, given the estate’s threat to impede distribution. And to be effective and thus harm the person seeking declaratory relief, a threat need not be a threat to sue. See, e.g., MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 132, 127 S.Ct. 764, 166 L.Ed.2d 604 (2007).

*4 The estate argues that Klinger’s suit is premature (“unripe” in legal jargon), and therefore not yet an actual controversy and so not within the jurisdiction of the federal courts, for until the book is completed (and thus can be read), how is one to decide whether it infringes? That would be a good argument in many

cases but not in the present one, because the only issue presented by Klinger’s quest for a declaratory judgment is one of law: whether he is free to copy the characters of Holmes and Watson as they are depicted in the stories and novels of Arthur Conan Doyle that are in the public domain. To answer that question requires no knowledge of the contents of the book. A different question is whether the book will infringe the estate’s unexpired copyrights, and to answer that question would require knowledge of the contents. But that question is not presented by this suit. Klinger avers that his book will contain no original and therefore copyrightable material that appears only in the last ten stories, which are still under copyright, but only material that appears in the public-domain works. If he’s lying, the estate will have a remedy when the book is published. To require him to defer suit until he finishes the book would gratuitously discourage declaratory-judgment suits by authors and publishers threatened with suits for copyright infringement or with boycotts by distributors—and so would discourage authors from ever writing such works in the first place.

There is still another jurisdictional wrinkle. Apparently because of a mislabeling of certain exhibits, the district judge was under the impression that Klinger’s suit was challenging the copyrights on the ten stories published after 1922, and so he denied summary judgment insofar as those stories were concerned. That makes it seem as if there were no final judgment in the district court, in which event we would not have jurisdiction of the appeal, as there is no suggestion that there is any basis for an interlocutory appeal. The plaintiff claims, however, not to be challenging the copyrights on the last ten stories. And the claim is correct, for he acknowledges that those copyrights are valid and that the only copying he wants to include in his book is copying of the Holmes and Watson characters as they appear in the earlier stories and in the novels. The summary judgment ruling on the last ten stories was a mistake, and can be ignored. Nothing remains in the district court. The declaratory judgment issued by the district judge, limited entirely to the earlier works, ended the litigation in that court.

So the judge was right to assert (and retain) jurisdiction over the case, and we come to the merits, where the issue as we said is whether copyright protection of a fictional character can be extended beyond the expiration of the copyright on it because the author altered the character in a subsequent work. In such a case, the Doyle estate contends, the original character cannot lawfully be copied without a license from the writer until the copyright on the later work, in which that character appears in a different form, expires.

*5 [2][3] We cannot find any basis in statute or case law for extending a copyright beyond its expiration. When a story falls into the public domain, story elements-including characters covered by the expired copyright-become fair game for follow-on authors, as held in Silverman v. CBS Inc., 870 F.2d 40, 49–51 (2d Cir.1989), a case much like this one. At issue was the right to copy fictional characters (Amos and Andy) who had appeared in copyrighted radio scripts. The copyrights covered the characters because they were original. As in this case the characters also appeared in subsequent radio scripts that remained under copyright, though the copyrights on the original scripts in which the characters had appeared had expired. The court ruled that “a copyright affords protection only for original works of authorship and, consequently, copyrights in derivative works secure protection only for the incremental additions of originality contributed by the authors of the derivative works.” Id. at 49; see Leslie A. Kurtz, “The Methuselah Factor: When Characters Outlive Their Copyrights,” 11 U. MiamiEntertainment & Sports L.Rev. 437, 447–48 (1994). The copyrights on the derivative works, corresponding to the copyrights on the ten last Sherlock Holmes stories, were not extended by virtue of the incremental additions of originality in the derivative works.

[4] And so it is in our case. The ten

Holmes–Watson stories in which copyright persists are derivative from the earlier stories, so only original elements added in the later stories remain protected. Id. at 49–50. The “freedom to make new works based on public domain materials ends where the resulting derivative work comes into conflict with a valid copyright,” Warner Bros. Entertainment, Inc. v. X One X Productions, 644 F.3d 584, 596 (8th Cir.2011)—as Klinger acknowledges. But there is no such conflict in this case.

