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February 3, 2014

Swatch Your Back -- Copyrighted Corporate Earnings Calls Are Fair Game

By Barry Werbin and Sharon O'Shaughnessy
Herrick, Feinstein LLP

In The Swatch Group Management Services Ltd. v. Bloomberg L.P., 12-2412-cv (2d Cir. Jan. 27, 2014), a Second Circuit panel unanimously decided that Bloomberg L.P. (Bloomberg), the prominent financial news and data reporting service, did not infringe on The Swatch Group Management Services Ltd's (Swatch) copyright in an invitation-only recorded Swatch earnings call, by obtaining a copy of the recording without authorization and making it available to Bloomberg's paying subscribers. Despite the failure of Bloomberg to manifestly transform the recording in any way before publication, the Second Circuit nonetheless held that Bloomberg's use of the recording qualified as fair use under Section 107 of the Copyright Act. The court emphasized that American investors and analysts are entitled to receive newsworthy financial information and that Bloomberg's conduct is protected by the First Amendment.

On February 8, 2011, Swatch released its 2010 earnings report, which was subsequently made available to the public. Swatch then convened an earnings call with 132 analysts, who were informed that they were expressly prohibited from recording the call for publication or broadcast. Bloomberg, while not invited to the call, obtained a sound recording and written transcript of the call and made both available online, without alteration, to its subscribers. Swatch then sued for copyright infringement. In an opinion and order entered on May 17, 2012, Southern District Judge Alvin Hellerstein sua sponte granted summary judgment to Bloomberg, finding that Bloomberg's copying and dissemination of the recording qualified as fair use.

On appeal, the Second Circuit engaged in its own analysis of the fair use factors under 17 U.S.C. § 107 and affirmed the district court's grant of summary judgment in favor of Bloomberg, concluding that "the copyright law's goal of promoting the Progress of Science and useful Arts would be better served by allowing [Bloomberg's] use than by preventing it."

Turning to the first statutory fair use factor, "purpose and character of use," the court held that, although Bloomberg obtained the recording without authorization and put it to commercial use without transforming it, Bloomberg's use served an important public purpose of ensuring the wide dissemination of important financial information.

The court emphasized that "Bloomberg's overriding purpose here was not to 'scoop[]' Swatch or 'supplant the copyright holder's commercially valuable right of first publication," but rather simply to deliver newsworthy financial information to American investors and analysts. That kind of activity, whose protection lies at the core of the First Amendment, would be crippled if the news media and similar organizations were limited to authorized sources of information."

Moreover, after stressing that "transformative use" is not absolutely necessary for a finding of fair use, the court held that, in the context of news reporting and analogous activities, "the need to convey information to the public accurately may in some instances make it desirable and consonant with copyright law for a defendant to faithfully reproduce an original work rather than transform it."

With respect to the second statutory fair use factor, "the nature of the copyrighted work," the court determined that the balance tipped decidedly in Bloomberg's favor because, while the recording had not been "published" by Swatch as that term is applied under the Copyright Act, Swatch itself publicly disseminated the spoken performance embodied in the recording before Bloomberg's use and the earnings call was factual in nature. As the court noted, "the scope of fair use is greater with respect to factual than non-factual works."

Next, while the court declined to weigh the third "substantiality" factor in either party's favor, it did find that Bloomberg's use of the entire recording was nonetheless reasonable "in light of its purposes of disseminating important financial information to American investors and analysts."

Lastly, the court determined that the fourth statutory factor, "the effect of the use upon the potential market for or value of the copyrighted work," weighed in favor of fair use because Second Circuit case law limits the court's consideration to a use's "impact on potential licensing revenues for traditional, reasonable, or likely to be developed markets" and the possibility of receiving licensing royalties in no way factored into the creation of the earnings call. Furthermore, the court highlighted that the "value" of the copyrighted expression for Swatch rested in its capacity to convey important information about the company to interested investment analysts and that Bloomberg, "[b]y making the recording available to analysts who did not or could not participate in the call initially... simply widened the audience of that call, which is consistent with Swatch Group's initial purpose."

This decision continues what many see as a trend in the Second Circuit to expand the contours of the fair use doctrine. Interestingly, this is only the sixth time the Second Circuit has addressed the fair use doctrine in the past decade in a reported decision.

A copy of the Second Circuit decision is available here: http://caselaw.findlaw.com/us-2nd-circuit/1655777.html.

Northwestern University Men's Football Team Files For Union Designation From NLRB

By Mike Furlano

On January 28th, the Northwestern University Men's NCAA Division One Football team filed a petition with its local National Labor Relations Board seeking union status. The proposed union, named the College Athletes Players Association (CAPA), argues that the Northwestern football players are more like "employees" than "student-athletes," and should be treated as such. The NCAA publicly opposed the players' unionization attempts, stating that "student-athletes are not employees within any definition of the National Labor Relations Act (NLRA) and that there is no existing relationship between the NCAA, its affiliated institutions, or student-athletes."

According to the CAPA President Ramogi Huma, the proposed union's main goal is to give college athletes a voice "when it comes to their physical, academic, and financial protections." The union is initially concerned with medical treatment and tuition after a player stops playing his or her sport. Currently the CAPA is only representing Division One Football Bowl Subdivision players and men's basketball players.

The main challenge for the CAPA is reversing 50 years of National Labor Relations Board (NLRB) precedent refusing to consider student-athletes as employees -- mostly for worker compensation issues. Since 1953 when the Colorado Supreme Court ruled that a University of Denver football player was an "employee" for purposes of Colorado's workers compensation laws, the NCAA has diligently worked to separate athletes from employees. The NCAA thereafter started using the term "student-athletes," calling scholarships "grant-in-aid," and enacting other procedures to further the distinction between athletes and employees.

Two notable decisions that may guide the NLRB involve graduate teaching assistants. In 2004, the NLRB concluded that graduate teaching assistants could not unionize because the assistants' relationship with Brown University (Brown) was more educational than economical. In 2011, however, the NLRB cast doubt on its earlier ruling when it considered a New York University (NYU) graduate assistants' union petition. While the Regional Board ultimately rejected the petition, it noted that the 2004 Brown decision was ripe for reconsideration because the graduate assistants' relationship with the school was both educational and economic. Indeed, in 2012 the National Board voted to reconsider the Brown decision. The Board did not get a chance, though, because NYU and its graduate assistants came to an agreement and withdrew the petition. The CAPA would likely rely on these recent developments to establish that the student-athletes are employees under the NLRA.

A ruling in the CAPA's favor would apply to all private universities across the United States. Public universities, however, are not bound by NLRB rulings because the NLRA does not apply to public entities. Instead, public universities are bound by state labor laws. This is problematic for the union movement because many states have "right-to-work" laws that limit unionization by public employees.

Unionizing college athletes can have widespread effect on the collegiate sports landscape. A successful petition could affect everything from NCAA antitrust violation claims to individual universities' tax-exempt status. Even if the petition is initially denied, the final matter will take years to play out in administrative hearings and the courts.

February 4, 2014

Week in Review

By Martha Nimmer


Cronut, the doughnut-croissant hybrid with a cult-following, is now a registered trademark. The brainchild of New York baker Dominique Ansel, the cronut launched in 2013 and quickly became the stuff of culinary legend, leading countless New Yorkers and tourists to line up outside Ansel's West Village bakery, sometimes before dawn, hoping to snap up the sweet confections before they sold out. The cronut was so popular that a black market for the pastry even sprang up on Craigslist and across the city, with some people paying as much as $40 for a single cronut, or sometimes, for a cronut-knockoff. Those knockoffs eventually led Ansel to apply for the cronut trademark in Spring 2013. As of January 14th, cronut is an official, registered trademark.

