The Entertainment, Arts and Sports Law Blog

Judge Chin has adjourned the fairness hearing scheduled for October 7th. The Judge agreed with many of the Copyright Office and Department of Justice's comments, in that there are many potential positive aspects to a settlement.

Judge Chin ordered the parties to the settlement to appear on October 7th for a status conference in order "to determine how to proceed with the case as expeditiously as possible".

The link to a PDF copy of Judge Chin's order is: here.

It appears that Shepard Fairey lied, deliberately destroyed evidence of the actual image used in the Obama Hope poster, and in a cover-up, created false documents to support his fraud. He has now issed the below press release in apology. Fairey's attorneys have given notice to AP that they intend to withdraw upon his acquiring new counsel.

For Immediate Release
Contact: Jay Strell– Sunshine, Sachs & Associates,
(212) 691-2800/ (917) 362-9248 cell
strell@sunshinesachs.com

STATEMENT BY SHEPARD FAIREY ON ASSOCIATED PRESS FAIR USE CASE
OCTOBER 16, 2009

In an effort to keep everyone up to date on my legal battle to uphold the principle of fair use in
copyright laws, I wanted to notify you of a recent development in my case against The
Associated Press (AP).

On October 9, 2009, my lawyers sent a letter to the AP and to the photographer Mannie Garcia,
through their lawyers, notifying them that I intend to amend my court pleadings. Throughout the
case, there has been a question as to which Mannie Garcia photo I used as a reference to
design the HOPE image. The AP claimed it was one photo, and I claimed it was another.
The new filings state for the record that the AP is correct about which photo I used as a
reference and that I was mistaken. While I initially believed that the photo I referenced was a
different one, I discovered early on in the case that I was wrong.

In an attempt to conceal my mistake I submitted false images and deleted other images. I
sincerely apologize for my lapse in judgment and I take full responsibility for my actions which
were mine alone. I am taking every step to correct the information and I regret I did not come
forward sooner.

I am very sorry to have hurt and disappointed colleagues, friends, and family who have
supported me in this difficult case and trying time in my life.

I am also sorry because my actions may distract from what should be the real focus of my
case – the right to fair use so that all artists can create freely. Regardless of which of the two
images was used, the fair use issue should be the same.

Statement from Srinandan R. Kasi, VP and General Counsel, The Associated Press

Striking at the heart of his fair use case against the AP, Shepard Fairey has now been forced to admit that he sued the AP under false pretenses by lying about which AP photograph he used to make the Hope and Progress posters. Mr. Fairey has also now admitted to the AP that he fabricated and attempted to destroy other evidence in an effort to bolster his fair use case and cover up his previous lies and omissions.

In his Feb. 9, 2009 complaint for a declaratory judgment against the AP, Fairey falsely claimed to have used an AP photograph of George Clooney sitting next to then-Sen. Barack Obama as the source of the artist’s Hope and Progress posters. However, as the AP correctly alleged in its March 11, 2009 response, Fairey had instead used a close-up photograph of Obama from the same press event, which is an exact match for Fairey’s posters. In its response, the AP also correctly surmised that Fairey had attempted to hide the true identity of the source photo in order to help his case by arguing that he had to make more changes to the source photo than he actually did, i.e., that he at least had to crop it.

After filing the complaint, Fairey went on to make several public statements in which he insisted that the photo with George Clooney was the source image and that “The AP is showing the wrong photo.” It appears that these statements were also false, as were statements that Fairey made describing how he cropped Clooney out of the photo and made other changes to create the posters.

Fairey’s lies about which photo was the source image were discovered after the AP had spent months asking Fairey’s counsel for documents regarding the creation of the posters, including copies of any source images that Fairey used. Fairey’s counsel has now admitted that Fairey tried to destroy documents that would have revealed which image he actually used. Fairey’s counsel has also admitted that he created fake documents as part of his effort to conceal which photo was the source image, including hard copy printouts of an altered version of the Clooney Photo and fake stencil patterns of the Hope and Progress posters. Most recently, on Oct. 15, Fairey’s counsel informed the AP that they intended to seek the Court’s permission to withdraw as counsel for Fairey and his related entities.

The AP intends to vigorously pursue its countersuit alleging that Fairey willfully infringed the AP’s copyright in the close-up photo of then-Sen. Obama by using it without permission to create the Hope and Progress posters and related products, including T-shirts and sweatshirts that have led to substantial revenue. According to the AP’s in-house counsel, Laura Malone, “Fairey has licensed AP photos in the past for similar uses and should have done so in this case. As a not-for-profit news organization, the AP depends on licensing revenue to stay in business.” Proceeds received for past use of the photo will be contributed by the AP to The AP Emergency Relief Fund, which assists staffers and their families around the world who are victims of natural disasters and conflicts.