Lacking any ground known to American law for asserting post-expiration copyright protection of Holmes and Watson in pre–1923 stories and novels going back to 1887, the estate argues that creativity will be discouraged if we don’t allow such an extension. It may take a long time for an author to perfect a character or other expressive element that first appeared in his early work. If he loses copyright on the original character, his incentive to improve the character in future work may be diminished because he’ll be competing with copiers, such as the authors whom Klinger wishes to anthologize. Of course this point has no application to the present case, Arthur Conan Doyle having died 84 years ago. More important, extending copyright protection is a two-edged sword from the standpoint of inducing creativity, as it would reduce the incentive of subsequent authors to create derivative works (such as new versions of popular fictional characters like Holmes and Watson) by shrinking the public domain. For the longer the copyright term is, the less public-domain material there will be and so the greater will be the cost of authorship, because authors will have to obtain licenses from copyright holders for more material—as illustrated by the estate’s demand in this case for a license fee from Pegasus.

*6 Most copyrighted works include some, and often a great deal of, public domain material—words, phrases, data, entire sentences, quoted material, and so forth. The smaller the public domain, the more work is involved in the creation of a new work. The defendant’s proposed rule would also encourage authors to continue to write stories involving old characters in an effort to prolong copyright protection, rather than encouraging them to create stories with entirely new characters. The effect would be to discourage creativity.

The estate offers the hypothetical example of a mural that is first sketched and only later completed by being carefully painted. If the sketch is allowed to enter the public domain, there to be improved by creative copiers, the mural artist will have a diminished incentive to perfect his mural. True; but other artists will have a greater incentive to improve it, or to create other works inspired by it, because they won’t have to pay a license fee to do so provided that the copyright on the original work has expired.

The estate asks us to distinguish between “flat” and “round” fictional characters, potentially a sharper distinction than the other one it urges (as we noted at the beginning of this opinion), which is between simple and complex. Repeatedly at the oral argument the estate’s lawyer dramatized the concept of a “round” character by describing large circles with his arms. And the additional details about Holmes and Watson in the ten late stories do indeed make for a more “rounded,” in the sense of a fuller, portrayal of these characters. In much the same way we learn things about Sir John Falstaff in Hen ry IV, Part 2, in Hen ry V (though he doesn’t actually appear in that play but is merely discussed in it), and in The Merry Wives of Windsor, that were not remarked in his first appearance, in Hen ry IV, Part 1. Notice also that Hen ry V, in which Falstaff is reported as dying, precedes The Merry Wives, in which he is very much alive. Likewise the ten last Sherlock Holmes stories all are set before 1914, which was the last year in which the other stories were set. One of the ten, The Adventure of the Veiled Lodger (published in 1927), is set in 1896. See 2 William S. Baring–Gould, The Annotated Sherlock Holmes 453 (1967). Thus a more rounded Holmes or Watson (or Falstaff) is found in a later

work depicting a younger person. We don’t see how that can justify extending the expired copyright on the flatter character. A contemporary example is the six Star Wars movies: Episodes IV, V, and VI were produced before I, II, and III. The Doyle estate would presumably argue that the copyrights on the characters as portrayed in IV, V, and VI will not expire until the copyrights on I, II, and III expire.

The estate defines “flat” characters oddly, as ones completely and finally described in the first works in which they appear. Flat characters thus don’t evolve. Round characters do; Holmes and Watson, the estate argues, were not fully rounded off until the last story written by Doyle. What this has to do with copyright law eludes us. There are the early Holmes and Watson stories, and the late ones, and features of Holmes and Watson are depicted in the late stories that are not found in the early ones (though as we noted in the preceding paragraph some of those features are retrofitted to the earlier depictions). Only in the late stories for example do we learn that Holmes’s attitude toward dogs has changed—he has grown to like them—and that Watson has been married twice. These additional features, being (we may assume) “original” in the generous sense that the word bears in copyright law, are protected by the unexpired copyrights on the late stories. But Klinger wants just to copy the Holmes and the Watson of the early stores, the stories no longer under copyright. The Doyle estate tells us that “no workable standard exists to protect the Ten Stories’ incremental character development apart from protecting the completed characters.” But that would be true only if the early and the late Holmes, and the early and the late Watson, were indistinguishable—and in that case there would be no incremental originality to justify copyright protection of the “rounded” characters (more precisely the features that makes them “rounder,” as distinct from the features they share with their earlier embodiments) in the later works.

