Letter from AmeriKat: From Sea to Shining Sea

The AmeriKat was travelling again this past week. Irrespective of the past 25 years of frequent flying transatlantic-ally, continentally, transpacific-ally, and more, she is always surprised to find herself in a completely new location after seemingly no time at all. Leaving behind one established life and role and trading it in for a new role, set of contacts and friends has always given the AmeriKat a bit of a thrill. She can discard her "American lawyer in London" role when she steps off the plane in Dallas and just be someone welcomed home by immigration officials. Entering immigration in other ports her role is constantly transformed by a stamp in the passport to tourist, visiting family, attending a conference, here for business, or "living and working here". The only constant in these travels, from country to country and coast to coast, is her trusty Coach luggage, who has seen her across hundreds of thousands of miles, over-head bins and immigration authorities and is the subject of her first story this week.

Jo-Ann Fabrics sued for infringing fabric by Coach

In most isolated strip malls in U.S. cities from sea to shining sea, usually in between a dry-cleaners and a cell-phone retailer, is a Jo-Ann Fabrics where soccer-moms, crafters, and all in between go to purchase a multitude of fabrics, zippers, buttons and threads. Last Monday, Jo-Ann Fabrics was sued for trade mark, trade dress and copyright infringement in Chicago federal court by New York-based high-end leather goods manufacturer and AmeriKat favorite, Coach. Coach is complaining about a fleece fabric being sold by Jo-Ann Fabrics in store and on-line which is infringing Coach's signature "C" trade mark, associated trade dress rights and copyright in the signature "C" trade mark design (picture, right). Coach is asking the court for $2 million per each infringing mark, additional damages, attorney fees, and an injunction restraining future sales of the infringing product.

The "C" trade mark and insignia is on several of Coach's signature lines of bags, wallets, belts, shoes, hats, scarves and the lining therein and was registered as a U.S. trade mark in September 2002. You can even spot the AmeriKat in Holborn by the violet Coach scarf with the trade mark double "C" pattern that she carries on her Coach bag. However, the "C" insignia and pattern is a prime target for counterfeiters and counterfeit Coach bags (see AmeriKat report on previous action taken by Coach in Chicago) and the market is rife with copycats. According to the complaint Coach sells more than $3 billion products annually and has filed more than 500 trade mark infringement suits since 2010.

According to the complaint the fabric (picture, left) was designed and supplied to Jo-Ann Fabric by the named co-defendant, Feldman Co. and together with Jo-Ann Fabric are accused by Coach of trying to benefit from the "incalcuable goodwill" associated with Coach's C trade mark by selling the allegedly infringing fabric. Coach also argue that consumers will be confused as to the source of the fabric - the AmeriKat does not disagree, but there are some differences between the two fabrics. The "C"s on Jo-Ann's Fabric fabric are almost closed, looking more like "O"s than the clearly differentiated "C"s on Coach's fabric. The AmeriKat believes these differences not to be fatal and also believes that although a consumer would be able to recognize the difference after closer study of the fabric, initial interest confusion is nevertheless present.

Had the Amerikat seen the fabric in a Jo-Ann's Fabrics store her immediate reaction would first be "Why is Coach allowing their signature print fabric to be sold in Jo-Ann's Fabrics?"- a reaction that goes first to the pure dilution argument as argued by the complaint. Her next reaction would be one dealing with tarnishment of the mark - "Why is Coach allowing their signature print fabric to be printed on fleece and sold in Jo-Ann fabrics?". As far as the AmeriKat knows from the Coach range, they have never used their signature print on fleece - a fabric that is not associated with the up-market silk and leather ranges produced by Coach. Of note Jo-Ann Fabrics does sell fabrics with trade mark names and logos, namely for major league sports teams such as the New York Yankees and licensed fabrics from Disney. The AmeriKat does not anticipate this case going all that far and expects it to settle quite quickly given the similarity of the designs and strength of reputation in Coach's mark, however it acts as a warning to fabric buyers not to skate so closely to the edge of trade mark infringement.

Organic farmers sue Monsanto over genetically modified seeds

From Illinois to New York now. Two weeks ago, the Public Patent Foundation (PUBPAT), a non-for profit legal services organization based out of the Cardozo School of Law, filed a pre-emptive lawsuit in Manhattan federal court on behalf of 60 plaintiff family farmers, seed businesses and organic agricultural organizations against agricultural biotechnology company Monsanto challenging their patents on genetically modified seed. The lawsuit was pre-emptive in order to protect the class from anticipated patent infringement suits should their crops ever be contaminated by Monsanto's genetically modified seed. The AmeriKat has read about the 60 plaintiffs and noted that they included three farmers and seed producers from her home state of New Mexico, Chispas Farms, in Albuquerque, Jardin del Alma from Monticello and farmer Paul Romero from Espanola - a reminder that patent litigation does not just impact big businesses in Silicon Valley, but your neighbors.

