US Trade Representative Seeks Comments on 2011 Notorious Markets List

by Christina Frangiosa


The U.S. Trade Representative today released a request for public comment regarding its Special 301 Out-of-Cycle Review of Notorious Markets. 76 Fed. Reg. 184 (published Sept. 22, 2011). In its summary of the request, the USTR explained:

“In 2010 the Office of the United States Trade Representative (USTR) began publishing the notorious market list as an ‘Out of Cycle Review’ separately from the annual Special 301 report. This review of Notorious Markets (‘Notorious Markets List’) results in the publication of examples of Internet and physical markets that have been the subject of enforcement action or that may merit further investigation for possible intellectual property infringements. The Notorious Markets List does not represent a finding of violation of law, but rather is a summary of information that serves to highlight the problem of marketplaces that deal in infringing goods and which help sustain global piracy and counterfeiting. USTR is hereby requesting written submissions from the public identifying potential Internet and physical notorious markets that exist outside the United States and that may be included in the 2011 Notorious Markets List.
 

See summary (emphasis added).

The first Out-of-Cycle review of Notorious Markets was published in February 2011, following a similar request for public comments, and is available on the USTR site. The 2011 Annual Report (published in April 2011 with country reports and a watch list) is also available.

The deadline to respond with comments is October 26, 2011. Specifically, the USTR is looking for detailed information about potential markets “where counterfeit or pirated products are prevalent to such a degree that the market exemplifies the problem of marketplaces that deal in infringing goods and help sustain global piracy and counterfeiting.” Id. ¶ 2a. If possible, the USTR would like to see location of the market, principal owners/operators (if known), types of products sold, distributed or otherwise made available, volume of traffic of the website (such as the Alexa ranking), and any known enforcement activity against it (including any requests for takedown of infringing content and the site’s response). Id. ¶ 2b.

The USTR will maintain a docket of public comments received about these markets, which will be open for public inspection, except for certain confidential business information, pursuant to 15 C.F.R. § 2006.13. This docket should be available here. (My apologies in advance if this link doesn’t work – there were no comments posted when I tested it, but I think the link will be active soon. As an alternative, visit http://www.regulations.gov/, search for public submission and enter “USTR-2011-0012” in the Keyword or ID field.)

Upcoming Senate Judiciary Committee Hearing on Google

by Christina Frangiosa


The Senate Judiciary Committee’s Subcommittee on Antitrust, Competition Policy and Consumer Rights will hold a public hearing on September 21, 2011 at 2:00pm (Eastern) in the Dirksen Senate Office Building, Room 226. The hearing is entitled, “The Power of Google: Serving Consumers or Threatening Competition?” The witness list has not yet been posted.

It appears the hearing will be simulcast over the web, through a link provided in the notice.

Removal of Photographer’s “Gutter Credit” is Potentially Actionable Under DMCA

by Christina Frangiosa


According to an opinion issued earlier this summer by the U.S. Court of Appeals for the Third Circuit (N.J.), removing the photographer’s credit from a magazine copy of his photograph before re-using it can qualify as “copyright management information” for purposes of determining whether a defendant has violated the Digital Millennium Copyright Act (“DMCA”), particularly 17 U.S.C. § 1202. Murphy v. Millennium Radio Group, No. 10-2163, 2011 U.S. App. LEXIS 11984 (3d Cir. June 14, 2011). Note that this opinion did not conclude whether or not the infringement occurred – just whether the removal of the photographer’s credit information that appeared in the “gutter” of a magazine could qualify as actionable removal of copyright management information under the DMCA. A determination of the substantive liabilities in this case has yet to be made.

Facts (according to the Third Circuit Opinion at pages 3-6)

Plaintiff Peter Murphy, a professional photographer, was hired in 2006 by New Jersey Monthly magazine to take the photograph of Craig Carton and Ray Rossi, two radio show hosts, who were to be named “best shock jocks” in an upcoming article. The photograph was risqué (showing Carton and Rossi “standing, apparently nude,” behind the radio station’s sign). Murphy retained copyright in the photo.

After the magazine was published, an employee of the radio station scanned the image (without the caption explaining the award or the gutter credit naming Murphy as the photographer) and posted it to the radio station’s web site and to another site. The radio station’s web site invited visitors to alter the image and submit it to the radio station for feedback. The radio station posted 26 of these alterations on its web site. At no time did the radio station or the hosts obtain Murphy’s permission to use the original or an altered version of the photo.