Anthony T. Falzone (admitted pro hac vice)
Julie A. Ahrens (JA0372)
Stanford Law School
Center for Internet and Society
559 Nathan Abbott Way
Stanford, CA 94305
Telephone: (650) 736-9050
Facsimile: (650) 723-4426
Email: falzone@stanford.edu

Mark Lemley (admitted pro hac vice)
Joseph C. Gratz (admitted pro hac vice)
Durie Tangri LLP
332 Pine Street, Suite 200
San Francisco, CA 94104
Telephone: (415) 362-6666
Email: mlemley@durietangri.com
Attorneys for Plaintiffs and Counterclaim Defendants
UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK
SHEPARD FAIREY and OBEY GIANT ART, INC., Plaintiffs,
-against-
THE ASSOCIATED PRESS, Defendant and Counterclaim Plaintiff,
-against-
SHEPARD FAIREY, OBEY GIANT ART, INC., OBEY GIANT LLC and STUDIO NUMBER ONE,
INC. Counterclaim Defendants,
And
Case No.: 09-01123 (AKH)
ECF Case
MOTION TO AMEND PLEADINGS

MANNIE GARCIA, Defendant, Counterclaim Plaintiff and Cross-claim Plaintiff/Defendant,
v.
SHEPARD FAIREY AND OBEY GIANT ART, INC., Counterclaim Defendants,
And
THE ASSOCIATED PRESS, Cross-claim Plaintiff/Defendant.

Plaintiffs-Counterclaim Defendants Shepard Fairey (“Fairey”) and Obey Giant Art, Inc. and Counterclaim Defendants Obey Giant LLC and Studio Number One, Inc. by and through their attorneys, respectfully request leave to amend the following pleadings: (A) Plaintiffs Fairey and Obey Giant Art, Inc.’s Complaint; (B) Plaintiffs-Counterclaim Defendants Fairey and Obey Giant Art, Inc. and Counterclaim Defendants Obey Giant LLC and Studio Number One Inc.’s Answer and Affirmative Defenses to the Counterclaims of Defendant The Associated Press (“The AP”); and (C) Plaintiffs-Counterclaim Defendants Fairey and Obey Giant Art, Inc. and Counterclaim Defendants Obey Giant LLC and Studio Number One Inc.’s Answer, Affirmative Defenses, and Counterclaims to the Counterclaims of Defendant Mannie Garcia (“Garcia”). Plaintiffs and Counterclaim Defendants (“Plaintiffs”) move to amend these pleadings to reflect new information Plaintiffs’ counsel first learned on October 2, 2009 relating to the identity of the photograph Mr. Fairey used as a reference to create the Obama Works at issue in this case. The pleadings, with redlining indicating the proposed amendments, are attached to this motion as Exhibits A through C, respectively. The AP stated that it would not oppose this motion as long as Plaintiffs provide the Court with a full explanation as to why the amendment is necessary. Mr. Garcia’s counsel informed Plaintiffs’ counsel that Mr. Garcia does not oppose the motion so long as he is granted an additional 60 days for discovery. In Plaintiffs’ original complaint for declaratory judgment and in their answers to claims alleged against them by The AP and Mannie Garcia, Plaintiffs alleged that Mr. Fairey used a photograph of George Clooney and Barack Obama (identified in the original Complaint as the “Garcia Photograph” and identified by The AP in its Counterclaims as the “Clooney Photograph”) as a photographic reference to create the illustration of Barack Obama that appears in the Obama Works at issue in this case. In addition, Plaintiffs denied that Mr. Fairey used a photograph of Barack Obama alone (identified by The AP in its counterclaims as the “Obama Photograph”) as the photographic reference he used.

On October 2, 2009, counsel for Plaintiffs learned new information revealing that Plaintiffs’ assertions were incorrect. Mr. Fairey was apparently mistaken about the photograph he used when his original complaint for declaratory relief was filed on February 9, 2009. After the original complaint was filed, Mr. Fairey realized his mistake. Instead of acknowledging that mistake, Mr. Fairey attempted to delete the electronic files he had used in creating the illustration at issue. He also created, and delivered to his counsel for production, new documents to make it appear as though he had used the Clooney photograph as his reference.

