Copyhype

The headlines heralding a Seventh Circuit decision in Flava Works v. Gunter, written by Judge Richard Posner, one of the most widely cited judges and legal scholars, showcase some of the shortcomings consistently seen in legal reporting. They range from slightly incorrect — Embedding copyrighted video is not infringement, rules Posner — to wildly inaccurate — Embedding copyright-infringing video is not a crime, court rules — to facepalm-inducing absurdity — Embed all the Pirated Video You Want Because It’s Totally Legal.

The appellate court, however, did no such thing. What it did do was vacate a preliminary injunction against video bookmarking site myVidster because the district court had applied the wrong standard.

Flava Works is a NSFW producer of videos. myVidster is a social video bookmarking service. myVidster users can “bookmark” videos found around the web, and myVidster uses embed codes to allow users to view the videos through their myVidster account in the future. Flava Works sued myVidster for copyright and trademark infringement in October 2010, alleging that several of its videos had been posted on myVidster without authorization.

Flava Works moved for a preliminary injunction against myVidster, and on July 27, 2011, the district court granted the injunction, concluding that “(1) plaintiff is likely to succeed on the merits of its contributory infringement claim; (2) unless a preliminary injunction issues, plaintiff will suffer irreparable harm to its business; (3) the balance of harms favors plaintiff; and (4) the public interest favors granting a preliminary injunction.” myVidster appealed the preliminary injunction to the Seventh Circuit. I previously covered the district court’s opinion and the issues raised on the appeal here.

The appeal drew the attention of Google, Facebook, and the MPAA because of the issues it raised, and these parties filed amici briefs, drawing attention to what had up til then been a relatively obscure copyright lawsuit. But few of the issues raised in the appeal were addressed by the Seventh Circuit, including the central issue of whether or not the Circuit should adopt the Ninth Circuit’s “server test” for analyzing a service provider’s liability for public performance and, if so, whether the “server test” even applies to the public performance right.

So what did the Seventh Circuit do here?

The eBay Standard

Perhaps the key holding in this decision was the application of the standard set out by the Supreme Court in eBay v. MercExchange in 2006. There, the Court reversed the Federal Circuit’s application of its “general rule that courts will issue permanent injunctions against patent infringement absent exceptional circumstances” and held that plaintiffs seeking permanent injunctions in patent infringement cases must satisfy a four-factored test:

(1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction.

The Seventh Circuit held that the district court erred by not considering all four factors. But, while it’s true the district court said, “as a practical matter, the analysis boils down to a single factor—the plaintiff’s likelihood of success,” it isn’t true that the other factors weren’t considered. Immediately before this statement, the district court said:

To determine whether a preliminary injunction is warranted, we engage in a two-phase analysis:

As a threshold matter, a party seeking a preliminary injunction must demonstrate (1) some likelihood of succeeding on the merits, and (2) that it has “no adequate remedy at law” and will suffer “irreparable harm” if preliminary relief is denied. If the moving party cannot establish either of these prerequisites, a court’s inquiry is over and the injunction must be denied. If, however, the moving party clears both thresholds, the court must then consider: (3) the irreparable harm the non-moving party will suffer if preliminary relief is granted, balancing that harm against the irreparable harm to the moving party if relief is denied; and (4) the public interest, meaning the consequences of granting or denying the injunction to non-parties.

“Irreparable injury may normally be presumed from a showing of copyright infringement.” As for the third factor, “courts typically fail to invoke this standard in copyright cases” because if it were applicable, “a knowing infringer would be permitted to construct its business around its infringement.” Similarly, the fourth factor requires little discussion because there is a strong public policy interest in protecting copyrights. [Citations removed.]

And, as noted earlier, the district court recited the four eBay factors when it reached its conclusion.

The Seventh Circuit took issue primarily with the presumption of irreparable harm that results from a facial showing of copyright infringement, stating that the Supreme Court’s decision in eBay “made clear that there is no such presumption.”

