Copyright Infringement

The Copyright Act grants the owner of a copyright certain rights, including the right to reproduce, to distribute, and to perform and display the copyrighted work. 17 U.S.C. § 106. However, these rights are limited by other sections of the statute. One such limitation to the distribution right is known as the “first sale doctrine,” which states, “the owner of a particular copy or phonorecord lawfully made [] is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy or phonorecord. Id. at § 109(a). For example, if you purchase a DVD at the store, you own a particular copy of a copyrighted work. You can resale the DVD, give it away, or destroy it without infringing the copyright owner’s right of distribution. The same is true for any number of copyrighted works fixed in a variety of mediums, e.g., a CD, cassette, vinyl record, book, photograph, art print, etc. But what about digital content? That is, can you resell a song or movie you lawfully purchase and download?

The United States Copyright Office (“USCO”) has acknowledged digital content differs from traditional physical copies of works. In 2001, the USCO stated that with traditional physical copies, the natural degradation of works (e.g., scratches, fading, etc.) and “the need to transport physical copies of the works” “act as a natural brake on the effect of resales on the copyright owner’s market.” The USCO further stated that these limitations no longer exist with digital transmissions. “Digital information does not degrade…. [and] time, space, effort and cost no longer act as barriers to the movement of copies, since digital copies can be transmitted nearly instantaneously anywhere in the world with minimal effort and negligible cost.” In addition, the USCO recognized the product of a digital transmission “is a new copy in the possession of a new person” and thus the recipient “obtains a new copy, not the same one with which the sender began.” For example, when we email or text a photo, we retain our “particular” copy while the recipient receives a new copy.

In Capitol Records, LLC v. ReDigi Inc., the court, relying in part on the USCO’s report, found that it was impossible to digitally transfer the “particular” copy purchased; any digital transfer creates a new copy of the work, even if the original file is deleted during the transfer. First, the court found the new copy violates the copyright owner’s reproduction rights, to which the first sale doctrine is not a defense. Second, because the thing being sold is an unlawful reproduction and not the “particular” copy originally purchased, the first sale doctrine does not protect such a distribution. In another recent case, the court held that the first sale doctrine was inapplicable until a particular physical copy of copyrighted work was downloaded. Disney Enterprises, Inc. v. Redbox, Automated Retail, LLC (declining to extend the first sale doctrine to the reselling of a digital code that would allow a user to download a copy of the copyrighted work). That is, in order for the first sale doctrine to likely apply the copyrighted work must physically exist as a digital copy but once downloaded, it probably cannot be digitally transferred without creating an unlawful reproduction.

The court in Capital Records also held the owner of a copyrighted work may sell, gift, or otherwise dispose of the hard drive, iPod, or other memory device onto which the digital file was originally downloaded. This solution may alleviate the numerous concerns expressed by the USCO in 2001. However, by forcing the user to dispose of their digital content in this manner it forces the user to dispose of at least part of their electronic device, which in all likelihood includes digital copies of multiple copyrighted works. In other words, in order to be protected by the first sale doctrine the owner of the copyrighted work must dispose of significantly more than he or she initially bargained for.

As digital downloads increase in popularity, the importance of this issue will continue to grow. The Second Circuit, where the Capital Records case is currently on appeal, is poised to give us further guidance by creating the first circuit level case law on digital first sale. However, when the Digital Millennium Copyright act was introduced nearly 20 years ago, it was acknowledged that this was “only the beginning of Congress’ evaluation of the impact of the digital age on copyrighted works.” Ultimately, it may again be time for Congress to evaluate this impact.

If anyone was still unsure, Kylie Jenner recently proved that a tweet or post from a social media influencer can have a profound impact. Accordingly, companies are increasingly collaborating with social media influencers to promote their brand. This partnership has become quite lucrative for both parties. For example, a recent Forbes article found that influencers could charge $3,000 to $5,000 per post, while some more sought-after influencers were commanding upwards of $25,000. Influencers could also charge anywhere from $20,000 to $300,000 for a campaign or partnership, depending on the number of followers and the social media platform used. Likewise, a 2015 survey by Tomoson found that, on average, “[b]usinesses are making $6.50 for every $1 spent on influencer marketing.” Influencer campaigns have even resulted in products immediately selling-out.

But what happens when an influencer’s post infringers on the intellectual property rights of another?

