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April 2012 Archives

April 2, 2012

Nike v. Reebok: Reebok takes Advantage of Tebow-Mania

By Jenna Norys

While Jeremy Lin has created hysteria and cause for sportscasters all over the world to exhaust their creativity with Lin-puns, one would think that the previous sensation, the man that inspired YouTube to explode with "Tebowing", had finally lost steam to another. Oh how some of us underestimated the fanaticism that is Tim Tebow. On March 21st of this year, Lady Liberty herself was seen to kneel with her fist to her head as the New York Jets announced its acquisition of the clean cut Christian Quarterback. Jets fans all over the nation could not wait to get their hands on Jets t-shirts with Tebow's name proudly sprawled across the back. However, Tim Tebow's team affiliation was not the only thing that changed in the NFL. This year the NFL ended its longstanding relationship with Reebok as its official apparel company, and signed on to a 5-year deal with Nike.

These relationships give rise to the recent conflict between Nike and Reebok slated to be battled out -not on, but in the court of the Southern District of New York. While Reebok's rights were said to have ended prior to Tebow's move to the Jets, a complaint filed by Nike explains that as soon as the announcement was made, Reebok t-shirts bearing the name of Tebow were sold all over the nation. (Nike, Inc. and Nike USA, Inc., v. Reebok International Ltd. 12 cv. 2275, Complaint Available at: http://docs.justia.com/cases/federal/district-courts/new-york/nysdce/1:2012cv02275/393953/1/)

Nike's complaint came only one week after the purported sale. It claimed violations of the Lanham Act, misappropriation of rights of publicity, tortious interference with current and prospective business relationships, and unjust enrichment. On March 28th, Judge Kevin Castel granted Nike's request for a Temporary Restraining Order blocking Reebok from distributing, manufacturing or selling anymore Tebow gear.

Part of this case comes down to the licensing schemes of respective NFL entities. Reebok has had past licenses with the NFL for the use of its teams' trademarks, as well as a group license from the NFL Players Association for individual players. While Reebok is apparently allowed to sell off its remaining products, however, what it has purported to do in this situation is to take 2 previous licenses and lump them together where only one was permissible. This is a catch-22 in all senses: had Reebok sold its Jets t-shirts without Tebow's name, there would be no issue, yet there would not likely be an influx of sales either.

A Chargers fan myself, my thoughts went to Peyton Manning and his move to Denver as being the critical NFL player change this year (who wants Peyton anywhere near their division?!). Thinking this was big news, I thought why would Nike sue only on Tebow's name? Are Denver fans eating up Bronco shirts reading "Manning" just as fast? Apparently not, for as the Nike complaint points out, New York is the largest market for sports in the nation and the public interest in Tebow is a unique phenomenon that has made his jersey the second most popular of all NFL players in 2011, only second to Aaron Rogers.

There is a unique issue in this case, in that Nike did not actually acquire the rights to the NFL trademarks until April 1st, but has the licensing for Tebow individually. One concern is that neither Reebok nor Nike could have lawfully sold a Jets Tebow t-shirt from March 21st - April 1st due to the fact that each had rights to only one aspect of the product, Reebok having the Jets' rights and Nike having Tebow's.

Nike has alleged that it has been prevented from capitalizing on the market for New York-Tebow apparel in the immediate aftermath of the trade. While the arguments are persuasive in the complaint, it is clear that Nike would not be able to capitalize on the trade at the height of the event. It has only been 10 days since the trade, and since then there have been a number of people who are downplaying the trade as a PR stunt, and speculating whether Tebow will even play or if he was only drafted to neutralize the Jets' "bad boy" image (Associated Press Mar. 30, 2012 available at: http://espn.go.com/new-york/nfl/story/_/id/7757218/new-york-jets-tim-tebow-unsure-ever-starting-quarterback-again, Davenport, Gary, "Tim Tebow to Jets is Nothing More Than Publicity Stunt," Mar. 30, 2012, available at: http://bleacherreport.com/articles/1125723-tim-tebow-to-jets-is-nothing-more-than-publicity-stunt).

In the trend-driven environment that we all live in, instant gratification seems to drive the market. What makes this lawsuit intriguing is that Nike probably did not suffer so much from the sales as Reebok gained. This is because it is not clear that Nike would have actually kept the Tebow hype up until after its scheduled April 3rd grandiose jersey unveiling ceremony and it could not have sold the Jets-Tebow gear until April 1st. Additionally, it may be that the new style of Nike jerseys will lead to consumers throwing out those Reebok threads in favor of a newer sleek style. Of course that fact is somewhat irrelevant, as the claims are based on the unjust enrichment of Reebok, but it is interesting that where there was a market demand, legally speaking, these two parties cancelled each other out and could have prevented consumers from obtaining the product they wanted in that small window of opportunity. It will undoubtedly be interesting to see how Reebok responds as its answer is due on April 18, 2012.

