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August 24, 2010

Update in Fairey v. AP (Obama Hope Poster Case)

By Joel L. Hecker

This copyright infringement proceeding in the U.S. District Court for the Southern District of New York case became a little simpler on August 20, 2010, when the parties filed a stipulation with the court dismissing AP photographer Mannie Garcia from the case. As you may recall, Garcia was the photographer who took the photograph which was used as the basis for Shepard Fairey's poster. Although Fairey initially claimed that he relied upon a different photo, he later recanted, admitting that he had lied, thereby removing the question of which photo was copied.

Garcia dropped his claim that he owns the copyright to the photo and AP dropped its counterclaim against him. This is not surprising since the documentary evidence filed in the case appeared to clearly establish that the copyright did in fact belong to AP.

Judge Hellerstein, who has in the past pushed for a resolution to the case, has now scheduled what he anticipates to be a three week trial for March 21, 2011, at which time the selection of an eight person jury will commence.

Joel L. Hecker, Of Counsel to Russo & Burke, 600 Third Avenue, New York, NY 10016, practices in every aspect of photography and visual arts law, including copyright, licensing, publishing, contracts, privacy rights, and other intellectual property issues. He can be reached at (212) 557-9600, website www.RussoandBurke.com, or via email: HeckerEsq@aol.com.

September 29, 2010

Second Circuit Confirms Digital File Download is Not a Public Performance

By Joel L. Hecker
HeckerEsq.com

The United States Court of Appeals for the Second Circuit has just issued its decision, dated September 28, 2010, affirming the district court ruling that a download of a digital file containing a musical work does not constitute a public performance of that work under the U.S. Copyright Act. However, the appellate court vacated the district court's assessment of fees for a blanket ASCAP license and remanded it for further proceedings. The decision can be found at US v. American Society of Composers, Authors and Publishers, decided September 28, 2010, docket number 09-0539-CV.

Digital File Downloads

The first issue before the court on appeal was whether a download of a digital file containing a musical work constitutes a public performance of that work. It was not disputed that playing the music after it had been downloaded is a public performance, since the downloading of the files actually created copies of the musical work. Therefore, the copyright owners must be compensated for these downloads. However, the case involved the public performance right, which is a separate and distinct copyright right.

The court first turned to Section 101 of the Copyright Act, which defines "performance" to mean to "recite", "render", "play", "dance", or "act it". The court stated that a download is plainly neither a "dance nor an act", and went on to determine whether the download falls within the meaning of the terms "recite", "render", or "play".

The court had no difficulty determining that the ordinary sense of these words entail what is called contemporaneous perceptibility. That is, a "recital" is a performance before an audience and a performance, as defined in the audio-visual context of Section 101, requires such contemporaneous perceptibility.

The court also dismissed ASCAP's interpretation of the definition of "publicly", holding that "publicly" simply defines the circumstances under which a performance will be considered public and does not define the meaning of "performance".

In further support of its decision, the court juxtaposed the parties' agreement that stream transmissions constitute public performances because streaming entails a playing of the song that is perceived simultaneously with the transmission. In contrast, said the court, downloads do not immediately produce sound. That only occurs after a file has been downloaded and played back. Accordingly, the court concluded that transmittal without a performance does not constitute a "public performance" under the Copyright Act.

Fee Determination for Using the ASCAP Repertory

The district court had determined royalty rates for blanket licensing fees for the uses involved in the case. The Second Circuit found that the district court did not adequately support the reasonableness of its methods or royalty rate applied. Accordingly it remanded the case to the district court to redetermine reasonable fees for the licenses in light of the guidelines set forth in the opinion. A discussion of those guidelines is too involved for this blog and the reader is referred to the opinion itself.

Joel L. Hecker, Of Counsel to Russo & Burke, 600 Third Avenue, New York, NY 10016, practices in every aspect of photography and visual arts law, including copyright, licensing, publishing, contracts, privacy rights, and other intellectual property issues. He can be reached at (212) 557-9600, website www.heckeresq.com, or via email: HeckerEsq@aol.com.

October 21, 2010

Photographer Wins Lawsuit against Homeland Security to Photograph Outside of Federal Courthouses

By Joel L. Hecker

Antonio Musemeci, a software developer who works with the radio show Free Talk Live, and is a member of the Manhattan (New York) Libertarian Party, was arrested by an officer of the United States Department of Homeland Security's Federal Protective Service on November 9, 2009 while taking photographs of another Libertarian party member who had been handing out pamphlets in front of the Daniel Moynihan United States Courthouse at 500 Pearl Street in Manhattan.