On October 9, 2009, Plaintiffs’ counsel sent a letter to counsel for The AP and counsel for Mannie Garcia notifying them of the situation and of the need to amend Plaintiffs’ pleadings accordingly. Plaintiffs’ counsel enclosed proposed amendments with that letter, and specifically advised counsel for The AP and Mr. Garcia that Plaintiffs no longer contend Mr. Fairey used the Clooney Photograph in creating the Obama Works at issue in this case and that Plaintiffs do not deny he used the Obama Photograph. In this letter, Plaintiffs’ counsel also informed opposing counsel that Plaintiffs no longer contend that certain documents Plaintiffs produced in discovery (bearing Bates numbers FAIREY00669 through FAIREY00672) were used in the creation of the Obama Works, and that Mr. Fairey had created these documents in 2009, after the original complaint was filed in this matter. Plaintiffs’ counsel also produced additional documents (bearing Bates numbers FAIREY104735 through FAIREY104766) and explained that Mr. Fairey had attempted to delete some or all of these documents at or around the same time he created the documents bearing Bates numbers FAIREY00669 through FAIREY00672, but that he had been unsuccessful in deleting all copies of them. Finally, the letter corrected certain misstatements Plaintiffs’ counsel had previously made (understanding them to have been true at the time) while meeting and conferring on discovery.

Plaintiffs therefore respectfully request that the Court grant their motion to amend their pleadings in light of the information above.

DATED: October 16, 2009 Respectfully Submitted,
/s/
Anthony T. Falzone (admitted pro hac vice)
Julie A. Ahrens (JA0372)
Stanford Law School
Center for Internet and Society
559 Nathan Abbott Way
Stanford, CA 94305
Telephone: (650) 736-9050
Facsimile: (650) 723-4426
Email: falzone@stanford.edu

Mark Lemley (admitted pro hac vice)
Joseph C. Gratz (admitted pro hac vice)
Durie Tangri LLP
332 Pine Street, Suite 200
San Francisco, CA 94104
Telephone: (415) 362-6666
Email: mlemley@durietangri.com
Attorneys for Plaintiffs and Counterclaim
Defendants

The Exhibits to the Motion to Amend may be found at: http://www.ap.org/iprights/fairey.html.

AP's Motion to Amend the Pleadings and exhibits thereto are available at: http://www.ap.org/iprights/fairey.html.

By Marie-Andree Weiss

In a case filed on December 18, 2009 in the New York Southern District Court, Nygård International Partnership claims that the Canadian Broadcasting Company (CBC) copied without authorization plaintiff’s copyrighted performance/material.

Here are the facts of the case, as stated in the complaint: Nygård opened a store in Manhattan last November, and organized a fashion show featuring Nygård merchandise as part of the opening celebration. Nygård invited only a limited number of preapproved media members, and had them all sign an agreement limiting their rights to record the show. CBC had not been invited to the show, and thus had not signed the agreement. One of its employees nevertheless allegedly made an unauthorized recording of the event, even after having been asked by a Nygård employee to leave the store. A cameraman who may be a CBC employee also made an unauthorized video recording of it.

Count 1 of the Complaint claims that defendant infringed Nygård’s exclusive rights in its copyrighted works. Which works are they, the fashion clothes or the fashion show?

Plaintiff applied for copyright registration for the show. Searching the copyright office database reveals that it holds two copyright registrations for a motion picture of the fashion show, one contained on four DVDs, and one contained on one DVD. Nygård claims that the distribution of images of its fashions prior to their release in the marketplace would give its competitors an unfair advantage, and could cause Nygård to lose control over its intellectual property.

But which intellectual property is it? Nygård’s competitors are fashion houses, not media companies. It seems that by claiming copyright protection of the movie picture depicting the fashion show, Nygård is trying to indirectly protect its fashion creations. As we know, clothes, even highly fashionable ones, are not protected by U.S. copyright laws, because they are useful articles

By claiming copyright protection of the recording of a fashion show, featuring fashion clothes not protected by U.S. copyright, could fashion designers protect their creations? If successful, this case could allow protecting fashion clothes using a back door, or perhaps one should say, a stage door.

What could be the outcome of this case? In a similar case, Sarl Louis Féraud Inter v. Viewfinder Inc. (S.D.N.Y 2005), the S.D.N.Y. dismissed French Fashion house plaintiffs Féraud and Balmain’s action to enforce two judgments issued by the Tribunal de Grande Instance de Paris against Viewfinder, an American company. Viewfinder’s Internet site had reproduced photographs of plaintiff’s fashion shows.

One of Viewfinder’s arguments had been that the French judgment was repugnant to the New York public policy because it was inconsistent with American intellectual property law. Fashion designs are indeed protected by French copyright law: article L.112- 2 14° of the French Intellectual Property Code (thereafter French IP Code) specifically lists as protected works “creations of the seasonal industries of dress and articles of fashion.” Interestingly, fashion shows, although not expressly protected by the French IP Code, are protected under its article L112-1 which grants protection to the “rights of authors in all works of the mind, whatever their kind, form of expression, merit or purpose.” This rather large definition encompasses fashion shows. Until recently though, French Courts had not explicitly held that fashion shows were protected, even though legal IP scholars, such as Professor Pierre-Yves Gautier, argued that they ought to be. The Criminal Chamber of the Cour de Cassation, France’s Supreme Court, finally held in February 2008 that a fashion show is protected by French IP laws, and thus the persons who reproduced it illegally were indeed guilty of the crime of counterfeiting (Cass. Crim. February 5, 20008, number 07-81.387).