April 6, 2012

Weekly Issues in the News

By Geisa Balla

Viacom v. YouTube

The 2nd Circuit Court of Appeals reversed a June 2010 decision, which had been considered a landmark decision in setting guidelines for websites to use content uploaded by users. The lawsuit was first filed in 2007 by Viacom to stop the posting of clips of TV programs on YouTube. The case tested the Digital Millennium Copyright Act of 1998, which limits the liability of online service providers for copyright infringement by users. Southern District of New York Judge Louis Stanton ruled on the case in 2010 in favor of YouTube, reasoning that YouTube could not be held liable for simply having "general awareness" that such videos might be posted, and that it does not need to monitor such activity. The decision was overturned, when Judge Jose Cabranes for the 2nd Circuit held that "a reasonable jury could find that YouTube had actual knowledge or awareness of specific infringing activity on its website." A YouTube representative stated in an e-mail: "All that is left of the Viacom lawsuit that began as a wholesale attack on YouTube is a dispute over a tiny percentage of videos long ago removed from YouTube. Nothing in this decision impacts the way YouTube is operating." Viacom, in a statement, said the appeals court "delivered a definitive, common sense message to YouTube: intentionally ignoring theft is not protected by the law."


Facebook v. Yahoo

Facebook filed a counterclaim against Yahoo this week in Yahoo's patent infringement litigation against Facebook initiated in March 2012 in the Northern District of California. Facebook is claiming that Yahoo is infringing upon 10 of Facebook's patents, five of which target features related to Yahoo's online advertising business. One of the allegedly infringing patents relates to Yahoo's Flickr photo sharing service, and its ability to connect with other users, to identify people in photographs and to generate personalized news feed. Facebook General Counsel Ted Ullyot said: "While we are asserting patent claims of our own, we do so in response to Yahoo's short-sighted decision to attack one of its partners and prioritize litigation over innovation."


Huffington Post

Southern District of New York Judge John Koeltl dismissed the lawsuit against the Huffington Post on March 30, 2012. This lawsuit was brought by unpaid bloggers for the Huffington Post, who claimed that the work of unpaid content providers for the Huffington Post gave it its value. AOL Inc. purchased the Huffington Post for $315 million last year, and the lawsuit claimed that the estimated 9,000 bloggers are entitled to about one-third of the purchase price. Judge Koeltl dismissed the lawsuit, reasoning that no one forced the bloggers to repeatedly provide their work with no expectation of being paid, and they got what they bargained for when their work was published. "The principles of equity and good conscience do not justify giving the plaintiffs a piece of the purchase price when they never expected to be paid, repeatedly agreed to the same bargain, and went into the arrangement with eyes wide open," the judge wrote. The case was dismissed with prejudice. Attorneys for the bloggers stated that they are considering their options going forward.


Gucci v. Guess

Gucci's trademark infringement trial against Guess continued this week. Gucci first sued Guess in 2009, claiming that Guess was selling items with logos that are "studied imitations of the Gucci trademark". Paul Marciano, the C.E.O. of Guess, testified on April 4, 2012, denying that his company intentionally copied Gucci's products. With regards to copying Gucci's interlocking "G"s in beige fabric, trimmed with red and green, he stated, "This kind of pattern is common in the world of fashion and it's not particular to Gucci... What I understand here, which is very frequent [in fashion], is an inspiration to create an original bag of G's with the same components. That's what design is." Yet Gucci's lawyers presented emails Marciano had exchanged with supplier Marc Fisher Footwear regarding sending Gucci fabric samples to Guess's own fabric supplier for copying.


April 7, 2012

Poindexter v. EMI

By Barry Werbin

This quietly noteworthy music copyright infringement decision was issued March 27th by Judge Swain (SDNY), and reminded me of the 6th Circuit's 2005 decision in Bridgeport Music Inc. v. Dimension Films (410 F.3d 792 (6th Cir. 2005)), where that Circuit, in a case of first impression, held there was no "de minimus" copying defense as a matter of law in music sampling infringement cases (Bridgeport addressed a two-second sample of a rap song used in a film). Now, in Poindexter, a case that primarily addresses lack of standing and scope of work for hire/assignment agreements, Judge Swain also held that the subject sample consisting of a single "F-sharp" note played on a piano for less than two seconds was de minimus and not subject to copyright protection because a single note is not copyrightable, citing Swirsky v. Carey (376 F.3d 841 (9th Cir. 2004)).

The decision can be accessed here: http://docs.justia.com/cases/federal/district-courts/new-york/nysdce/1:2011cv00559/374395/40/.