This is great news for Ansel, but potentially damaging for countless bakeries across the country that continue to refer to their doughnut-croissant creations as "cronuts." Bakers beware.

Read the trademark registration here: http://eater.com/archives/2014/01/15/cronuts-are-officially-trademarked-now.php

Stephen Glass, non-Esq.

Stephen Glass "failed to carry his heavy burden of establishing his rehabilitation and current fitness," the California Supreme Court ruled last week. Glass was "all but banished from the profession of journalism" in 1998 after it was revealed that he "had partly or wholly fabricated dozens of articles for The New Republic and other magazines." Now, it appears that Glass has failed at attaining another career -- that of attorney.

The unanimous, 33 page ruling called into question the disgraced author's motives for wanting to practice law, raising questions about his sincerity and the efficacy of his personal rehabilitation after leaving The New Republic. Further damning was that Glass had "not been forthright in a previous application to the New York bar and had not acknowledged his shortcomings in that effort (he was informally notified in advance that his New York application would be rejected)." Unpersuaded, the court also noted that the writer's rehabilitation efforts "seem to have been directed primarily at advancing his own well-being rather than returning something to the community."

Glass entered the public consciousness for his "larger-than-life features in The New Republic, George and Rolling Stone." That fame came to an end "when an editor at the website Forbes Digital Tool discovered that one of Mr. Glass's articles, about computer hackers, appeared to be invented." The New Republic fired Glass and severed all ties with him, and then turned to "examining his archive of work for more fabrications." According to The New York Times, an investigation at the magazine revealed that many of Glass's articles "were completely made up," while others were partially, sometimes almost entirely, fabricated.

A 2003 film, "Shattered Glass," was made about Glass's fabrications while an author for The New Republic. In 2004, Glass moved to California and began working as a law clerk at a law firm. He passed the California Bar Exam in 2006, "but was found morally unfit to practice law in 2009." After a trial, Glass won an appeal, but, after being asked to reconsider its decision, the California Supreme Court issued this latest ruling.



A California jury has ruled for Courtney Love in a defamation case brought against her by one of her former attorneys. The jury found that a Twitter post made by Love, which suggested that one of Love's attorneys had been "bought off," included false information, but that Love did not know that the information was untrue. Lawyers for the plaintiff, attorney Rhonda Holmes of San Diego, had sought $8 million in damages in the case. Referred to as the "Twibel" case -- a combination of Twitter and libel -- this case is "reportedly the first defamation suit tried in the U.S. over a message posted on Twitter."

Love originally hired Holmes to file a fraud case against the estate of her late husband, Nirvana singer Kurt Cobain. When Holmes failed to pursue the claim, Love took to Twitter and aired her disappointment: "I was f-cking devastated when Rhonda J Holmes Esq of san diego was bought off." Love argued, however, that this statement was never meant to be public; she told the jury that she intended to send the statement as a private, "direct message" (DM), but instead tweeted the statement to her followers, quickly deleting it.

This is not the first time, however, that Love's social media activities have landed her in hot water. According to ABC, in 2011, the singer "agreed to pay $430,000 to fashion designer Dawn Simorangkir over statements [Love] posted on Twitter and Myspace." Simorangkir also sued Love again last year, "alleging the musician libeled her when Love accused Simorangkir of theft on the Howard Stern's radio show and taunted her on the social media site Pinterest." That case is currently pending.



Tarantino Sues Gawker

Famous film director Quentin Tarantino has sued Gawker Media (Gawker) for contributory copyright infringement in California federal court, alleging that Gawker facilitated the "dissemination of copies of his unproduced script, The Hateful Eight." The complaint accuses Gawker of "predatory journalism" and calls out the website for "violating people's rights to make a buck."

The script for The Hateful Eight was leaked by Gawker's Defamer blog after Tarantino, angry that details about the Western flick had leaked to the public, told the media that he would no longer be making the movie as his next project. In response, the Defamer blog published a link to the 146-page script in a post titled, "Here Is the Leaked Quentin Tarantino Hateful Eight Script."

Despite "repeat demands for the removal of the posted URL links" and "submissions of DMCA notices of copyright infringement," Gawker has refused to remove the script from its site. John Cook, editor of Gawker, maintains that Gawker did not leak the script: "[s]omeone unknown to Gawker put [the script] on a web site called AnonFiles, and someone unknown to Gawker put it on a different web site called Scribd. Last Thursday, Gawker received a tip from a reader informing us that the script was on the AnonFiles site, after which Gawker published a story reporting that the script had surfaced online."

This is not the first time that Gawker has found itself on the defense side of a lawsuit. According to The Hollywood Reporter, the website "has sparked lawsuits . . . over sex tapes from Hulk Hogan and Rebecca Gayheart," and also received a cease-and-desist letter from Lena Dunham's attorney after featuring Dunham's book proposal on Gawker.

Tarantino is seeking actual and statutory damages as well as "Gawker's profits in the amount of at least $1 million."



Gimme an L, Gimme an A, Gimme a W, Gimme an S, Gimme a U...

Known only as Lacy. T, a cheerleader for the Oakland Raiders filed a class action lawsuit last week in Alameda County Superior Court. The cheerleader, known as a "Raiderette," accuses the NFL team of "underpaying wages, withholding wages for months and forcing cheerleaders to pay expenses the team forces them to incur."

According to the complaint, Lacy T. began working for the Raiders in 2013, but did not receive a paycheck from the team for nine months. When her check finally did arrive, the plaintiff realized that the Raiders had failed to pay her even minimum wage or overtime. According to the complaint, Lacy. T. earned $125 per game, which translates into just $1,250 for an entire season. This figure, according to the Raiderette's attorneys, "amounts to less than $5 an hour for all the work they are required to put in." As noted in the complaint, the cheerleaders' contracts require them "to attend practices, rehearsals, fittings, drills, photo sessions, meetings and workouts. They receive no pay for any of those mandatory assignments, including the Raiderettes swimsuit calendar, which costs $15 on the Raiders website." Raiderettes, according to the suit, "make a total of 300 appearances a year at charity, corporate and community events, and each Raiderette is expected to show up at 10 events."

The complaint goes on to allege a litany of additional labor law violations. For instance, the team failed to provide meal or rest breaks during cheerleaders' eight-hour (or longer) shifts. Additionally, the complaint alleges that if a Raiderette failed to arrive at an appearance at least 15 minutes before the start time, she would be required to make an additional, unpaid "charity appearance." Further noted in the complaint is the cheer squad's practice of publishing "a schedule of fines for the Raiderettes," to be deducted from their compensation. Raiderettes, according to The Los Angeles Times, "can be fined if they forget to bring the right pom poms to practice, if they forget to bring a yoga mat or wear the wrong workout clothing in rehearsals. (Raiderettes have rehearsals two to three times a week. They are compulsory, and, as noted, uncompensated.)" The Raiders, according to Lacy T., also failed to compensate the cheerleaders for mandatory hairstyling and hair coloring performed by a salon selected by the team.