For decades prior to eBay, many courts, including courts in the Seventh Circuit, presumed irreparable harm for a preliminary injunction when plaintiffs could show the facial elements of copyright infringement. ¹See, for example, the case cited in the opinion, Atari v. North American, 672 F.2d 607, 620 (7th Circuit 1982). But since eBay, there has been debate over whether this presumption in copyright cases has survived.

With this decision, the Seventh Circuit joins the Second, ²Salinger v. Colting, 607 F.3d 68 (2010). Fourth, ³Bethesda Softworks v. Interplay Entertainment Corp. (2011). Ninth, ⁴Flexible Lifeline Systems v. Precision Lift, 654F.3d 989 (2011). and Eleventh Circuits ⁵Peter Letterese & Associates v. World Inst. of Scientology, 533 F.3d 1287 (2008). in saying it does not. The Seventh Circuit specifically notes the Second Circuit’s decision in Salinger v. Colting and the Ninth Circuit’s decision in Flexible Lifeline Systems v. Precision Lift as particularly persuasive, and both provide far more discussion regarding their conclusion on how eBay abrogated copyright law’s traditional presumptions in preliminary injunction motions.

The effect, in theory, is that preliminary injunctions for copyright infringement would be granted less often. Plaintiffs would need to demonstrate more fully irreparable harm without relying on presumptions. Courts would need to consider more fully the balance of hardships and public interest without relying on categorical rules. For an insightful take on the consequences of the eBay decision, read law professors Mark Gergen, John Golden, and Henry Smith’s The Supreme Court’s Accidental Revolution? The Test for Permanent Injunctions. They criticize eBay‘s reliance on “traditional principles” of equity for actually being a sharp divergence from such traditional principles. The authors note, “Equity’s traditional, structured sets of presumptions and safety valves—the true ‘well-established principles of equity’—are well designed to solve the problems stressed by the equitable tradition while at the same time minimizing harms from vagueness and ex post discretion.'”

What else did the court hold?

From here, the Seventh Circuit begins a meandering discussion that is peppered with speculation, obtuse analogies, and musings on copyright law. Some of it is entertaining, much of it is perhaps dicta. ⁶Since the Circuit Court ruled that the district court erred by not applying the eBay standard, its analysis of the plaintiff’s likelihood of success on the merits is seemingly irrelevant. Likelihood of success on the merits is not a threshold question for a grant of a preliminary injunction; even after eBay, courts have continued to apply a “sliding scale” to their analyses, where a stronger public interest present or a stronger hardship faced by a defendant requires a stronger showing of likelihood of success on the merits, and vice versa. This type of situation would tend to suggest dicta rather than holding. See Michael Abramowicz & Maxwell Stearns, Defining Dicta, 57 Stanford Law Review 953 (2005).

The ruling is, after all, a review of the district court’s grant of a preliminary injunction. The Seventh Circuit confines itself to a discussion of whether or not the plaintiff demonstrated a likelihood of success on the merits. This is necessarily both a cursory and speculative analysis — a motion for preliminary injunction occurs before all the facts and arguments are fully developed. ⁷Smyth ex rel. Smyth v. Rivero, 282 F.3d 268, 276 (4th Cir. 2002). From a practical standpoint, the success or failure of a preliminary injunction often has an effect on lawsuits since it gives the prevailing party more leverage in settlement negotiations, but from a legal standpoint, a court’s conclusions at this stage have no dispositive effect.

More importantly, here the plaintiff had only sought a preliminary injunction based on the myVidster’s alleged contributory copyright infringement. Flava Works’ complaint, however, alleges six other causes of action, including direct copyright infringement, vicarious liability, and inducement. In other words, any suggestion that specific features of myVidster or similar services were declared “legal” by the Seventh Circuit are incorrect.

myVidster Does not Contribute to Unauthorized Copying

With that in mind, Judge Posner suggests that myVidster is not likely to contribute to the copying and distribution of Flava Works’ videos. Posner implies that myVidster could be liable for inducement if it invites users to upload or bookmark Flava Works’ videos, but, though Flava Works alleges inducement in its complaint, it did not seek the preliminary injunction on this ground. Not discussed is whether myVidster could be held vicariously liable for infringement — if it benefitted financially from infringement that it had a right and ability to control — a claim that, again, was alleged in the complaint but not argued for in the injunction.