The arresting officer took his camera and memory card and charged him with violating 41 CFR Section 102-74.420, which places restrictions upon photographing certain federal property. The criminal charge was eventually dismissed and on April 22, 2010 Musemeci filed a lawsuit in the United States District Court for the Southern District of New York. The case, Musemeci v. US Department of Homeland Security, Docket No. 10 Civ. 3370 (RJH), sought to enjoin government officials from restricting non-commercial photography in outdoor public areas where pedestrians have an unrestricted right of access. He was represented by the New York Civil Liberties Union.

That case has now been settled with a complete victory to Mr. Musemeci, other photographers and the public at large. In the settlement agreement filed on October 15, 2010 FPS agreed to provide a written instruction to its officers and employees engaged in law enforcement, stating that for federal courthouses under its protective jurisdiction, there are generally no security regulations prohibiting exterior photography by individuals from publicly accessible spaces, absent a written local rule, regulation or order. The instruction will also inform FPS officers and employees that the public has a general right to photograph the exterior of federal courthouses from publicly accessible spaces.

The settlement does not preclude FPS or any other government agency from taking any legally permissible law-enforcement action, including but not limited to approaching any individual taking photographs and asking for the voluntary provision of information such as the purpose of taking the photographs or the identity of the individual, or taking lawful steps to ascertain whether unlawful activity or reconnaissance for the purpose of a terrorist, or unlawful, act is being undertaken.

FPS also agreed to release Musemeci's memory card which it had seized for use as possible evidence in the initial criminal matter. In addition, FPS will pay Musemeci the sum of $1,500 in damages and $3,350 for his attorney's fees and costs. The stipulation also included mutual general releases.

This settlement and directive would appear to clarify what professional and amateur photographers may do when taking photographs of certain federal courthouses, subject to the specified permissible security measures. Such photographers however, need to be aware of local laws or regulations which might apply to taking photographs in public places.

This settlement is obviously a welcome and long-coming clarification of this federal statute, and what photographers as well as the public at large may do in these situations.

Joel L. Hecker, Of Counsel to Russo & Burke, 600 Third Avenue, New York, NY 10016, practices in every aspect of photography and visual arts law, including copyright, licensing, publishing, contracts, privacy rights, and other intellectual property issues. He can be reached at (212) 557-9600, website www.heckeresq.com, or via email: HeckerEsq@aol.com.

November 10, 2011

The Demise of Righthaven Litigations May Finally Have Arrived

By Joel L. Hecker

Most of you are probably familiar with the saga of the litigations brought by Righthaven, LLC, a Nevada limited liability company wherein Righthaven filed in excess of 250 lawsuits for copyright infringement with many of them being brought in the United States District Court, District of Nevada.

The business model for Righthaven was to acquire certain rights from its affiliate, Stephens Media, LLC, which owns the Las Vegas Review-Journal, a newspaper located in Nevada. Righthaven then would basically commence copyright infringement litigation against website owners and others, accusing them of copyright infringement in connection with alleged improper uses of the news articles first appearing in the Las Vegas Review-Journal.

The lawsuits were usually commenced without any previous contact or attempt to negotiate a cease and desist of the allegedly infringing material. Many of the cases were immediately settled because of the cost to defendants in opposing them. This business model has been called nothing less than a blatant money-making venture and not a legitimate attempt at copyright protection. It has acquired the perhaps unflattering nickname of "copyright troll suits".

The judges in the District Court of Nevada in effect finally put a stop to Righthaven's activities by first questioning the legitimacy of Righthaven's claim of copyright ownership and by ruling in the few cases that were actually litigated that the uses in such cases were in fact fair uses.

On November 1, 2011, in what may be one of the final acts in this Righthaven saga, pursuant to an order in Righthaven LLC v. Wayne Hoehn, case number 2:11-cv-00050, of the District Court of Nevada, the clerk of the court issued a writ of execution against Righthaven in the sum of $63,720.80. This writ was issued on a motion of Mr. Hoehn, who successfully defended the case resulting in a decision that use of a newspaper article in his blog was, in fact, a fair use of the material and, in addition and perhaps more important, that Righthaven never owned the underlying copyright in the first place and therefore lacked standing to bring the action.

In another case in Nevada which Righthaven lost, the court assessed a substantial amount against Righthaven for legal fees incurred by the defendant.

All in all, with Righthaven's losing any sense of legitimacy for its business model, judicial decisions holding that it does not have standing to bring these "troll" actions, and the substantial judgments being entered against it, we have undoubtedly seen the end of these copyright trolls.


