“The law, like the marketplace, applauds innovators. It rewards the trend-setters, the market-makers, the path-finding non-conformists who march to the beat of their own drums. To foster such creativity, statutes and common law rules accord to inspired pioneers various means of recompense and incentives.” 1Louboutin v. Yves Saint Laurent, Decision and Order, No. 11 Civ. 2381 (SDNY Aug. 10, 2011).

Please help UK indie labels harmed in PIAS warehouse fire — One of the many casualties of this week’s riots in London was a warehouse containing inventory for a large number of independent record labels. Many lost large portions of their entire physical inventory. The Create Digital Music blog has additional information on official and third-party efforts to assist the labels and artists affected.

Creative America is seeking stories from those affected by content theft — The new grassroots organization writes: “Don’t forget to share your story about how content theft has affected you or a project you’ve worked on. Email us your story at stories@creativeamerica.org along with your name and studio and/or union affiliation for our upcoming new website and our Facebook and Twitter feeds!”

Authors and press publishers worry about making a living in the digital age — Future of Copyright takes a look at these worries, specifically as explored by Robert Levine in his new book Free Ride and German economist Torben Stühmeier.

New Website for the National IPR Coordination Center — ICE announces a redesigned website for the Center, which coordinates enforcement efforts, investigations, and training between 17 different federal agencies charged with protecting IP rights.

Zediva ‘suspending’ operations; many legal alternatives remain — The streaming site has officially shut down its operations following a federal court imposing a preliminary injunction against it. The MPAA notes the wealth of services where movie fans can watch films online, from iTunes to Netflix, Amazon, Vudu, and VOD offerings from cable and satellite providers.

The Numbers Behind a CreateSpace Bestseller — CreateSpace, a subsidiary of Amazon.com, provides Print On Demand services for authors. How much can writers sell through it? Author Lee Goldberg reports that he was #4 on the fiction bestseller chart at CreateSpace in July … and he had sold 204 copies.

Waiting for Kirtsaeng: the Still Unresolved Tension Between Sections 602 and 109 of the Copyright Act — Last year’s 4-4 split in Costco v. Omega did little to provide guidance for those involved with grey market goods and parallel imports. Andrew Berger looks at three separate cases pending in the 2nd Circuit that must resolve the issues the Supreme Court punted on.

The Greatest Anti-Plagiarism Video I’ve Seen — Entertaining video aimed at educating college students about the dangers of plagiarism. “A Plagiarism Carol” is in Norwegian, but includes English subtitles.

Why Free is so Misunderstood — Faza looks at the strange subset of pundits who champion the “economics of free” as though it were some sort of religious tenet. The reality is that the ideas of loss leaders, promotional giveaways, and giving away the razors and selling the blades have been around for centuries. Creators shouldn’t ignore these ideas, but they also shouldn’t rush into giving away their work because it’s the latest craze.

Hargreaves IP Review – the Response — The Copyright Alliance presents a guest blog from PPL’s Dominic McGonigal looks at the latest UK IP Review, the Hargreaves Report. He notes that the UK’s efforts to reform copyright law are beginning to seem like Groundhog Day: “Another review of IP. Another Report. Another set of Recommendations.”

References   [ + ]

1. Louboutin v. Yves Saint Laurent, Decision and Order, No. 11 Civ. 2381 (SDNY Aug. 10, 2011).

Of the 100+ domain names seized by ICE since it began Operation in Our Sites last summer, only one has raised a challenge. Rojadirecta, which allegedly catalogs hundreds of links, primarily to live sporting events streaming online, has enlisted no less than six lawyers in its effort to prevent its domain names from being forfeited by the US government.

On Friday, Rojadirecta’s petition for release of seized property was denied by the court. 1The petition was actually filed by Puerto 80 Projects, the company that owns the Rojadirecta site. To keep things simple, I’ll refer to both the site and the site’s owners and operators as Rojadirecta for this article. On the same day, it filed its motion to dismiss in the Government’s forfeiture proceeding against its domain name. The Government’s response is due by August 26th, and Rojadirecta’s reply to the response is due September 2nd.

Was the court correct in refusing to release the domain name to Rojadirecta? Will Rojadirecta succeed in getting the Government’s forfeiture complaint dismissed?

The short answer to these questions are, in my opinion, yes and no. For the gory legal details, read on.

Petition to Release Seized Property

Civil forfeiture is based on the idea that property can be “guilty” — a strange idea, but not a new one. 2See Calero-Toledo v. Pearson Yacht Leasing Co., 416 US 663, 680-684 (1974) where the Supreme Court traces the history of forfeiture laws since Biblical times. But other than the defendant being property rather than a person, a civil forfeiture proceeding largely mirrors any other civil lawsuit. It begins with a complaint filed in court, proceeds through motions practice and discovery, and (if it makes it this far) ends in trial and judgment.

In a previous post, I wrote how the petition to release seized property largely mirrors the procedure of a criminal defendant being released on bail pending trial. Viewed this way, it’s easy to see why Rojadirecta didn’t succeed with its petition. Essentially, Rojadirecta’s lawyers made two arguments: “our client should be released on bail because he’s innocent” and “our client should be released on bail because he was wrongfully arrested.”

Those are certainly valid arguments, just not in this context.

As I detailed in my previous post, a petition like this is only granted if a claimant is suffering a substantial hardship due to the seizure. Most deprivations of property will cause some level of hardship, obviously; Congress added this procedure to reach those situations where the seizure would be devastating — situations like “preventing the functioning of a business, preventing an individual from working, or leaving an individual homeless.” 318 USC § 983(f)(1)(C).

