IP/Entertainment Law Weekly Case Update for Motion Picture Studios and Television Networks
October 1, 2008
Table of Contents
Capitol Records Inc., et al. v. Thomas, USDC D. Minnesota, September 24, 2008In a recent decision involving file-sharing on peer-to-peer networks, the United States District Court for the District of Minnesota held that simply making songs available for downloading on peer-to-peer networks, without actual proof of downloading by others, does not constitute infringing distribution under the Copyright Act. In this action, the judge had instructed the jury that “[t]he act of making copyrighted sound recordings available for electronic distribution on a peer-to-peer network, without license from the copyright owners, violates the copyright owners’ exclusive right of distribution, regardless of whether actual distribution has been shown.” The jury returned a verdict for the plaintiffs and awarded $222,000 in statutory damages. On defendant’s motion for a new trial, the court sua sponte raised the issue of whether this instruction adopted an erroneous interpretation of the Copyright Act’s distribution right.
Click here for a copy of the full decision.
During trial, the plaintiff recording companies had demonstrated that an investigator they hired had downloaded 24 songs that the defendant made available on the peer-to-peer network Kazaa. The court held that the dissemination of these songs to the investigator constituted distribution, but nonetheless rejected plaintiffs’ argument that the jury instruction at issue, even if erroneous, had no prejudicial effect in light of the fact that plaintiffs had proved violations of the distribution right. The court held that because it was impossible to determine the basis for the verdict and damages award, the erroneous jury instruction at issue requires a new trial.
In holding that simply making sound recordings available over peer-to-peer networks without actual dissemination does not constitute distribution, the court primarily relied on the statutory framework of the Copyright Act. Noting that section 106(3) of the Copyright Act grants an exclusive right “to distribute copies or phonorecords of the copyrighted work by sale or other transfer of ownership, or by rental, lease, or lending,” the court found the plain meaning of this phrase to require actual dissemination. Moreover, the court noted, other provisions of the Copyright Act define “distribute” to include offers to disseminate, demonstrating Congress’s ability to prohibit offers of dissemination when it so chooses. Contrasting these other provisions, the court stated, “While the Copyright Act does not offer a uniform ‘distribution,’ the Court concludes that, in light of the examined provisions, Congress’s choice to not include offers to do the enumerated acts or the making available of the work indicates its intent that an actual distribution or dissemination is required in § 106(3).”
In reaching its holding, the court rejected several arguments made by the plaintiffs. First, the court rejected the argument that, under the Copyright Act, “distribution” is synonymous with “publication,” defined to include both distribution and offers of distribution. The court held that, notwithstanding certain portions of the legislative history of the Copyright Act equating the two terms, “that fact cannot override the plain meaning of the statute.”
Second, the court also rejected the argument that the plaintiff had violated the exclusive right under Section 106 “to authorize” distribution by making songs available over the peer-to-peer network, holding that “the authorization clause merely provides a statutory foundation for secondary liability, not a means of expanding the scope of direct infringement liability. . . . Without actual distribution, there can be no claim for authorization of distribution.”
Finally, the court rejected the plaintiffs’ argument that U.S. treaty obligations under the World Intellectual Property Organization and the WIPO Performances and Phonograms Treaty, as well as certain free trade agreements, require the United States to provide an exclusive “making-available” right with respect to copyrighted works. Noting that none of these treaties is self-executing and thus does not create an independent enforceable right, the court explained that the U.S. Supreme Court’s Charming-Betsy doctrine nonetheless directs courts to adopt reasonable constructions of Congressional statutes so as to comply with the United States’ international obligations. The court held, however, the application of the Charming-Betsy doctrine could not override the clear Congressional intent to exclude a making-available right from the distribution right.
Accordingly, the court vacated the judgment and granted defendant’s motion for a new trial.
In the Matter of Antonio Barboza, et al. v. New Form, Inc., USCA Ninth Circuit, September 23, 2008In this case the Ninth Circuit held that the term "willful" as used in copyright infringement cases is not equivalent to "willful" as used in determining whether a debt is nondischargeable under the Bankruptcy Code.
Click here for a copy of the full decision.
A jury had found that Antonio Barboza and Lucia Munguia Albarran willfully infringed the copyrights of New Form, Inc., by making copies of ten Spanish language films. The jury awarded New Form $75,000 in statutory damages for each of the films, plus costs and attorney’s fees.
Barboza and Albarran filed for bankruptcy, and New Form timely filed a complaint seeking to have the entire judgment debt declared nondischargeable as a debt resulting from a "willful and malicious" injury as defined under the Bankruptcy Code (11 U.S.C. § 523(a)(6)). The Bankruptcy Judge held on summary judgment that the judgment award was nondischargeable under § 523(a)(6) as a "willful and malicious injury" based upon the jury's finding of willful infringement and uncontroverted evidence of Barboza’s and Albarran’s knowledge of New Form's copyright interest (expressed in a cease and desist letter). The Bankruptcy Appellate Panel affirmed.
The Ninth Circuit reversed and remanded explaining that there is a genuine issue of material fact as to whether the infringement was a "willful" injury within the meaning of § 523(a)(6) of the Bankruptcy Code, and because the "malicious" requirement was not addressed separately from the "willfulness" requirement.
The Ninth Circuit noted that the term "willful" as used in copyright infringement cases is not equivalent to "willful" as used in determining whether a debt is nondischargeable under the Bankruptcy Code. In the copyright infringement context, "willfulness" can be based on either "intentional" behavior or merely "reckless" behavior. The jury was instructed that that the infringement was willful if Barboza and Albarran "knew that they were infringing [New Form’s] copyrights or that they acted with reckless disregard as to whether they were doing so."
Although the jury found that the defendants acted willfully, the Ninth Circuit explained that the Bankruptcy Court had no way to determine whether the jury found the willful infringement based on a reckless disregard or a knowing violation of New Form's copyright. According to the Ninth Circuit, the Supreme Court has clearly held that injuries resulting from recklessness are not sufficient to be considered willful injuries under § 523(a)(6) of the Bankruptcy Code and are therefore insufficient to merit an exemption to dischargeability. In addition, Barboza and Albarran submitted evidence that they did not authorize the copying of the films and this could have led the jury to find that they acted recklessly. “Because there was evidence that could have led the jury in the District Court action to determine that the infringement was reckless, the judgment in that action cannot sustain a summary judgment that the infringement was willful within the meaning of the Bankruptcy Code.”
The court also held that the bankruptcy court failed to separately consider the “malicious” factor as required by Ninth Circuit precedent. Section 523(a)(6) of the Bankruptcy Code provides that an individual debtor may not discharge a debt "for willful and malicious injury by the debtor to another entity or to the property of another entity." Although the bankruptcy court addressed the issue of willful injury, there was nothing in the record indicating that the bankruptcy court addressed the issue of malicious injury.
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/.
Circular 230 Disclosure: To assure compliance with Treasury Department rules governing tax practice, we inform you that any advice (including in any attachment) (1) was not written and is not intended to be used, and cannot be used, for the purpose of avoiding any federal tax penalty that may be imposed on the taxpayer, and (2) may not be used in connection with promoting, marketing or recommending to another person any transaction or matter addressed herein.