*7 It’s not unusual for an author to use the same character in successive works, yet with differences resulting, in the simplest case, just from aging. In Shakespeare’s two Henry IV plays, the Henry who later becomes Henry V is the Prince of Wales, hence Crown Prince of England; in Henry V he is the King of England. Were Henry IV in the public domain and Henry V under copyright, Henry Prince of Wales could be copied without Shakespeare’s permission but not Henry V. Could the Doyle estate doubt this? Could it think Holmes a more complex and altered character than Henry?

The more vague, the less “complete,” a character, the less likely it is to qualify for copyright protection. An author “could not copyright a character described merely as an unexpectedly knowledgeable old wino,” but could copyright “a character that has a specific name and a specific appearance. Cogliostro’s age, obviously phony title (‘Count’), what he knows and says, his name, and his faintly Mosaic facial features combine to create a distinctive character. No more is required for a character copyright .” Gaiman v. McFarlane, 360 F.3d 644, 660 (7th Cir.2004); see also Nichols v. Universal Pictures Corp., 45 F.2d 119, 121 (2d Cir.1930) (L.Hand, J.). From the outset of the series of Arthur Conan Doyle stories and novels that began in 1887 Holmes and Watson were distinctive characters and therefore copyrightable. They were “incomplete” only in the sense that Doyle might want to (and later did) add additional features to their portrayals. The resulting somewhat altered characters were derivative works, the additional features of which that were added in the ten late stories being protected by the copyrights on those stories. The alterations do not revive the expired copyrights on the original characters.

We can imagine the Doyle estate being concerned that a modern author might write a story in which Sherlock Holmes was disparaged (perhaps by being depicted as a drug dealer—he was of course a cocaine user—or as an idiot detective like Inspector Clouseau of the Pink Panther movies), and that someone who read the story might be deterred from reading Doyle’s

Sherlock Holmes stories because he would realize that he couldn’t read them without puzzling confusedly over the “true” character of Sherlock Holmes. The analogy would be to trademark dilution, see, e.g., Hyatt Corp. v. Hyatt Legal Services, 736 F.2d 1153, 1157–59 (7th Cir.1984), as if a hot-dog stand advertised itself as “The Rolls–Royce Hot–Dog Stand.” No one would be confused as to origin—Rolls-Royce obviously would not be the owner. Its concern would be that its brand would be diminished by being linked in people’s involuntary imagination to a hot-dog stand; when they thought “Rolls–Royce,” they would see the car and the hot-dog stand—an anomalous juxtaposition of high and low. There is no comparable doctrine of copyright law; parodies or burlesques of copyrighted works may or may not be deemed infringing, depending on circumstances, see Campbell v. Acuff–Rose Music, Inc., 510 U.S. 569, 580–81 and n. 14, 588, 591, 114 S.Ct. 1164, 127 L.Ed.2d 500 (1994), but there is no copyright infringement of a story or character that is not under copyright. Anyway it appears that the Doyle estate is concerned not with specific alterations in the depiction of Holmes or Watson in Holmes–Watson stories written by authors other than Arthur Conan Doyle, but with any such story that is published without payment to the estate of a licensing fee.

*8 With the net effect on creativity of extending the copyright protection of literary characters to the extraordinary lengths urged by the estate so uncertain, and no legal grounds suggested for extending copyright protection beyond the limits fixed by Congress, the estate’s appeal borders on the quixotic. The spectre of perpetual, or at least nearly perpetual, copyright (perpetual copyright would violate the copyright clause of the Constitution, Art. I, § 8, cl. 8, which authorizes copyright protection only for “limited Times”) looms, once one realizes that the Doyle estate is seeking 135 years (1887–2022) of copyright protection for the character of Sherlock Holmes as depicted in the first Sherlock Holmes story.

AFFIRMED.

C.A.7 (Ill.),2014.
Klinger v. Conan Doyle Estate, Ltd.
—- F.3d ——, 2014 WL 2726187 (C.A.7 (Ill.))

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