Rojadirecta failed to argue any of these.

It did argue, in part, that its users were suffering a substantial hardship due to the seizure because their First Amendment rights had been infringed. The court rejected this argument, causing some to scratch their heads, since it sounds like the court is saying it doesn’t think a loss of First Amendment rights is a substantial hardship.

That’s not what the court is saying, however. Infringement of free speech certainly causes substantial, if not irreparable, hardship. But the definition of “substantial hardship” in this particular statute is far more limited than the general meaning of the phrase. In addition, Congress didn’t intend to include free speech violations under this statute because those rights are already protected.

Claimants can challenge the legality of a seizure during the forfeiture proceeding itself or through existing procedures — for example, a Bivens action or a motion to suppress. 4US v. PlayboyMonthly.com, United States’ Motion to Dismiss Claimant’s Counterclaims, No. 8:10-cv-1214-T-27TBM (MD Fla. 2010); US v. $80,633, 512 F.Supp.2d 1196 (MD Ala. 2007). The 983(f) petition is an additional layer of procedural protection on top of existing procedures, designed for a specific purpose. Rojadirecta simply raised this issue in the wrong place.

Judging by the brevity of the order, the denial of Rojadirecta’s petition was, as I had predicted, an easy call for the court to make.

Rojadirecta’s Motion to Dismiss

A motion to dismiss will be granted if the complaint is insufficient on its face.

Civil forfeiture complaints are governed by the Supplemental Rules in the Federal Rules of Civil Procedure, which state in part that the Government must “state sufficiently detailed facts to support a reasonable belief that the government will be able to meet its burden of proof at trial.” “However,” as one court explains, “the Government is not required to allege in the complaint all of the facts and evidence at its disposal.”

It is sufficient for the Government to simply plead enough facts for the claimant to understand the theory of forfeiture, to file a responsive pleading, and to undertake an adequate investigation. The issue is one of pleading, not proof at trial. And it is for this reason that “[n]o complaint may be dismissed on the ground that the Government did not have adequate evidence at the time the complaint was filed to establish the forfeitability of the property.” 5US v. $22,173.00 in US Currency, 716 F. Supp. 2d 245, 248-49 (SDNY 2010.

What does the Government have to show to establish the forfeitability of property?

Federal civil forfeiture statutes, including those applying to criminal copyright infringement, are subject to CAFRA, the Civil Asset Forfeiture Reform Act of 2000. Under CAFRA, the Government must show that the defendant property is subject to forfeiture by a preponderance of the evidence. When the defendant property is alleged to be an instrumentality of a crime, the Government must also show that there is a substantial connection between the property and the alleged crime.

If the Government can show both, the only way a claimant can win is by rebutting the showing of a substantial connection or raising an affirmative defense to the forfeiture — the claimant is an “innocent owner” of the property, for example. Under CAFRA, an innocent owner is one who “did not know of the conduct giving rise to forfeiture; or upon learning of the conduct giving rise to the forfeiture, did all that reasonably could be expected under the circumstances to terminate such use of the property.” 6Van Hofe v. US, 492 F.3d 175, 179-80 (2nd Cir. 2007).

18 USC § 2323(a)(1)(B) subjects the following to forfeiture: “Any property used, or intended to be used, in any manner or part to commit or facilitate the commission of an offense referred to in subparagraph (A).” Subparagraph (A) refers to criminal copyright infringement offenses, including those set out in 17 USC § 506, which states:

(1) In general.— Any person who willfully infringes a copyright shall be punished as provided under section 2319 of title 18, if the infringement was committed—

(A) for purposes of commercial advantage or private financial gain;

(B) by the reproduction or distribution, including by electronic means, during any 180–day period, of 1 or more copies or phonorecords of 1 or more copyrighted works, which have a total retail value of more than $1,000; or

(C) by the distribution of a work being prepared for commercial distribution, by making it available on a computer network accessible to members of the public, if such person knew or should have known that the work was intended for commercial distribution.

Facilitation “occurs when the property makes the prohibited conduct less difficult or more or less free from obstruction or hindrance.” 7In re 650 Fifth Avenue and Related Properties, Memorandum Opinion and Order, No. 1:08-cv-10934-RJH (SDNY March 30, 2011). As one court noted, “It is ‘[i]rrelevant whether the property’s role in the crime is integral, essential or indispensable.’ A single incident of facilitating criminal activity is sufficient to trigger forfeiture.” 8US v. LAM, No. 3:07-CR-374, Memorandum Opinion (ED Va. March 28, 2011).

Notice what is not required in civil forfeiture proceedings.

First, the Government does not have to prosecute or convict anyone of the underlying crime to seek forfeiture of property that facilitates that crime. 9See, for example, Van Hofe at 179, US brought civil in rem forfeiture action against residence used to facilitate commission of drug crime without indicting and prosecuting owners personally; Austin v. US, 509 U.S. 602, 627 (1993) (Scalia, J. concurring in part and concurring in judgment), conviction irrelevant to forfeiture proceeding; The Palmyra, 25 US 1, 15 (1827), “no personal conviction of the offender is necessary to enforce a forfeiture in rem in cases of this nature”; US v. One Parcel of Real Estate Located at 7715 Betsy Bruce Lane Summerfield, 906 F. 2d 110,111-12 (4th Cir. 1990), “In civil forfeiture cases, property is subject to forfeiture ‘even if its owner is acquitted of — or never called to defend against — criminal charges.'”