There’s another caveat to Posner’s conclusion. He notes:

But as long as the visitor makes no copy of the copyrighted video that he is watching, he is not violating the copyright owner’s exclusive right, conferred by the Copyright Act, “to reproduce the copyrighted work in copies” and “distribute copies . . . of the copyrighted work to the public.”  His bypassing Flava’s pay wall by viewing the uploaded copy is equivalent to stealing a copyrighted book from a bookstore and reading it. That is a bad thing to do (in either case) but it is not copyright infringement. The infringer is the customer of Flava who copied Flava’s copyrighted video by uploading it to the Internet.

But it is not a foregone conclusion that the viewer of streaming video hasn’t made a copy. Streaming and downloading are technically the same — both involve the reproduction of the work onto the user’s computer, it’s just that with streaming, the copy is typically stored temporarily in an unintuitive location. ⁸See Cory Doctorow, Streaming Will Never Stop Downloading, The Guardian (Dec. 8, 2009). The Copyright Act defines a “copy” as a material object “in which a work is fixed”, which, in turn, means “sufficiently permanent or stable to permit it to be perceived, reproduced, or otherwise communicated for a period of more than transitory duration. A work consisting of sounds, images, or both, that are being transmitted, is “fixed” for purposes of this title if a fixation of the work is being made simultaneously with its transmission.” ⁹17 USC § 101. This language suggests a strong argument that a visitor to a site providing streaming video makes a copy of the video he watches. ¹⁰See, MAI Systems v. Peak Computer, 991 F.2d 511 (9th Cir. 1993), holding that loading copyrighted software into RAM creates a “copy” in violation of the Copyright Act. But see Cartoon Network v. CSC Holdings, 536 F.3d 121 (2nd Cir. 2008) and CoStar Group v. LoopNet, 373 F.3d 544 (4th Cir. 2004), which both held intermediaries not liable for copying under the Copyright Act because the copying was transitory in duration.

Are embedded videos a “public performance”?

As the Seventh Circuit notes, the conclusion that myVidster did not infringe or contribute to infringement of the reproduction and distribution rights of Flava Works doesn’t end the analysis, since copyright owners also have the exclusive right to publicly perform their works.

The Copyright Act defines, separately, “public” and “performance”:

To “perform” a work means to recite, render, play, dance, or act it, either directly or by means of any device or process or, in the case of a motion picture or other audiovisual work, to show its images in any sequence or to make the sounds accompanying it audible.

[…]

To perform or display a work “publicly” means—

(1)to perform or display it at a place open to the public or at any place where a substantial number of persons outside of a normal circle of a family and its social acquaintances is gathered; or

(2)to transmit or otherwise communicate a performance or display of the work to a place specified by clause (1) or to the public, by means of any device or process, whether the members of the public capable of receiving the performance or display receive it in the same place or in separate places and at the same time or at different times.

Judge Posner makes a common mistake by bootstrapping the definition of what makes a performance “public” into a definition of what a “performance” is in the first place. This mistake is the same one relied on by ASCAP when it argued that a download of a digital file containing a musical composition constituted a public performance of that composition. The Second Circuit explicitly rejected this argument in 2010 and noted the mistake:

ASCAP argues that downloads fall under clause (2) of this definition because downloads “transmit or otherwise communicate a performance,” namely the initial or underlying performance of the copyrighted work, to the public. We find this argument unavailing. The definition of “publicly” simply defines the circumstances under which a performance will be considered public; it does not define the meaning of “performance.” ¹¹US v. ASCAP, 627 F.3d 64, 73 (2010).

What, if any, legal holdings could be gleaned from the portion of the opinion that follows this erroneous interpretation could only add to confusion over the contours of the public performance right.

In the end, this is an odd opinion, and it remains to be seen what effect, if any, it will have. In the meantime, litigation at the district court continues between Flava Works and Gunter, as well as newly-added (as of May) defendants, the alleged domain name server and website host for myVidster.