Joel L. Hecker, Of Counsel to Russo & Burke, 600 Third Avenue, New York, NY 10016, practices in every aspect of photography and visual arts law, including copyright, licensing, publishing, contracts, privacy rights, and other intellectual property issues. He can be reached at (212) 557-9600, website www.RussoandBurke.com, or via email: HeckerEsq@aol.com.

February 12, 2013

Macmillan Settles Antitrust Action

By Joel L. Hecker

As you probably know by now, the U.S. Justice Department commenced a civil antitrust action against five of the six major book publishers in the United States as well as Apple, Inc. This action arose out of allegations that the defendants conspired to raise the price of e-books over a period of time in response to the practice by Amazon.com of selling e-books for $9.99.

The parties had extensive negotiations prior to the filing of the action and the government reached a settlement with Hachett Book Group, Inc., HarperCollins Publishers, LLC, and Simon & Schuster, Inc., three of the publishers. As a result, simultaneously with the filing of that complaint, the government also filed a Stipulation of Settlement and Consent Decree along with a Competitive Impact Statement. That settlement was approved by Judge Cote of the Southern District of New York on September 5, 2012, at which time she granted the government's motion for a final judgment against these three publishing defendants. (Please see my article in the Fall/Winter 2012 Edition of the EASL Journal for a detailed description of the terms of that settlement.)

In December 2012, the fourth publishing defendant, the Penguin Group (Penguin), a division of Pearson PLC, Penguin Group (USA) Inc. abandoned its defense and also agreed to settle on the same terms as previously approved by Judge Cote. The public comment period on that settlement runs through March 5, 2013, after which Judge Cote will hold a hearing on the government's motion to approve that Consent Decree and whether to grant the government's motion for a final judgment against Penguin.

As a result, Macmillan (actually Verlagsgruppe Georg Von Holtzbrinck GMBH, Holtzbrinck Publishers, LLC d/b/a Macmillan) was left as the only remaining publishing defendant in the action (along, of course, with Apple). On February 8, 2013, Macmillan gave in and agreed to settle on the same terms previously agreed to by the other four publishing defendants. The reasons given for abandoning its defense were spelled out, in a letter by Macmillan's CEO, John Sargent, that Macmillan "settled because the potential penalties became too high to risk even the possibility of an unfavorable outcome." Sargent also wrote that, "I had an old-fashioned belief that you should not settle if you had done no wrong. As it turns out, that is indeed old-fashioned." Aside from being old-fashioned, the government obviously takes issue that Macmillan had done no wrong!

Another reason that Macmillan reached the settlement was that the market for e-books seems to have not led to any noticeable drop in e-book prices, which was the great fear of the publishers. Therefore, Macmillan had been out of step in the marketplace.

Macmillan will now go through the same process of having the government file a Stipulation of Settlement and Consent Decree along with a Competitive Impact Statement. There will then be a period for public comment, followed by a motion by the government before Judge Cote for approval and for a final judgment.

This leaves Apple as the only defendant in the action with a trial date currently set for June 2013.

September 26, 2013

A Copyright Claim Cannot Bar Use of Briefs and Pleadings in a Pending Litigation

By Joel L. Hecker

All attorneys who litigate at one time or another create new material as part of pleadings and briefs. To some extent this original work may be considered to be copyrighted material, with the copyright owned by the author/attorney. In a case of first impression, the United States Court of Appeals for the Second Circuit was called upon to rule on an appeal from the Eastern District's dismissal of such a copyright infringement claim. The case is Unclaimed Property Recovery Service, Inc. and Bernard Gelb v. Norman Alan Kaplan (Docket No. 12-4030, decided August 20, 2013).

The Circuit Court phrased the facts as follows: "this case concerns a novel attempt to use Copyright Law in furtherance of sharp litigation practices". The plaintiffs were two of the named plaintiffs in a class action and Kaplan was the class action plaintiffs' attorney. The plaintiffs alleged that Gelb wrote the Amended Class Action Complaint and compiled 305 pages of accompanying exhibits (the "First Exhibits"). The plaintiffs claimed that they owned the copyrights in these documents.