When Murphy found out about this use, his attorney sent a cease and desist letter to the radio station, demanding that the infringing use cease. Shortly thereafter, Carton and Rossi featured Murphy in one of their radio shows in which they allegedly recommended that listeners avoid doing business with him because “he would sue his business partners” and suggested that he was gay (despite his self-identification as a heterosexual married man with children of his own).

Claims

This lawsuit ensued. Murphy sued the radio station and the two hosts (collectively referred to in the opinion as “Station Defendants”) for copyright infringement under the Copyright Act, violations of § 1202 of the DMCA, and defamation under NJ law. After denying Murphy’s requests for additional discovery relating to his defamation claim, the Trial court ultimately granted the Station Defendants’ motion for summary judgment, which dismissed all of Murphy’s claims.

Murphy appealed, arguing that “by reproducing the Image on the two websites without the [magazine] credit identifying him as the author, the Station Defendants violated the Digital Millennium Copyright Act.” Id. at 9. In turn, the Station Defendants argued that the § 1202 cause of action could not survive because the gutter credit was not an “automated copyright protection or management system” – in essence claiming that the activity proscribed by § 1202 was limited only to digital information embedded within the work, not to any information that appeared “near the Image” in question. Id. at 10, 19.

Trial Court’s Opinion

In its opinion granting the Station Defendants’ summary judgment motion (Summary Judgment Opinion, ECF No. 43, Mar. 31, 2010), the trial court concluded that a “photography credit in the gutter of a print magazine . . . was in no way a ‘component of an automated copyright protection or management system'” as required by an earlier case in the same court (IQ Group, Ltd. v. Wiesner Publ., LLC, 409 F. Supp. 2d 587 (D.N.J. 2006)). Moreover, it opined that “the fact that a [magazine] employee used a software program to compose the page and insert the gutter credit does not bring this case into the scope of the DMCA.” Summary Judgment Opinion, ECF No. 43 at 6-7. Specifically, “[t]he DMCA should not be construed to cover copyright management performed by people, which is covered by the Copyright Act, as it preceded the DMCA; it should be construed to protect copyright management performed by technological measures of automated systems.” Id. at 7 (citations omitted).

The Appeal

Murphy appealed claiming numerous errors in the trial court’s opinion, among them that the court erred when it determined that § 1202 required the tampering with electronic copyright management information.

This appears to be a case of first impression. Murphy v. Millennium Radio Group, No. 10-2163, at 10-11 (3d Cir.). In its opinion vacating the trial court’s opinion and sent the case back for further proceedings, the appeals court focused its analysis of the DMCA issue largely on the issue of whether “the definition of ‘copyright management information’ should be restricted to the context of ‘automated copyright protection or management systems'” as defendants argued, and as the trial court opined. Id. at 12.

Remember that this case involves a photograph copied from its paper form – not an electronic image. Indeed, the radio station employee created the scanned copy (without copying the gutter credits or the caption that the magazine prepared). Thus, the image that the Station Defendants copied was not in electronic form when the copy was made.

However, is a digital image required in order to invoke the DMCA? Both the Station Defendants and Murphy agreed that “whatever CMI is, it is not necessary for it to be digital. For example, they concede that a bar code printed in ink on a paper label might be CMI.” Id. at 17 n.11. Their dispute focuses on whether the CMI must function “in connection with an electronic or automated copyright protection or management system” or whether it can appear in a variety of forms. Id. at 17 n.12.

The appellate court’s opinion focuses a great deal on the statutory construction of § 1201 of the DMCA (which requires the “circumvention of technological measures” – a phrase that does not appear in § 1202). In addition, the court noted that § 1202 explicitly defines copyright management information to include information ‘conveyed in connection with copies . . . of a work . . . including in digital form . . . .” In addition, nothing about the statute indicates that § 1201 and § 1202 have to be interpreted as interrelated. “Instead, to all appearances, § 1201 and § 1202 establish independent causes of action which arise from different conduct on the part of defendants, albeit with similar civil remedies and criminal penalties.” Id. at 13.

Ultimately, the appellate court concluded that “a cause of action under § 1202 of the DMCA potentially lies whenever the types of information listed in § 1202(c)(1) – (8) and ‘conveyed in connection with copies . . . .of a work . . . including in digital form’ is falsified or removed, regardless of the form in which the information is conveyed.” Id. at *22 (emphasis added). This essentially means that copying a work appearing in hard copy form by transforming it into a digital version – but omitting any credit details that appeared with the work in its hard copy form, can qualify as the basis for a cause of action under § 1202.

Further Activity in the Case

Note that this appeal only addressed whether the gutter credit information could qualify as “copyright management information,” thus permitting an application of § 1202 to the analysis. It does not address whether or not other aspects of the DMCA claim can be met, as this claim was not presented to the appellate court for consideration. It remains to be seen whether plaintiff’s claim on this cause of action can survive after this initial victory.