Second Circuit Interprets DMCA Safe Harbor Provision in Viacom International v. YouTube

By Brendan Mee

On April 5, 2012, the Court of Appeals for the Second Circuit vacated a summary judgment order from the Southern District for the State of New York in the closely watched Viacom case. (Viacom International v. YouTube, No. 10-3270, 2012 WL 1130851 (2d Cir. Apr. 5, 2012)). The suit now returns to the District Court on remand for fact finding as to whether the defendants had "actual knowledge or awareness" of specific acts of copyright infringement, and whether the defendants made "deliberate effort to avoid guilty knowledge" of infringement (i.e., were willfully blind to specific acts of infringement). (Id. at *34). However, damages may only be recovered where the defendants are shown to have knowledge of specific acts of infringement. Thus, the massive damages award sought by the plaintiffs at the outset of the suit is no longer on the table.


The Digital Millennium Copyright Act,17 U.S.C. § 512 (the DMCA) provides a safe harbor for internet service providers, such as YouTube, so that the service providers are not liable for copyright infringing material on their websites provided they meet the criteria set forth in the statute and expeditiously comply with the "take-down" provisions. The Viacom case has been viewed as an important test of the DMCA safe harbor. No less than 28 amicus briefs were filed in the appeal of the District Court decision, and the decision to vacate the summary judgment order has already been widely reported in the general press.

In reaching its conclusions, the Second Circuit construed several aspects of the DMCA safe harbor provisions, specifically 17 U.S.C. § 512(c), which "covers infringement claims that arise 'by reason of the storage at the direction of a user of material that resides on a system or network controlled or operated by or for the service provider.'" (Id. at *10).

"Actual knowledge" Under 17 U.S.C. § 512(c)(1)(A)

The safe harbor applies only if a service provider "does not have actual knowledge that the material or an activity using the material on the system or network is infringing." 17 U.S.C. § 512(c)(1)(A). Thus, the principal issue in this case was what constitutes "actual knowledge" of infringement that will disqualify a defendant such as YouTube from taking advantage of the DMCA safe harbor provisions.

Although the Second Circuit remanded, it adopted the essential aspects of the District Court's construction of the DMCA safe harbor provision: Actual knowledge means "knowledge or awareness of facts or circumstances that indicate specific and identifiable instances of infringement." (Id. at *15). The Second Circuit pointed out that this interpretation flowed from the statute, because "the nature of the removal obligation itself contemplates knowledge or awareness of specific infringing material." (Id. at *16).

The initial suit sought infringement damages for copyright infringement of some 79,000 YouTube clips. (Id. at *8). Of course, showing specific knowledge of each such infringement would be a monumental burden of proof. Thus, under the knowledge standard adopted by the Second Circuit, a huge damages award of the type initially sought will be impossible to win.

However, the Second Circuit did find evidence in the record that YouTube executives had knowledge of specific cases of infringement, and remanded to the district court to determine whether any of those cases were among the 79,000 charged. (Id. at *21). The court also held that actual knowledge could be shown by willful blindness, and on remand the District Court will review whether the defendants were willfully blind with respect to any of the 79,000 specific acts of infringement charged. (Id. at *24).However, discovery on both actual knowledge and willful blindness is over; the Second Circuit deems the record to be complete with respect to these issues. (Id. at *35).

"Right and ability to control" Under 17 U.S.C. § 512(c)(1)(B)

The Second Circuit also remanded to the District Court on a second aspect of the safe harbor provision, in Section 512(c)(1)(B), which provides that an eligible service provider must not "receive a financial benefit directly attributable to the infringing activity, in a case in which the service provider has the right and ability to control such activity." The question was what constitutes "right and ability to control" infringing activity under the statute. (Id. at *28).

The Southern District had favored the defendant's view that "right and ability to control" the infringing activity required item-specific knowledge of the infringement, which essentially merged the issue with the "actual knowledge" requirement. The Second Circuit rejected this interpretation, as it would have rendered the neighboring provision in Section 512(c)(1)(A) superfluous. (Id. at *25).

Likewise, the court rejected the theory advanced by the plaintiffs, who argued that the common law standard for vicarious liability for copyright infringement should apply. Instead, the Second Circuit indicated that "'something more than the ability to remove or block access to materials posted on a service provider's website'" was required to show the right and ability to control. (Id. at *27). The "something more" required to show control under the statute was left somewhat vague, but the court remanded to the District Court for fact finding on the issue of whether the defendants "exerted substantial influence on the activities of users, without necessarily--or even frequently--acquiring knowledge of specific infringing activity."(Id. at *28).