PUBPAT's Executive Director and law lecturer at the Cardozo School of Law, Dan Ravicher, stated that the case

"asks whether Monsanto has the right to sue organic farmers for patent infringement if Monsanto's transgenic seed should land on their property. It seems quite perverse that an organic farmer contaminated by transgenic seed should be accused of patent infringement, but Monsanto has made such accusations before and is notorious for having sued hundreds of farmers for patent infringement, so we had to act to protect the interests of our clients."

For anyone who has seen Food, Inc., you will be aware about such legal issues involving Monsanto (click here for an excerpt of Food, Inc. about Monsanto) and the case of Percy Schmeiser. Genetically modified seed are alleged to contaminate and destroy organic seeds when they enter organic crops. Further, legally speaking, as with what happened with Schmeiser, when genetically modified seed enters a neighbouring crop and grows and/or cross pollinates with a farmer's crop the farmer can be held to be infringing the patent of that seed. PUBPAT is thus asking the court to declare that if organic farmers are contaminated by Monsanto's seed they need not fear of being threatened with patent infringement proceedings.

PUBPAT are also arguing that Monsanto's genetically modified patents for seeds are invalid because they do not meet the "usefulness" criteria under section 101 of the Patent Act. An invention is "useful" under section 101 if it is capable of providing some identifiable benefit. The complaint cites Justice Story's dicta in Lowell v Lewis (1817) which stated that inventions that are "injurious to the well being, good policy, or sound morals of society" are unpatentable. Ravicher's argument is that genetically modified seed has negative economic and health effects, and the promised benefits and usefulness of the seed, namely increased production and decreased herbicide use, are false. (picture, right - alfalfa)

Monsanto stated that the lawsuit was a "publicity stunt" and that Monsanto is committed to never suing farmers over the inadvertent presence of their genetically modified seed in their fields - (the AmeriKat wonders how does one even prove or disprove inadvertent presence of GM seeds?) Monsanto also stated that the validity of their patents was without question and supported by legal precedent. Monsanto stated that:

"The plaintiffs' approach is a publicity stunt designed to confuse the facts about American agriculture. These efforts seek to reduce private and public investment in the development of new higher-yielding seed technologies. This attack comes at a time when the world needs every agricultural tool available to meet the needs of a growing population, expected to reach 9 billion people by 2050. While we respect the views of organic farmers as it relates to the products they choose to grow, we don't believe that American agriculture faces an all-or-nothing approach."

The suit comes soon after the US Department of Agriculture (USDA) fully deregulated genetically modified strains of alfalfa. The USDA has also allowed farmers to plant genetically modified sugar beets without restrictions while it completes its Environmental Impact Statement (EIS) on that crop. The timing of the lawsuit suggests that the plaintiffs groups may feel that the time is right to take action before an increasing number of GM crops are deregulated by the USDA and before the alleged impacts of GM crops on organic crops become more serious.

The AmeriKat will be watching this fight with anticipation. Although it is unlikely that PUBPAT will be able to create much of a dent in such a powerful organization, like Monsanto, she is interested in any attempt to try to address the balance of power created by the patent system in the agricultural industry. But what do readers think - is it a hopeless publicity stunt, or are the invalidity arguments with merit?

The AmeriKat recommends this recent interesting article by Anna Lappe in The Atlantic about the issues surrounding GM, Monsanto and food production.

Byrne settles with Crist over Talking Heads song use

From New York, we fly south to Florida where Florida's former Governor Charlie Crist settled (picture, left) a copyright infringement lawsuit last week brought against him by Talking Heads' David Byrne after Crist used the 1985 Talking Heads's song "Road to Nowhere" in a political attack ad during his Senate campaign last year. Crist's campaign failed to seek permission from Byrne, the Talking Heads or Warner Brothers when they used the song in the Senate campaign video published on YouTube attacking Crist's Republican opposition, Marco Rubio. Byrne sued Crist for $1 million. Byrne said last year that the lawsuit was

"not about politics...It's about copyright and about the fact that it does imply that I would have licensed it and endorsed him and whatever he stands for."

