2008 IP Lawyers Summary of Entertainment Law for the USA

September 2008

by Neville L. Johnson

1. Introduction

47% of gross domestic product involves intellectual property (IP) transactions, and about 6% of the USA's national worth — $626 billion annually — is from copyright businesses.

The internet has caused massive financial havoc.[1] IFPI, the international music industry trade organization, estimates freely traded downloads outnumber paid tracks 20 to 1.[2]

2.      Contracts

a.       Improper jury instruction: In Roger Rabbit creator's breach of contract action against Disney, the court of appeal held whether the term “purchaser” in the contract assigning rights to novel's characters to movie production company included the production company's subsidiaries was a judicial function, even though the parties vigorously disputed the inferences to be drawn from extrinsic evidence of production company's predispute conduct, absent any dispute over the evidentiary facts themselves, and therefore the trial court improperly permitted the jury to interpret the meaning of “purchaser.” Wolf v. Walt Disney Pictures and Television, 162 Cal.App.4th 1107, 76 Cal.Rptr.3d 585 (Cal.App. 2 Dist. 2008).[3]

3.      Trademark

a.       eBay wins over Tiffany: eBay prevailed in defending claims that it did not take enough steps to police fake Tiffany jewelry sold on its website, with the court holding that brand owners are ultimately responsible for protecting their own trademarks.  Tiffany (NJ) Inc. v. eBay, Inc., 2008 WL 2755787 (S.D.N.Y.).

b.      Troubles with trademarking a name: Individual was permanently enjoined and restricted from using his personal name to sell, market, or otherwise promote, goods, products, and services to the consuming public because he had previously sold the rights to his trademarked name.  JA Apparel Corp. v. Abboud, 2008 WL 2329533 (S.D.N.Y.).

4.      Copyright

a.       Copyright holder must get registration before infringement for statutory damages and attorneys' fees:  An award of statutory damages or attorneys' fees for post-registration infringements (not within three months after first publication of work) is not available under the Copyright Act when the initial act of infringement occurred prior to effective copyright registration date and there was no legally significant difference between pre-registration and post-registration infringement.  Derek Andrew, Inc. v. Poof Apparel Corp., 528 F.3d 696 (9th Cir. (Wash.) 2008).

b.      When a co-owned copyright interest comes through an assignment from someone who was themselves a co-owner, rather than arising as a result of joint authorship, that person is not a co-owner but merely a non-exclusive licensee with no standing to bring an infringement claim.  Sybersound Records, Inc. v. UAV Corp., 517 F.3d 1137 (9th Cir. (Cal.) 2008).[4]

c.       Contributory infringement – Perfect 10: Copyright owner brought actions against operator of Internet search engine and Internet retailer for, inter alia, infringement of copyrighted images.  The court remanded the case for factual inquiries into the claims that Google and Amazon.com were secondarily liable for infringement of Perfect 10's full-size images.  Copyright owner also brought action against credit card companies and several affiliated banks and data processing services alleging secondary liability under federal copyright and trademark law and liability under California statutory and common law for processing credit card payments to Internet websites that infringed publisher's intellectual property rights.  The Ninth Circuit affirmed dismissal of that case, holding that there was no material contribution to infringements or vicarious infringements.  Perfect 10, Inc. v. Amazon.com, Inc., 487 F.3d 701 (9th Cir. (Cal.) 2007); Perfect 10, Inc. v. Visa Intern. Service Ass'n, 494 F.3d 788 (9th Cir. (Cal.) 2007).[5]

d.      Riviera Distributors, Inc., et al. v. Jones, et al., 517 F.3d 926 (7th Cir. (Ill.) 2008).  In a copyright infringement suit between competing video game makers, after the time for voluntary dismissal under Fed. R. Civ. Proc. 41(a)(1) had passed, the plaintiff filed a motion to dismiss its own claim without prejudice.  Defendant was awarded attorneys fees as a “prevailing party.”

5.      Talent Agencies Act

a.       Personal managers may be able to keep money even though they violated the Talent Agencies Act: Personal manager of an actress sued for his commission on her earnings from a television show. After Labor Commissioner voided parties' contract ab initio for manager's procurement of employment for actress without license under Talent Agencies Act, actress moved for summary judgment.  The Supreme Court of California held that the Talent Agencies Act applied to the personal manager, that the doctrine of severance applied to contracts partially illegal under the Act, and that a fact issue remained whether contract was severable. Marathon Entertainment, Inc. v. Blasi, 42 Cal.4th 974, 70 Cal.Rptr. 3d 727 (2008). This is the most important legal decision in the history of talent-manager relations. For over four decades, talent has sought to terminate contracts because managers offered, promised, procured, or attempted to procure employment and did not have a talent agencies license. The severity of the remedy is now looked at on a case by case basis, and monies derived from that which was wrongfully procured can be “severed” allowing manager to still collect his/her commission.