Kaplan signed and filed the First Amended Complaint and the First Exhibits on behalf of the class action plaintiffs, including UPRS and Gelb. The District Court dismissed the class action as time-barred, and Kaplan appealed on behalf of all the class plaintiffs. While the appeal was pending, Kaplan and Gelb (who is not an attorney) had a falling out and Kaplan informed Gelb that he would no longer represent Gelb and UPRS. Gelb and UPRS thereupon retained new attorneys to represent them in the class action, but Kaplan remained the attorney of record. New counsel for UPRS and Gelb then moved to withdraw the pending appeal in its entirety. However, the court only granted the motion with respect to them and the appeal proceeded without them. The Second Circuit vacated the District Court dismissal of the class action and on remand Kaplan filed a Second Amended Class Action Complaint and accompanying exhibits (the "Second Exhibits") on behalf of the class plaintiffs. The key component of this case was that significant portions of the Second Amended Complaint and Second Exhibits were identical to portions of the First Amended Complaint and First Exhibits in which Gelb and UPRS claimed copyright ownership.

Thereafter, Gelb and UPRS brought suit against Kaplan, alleging that Kaplan had infringed their copyrights when he incorporated portions of the First Amended Complaint and First Exhibits into the Second Amended Complaint and Second Exhibits. The District Court dismissed the action for failure to state a claim upon which relief can be granted, holding that they had granted Kaplan an irrevocable implied license to file the amended documents. The District Court did not reach the issue of whether they had valid copyright interests because this decision was dispositive.

The issue on appeal, as framed by the Circuit Court, was "whether the holder of a copyright in a litigation document who has authorized the party to a litigation to use the document in the litigation may withdraw the authorization after the document has already been introduced into the litigation and then claim infringement when subsequent use is made of the document in the litigation."

The Circuit Court affirmed the District Court in dismissing the case but on different grounds. It held that "such an authorization necessarily conveys, not only to the authorized party but to all present and future attorneys and to the court, an irrevocable authorization to use the document in the litigation thereafter". (The court in a footnote stated that it does not suggest that permission of the copyright holder is needed for use of a copyrighted document in litigation since the ruling only concerns the grant of authorization for use in litigation which the holder then purports to withdraw.)

The Second Circuit, in what seems to be an obvious conclusion, held that litigation could not be conducted successfully unless the parties to litigation and their attorneys are free to use documents that are a part of the litigation since the parties rely on such documents as a means of establishing the nature of dispute and the facts and legal arguments that have been put forward by each party.

In addition, the Court found that a court's ability to perform its function depends on the ability of the parties and their attorneys to submit copies of documents in contention and to serve one another with copies of such documents. Finally the Court said that courts could not thoroughly and fairly adjudicate a matter if suddenly in the midst of litigation the parties lost the right to give the court copies of documents already used in the litigation that support their argument.

Accordingly, held the Circuit Court, the copyright holder's authorization will be construed to encompass the authorization, irrevocable throughout the duration of the litigation, not only to the expressly authorized party, but to all parties to the litigation and to the court, to use the document for appropriate purposes in the conduct of the litigation.

The Circuit Court severely criticized the conduct of the plaintiffs and their questionable litigation practices, stating that they attempted to influence the class action litigation by means of this novel use of copyright law after the Circuit Court, in its earlier decision, had refused to allow them to withdraw the class action appeal on behalf of all of the named plaintiffs.

In what the Circuit Court described as particularly troubling, the plaintiffs' theory, if successful, would permit the replaced attorney to use copyright law to hamper the former client's ability to select his own new counsel - a right that is one of the foundations of our systems of justice.

Finally, the theory put forth by the plaintiffs would allow the author of a legal pleading to also bar the district court from exercising its discretion with respect to the management of the case, as courts often permit a party to amend a pleading in part but not in full. That would obviously require that an amended pleading retain a portion of the original pleading.

All in all, the Circuit Court rejected all of the plaintiffs' claims in what was a very sound and well-reasoned decision, leaving litigation attorneys wondering why this issue ever reached the Circuit Court of Appeals in the first place!


October 17, 2013

Postal Stamp Infringement Valuation Determined

By Joel L. Hecker

Frank Gaylord created and is the copyright owner of his sculptures called the "Column", which consist of a group of 19 stainless steel soldiers which form the centerpiece of the Korean War Veterans' Memorial on the National Mall in Washington, D.C. In January 1996, an amateur photographer named John Alli visited the Memorial during a snowstorm and took a photograph of the Column. In 2002, the United States Postal Service licensed the photograph for use on the 37 cent stamp commemorating the memorial. However, the Postal Service did not get Mr. Gaylord's consent to use the photograph of his copyrighted sculptures.