Rubio himself was also on criticized for using The Steve Miller Band's "Take the Money and Run" in an attack ad against Crist. Rubio, however, was not sued. AmeriKat readers may recall past political song problems, such as in 2008 when Jackson Browne sued then presidential candidate John McCain for unauthorized use of his song "Running on Empty". Browne's lawyer, Lawrence Iser, also represented Byrne and stated in the initial complaint that it was "extraordinary" for another Republican campaign to misappropriate another artists's work without permission.

Another lesson that party politics and rock music do not mix.

Letter from Amerikat: Birthday Bits 'n Bobs

The AmeriKat is celebrating her 2nd birthday this week (she will leave you to calculate her age in Kat years). During the past few days she has cast her mind back to reminisce over the past two years in music, film, politics, and law. When she was a fresh kitten, the radios were booming with Madonna, Queen, Beastie Boys and Peter Gabriel and movie theaters were welcoming audiences to watch Top Gun, Pretty in Pink and Aliens. And in law, in the January that the AmeriKat was born, Kodak lost a patent infringement case with Polaroid, a loss which signalled Kodak's exit from the instant camera business. Today, we may still have Madonna booming away, but this time it is through our iPods. Patent law has also come a long way from the instant camera days. Nowadays our patent wars focus on mobile phone technology, albeit still concerning their camera technology as well as their touch-screen capabilities. This brief journey down memory lane just goes to show that over the past two *cough* years, everything changes, but everything stays the same be it in music or in IP law.

Lawyer Barbie back in the Federal Circuit dealing with Bratz - Something else that has not changed all that much from last year is the continuation of the Barbie v Bratz battle (previously reported by the AmeriKat here) which last week heard the parties' opening arguments in Californian federal court before Judge Carter. Barbie's maker, Mattel, alleged that the maker of the Bratz doll - MGA Entertainment- stole the idea for the Bratz doll by entering into a deal with the designer of the doll who had previously worked for Mattel. Mattel subsequently filed for copyright infringement and trade secret violations, while MGA alleges unfair competition and also trade secret theft. The case being heard by the court last week follows the previously overturned $100 million verdict of Judge Larson in favor of Mattel. MGA appealed this 2008 ruling on the grounds of incorrect jury instructions and an overly broad injunction. The US Court of Appeals for the Ninth Circuit agreed holding that the federal court judge had erred in ruling that Mattel automatically owned the designer's sketch of the doll under the terms of the 'Employee Confidential and Inventions Agreement' between Mattel and the designer and remanded the case back to the federal court. At the end of 2010 both parties applied for summary judgment on the issue of copyright infringement for the first and second generation Bratz dolls. Judge Carter granted summary judgment in MGA's favor in respect of the second generation Bratz dolls, but the remaining issues, including breach of copyright for the first generation of Bratz dolls and the breach of confidence/trade secret claims, remained for trial.

Following Judge Larson's departure from the federal bench, Judge Carter will now be rehearing Mattel's claims, but unlike the first trial the court will be tasked with determining whether the Inventions Agreement entitles Mattel to the designer's ideas for names like "Bratz" together with sketches that he created outside working hours. Also, ripe for ruling is MGA's trade secret claim against Mattel. Last year, MGA filed a counterclaim alleging that Mattel conducted an elaborate corporate espionage scheme in which Mattel employees, including general counsel Robert Normile and their attorneys from Quinn Emanuel, engaged in a racketeering conspiracy in order to gain access to MGA's private showrooms to obtain confidential information of Mattel's competitor's plans. According to a report last year in Am Law Litigation Daily, Quinn Emanuel partner Michael Zeller said that MGA's claims were "second-rate tactics by desperate lawyers" that "won't survive the pleading stage." Well, apparently they have! Mattel's lawyers say that in so far as the information MGA shared was shared at toy fairs, this information does not constitute a trade secret and therefore MGA is not entitled to their claimed $475 million in damages. The trial continues.

MJ's estate increases litigious activities - Last week, Michael Jackson's estate sued a website who is selling a book written by the singer's mother, Katherine Jackson, alleging copyright infringement. As reported by the Associated Press, Howard Mann, who operates the domain name www.jacksonsecretvault.com (picture, right - a shot of the allegedly infringing website left) is on the recieving end of the suit that alleges that he and the website are infringing copyright and are also liable under unfair competition laws. The complaint is reported to allege that the site is using the late singer's likeness and sketches that he drew and is said to creating a fasle endorsement by virtue of the inclusion of a "special thanks" to the estate. In a statement, the estate's attorney Howard Weitzman said that

"The Estate had hoped Mann would voluntarily cease his conduct but that was not to be. People who trade off of Michael's personality, copyrights and trademarks should not be allowed to exploit the legacy of one of the world's most recognized talents for their own benefit."