Lacy T.'s lawsuit seeks back wages for herself and "about 100 current and former Raiderettes going back four years." Will Kiss, head of Raiders media relations, said that the team "would have no comment" on the lawsuit.


Read the complaint here: http://www.levyvinick.com/images/SKMBT_60014012209230.pdf

Freedom of Yelping?

Yelp, the popular social media/business reviews website, "must turn over the identities of seven anonymous reviewers of a carpet cleaning business who did not appear to be actual customers," a Virginia appeals court ruled last week. The Virginia Court of Appeals wrote that "[t]he freedom of speech -- and within this, the freedom to speak with anonymity -- is not absolute."

The controversy began in 2012 when the defendant, Hadeed Carpet Cleaning, Inc. (Hadeed), filed suit against the authors of "seven specific critical reviews" of the cleaning business. One reviewer, "Aris P." from Haddonfield, N.J., wrote in his Yelp review that the price of carpet cleaning was "double the quote," and that Hadeed had once filed for bankruptcy. Several other allegedly fake reviews on Yelp claimed "the price was double the quote, or criticized Hadeed's advertising." Hadeed sought to "match the negative reviews with its customer database, but could find no record that the negative reviewers were actually Hadeed customers; consequently, Hadeed "issued a subpoena duces tecum to Yelp, seeking documents revealing information about the authors of each of the challenged reviews." Yelp refused, but was dealt a blow from a Virginia circuit court in November 2012, when the court issued an order enforcing the subpoena duces tecum. Yelp, however, failed to comply, and Hadeed moved to have Yelp held in contempt. The circuit court held Yelp in civil contempt, and levied a fine of $500 against the company, while awarding Hadeed an additional $1,000 in attorney's fees. This appeal eventually found itself before the Virginia Court of Appeals, which ruled in Hadeed's favor.


Read the opinion here: http://www.courts.state.va.us/opinions/opncavwp/0116134.pdf

February 5, 2014

Quentin Tarantino Files Copyright Infringement Suit Against Gawker

By Shane Wax

On January 22nd, Gawker Media LLC (Gawker), the popular media and entertainment gossip and news website, published a blog entry about the unauthorized leak of the script for Quentin Tarantino's next film, "The Hateful Eight," and his exasperated response. Tarantino had decided that he would no longer proceed with the film. The next day, Gawker posted links to third party websites where anonymous individuals had uploaded a copy of the leaked a script. A week later, Tarantino's lawyers hastily filed a lawsuit against Gawker Media and 10 Doe defendants in U.S. District Court in Los Angeles. Gawker responded to the lawsuit in yet another blog entry, claiming that it shared the links to the leaked scripts "because it was news."

The complaint in Tarantino v. Gawker Media, No. 14-cv-00603 (C.D. Cal.) alleges that the Doe defendants infringed Tarantino's right to reproduction, distribution and display of the script by illegally uploading the script to one of two websites. It further alleges that Gawker contributed to this infringement of Tarantino's copyrights by encouraging or inducing the upload.

However, what did Gawker actually do? For one, it did not upload the script itself. Rather, Gawker learned that the script was uploaded by anonymous third parties to other websites, and then provided its readers with links to those webpages. Gawker's alleged contribution stems from a statement on the first blog entry telling readers, "if anyone would like to name names or leak the script to us, please do so." While the complaint tries to claim that Gawker acted as the "first source" to offer the links, Gawker never claimed to be the exclusive or first source in either blog entry. In fact, it offered two separate links where users could find the leaked script.

Tarantino's main challenge will be the binding legal precedent set by the Ninth Circuit in the Perfect 10 cases. Those cases adopted the "server test," a rule which requires that a website maintains the copyrighted content on its own server to be held liable for public display.

While Tarantino's lawyers, perhaps aware of this precedent, are not alleging that Gawker is directly infringing the copyright attached to the script, it is unclear to what impact that holding will have on the contributory infringement claim.

Another notable decision that may pose both a challenge and a boon to Tarantino's legal team is the Seventh Circuit's 2012 decision in Flava Works v. Gunter. There, Judge Posner implicitly adopted the server test to find that the website owner could not be held directly liable for the digital performance of copyrighted videos that were framed within the website, i.e., accessible through links. As may be relevant to Tarantino, Judge Posner concluded that linking to copyrighted content could not give rise to contributory liability because there was no evidence that this conduct had an "effect on the amount of infringement" occurring. In other words, a website that allows its members to link to copyrighted material does not necessarily cause people to unlawfully upload the copyrighted content in the first place.

Importantly, however, Judge Posner also wrote that if a website "invited people to post copyrighted videos on the Internet without authorization," it could be held liable for inducement. This is more or less what Tarantino alleges, and what the Seventh Circuit found noticeably absent in Flava Works. It is therefore plausible that the outcome of this case could depend upon whether the court finds that Gawker's passive invitation encouraged the infringement.

A copy of the Complaint can be found here: http://msnbcmedia.msn.com/i/TODAY/Entertainment/_ENT%20archive%20and%20storage/PDFs/TarantinoVGawker.pdf

The Gawker webpage that lead to the lawsuit can be found here:

Quentin Tarantino v Gawker Media

By Kara Buonanno

Edgy, Oscar winning filmmaker Quentin Tarantino is demanding real-life revenge from Gawker Media LLC (Gawker) for the latter's publishing of online links to a downloadable version of the script to his latest movie, "The Hateful Eight." On January 27th, Tarantino filed a lawsuit against Gawker in U.S. District Court in Los Angeles, alleging contributory copyright infringement. The lawsuit also names as a defendant AnonFiles.com, the file share website that made the actual script available for viewing.

The suit alleges that Gawker promoted and disseminated "unauthorized downloadable copies of the leaked unreleased complete screenplay". Additionally, court documents state that Gawker has "failed and expressly refused to remove their directions to and URL links to get the infringing materials". More specifically, on both January 23rd and 24th, Gawker received DMCA notice and takedown letters stating that links to access the screenplay appeared at URL locations on its website. Pursuant to these notices, the plaintiff demanded removal of the directions and URL links leading to the script.

According to court documents, Tarantino submitted a copyright registration application for "The Hateful Eight" on January 23, 2014, prior to the alleged infringements.

The director is seeking actual and statutory damages, along with Gawker's profits of at least $1 million for each count of copyright infringement.

Tarantino is represented by Los Angeles-based attorney Marty Singer of Lavely and Singer PC. Singer is commonly and endearingly referenced as the "Pit Bull Litigator" or "Guard Dog to the Stars" by the media. He has represented a multitude of celebrities in various litigation matters, including Charlie Sheen, John Travolta, Arnold Schwarzenegger and Scarlett Johansson. Gawker has dealt with Singer before. In 2009 and 2010 Singer represented Eric Dane and his wife Rebecca Gayheart in a copyright infringement suit against Gawker for the posting of a sexually explicit video. The case settled for an undisclosed six-figure sum, and Gawker pulled any traces of the video from its website.

Gawker Editor-In-Chief John Cook stated that Gawker planned to fight Tarantino's lawsuit and denied any allegations of copyright infringement in a post on Gawker.com, where he claimed that its role was only to provide users a link to the script. The post states: "Gawker received a tip from a reader informing us that the script was on the AnonFiles site, after which Gawker published a story reporting that the script had surfaced online."

As a result of the script leak, Tarantino has publicly claimed that he will no longer make "The Hateful Eight". According to IMDB.com, the project has been shelved.