Since plaintiffs could not copyright their dress designs in the U.S., Viewfinder’s argued that its photographs could thus not be found to violate plaintiffs' property interests under U.S. law. The S.D.N.Y refused to enforce the French judgment, stating that doing so would have been repugnant to the public policy of New York State under C.P.L.R. § 5304 (b)(4). However, it did not decide that enforcing the Paris court’s judgment would be repugnant because the French intellectual property laws differ so from those of the United States, but because enforcing it would violate Viewfinder's First Amendment rights. Even if the plaintiffs' designs were copyrightable, U.S. copyright law provides “as a matter of First Amendment necessity, a “fair use” exception for the publication of newsworthy matters (Viewfinder, 406 F.Supp.2d at 284). The Court noted that “fashion shows are a matter of great public interest, for artistic as well as commercial purposes” and that “the extensive coverage given to such events in various mass media makes clear that there is widespread public interest in these matters.”

This argument did not fare well with the Court of Appeal for the Second Circuit (Feraud v. Viewfinder, 489 F.3d 474 (2nd Cir. 2007), which vacated the lower court’s order for failure to conduct the full analysis necessary to reach the conclusion that Viewfinder’s First Amendment rights would be violated. The Second Circuit noted that the First Amendment does not provide a categorical protection, and it must co-exist with intellectual property laws: “the fact that an entity is a news publication engaging in speech activity does not, standing alone, relieve such entities of their obligation to obey intellectual property laws.”

As for the ‘fair use’ argument, the Second Circuit cited Harper & Row, 471 U.S. at 557, 105 S.Ct. 2218, where the Supreme Court had found that publishing "newsworthy matters” is not necessarily fair use. This precedent may be helpful to Nygård, should the defendants invoke fair use as a defense. Regardless, this interesting case should be monitored closely by those interested in finding a way to protect fashion designs in the United States.

Link to Nygard complaint:
http://www.scribd.com/doc/24376395/Complaint-Copyright-Trespass-CBC

Link to French IP Code:
http://195.83.177.9/code/liste.phtml?lang=uk&c=36&r=2494

Link to Sarl Louis Feraud Int’l v. Viewfinder, Inc. (2nd Cir. 2007): http://vlex.com/vid/sarl-louis-feraud-int-l-viewfinder-28797792

By Monica Pa

On January 27, 2010, the First Circuit Court of Appeals issued an important decision protecting the scope of artists’ rights under the Visual Artists Rights Act (“VARA”), 17 U.S.C. § 106A. In this much-publicized lawsuit, the Swiss artist Christoph Büchel was commissioned by the Massachusetts Museum of Contemporary Art Foundation, Inc. (“Mass MOCA”) to construct a mammoth art installation, roughly the size of a football field, entitled “Training Ground for Democracy” (“Training Ground”). The work included several major components, such as a vintage movie theater interior, a house, a variety of vehicles, a burned out 737 aircraft fuselage, and a bomb carousel. Mass MOCA was solely responsible for the cost of acquiring these items for the installation, which ultimately amounted to an upwards of $300,000 (nearly twice its initial budget) for materials and labor. Remarkably, the parties never memorialized the terms of their relationship or their understanding as to the intellectual property rights at issue. Communications between the artist and the museum became so strained that the artist refused to continue working on the unfinished installation. The museum, nevertheless, continued putting together the work in accordance with Büchel’s latest instructions. Unable to convince Büchel to return to the project, on May 21, 2007, Mass MOCA filed a complaint in federal court seeking a declaration that it was entitled to exhibit this unfinished work and a retraining order preventing Büchel from interfering. Büchel responded with a five-count counterclaim, asserting, among other things, that showing his unfinished work would violate his rights under VARA.

In July 2008, Judge Michael A. Ponsor in the District Court of Massachusetts ruled in favor of Mass MOCA, 565 F. Supp. 2d 245 (D. Mass. 2008), holding that VARA did not protect unfinished works of art. As such, the museum was entitled to show the Training Ground work so long as it included an accurate disclaimer. In any event, Büchel’s rights of attribution and integrity under VARA were not implicated by the museum’s conduct. The district court then dismissed Büchel’s copyright claims, finding that the display of “covered components of an unfinished installation” was neither an infringement of Büchel’s exclusive right to publicly display his work or to create derivative copies. Accordingly, the district court entered judgment in favor of the museum and dismissed all five of Büchel’s counterclaims.