For more information see these reports in Hollywood Reporter and AP.

Koons's Balloon Dog to pop gallery's bubble? - Artist Jeff Koons has claimed copyright infringement against San Francisco gallery Park Life over a set of bookends that look like Koon's Balloon Dog, i.e. they look like balloon dogs. What do we think IPKat readers? Can Koons claim copyright infringement for anything that resembles a balloon dog? The AmeriKat thinks his lawyers, reported to be Jones Day, must have a field day at children's birthday parties.... For a more in depth look at that saga please see this excellent article in the New York Times. For how to make a balloon dog or an allegedly infringing Koons dog, please click here. (Pictures below from left to right - Koon's Balloon Dog; Park Life's balloon dog bookends; a balloon dog)

USPTO renews its IP Australia vows - Last week USPTO and IP Australia announced the extension of their existing pilot Paris Convention Patent Prosecution Highway (PPH) agreement and the formation of a new PPH pilot agreement utilizing the Patent Cooperation Treaty (PCT-PPH) results. PPH agreements improve efficiency by allowing patent examiners to use work already undertaken in respect of the same claim or claims already reviewed at other patent offices and PCT Authorities. USPTO Director Kappos has stated that by including the PCT "more work can be shared between our two offices. This will benefit applicants by reducing patent pendency and improving quality.” According to the USPTO press release the addition of the PCT international phase work

"will greatly expand the usefulness of the PPH program to applicants and the offices. The new PCT-PPH pilot is scheduled to launch on January 24, 2011. The PPH pilot program and the PCT-PPH pilot program between the USPTO and IPAU are both currently scheduled to continue until April 13, 2012."

Pancake house drops suit against a house of God - Last year the AmeriKat reported on the trade mark suit filed by US eatery chain IHOP which stands for the International House of Pancakes against the International House of Prayer also known as IHOP. Unfortunately, however, there will be no courtroom fireworks in battle between pancakes and God, because four days before Christmas IHOP dismissed its case against the church citing "ongoing mediation with the defendants."

Letter from AmeriKat II: Viacom v YouTube - The Viacom Appeal

Willfull Blindness cannot save you now

Viacom argues that, even if Section 512(c) excludes from liability those that do no not have URL-specific knowledge of infringement, the district court erred by finding for YouTube where the evidence showed that it was willfully blind to the massive scale of copyright infringement on the site. It was held In re Aimster Copyright Litigation (2003), cited in Arista Records v Doe 3 (2010) and recently in Tiffany v eBay that “willful blindness is knowledge in copyright law…as it is in the law generally.” Willful blindess occurs where a person engages in “deliberate avoidance” amounting to knowledge where “the circumstances were such to alert [the person] to a high probability” of the relevant fact, but the defendant “consciously avoided learning” that fact. A potential finding of willful blindness can be defeated where a defendant “continually taking steps to further refine its anti-fraud measures”, as was the case of eBay in Tiffany v eBay. Viacom argues that YouTube actually did the opposite of eBay in taking “affirmative steps to shut down any mechanism that might have provided the URL-specific knowledge YouTube claims is indispensable” for a finding of liability by removing the ability for community users to flag suspected infringing videos and only “selectively” implementing fingerprint technology. (picture, top left - YouTube's business policy? - "See no evil, hear no evil, speak no evil")

The Section 512(1)(B) Problem: YouTube Profiteering from Infringement

Section 512(c)(1)(B) requires that a defendant who benefits from a safe harbour protection must “not receive a financial benefit directly attributable to the infringing activity, in a case in which the service provider has the right and ability to control such activity.” Judge Stanton held that YouTube lacked the “right and ability to control” the activity because they did not have “item-specific” knowledge of the activity, but did not rule on whether or not they received a financial benefit. Viacom again argues that the touchstone of “item-specific” knowledge is not a pre-requisite for being able to control an activity. This is because, says Viacom, YouTube has the “ability” to control third-party infringement by implementing Audible Magic filtering.

Further, like with the district court’s interpretation holding Section 512(c)(1)(A)(ii) virtually meaningless, their interpretation of Section 512(c)(1)(B) is rendered likewise. This is because, if “right and ability to control” requires an ISP to have “item-specific knowledge”, this appears to be the same knowledge required for and ISP to fall foul of Section 512(c)(1)(A)(i) and (ii). Section 512(B), on this construction, essentially duplicates Section 512(c)(1)(A) as any service provider who has item specific knowledge of users’ acts of infringement automatically falls foul of Section 512(c)(1)(A) and thus never gets to Section 512(B).