Second, the forfeiture proceeding is not directed at the site operators of Rojadirecta, but at the domain name itself. 10See Calero-Toledo v. Pearson Yacht Leasing Co., 416 US 663 (1974). The culpability of the site’s owners is irrelevant. 11See US v. Cherry, 330 F.3d 658, n.16 (4th Cir. 2003). In fact, the civil forfeiture has been described as an “essential tool” when the government “can prove that the property was involved in a crime, but cannot prove who the wrongdoer was.” 12Stefan D. Cassella, Overview of Asset Forfeiture Law in the United States, United States Attorneys’ Bulletin, Vol. 55, vol. 6, pg. 17 (November 2007).

With this in mind, let’s turn to Rojadirecta’s general argument supporting its motion to dismiss. It states, “the Complaint, which focuses entirely on Puerto 80’s actions, fails to allege facts that, if proven, would suffice to show that Puerto 80’s operation of the Rojadirecta site constitutes criminal copyright infringement.”

As we’ve just seen, the Government’s forfeiture complaint doesn’t have to allege such facts. In other words, Rojadirecta is barking up the wrong tree with its entire argument. The question of whether or not the operators of Rojadirecta are directly or indirectly liable for criminal copyright infringement — as well as the question of whether or not criminal copyright infringement even allows for indirect liability — is completely unrelated to the question of whether the domain name can be forfeited for facilitating the commission of a criminal copyright offense.

I doubt, then, that Rojadirecta can succeed with its motion to dismiss. Its argument doesn’t apply to the Government’s claim that its property was used to facilitate the commission of criminal copyright infringement.

Limits on Forfeiture

Some have wondered what limits the Government from seizing just about any web site’s domain name, considering the seemingly broad reach of civil forfeiture law. I’ve previously discussed some of the legal limitations preventing a seizure free-for-all; I want to briefly mention one more.

The Eighth Amendment’s prohibition of excessive fines places limits on civil forfeiture. The 2nd Circuit analyzes property forfeiture for excessiveness by considering the following:

(1) the harshness, or gross disproportionality, of the forfeiture in comparison to the gravity of the offense, giving due regard to

(a) the offense committed and its relation to other criminal activity,

(b) whether the claimant falls within the class of persons for whom the statute was designed,

(c) the punishments available, and

(d) the harm caused by the claimant’s conduct;

(2) the nexus between the property and the criminal offenses, including the deliberate nature of the use and the temporal and spatial extent of the use; and

(3) the culpability of each claimant.

It adds, “Determining the excessiveness of a civil in rem forfeiture is necessarily fact-intensive and the ‘quantum, in particular, of pecuniary fines neither can, nor ought to be, ascertained by any invariable law.’ Given the impossibility of establishing a formula for an excessive fine with surgical precision, this framework provides a useful template for the fact-finding process and the ultimate excessiveness inquiry.” 13Van Hofe at 186.

A more detailed look at how this inquiry works in practice is beyond the scope of this article.

References   [ + ]

1. The petition was actually filed by Puerto 80 Projects, the company that owns the Rojadirecta site. To keep things simple, I’ll refer to both the site and the site’s owners and operators as Rojadirecta for this article.
2. See Calero-Toledo v. Pearson Yacht Leasing Co., 416 US 663, 680-684 (1974) where the Supreme Court traces the history of forfeiture laws since Biblical times.
3. 18 USC § 983(f)(1)(C).
4. US v. PlayboyMonthly.com, United States’ Motion to Dismiss Claimant’s Counterclaims, No. 8:10-cv-1214-T-27TBM (MD Fla. 2010); US v. $80,633, 512 F.Supp.2d 1196 (MD Ala. 2007).
5. US v. $22,173.00 in US Currency, 716 F. Supp. 2d 245, 248-49 (SDNY 2010.
6. Van Hofe v. US, 492 F.3d 175, 179-80 (2nd Cir. 2007).
7. In re 650 Fifth Avenue and Related Properties, Memorandum Opinion and Order, No. 1:08-cv-10934-RJH (SDNY March 30, 2011).
8. US v. LAM, No. 3:07-CR-374, Memorandum Opinion (ED Va. March 28, 2011).
9. See, for example, Van Hofe at 179, US brought civil in rem forfeiture action against residence used to facilitate commission of drug crime without indicting and prosecuting owners personally; Austin v. US, 509 U.S. 602, 627 (1993) (Scalia, J. concurring in part and concurring in judgment), conviction irrelevant to forfeiture proceeding; The Palmyra, 25 US 1, 15 (1827), “no personal conviction of the offender is necessary to enforce a forfeiture in rem in cases of this nature”; US v. One Parcel of Real Estate Located at 7715 Betsy Bruce Lane Summerfield, 906 F. 2d 110,111-12 (4th Cir. 1990), “In civil forfeiture cases, property is subject to forfeiture ‘even if its owner is acquitted of — or never called to defend against — criminal charges.'”
10. See Calero-Toledo v. Pearson Yacht Leasing Co., 416 US 663 (1974).
11. See US v. Cherry, 330 F.3d 658, n.16 (4th Cir. 2003).
12. Stefan D. Cassella, Overview of Asset Forfeiture Law in the United States, United States Attorneys’ Bulletin, Vol. 55, vol. 6, pg. 17 (November 2007).
13. Van Hofe at 186.