The appeal also addressed the copyright infringement and defamation claims, as well as the trial court’s cursory analysis of both in its Summary Judgment Opinion. Without going into detail here, the appellate court concluded that the trial court erred in finding that the Station Defendants’ use of the unaltered photograph constituted fair use (Id. at 20-27) and in declining to permit discovery into the defamation claim (Id. at 28-30). Both of these decisions were vacated and the case has been remanded for further proceedings.

The next scheduled event on the trial court’s docket – now that the case has been remanded to the lower court for further proceedings – is a status conference set for September 14, 2011.  ECF No. 56, Aug. 31, 2011.  It appears that during a Rule 16 scheduling conference held on August 30, the parties mentioned pending settlement discussions, as correspondence sent to the court indicates that additional discussions will be held on September 9.  Id. 

First Sale Doctrine Not Available as Defense to Copyright Infringement, Where the Works were Foreign-Made

by Christina Frangiosa


The Second Circuit Court of Appeals recently held that the “first sale doctrine” cannot be used as a defense to a claim of copyright infringement where the defendant distributed copies in the U.S. of the plaintiff’s works that were manufactured in a foreign country. John Wiley & Sons, Inc. v. Kirtsaeng, No. 09-4896-CV, 2011 U.S. App. Lexis 16830 (2d Cir. Aug. 15, 2011).

First Sale Doctrine, Defined

Under U.S. law, a defendant can avoid liability in copyright infringement case if what he or she distributed was a copy of the work that was obtained legitimately. 17 U.S.C. § 109(a). In other words, once you purchase a paperback copy of a book, you may sell your copy of that book at any price you determine is fair without violating the copyright owner’s exclusive rights to distribute its works. This is called the “first sale doctrine.” This defense is generally described as follows: “the owner if a particular copy . . . lawfully made under this title . . . is entitled, without authority of the copyright owner, to sell or otherwise dispose of the possession of that copy . . . .” Id. There is a separate provision for sound recordings and computer programs, but it is not applicable here. See generally 17 U.S.C. § 109(b).

According to the Second Circuit, this defense is only available when the work at issue was made in the U.S. John Wiley & Sons, Inc., No. 09-4896-CV at 16 (“In sum, we hold that the phrase ‘lawfully made under this Title” in § 109(a) refers specifically and exclusively to works that are made in territories in which the Copyright Act is law, and not to foreign-manufactured works.”).

Facts of the John Wiley & Sons Case

In John Wiley & Sons, the defendant, Supap Kirtsaeng was a Thai student who first attended Cornell University, and then moved to California to pursue a doctoral degree. Between 2007 and September 2008, Kirtsaeng allegedly funded his educational expenses by receiving foreign edition textbooks from his family and friends in Thailand, and then selling them on commercial sites such as eBay. He reimbursed his family and friends for their acquisition and shipping costs and kept the profits for himself. Apparently, Kirtsaeng received about $1.2 million in revenue, a fact he tried to withhold from the jury as unduly prejudicial (see below). Id. at 7. In his defense of the lawsuit that followed, Kirtsaeng claimed that he had sought advice from friends in Thailand and on the Internet (using “Google Answers“) to determine that his actions would be lawful. (Factual discussion appears in the opinion in pages 4-5).

Complaint & Trial

On September 8, 3008, the textbook publisher, John Wiley & Sons, filed suit in the federal district court in Manhattan (Southern District of New York) claiming copyright infringement (17 U.S.C. § 501) and trademark infringement (15 U.S.C. § 1114(a)) under federal law, and unfair competition under New York state law. John Wiley & Sons sought preliminary and permanent injunctive relief under 17 U.S.C. § 502(a) and statutory damages under 17 U.S.C. § 504(c). At trial, the jury found Kirtsaeng “liable for willful copyright infringement of all eight works and imposed damages of $75,000 for each of the eight works.” Id. at 8. Kirtsaeng appealed to the U.S. Court of Appeals for the Second Circuit (the “Second Circuit”), alleging that the judge erred in (1) finding the “first sale defense” not to apply to this situation; (2) in not instructing the jury that the “first sale doctrine” constituted a complete defense to the claims and (3) allowing certain evidence to be introduced regarding his gross receipts, which he claimed to be improper and unduly prejudicial.