b.      The role of the Labor Commissioner in Talent Agencies Act disputes gets dealt a serious blow: Where an attorney who rendered services for personnel in motion picture-television industry initiated arbitration proceeding against performer, seeking to recover fees to which he claimed he was entitled under their contract, the California Court of Appeal (145 Cal.App.4th 440, 51 Cal.Rptr.3d 628) affirmed the denial of arbitration and grant of the performer's motion to stay action pending proceedings before Labor Commissioner.  The United States Supreme Court held that when parties agree to arbitrate all questions arising under contract, Federal Arbitration Act (FAA) supersedes state laws lodging primary jurisdiction in another forum, whether judicial or administrative.  Preston v. Ferrer, — U.S. –, 128 S.Ct. 978 (2008).[6]

6.      Guilds

a.       Plaintiff contended that he was improperly left out as a producer on the 2006 Academy Award winning best picture “Crash.”  The court of appeal held that the right of fair procedure does not apply to the decisions that private organizations, such as the Academy of Motion Picture Arts and Sciences and Producers Guild of America, make about their own awards. Yari v. Producers Guild of America, Inc., 161 Cal.App.4th 172, 73 Cal.Rptr.3d 803 (Cal.App. 2 Dist. 2008). (Note, however, that the two entities above are not unions in the traditional sense, so traditional labor laws do not apply to them.)

b.      Attorneys can be class counsel even if representing competing clients: Non-union writers brought wage and labor law class action lawsuits against reality television production companies and television networks. Defendants filed motion to disqualify counsel based on a conflict of interest, alleging that law firm who represented labor union was also counsel for the writers, that the union paid for writers' attorney fees and costs, and the union had conceived the litigation as part of its organizing campaign, which many writers supported.  The Court of Appeal held that the named representatives and union each waived any conflict of interest, that, as an issue of first impression, conflict of interest waivers were not required from each and every member of putative class, and that the issue of whether named writers could act as representatives of putative classes was premature.  Sharp v. Next Entertainment, Inc., 163 Cal.App.4th 410, 78 Cal.Rptr.3d 37 (Cal.App. 2 Dist. 2008).

c.       Class actions allege that less than half of approximately $100 Million in foreign levies collected for directors, writers, and actors has been paid out, going back to 1991.  Federal court remanded claims to state court, finding that labor laws are not applicable and defendants can be sued for common law claims.  Webb v. Directors Guild of America; Richert et al. v. Writers Guild of America west; Osmond v. Screen Actors Guild.  2007 WL 5022165 (Johnson & Johnson LLP is counsel for plaintiffs; all cases are currently pending in Los Angeles Superior Court.)

7.      SLAPP

a.       The SLAPP or anti-SLAPP statute is a special motion to strike created by Civil Code of Procedure section 425.16.  At its core the statute was enacted “to provide a procedural remedy to dispose of lawsuits that are brought to chill the valid exercise of constitutional rights.”  Rusheen v. Cohen, 37 Cal.4th 1048, 1055-1056, 39 Cal.Rptr.3d 516 (2006).  Section 425.16 requires a two-step process for determining whether an action is a SLAPP.  Navellier v. Sletten, 29 Cal.4th 82, 88, 124 Cal.Rptr.2d 530 (2002).  First, the defendant must make a threshold showing that the challenged cause of action is one arising from protected activity.  Id. (citing §425.16(b)(1)).   “A defendant meets this burden by demonstrating that the act underlying the plaintiff's cause fits one of the categories spelled out in section 425.16, subdivision (e).”  Braun v. Chronicle Publishing Co., 52 Cal.App.4th 1036, 1043, 61 Cal.Rptr.2d 58 (1997).  If the court finds that such a showing has been made, it must then determine whether the plaintiff has demonstrated a probability of prevailing on the claim.  Navellier v. Sletten, supra, 29 Cal.4th at 88 (citing §425.16(b)(1)); see generally Equilon Enterprises v. Consumer Cause, Inc., (2002) 29 Cal.4th 53, 67, 124 Cal.Rptr.2d.  Therefore, the threshold issue of whether a case falls within the parameters of the SLAPP statute is often litigated.

b.      “‘[A]n issue of public interest' within the meaning of section 425.16, subdivision (e)(3) is any issue in which the public is interested.  In other words, the issue need not be ‘significant' to be protected by the anti-SLAPP statute–it is enough that it is one in which the public takes an interest.”  Nygard, Inc. v. Uusi-Kerttula, 159 Cal.App.4th 1027, 72 Cal.Rptr.3d 210, 220 (Cal.App. 2 Dist. 2008) (emphasis in original) (collecting cases and analyzing statute).