Prior Judicial History

Gaylord sued the Postal Service for copyright infringement (Frank Gaylord v. United States, US Court of Federal Claims, Index No. 06-539C). In a torturous tangle of proceedings, the United States Court of Federal Claims initially found that the Postal Service's use of the photograph of the Column was a fair use and therefore it was not liable for copyright infringement. On appeal, the Federal Circuit Court of Appeals reversed that finding and found that the Postal Service had indeed infringed Gaylord's copyright in three categories: 1) stamps used to send mail; 2) unused stamps retained by collectors; and 3) retail goods featuring an image of the stamp.

On remand, the Court of Federal Claims awarded $5,000 in damages on the grounds that this amount was the largest the Postal Service had ever paid to use an image on a stamp. Gaylord appealed the damage award and the Federal Circuit once again vacated the Court of Federal Claims order and remanded the case for a determination of the fair market value of such infringing use. As instructed, the Court of Federal Claims has now determined the amount of damages due to Gaylord in an Opinion and Order filed September 20, 2013.

Stamps Used to Send Mail

On the second remand, the Court of Federal Claims was required, for the first element (stamps used to send mail), to calculate the value of a license granted based upon "a hypothetical, arms-length negotiation between the parties". In addition, the mandate instructed the court to determine whether an ongoing royalty of a one-time fee more accurately captures the fair market value of a license for stamps used to send mail. However, since Gaylord was no longer seeking damages for stamps used to send mail, the court awarded no damages for this category.

Unused Stamps Purchased by Collectors

The analysis for this category differs from used stamps, because the latter represent nearly pure profit for the Postal Service. The Federal Circuit instructed the Court of Federal Claims to consider whether the evidence supports an ongoing royalty rate or a lump sum royalty payment for the estimated $5.4 million collected from unused stamps. The Court found that a 10% running royalty is the appropriate approach, and thereby awarded $540,000 in damages for this component of the case (this stamp is no longer being sold by the Postal Service and therefore a finite amount of damages award could be made).

Commercial Merchandise

The record reflected that Gaylord has consistently licensed images of his Column for retail and commemorative items at approximately a 10% royalty, and therefore in the hypothetical negotiation he would have likely received that 10% royalty on merchandise. Accordingly, he was awarded damages equal to 10% of the estimated $330,919 collected by the Postal Service or $33,092.

Pre-Judgment Interest

Lastly, the Federal Circuit determined that Gaylord was entitled to pre-judgment interest in order to make his compensation complete. By stipulation between the parties, that amount was calculated at $111,752.94.

Total Award

The total award granted to Gaylord against the Postal Service therefore aggregated the sum of $684,844.94. Gaylord, after having the dismissal of his case reversed, as well as a reversal of the minimal $5,000 award, and with the benefit of two Federal Circuit Court decisions in his favor, has finally been awarded what he considers to be just compensation for the infringement of his copyrighted work. Perseverance indeed sometimes does pay!


Joel L. Hecker, Of Counsel to Russo & Burke, 600 Third Avenue, New York, NY 10016, can be reached at (212) 557-9600, fax (212) 557-9610, www.RussoandBurke.com, or via email: HeckerEsq@aol.com.


September 18, 2014

Photographers Action Against The Google Book Project Is Settled

By Joel L. Hecker

This suit, American Society of Media Photographers, Inc. et al v. Google, Inc., Case No. 10-CV-02977 (DC) in the Southern District of New York, arose out of the 2005 Authors Guild and Association of American Publishers class action lawsuit against Google (the Authors Guild Litigation) in connection with Google's scanning of books from university libraries, without the consent of the copyright owners of the books scanned, which became known as the Google Book Search Project litigation. The Authors Guild Litigation alleged that Google's acts, as part of the Google Book Search Project, constituted copyright infringement.

The Authors Guild Litigation eventually reached the point where a proposed settlement was submitted to the court for approval. However, the Amended Proposed Settlement specifically excluded almost all photography and graphic art works. As a result, the American Society of Media Photographers (ASMP), Graphic Artists Guild (GAG), Picture Archive Council of America (now known as Digital Media Licensing Association (PACA)), North American Nature Photography Association (NANPA), and various other organizations and individual photographers attempted to intervene in the Authors Guild Litigation and thereby have such organizations and the visual artists they represented be included in any resulting settlement.

On November 4, 2009, Judge Denny Chin, who was assigned to the case, denied the motion and refused to permit such intervention, concluding that these visual artists had acted too late (the case was then four years old), and in his view, the Google Book Search Project primarily involved textual content and not visual works. Judge Chin stated in his denial of the motion that: "Frankly, in the context of an online database that is searchable using keywords, it makes sense to prioritize the rights of word-based material." [It should be noted that these words, written in 2009, have basically been made obsolete by technology and circumstances, as searchable pictorial content is very much an everyday occurrence in 2014.]