February 7, 2014

Week in Review

By Martha Nimmer

The Gift of Art

After months of negotiations, the Dallas Museum of Art announced earlier this week that it would receive what The New York Times has called "one of the most important collections of Islamic art in private hands." The collection will arrive in Dallas in May, and will be housed at the museum for at least 15 years as part of "an unusual long-term renewable loan that will give the museum the right to lend pieces to other institutions and to make objects widely available to scholars."

Called the Keir Collection, this trove of Islamic art was collected over decades in Britain by Edmund de Unger, a Hungarian real-estate magnate who passed away in 2011. The collection, consisting of around 2,000 objects, boasts many carpets, textiles and manuscripts. The agreement with the Dallas Museum of Art will elevate the museum's collection of Islamic art works to "perhaps the third most important Islamic collection in the country, after the Metropolitan Museum of Art in New York and the Smithsonian's Freer and Sackler Galleries in Washington."

This interest in and demand for Islamic art and artifacts has increased in the last decade, according to The New York Times, "as threats to major collections and historic sites in parts of the Middle East come with ever greater frequency." Just two weeks ago, for instance, the Museum of Islamic Art in Cairo was badly damaged after a truck bomb exploded, destroying more than 70 artifacts.


Tackling Super Bowl Ticket Prices

Claiming that the National Football League's (NFL) ticketing practices for the Super Bowl run afoul of New Jersey consumer protection law, Josh Finkelman sued the NFL in Newark federal court in December. According to The New York Times, this "is the first suit that a football fan aggrieved by the price of tickets has filed against the N.F.L." Finkelman accuses the NFL of "unjust enrichment and violating New Jersey consumer fraud law, which prohibits withholding more than 5 percent of seating from the public for any event to be sold at other than face value." He seeks class action certification. As so many fans buy their tickets from secondary sources that obtain the tickets from the NFL or from the NFL's teams, the putative class could "reach into the tens of thousands."

Although Finkelman's lawsuit will be decided long after the Seahawks' victory over the Broncos fades, the plaintiff hopes that his suit will change the way that the NFL sells tickets to the next Super Bowl. For last week's Super Bowl, Finkelman's attorneys claim that "just 1 percent, or 775 of 77,500 tickets, [were] available to the public at face value for this year's Super Bowl XLVIII at MetLife Stadium in East Rutherford, N.J." According to the stadium website, capacity for the venue is 82,500. This scarcity translates into high ticket prices. A month before Super Bowl XLVIII, the average ticket price was $3,432.90; according to the suit, the plaintiff purchased two tickets at $2,000 each, "far in excess of the face value of the tickets," which is about $500 each.

The significant difference between the face value of Super Bowl tickets and their purchased-for-price can be traced to the NFL's ticket distribution policy. The overwhelming majority of tickets to the Super Bowl is never made available to the public. In fact, 75% of the tickets are shared among the NFL's 32 teams, with roughly 25% of the remaining tickets retained by the NFL and distributed to game officials, media and corporate sponsors. According to the complaint, that means that less than 1% of tickets is made available to the public, via a ticket lottery. Those tickets are then sold at face value. The ticket lottery is held every year by mail; starting in February and concluding in June. If fans cannot purchase Super Bowls tickets through the ticket lottery, they are left with the secondary market, and the accompanying high prices. This leaves many fans unhappy, or left out of the game.

At first blush, Finkelman's suit appears to be a legal long shot, given the fact the NFL has sold Super Bowl tickets in the same manner, year after year. What was different with this Super Bowl was that it was held in New Jersey, which boasts robust consumer protection laws. Specifically, Finkelman's suit alleges that the NFL's ticket distribution policy violates Section 56:8-35.1 of the New Jersey Consumer Fraud Act. That section reads: "[i]t shall be an unlawful practice for a person, who has access to tickets to an event prior to the tickets' release for sale to the general public, to withhold those tickets from sale to the general public in an amount exceeding 5 percent of all available seating for the event." In other words, attorneys for the plaintiff argue, this section of the state's Consumer Fraud Act "explicitly forbids the N.F.L.'s practice of providing only 1 percent of Super Bowl tickets for sale to the public. In fact, it would seem to dictate that 95 percent of the seats must be sold that way."

The NFL maintains that its ticket distribution system is fair. "We can never fulfill all the requests for tickets. The NFL's Super Bowl ticket distribution process has been in existence for years and is well documented. We are confident it is in compliance with all applicable laws," the NFL said in response to the lawsuit.



Standing Up for Student Athletes

Northwestern University football players have taken the first step to unionization, filing a formal petition with the Chicago office of the National Labor Relations Board (NLRB). If the NLRB certifies the group, the union will be known as the College Athletes Players Association (CAPA). CAPA's initial goals include "medical protection for concussions," guaranteed scholarships -- even if players are injured -- and a trust fund available to players whose NCAA eligibility expires, but who wish to finish college.

The National Collegiate Athletic Association (NCAA) opposes the move for unionization, arguing that providing medical protections and multiyear scholarships would distract from the purpose of college, i.e. education: "[t]his union-backed attempt to turn student-athletes into employees undermines the purpose of college: an education. Student-athletes are not employees, and their participation in college sports is voluntary. We stand for all student-athletes, not just those the unions want to professionalize."


I'll Make You an Offer I Can Refuse

After years of legal wrangling, the case of the Dateline $1 million "challenge" has finally concluded.

In 2006, an Orlando attorney appeared on Dateline, saying it was impossible for his client, Nelson Serrano, to have murdered four people. The attorney, James Mason, maintained that his client was innocent of the accused crimes because to commit them in the time-frame alleged by police and prosecutors, his client would have needed to exit a plane in a busy Atlanta airport and arrive at a hotel miles away, all in less than 28 minutes. So convinced was Mason of the impossibility of this feat that he said, "I challenge anybody to show me -- I'll pay them a million dollars if they can do it." Unfortunately for Mason, someone decided to show him.

Enter Dustin Kolodziej, then a law student at South Texas College of Law. In December 2007, Kolodziej retraced Serrano's alleged route from an Atlanta airport to a La Quinta hotel five minutes away, and made a video recording of the trip. Kolodziej completed the journey in under 28 minutes, and then tried unsuccessfully to collect the $1 million. He sued Mason, claiming that Mason had made a unilateral offer to the public, which Kolodziej had accepted by traveling from the airport to the hotel in under 28 minutes. Unfortunately for Kolodziej, Mason had not made an offer to the public -- Dateline had edited Mason's comments for television. What Mason actually said was "I challenge anybody to show me, and guess what? Did they bring in any evidence to say that somebody made that route, did so? State's burden of proof. If they can do it, I'll challenge 'em. I'll pay them a million dollars if they can do it."

Weighing the tone and context of the unedited statement as a whole, U.S. District Judge Charlene Honeywell ruled that "[the interview] can only lead a reasonable person to but one understanding, that the words 'them' and 'they' as used throughout the entire excerpt now refers to the state prosecution." In other words, because the defendant was not communicating an offer to the world, but simply, to the prosecution, Kolodziej cannot claim that "the 'challenge' somehow constituted a valid offer and that he accepted that offer by his performance. Kolodziej cannot proceed with his claim for one million dollars by supposing, believing, imagining or hoping that an offer was made to him that simply was not."

Better luck next time?