Given the original decision from the District Court, it appears very unlikely that the Southern District would find that YouTube exerted that kind of control over its users' content. Rather, the detailed directions to the District Court on remand indicate the Second Circuit's intent to have its interpretation of the DMCA safe harbor provision completely articulated in the record, conscious that its interpretation may become the "gold standard" for other Circuits going forward.

"By reason of storage at the direction of a user. . ." 17 U.S.C. § 512(c)(1)

The final statutory construction issue addressed by the appellate court involved functionality offered by YouTube to its customers. The statute limits application of the safe harbor to instances where the infringement occurs "by reason of the storage at the direction of a user of a material . . . ". The question was whether certain activities on YouTube met this criterion, because the infringement in these instances occurred (at least arguably) at the direction of YouTube rather than at the direction of the user.

The court reached the conclusion that transcoding of videos into a standard display format, and the playback of videos on "watch" pages merely facilitated access to user-stored material, and consequently the safe harbor applied. Likewise with the thumbnail function in YouTube, which displays related content in a side bar when a video is viewed--the court agreed with the District Court that to allow such activities to fall outside the scope of the safe harbor would have eviscerated the protection afforded to service providers under the DMCA, even though the display of additional content is generated automatically by YouTube. (Id. at *30).

The court did allow that certain activities undertaken by YouTube, specifically licensing of certain videos to mobile telephone companies for use with mobile devices would likely not fall within the scope of the safe harbor. However, in order to avoid delivering an advisory opinion on the challenged activities, the court chose to remand the case to the district court for confirmation that none of the clips asserted in the litigation were ones that had been licensed to the mobile companies. (Id. at *31-32).


YouTube spins the Second Circuit's decision as a victory, notwithstanding the remand, because "actual knowledge" requires knowledge of specific acts of infringement, which likely precludes the kind of huge damages award that was originally sought. However, the Second Circuit opinion contains some subtleties regarding the boundaries of the safe harbor provision, of which all of the service providers will have to take careful note to ensure that they fall within the protections of that provision.

The decision can be reviewed at: http://www.ca2.uscourts.gov/decisions/isysquery/fb25d6fa-bee5-4c8d-8748-a1989496c9dc/5/doc/10-3270_10-3342_opn.pdf#xml=http://www.ca2.uscourts.gov/decisions/isysquery/fb25d6fa-bee5-4c8d-8748-a1989496c9dc/5/hilite/

April 10, 2012

Unraveled: A Film Review

By Christine A. Pepe

The documentary film Unraveled tells the compelling story of Marc Dreier, a once well-regarded attorney, who was convicted in 2009 for defrauding hedge funds and other investors of more than $400 million dollars. Dreier's scheme involved creating and selling fictitious promissory notes purportedly issued by his "clients." Of course, there were no real clients borrowing the money--Dreier used the borrowed funds to fuel his lavish lifestyle (e.g., an art collection including works by Warhol, Picasso, Matisse, and Damien Hirst, two yachts, an Aston Martin, a vacation home in the Caribbean, multiple homes in the Hamptons) and grow his law firm, Dreier LLP. The successful perpetration of Dreier's Ponzi scheme ultimately involved arranging meetings for the hedge fund investors during which Dreier (or one of his lackeys) impersonated representatives from the purported issuers of the promissory notes. If you haven't heard of Marc Dreier, that's largely because his story was overshadowed by an even bigger Ponzi schemer, Bernie Madoff, who was arrested and sentenced around the same time. Madoff was sentenced to 150 years in prison--Dreier to 20 years.

Consisting of first person accounts, archival footage and graphic animation, Unraveled presents an engaging and thought-provoking portrait of one of America's more brazen white collar criminals. Part of the film's impact is that it captures Dreier during his period of house arrest as he awaits sentencing after pleading guilty, an undoubtedly intimate and vulnerable time. Unraveled is directed by Marc Simon--an entertainment attorney at Cowan, DeBaets, Abrahams & Sheppard LLP--who previously worked for Dreier LLP and knows Dreier personally, even viewing him as a mentor at one time. Despite this potential closeness to the subject matter, Simon's film remains objective in its case study. The score, written by Chris Hajian, adds to the film, creating an ominous and powerful backdrop to this dark tale of one man's self-inflicted demise.

Dreier graduated from Yale and went on to Harvard Law School; in high school, he was president of his class and was voted "Most Likely To Succeed." These types of achievements apparently weigh heavy on a person throughout life--they convinced Dreier that not only was he was destined for tremendous success, but that he must achieve it--at all costs. Success can mean a lot of things to different people, but for Dreier, success meant money, status, and more importantly, the appearance of success. While many attorneys can relate to the pressure to succeed, for Dreier, the illusory appearance of success became a compulsion. The film gives Dreier a platform to explain why he "lost his way", as he admits, and lets the viewer decide whether any degree of sympathy is warranted.

