No Standing if Plaintiff’s Exclusive Rights Were Limited in Time

Evaluating ownership of a sound recording under both the Indian Copyright Act and U.S. Copyright Act, the U.S. Court of Appeals for the Eleventh Circuit upheld a district court’s grant of summary judgment to defendants in a copyright infringement action, finding that the plaintiff lacked standing to sue because the underlying agreement granted exclusive rights that were limited in time.   Saregama v. Timbaland, et al.   Case No. 10-10626 (11th Cir., March 25, 2011) (Marcus, J.)

Saregama asserted that hip hop producer Timbaland and other defendants infringed its sound recording copyright by digitally sampling a portion of the Indian song “Baghor Mein Bahar Hai” in the song “Put You on the Game.”   Saregama claimed ownership of the copyright in the sound recording through an agreement between Saregama’s predecessor and another company, which was governed by Indian law.   The agreement provided the plaintiff with exclusive rights in certain sound recordings for a two-year period.   The district court granted the defendants’ motion for summary judgment, holding that Saregama did not possess a valid copyright, as the agreement limited the plaintiffs’ exclusive rights to the sound recording to a two-year period.  Second, the district court determined that the defendants’ digital sample was not substantially similar to the plaintiff’s asserted work.

On appeal, the 11th Circuit affirmed the grant of summary judgment to defendants.   The 11th Circuit held that Saregama possessed only a two-year right to the sound recording, which had since lapsed, such that the plaintiff did not own a copyright as to possess the standing required to institute an infringement lawsuit.

Because the underlying work originated in India, the court first looked to the Indian Copyright Act to analyze the ownership issue.   Comparing the Indian Copyright Act with the U.S. Copyright Act, the court ultimately concluded that the result would be the same under either law.   While the agreement conveyed Saregama an exclusive right to certain sound recordings, that right was limited to two years. After those two years, the other company had the unambiguous right to allow third parties to record the song, although the plaintiff retained non-exclusive rights to the song.  Because the exclusive right granted to Saregama in the agreement became non-exclusive, the court explained that the plaintiff, at most, possessed a two-year exclusive license.  As such, Saregama did not possess the requisite exclusive rights to confer standing.

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Supreme Court Affirms No “First Sale” Defense for Foreign-Made Copies

On December 13, 2010, the Supreme Court affirmed the Ninth Circuit’s decision in Omega S.A. v. Costco Wholesale Corp., upholding the Ninth Circuit’s interpretation of the first sale doctrine as inapplicable to foreign-made goods covered by U.S. copyrights.

Omega, a Swiss luxury watch manufacturer, sold its products internationally through various authorized dealers in the U.S. and abroad. One such product, a watch that included a design protected by a U.S. copyright, was made overseas and sold by Omega to one of its authorized foreign distributors. Following this sale, these copyrighted watches were imported into the U.S. without Omega’s approval by an unidentified third party. The watches were then purchased by ENE Limited, a NY company, which in turn sold the watches to Costco, which then began selling them in California.

Upon learning of Costco’s sales, Omega filed a copyright infringement action in the Central District of California. In its defense, Costco argued that the first sale doctrine under 17 U.S.C. § 109(a) barred Omega’s ability to bring the action, because the watches were the subject of an authorized sale to one of Omega’s foreign distributors. This, Costco argued, shielded it from liability despite the fact that its subsequent U.S. sale was unauthorized. The district court agreed, ruling in favor of Costco on summary judgment. Omega promptly appealed.

On appeal, Omega argued that § 109(a) applies only to the sale of goods “lawfully made under [U.S. copyright law]” and, therefore, the first sale doctrine did not apply because the goods were made outside the U.S. In response, Costco asserted that Omega’s reliance on earlier Ninth Circuit case law, specifically BMG Music v. Perez1, Parfums Givenchy, Inc. v. Drug Emporium, Inc.,2 and Denbicare U.S.A. Inc. v. Toys “R” Us, Inc.,3was misplaced because these cases had been overruled by the Supreme Court in Quality King Distribs., Inc. v. L’anza Res. Int’l, Inc.4

In its opinion, the Ninth Circuit first restated that an owner of a copy “lawfully made under [Title 17]” who imports and sells that copy does not infringe under the first sale doctrine. After reviewing BMG Music, Drug Emporium, and Denbicare, the court turned to the Supreme Court’s Quality King decision. In Quality King, the copyrighted goods had been “round trip” imported: they were first manufactured in the U.S., exported through an authorized distributor, sold to an unidentified third party abroad, and then shipped back to the U.S. where they were sold without the copyright holder’s permission. The Court in Quality King ruled that the first sale doctrine provided a defense against copyright infringement under these facts. However, the Court declined to address whether the same result would be warranted if the copyrighted products were first manufactured outside the U.S.5

Picking up where Quality King left off, the Ninth Circuit concluded that the first sale doctrine provides a defense against copyright infringement “only insofar as the claims involve domestically made copies of U.S.-copyrighted works” (emphasis added).6 Thus, under this decision, the first sale doctrine is available as a defense only if the copies were legally made in the U.S. Accordingly, the Ninth Circuit rejected Costco’s position and reversed the district court, finding no inconsistency between Quality King and the rule of law established by BMG, Drug Emporium, and Denbicare. Costco then sought certiorari to the Supreme Court.

