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IP/Entertainment Case Law Updates

The SCO Group, Inc. v. Novell, Inc.

Plaintiff accused defendant of slander of title based on defendant’s public claims that it, rather than plaintiff, owned certain copyrights. Court holds that the First Amendment applies to slander of title claims and that plaintiff is a limited-purpose public figure; as a result, plaintiff must prove, by clear and convincing evidence, that defendant acted with actual malice. Court also holds that defendant’s press releases are not commercial speech for First Amendment purposes.

Plaintiff The SCO Group claimed that it is the rightful owner of the UNIX and UnixWare copyrights. Defendant Novell publicly disputed plaintiff’s claims of ownership, among other things, by issuing press releases claiming that it, not plaintiff, is the true owner of the copyrights in question.

Plaintiff filed suit accusing defendant of slander of title. Defendant, in turn, filed a motion asking the court to rule that the First Amendment applies to slander of title claims. According to the court, the U.S. Supreme Court has not addressed this exact issue, but it did hold, in New York Times Co. v. Sullivan, 376 U.S. 254 (1964), that the First Amendment requires a public official to prove that a defamatory falsehood relating to his official conduct was made with “actual malice,” and the Supreme Court has extended this rule to claims for invasion of privacy and intentional infliction of emotional distress. Furthermore, according to the court, federal courts and state supreme courts have extended the First Amendment to other claims directed against an allegedly wrongful statement, including claims for product disparagement and tortious interference.

Having reviewed the relevant authority, the court found that slander of title claims are subject to the First Amendment, citing one commentator who stated: “There is no reason to accord lessened protection because the plaintiff’s claim is denominated ‘disparagement,’ ‘trade libel,’ or ‘injurious falsehood’ rather than ‘libel’ or ‘slander’ or because the injury is to economic interests rather than to personal reputation. Since only economic injury and not injury to reputation and psyche is at issue, perhaps the balance should tip even further to the side of free expression.”

The court then turned to plaintiff’s assertion that defendant’s press releases are commercial speech and as such should be afforded lesser First Amendment protection than non-commercial speech. The court declined to answer the question of whether the actual malice standard applies to commercial speech because the court held that the press releases were not commercial speech.

According to the court, speech may properly be characterized as commercial speech where (1) it is concededly an advertisement, (2) it refers to a specific product, or (3) it is motivated by an economic interest in selling the product. The court found that while in some circumstances a press release may constitute an advertisement, the press releases here do not constitute commercial speech as they do not propose a commercial transaction. As the court stated, while the press releases “do mention certain of Defendant’s products, they do not attempt to market those products in any way. Rather, these press releases merely challenge Plaintiff’s claims of ownership to the UNIX and UnixWare copyrights and their claims of infringement of such copyrights by Linux.” Furthermore, the court noted that while the press releases do mention some of defendant’s specific products, these mentions are “only in passing and in connection with boilerplate language describing Defendant.”

Finally, the court held that the plaintiff is a limited-purpose public figure. The U.S. Supreme Court has defined a limited-purpose public figure as one who “voluntarily injects himself or is drawn into a particular public controversy and thereby becomes a public figure for a limited range of issues.” According to the court, Utah employs a two-part test to determine whether the plaintiff is a limited-purpose public figure. First, the court must isolate the specific public controversy related to the defamatory remarks. Next, the court should examine the type and extent of the plaintiff’s participation in that public controversy to determine whether he has “thrust [himself] to the forefront of [the] controvers[y] in order to influence the resolution of the issues involved.”

In this case, the court found that there is a public controversy concerning the ownership of the UNIX and UnixWare copyrights and plaintiff’s contention that Linux users infringed those copyrights. Defendant submitted a number of news accounts of this controversy, and the court reasoned that thousands of companies and individuals have a direct interest in the controversy because of the impact it may have on them. Also, the court found that the plaintiff thrust itself to the forefront of the controversy in order to influence the resolution of those issues.

As a result of these findings, the court held that, in order for its slander of title claim to survive, plaintiff must prove by clear and convincing evidence that defendant acted with actual malice.

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