Most people will never cross the line that Dreier crossed, but is that, as Dreier muses in the film, because the line is presented to so few people--dare we say an elite few? As Dreier continues his on-camera introspection, he ponders what really stops most people from committing crimes: Is it moral opposition or just a fear of getting caught? In this way, Dreier is reminiscent of Dostoevsky's Raskolnikov. It seems that what was driving both Dreier and Raskolnikov in part was a desire to prove themselves "extraordinary men" above morality and law. Raskolnikov killed because he could; Dreier swindled because he could. Of course, the analogy to Raskolnikov ends when Dreier gets caught in the criminal act, whereas, if you recall, Raskolinkov's guilt over his murder overwhelmed him to the brink of confession. For me, Unraveled provided a fascinating exploration of the psychological motivations of a white collar criminal. See this film and decide for yourself what drove a member of the legal profession off the rails into a life of criminality and whether the punishment fits the crime.

UNRAVELED premieres April 13th, 2012 at the City Village Cinema East (2nd Avenue and 11th/12th Streets)

Tickets can be purchased here: http://www.fandango.com/citycinemasvillageeast_aaecf/theaterpage?date=4%2F13%2F2012

or you can visit the UNRAVELED Facebook page with links to the theatre website: http://www.facebook.com/Unraveledthefilm?ref=tn_tnmn

April 11, 2012

EASL/IP Pro Bono Clinic at New York Foundation For the Arts

On Tuesday, May 15th, the EASL and IP Sections will be co-sponsoring a Pro Bono Clinic at the New York Foundation for the Arts (NYFA). The Clinic will take place between 4:00 and 7:00 p.m. at NYFA's offices in Dumbo, at 20 Jay Street, 7th Floor, Brooklyn.

If you would like to volunteer for one or more of the 30 minute time slots, please email Elissa Hecker at eheckeresq@yahoo.com and specify your contact information (name, firm/company, phone number and email address), which time slot(s), area(s) of expertise, and whether you are an EASL and/or IP Section member.

If you do not have pro bono liability insurance, you may be covered under EASL and IP's policy for this Clinic. Please also indicate if you need such coverage.

We look forward to hearing from you.

Best regards,

Elissa D. Hecker and Kathy Kim
EASL Pro Bono Steering Committee

April 12, 2012

The Right to Remain Silent

By Steven A. Adelman

There is an old saying, "Better to remain silent and be thought a fool than to open your mouth and remove all doubt." Recent events involving the Miami Marlins' new manager Ozzie Guillen allow us to test this. In the wake of his "I love Fidel Castro" line, there has been much discussion about what Americans loosely refer to as the right of 'free speech.' Since this subject has come up before regarding venue employees and students' right to say and post things, let's see what that right really is.

We begin where most rants on this subject begin, with the First Amendment to the United States Constitution. Here is what it actually says: "Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances."

Congress shall make no law? Why, this doesn't say anything about the right of a professional sports team to make rules "abridging the freedom of speech" of club employees, does it? To anyone venting about the Marlins trampling on their manager's rights as an American, I say, READ THE CONSTITUTION -- then be quiet.

What about Mr. Guillen's employer? Does it have the right to suspend him for five games, or even to fire him, just for his words? Of course it does. Why? Because it is his employer, a private company for which the manager serves at its pleasure. Do the Marlins have the right to be politically correct, if that's what you want to call not deeply offending Miami's large population of potential Marlins fans who fled Castro's Cuba? Yes!(Does the context make "I love Fidel Castro" sound any better? Ozzie's next sentence was, "A lot of people have wanted to kill Fidel Castro for the last 60 years, but that (expletive) is still here." In other words, he is impressed with Castro's resilience, not his politics. On the other hand, the context also includes that the Marlins' brand new ballpark is located in an area called "Little Havana.")

Do the Marlins have the right to cut an employee loose who hurts their bottom line? Sure! Ozzie Guillen has the same free speech rights that you do relative to your workplace. If you say something that hurts your employer's ability to sell tickets, licensed merchandise, or personal seat licenses, then you can be disciplined. The only difference for most readers is that Ozzie Guillen has a multi-year contract which the Marlins must honor whether it lets him manage or not. Likely you are an employee at-will, meaning that you can be fired for good cause (you do a lousy job) or no cause (the bosses don't like your hair), just not bad cause (you require an ADA accommodation).

America is, as people say, a "free country." We are free to speak our minds, to post comments or pictures on social media, to express ourselves in the marketplace of ideas. But these are not unlimited rights. To the contrary, our individual liberties are balanced against the rights of other individuals (which is why you can be arrested for causing a stampede by yelling "Fire" in a crowded movie theater), and even against the interests of corporate entities like employers.