ASMP and the others disagreed and filed their own class action lawsuit against Google on April 7, 2010, alleging copyright infringement by Google of visual artwork arising out of the Google Book Search Project.

The ASMP Complaint

The 21 page complaint alleged that it was "designed to redress the most widespread, well-publicized and uncompensated infringement of exclusive rights in images in the history of book and periodical publishing." That "evil" was, of course, the Google Book Search Project, under which Google was essentially scanning entire library collections and thereby creating digital archives of what eventually was intended to be an online database of all of the world's books.

All in all, the complaint can be summarized as alleging that Google was committing massive copyright infringements of visual works similar to its infringements of text-based works (as alleged in the Author's Guild Litigation) and that the visual artists must be included in the process.

Dismissal of the Authors Guild Litigation

Judge Chin, now an appellate judge sitting on the Second Circuit Court of Appeals, initially approved class action status in the Authors Guild Litigation, which decision was reversed by the Second Circuit as premature since he had not first ruled on the Fair Use defense raised by Google. On remand, Judge Chin found that Google's acts did indeed constitute fair use and accordingly dismissed the Authors Guild complaint. That decision is now on appeal.


The Photographers Action Settlement

The parties to the photographers' case issued a press release on September 10, 2014 indicating that they are "pleased to have reached a settlement that benefits everyone and includes funding for the PLUS Coalition, a non-profit organization dedicated to helping rights holders and users communicate clearly and efficiently about rights in works."

Further terms of the agreement are apparently confidential. The parties pointed out that since the settlement is only between the parties to the litigation, court approval of the terms of the settlement is not required. This is so because, although the action was commenced as a class action on behalf of photographers and other visual artists similarly situated, no motion had yet been made to confirm a class or classes in the litigation, and therefore this settlement will not be binding on any party other than the parties to the action.

The settlement also does not affect the current appeal in the Authors Guild Litigation from Judge Chin's dismissal of their class action against Google on the grounds that Google's Book Project constituted fair use.

July 30, 2015

Claim to Comic Book Art Ownership Tossed

By Joel L. Hecker

On July 24th, United States District Judge Laura Taylor Swain dismissed an action brought in the United States District Court of the Southern District of New York concerning ownership of comic book art on the grounds that the action was commenced after the applicable three-year statute of limitations had run. The case is Wallace Wood Properties, LLC v. Tatjana Wood, docket No. 14-CV-8597-LTS: Decision.pdf

Disclosure: I am counsel to the prevailing defendant, Tatjana Wood, in this action.

Legal Standard on a Motion to Dismiss

On the motion to dismiss, the court is required to accept all allegations in the complaint as true and to draw all reasonable inferences in the plaintiff's favor. Accordingly, the defendant's motion to dismiss must assume that the allegations in the complaint were true, although, if the action continued, the defendant certainly would have contested many of the allegations. Accordingly, in reviewing the actual opinion, the reader should not assume the facts are accurate or truthful, except insofar as they relate to the issue pertaining to the expiration of the statute of limitations.

Background Facts

Wallace Wood ("Wally") was a famous comic book writer and illustrator whose work has been featured in well-known comic books published by Marvel Comics ("Marvel") and EC Comics. The defendant was Wally's first wife. Although the couple divorced in the 1960s, they remained friendly until his death by suicide in 1981. In fact, Wally bequeathed all "bank accounts, whether savings, checking, Certificates of Deposit, or otherwise" to her. Unfortunately for the defendant, there were no assets in the estate to fulfill this bequest.

Wally's will left the rest, residue, and remainder of his estate to a close friend, John Robinson, who also was named executor.

The plaintiff ("WWP") is a not-for-profit limited liability company established in 2011 by J. David Spurlock ("Spurlock"), allegedly to promote Wally's legacy and to manage the latter's tangible properties and intellectual property rights. Spurlock is the sole member and manager of WWP and, as such, is the driving force behind the litigation.

Spurlock, who had written a biography of Wally, claims he first saw a copy of the will in 2009. On February 23, 2012, Robinson assigned to WWP his interest in Wally's property, which was left to Robinson under the terms of the will. The complaint alleges that WWP became the owner of all original artwork created by Wally during his lifetime, which was not subject to a written agreement explicitly providing otherwise. [This allegation was accepted as true for purposes of the motion, but otherwise was contested in that there was a very strong argument that Wally's work consisted of works made for hire for Marvel and that Marvel owned the original artwork and copyrights thereto.]