Viacom argues that Congressional intent of Section 512(c)(1)(B) was to track the common law rule that a defendant may be found vicariously liable for copyright infringement where the defendant

“derive[s] a direct financial benefit from the infringement and ha[s] the right and ability to supervise the infringing activity.” (Ellison v Robertson (2004); Matthew Bender v W. Publishing Co. (1998))

This interpretation, says Viacom, is confirmed by Congress in the HR Rep NO 105-551(I) at 25-26, by the courts in Perfect10 and by academics in Nimmer on Copyright (section 12B.04[A][2] at 12B-38). Because vicarious liability turns on financial benefit and control, even in the absence of actual knowledge of infringement (Shapiro (1966); Grokster (2005)), YouTube’s activities clearly fall within the scope of Section 512(c)(1)(B). This is because, Viacom argues, YouTube has the right to control activities on the site by reserving editorial control in and the right to remove content and terminate accounts. It also has the ability to control the site by way of community flagging of suspected infringing videos, by way of its search feature and index and by implementation of fingerprint filtering technologies. YouTube also obtained a direct financial benefit attributable to the infringement because the infringing material acted as a “draw” or “major lure” for an ever-increasing YouTube audience. Such popularity resulted in YouTube being bought by Google for $1.65 billion only about 18 months after it was founded. This financial element is also seen by the placement of ads next to videos up until 2007.

No storage, no harbour!

A final requirement of Section 512(c)’s safe harbour is that the infringement is “by reason of the storage at the direction of a user” of the material. This includes service space for a user’s website, chatroom, or other forum where material is posted by users, which on the face of it may include a YouTube-type service. However, Viacom argues that its claims of infringement do not have anything to do with “storage” with or without the direction of a user: YouTube, in transcoding user-uploaded material into a standard format for display, distribution and performance of the content from its site, does not just facilitate storage but facilitates broadcasting. Viacom argues that a user’s decision to upload a video on to YouTube is not a direction to YouTube to then make copies of the video in different formats, to index and feature the material, or to licence the material to third parties to make viewing of the video easier on hand-held devices (such as the case with Verizon wireless). Viacom argues that YouTube takes those actions independently and for its own benefit and profit.

However, the AmeriKat cannot help but find fault with this argument because, if YouTube users just wanted their videos to be stored they would not be uploading them onto YouTube. YouTube users upload their videos on the site for the very reason that YouTube transforms the video into the particular viewable format. Surely their “direction” is implicit from the mere fact they are using YouTube to upload their video.

What’s Next

Almost 55 pages later, the bulk of Viacom’s substantive arguments end and its arguments for their motions for summary judgment on these issues begin—all in all 13,880 words or 15,000 more than this post.

A large swarm of amici curiae including Microsoft, The Washington Post, Newspaper Association of America, The Associated Press, and a group of economic professors also aligned with Viacom – a summary of their briefs can be found here. Microsoft’s brief in particular focused on YouTube’s “intentional efforts to build – and expand – its business based on a model that invited users to upload copyright infringing content to its site” and stating that this type of activity was not intended by Congress to benefit from the DMCA’s safe harbour provisions.

The AmeriKat is cautious about Viacom’s chances of success in their appeal and motion for summary judgment. Although she sees some logic in their arguments, especially in relation to redundancy of Section 512(c)(1)(A)(ii) with the heightened standard of knowledge, the US courts have in recent history been interpreting IP statutes in a way which benefits a Google, YouTube and eBay-type business model and she does not think that this case will be all that different. What do readers think? Will the Appeals Court save Viacom?

As far as the AmeriKat is aware, we have yet to receive a response from YouTube’s camp, be it press release or court filing. The AmeriKat has not been able to find any evidence of a peep or meow from YouTube, but if any reader knows of any, please let her know.

Letter from AmeriKat I: Viacom v YouTube - The Viacom Appeal

The past three Sundays the Amerikat has found herself engaged in many battles. First she was battling London Heathrow's snow incompetency, which delayed her flight home by four days. Then she was left battling a furiously stubborn cold, and then finally she was battling her over-stuffed suitcase in preparation for her trip to Singapore for the Global Foum on IP (more about this later this week). Having flown around the world in four days, she is now battling a bizarre jetlag cocktail. (picture, left - the AmeriKat with more legroom than she has experienced in weeks) However, the AmeriKat has pulled herself together this week with a report on a different battle: this time Viacom's opening brief filing in the Viacom v YouTube litigation, filed last month. For previous IPKat reports on the battle click here.