So Ozzie Guillen can say what he wants, so long as he is prepared to deal with the consequences. Just like all of us. If we all had four-year, $10 million guaranteed contracts.

April 14, 2012

Weekly Issues in the News

By Geisa Balla

One Direction

California band "One Direction" has filed a trademark infringement suit against UK band "One Direction" in the Central District of California. The UK's "One Direction" was discovered on Simon Cowell's show, The X Factor, in 2010. The five members of the band, Simon Cowell's Syco Entertainment and Sony Music were named as defendants in the lawsuit. The plaintiff claims that the California band has been using the name "One Direction" since 2009, and has recorded two albums. The band filed a trademark application with the USPTO in February 2011. The UK "One Direction" reached instant stardom after its appearance on The X Factor, and has a much higher profile than the American "One Direction." The lawsuit alleges that Syco and Sony Music "chose to ignore the plaintiff's rights and willfully infringed them" after they realized that the bands shared the same name. The plaintiff in this action is seeking an injunction that would stop Syco and Sony Music from using "One Direction" in promotional materials, treble damages on the profits made by its UK rival, as well as compensatory damages in excess of $1 million. The lawsuit said that the continued use by both bands of the same name was causing "substantial confusion and substantial damage" to the goodwill earned by the California group.


Nike v. Reebok

Nike and Reebok have settled their lawsuit related to the sale of New York Jets football apparel with Tim Tebow's name. Nike first filed a lawsuit against Reebok on March 27, 2012, in the Southern District of New York, alleging that Reebok had no right to sell Tebow-related Jets merchandise as Reebok's licensing agreement with the NFL had expired at the end of February 2012. Pursuant to the settlement, Reebok will halt the sale of the Jets apparel bearing Tebow's name and will offer to buy apparel already shipped to retailers. Nike's exclusive five-year contract to sell apparel for the NFL began on April 1, 2012, and Tebow-Jets merchandise will be available for sale in late April.


Los Angeles Dodgers

The Los Angeles Dodgers announced that it expects to emerge from bankruptcy by the end of April. The Dodgers first filed for Chapter 11 Bankruptcy in June 2011. On March 27, 2012, the Dodgers announced that a group of buyers, led by investment firm Guggenheim Partners and Earvin "Magic" Johnson, had agreed to buy the team for $2 billion. The Dodgers are now filing an amended plan of reorganization, which would provide payments in full to all the allowed claims of creditors. The bankruptcy judge overseeing this case stated that he will confirm the plan to exit Chapter 11.



Apple rejected the U.S. Justice Department's allegations that it colluded with publishers over electronic book pricing. The Justice Department filed an antitrust lawsuit against Apple and five other publishers, claiming that the parties conspired to fix the prices of electronic books. The Justice Department reached a settlement with three of the publishers. Apple is defending its pricing structure. In a statement to the Wall Street Journal, Apple representative Natalie Kerris stated: "The launch of the iBookstore in 2010 fostered innovation and competition, breaking Amazon's monopolistic grip on the publishing industry . . . Just as we have allowed developers to set prices on the App Store, publishers set prices on the iBookstore".


April 20, 2012

Weekly Issues in the News

By Geisa Balla

Copyright Law and Gray Market Goods

The U.S. Supreme Court will examine two contradictory provisions in the Copyright Act in Kirtsaeng v. John Wiley & Sons. The competing provisions are the first sale doctrine, which permits the owner of a lawfully-produced work to resell the work without the authority of the copyright owner, versus the one controlling the importation of copyrighted material into the United States. The case at hand involves a Thai student, Kirtstaeng, who was selling used foreign-manufactured books on eBay at a profit. The student's position is that the first sale doctrine allows him to resell these books. John Wiley & Sons, whose Asian subsidiary produced some of the books in question, disagreed, and filed a copyright infringement lawsuit in 2008 in the Southern District of New York. The jury eventually found Kirtsaeng liable, and Kirtsaeng appealed. The Second Circuit upheld the verdict, ruling that the first-sale doctrine applies only to goods made in the United States. The Appellate Court also noted a "particularly difficult question of statutory construction" because of the competing Copyright Acts provision. The Supreme Court is expected to hear arguments in its October term for 2012.


Louis Vuitton

The U.S. International Trade Commission (ITC) issued a decision this week, putting border agents on notice to block counterfeit Louis Vuitton goods from entering the United States. Louis Vuitton filed an ITC complaint in December 2010, alleging that various Chinese counterfeiters and some U.S. retailers were infringing its Toile trademark. Some of the defendants settled the matter before trial, and the remaining defendants failed to participate in the proceedings. The decision by Administrative Law Judge Charles Bullock doesn't specify a remedy, but says that the ITC may issue cease-and-desist orders to keep the alleged counterfeiters from "engaging in unfair acts in the importation and sale" of infringing articles. Vuitton's global intellectual property director, Valerie Sonnier, told Women's Wear Daily that, "The chief administrative law judge recognizes the importance of protecting intellectual property and took the welcome step of ensuring that its orders include all merchandise that infringes on our Toile Monogram Marks, and not just products of the respondents in this case."


