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IP/Entertainment Case Law Updates

Rearden LLC v. Walt Disney Company

District court dismisses copyright and direct patent infringement claims against various film studios arising out of allegedly unauthorized use of plaintiff’s MOVA computer-graphics motion capture technology, but allows active inducement patent claim and trademark claims to survive motion to dismiss.

Plaintiffs Rearden LLC and Rearden Mova LLC brought claims of copyright, patent and trademark infringement against The Walt Disney Company, Twentieth Century Fox Film Corporation and Paramount Pictures Corporation concerning the use of computer-graphics motion capture technology in movies including “Beauty and the Beast,” “Deadpool” and “Terminator: Genisys.” Rearden owns the intellectual property in a program called MOVA Contour Reality Capture Program, which captures the motion of a human face and creates computer-graphics images that can be used on characters for movie production. In an earlier action, Rearden won a dispute over the rights to the MOVA program with an entity associated with Digital Domain 3.0 Inc. (DD3). Disney, Fox and Paramount allegedly contracted with DD3 to utilize the MOVA program for their films, but DD3 purportedly used the program without authorization from Rearden. Disney, Fox and Paramount moved to dismiss Rearden’s various claims of infringement.

First, Rearden alleged that Disney, Fox and Paramount infringed its copyrights in the output images from the MOVA program and the computer-generated characters derived from those images. The district court acknowledged that the copyright protection afforded a computer program might extend to the program’s output if the program does the “lion’s share” of the creative work and the program user’s creative work is “marginal.” However, defendants argued that “a person is directed by the performance of another person (the actor) to make the various facial motions that determine the output,” and that “[t]he human contribution to the expressive components of the output file is substantial” and cannot be deemed “marginal” in any sense. The court agreed, finding that it was not plausible that the MOVA output was created by the program without substantial contribution from actors or directors, and that defendants’ role in creating the end product is not so “marginal” that the output reflects the program’s contents. The court therefore found that Rearden had not adequately alleged ownership of the output, and dismissed the copyright claims without prejudice.

Rearden also claimed that Disney violated its patents in the MOVA program when it allegedly contracted with DD3 to provide images from the MOVA system. Rearden alleged that Disney committed direct infringement because it “directed and controlled” DD3’s unauthorized use of the MOVA program — however, the court found that this alleged an indirect infringement claim, not a direct infringement claim. Rearden also alleged that Disney was liable for direct infringement because it “used” the patented MOVA system, but the court held that Rearden’s allegations merely suggested that Disney contracted with DD3 to provide a service, and this does not constitute “use” of a system sufficient to give rise to a direct patent infringement claim.

On the other hand, the court found that Rearden had sufficiently pleaded active inducement of infringement by Disney. To establish inducement, a plaintiff must show that defendant knew of the patent, knowingly induced the infringer’s actions and had the specific intent to encourage infringement of the patent. According to plaintiffs, Disney contracted with Rearden to operate the MOVA program in the past, performed due diligence concerning Rearden’s rights to the intellectual property of the MOVA program, and thus knew of Rearden’s patents. Later, Disney allegedly contracted with DD3 to perform these services, performed due diligence on DD3’s rights to the intellectual property, and knew or should have known that DD3 was not authorized to operate the MOVA program. By contracting with DD3 to provide these services despite this knowledge, Disney allegedly possessed the specific intent to encourage infringement by DD3. Drawing all inferences in plaintiffs’ favor, the court found that Rearden’s allegations, although “inarguably thin,” were enough to survive a motion to dismiss.

Rearden also alleged that the various studios breached its trademarks by using the MOVA service mark in the credits for the film “Guardians of the Galaxy” and in various featurettes, commercial advertising and promotional activities. Defendants largely defended themselves against these individual trademark claims by relying on the doctrine of nominative fair use; when a defendant uses a trademark to describe plaintiff’s product, rather than its own, it is entitled to a nominative fair use defense provided that (i) the product or service in question is not readily identifiable without use of the trademark; (ii) only so much of the mark may be used as is reasonably necessary to identify the product or service; and (iii) the user must do nothing that would, in conjunction with the mark, suggest sponsorship or endorsement by the trademark holder. For the majority of the alleged infringements, the court found that the nominative fair use defense was premature, and that, for purposes of surviving a motion to dismiss, Rearden had plausibly alleged that a viewer might be confused into believing that Rearden had endorsed the studios’ films — therefore, the court did not dismiss the majority of the trademark claims. However, the court did dismiss claims based on featurettes and promotional social media pages that merely contained visual and narrative descriptions of the technology but did not use the MOVA mark itself.  

Summary prepared by Jonathan Neil Strauss and Joel Ernst