In a substantial victory for artist rights advocates, the First Circuit reversed. Most important, Judge Lipez, writing for the unanimous panel, held that the “statute’s plain language extends its coverage to unfinished works”, as well as the statute’s history and purpose. The court concluded that Büchel’s rights in his Training Ground work “were protected under VARA, notwithstanding its unfinished state.” VARA protects an artists “right of integrity” which allows the artists to prevent distortions, mutilations or modifications of their works that are prejudicial to their reputation or honor. The record contained “sufficient evidence to allow a jury to find that Mass MOCA’s actions [namely modifying the “Training Ground” work over his objections] caused prejudice to Büchel’s honor or reputation.” The court, however, dismissed Büchel’s right of attribution claim. Since VARA’s protection for a right of attribution is only enforceable through injunctive relief, this claim was moot because the Training Ground work no longer existed after the museum dismantled it.

This decision is also notable for its copyright holding. Acknowledging the intersect between VARA and the Copyright Act, the First Circuit held that the record revealed a factual dispute as to whether Mass MOCA violated Büchel’s exclusive right to publicly display his work when it repeatedly and deliberately showed Büchel’s unfinished works on numerous occasions to various individuals without his permission. The court, however, held that because Büchel’s counsel did not adequately develop the claim that the museum’s modification of the Training Ground work constituted the creation of an unauthorized derivative work, this copyright right was waived on appeal. This case was remanded for further proceedings on Büchel’s reinstated VARA and copyright claims. In a recent statement to the press, Büchel’s counsel has indicated that Büchel, now represented by the Volunteer Lawyers for the Arts, Wachtell, Lipton, Rosen & Katz in New York City, and K&L Gates LLP in Boston, intends to litigate this case “to the fullest extent possible.”

This litigious debacle has, interestingly, reemerged in Büchel's other works. At the latest Art Basel Miami Beach show in December 2007, he presented a smaller version of the Training Ground work, which featured litigation papers and correspondence about the failed show. Reportedly, this work was purchased by a collector for $250,000, and donated to the Hamburger Bahnhof museum in Berlin.

Seton Hall University School of Law, Sports and Entertainment Law Journal

Presents:
2010 Sports & Entertainment Law Symposium
February 26, 2010 | Newark, New Jersey

9:00 AM – Registration and Breakfast

9:30 AM – Welcome & Opening Remarks
- BRETT THEISEN, Co-Chair, Seton Hall Law Symposium Committee

9:45 AM – Equal Opportunity in Coaching: Effects of the Rooney Rule
- This panel will examine attempts to equalize opportunities for minority coaching candidates, specifically analyzing the NFL's Rooney Rule and the absence of a similar rule in NCAA sports.

Moderator:
o PROFESSOR TIMOTHY GLYNN, Seton Hall University School of Law
Panelists:
o PROFESSOR ROBERT BOLAND, New York University Preston Robert Tisch Center for Hospitality, Tourism, and Sports Management
o ROBERT TALLEY, Head Football Coach, Stonehill College
o RICH ENSOR, ESQ., Commissioner, Metro Atlantic Athletic Conference
o CHARLOTTE WESTERHAUS, ESQ., Vice President of Diversity and Inclusion, NCAA

11:15 AM – Financial & Estate Planning for Athletes & Entertainers in Turbulent Times
- This panel will analyze the distinctive needs of professional athletes and entertainers, especially in light of the current economic climate. The panelists will address the state of the NFL collective bargaining agreement and the impact of a possible work stoppage. Professional athletes and entertainers are not your typical high net worth clients, and this panel will also discuss the psychological and sociological issues that surround newly acquired wealth.
Moderator:
o LANCE T. EISENBERG, ESQ., Drinker Biddle & Reath, LLP, NFLPA Registered Player Financial Advisor
Panelists:
o ROBERT RAIOLA, CPA, Van Duyne, Behrens & Co., P.A., Co-Author, Winning Tax Strategies and Planning for Athletes and Entertainers
o JUSTIN MCCARTHY, RR Advisory Group, LLC
o JIM SPANARKEL, Financial Advisor and former Duke Basketball Player
o BRIAN LEONARD, Fullback, Cincinnati Bengals (Rutgers University)
o AARON VAN DUYNE III, Senior Principle, Van Duyne, Behrens & Co., P.A., (Entertainment Industry Issues)

1:00 PM - Lunch

2:00 PM – Keynote Speaker
- LOU LAMORIELLO, CEO, President, and General Manager, New Jersey Devils
o Introduction by MARC BIANCHI, Co-Chair, Seton Hall Law Symposium Committee