On the Heels of the Week: Privacy, Fashion, and the Internet

Tuesday, February 11, 2014
5:00pm - 8:30pm

- Location -
Kenyon & Kenyon LLP
1 Broadway
New York, NY 10004

As consumers stroll through the doors of their favorite designer flagship or visit their favorite online clothing store, they may not be aware of how much information is being collected about them and their shopping habits. More than ever, retailers are collecting analytic data on consumers that include typical consumer information (name, address, phone number) as well as consumer arrival and shopping habits. Both brick-and- mortar and e-tail fashion retailers can now track consumer in-store and online movements, noting when they visit, what items they stop to admire, and even gathering data on gender, ethnicity, and facial expressions.

Collecting consumer information can be an invaluable tool for retailers, however, it is not without legal implications. EASL's Fashion Law Committee invites you to its third annual "On the Heels of Fashion Week" CLE program, where we will examine these and other privacy issues that arise from the collection and use of consumer information in a retail environment. We will discuss:

* How can fashion retailers collect and use consumer information while balancing the rights of consumers?
* What must be disclosed to consumers about the recording and use of their personal data?
* What type of consumer information is considered Personally Identifiable Information (PII)?
* Is it legal to ask customers for their zip codes or email addresses at checkout?

Jessica B. Lee, Esq., Loeb & Loeb LLP

Khaliah Barnes, Esq., Administrative Law Counsel, Electronic Privacy Information Center Barry M. Benjamin, Esq., Partner, Kilpatrick Townsend & Stockton LLP Joseph V. DeMarco, Esq., Partner, DeVore & DeMarco LLP Shelley E. Kohan, Fashion Institute of Technology Daniel Marques, Consulting Chief Technology Officer/Technology Advisor

Program Agenda:
5:00 - 6:00 - Refreshments
6:00 - 6:30 - Overview of federal and state privacy laws
6:30 - 7:00 - Recent privacy cases
7:00 - 7:30 - Sample retail/fashion marketing trends that implicate privacy issues
7:30 - 8:00 - Creating a privacy policy
8:00 - 8:30 - Q&A

This program is sponsored by the Fashion Law Committee of the Entertainment Arts & Sports Law Section of the New York State Bar Association.

To Register Visit: FashionLawCLE

Under New York's MCLE rule, this program is approved for a total of 2.0 credit hours in Professional Practice. his program is NOT a transitional program and does not qualify for newly admitted attorneys.

February 13, 2014

How Employers Should Handle Workplace Romances


With Valentine's Day approaching, and workplace romance as pervasive as ever, what better topic for this week's post than options for employers seeking to handle workplace romances between employees?

The Bad and the Ugly of Workplace Romance

When a workplace romance ends, it can have all kinds of repercussions, regardless of whether it ends on a sour note or on a seemingly good note. A dumped co-worker might attempt to woo back his/her former lover, and those attempts could be viewed as contributing to a hostile work environment if the attention is no longer welcome.

Worse is when the relationship involves a supervisor or a higher-ranking colleague. In those instances, the subordinate or lower-ranking employee could claim that the romantic advances were never welcome, and that any "consent" to the relationship was the result of coercion, fear of being fired or demoted, or in response to a promised promotion or other preferential treatment.

That's not all. Concerns regarding workplace romance extend beyond the demise of a relationship, and include issues like: public displays of affection; inappropriate sharing of confidential company information between romantic partners; inappropriate gossiping among co-workers; less productivity from the couple and their colleagues; claims of favoritism; poor employee morale; and damage to the business because the pairing may be seen as unprofessional.

With this much at stake, what options do employers have?

Workplace Romance Policy

One option is a workplace romance policy. Some workplace romance policies ban workplace dating entirely, while some only prohibit supervisors from dating people who report directly to them. Others also forbid romances between employees with significantly different rank.

Regardless of what is prohibited by a workplace romance policy, the policy should state that romantic relationships between co-workers are not the company's business unless the office romance affects the workplace.

Employers should also keep in mind that workplace romance policies can sometimes backfire. There is always the possibility that employees will date and keep it a secret. Furthermore, if harassment does occur, the victim may not come forward for fear of being disciplined for breach of the workplace romance policy.

Love Contracts

Another option is a "love contract" (or consensual relationship agreement). A love contract is a relationship agreement that, in theory, allows employees to disclose office romances while at the same time insulating employers from liability in the event that the romantic relationship ends.

The terms of love contracts are fairly robust, and typically include terms addressing: the voluntary nature of the couple's relationship; compliance with the employer's anti-discrimination and anti-harassment policies; termination of the relationship; retaliation; workplace behavior; and modification of reporting relationships.

The notion that love contracts help mitigate sexual harassment litigation risks is a big draw for employers. Love contracts, however, do not entirely insulate employers from liability, and the romantic relationships most likely to cause problems for an employer (i.e., affairs) are those in which the participants will be least likely to self-report and sign a love contract. The greater benefit of love contracts is that they help employers maintain a functional office environment, for example, by reminding the couple to behave professionally and securing the couple's agreement to keep public displays of affection out of the workplace.

Employers who ultimately do opt for love contracts must recognize that requiring love contracts is no substitute for having a well-implemented policy against sexual harassment, appropriate training (for all levels of staff and management), and a sound enforcement program. On balance, most employers would probably be better served trying to create a culture of compliance and respect in the workplace than having employees sign contracts.

February 15, 2014

Week in Review

By Martha Nimmer

Picasso Stays Put

Picasso's "Le Tricorne" tapestry will remain at the Four Seasons Restaurant, at least for the next month, according to a temporary injunction issued last week by New York State Supreme Court Justice Matthew F. Cooper. The dispute over the future of the Picasso work comes, writes The New York Times, "as the Four Seasons and Aby J. Rosen, the developer who controls the building, are in the midst of rent negotiations that could cause the restaurant to leave the building."

The large painted curtain, valued at $1.6 million, has adorned the restaurant's walls since 1959. The temporary injunction was issued against RFR Holdings, the real estate company that owns the Seagram Building where the Four Seasons Restaurant is located, after RFR had announced in late January that the company would remove the tapestry. This plan upset the New York Landmark Conservancy, which owns the Picasso work. Conservancy officials worried that moving the almost century-old tapestry could severely damage or even destroy it; Peg Breen, president of the conservancy, stressed "that if 'Le Tricorne' had to be moved, the experts recommended a process 'that would take at least eight working days that would move it slowly and carefully.'" In contrast, RFR's plan for moving the Picasso work envisioned a much faster timetable. At a hearing last week, the attorney for RFR stated, "[i]f we break it, we'll buy it." That promise from RFR did little to assuage the fears of the New York Landmark Conservancy. RFR maintained, however, that because "Le Tricorne' was not part of the internal landmark designation of the Seagram Building, the tapestry could be removed; RFR went on to say that "as owner of the building and in reliance on the advice of professionals, RFR has determined that the tapestry should be removed from the wall so that necessary work can be done . . . RFR believes that the tapestry can be removed from the wall safely through a careful process that had been scheduled to take approximately eighteen hours."

Justice Cooper, however, was not convinced, apparently concerned about his place in art history: "I don't want to be the judge who has a Picasso destroyed. If some damage were to occur, no amount of money could make up for the loss of any Picasso." So for now, the Picasso stays put.