i.      For example, a website created by a patient brought related to her experience with her plastic surgeon concerned a matter of public interest within the meaning of section 425.16, with the court recognizing that there was no dispute that plastic surgery is a subject of widespread public interest and discussion, citing a Google search, the popular television series Extreme Makeover, and the “firestorm” of negative publicity and comment.   Gilbert v. Sykes, 147 Cal.App.4th 13, 53 Cal.Rptr.3d 752 (Cal.App. 3 Dist. 2007).

c.       After obtaining pre-filing discovery order in Ohio to aid in effort to learn identities of anonymous individuals who had posted statements about him on the Internet that he believed were defamatory, plaintiff filed request for subpoenas in California court.  The posters filed a SLAPP motion, which the court granted, and the plaintiff withdrew his request for subpoenas.  The Court of Appeal held that a request for subpoenas does not fall within section 425.16, and therefore the superior court erred in granting the motion and in awarding attorneys' fees.   Tendler v. www.jewishsurvivors.blogspot.com, 2008 WL 2352497, 79 Cal.Rptr.3d 407 (Cal.App. 6 Dist. 2008).

8.      Miscellaneous

a.       Court allowed estate to pursue intentional infliction of emotional distress and civil rights claims where an assistant district attorney in Texas shot himself in his home as he was about to be arrested by the police for attempting to solicit a minor online.  Waiting outside the house were members of the cast and crew of the national television news show Dateline NBC, there to film Conradt's arrest for a segment of “To Catch A Predator.”   Conradt v. NBC Universal, Inc., 536 F.Supp.2d 380 (S.D.N.Y. 2008).

b.      Prima facie showing required to subpoena identity of anonymous “internet speaker”:  A corporate president, who had brought action in Florida for damages and injunctive relief against 10 fictitiously named defendants for alleged defamatory statements posted on Internet sites under pseudonyms, served subpoena on custodian of records of California internet service provider (ISP) to ascertain identities of anonymous posters. One defendant moved to quash subpoena.  The Court of Appeal held that for issuance of subpoena, president was required to make prima facie showing of alleged tort, which he did not do.  Krinsky v. Doe 6, 159 Cal.App.4th 1154, 72 Cal.Rptr.3d 231 (Cal.App. 6 Dist. 2008).

c.       Professional model sued corporation after corporation used model's image on a coffee label without model's consent and without remuneration. Following trial, the jury awarded model $330,000 in damages and over 15 million dollars in profits.   The court of appeal reversed and remanded, holding that the model must provide some evidence that the corporation's profits were specifically attributable to the use of his identity or persona and that only then does the burden shift to the corporation to show what percentage of its profits that are not attributable to the use of the model's persona.  Christoff v. Nestle USA, Inc., 62 Cal.Rptr.3d 122, previously published at 152 Cal.App.4th 1439 (Cal.App. 2 Dist. 2007) (petition for review granted, 169 P.3d 888, 67 Cal.Rptr.3d 468; however this is only on the issue of whether the wrongful use need be knowing,” which the lower court found was not a requirement).[7] This is not the end of the tort (which is common law and statutory, Civil Code section 3344) as emotional and punitive damages may be available, but a “profits” analysis will be much more difficult for non-celebrities.

d.       Where the plaintiffs sued defendant, an individual, for libel, alleging that she maliciously republished messages and postings on the Internet after being warned that they were defamatory, the California Supreme Court held that Internet service providers and users are immune by federal statute from defamation liability for republication under the Communications Decency Act of 1996.  Barrett v. Rosenthal, 40 Cal.4th 33, 51 Cal.Rptr.3d 55 (2006); see 47 U.S.C., §230; accord Zeran v. America Online, 129 F.3d 327 (4th Cir. 1997).

The internet has created huge privacy and defamation issues.  There is no immunity if a chat room is moderated.  A, if not the, most important issue is whether the potential defendant can satisfy a judgment.

e.       Comedy Club Inc. v. Improv West Associates, Comedy Club, Inc. v. Improv West Associates, 514 F.3d 833 (9th Cir. (Cal.) 2007).  Comedy Club allegedly breached trademark licensing agreement by not opening a sufficient number of Improv clubs.  A covenant not to compete in term (here until 2019) by opening other comedy clubs was found to violate Cal. Bus. and Prof. Code section 16600, which provides “Except as provided in this chapter, every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.”  Such covenants are not necessarily invalid, but are prohibited when they foreclose competition in a “substantial share of the affected line of commerce.”