Superman and DC Comics

Attorney and businessman Marc Toberoff represented the heirs of Superman's creators, Jerome Segel and Joe Shuster, in a copyright dispute over the Man of Steel. After Toberoff won summary judgment for his clients in 2008, DC Comics filed a declaratory judgment action against him, his companies and his heirs. DC Comics contends that Toberoff induced Siegel and Shuster's families to break previous rights agreements, and in return, Toberoff would get 40% of whatever the families would earn from Superman rights. The court decided on April 17, 2012, that Toberoff cannot claim attorney-client privilege on the documents he turned over to prosecutors investigating a former associate who allegedly stole case documents from his office. DC Comics and Warner Brothers will now have access to the materials that support their arguments that the Siegel and Shuster families had entered into rights agreements before Toberoff interfered in their relationship with DC Comics. A Warner Brothers spokesperson stated, "We are extremely pleased that the 9th Circuit unanimously found in our favor. The ruling means that defendant Marc Toberoff must now turn over critical evidence in the pending litigation against him and others."



Magician and comedian Teller, of Penn & Teller, filed a lawsuit in the District of Nevada on April 11, 2012, against Dutch entertainment Gerard Dogge over Teller's copyright illusion known as "Shadows." The illusion involves a spotlight on a vase containing a rose, where the shadow of the rose is projected onto a white screen. Using a knife, Teller then severs the leaves and petals of the shadow, and the corresponding leaves and petals of the actual rose fall to the ground. The complaint alleges that Shadows is "the oldest most venerated piece of material in Penn & Teller's show." The illusion was registered with the Copyright Office in 1983. The defendant in this matter posted a YouTube video where he performs the illusion, and offers to sell the trick. Once Teller found out about the video, he directed YouTube to remove it and contacted Dogge, asking him to stop marketing the work, and even asked him to pay for it. Dogge countered, demanding a much higher sum from Teller, and threatened to disclose the secret to the illusion if Teller did not agree to Dogge's terms. The lawsuit seeks a permanent injunction against any copyright infringement, plus damages.


The Bachelor

Two African-American men filed a class action racial discrimination lawsuit against ABC television and the producer of the reality show "The Bachelor" and "The Bachelorette." The plaintiffs are Nashville residents Nathaniel Claybrooks, an All-American football player, and Christopher Johnson, an aspiring NFL player. They claim that in the 10 years and 23 seasons of the shows, a person of color has never been featured in a central role. Both plaintiffs applied during an open casting in August 2011. Claybrooks claims that his interview lasted less than half the time of white applicants. Johnson alleges that he "did not get the opportunity to even make it to the second level," stating, "I was stopped by a young gentleman about five feet into the door. He saw fit to ask me exactly what was I doing here." Plaintiffs' counsel stated that he estimated there have been dozens or hundreds of contestants turned away because of their race, reasoning "How do you explain zero [Bachelors and Bachelorettes of color] for 23 [seasons]?" The plaintiffs refused to discuss their financial goals, but their attorney insisted: "This case is impact litigation... it can be a vehicle for change."


April 27, 2012

Weekly Issues in the News

By Geisa Balla

Trade Secrets During Discovery

New York Supreme Court Justice Shirley Werner Kornreich issued a decision on April 23, 2012, holding that plaintiffs who claim their trade secrets were misappropriated must identify what those secrets were during discovery. The decision was issued in a lawsuit by MSCI, which alleged that a former employee and his new employer misappropriated MSCI's source code for risk management software to sell to investment institutions. In a November ruling, the judge permitted MSCI to identify only which portions of its source code were not trade secrets. The defendants argued that it was unfair to expect defendants to deduce what secrets were at issue. The judge sided with them, holding that MSCI must identify "with reasonable peculiarity" the trade secrets were allegedly misappropriated. "Only by distinguishing between the general knowledge in their field and their trade secrets, will the court be capable of setting the parameters of discovery and will defendants be able to prepare their defense," Kornreich wrote. "Plaintiffs who have brought this action, bear the burden of proving their allegations," the judge continued. "Merely providing defendants with plaintiffs' 'reference library' to establish what portions of their source code are in the public domain shifts the burden to defendants to clarify plaintiffs' claim."