Treasure Trove

Another stash of priceless art has been found in the second home of the son of a deceased Nazi-era art dealer. The 60 pieces, including works by Claude Monet and Pablo Picasso, were found at Cornelius Gurlitt's home in Salzburg, Austria. The Los Angeles Times reports that Austrian "authorities viewed and secured the precious works Monday, according to a statement by Gurlitt's spokesman carried by Austrian and German media." Gurlitt's spokesman added that a preliminary examination produced no matches between the recovered pieces and works of art known to have been taken from Jews during the Nazis' campaign against what they called "degenerate art." In 2012, a search by German authorities of Gurlitt's home in Munich revealed an estimated 1,400 works of art; 380 of these pieces are believed to have been stolen by the Nazis during World War II. Last month, Gurlitt's legal counsel said that his client was "willing to negotiate restitution and compensation for some of the pieces," writes The Los Angeles Times.

Gurlitt was the son of well-known Nazi-era art dealer Hildebrand Gurlitt. Hildebrand Gurlitt helped the Nazi regime acquire famous works of art from museums and from Jews who fled Europe or were sent to concentration camps. Many of those priceless works have vanished -- some destroyed by the Nazis, some destroyed by war, and others lost to history. The new Matt Damon and George Clooney film, "The Monuments Men", depicts "the race in the waning days of World War II to rescue art stolen by the Nazis."


A New Trend on the Catwalk

There is a new trend on the runways at New York Fashion Week: models over age 18. This change comes on the heels of legislation passed last October in New York that designates models who are younger than 18 years old as child performers. This designation translates into "earlier bedtimes and easier hours" for underage models, and "lots of paperwork" for designers who want to use child models. Given the challenges of using models under age 18, designers have been choosing older models: "[t]his year, I saw over 350 girls, and I only saw 3 that were under 18," said James Scully, a casting director for fashion labels such as Jason Wu, Derek Lam and Tom Ford. In the past, he says, "60%" of the individuals who graced the catwalk were under 18. "Years ago we had girls that used to come with their mother," said the designer Carolina Herrera. "They were 14 or 15. I remember one Russian girl who used to come with her mother and a Polish girl who used to come with their father because they were so young." Herrera added that she supports the new law, and is not using models younger than 18 for her show this season.


Dairy Diplomacy

Unable to convince the Russian government to suspend temporarily its three year old embargo of U.S. dairy products, New York-based Greek yogurt maker Chobani has announced that "the world's most controversial shipment of yogurt is headed to food banks in New York and New Jersey" instead of to American Olympians in Sochi. The 5,000 cups of Chobani yogurt have been stuck for more than a week in an industrial freezer near Newark Liberty International Airport, due to a "diplomatic tiff with Russian authorities." Russian officials refuse to permit the yogurt into the country, blaming U.S. Department of Agriculture officials for not providing the "necessary certifications."

The Russian Federation, with a population of roughly 140 million, is one of the world's top dairy importers. In September 2010, "the country banned the import of all milk, cheese, yogurt and more from the United States by mandating that all dairy products be on a pre-approved list before they're brought into the country." Russia scrapped that requirement in 2012 as part of a deal to join the World Trade Organization, but American dairy companies continue to encounter barriers to market access in Russia.

Unfortunately for Chobani and hungry American Olympians, pleas from U.S. Senators Charles Schumer and Kirsten Gillibrand to Russian diplomats and Olympic officials fell on deaf ears, leading Chobani to abandon its efforts to get the yogurt to U.S. Olympic athletes. "As a proud supporter of the Olympics and Team USA over the past four years, we're disappointed our athletes won't be able to enjoy Chobani while they compete in the games as we all hoped, and are deeply appreciative to everyone who tried to help get it there, especially Sens. Schumer and Gillibrand and various officials here at home," said Hamdi Ulukaya, Chobani's founder and chief executive officer. Luckily, there is a silver-lining in the dairy debacle: hungry New Yorkers and New Jerseyans will be able to enjoy the blueberry-, strawberry- and peach-flavored Greek yogurt.



Uh-Oh Armour

After poor showings in the men's and women's speedskating competition, the national speedskating federation has announced that it will "drop its controversial Under Armour Inc. suits for the rest of the Olympic Games." Instead, the skaters will use the Under Armour suits worn during the team's more successful World Cup events last year. Despite being heavily favored to win gold medals in at least two events, U.S. speedskaters have so far failed to win a medal at the Sochi games. At the 2010 Vancouver Olympic Games, the U.S. won four medals in speedskating, but as of Thursday night, no American speedskater had finished better than seventh place in any of the six long-track speedskating events. Luckily for the U.S. team, another six long-track events remain.

These new Mach 39 suits, "billed before the Games as a competitive advantage," are rumored to have a design flaw that may be slowing down skaters. Openings on the backs of the suits, designed to allow heat to escape, "are also allowing air to enter and create drag that keeps skaters from staying in the low position they need to achieve maximum speed," writes The Wall Street Journal. One member of the speedskating team even said that members felt they were "fighting the suit" to maintain correct skating form. Bert van der Tuuk, the designer of the Dutch Olympic speedskating team's suits, told The Wall Street Journal that he had used a similar vent on the back of a prototype three years ago, but eliminated the panel because it slowed his skaters: "[t]he suit was blowing itself up."

Under Armour developed the speedskating suit specially for the Sochi Olympics, pretesting the suit for specific conditions, "including the sea-level altitude that athletes would face there." The Baltimore-based athletic apparel company called the Mach 39 outfit "the fastest speedskating suit in the world." Made from five synthetic fabrics, the Mach 39 went through "300 hours of wind-tunnel testing and incorporated the design expertise of Lockheed Martin's aircraft engineers," the company said. Under Armour sent the outfits to the U.S. Olympic team in January for preliminary adjustments for each athlete. The company also sent a team of specialists to Sochi to make alterations. Although the U.S. team wore the suits in the past month for simulated race conditions, "the Games marked the first time in competition."



February 28, 2014

Some of Your Salaried Employees May Be Entitled to Overtime Pay

By Kristine Sova

Many employers mistakenly believe that overtime pay only applies to hourly workers. The reality is that many salaried employees are also entitled to overtime pay.

Generally speaking, unless employees are considered "exempt," the law requires that any hours worked in excess of 40 per workweek be compensated at a rate of not less than time and one-half of their regular rate of pay. This holds true for employees who receive a salary, provided that they do not fall within one of the available exemptions. The exemptions are defined by federal and state law, and while they apply generally to white-collar workers whose primary functions are executive, administrative, professional, or in other narrowly-defined categories, the standards under federal and state law are not always the same, with the latter usually being stricter.

Two of the most relied-upon exemptions are the administrative and executive exemptions. The requirements for these two exemptions, detailed below, include the requirements under both federal and New York state law.

The Executive Exemption

• The employee must be compensated with a salary that is greater than or equal to $600.00 per week;
• The employee's primary duty must be managing the business/organization, or managing a particular department or other subdivision of the business/organization;
• The employee customarily and regularly direct the work of at least two other full-time employees (or the equivalent);
• The employee's suggestions and recommendations as to the hiring, firing, advancement, promotion, or any other change of status of other employees have particular weight; and
• The employee customarily and regularly exercises discretionary powers.