Available Precedent

On appeal, the Second Circuit considered both Quality King Distr., Inc. v. L’anza Res. Int’l, Inc. (523 U.S. 135 (1998)) and Omega S.A. v. Costco Wholesale Corp. (541 F.3d 982 (9th Cir. 2008)) as potential precedent, and found both to be inapposite. Quality King dealt with works that were made in the U.S. for export to other countries, being returned to the U.S. and sold without authorization by the copyright owner. In that case, in a concurring opinion, Justice Ginsberg explained, “This case involves a ’round trip’ journey, travel of the copies in question from the United States to places abroad, then back again” and explicitly noted that “we do not today resolve cases in which the allegedly infringing imports were manufactured abroad.” Id. at 11 (citing Quality King Distr., Inc. v. L’anza Res. Int’l, Inc., 523 U.S. 135, 154 (1998)). As a result, the Second Circuit concluded that Quality King did not address precisely the situation posted by the John Wiley case, although its analysis could be borrowed for guidance about what the Supreme Court might do were this issue squarely presented before it.

The Second Circuit also considered a recent decision from the Ninth Circuit, Omega S.A. v. Costco, for the proposition that the first sale doctrine (§ 109(a)) “does not apply to items manufactured outside of the United States unless they were previously imported and sold in the United States with the copyright holder’s permission.” Id. at 12 (citing Omega S.A., 541 F.3d at 990). This case had been appealed to the U.S. Supreme Court, which affirmed the judgment by an equally divided panel (with Justice Kagan recused). In other words, four of the nine justices voted to overturn the opinion, but without a majority of votes, the opinion was essentially affirmed.

Court’s Ruling

In reaching its ruling, the Second Circuit conceded that the statutory text was simply “utterly ambiguous.” Id. at 15. The phrase “lawfully made under this title” could mean any of the following: “(1) ‘manufactured in the United States,’ (2) ‘any work made that is subject to protection under this title,’ or (3) lawfully made under this title had this title been applicable.'” The last two meanings would have supported Kirtsaeng’s position, but the court explained, “these definitions, like Wiley’s, are at best merely consistent with a textual reading of § 109(a)” but are not mandated by the statute. Id.

Following its analysis, the Second Circuit concluded that it was most appropriate to “adopt an interpretation of § 109(a) that best comports with both § 602(a)(1) and the Supreme Court’s opinion in Quality King.” Id. (Section 602(a)(1) provides that unauthorized importation into the U.S. of works that were acquired outside the U.S. constitutes infringement.) The Second Circuit explained that the “mandate of § 602(a)(1) . . . would have no force in the vast majority of cases if the first sale doctrine was interpreted to apply to every work manufactured abroad that was either made” under definition number 2 (“subject to protection under Title 17”) or 3 (“consistent with the requirements of Title 17 had Title 17 been applicable”) above. Thus, the only definition that could apply – and still allow § 602(a)(1) to have any teeth – must be definition number (1) (“manufactured in the U.S.”).

In reaching this conclusion, the Second Circuit also distinguished the Omega v. Costco decision by finding that it was based largely on Ninth Circuit precedent that has not been widely adopted by other appellate courts.

As to the remaining bases for appeal, the Second Circuit held that it “could not conclude that the District Court plainly erred in declining to give Kirtsaeng’s proposed jury instruction” and “we see no reason to conclude that the District Court’s decision [regarding admission of evidence of Kirtsaeng’s gross revenues] was improper under Rule 403(b).” Id. at 18, 20.

Accordingly, all three of Kirtsaeng’s arguments failed and he lost the appeal.

Dissenting Opinion

The Honorable J. Garvan Murtha, a Vermont district court judge sitting by designation, filed a dissenting opinion, basically concluding that “the first sale doctrine should apply to a copy of a work that enjoys United States copyright protection wherever manufactured.” Id. at 1 (dissent). As in the majority opinion, the dissent focused on the “lawfully made under this title” phrase, and noted a circuit split over the interpretation of this phrase. One definition (as articulated by the majority) adopted the “legally manufactured . . . within the United States” construct.  Id. at 2 (dissent). The other (to which Judge Murtha subscribed) “refers not to the place a copy is manufactured but the lawfulness of its manufacture as a function of U.S. copyright law.” Id. at 3 (dissent).

Judge Murtha described his disagreement rather plainly:

A U.S. copyright owner may make her own copies or authorize another to do so. 17 U.S.C. § 106(1). Thus, regardless of place of manufacture, a copy authorized by the U.S. rightsholder is lawful under U.S. copyright law. Here, Wiley, the U.S. copyright holder, authorized its subsidiary to manufacture copies abroad, which were purchased and then imported in to the United States.
 

Id. (dissent) at 3. Under this construct, therefore, the first sale doctrine should apply to exempt Kirtsaeng from liability for copyright infringement for distributing these valid copies of a U.S. copyrighted work that he acquired lawfully before further selling them.