Apple and Motorola

The International Trade Commission (ITC)issued a preliminary ruling that Apple Inc. infringed on a Motorola Mobility Inc. patent in making its iPhones and iPads. The patent at issue covered eliminating noise and other interference during voice and data transmissions. A full commission will review the preliminary decision and make a final ruling in August. Motorola also accused Apple of violating three other patents, but the ITC did not rule in Motorola's favor on those patents. Motorola, who is being acquired by Google Inc., has filed related lawsuits against Apple in federal courts in Illinois and Florida. These legal battles are part of the larger market share battle between Apple's products and Google's Android software. Google has not yet been directly involved in the lawsuits because it does not make its own phone, but that will change once it acquires Motorola.


Facebook and AOL

Facebook will pay Microsoft Corp $550 million for 650 patents and patent applications, as well as a license to another 275 patents and applications owned by Microsoft. Earlier this month Microsoft purchased more than $1 billion in AOL Inc. patents. Microsoft's General Counsel stated that the Facebook deal allows Microsoft "to recoup over half of our costs while achieving our goals from the AOL auction." In the meantime, Facebook is also in a legal battle with Yahoo Inc. Yahoo sued Facebook earlier this year, alleging that Facebook infringed 10 Yahoo patents, and Facebook countersued alleging that Yahoo infringes 10 of Facebook's patents.



Google has agreed to pay a $25,000 fine to the Federal Communications Commission (FCC) for allegedly impeding the agency's investigation into whether Google violated federal rules when its street-mapping service collected and stored data from unencrypted Wi-Fi networks. The FCC stated that Google executives "deliberately impeded and delayed" its investigation. A Google engineer who developed the code for Google's Street View service declined to testify and invoked his Fifth Amendment rights against self-incrimination. Google responded that it did not provide "untimely" responses, but the delays by the investigators lengthened the FCC's review. Google told the FCC in a letter that it "disagrees with the premise" of the fine, but "has determined to pay the forfeiture proposed [by the FCC] in order to put this investigation behind it." The FCC stated it did not find enough evidence to conclude that Google violated federal law designed to prevent electronic eavesdropping.


April 30, 2012

Mechanical Rate Settlement

By Aleeshea Sanders

The Copyright Royalty Board is set to approve an historic agreement proposed by major music industry trade association groups representing major record labels, music publishers and songwriters, and digital music service providers and mobile phone companies, for statutory mechanical royalty rates and terms under Section 115 of the Copyright Act (17 U.S.C. 115) for all physical and digital music services. The settlement announced by the Recording Industry Association of America (RIAA), the National Music Publishers Association (NMPA), and the Digital Media Association (DiMA) maintains, with limited adjustments, the existing mechanical rate structure and terms from the 2008 rate proceedings for physical phonorecords, permanent digital downloads, ringtones, limited downloads and interactive streams (i.e., 9.1 cents for downloads, CDs and other physical formats, 24 cents for ringtones, and the same formulas, with minor changes, used to determine the mechanical rate for different kinds of subscription and free interactive-streaming services). (Motion to Adopt Settlement Docket No. 2011-3 CRB Phonorecords II)

The proposed regulatory language in Part 385-Rates and Terms for Use of Musical Works Under Compulsory License for Making and Distributing of Physical and Digital Phonorecords (Motion to Adopt Settlement Exhibit A - Docket No. 2011-3 CRB Phonorecords II) creates new rates and terms for five new digital service categories for compulsory licensing:

1. Mixed service bundles (a locker service, limited interactive service, downloads or ringtones combined with a nonmusic product, e.g., a mobile phone, consumer electronics device or internet service) for 11.35% of revenue or 21% of total content cost, whichever is greater.

2. Paid locker services (subscription-based locker, e.g., iTunes, providing on-demand streaming and downloads) for 12% of revenue or 20.65% of total content cost or 17 cents per subscriber, whichever is greater.

3. Purchased content lockers services (a free digital locker that provides free "cloud storage" to a purchaser of a permanent digital download, ringtone or CD) for 12% of revenue or 22% of total content cost, whichever is greater.

4. "Limited offerings" (e.g., limited interactive subscription-based service offering limited genres of music or specialized playlists) for 10.5% of revenue or 21% of total content cost or 18 cents per subscriber, whichever is greater.

5. Music bundles (e.g., CD with download, ringtones and permanent digital downloads) for 11.35% of revenue or 21% of total content cost.
The Proposed Agreement provides for the launch of new digital music services and business models offering music to consumers, and it sets mechanical royalty rates on digital music going forward through 2017.

About April 2012

This page contains all entries posted to The Entertainment, Arts and Sports Law Blog in April 2012. They are listed from oldest to newest.

March 2012 is the previous archive.

May 2012 is the next archive.

Many more can be found on the main index page or by looking through the archives.