3:00 PM – Franchise Bankruptcy and Relocation Rights
- This panel will consider issues relating to bankruptcy of professional sports franchises, in light of the recent Phoenix Coyotes bankruptcy litigation. The Coyotes ownership attempted to sell the team under §363(f) of the Bankruptcy Code and relocate to Hamilton, Ontario, thereby infringing on the NHL’s exclusive right to determine the geographical distribution of its franchises and the City of Glendale’s right to specific performance under the arena agreement.
Moderator:
o PROFESSOR GEOFFREY C. RAPP, University of Toledo College of Law
Panelists:
o PROFESSOR STEPHEN J. LUBBEN, Seton Hall University School of Law
o JAMES A. KEYTE, ESQ., Partner, Skadden, Arps, Slate, Meagher, & Flom, LLP
o PROFESSOR MARC EDELMAN, Professor Barry University School of Law and Sports Attorney
o ANDREW SROKA, ESQ. Senior Associate, Brown Rudnick LLP

4:30 PM – Closing Remarks
- ANDREW FERENCEVYCH, Co-Chair, Seton Hall Law Symposium Committee

Symposium Registration:

law.shu.edu/SportsLawSymposium

5 NYCLE Credits (full day attendance required) $100

General Public $25

Free Admission for Students

Breakfast & Lunch will be provided to all attendees

For details, contact Brett Theisen, Symposium Co-Chair

Brett.Theisen@student.shu.edu

By Mary Rasenberger

A careful reading of the Statement of Interest filed in the Google Books case by the Justice Department last week shows a harsher assessment than was evident in its earlier filing. The government’s brief rejects the amended settlement agreement (“ASA”), finding that the parties’ attempts to cure the issues the government identified in its earlier brief do not go nearly far enough: “Despite this worthy goal [trying to create a mechanism to allow for lawful large-scale book digitization], the United States has reluctantly concluded that the use of the class action mechanism in the manner proposed by the ASA is a bridge too far.”

Given the stakes and pressures that were likely put to bear on the government, it is an incredibly strong document. It will be remarkable if Judge Chin (or his successor in the case, if he is moved up to the Second Circuit soon) approves the ASA as-is, even after the substantial responses filed by the parties.

The government’s main issue with the ASA is that it uses the class action suit to create a far-reaching commercial arrangement that looks far into the future (indeed in perpetuity) and far beyond the claims off the suit. It does this by granting Google legal rights that it never could have obtained through a private arrangement or through a judicial resolution of the suit – and these legal rights fly in the face of “the core principle of the Copyright Act that copyright owners generally control whether and how to exploit their works during the term of copyright.” Secondarily, providing these rights, the government argues, confers significant, possibly anti-competitive advantages to Google.

The government’s September 18th brief focused on the anti-competitive concerns and more technical class action issues, and did so in an equivocal enough way that it left room for the parties to make the minor changes they did in the ASA and be able to wipe their hands with a straight face. The recent brief, in contrast, does not mince words and hits hard on the underlying problem many objectors have with the ASA - it attempts to use the class action process to get around the existing legal system rather than to support it. As Marybeth Peters, the Register of Copyright, has said, and many have repeated: the settlement turns copyright on its head. It creates a whole new legal system of opt-out regime for the benefit of a single entity, which is totally at odds with copyright’s grant of exclusive rights to authors.

To summarize the government’s brief at a very high level, there are three key objections to the ASA:

1. Class action law does not permit settlements to replace commercial transactions that go far beyond the claims at issue in the case or restructure the law;

2. The settlement turns copyright on its head by creating an opt-out regime for the vast majority of works at issue; and

3. Granting an across-the-board license to Google for non-commercial works on an opt-out basis creates potential anti-competitive advantages, as no competitor will be able to obtain those rights, especially in the case of unclaimed works.

At the same time, the government is rightly sympathetic with the parties’ attempt to use the class action process in this way. The current law and practice is arguably defective, and makes mass-digitization, even when it serves a good public purpose, impossible to do legally. Orphan works legislation might help some, as would collective licensing arrangements or perhaps a statutory license for libraries. But you don’t have to be a class action lawyer to know that Rule 23 (the civil procedure rule allowing for class action lawsuits) is not intended to be used to create new law. We have one mechanism for fixing the law in this country – legislation. As judges in countless cases have said: you have a problem with the law, take it to Congress.

Sure, it’s been impossible in recent years to pass copyright legislation, but that doesn’t mean we get to amend the law ourselves in class action lawsuits.

For those interested in more detail, I’ve summarized some of the specific arguments in the government’s February 4th Statement of Interest below. The arguments are made in the context of two separate sets of laws: class action law and antitrust law.

Class Action Law Related Issues

The Government’s brief states: “The Supreme Court has cautioned that 'Rule 23… applied with the interests of absent class members in close view, cannot carry the large load of restructuring legal regimes in the absence of congressional action – however sensible that restructuring might be.'”

The arguments regarding non-compliance with the Rule 23 class action rules are some of the more interesting and compelling ones raised in the case. The Rule 23 law gets at some of the smell test issues in this case, described above – i.e., even though it sounds good, it looks good, it doesn’t smell quite right. It seems at odds with some of our underlying basic legal principles to allow a class action law suit filed by a small group of associations and individuals, who admittedly do not represent all author and publisher class members throughout the world or even the U.S., to take away hundreds of thousands (if not millions) of individuals’ rights without their consent. It’s even odder when you consider that the law suit was brought to enforce those very rights.

