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IP/Entertainment Law Weekly Case Update for Motion Picture Studios and Television Networks
January 27, 2010
Table of Contents
Capitol Records Inc., et al. v. Thomas-Rasset, USDC D. Minnesota, January 22, 2010
 Click here for a copy of the full decision.
- In peer-to-peer copyright infringement action, court grants defendant’s motion for remittitur and reduces jury’s statutory damage award from $1,920,000 to $54,000 after holding that jury’s statutory damages award is shocking and unjust; court concludes that treble the minimum statutory damages amount of $750 per song is the maximum amount the jury could properly have awarded.
In October, 2007, a jury returned a verdict that defendant Jammie Thomas-Rasset willfully infringed plaintiff record companies’ copyrights by downloading 24 songs using the Kazaa peer-to-peer network, awarding statutory damages in the amount of $9,250 for each willful infringement, for a total of $222,000. After the court vacated the verdict and granted a new trial based on an erroneous jury instruction, in June 2009 the jury returned a verdict finding that defendant had willfully infringed all 24 sound recordings and awarded statutory damages in the amount of $80,000 per song, for a total verdict of nearly $2 million. Plaintiffs chose statutory damages instead of actual damages. The Copyright Act provides that statutory damages can be between $750 and $30,000 for each infringement, but allows the court to increase the award of statutory damages to $150,000 in cases of willful infringement. 17 U.S.C. § 504(c).
Defendant moved for a new trial, remittitur (i.e., reducing a judgment awarded by a jury without ordering a new trial), and to alter or amend the judgment. The court rejected plaintiff’s argument that it did not have the authority to remit an award of statutory damages and that the jury alone has the authority to determine statutory damages. The court did say, however, that plaintiffs have the right to reject remittitur and seek a new jury trial on the issue of statutory damages. The court held that the jury’s statutory damages award was shocking and unjust and granted defendant’s motion for remittitur, reducing the damages award to $2,250 per song – three times the statutory minimum.
According to the court, a statutory damages award has a deterrent and compensatory component, and, while plaintiffs were not required to prove their actual damages, a statutory damages award must bear some relation to actual damages suffered. The court acknowledged that it would be difficult to determine actual damages resulting from peer-to-peer downloading of plaintiffs’ songs, and that such activity had caused widespread harm to the music industry. The court also acknowledged that the jury found that the defendant willfully infringed plaintiffs’ copyrights and that she was aware that downloading songs using peer-to-peer networks was illegal. Nonetheless, the court held that the jury’s almost $2 million award was “monstrous and shocking”.
The court said it would not substitute its judgment for the jury’s judgment but instead would determine the maximum amount that the jury could properly have awarded. The court concluded that treble the minimum statutory damages amount was appropriate considering that the defendant’s infringement was willful, that defendant was not infringing plaintiffs’ copyrights for profit, the need to deter others from engaging in music piracy, the loss to the music industry caused by illegal downloading and that other statutes (such as the Digital Millennium Copyright Act and the Lanham Act) provide for treble damages for willful violations. The court thus reduced the jury’s award to $2,250 per song for a total statutory damages award of $54,000. The court also granted plaintiffs’ request to amend the judgment by adding a permanent injunction.
Summit Entertainment, LLC v. Beckett Media, LLC, USDC C.D. California, January 12, 2010
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- Court grants plaintiff’s motion for preliminary injunction in copyright and trademark infringement action against publisher of a Twilight fanzine that used plaintiff’s Twilight trademark as well as images from the Twilight films and promotional images that were taken from plaintiff’s publicity website.
Plaintiff Summit Entertainment owns copyrights and trademarks associated with the motion picture Twilight and its sequel New Moon. Defendant Beckett Media published two issues of a Twilight fan magazine. Plaintiff claimed that these fanzines reproduced without authorization numerous images from the films, as well as trademarks and promotional images associated with the films.
More specifically, plaintiff claimed that defendant’s fanzines displayed plaintiff’s stylized trademark without authorization, contained unauthorized reproductions of photographs from the films and plaintiff’s promotional materials (including photographs that are not obtainable from plaintiff’s publicity website and photographs that were altered in violation of the website's terms of use), contained posters that are unauthorized reproductions of plaintiff’s photographs and artwork, and contained unauthorized reproductions of a set of Twilight trading cards published by plaintiff’s licensee.
Plaintiff filed suit for, inter alia, trademark infringement and dilution, copyright infringement, and breach of contract, and filed an application for a temporary restraining order, which the court converted into a motion for a preliminary injunction. In the Ninth Circuit, a plaintiff seeking a preliminary injunction must establish “that he is likely to succeed on the merits, that he is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in his favor, and that an injunction is in the public interest.” Am. Trucking Ass'ns v. City of Los Angeles, 559 F.3d 1046, 1052 (9th Cir. 2009) (quoting Winter v. Natural Res. Def. Council, Inc., 129 S. Ct. 365, 374, 172 L. Ed. 2d 249 (2008)).
The court held that plaintiff was likely to succeed on the merits of its copyright claim because plaintiff submitted credible evidence that it owns the copyrighted works at issue, that images in defendant’s fanzines are substantially, “even strikingly similar,” in their protected elements to plaintiff’s images, and that defendant had access to the images due to their availability on plaintiff’s website and “by virtue of their pervasiveness resulting from the Twilight movies’ enormous popularity.”