On August 8, 2010, I wrote the first post for Copyhype.

When I began this site exactly one year ago, I wasn’t sure what to expect from it. I find copyright law fascinating and enjoy writing about it. I also felt there was room in the blogosphere for thoughtful legal analysis of copyright issues, analysis that doesn’t necessarily require you to have a law degree to understand.

I don’t know if I’ve achieved that, but I have been genuinely surprised and encouraged by this blog’s reception. I want to thank all my readers, those who’ve commented here, and those who’ve linked here. I also want to thank everyone who has followed me on Twitter and Facebook.

Some stats: In the first year, Copyhype has had over 40,000 visits from 142 countries.

The most popular posts in the first year have been:

  1. Kind of Bamboozled: Why ‘Kind of Bloop’ is not a Fair Use
  2. Demonizing Copyright
  3. Is Copyright Infringement Theft
  4. Fears of Felony Streaming Bill Overblown
  5. The “Fallacy of Intellectual Property” Fallacy

Since August 8, 2010, I’ve written 104 posts with a total of 163,728 words. If this was a book, assuming an average of 250 words per page, then it would be 655 pages long.

New stuff: I’ve added a page for online copyright resources. They include many resources I use when writing for this site, as well as ones I’ve culled from previous articles. You may also notice a few cosmetic changes on the page. Nothing major, I just wanted to spruce things up a bit after a year.

What’s in store for the next year of this site? You tell me! Let me know if there are news items or issues you would like to see addressed, or subject matters you’d like to see more of. I love hearing from readers.

With that said, I’m excited to enter the second year of Copyhype, and I hope to continue to improve the quality of coverage and analysis that this site is becoming known for. Thanks for a great first year!

“[I]t is virtually axiomatic that the public interest can only be served by upholding copyright protections…” 1Order granting preliminary injunction against Zediva, quoting Apple Computer v. Franklin Computer Corp, 714 F.2d 1240, 1255 (3rd Cir. 1983).

Federal Judge Grants Injunction Against Zediva — A major setback for the unlicensed streaming service this week as the motion picture studios were granted the preliminary injunction they sought. In A Rose By Any Other Name, the 1709 Blog notes that this was thoroughly unsurprising. Zediva’s “loophole” wasn’t a novel interpretation; others have tried and failed as far back as 1984.

With Final Filings, Parties in GSU E-Reserve Case Await Verdict — Higher ed has been closely watching the copyright infringement suit between academic publishers and Georgia State University regarding its e-reserve practices. Publishers Weekly reports on the post-trial developments before the upcoming verdict.

Myths About Fair Use — Patricia Aufderheide, writing at Inside Higher Ed, discusses seven myths about fair use and the academic world. Good read for anyone in education. Especially good: “Myth #5: Sure, fair use is on the books, but it’s too risky — even if I’m right, I could get sued.”

Copyright Infringement IS Theft, You Filthy Pirates — The Humble Indie Bundle is a group of independently developed video games. It’s sold under a “pay-what-you-want” model (minimum price: one cent), with proceeds going to various charities. Yet, the games are still pirated. This eloquent rant is aimed at those who attempt to justify this kind of theft.

Pirate Economics — The Cynical Musician gives us an economic analysis of online piracy.

The Grammar of Copyright — Jonathan Bailey talks about the proper use and spelling of the word “copyright”. It’s an interesting topic, as the word can be either a noun or a verb. Anyone who has spent time reading or writing about the subject knows the word is frequently misused; and no wonder, even I sometimes have to pause to figure out if I’m using it correctly.

UK Proposals to Modernize UK Copyright Act — Sookman also takes a look at the UK government’s adoption of a number of recommendations from the Hargreaves Report. He also notes that the fact that the blocking of infringing sites was not adopted is not as big a deal as it has been made out to be.

UK Copyright caselaw update: the Lucasfilm, BT, ITV and Meltwater cases — Barry Sookman summarizes the four major cases that came out of the UK last week. Great article for getting caught up in one sitting.

On Location: Picture Shop Frames a Hollywood Future (via MPAA Blog) — The LA Times profiles a California business that provides picture frames and other items for TV and film productions. The story highlights the role small businesses play in the entertainment industry.  “Catering to Hollywood has become an increasingly vital source of income to small business owners like Cruz, who have been buffeted by a deep recession and an anemic recovery that has kept may consumers from buying discretionary items like picture frames. ‘If it wasn’t for the film and TV business, we would be in hot water,’’ said Cruz, who generates 75% of her annual sales — more than $500,000 a year -– by supplying frames to set decorators on such TV shows as ‘CSI’ and HBO’s ‘True Blood’ and movies including ‘Spider-Man 3,’ ‘Funny People’ and the upcoming December release ‘The Girl with the Dragon Tattoo.'”

Facebook’s Complete Guide to Building a Band Page — The social networking site has released a 40 page guide designed to helping musicians get the most out of Facebook pages and Facebook integration with their websites. Though it’s geared specifically toward musicians, most of the information is helpful to other creative professionals and small businesses.

MTV’s standard Real World contract — The Village Voice got their hands on a copy of a contract used for participants in MTV’s The Real World. Read it in all its glory. Be sure to check out paragraph 41 on page 17: Real World cast members are responsible for clearing permissions on all copyrighted music, photos, and video that they perform or use when on camera.

References   [ + ]

Last Thursday, a district court ruled against the estate of Jack Kirby in its attempt to reclaim the copyright on his creations. (Full opinion here).