Viacom v YouTube: Viacom's appeal arguments

Following YouTube's summary judgment success in the Viacom litigation last year it was no surprise that Viacom, supported by several amici curiae, would appeal Judge Stanton’s June summary judgment (here and reported here). Sure enough, on 3 December 2010, Viacom filed its opening brief with the US Court of Appeals for the Second Circuit and requested summary judgment on the issues. Readers will recall that this case focuses on Viacom’s copyright-protected content being uploaded onto YouTube by third-party users and YouTube, once notified, not doing enough to remove the infringing content or in preventing the uploading of infringing material.

Judge Stanton held that YouTube was able to benefit from the Safe Harbor provisions in the Digital Millennium Copyright Act because it did not have actual or constructive knowledge of every specific YouTube URL containing infringing material on the site. Mere knowledge that there is, or is likely to be, infringing material on the site was not enough to be considered actual or constructive knowledge under Sections 512(c)(1)(A)(i) and (ii) respectively. To hold so would, Judge Stanton held, fly in the face of the DMCA's text, specifically Section 512(m)(1), as well as the Perfect 10 case—both of which indicate that the burden of identifying infringement must rest with the copyright owner, not on YouTube.

The Contentious Section

To refresh your memories, the section at issue is Section 512(c)(1) which provides that a service provider:

“shall not be liable for monetary relief or other equitable relief, for infringement of copyright by reason of the storage at the direction of a user of material that resides on a system if the provider:

(A) (i) – does not have actual knowledge that the material or activity using the material on the system or network is infringing; or

(ii) – in the absence of such knowledge is not aware of facts or circumstances from which infringing activity is apparent (the "red flag test"); or

(iii) – upon obtaining knowledge or awareness expeditiously removes it; AND

(B) – does not receive a financial benefit directly attributable to the infringing activity; AND

(C) – upon notification of claimed infringement it responds expeditiously to remove the material”

Viacom Sets the Scene

In its opening brief, Viacom calls Judge Stanton’s interpretation of Section 512(c) "absurd, disquieting and disruptive" and states that the effect of this interpretation would be that even the most

"piratical businesses held to account in Metro-Goldwyn-Mayer Studios v Grokster (2005) could be immune with just minor tweaks to their business models.”

Viacom also argue that the text of DMCA does the opposite to what Judge Stanton held, in that the DMCA actually "compels" internet service providers who are aware of pervasive copyright infringement, participate and profit from it, to be found liable for copyright infringement under the DMCA.

Viacom's opening brief first sets out the legislative history of the DMCA. The US Congress (picture, left) when drafting the DMCA, sought to achieve a balance between protecting copyright owners from mass online infringement and providing security to internet service providers who served as the "backbone" of the internet. In drafting Section 512, Congress aimed to strike this balance by creating a safe harbor for "innocent service providers" which disappears the moment that they lose their innocence (ALS Scan v RemarQ Communities (2001)). This disappearance of the safe harbor occurs when the ISP obtains actual or constructive knowledge (the "red flag test") of infringing activities and then does not act expeditiously to remove or disable access to the material. Congress also wove into the DMCA safe harbour, principles of vicarious infringement in order to exclude its shield in instances where ISPs receive financial benefit attributable to the infringement.

The brief legislative history segues into a somewhat damning historical account of YouTube's history entitled “YouTube Builds A Business Based on Infringement” which cites gems such as an email from YouTube founder Steve Chen who stated that removing the “obviously copyright infringing stuff” would reduce YouTube views “from 100,000 views a day down to about 20,000 views or maybe even lower”. From further internal YouTube emails, Viacom lifts other extracts which indicate that YouTube was aware of mass copyright infringement but chose to take a passive role in the self-monitoring of the site in order to benefit from the safe harbour legislation. Viacom also points to YouTube’s failure to implement software or digital fingerprint technology that would alert or prevent the upload of copyright material as being indicative of not only YouTube’s knowledge of the pervasiveness of infringement on the site, but as a conscious plan to evade liability by placing the burden of policing infringement squarely on the shoulders of a copyright owner in an effort to maintain their site traffic. In 2006, a “little exercise” conducted by Chen showed that over 70% of the “most viewed/most discussed/top favorites/top rated” videos on YouTube were copyright material. Viacom states that this method of business only grew after YouTube was bought by Google for $1.65 billion in late 2006.

The Section 512(1)(c)(A) issues: Surely YouTube knew what was going on!