The 2005 Marvel Transfer to the Defendant

The complaint alleges that in 2005, Marvel transferred 150 to 200 pieces of Wally's original comic book artwork ("the Marvel Artwork") to the defendant. The complaint also alleges that this transaction was not authorized by Wally, his estate, or Robinson, and the defendant knew that Marvel was not the actual owner of the artwork. The complaint further alleges that the defendant admits she did not receive the original artwork until 2005, and subsequently concealed the fact that she possessed it from Robinson and, ultimately, WWP.

The complaint sought return of the original artwork, as well as every other piece of art created by Wally that is or was ever in the possession, custody, or control of the defendant, including, but not limited to, the Marvel Artwork. This contention clearly had no merit in its breadth, since WWP knew that Wally had in fact given some of his artwork during his lifetime to the defendant, but, as stated above, the allegations are assumed to be true for the purposes of this motion.

WWP's Ownership Claims Regarding the Original Artwork

In 2006, well before Spurlock established WWP, he had visited the defendant's home and personally saw Wally's comic book artwork in the defendant's possession. The complaint further alleges that in 2013, Spurlock, "now in the WWP management role," realized for the first time that the artwork he had seen in the defendant's home seven years prior, was WWP's rightful property. As a result, on March 20, 2013, Spurlock, on behalf of WWP, made his first demand for the return of the artwork he had seen in 2006 in the defendant's home.

The defendant obviously refused to comply with such demands, and on October 28, 2014, WWP commenced this action for conversion and replevin, seeking money damages and the return of the Marvel Artwork. The defendant threatened to move to dismiss the complaint as being a frivolous action, which resulted in WWP filing a first and then a second amended complaint. The defendant brought her motion to dismiss the second amended complaint, which is the subject of this blog, on the basis that it was barred by the three-year statute of limitations, the doctrine of laches, and that WWP failed to sufficiently allege specific, identifiable property and ownership of the property in question.

Legal Analysis

The court accepted the defendant's contention that the three-year statute of limitations expired in 2009 because the limitations period accrued in either 2005 or 2006, when WWP alleges that the defendant wrongfully took possession of the artwork. WWP had also argued that it was entitled to an equitable tolling of the statute of limitations in light of the defendant's alleged fraudulent concealment of the Marvel artwork. The court rejected this contention as well.

The court first addressed the issue, for statute of limitations purposes, as to whether the current possessor was a good-faith purchaser or bad-faith possessor. An action against a good-faith purchaser of stolen property accrues once the true owner makes a demand and is refused. This is the argument made by WWP and rejected by the court. On the other hand, where the property is held in bad faith or unlawfully, the limitations period begins to run immediately from time of possession, without a demand and refusal period. Furthermore, such a demand and refusal is not required when the current possessor deals with contested property openly as his or her own.

In this case, WWP specifically and affirmatively alleged in the complaint that the defendant actually possessed the Marvel Artwork in bad faith. The court found that, based upon WWP's own allegations, no demand and refusal period was required and that the limitations period accrued at the time of the alleged conversion in 2005, when Marvel delivered the Marvel Artwork to the defendant. In a footnote, the court explained that, even if the limitations period did not accrue until 2010 when the defendant sold two of the original illustrations at a public auction, which acts constituted the exercise of ownership rights, WWP's claims nevertheless would have become time-barred in 2013.

To avoid dismissal, WWP contended that the defendant had fraudulently concealed these transactions and therefore WWP was entitled to the benefit of equitable tolling. However, to prevail on these grounds, WWP needed to establish that the defendant's alleged fraudulent conduct actually concealed the cause of action during the period WWP sought to have tolled. Moreover, WWP needed to also establish that it exercised due diligence in pursuing the discovery of the claim.

The court found that WWP made only general allegations, which were not supported with any facts, and the court correctly determined that these conclusory allegations of fraudulent concealment and diligence were insufficient to raise a factual issue as to the potential availability of equitable tolling. In effect, the court determined that WWP's complaint contained no pleadings to indicate that the defendant or Marvel caused it, or Wally, or Robinson, to refrain from taking any action to protect the alleged rights of Wally's estate. This was so, despite the fact that Wally's work had been published extensively by Marvel and that Robinson made no effort whatsoever in the decades after Wally's death to inquire after any possible ownership interest. Furthermore, there was no allegation of any kind in the complaint that Marvel or the defendant made any affirmative misrepresentation upon which WWP or its predecessors relied upon in determining whether or when to sue. In fact, the reverse was the case, as the complaint alleges that the defendant actually displayed the Marvel artwork to Spurlock in 2006, and had been selling some of it at auction.