If you’re a comic fan, you don’t need to be told who Jack Kirby (1917-1994) is. The artist was a key figure at Marvel during the Silver Age of Comic Books, helping create many iconic characters that are as popular today as they were over 40 years ago.

On September 16, 2009, Kirby’s heirs served Marvel Comics with termination notices for 45 Kirby comics published by Marvel between 1958 and 1963, including comics that introduced many iconic characters like Spider-man, the X-Men, Iron Man, the Mighty Thor, the Avengers, the Fantastic Four, and the Incredible Hulk. 1Marvel is no stranger to this type of litigation — in 2003, it settled a similar suit with creator Joe Simon over rights to Captain America, and has faced challenges to various other characters, including an ongoing dispute with Gary Friedrich, creator of Ghost Rider; see also In re Marvel Entertainment Group, 254 BR 817 (D. Dela. 2000) which covered a dispute over various characters. Marvel filed for declaratory relief on January 8, 2010, claiming that the comics were works made for hire, making the termination notices invalid. Kirby’s heirs counterclaimed. 2This litigation spawned an earlier decision, Marvel Worldwide v. Kirby, 756 F.Supp. 2d 461 (SDNY Nov. 22, 2010), where the court dismissed several of Kirby’s counterclaims.

On cross motions for summary judgment, the Southern District Court of New York sided with Marvel, ruling that the Kirby works were works for hire under the Copyright Act of 1909. Kirby’s estate has announced that it intends to appeal this ruling.

Litigation like this inevitably can lead to strong reactions among comic fans. The District Court commendably begins its opinion by making an effort to separate the emotional aspects of this case from the pragmatic:

At the outset, it is important to state what this motion is not about. Contrary to recent press accounts and editorials, this case is not about whether Jack Kirby or Stan Lee is the real “creator” or Marvel characters, or whether Kirby (and other freelance artists who created culturally iconic comic book characters for Marvel and other publishers) were treated “fairly” by companies that grew rich off the fruit of their labor. It is about whether Kirby’s work qualifies as work-for-hire under the Copyright Act of 1909, as interpreted by the courts, notably the United States Court of Appeals for the Second Circuit. If it does, then Marvel owns the copyright in the Kirby Works, whether that is “fair” or not. If it does not, then the Kirby Heirs have a statutory right to take back those copyrights, no matter the impact on a recent corporate acquisition or on earnings from blockbuster movies made and yet to be made.

Work for Hire

Copyright protection initially vests with the author or creator of the work. The exception to this rule is when the work is a “work made for hire” — in that case, the employer or entity commissioning the work is considered the author under the law.

Whether a particular work is a work made for hire depends on which copyright act applies to it. Works made before January 1, 1978 are governed by the Copyright Act of 1909, works made after are governed by the Copyright Act of 1976. Sometimes courts have to look at both Acts in one case. 3For example, in Playboy v. Dumas, 53 F.3d 549 (2nd Cir. 1995), the works at issue were made between 1974 and 1984.

This point is key since each Act has a different definition of what makes a work a work for hire.

The 1909 Act only mentions the doctrine once: “[i]n the interpretation and construction of this title … the word ‘author’ shall include an employer in the case of works made for hire.” 417 USC § 26 (1976) (repealed). The Act doesn’t define “employer” or “works made for hire” separately. Courts generally applied the work for hire doctrine only in cases involving a traditional employer/employee relationship until the mid-1960s. 5Playboy at 554.

However, courts also recognized that work for hire can apply when a work is commissioned — the creator is an independent contractor rather than a traditional employee. 6Yardley v. Houghton Mifflin Co, 108 F.2d 28 (2d Cir 1939); Grant v. Kellogg Co, 58 F.Supp. 48 (SDNY 1944); Dielman v. White, 102 F. 892 (CCD Mass 1900). In 1965, the 9th Circuit first expressed what became known as the “instance and expense” test for works made for hire:

[W]e believe that when one person engages another, whether as employee or as an independent contractor, to produce a work of an artistic nature, that in the absence of an express contractual reservation of the copyright in the artist, the presumption arises that the mutual intent of the parties is that the title to the copyright shall be in the person at whose instance and expense the work is done. 7Lin-Brook Builders Hardware v. Gertler, 352 F.2d 298, 300.

The “instance and expense” test was adopted by other Circuits, most notably the 2nd Circuit, where a majority of copyright cases are litigated. 8See  Brattleboro Publishing Co v. Winmill Publishing, 369 F.2d 565, 567-68 (2d Cir 1966); Murray v. Gelderman, 563 F.2d 773, 775 (5th Cir 1977). Under this test, courts find a work made for hire when “the motivating factor in producing the work was the employer who induced the creation” and the employer has the right to “direct and supervise the manner in which the writer performs his work”. 9Playboy at 554.

The work made for hire doctrine under the 1976 Act is more specific and limited. The Act defines a “work made for hire” as:

(1) a work prepared by an employee within the scope of his or her employment; or

(2) a work specially ordered or commissioned for use as a contribution to a collective work, as a part of a motion picture or other audiovisual work, as a translation, as a supplementary work, as a compilation, as an instructional text, as a test, as answer material for a test, or as an atlas, if the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire… 1017 USC § 101.