The court rejected defendant’s argument that it obtained the images with plaintiff’s permission from the plaintiff’s publicity website. According to the court, the existence of a license creates an affirmative defense to a claim of copyright infringement, but it is the defendant’s burden to show a likelihood of success on that affirmative defense. “Defendant has not carried that burden here since, most notably, defendant makes no effort to account for its use of allegedly infringing photographs that were not even available on plaintiff’s publicity website. Moreover, a licensee infringes the owner’s copyright if its use exceeds the scope of its license” (internal quotations and citations omitted). The court held that plaintiff presented credible evidence that defendant’s fanzines displayed altered versions of plaintiff’s images and that the publicity website’s terms of use expressly require users to agree that they “will not edit, alter or modify any of the Content without Summit’s prior written approval.” Defendant did not offer any evidence to rebut either point, and the court thus held that plaintiff is likely to overcome defendant’s license defense by establishing that defendant impermissibly copied plaintiff’s images beyond the scope of any license defendant may have had to use those images.
The court also held that plaintiff was likely to succeed on the merits of its trademark infringement claim because it provided credible evidence that it owns a valid, protectable trademark and that defendant displayed a “virtually identical version of this mark” in and on its fanzines.
Turning to irreparable injury, the court held that, in copyright and trademark infringement actions, irreparable injury is presumed upon a showing of likelihood of success on the merits. Moreover, while cessation of unlawful conduct can “moot” a dispute in a manner that renders a preliminary injunction appropriate, such cessation must be irrefutably demonstrated and total. Here, even though defendant indicated it voluntarily recalled both of its fanzines and did not intend to redistribute them or publish any future issues, irreparable injury weighed in favor of plaintiff because, as of the date that defendant’s opposition was filed, copies of the fanzines were still widely available in Los Angeles stores and over the internet.
Regarding the balance of hardships, the court held that plaintiff credibly stated that its copyrights, trademarks and goodwill are at risk of being devalued by defendant’s fanzines, and if an injunction is improperly granted “defendant would not appear to suffer substantial hardship, since the injunction would merely enforce what defendant has already announced its intention to do, namely, cease all offending activity.” Finally, the court agreed with defendant that the scope of the preliminary injunction should be narrowed so that it does not bar any fair use of plaintiff’s copyrighted works and that it should clearly define which of plaintiff’s trademarks are included in the injunction.
Starr, et al. v. Sony BMG Music Entertainment, et al., USCA Second Circuit, January 13, 2010
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- Second Circuit holds that the plaintiff class adequately pled violations of Section 1 of the Sherman Antitrust Act against defendant producers and distributors of digital music, where the defendants’ alleged parallel conduct in selling music over the internet plausibly suggested that defendants entered into an agreement to fix prices and to restrain the availability and distribution of music over the internet.
The defendant-appellees are several music industry producers and distributors, including Sony BMG Music, Bertelsmann, Universal Music Group, Time Warner, Warner Music, EMI Music, and Capitol Records. Defendants collectively control over 80% of all CDs and other digital music sold to consumers. Plaintiffs are consumers who filed a class action complaint alleging violation of antitrust and unfair competition laws.
Defendants launched two joint ventures – MusicNet and pressplay – in order to sell music directly to consumers over the internet. According to plaintiffs, consumers who subscribed to either service were required to pay artificially high prices in order to download music. Consumers were also required to agree to certain Digital Rights Management terms (DRM), which restricted consumers’ ability to use or copy the music.
Defendants also sold digital music to consumers through third party, online distributors. Plaintiffs claimed that defendants entered into licensing agreements with the distributors, requiring the distributors to offer the same prices and restrictions on their digital music as MusicNet, pressplay, and other licensees. Some defendants included in their licensing agreements Most Favored Nation (MFN) clauses, which guaranteed that no defendant’s licenses would be less favorable to the licensor than any other defendant’s licenses. Other defendants included such MFN clauses in side agreements rather than including them in the licensing agreements themselves.
Plaintiffs sued defendants for violating Section 1 of the Sherman Act and various state unfair and deceptive trade practices statutes and for unjust enrichment. Plaintiffs alleged that defendants engaged in a conspiracy to restrain the availability of online digital music and to fix prices at an artificially high level. The district court granted defendants’ motion to dismiss, finding that plaintiffs had not adequately alleged that defendants had entered into an illegal agreement, and that plaintiffs’ allegations of parallel conduct, coupled with a bare assertion of conspiracy, were insufficient to state a claim under Section 1 of the Sherman Act.
The Second Circuit reversed, finding that the complaint contained allegations of parallel conduct in a context that plausibly suggested a preceding illegal agreement among the defendants, which was sufficient to state a Section 1 claim. Specifically, the Second Circuit held that the following allegations, taken together, placed the parallel conduct “in a context that raises a suggestion of a preceding agreement, not merely parallel conduct that could just as well be independent action.” First, defendants controlled a substantial share of the market for digital music. Second, defendants’ pricing and terms were widely unpopular. Third, Warner Music’s CEO indicated that pressplay was an effort to halt the devaluation of music. Fourth, some defendants attempted to hide their MFN clauses in side agreements to avoid antitrust scrutiny. Fifth, all defendants refused to do business with eMusic, a large online music retailer that charges substantially less per song than defendants. Sixth, the New York Attorney General and the Department of Justice were investigating defendants for price fixing. Finally, defendants all raised their prices as their costs in providing digital music fell substantially. These factual allegations, taken together, plausibly suggest that defendants entered into an illegal agreement, and were sufficient to survive defendants’ motion to dismiss. The Second Circuit further held that plaintiffs were only required to allege facts that suggest an agreement, not facts that tend to exclude the possibility that defendants acted independently of each other.
For more information, please contact Jonathan Zavin, W. Allan Edmiston, David Grossman, Jonathan Neil Strauss, Tal Dickstein or Meg Charendoff.
Westlaw decisions are reprinted with permission of Thomson/West. If you wish to check the currency of these cases, you may do so using KeyCite on Westlaw by visiting http://www.westlaw.com/.
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