The Administrative Exemption

• The employee must be compensated with a salary that is greater than or equal to $600.00 per week;
• The primary duties of the employee must be office or other non-manual work that relates directly to management or business operations, either to the employer or the employer's customers/clients;
• The employee's primary duties include the exercise of discretion and independent judgment to matters that are significant to the operation of the business/organization; and
• The employee regularly and directly assists an employer or an employee employed in a bona fide executive or administrative capacity; or performs, under only general supervision, work along specialized or technical lines requiring special training, experience or knowledge.

Although these two exemptions are two of the most popular exemptions, the requirements present real hurdles to employers looking to claim these exemptions. Employees who are not properly exempt, even when paid a salary, will be entitled to overtime wages for hours worked over 40 in a workweek.

With wage-and-hour litigation and investigations still at a high, employers should confirm that they are correctly classifying (and paying) their salaried employees. This is particularly important when it comes to salaried employees because damage awards have a tendency to skyrocket based on the inherent circumstances of claims involving salaried employees. Any damage award will be based off of the salary and, for that reason, will result in a higher rate of pay. In addition, most employers do not keep a record of hours worked by their (properly or improperly classified) salaried employees. That fact alone won't preclude a damage award. Rather, in the absence of records, it's highly likely that a damage calculation will be based on the employee's typically inflated recollection of hours worked.

Week in Review

By Martha Nimmer

$40 Million Worth of Fakes?

Nine collectors of artwork by visual artist and social activist Keith Haring have sued the late artist's foundation, the Keith Haring Foundation (Foundation), claiming that it 'wrongfully destroys' the value of the collectors' works by publicly calling them "fakes." The $40 million suit, filed last week in Manhattan federal district court, says that the Foundation referred to the collectors' peices as fakes in order to "limit[] the number of Haring works in the public domain, thereby increasing the value of the Haring works that the foundation and its members own or sell."

The authenticity of around 80 works was called into question by the Foundation after the works were displayed in an exhibit in Miami in March 2013. Two days after the show opened, the Foundation filed a trademark and copyright infringement lawsuit to shut down the exhibition; in its suit, the Foundation claimed that the displayed works were "counterfeits." After the lawsuit was filed, the show's promoter agreed to take the works out of the exhibit, and, according to court documents, none of the pieces were sold. Sales at the Miami show would have brought in at least $40 million, according to the collectors' complaint. Unhappy, the owners of the Haring pieces filed suit against the Foundation.

Keith Haring was a popular artist whose work, often political in nature, depicted 1980s "street culture" in New York City. The artist died in 1990.


CTE Detected in Soccer Player

Chronic traumatic encephalopathy (CTE), the degenerative brain disease usually associated with football players, has been detected posthumously in the brain of a 29-year-old former soccer player. According to The New York Times, this finding is "the strongest indication yet that the condition is not limited to athletes who played violent collision sports like football and boxing."

Patrick Grange, the semiprofessional soccer player in whose brain CTE was found, passed away in April of last year. At the time of his death, Grange was suffering from amyotrophic lateral sclerosis (ALS), a disease normally associated with patients in their 50s. "He had very extensive frontal lobe damage," said Dr. Ann McKee, the neuropathologist who performed the exam on Grange. "We have seen other athletes in their 20s with this level of pathology, but they've usually been football players." As a child, Grange would repeatedly practice "heading" the soccer ball (hitting it with his head), a skill that he developed and continued to use in college soccer and top-level amateur and semiprofessional leagues. Dr. Erin Bigler, a professor of psychology and neuroscience and director of the Magnetic Resonance Imaging Research Facility at Brigham Young, remarked that he was "not surprised" to hear that CTE was found in a soccer player. Dr. Bigler added that he would not recommend that players "routinely head[] the ball," especially if those players are young--"the brain is not fully developed until about age 25," the doctor said, thereby making it more susceptible to damage. Some children's soccer organizations have warned against heading until players reach a certain age, usually between 10 and 14 years old. Some scientists say that those ages are arbitrary, however, "but they know that parents want to know whether their children should be permitted to head soccer balls." Unfortunately for uneasy parents and youth soccer players, "the data don't exist to address that question."

Physicians and researchers believe CTE to be caused by repetitive hits to the head, including "even subconcussive [hits] barely noted." Symptoms of CTE include depression, memory loss, impulse control problems and, eventually, progressive dementia. The disease used to be considered "unique" to boxers, but has received significant attention in recent years after dozens of deceased football players were diagnosed. In December 2013, the disease was detected for the first time in a baseball player, according to The New York Times. Boston University researchers also found a severe case of CTE in a 77-year-old former rugby player from Australia named Barry Taylor, although research into CTE in rugby players is "in its infancy."


Banding Together

Following the Second Circuit's decision last year that determined Richard Prince's use of Patrick Cariou's photographs in Prince's artwork was fair use, photographers and trade groups have come together to push back against the court's ruling. Organizations such as the National Press Photographers Association, Professional Photographers of America and the Picture Archive Council of America have joined forces and submitted a friend of the court brief to support photographer Patrick Cariou after his suit against Prince was remanded for reconsideration.

In addition to submitting the brief, the groups have also considered taking the fight to Congress, including hiring a Washington lobbyist and meeting with legislators, among them members of a House of Representatives subcommittee. Lawsuits, after all, are expensive, so photographers are hoping to make their case, instead, to lawmakers: "[t]he courts have taken an approach to fair use that we do not believe was originally intended," Victor Perlman, general counsel for the American Society of Media Photographers, said. "A lot of what's going to have to happen in fair use is going to have to happen on Capitol Hill."

As an artist, Prince "is known for reworking imagery created by others." To create his now controversial series entitled "Canal Zone," the artist cut out images from Cariou's book, Yes Rasta, which contained photographs of Jamaican Rastafarians, and then painted them or placed them alongside other images. In 2008, sales of these Canal Zone works at Gagosian Gallery topped $10 million, leading Cariou to sue.


Aereo Update

Major television broadcasters, including ABC, CBS, NBC and Fox, accuse Aereo of stealing from the broadcast networks on a "giant scale." In a brief filed on Monday with the U.S. Supreme Court, the networks wrote, "[t]he Copyright Act does not tolerate business models premised on the unauthorized exploitation of the copyrighted works of others."

On April 22, the high court will hear American Broadcasting Companies v. Aereo, a case that promises to have vast and long-lasting implications for the television industry as well as its online streaming competitors, including Amazon and Netflix. Aereo is, perhaps, the greatest threat to the traditional television broadcasters. The company, founded by entrepreneur Chet Kanojia and backed by IAC/InterActiveCorp and Expedia, Inc. Chairman and Senior Executive Barry Diller, is just two years old and operates in 13 cities, with sights set on opening up a fourteenth operation, likely in Austin. What makes Aereo so popular and hence, such a threat to traditional television broadcasters, is that for a modest monthly fee, starting at $8, Aereo subscribers "can watch or record broadcast television through the Internet with no wires or cable boxes required." Aereo makes this service possible by providing each user with a miniature antenna that "captures" broadcast signals; the company also gives customers access to a "cloud-based digital video recorder." This antenna, Aereo maintain, is what makes its business legal and exempts the company from having to pay the networks for retransmission of their programming: because Aereo "temporarily assigns each viewer an antenna at its storage facility" instead of Aereo's copying the material outright, customers copy the material on their own, for their personal use, an authorized use within the Copyright Act.

The lower courts remain divided on the legality, however. The Second Circuit Court of Appeals ruled last summer in favor of Aereo, but just last week, a federal judge in Utah issued a decision in favor of the broadcasters, forcing Aereo to cease operations in Denver and Salt Lake City. Aereo's reply brief is due on March 26.