Based on this definition, the Supreme Court held that the “instance and expense” test doesn’t apply for works created under the 1976 Act, though it rejected the idea that the first definition only refers to “formal, salaried” employees. 11Community for Creative Non-Violence v. Reid, 490 US 730 (1989). Instead, courts must look at common law rules of agency to determine whether a work was made within the scope of employment — these rules place the actual nature of the relationship between two parties above whatever language is used in written agreements between them.

Factors that a court might consider include “the skill required; the source of the instrumentalities and tools; the location of the work; the duration of the relationship between the parties; whether the hiring party has the right to assign additional projects to the hired party; the extent of the hired party’s discretion over when and how long to work; the method of payment; the hired party’s role in hiring and paying assistants; whether the work is part of the regular business of the hiring party; whether the hiring party is in business; the provision of employee benefits; and the tax treatment of the hired party.”

Whether a particular work is a work made for hire or not has numerous implications, but the doctrine is especially significant when it comes to the question of a creator’s termination rights, which is the issue at play here.

Copyright Termination

The 1909 Copyright Act provided for an initial copyright term of 28 years with an optional renewal period of 28 more years of protection. The idea behind this set-up was to give authors, who may have been in a weak bargaining position when their work was first created, a chance to renegotiate licenses if a work became valuable. However, in 1943, the Supreme Court held that there was nothing in the 1909  Act that prevented authors from assigning the right to copyright renewal in their initial assignment. 12Fred Fisher Music v. M. Witmark & Sons, 318 US 643. The court noted, “We are asked to recognize that authors are congenitally irresponsible, that frequently they are so sorely pressed for funds that they are willing to sell their work for a mere pittance, and therefore assignments made by them should not be upheld … We do not have such assured knowledge about authorship, and particularly about song writing, or the psychology of gifted writers and composers, as to justify us as judges in importing into Congressional legislation a denial to authors of the freedom to dispose of their property possessed by others. While authors may have habits making for intermittent want, they may have no less a spirit of independence which would resent treatment of them as wards under guardianship of the law.” The result of this ruling was that it became common practice for publishers to insist upon an assignment of the renewal period when an author initially assigned his rights, effectively erasing the purpose of having two copyright terms. 13Marvel Characters v. Simon, 310 F.3d 280, 284 (2nd Cir. 2002).

When Congress set its sights on revising the Copyright Act, it took another look at this issue of new and emerging authors and creators signing away their rights because of their weak bargaining positions. This led to the creation of a termination right in the Copyright Act of 1976, gives an author the right to terminate any exclusive or nonexclusive license or transfer of copyright. 1417 USC § 203. Works that were already in existence when the 1976 Act was passed also received a termination right, 17 USC § 304(c). The termination right is inalienable — any agreement that takes it away is invalid.

The termination right does not, however, apply to works made for hire. Under the law, the “author” of a work for hire is the person or company doing the hiring. Since the actual creator never had a copyright to transfer, it follows that there is nothing to terminate. It should not be surprising then that most challenges to copyright terminations will hinge upon whether the original work was a work for hire or not.

The Court Decision

The court found the evidence that Kirby’s works were made at Marvel’s instance “overwhelming” — it pointed to only one conclusion: “Kirby did not create the artwork … until [Stan] Lee told him to.” Kirby’s heirs argued that there wasn’t a written agreement between Kirby and Marvel, meaning Marvel lacked the legal right and to control his work, but the court pointed out that a contract need not be in writing. When it looked at the actual relationship of the parties, it concluded that it was “undisputed” that “Marvel did control and supervise all work that it published between 1958 and 1963.”

The expense prong is in Marvel’s favor as well, since it was Marvel, not Kirby, who bore the risk of the comic books’ failure. The fact that Kirby was paid a flat sum for each page he submitted also favored Marvel, since the Second Circuit views a flat sum payment for work sufficient to meet the expense prong of the test. 15Playboy at 555. This made Marvel the presumptive author of Kirby’s creations unless Kirby’s heirs could rebut this presumption with evidence to the contrary.

Unfortunately for the heirs, the court found the evidence they presented thoroughly unconvincing. One piece, a 1972 agreement that was the first written contract between Kirby and Marvel, even contained a clause stating that Kirby agreed the works were made for hire.

The heirs pointed out, however, that the contract included a provision assigning “any and all right, title and interest [Kirby] may have or control” to Marvel. They argued that this provision made no sense if Marvel already owned the copyrights on Kirby’s creations as works made for hire.

The court disagreed, citing to several other cases where similar provisions were not sufficient to rebut the work made for hire presumption. In many situations, provisions like these operate like “quit-claim” deeds in real estate; that is, they aren’t warranties or admissions that a party has any rights to transfer.

In total, the facts and evidence presented convinced the court that Kirby’s creations were works made for hire. Marvel was the statutory author under the 1909 Act, making the termination notices filed by Kirby’s heirs invalid. This conclusion is, I think, on solid legal ground and consistent with previous cases.