Judge Murtha further supported his position by relying on the initial Supreme Court case that articulated the first sale defense, in which the Court held that the “defendant-retailer’s sales of a copyrighted book for less than the price noted on the copyright page was not a copyright violation.” Id. at 4 (dissent) (citing Bobbs-Merrill Co. v. Straus, 210 U.S. 339, 341 (1908)). “The purchaser of a book, once sold by authority of the owner of the copyright, may sell it again, although he could not publish a new edition of it.” Id. at 4-5 (dissent) (citing Bobbs-Merrill Co., 210 U.S. at 350). Thus, the copyright owner cannot control the terms of subsequent sales, if the initial sale was authorized.

In sum, Judge Murtha pointed to the Supreme Court’s lack of guidance as to its views of the Ninth Circuit’s “imperfect solution” in the Omega case because at least four justices “did not agree
the Quality King dicta [by Justice Ginsberg, cited above] directly addresses [this issue] or constitutes the Court’s current view.” Id. at 8 (dissent). In his view, they would have overturned the Omega decision, which was upheld only because it was not overturned by a majority of votes of the justices. Thus, while this is a “close call,” it should have been decided the other way — that the first sale doctrine applies to foreign manufactured copies. Id.

Conclusion

Given the circuit split articulated by the dissent, the statutory text’s “utter ambiguity” as conceded by the majority and the Supreme Court’s narrow upholding of the Ninth Circuit’s opinion in the Omega case, it is possible that this issue may see further consideration by the Supreme Court. This, of course, assumes that either Kirtsaeng further appeals or another case with similar facts is presented for the Supreme Court’s consideration – and that the Supreme Court grants certiorari.

Until then, future litigants should consider whether the John Wiley & Sons case operates as binding precedent to their case or whether under the facts and circumstances presented, the first sale doctrine (despite foreign manufacture of the works at issue) could act as a defense to claims of copyright infringement for the subsequent sale of a validly obtained copy.

IP Enforcement Coordinator Seeks Public Comments about Counterfeiting

by Christina Frangiosa


The Office of the Intellectual Property Enforcement Coordinator seeks public comment about “how the U.S. Government can prevent counterfeits products from entering its supply chain.” In a recent press release circulated on August 9, IPEC Victoria Espinel confirmed that her office is leading a “U.S. Government anti-counterfeiting working group” comprising fourteen government agencies which have been tasked to provide legislative, regulatory and policy recommendations to address this problem.

Submissions are due by September 16, 2011 at 5 p.m. (presumably Eastern time, although no time zone is specified in the notice) and should be filed electronically at http://www.regulations.gov/ docket number OMB-2011-0003. If you are unable to submit your comments through this form, you can call James Schuelke (202/395-1808) to make arrangements for an alternate submission. You can also submit confidential materials in support of a public comment to Michael Lewis ([email protected]).

The original Federal Register notice can be found here. It explains that the purpose of this request for comments is to “solicit feedback and best practices from industry, academia, research laboratories, and other stakeholders on issues related to identifying areas of common interest and compare progress and best practices to ultimately eliminating counterfeits in Federal Government supply chains.” 76 Fed. Reg. 153 at 48906.

The Notice identifies six objectives of the working group, along with six categories of questions to be addressed in submitted comments (covering the first five of the specific objectives and a sixth “general” area. The sixth objective is not specifically included in the enumerated questions). These six objectives are:

• Objective #1—Develop procedures for program managers to identify items at risk for counterfeiting or requiring authentication of legitimacy. These procedures will, to the greatest extent practicable, utilize current industry standards.
 
• Objective #2—Examine whether additional administrative actions, including regulatory actions, are needed to require suppliers to take stronger anti-counterfeiting measures.
 
• Objective #3—Examine when and how product and package traceability, reporting and marking processes can be used by prime contractors, their suppliers, Federal government personnel and potentially other customers to confirm production authority by the original manufacturer of at-risk items.
 
• Objective #4—Examine government/industry evaluation capabilities and determine whether improvement is needed.
 
• Objective #5—Develop an anticounterfeiting training and outreach strategy for the Federal workforce.
 
• Objective #6—Examine whether additional measures are needed to protect the rights and interests of the United States, recoup costs and prosecute offenders.
 

76 Fed. Reg. 153 at 48905.  The notice also explains that the working group is charged with “reviewing current industry standards, the ability of prime contractors and their suppliers to authenticate or trace at-risk items to the original manufacturer, government evaluation and detection capabilities and limitations, and contractual enforcement authority.”  Id.