In a per curium opinion released December 13, 2010, an equally-divided Supreme Court affirmed the Ninth Circuit’s decision.7 Justice Kagan recused herself and took no part in the decision, most likely due to her role as Solicitor General in preparing an amicus brief on behalf of the U.S. In this brief, the U.S. supported Omega’s assertion that “lawfully made under this title” as used in § 109(a) means made in accordance with U.S. copyright law, which does not apply extraterritorially.

On its face, the case appears to strike a blow to one of the remaining openings in the gray market, and may provide a powerful tool for international manufacturers who maintain separate marketing and pricing structures in separate international markets. A foreign DVD, camera, or electronics manufacturer, for example, would be able to charge less for its goods in the Asian market than it does in the U.S., and could enforce that marketing decision so long as the goods themselves are manufactured outside the territory of the United States. The Ninth Circuit’s holding that foreign-made goods are excluded from the first sale doctrine, combined with the increasing trend of manufacturing luxury goods abroad, may result in higher prices due to a reduced gray market.8

But this decision may be less a “victory” for international venders than it appears at first glance. After all, the 4-4 split merely earns Omega a win by default, not an express affirmation of its legal position. Indeed, the decision may also be viewed as a near miss on a Ninth Circuit reversal, rather than as an approval of that court’s interpretation of § 109(a). While one might assume that Justice Kagan—in light of the position taken by her, as Solicitor General, on behalf of the government—would have given Omega the final, precedent-setting vote it needed had she taken part, there is no guarantee of that. Nor can one assume that, had it come to a reasoned decision, the Court would not have created its own, different interpretation of the disputed provision.

The outcome of last week’s decision leaves the Ninth Circuit at least9 in support of a narrow interpretation of the “first sale” doctrine and market division programs based on control of copyrights in products.

Football Dataco Ltd v Sportradar GmbH: Copyright and Database Right Infringement and Jurisdiction

Allowing Sportradar’s appeal in part, the Court of  Appeal of  England and Wales has ruled that Dataco’s copyright claim in  relation to a database of football statistics failed because what  was allegedly copied was “mere data”, not the database itself.   Lord Justice Jacob, however, dismissed Sportradar’s appeal on  jurisdiction over database right infringement claims insofar as  they were based on allegations that Sportradar were joint  tortfeasors with its UK customers.  Further and most  significantly, on the question of primary infringement by  Sportradar of Dataco’s database rights, Jacob LJ has decided to  refer the reutilisation issue to the Court of Justice of the  European Union (CJEU).

BACKGROUND 

Dataco creates and exploits data relating to football matches in  the English and Scottish leagues.  Sportradar provides live  scores, results and other statistics relating to football and other  sports, including UK football matches, to the public  via the  internet.  A number of Sportradar’s customers provide betting  services for and aimed at the UK market.  In Football Dataco  Ltd and others v Sportradar GmbH and another [2010] EWHC  2911 (Ch) Dataco argued that Sportradar copies data from  Dataco.

Sportradar denied copying and commenced proceedings against  Dataco in Germany, seeking declarations that its activities did  not infringe Dataco’s rights.  Sportradar contended that the  English proceedings did not disclose a “good arguable case”  against the company and so the German court is the court first  seised with the dispute.

DECISION 

Copyright Claim

Jacob LJ accepted Sportradar’s submission that the data alleged  to have been copied (goals, goal scorers, etc.,) were matters of  fact that were precluded from copyright protection  as mere  “contents” of a database.  It followed, therefore, that when the  proceedings started, the English court was not seised of a claim  in copyright to the necessary standard.

Database Right:  Joint Tortfeasorship 

The issue here was not subsistence of database rights but  whether Dataco’s claim identified properly any cause of action  justiciable in the English courts.    Jacob LJ agreed with Dataco’s submissions, finding  that the  English courts were first seised of the dispute insofar as  Dataco’s claim alleged that Sportradar was joint tortfeasor with  businesses in the United Kingdom over which the court had  jurisdiction.  If Dataco was right about copying, it was arguable  clearly that Sportradar and its customers were acting in concert  to enable access in the United Kingdom to the copied data.

Database Right:  Primary Infringement

On the question of primary infringement, Jacob LJ decided to  refer to the CJEU questions on the meaning of “reutilisation”  under Article 7.2 of the Database Directive (96/9/EC).   Dataco’s claim of primary infringement by Sportradar turned  on the definition of infringement in the Directive, which  includes transmission.

Transmission over the internet, in Dataco’s submission,  involves both the acts of hosting the website and also the act of  the user in accessing it.  Sportradar’s case is that acts of  transmission occur only in the place from where the data  emanates.  Jacob LJ decided that “this very important and  difficult question” should be referredto the CJEU.

COMMENT 

Dataco’s claim that Sportradar is directly liable for breach of  database right is now stayed pending the outcome of the  reference to the CJEU, whilst its claim in joint tortfeasorship,  which is not dependent on the questions asked, is allowed to  proceed.  Given the far reaching consequences of a  decision  that transmission can “occur” where the user accesses the  information, the CJEU’s view is eagerly anticipated.