References   [ + ]

1. Marvel is no stranger to this type of litigation — in 2003, it settled a similar suit with creator Joe Simon over rights to Captain America, and has faced challenges to various other characters, including an ongoing dispute with Gary Friedrich, creator of Ghost Rider; see also In re Marvel Entertainment Group, 254 BR 817 (D. Dela. 2000) which covered a dispute over various characters.
2. This litigation spawned an earlier decision, Marvel Worldwide v. Kirby, 756 F.Supp. 2d 461 (SDNY Nov. 22, 2010), where the court dismissed several of Kirby’s counterclaims.
3. For example, in Playboy v. Dumas, 53 F.3d 549 (2nd Cir. 1995), the works at issue were made between 1974 and 1984.
4. 17 USC § 26 (1976) (repealed).
5. Playboy at 554.
6. Yardley v. Houghton Mifflin Co, 108 F.2d 28 (2d Cir 1939); Grant v. Kellogg Co, 58 F.Supp. 48 (SDNY 1944); Dielman v. White, 102 F. 892 (CCD Mass 1900).
7. Lin-Brook Builders Hardware v. Gertler, 352 F.2d 298, 300.
8. See  Brattleboro Publishing Co v. Winmill Publishing, 369 F.2d 565, 567-68 (2d Cir 1966); Murray v. Gelderman, 563 F.2d 773, 775 (5th Cir 1977).
9. Playboy at 554.
10. 17 USC § 101.
11. Community for Creative Non-Violence v. Reid, 490 US 730 (1989).
12. Fred Fisher Music v. M. Witmark & Sons, 318 US 643. The court noted, “We are asked to recognize that authors are congenitally irresponsible, that frequently they are so sorely pressed for funds that they are willing to sell their work for a mere pittance, and therefore assignments made by them should not be upheld … We do not have such assured knowledge about authorship, and particularly about song writing, or the psychology of gifted writers and composers, as to justify us as judges in importing into Congressional legislation a denial to authors of the freedom to dispose of their property possessed by others. While authors may have habits making for intermittent want, they may have no less a spirit of independence which would resent treatment of them as wards under guardianship of the law.”
13. Marvel Characters v. Simon, 310 F.3d 280, 284 (2nd Cir. 2002).
14. 17 USC § 203. Works that were already in existence when the 1976 Act was passed also received a termination right, 17 USC § 304(c).
15. Playboy at 555.

The latest darling of the digerati is music service Turntable.fm. The site has grown to nearly 400,000 monthly active users (despite still being invite-only) and has raised $7.5 million from investors since it launched just two months ago. Along with countless rave reviews in the blogosphere, it has been covered by Billboard, labelled “the cool kids’ Pandora” by CNN, and called “amazing” by the New York Times.

And it is pretty cool, as I’ve discovered after playing around with it in the last couple weeks. It’s great for sharing music — in the real sense of the word, not in the false “file-sharing” sense — with friends and strangers, discovering new music, or simply as a “traditional” internet radio station that you listen to at work or home.

But is it legal? Several people have already asked the question. As with most questions involving copyright, the answer is not easy, as these answers are typically very fact-specific and depend on interpreting laws that lack bright-line distinctions. The answer isn’t made easier by the fact that the team behind Turntable.fm has remained tight-lipped for the time being.

For those unfamiliar with the site, Billboard’s article provides a good rundown of how it works.

Whether Turntable.fm is legal depends on whether it is licensed to exercise any of the exclusive rights of any copyrighted content.  Recorded music consists of two separate copyrights: a copyright for the underlying musical composition and a copyright for the particular sound recording of the song. Each of these copyrights consist of individual rights — notably, the right to reproduce, the right to distribute, and the right to publicly perform a work.

Public Performance

Streaming a song implicates the public performance right of a musical composition. 1US v. ASCAP, 485 F.Supp.2d 438, 442 (SDNY 2007). Performance Rights Organizations (PROs) — in the US, these include ASCAP, BMI, and SESAC — administer the licensing of public performance rights for nearly all musical compositions — the notable exception being a portion of the catalog of EMI, which recently began administering the public performance rights for “New Media” services itself.

In the past couple weeks, Turntable.fm has inked deals with both ASCAP and BMI. That leaves agreements with SESAC and EMI Publishing for the site to be fully covered, though presumably those are in the works or already on the way based on the site’s efforts to become licensed under the other PROs.

Performance rights for sound recordings are a bit trickier. When sound recordings were first given copyright protection, that protection did not include a right to public performance. However, in 1995, Congress added a narrow performance right to sound recordings via a digital audio transmission. 2Digital Performance Right in Sound Recordings Act, Pub. L. No. 104-39, 109 Stat. 336 (Eff. Feb. 1, 1996). It also included provisions for statutory licensing for certain webcasters, provisions that were amended by the DMCA in 1998.

Currently, noninteractive services are eligible for statutory licensing; interactive services — think on-demand streaming services like Spotify — must negotiate directly with copyright owners for public performance licenses. 317 USC § 114(d)(1) and (d)(2).

The Copyright Act defines an “interactive service” as:

one that enables a member of the public to receive a transmission of a program specially created for the recipient, or on request, a transmission of a particular sound recording, whether or not as part of a program, which is selected by or on behalf of the recipient. The ability of individuals to request that particular sound recordings be performed for reception by the public at large, or in the case of a subscription service, by all subscribers of the service, does not make a service interactive, if the programming on each channel of the service does not substantially consist of sound recordings that are performed within 1 hour of the request or at a time designated by either the transmitting entity or the individual making such request. If an entity offers both interactive and noninteractive services (either concurrently or at different times), the noninteractive component shall not be treated as part of an interactive service. 417 USC § 114(j)(7).

Only one case has been faced with the issue of distinguishing between interactive and noninteractive services. In Arista Records v. Launch Media, the Second Circuit considered whether the webcasting service LAUNCHcast was “interactive” within the meaning of the statute. LAUNCHcast allows users to create custom stations by selecting a genre, artist, or song; the service than generated a custom playlist for the user (I’ve never used LAUNCHcast, but from the description, the service sounds like it operates similarly to Pandora). The plaintiffs argued that this type of service is clearly interactive since the stations are “specially created for the recipient.”

