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Week in Review

By Martha Nimmer

First Sale Fallacy

Last week, a federal judge in New York ruled that the first sale doctrine does not apply to digital music. On Monday, U.S. District Judge Richard Sullivan held "the first-sale defense is limited to material items, like records, that the copyright owner put into the stream of commerce." This comes as bad news for ReDigi, a company started in October 2011 that sought to apply the first sale doctrine to the resale of "used" digital music purchased from iTunes. According to The Hollywood Reporter, ReDigi's system permitted "song files to be stored in a cloud. The company assured that it had technical measures in place to delete those files from a user's hard drive after the files were resold." Google, a supporter of this novel approach to selling digital music, tried to file an amicus brief in support of ReDigi. Judge Sullivan, however, declined to rule in the defense's favor.

In holding that the first sale doctrine does not permit the re-sale of used digital music, Judge Sulllivan first addressed a copyright owner's reproduction rights; these, the judge wrote, are "the exclusive right to embody, and to prevent others from embodying, the copyrighted work (or sound recording) in a new material object (or phonorecord)." The judge also pointed to previous P2P infringement cases that distinguished between the copyrighted work and the material--digital--object: "when a user downloads a digital music file or 'digital sequence' to his 'hard disk,' the file is 'reproduce[d]' on a new phonorecord within the meaning of the Copyright Act." Judge Sullivan did not stop with the Copyright Act, however, turning later to the "law of physics": "[t]his understanding is, of course, confirmed by the laws of physics," the judge said. "It is simply impossible that the same 'material object' can be transferred over the Internet. ... Because the reproduction right is necessarily implicated when a copyrighted work is embodied in a new material object, and because digital music files must be embodied in a new material object following their transfer over the Internet, the Court determines that the embodiment of a digital music file on a new hard disk is a reproduction within the meaning of the Copyright Act."

So, at least for now, it seems unlikely that used digital music "stores" will be popping up across the Internet.


Read the decision here: http://www.scribd.com/doc/133478866/redigi

Mendelssohn Heirs Seek Return of Picasso

Descendants of the Mendelssohn family--the same family that produced famed Romantic composer Felix Mendelssohn--have sued the Bavarian government, seeking return of the famed 1903 Picasso work "Madame Soler." The plaintiffs claim that their ancestor, Berlin banker and art collector Paul von Mendelssohn-Bartholdy, was forced to sell the painting in question in 1934 to Berlin art dealer Justin K. Thannhauser, following threats and pressure from the Nazis.

These "paradigmatic forced transfers" of art and other valuable goods arose as a result of "Nazi policies to eradicate Jewish-owned banks and bankers." Mendelssohn-Bartholdy, facing "escalating Nazi predation directed at his real estate property - and with no reasonable expectation of receiving any sustainable future income" from his other corporate holdings, began "liquidating his art collection to protect his residual estate from Nazi seizure and to offset his precipitate deficit," the complaint states. The government in Bavaria eventually acquired the painting from Justine Thannhauser in 1964, ignoring the "conspicuous possibility that Nazi policies had deprived Mendelssohn-Bartholdy" of the work of art, and the fact that the initiator of the purchase for Bavaria, Halldor Soehner, was himself an ex-Nazi. Furthermore, the complaint avers, at the time of the Madame Soler acquisition, the Bavarian government was planning a secret sale of some 113 paintings that former Nazi officials had acquired prior to and during the Second World War. The complaint continues: with the help of ex-Nazi Halldor Soehner, Bavaria successfully auctioned 106 of these works in 1966-67 by concealing the provenance of these paintings, leaving prospective buyers unaware that notorious Nazi leaders once owned these priceless pieces of art that likely were acquired from persecuted Jewish families.

Hoping to recover the Picasso work, Mendelssohn-Bartholdy submitted a claim to recover the piece, "which included an 86-page memorandum and scores of exhibits proving that Nazi duress had compelled Mendelssohn-Bartholdy to relinquish the painting." The Bavarian government declined to return Madame Soler, stating "there is no connection between the sale of the artwork and the persecution of Paul von Mendelssohn-Bartholdy by the National Socialist regime." According to the complaint, Bavaria later refused to submit the claim to a special commission in Germany, charged with resolving Holocaust-era art recovery claims.

At its peak, the "Mendelssohn-Bartholdy's private art collection comprised approximately 60 master works by luminaries such as Picasso, van Gogh, Braque, Monet, Renoir and others. When he died of a heart attack at age 59 in 1935, Mendelssohn-Bartholdy had sold or consigned some 16 of these artworks in a period of less than 1.5 years of Nazi rule (September 1933 through February 1935) - having never sold a single major work in the more than 25 years that he had collected art before the Nazis took power in 1933." The heirs demand return of the painting or $100 million. They claim that by withholding the Picasso, "Bavaria in effect has ratified the wrongdoing of the Nazi government that purposefully compelled Mendelssohn-Bartholdy to forfeit the painting."


Fox Sports Sued for Race Discrimination

Last week, a former executive at Fox Sports sued Fox Cable Network Services, alleging he was denied a promotion and eventually fired because of his race. The suit, filed last Friday in Los Angeles Superior Court by Jerry Davis, states that he worked at Fox for over fifteen years as a director in the music department. Davis, who is African American, says that when the job above his became available on four different occasions, he was passed over "because, as a black man, he did not fit neatly in the company's corporate culture." Davis states that during his fifteen years at Fox, he did not receive a single promotion. According to the complaint, the defendant eventually "eliminated [Davis'] position when he was on disability leave 'without providing any interactive process or attempts at accommodation.'"

A lack of diversity plagues broadcast programming at Fox, at least according to Davis. "In the division that runs broadcast / 'over the air' sports programming for Fox, there are currently approximately 34 individuals employed at or above the vice president level. None are [sic] black," the lawsuit states. The complaint goes on to state that, "to the best of Mr. Davis' knowledge, no black person has ever held any position at or above vice president in that division's 19 year existence."

The suit alleges causes of action for unlawful discrimination based on race and disability, as well as retaliation and a failure to accommodate disability, wrongful termination and intentional infliction of emotional distress.


Read the complaint here: http://www.hollywoodreporter.com/sites/default/files/custom/Documents/bc504990.pdf

Close Call for Netflix

Netflix CEO Reed Hastings can breathe a sigh of relief: the U.S. Securities and Exchange Commission (SEC) has declined to bring regulatory sanctions against Hastings for announcing monthly viewing results on his Facebook page. In July of last year, Hastings made the mistake of posting on his Facebook page that viewing on Netflix's service had "exceeded 1 billon hours for the first time."

Under SEC Regulations, publicly-held companies are obligated to report findings and other information in a public filing before releasing the information via other media. The SEC's decision not to sanction Hastings arises, in part, from uncertainty surrounding whether SEC disclosure requirements apply to social media, such as Facebook. Following Hastings' announcement, onlookers called for the SEC to allow social media platforms to be used to communicate with investors. Last week, the SEC responded with an investigation that states that companies may utilize social media to announce key information, provided that investors have been told where this information can be found online.

Don't forget to "Like" Reed Hastings on Facebook...


Read the SEC investigation here: http://www.sec.gov/litigation/investreport/34-69279.pdf

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This page contains a single entry from the blog posted on April 8, 2013 11:44 AM.

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