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IP/Entertainment Case Law Updates

Peter Letterese and Associates, Inc. v. World Institute of Scientology Enterprises, International, et al.

The Eleventh Circuit issued a lengthy decision reversing in part the district court’s grant of summary judgment to the defendants in a copyright infringement suit involving a book on selling techniques used by organizations affiliated with the Church of Scientology.

Several Scientology organizations created course materials based on the book, but did not include any of the actual text of the book in their materials. Instead, the organizations created checklists and drills that were based on the book and incorporated chapter headings and sub-headings from the book. The author of the book consented to such use for many years and was hired by the organizations to lead seminars based on his book.

After the author died, a former member of the Church of Scientology acquired the exclusive rights to the book from the author’s heirs, ceased publication of the book, and then attempted to negotiate an agreement to allow the church organizations to use the book. Negotiations failed and the owner of the rights in the book sued the church organizations for four counts of copyright infringement.

The district court granted summary judgment on all four counts, finding that the works were not derivative works, that the defendants’ use was a fair use and, alternatively, that the plaintiff’s claims were barred by laches.

The Eleventh Circuit noted that whether a copyright infringement claim that is brought within the three-year statute of limitations can be barred by laches is a question that has generated a circuit split. The court declined to adopt the Fourth Circuit’s firm rule against allowing the defense of laches in situations where the statute of limitations has not run, and instead held that “there is a strong presumption that a plaintiff’s suit is timely if it is filed before the statute of limitations has run” and that only in the most extraordinary circumstances will laches be recognized as a defense, and even then laches serves as a bar only to the recovery of retrospective damages not to prospective relief.

Two of the plaintiff’s claims alleged that the defendants’ courses as a whole were derivative works. The district court rejected this argument and the Eleventh Circuit agreed. The defendants’ course materials did not include copies of any pages of the plaintiff’s book, but the defendants created checklists and drills that were based on the book and incorporated chapter headings and sub-headings from the book, and students taking the defendants’ courses bought or borrowed the plaintiff’s book. The plaintiff argued that the defendants’ sale of their own checklists and drills was akin to “remounting” the book, relying on Mirage Editions v. Albuquerque A.R.T. Co., 856 F.2d 1341 (9th Cir. 1988) which involved a defendant who cut out pages from an art book and mounted the pages on ceramic tiles. In this case, the Eleventh Circuit described the holding in Mirage Editions as questionable and rejected the plaintiff’s argument, explaining that the defendants’ use of the checklists and drills did not “recast, transform, or adapt” the preexisting work, as required by the Copyright Act’s definition of derivative works.

Turning to the defendants’ fair use defense, the court conducted the four-factor fair use analysis and reversed the district court’s finding of fair use with regard to one count of infringement, and affirmed for the other. The Eleventh Circuit rejected the district court’s attempt to fashion a “fifth” fair use factor based on the plaintiff’s implicit “consent” to use the works at issue. Regarding the purpose and character of the use, the court noted that the defendants’ works were commercial because they sold the course materials for $75 and that the materials were not transformative because they provide a “user-friendly method of reading and learning from” the plaintiff’s book but do not reshape the instructional purpose or character of the book or cast it in a different light. Regarding the nature of the copyrighted work, the court held that the plaintiff’s book is a factual work that contains the copyrightable elements of selection and original expression in the form of anecdotes to illustrate the sales techniques. The court also noted that although the defendants characterized the book as out of print, and that out-of-print status often favors a finding of fair use, the book was not out-of-print in the way that is normally understood because it was the plaintiff who chose to cease publication, not a publisher who stopped publishing a book because of declining sales. Regarding the amount and substantiality of the portion used, the court found that the defendants’ use of the checklists and drills slightly favored the plaintiff, and regarding the final factor – the effect on the market – the court held there was not enough evidence to show that the defendants’ sale of the course materials for one particular course would adversely affect the market for the plaintiff’s book, and reversed the district court’s finding of fair use for this one claim.

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