It turns out, according to one Justice (and certain other objectors, e.g., Microsoft, Amazon, Scott Gant) that the class action law does have standards, if not crystal clear ones, that don’t necessarily promote this kind of sweeping conversion of rights.

Both the parties’ and the government’s briefs discuss the standards set forth in the Supreme Court’s Firefighters case (Local Number 93, Int’l Assoc. of Firefighters v. City of Cleveland, 478 U.S. 501 (1986)). Under Firefighters and its progeny, the Court may approve a settlement that meets the following three-prong test: (1) the settlement springs from and serves to resolve a dispute with the Court’s subject matter jurisdiction, (2) the settlement comes within the general scope of the case made in the pleadings, and (3) it furthers the objectives of the law on which the complaint was based. The government concludes that:

1. It’s difficult to see how this settlement meets the first prong in that it resolves future claims by absent class members for activities well beyond the facts underlying the complaint;

2. The ASA does not meet the second prong because it creates a business relationship that covers future conduct that goes way beyond the claims in the complaint and provides Google with benefits that it never could have obtained through the litigation itself or even through a privately negotiated deal (i.e., the opt-out for non-commercial works); and

3. The ASA does not further the objectives of copyright law, but is inconsistent with the policy of Copyright Act, which provides for exclusive rights and not opt-outs.

The government concedes that a settlement of a class action may go “somewhat” beyond the conduct complained of in the complaint, but can’t go so far as “to abridge or enlarge substantive rights” and “usurp the legislative function.”

The government further states that the ASA does not remedy the lack of adequate representation of the interests of a large number of members (namely, unclaimed work owners, foreign rightsholders) in the settlement negotiations, and that appointing a fiduciary with limited powers for unclaimed works at the Registry does not solve the problem. It also exhorts the Court to look more closely at the notice provided to potential class members to determine if it was adequate, specifically requesting that the Court “undertake a searching inquiry to ensure both that a sufficient number of class members have been or will be reached and that the notice provided fives a complete picture of the broad scope of the ASA…”

Last, the government raises concerns about Attachment A of the ASA. Attachment A is a sub-agreement that controls potential disputes between authors and publishers, mainly regarding possession of rights and splits, and supersedes all agreements between publishers and authors, even foreign ones. The government notes that there may be a conflict of interest between subclasses of authors and publishers, which raises “serious questions” regarding adequacy of representation under Rule 23.

Antitrust Issues

The antitrust issues discussed in the brief are essentially the same ones addressed in the government’s September 18th brief; and they are the primary issues that the parties attempted to address in the ASA’s amendments. The government states that the parties made “constructive revisions” to address these potential anti-competitive problems, but that the amendments do not go far enough to remedy:

1. The creation of an industry-wide revenue-sharing formula at the wholesale level applicable to all works;

2. The setting of default prices and the effective prohibition on discounting by Google at the retail level; and

3. The control of prices for orphan books by the known publishers and authors with whose books the orphan books likely will compete.

With respect to the first issue, the government notes that the ASA gives Google the right to renegotiate the wholesale revenue split with rights holders, but only for commercially available works. The government believes that the carve-out for non-commercial works may render the amendment somewhat meaningless, given the fact that the vast majority of works at issue are not commercially available under the ASA’s definition and that this will be especially true if the publishers take commercially available books out of the settlement, as many have suggested they will do.

The government also does not believe that the “fixes” regarding the use of pricing algorithms go far enough to prevent a de facto horizontal agreement. It analogizes the publishers’ and authors’ agreement to allow Google to price the works (using its algorithms) to the delegation of pricing to a common agent - a practice found to be unlawful. Far preferable would be actual bilateral negations than the ability to opt-out of the default use of algorithms.

The government’s biggest concern, however, relates to the pricing of orphan works, since the Registry’s board, consisting primarily of commercial publishers and authors, would have the ability and incentive to limit competition from unclaimed works. The parties have responded to this criticism (also in the government’s September brief) by providing in the ASA for an “Unclaimed Works Fiduciary,” but this fiduciary’s powers are limited – for instance, he or she will not have the ability to set prices for works, or renegotiate splits. As such, the government does not believe the appointment of fiduciary cures the underlying problem.
Last and most importantly perhaps, the government finds that the amendments do not address Google’s de facto exclusive rights to use orphan and rights-uncertain works. The government states that no other entity will have the ability to offer these works legally. Although the ASA attempted to address this concern by expressly allowing resellers to provide access to these works, the government does not equate these reseller rights with the right Google has to freely exploit orphan and other unclaimed works. It concludes: “the reseller clause cannot create new competitors to Google.”