The Second Circuit disagreed with this broad reading of the statute’s language. It turned to Congress’s intent for more clarification, and after a thorough examination of the legislative history, said:

In sum, from the SRA to the DMCA, Congress enacted copyright legislation directed at preventing the diminution in record sales through outright piracy of music or new digital media that offered listeners the ability to select music in such a way that they would forego purchasing records.

Armed with a narrower reading of the statute, the court ultimately concluded that LAUNCHcast was not an “interactive” service “because the webcasting service does not provide sufficient control to users such that playlists are so predictable that users will choose to listen to the webcast in lieu of purchasing music, thereby—in the aggregate—diminishing record sales.”

It appears that Turntable.fm is operating as a noninteractive service. The music on its system is provided through MediaNet, which also assists with licensing through SoundExchange, the organization in charge with administering statutory licensing of digital performance rights for sound recordings.

For a non-DJing listener, the service does appear to be noninteractive in the legal sense. Aside from selecting a room to listen in, a non-DJ listener has no control over the selection of music. The service doesn’t announce the name of upcoming tracks, nor does it allow tracks to be downloaded. It also limits the number of times tracks from the same artist or album can be played within a certain time frame.

But the service may be considered interactive for those users who are DJ-ing, since they do specify the selection of songs to be played. A service can have both noninteractive and interactive components; for Turntable.fm, that may mean that the statutory license covers the streams made to non-DJ listeners while the streams made to DJ-ing users need to be licensed directly with the sound recording copyright owners.

There is evidence that Turntable.fm is working on complying with the law in this area, either by negotiating such a license or making sure the service is noninteractive under the statute for DJ-ing users. For example, when a user is the only one in a room DJ-ing, the song is only streamed to room visitors while the DJ can only hear a preview. This prohibits someone from using the service as a purely on-demand streaming service like Spotify.

Is that enough? Unfortunately for Turntable.fm, there is no clear answer to that question. The line that divides interactive from noninteractive services is unclear, and I think arguments could be made on either side. For example, this passage from a DMCA conference report points out certain features that would separate an interactive service from a noninteractive one:

[A] service would be interactive if it allowed a small number of individuals to request that sound recordings be performed in a program specially created for that group and not available to any individuals outside of that group. In contrast, a service would not be interactive if it merely transmitted to a large number of recipients of the service’s transmissions a program consisting of sound recordings requested by a small number of those listeners. 5H.R. Conf. Rep. No. 105-797, at 87-88 (1998).

Turntable.fm seems to fit more in the latter category than the former — although it does allow users to create “private” rooms. A “private” room might be considered specially created for a small group of people and not available to individuals outside that group — or it might not, because setting a room as “private” doesn’t bar anyone from joining the room, it just prevents that room from being included in the list of rooms that users see on the site; anyone can join the room if they know the link to it.

Bottom line, the interactive/noninteractive distinction is one that can only be fully determined in court. In 2000, the Digital Media Association (DiMA) petitioned the Copyright Office to clarify this distinction via regulation, but the Copyright Office declined. In its response to the petition, the Office said, “Such a determination must be made on a case-by-case basis after the development of a full evidentiary record in accordance with the standards and precepts already set forth in the statute,” and concluded, “In light of the rapidly changing business models emerging in today’s digital marketplace, no rule can accurately draw the line demarcating the limits between an interactive service and a noninteractive service.”

Reproduction and Distribution

Turntable.fm’s catalog of over 11 million songs is provided through MediaNet, and any reproduction or distribution of that content is covered by its agreement with the service. As per that agreement, Turntable.fm doesn’t allow users to download any of the songs — and in fact appears to be taking affirmative steps to ensure that continues to be true.

The site also allows users to upload songs to the service. The DMCA shields service providers from any infringement that arises by reason of storage at the direction of a user. 617 USC § 512(c). If a user uploads someone else’s song without permission, Turntable.fm must remove it if it has knowledge that it is infringing or receives a takedown notice from the copyright owner.

This feature doesn’t expose Turntable.fm to much risk of liability. Any song that is uploaded isn’t reproduced or distributed further, since the site doesn’t allow downloading. And any public performance of the composition or recording is likely already covered by the blanket licenses the site has in place.

Bottom Line

A few weeks ago, Turntable.fm blocked use of its site from non-US users. Currently, the licenses it does have in place probably extend only to the US. These licenses almost fully cover the site’s use of copyrighted content — Turntable.fm may need to negotiate directly with sound recording owners for public performances received by DJing users depending on whether it is considered an interactive webcaster for these users.

What’s encouraging is that the site owners appear to be working on building a legally-compliant music service from the start. Often, copyright critics try to build a false wedge between content and technology companies. But Turntable.fm shows that it’s possible for a start-up to build an exciting and innovative service that respects copyright. Such services are exciting because they represent sustainable business models that benefit everyone — creators, entrepreneurs, and consumers.

References   [ + ]

1. US v. ASCAP, 485 F.Supp.2d 438, 442 (SDNY 2007).
2. Digital Performance Right in Sound Recordings Act, Pub. L. No. 104-39, 109 Stat. 336 (Eff. Feb. 1, 1996).
3. 17 USC § 114(d)(1) and (d)(2).
4. 17 USC § 114(j)(7).
5. H.R. Conf. Rep. No. 105-797, at 87-88 (1998).
6. 17 USC § 512(c).