Viacom contends that the district court erred in holding that YouTube could benefit from the safe harbour provisions, despite being “generally aware of” and indeed “welcome[ing]” of copyright-infringing material, because they lacked knowledge of the specific URL of each individual infringing video. Viacom argues that there is actual evidence that YouTube did have item-and-location specific information in respect of some of the works complained of and, for those that it didn’t, YouTube chose to actively to blind itself from assimilating specific information of infringement in order to benefit from the safe harbour, i.e. by not implementing infringement detecting software or a community flagging system for infringing videos. The internal email evidence also indicates that, for years, YouTube’s policy and practice was to take “no action”. Viacom argues that because YouTube, in the district court’s own words, “welcomed” “blatant” infringement, and turned a blind eye to such infringement it knew was occurring as evidenced by the internal emails, it cannot be said to not be “aware of facts or circumstances from which infringing activity is apparent” under Section 512(c)(1)(A)(ii). A defendant’s inaction while aware of widespread incidents of infringement, Viacom argues, should not be rewarded with a shield from liability.

That being said, the district court said that the facts above were not specific enough for YouTube not to benefit from the safe harbour provision. However, Viacom argue that the district court’s higher standard of knowledge for Section 512(c)(1)(A)(ii) is not supported by the statutory language. Breaking down the provision Viacom states that the exclusion of the safe harbour depends upon the defendant’s awareness of “facts or circumstances” that make the “infringing activity” “apparent”. This does not mean that these facts have to automatically point to an activity being absolutely and conclusively illegal (citing Jane Ginsburg’s 2008 article in 50 Ariz. L. Rev. 577). Further “facts and circumstances” suggests that Congress intended there to be a more holistic view of the origin, quality and quantity of information of infringement which a defendant may possess to fall within or foul of the provision. That is to say there is not just one type of specific information that is required for the inoperability of the safe harbor under Section 512(c)(1)(A)(ii) ( i.e., the requirement of specific URL addresses) but a combination of information sufficient to raise a “red flag” of warning to the service provider. Holding that there has to be specific identifiable knowledge on the part of the defendant to find an ISP liable renders the purpose of 512(c)(1)(A)(ii) void. If the same standard of knowledge is required for 512(c)(1)(A)(i) as for (ii), what purpose does (ii) serve?

Turning away form statutory interpretation, Viacom argues that the district court’s interpretation cannot be reconciled with Congress’s intent in enacting DMCA. A main purpose of the DMCA was to provide reasonable assurance to copyright owners that their copyright would be protected, given the increased risk and ease that their works can be infringed online. Although Viacom has a hint of recognition that the safe harbour provisions in the DMCA are appropriate for “innocent service" it argues that if the DMCA is to

“conform to the central purposes of the statute, [it] must exclude at least those that ‘welcome’, and even intend, their users’ infringement. To conclude otherwise would fatally undermine Congress’s intent to address 'massive piracy.' It would immunize even entities such as Grokster itself, which ‘distribute[d] a device with the object of promotion its use to infringe copyright’, yet designed its system to avoid item-or location-specific knowledge of those infringements.”

Viacom argues that YouTube has not proved that Congress intended the DMCA to be anything other than this original intent and indeed cites another Second Circuit district court decision as recognizing the DMCA’s purpose as being just that (Arista Record LLC v USENET.com, Inc (2009)). To hold otherwise would also place a substantial burden on copyright owners, who would have to continuously and constantly monitor the entire site for infringing videos.

Judge Stanton’s decision also relied on the district court’s interpretation of Perfect 10 v CCBill (2007) where the defendants provided services to websites with domain addresses such as “illegal.net” and “stolencelebritypics.com”. The claimant argued that these domain names gave notice to the defendants of ongoing infringement on these cites. The Ninth Circuit held that the website names alone were insufficient to create awareness of infringement as the names may just be a method of increasing traffic to the site, rather than being conclusively illegal. Viacom argues that

“even the crabbed (picture, above left) construction of red flag awareness in the Ninth Circuit’s analysis would not save YouTube, however, for, the service provide in CCBill was found to have no awareness that infringement was ongoing at all. Here, in contrast, YouTube was well aware that massive infringement as occurring, intended it to occur, and made no attempt to remedy it."

Letter from AmeriKat: It's cold outside, but the US IP courts are warming up!