So now what?

The government’s brief advises the Court that the public interest would best be served by direction from the Court encouraging the continuation of settlement discussions between the parties. But if we can be realistic for a moment – what are the chances of Google agreeing to all of the concessions that Justice’s analysis would require to make the settlement copasetic? Google has made it clear that, from its perspective, the opt-out for out-of-print works, and especially the orphans, is essential to the deal. If you read the government’s brief carefully, it does not appear that its cumulative objections all could be adequately addressed without getting rid of the opt-out for non-commercial works. The government does state, however, that if the opt-out is retained, Google should be required, among other things, to conduct a search for unclaimed work prior to their use, similar to the reasonable search requirement in the last iterations of the orphan works bill. Google has publicly stated that, although it supports orphan works legislation, that legislation would not provide it with the flexibility it would need to create the inclusive database envisioned.

By Mary Rasenberger

An impressive number of pages were filed this past Thursday (February 11, 2010) by the parties in the Google Books Search case in support of the amended settlement agreement (“ASA”). Only a week after the Justice Department filed its brief, both Google and the named Plaintiffs (publishers and authors collectively) filed briefs worthy of fat binder clips. The Plaintiffs' briefs alone comprise nearly 250 pages, including a 170 page Supplemental Memorandum Objecting to Specific Objections (and with the numerous declarations and exhibits the parties' papers amount to over 2,500 pages altogether).

The briefs remind the Court of the benefits of and support for the settlement, and as would be expected, address the government’s concerns set out in its February 4th Statement of Interest. Google’s brief addresses the government’s objections in great detail supported by substantial case law; the brief also discusses a somewhat random, handful of objections filed by others (fairness to third parties, burden of determining whether a book was registered, inaccuracies in the database, security, and time limit on removal).

The Plaintiffs’ principal brief makes some compelling arguments as to why the ASA is preferable to the alternative outcomes in this case (e.g., protracted litigation, the risk of an on/off decision) and why the settlement is reasonable in light of the case. It summarizes the ASA and its benefits and takes on some of the Rule 23 and other concerns raised by the government. The Plaintiffs’ supplemental brief appears to take on the entire catalog of objections filed by all objectors with standing. Impressive as it is, the supplemental brief may have bit off more than it could chew. Some of the responses, some even to significant objections, come off as non-responsive or conclusory. Moreover, the same objections in some cases are addressed separately in the two briefs, not always completely consistently. They don’t always cross-reference arguments made in the other brief (e.g., the discussion of adequacy of notice in the supplemental brief seems very conclusory if not read alongside the discussion in the principal brief, which is not referenced).

For instance, in response to arguments that the ASA cannot bind foreign members of the class because (1) the law is at odds with that of other countries and (2) the Court lacks personal jurisdiction, the Plaintiffs state in the supplemental brief (pp. 61-63) that members of the class can be bound so long as notice meets the Rule 23 requirements, and that notice was compliant (here referencing their arguments as to why it was compliant). Admittedly, I have not read the cases they cite, but maybe they could explain why compliant notice would address these concerns.

In response to Justice’s and others’ concerns about the fact that Google alone will have the right to offer orphan works (i.e., books for which a copyright owner cannot be located) and the impossibility for others to obtain the rights to the orphans and enter that market, in the Supplemental Motion (pp 149-150), the Plaintiffs summarily respond: "This argument relies on unsupported and illogical speculation that the subset of out of print [orphan] books is so uniquely valuable and desired that other subscription products will be unable to compete with the Institutional Subscription."

Considering that the government and many others viewed this as a significant issue, the response seems flippant. Of course, a subscription database that includes all books, including out-of-print books for which no owner has come forward, is much more valuable than one that is created on an opt-in basis and so would not include orphans. As a library, which one would you chose? And if these works don’t increase the value of the database, then why is the opt-out so crucial to the settlement? Why does Google insist it needs these out-of-print works (a huge portion of the books at issue in the settlement)? If the out-of-print, unclaimed works really are so valueless, then make them available to Google on an opt-in basis and 95% of the objections go away.

Some odd responses aside, the parties’ recent briefs keep the ball in play. Perhaps most interestingly, filing these briefs indicates that the parties do not intend to go back to the negotiating table again as the government recommended. Moreover, the briefs contain some solid, convincing arguments. They are worth a thorough read for the interested – who have a lot of free time. (It does feel like reading the original settlement agreement all over again.) Most importantly, one hopes that Judge Chin will have the time to read it all. He may just want to run for the hills when he sees all that paper. I mean the Second Circuit.

The briefs have good table of contents, as you’d expect. One approach to reading the briefs is to do so on a topic by topic using the table of contents, rather than try to read them in linear fashion. And for those of us who’d love to see a list of all objections filed in the case, the supplemental brief serves as a pretty good proxy.