Utah District Court Issues First Preliminary Injunction Against Aereo

By Barry Werbin

In a marked turn of events for Aereo, the disruptive provider of dime-size antennae over-the-air rebroadcast services, on February 19, 2014, the Utah federal District Court (Judge Dale Kimball) became the first court to issue a preliminary injunction against Aereo, finding that it infringed the plaintiff broadcasters' public performance copyrights in the transmissions of their broadcasts under the Copyright Act's Transmit Clause. The court barred Aereo from operating within the Tenth Circuit, which covers the states of Utah, Colorado, Montana, New Mexico, Oklahoma and Wyoming. The case, which consolidates two separately filed actions in Utah by different sets of broadcasters, is Community Television Of Utah, LLC v. Aereo, Inc., No. 2:13CV910DAK. A copy of the decision can be accessed here: Aereo Utah.pdf.

Aereo was sued in the Utah cases after being victorious before the Second Circuit (albeit with a strong dissent from Judge Denny Chin) in WNET v. Aereo, Inc., 712 F.3d 676 (2d Cir. 2013), cert. granted sub nom ABC, Inc., et al, v. Aereo, Inc., Sup. Ct. (Jan. 10, 2014). The Supreme Court will hear argument on April 22nd and a decision is expected by June. Aereo also won before the District Court of Massachusetts in Hearst Stations Inc. v. Aereo, Inc., 2013 WL 5604284 (D. Mass. Oct. 8, 2013), which is on appeal to the First Circuit.

On the other hand, another Aereo-type tiny antenna service, FilmOnX (formerly Aereokiller), had a resounding defeat in the Central District of California, in a case now sub judice before the Ninth Circuit, where FilmOnX is presently subject to a preliminary injunction. FOX Television Stations, Inc. v. BarryDriller Content Systems PLC, 915 F.Supp. 2d 1138 (C.D. Cal. 2012), appeal pending. FilmOn also lost in the District of Columbia, where the court issued a nationwide preliminary injunction, excluding the Second Circuit. Fox Television Stations, Inc. v. FilmOn X LLC, 2013 U.S. Dist. LEXIS 126543 (D.D.C. Sept. 5, 2013).

In all these cases, including the new Utah decision, the core issue is whether these types of retransmission services violate the Transmit Clause under Section 101 of the Copyright Act, which defines a "public performance" -- one of the exclusive rights reserved to a copyright owner -- as the right "to transmit or otherwise communicate a performance or display of the work to a [public place] or to the public, by means of any device or process, whether the members of the public capable of receiving the performance or display receive it in the same place or in separate places and at the same time or at different times."

The Utah court characterized Aereo's retransmissions of over-the-air broadcasts as being "indistinguishable [to] a cable company" and that its services fall "squarely within the language of the Transmit Clause." The court examined the holdings of all these prior decisions, but because there is no existing Tenth Circuit law on the issue, it conducted its own analysis. In doing so, it concluded that "California and D.C. district court cases as well as Judge Chin's dissent in the Second Circuit case are the better reasoned and more persuasive decisions with respect to the proper construction of the Transmit Clause and its application to Aereo's operations."

In particular, the court examined the "plain language" of the Transmit Clause and the applicable definitions in the Copyright Act, and concluded that such "definitions in the Act contain sweepingly broad language and the Transmit Clause easily encompasses Aereo's process of transmitting copyright-protected material to its paying customers. Aereo uses 'any device or process' to transmit a performance or display of Plaintiff's copyrighted programs to Aereo's paid subscribers, all of whom are members of the public, who receive it in the same place or separate places and at the same time or separate times."

The court further examined the legislative history behind the Transmit Clause. In particular, it cited to Congress' intent in the 1976 Act to expressly overrule prior Supreme Court decisions, which had validated community antenna television systems (precursors to modern cable systems) under the 1909 Copyright Act and to "bring a cable television system's transmission of broadcast television programming within the scope of the public performance right."

Aereo relied on the Second Circuit's opinion and that decision's reliance, in turn, on the Second Circuit's earlier opinion in the Cablevision case, Cartoon Network LP v. CSC Holdings, Inc., 536 F.3d 121 (2d Cir. 2008), which had upheld a remote DVR system made available to end-users who already subscribed to Cablevision's services (and where Cablevision was otherwise paying legally required retransmission fees to broadcasters). The Utah court, however, said "the Second Circuit [in Cablevision] proceeded to spin the language of the Transmit Clause, the legislative history, and prior case law into a complicated web" by focusing "on discerning who is 'capable of receiving' the performance to determine whether a performance is transmitted to the public." Judge Kimball noted that "such a focus is not supported by the language of the statute. The clause states clearly that it applies to any performance made available to the public," regardless of whether such performance was public or private, and "encompass all known or yet to be developed technologies." Judge Kimball also faulted the Second Circuit in Cablevision for effectively changing the wording of the Transmit Clause from "members of the public capable of receiving the performance" to "members of the public capable of receiving the transmission."

In assessing the legislative history, Judge Kimball also quoted freely from Judge Chin's dissent in the Second Circuit's decision, and concluded that "[b]ased on the plain language of the 1976 Copyright Act and the clear intent of Congress, this court concludes that Aereo is engaging in copyright infringement of Plaintiffs' programs. Despite its attempt to design a device or process outside the scope of the 1976 Copyright Act, Aereo's device or process transmits Plaintiffs' copyrighted programs to the public."

Despite a dispute as to whether any financial harm would befall the plaintiffs during the pendency of the action, the court held that preliminary injunctive relief was nevertheless warranted because, from the perspective of irreparable harm, "if Aereo were permitted to continue to infringe Plaintiffs' copyrights... Aereo's infringement will interfere with Plaintiffs' relationships and negotiations with legitimate licensees, impede and effect Plaintiff's negotiations with advertisers, unfairly siphon viewers from Plaintiffs' own websites, threaten Plaintiffs' goodwill and contractual relationships with Plaintiffs' licensed internet distributors, lose their position in the competitive marketplace for Internet content, and cause Plaintiffs to lose control of quality and potential piracy of its programming."

With respect to the balance of harm element, because the court limited the preliminary injunction only to the Tenth Circuit, "the harm to Aereo's business is limited only to its ability to expand into the geographic area of the Tenth Circuit. The harm to Aereo's business, therefore, will not put Aereo out of business, it merely impacts its expansion."

Finally, the court found its ruling was consistent with the public interest because "[t]he public has an interest in continuing to receive unique, local programming provided by the Plaintiffs. Original local programming, covering local news, sports, and other areas of interest, costs millions of dollars to produce and deliver to the public and the public interest plainly lies in enjoining copyright infringement that threatens the continued viability of such local programming."

Post-script: Aereo promptly moved to stay enforcement of the injunction pending its appeal to the Tenth Circuit, particularly in light of the pending Supreme Court proceeding. In a February 25th order, the court denied Aereo's motion to stay entry of the preliminary injunction but granted a 14-day temporary stay pending the Tenth Circuit's ruling on an emergency motion to stay.

More to come!

About February 2014

This page contains all entries posted to The Entertainment, Arts and Sports Law Blog in February 2014. They are listed from oldest to newest.

January 2014 is the previous archive.

March 2014 is the next archive.

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