[1] The entertainment industries are under siege by peer to peer sharing and the effects of such websites as YouTube and Myspace.com, advertising based models, which have transformed the entertainment industries as the “sea-change” is that the entertainment companies no longer control traditional channels of distribution. Viacom is suing Google/YouTube over its alleged failure to adequately monitor and take down clips which would otherwise infringe copyright.  See Viacom Intern. Inc. v. Youtube, Inc., 540 F.Supp.2d 461 (S.D.N.Y. 2008); Viacom Intern. Inc. v. Youtube Inc., Slip Copy, 2008 WL 2627388 (S.D.N.Y. 2008).

[2] From 1997 to 2007, CD sales have gone from $13 Billion to $7.5 Billion.  Record companies are struggling to find an economic model that works, and the industry is in a freefall of sorts with thousands having lost their jobs due to the economic downturn. “360 deals” are now the norm; the record company takes a piece of recording, publishing, merchandising, and live revenues as opposed to the previous model that was limited to recording monies.  Because of the internet, it is now a “singles business”.

[3] The Allman Brothers are lead class action plaintiffs suing Sony over recording contract interpretation for the proper royalty rate to be paid on digital downloads of music, the argument being that the record companies by licensing to internet service providers, such as I-Tunes, should pay the traditional 50% of monies received rather than the much smaller percentage of the download price to the consumer.  The case, one of contractual interpretation, is pending in the United States district court for the Southern District of New York, and the parties are awaiting the court's decision (for over a year and a half!) on Sony's motion to dismiss.  Allman et al. v. Sony BMG Music Entertainment, S.D.N.Y. Case No. 06-3252.  The band did not fare well in Allman v. UMG Recordings, 530 F.Supp.2d 602 (S.D.N.Y. 2008), where they sued their record company for breach of contract, claiming that the record company failed to pay royalties owed to them.  Their claims were time-barred by the incontestability and limitations clauses in the recording contract.  The band did not object in writing to any royalty statement within two years of its issuance and they did not bring an action in connection with any royalty accounting or payment within three years from the date of such statement.  Finally, an equitable estoppel argument was rejected as the band argued it had been “lulled” into taking action because they were allowed to conduct a 20-month audit.  The court ruled that the plaintiffs, instead of commencing a discretionary audit, should have first initiated a legal action.  However, in practical terms, it does not make any sense to sue first and do the audit later.

[4] And note Cambridge Literary Properties, Ltd v. W. Goebel Porzellanfabrik G.m.b.H. & Co. Kg., et al., 510 F.3d 77 (1st Cir. 2007).  If a question of copyright co-ownership requires a determination of issues of original authorship or joint authorship, as opposed to merely determining contractual rights between co-owners, federal question jurisdiction applies over copyright co-ownership disputes.  Hence, the Copyright Act's statute of limitations applies, not the state's, even when a plaintiff only seeks state law remedies, as the ownership issue “arises under the Copyright Act.”  Even if a complaint does not expressly seek a declaration or an adjudication of co-ownership, federal jurisdiction is found, and the Copyright Act's three-year statute of limitations applies.

[5] And see Cartoon Network LP, LLLP v. CSC Holdings, Inc., — F.3d —-, 2008 WL 2952614 (2d Cir. (N.Y.) Aug. 4, 2008).  Owners of copyrighted programs brought action against cable television company seeking declaratory judgment as to whether company's digital video recorder (DVR) system would violate their copyrights.  Summary judgment for the copyright owners was reversed because the company's embodiments of copyrighted programs were not “fixed,” as required to qualify as a “copy” under Copyright Act, that copies were “made” by cable company's customers, and therefore cable company was not directly liable under the Copyright Act, and that playback transmissions of copies were not performances “to the public,” and therefore did not infringe any exclusive right of performance under the Copyright Act.

[6] This can be construed as another victory for managers in that the Labor Commissioner of California was viewed by some as being prejudiced against managers by taking a hard-line position as to remedies available for managers who were found to have booked employment, namely, that the contract was terminated and commissions had to be returned and/or were forfeited.

[7] And see Calkins v. Playboy Enterprises International, Inc., et al., — F.Supp.2d —-, 2008 WL 2095808

E.D.Cal., (May 15, 2008).  Playboy's use of a smaller, cropped version of a high school photograph of a Playmate taken by a portrait photographer, which he copyrighted, on Playmate's bio page in its magazine was a fair use.  Under a four factor analysis: (1) the use was commercial but  “incidental and less exploitative in nature than more traditional types of commercial use” as the photograph did not directly promote sales of its magazine and there was no profit in its use;  (2)  the use was transformative because it had a different function — not as a gift as when she was in high school, but to inform and entertain; (3) the amount and substantiality of the portion used did not weigh for or against a finding of fair use because only as much of the original work as necessary was used; and (4) the effect of Playboy's use on the market for the plaintiff's work — the single most important element of fair use — was not impacted as the photographer was not in the business of selling such photos.