The relationship between influencers and a business can vary widely. In some instances, businesses oversee and orchestrate the social media posting, almost akin to directing a commercial. In other scenarios, businesses request final approval before the posting is made public. In still other scenarios, the influencer is not given concrete direction or required to get approval for the posting, i.e., the influencer is free to promote the brand as they wish. Business and influencers should be aware of different liability concerns in each scenario.

One of the first cases in this arena was a suit brought by Ultra Records against influencer Michelle Phan for allegedly using background music in her postings without prior permission. While the case eventually settled, it raised the real concern of copyright infringement concerns in influencer advertising and marketing campaigns. As this emerging avenue of advertising and marketing grows in scope and profitability so will the lawsuits. When contracting in any scenario, parties should make sure to address liability concerns for any potential IP infringement. Businesses and influencers should think twice before making their next post and make sure the works and rights of others are not being used without permission. Perhaps more importantly, the parties should take proactive steps to address who will be liable in the event infringement does occur.

This post follows up on my prior blog post regarding the case pending at the United States Supreme Court involving the question of when a copyright holder can properly file a copyright infringement lawsuit.  The petitioner, Fourth Estate Public Benefit Corp., has framed the issue in its petition for certiorari as follows:  “Whether ‘registration of [a] copyright claim has been made’ within the meaning of § 411(a) when the copyright holder delivers the required application, deposit, and fee to the Copyright Office, as the Fifth and Ninth Circuits have held, or only once the Copyright Office acts on that application, as the Tenth Circuit and, in the decision below, the Eleventh Circuit have held.”

34126235 - copyrightFollowing the parties’ respective briefing as to whether the Supreme Court should grant certiorari and thus review the case, the Supreme Court has now invited the United States Solicitor General to submit a brief as well.  In other words, the Supreme Court is interested in the Solicitor General’s view on the issue.  A recent American Bar Association article explains that the Supreme Court has increasingly requested the views of the Solicitor General in order to assess how the United States’ interests are being affected by a lower court’s decision and to determine whether the case is important enough or a circuit split is developed enough to warrant the Supreme Court’s review.  This may mean that the Supreme Court is considering granting certiorari in this case, but it will likely be some time before we learn of that.

Last month, a journalism collective called the Fourth Estate Public Benefit Corp. (“Fourth Estate”) petitioned the United States Supreme Court to review a decision issued by the Eleventh Circuit involving the question of when a copyright holder can properly file a copyright infringement lawsuit.  At issue is 17 U.S.C. § 411(a), which states that “no civil action for infringement of the copyright in any United States work shall be instituted until preregistration or registration of the copyright claim has been made in accordance with this title.”  Although copyright holders obtain copyright protection immediately upon the creation of a copyrightable work, copyright holders cannot initiate a lawsuit without satisfying the “registration” requirement set forth in 17 U.S.C. § 411(a).  According to a Copyright Office circular, this means that “registration (or refusal) is necessary to enforce the exclusive right of copyright through litigation.”

34126235 - copyrightHowever, the Circuit Courts are split as to whether “registration” as used in 17 U.S.C. § 411(a) includes the mere filing of a registration application or whether it requires that the Copyright Office have actually approved or denied the registration application.  Earlier this year, the Eleventh Circuit held in Fourth Estate Public Benefit Corp. v. that “registration” requires the latter.  Because Fourth Estate had applied for copyrights that had not yet been decided upon by the Copyright Office, the Eleventh Circuit held that Fourth Estate could not properly bring its copyright infringement lawsuit against, a news website that Fourth Estate claims kept its news stories live after Fourth Estate’s membership was cancelled.  Therefore, the Eleventh Circuit affirmed the lower court’s dismissal of Fourth Estate’s complaint.

Now, Fourth Estate asks the Supreme Court to weigh in, reverse the Eleventh Circuit’s decision, and resolve the dispute amongst the Circuit Courts.  In the event the Supreme Court hears the case, copyright holders will finally obtain clarity as to whether they may file suit merely after filing an application for a copyright registration.  On the other hand, if the Supreme Court declines to hear the case, copyright holders will be forced to continue to evaluate which courts are, or may be, favorable on the issue.  If copyright holders are stuck with filing in an unfavorable court, they must evaluate the risks of waiting to file a lawsuit (and potentially paying for an expedited registration) or of jeopardizing dismissal of their complaint.

On November 1, 2017, the Supreme Court distributed the case for conference on November 21, 2017.  After that conference, we should know whether the Supreme Court has granted certiorari, and will thus hear the case, or whether the Circuit Court split will remain for the foreseeable future.