In light of the court's determination that the action must be dismissed as untimely, the court did not reach any of the work made for hire or other underlying issues involved in the case.

Conclusion

The complaint, on its face, actually alleged sufficient facts to affirmatively prove that the three-year statute of limitations had run, and that the complaint therefore required dismissal. As a result, the court correctly dismissed the second amended complaint as time-barred.

January 7, 2016

Class Action Filed Against Spotify for Copyright Infringement

By Joel L. Hecker

David Lowery, individually and on behalf of others similarly situated, has filed a class action against Spotify USA, Inc.(Spotify), alleging that Spotify has, and continues to, unlawfully reproduce and/or distribute copyrighted musical compositions to more than 75 million users via its interactive commercial music streaming service, as well as its offline listening service.

The complaint was filed on December 28, 2015 in the United States District Court for the Central District of California, Civil Action Case Number 15-cv-09929 (BRO) (RAO), and seeks injunctive relief to enjoin Spotify from continuing such alleged copyright violations, to have a third party auditor appointed to identify the owners of the works reproduced and/or distributed by Spotify without Spotify's first obtaining a mechanical license prior to such reproduction and/or distribution, and to require Spotify to remove all such works from its services until it obtains proper licenses for them. The plaintiff also seeks restitution of Spotify's alleged unlawful proceeds, including Spotify's gross profits, compensatory damages in an amount to be ascertained at trial, statutory damages as authorized by the Copyright Act, as well as attorney fees and costs and pre- and post-judgement interest.

Statutory damages may be awarded in the court's discretion up to $30,000 for each infringed work and, if willful, up to $150,000 per infringed work, plus attorney's fees. Therefore, given the scope and breadth of the purported class, the potential damages may well exceed $100 million (of course, these are all just allegations subject to proof of liability and of damages, assuming that class action status is granted).

The plaintiff, David Lowery, alleges he has been a fixture of the music industry for decades, is a prolific songwriter and producer as well as the author or co-author of more than 150 songs for his popular groups Cracker and Camper Van Beethoven.

Spotify, the defendant, is an interactive commercial music streaming service (among other services) that operates an Internet website (www.spotify.com), which permits users to customize listening choices for recorded music and to create Internet "radio stations." It is alleged in the complaint that Spotify claims to have played over 25 billion listening hours of music since its launch seven years ago. Attached to the complaint to substantiate this claim is an announcement by Spotify to the public boasting of such broad reach.

The complaint further alleges that Spotify offers its services to the public via both free non-subscription and premium paid subscription bases. Paid subscribers enjoy numerous specified benefits and users of its premium service pay a monthly fee of $9.99. Specifics of these services can be found at Spotify's website.

The complaint also alleges that Spotify claimed in writing in an exhibit attached to the complaint that as of June 10, 2015, it has 75 million active users and 20 million paid subscribers, and that it has paid more than $3 billion in royalties. In addition, the complaint alleges that Spotify sells the right to advertise to users on its website and mobile applications to earn revenue above and beyond paid subscriptions.

Spotify's alleged "egregious and willful violations" of the plaintiff's and the class members' rights as contained in the complaint refer particularly to Spotify's recent admissions regarding its failure to obtain licenses for the musical works it distributes and reproduces, as well as its failure to compensate copyright owners for its use of their works. In support of these allegations, the plaintiff attaches as an exhibit to the complaint Spotify's May 23, 2014 Comments to the United States Copyright Office's Notice of Inquiry made in connection with the Copyright Office's Music Licensing Study. In those comments, Spotify admits, it is alleged, that in some instances, "Spotify may not be able to identify the copyright owners from the sound recordings provided to Spotify". In addition, it is alleged that Spotify failed to pay songwriter royalties to a publishing company approximately 21% of the time.

One of the major issues raised by this complaint is the system in the U.S. for licensing music, which predates the Internet and all that it entails concerning distribution of music in mobile, streaming and other formats. The inability or difficulty to obtain consents from many of the varied owners of music rights has brought to the fore the tension between the presumed right of the public to gain access to the music, and the copyright owners' right to control the reproduction and distribution of their copyrighted works. A final solution probably should involve federal legislation, but given the mood of Congress these days, that seems highly unlikely, to say the least.


About Joel L. Hecker

This page contains an archive of all entries posted to The Entertainment, Arts and Sports Law Blog in the Joel L. Hecker category. They are listed from oldest to newest.

In-House Counsel is the previous category.

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