Now that the cold north winds have begun to truly blow winter onto London's stone streets, one can easily be forgiven for retreating into the warmth of their homes until spring. Having spent a blustery evening walking along the South Bank on Wednesday, a frigid journey from Farringdon to Holborn on Thursday, and a freezing walk in Marylebone on Saturday, the AmeriKat herself is still nursing frozen paw pads and refuses to go outside once more. However, the AmeriKat was reminded last week that during the winter we all (people and Kats alike) become more insular and that instead of burrowing up next to her warm radiator, she should instead be spending the dark winter days volunteering at the Battersea Dogs and Cats Home - who have just celebrated their 150th Anniversary. The AmeriKat will be donating some of her reserved Christmas money and time to the shelter this year as part of their Kitty Kabin drive, and she suggests that all you cat and Kat lovers alike do the same for this most deserved charity. To do so, please click here.

Oracle wins $1.3 billion in largest copyright infringement jury award

Someone else that may have spare funds ready for some charitable donation is Oracle, who last week was awarded $1.3 billion by a California jury in the copyright infringement case brought by Oracle against SAP in 2007. Oracle is the second largest supplier of business-related software after SAP. SAP had not contested liability, so all was remaining was for the jury award on damages, which is reported to be the highest copyright infringement award ever in the U.S. According to a report this afternoon, SAP plans to file a post-trial motion in an attempt to reduce the award.

Oracle, a California-based company who specialize in developing hardware and software systems, sued SAP, a German based software company, after learning that the US based subsidiary of SAP, TomorrowNow had allegedly made hundreds of thousands of illegal downloads and copies of Oracle's software to avoid paying for Oracle's licence fees. According to the complaint, TomorrowNow had been downloading and using Oracle's software to provide technical support to customers of Oracle's recently acquired companies in order to lure them to buy software from SAP, rather than from Oracle. An attorney for Oracle, Geoffrey Howard, said that the scale of TomorrowNow's infringement was "unprecedented." TomorrowNow was acquired by SAP in 2004 for $10 million and, according to Oracle's lawyers, knew of the unauthorized acquisition of Oracle's software by TomorrowNow prior and subsequent to SAP's acquisition and for this reason kept TomorrowNow as a separate operating company in order to provide SAP a shield from liability.

According to the jury's foreman, the scope of the jury's deliberation on the quantification of the award was limited to quantifying the notional reasonable licence fee that would have been agreed between SAP and Oracle, rather than loss profits of potential sales by Oracle. Orcale's expert witness had suggested $1.65 billion, but the jury reduced this figure by $350 million - this is still $1.26 billion more than SAP's suggestion of Oracle's actual loss. The difference between the two side's suggested figures of course being that Oracle was arguing for a reasonable licence fee, whereas SAP was arguing for actual loss of profit flowing from Oracle's loss of customers which they claim to have been only about 86.

Regardless of how the jury elects to assess damages, jury awards hold another benefit (if you are a claimant), or problem (if you are a defendant), in that the method and means of calculation used to arrive at these figures will not be forthcoming. The problem with jury awards has previously been illustrated in Microsoft's saga in the i4i litigation (see previous AmeriKat posts here). But according to the foreman the jury came to a figure that they thought

"... was a fair number."

Safra Catz, Oracle's President, said in an e-mailed statement:

"For more than three years, SAP stole thousands of copies of Oracle software and then resold that software and related services to Oracle's own costumers. Right before the trial begun, SAP admitted to its guilt and liability; then the trial made it clear that SAP's most senior executives were aware of the illegal activity from the very beginning."

Unfortunately, the 11-day trial did not see the appearance of Leo Apotheker's video testimony. Apotheker, SAP's former CEO and now the CEO of Hewlett-Packard CEO, was cited by the outspoken Oracle CEO, Larry Ellison, as having overseen TomorrowNow's illegal Oracle downloads. At trial, however, Oracle decided not to show Apotheker's statement and had said it was unable to subpoena him to appear. According to Bloomberg Business Week, HP spokesperson's Mylene Mangalindan has said that the subpoena was

"no more than an effort to harass him and interfere with his duties and responsibilities as HP's CEO."

Bill Wohl, a spokesperson for SAP, said that SAP would pursue all possible options, including a possibility for an appeal. He stated that:

"This will unfortunately be a prolonged process and we continue to hope that the matter can be resolved appropriately without more years of litigation."

The case, besides holding interest due to the scale of the award, has shaken up the software industry. The manner in which the field of third party technical support in the software industry operates will most likely be subject to some serious self-reflection in the wake of the award. Further, the litigation has revealed some bad blood between all three major competitors - SAP, Oracle, and HP - and if the jury award is appealed, it is anyone's guess what other battles will be seeping out of Silicon Valley.

Sarah Palin and Gawker settle over leaked book excerpts

Gawker has settled with HarperCollins last week following Judge Thomas Grisea's order that the news and blog-orientated website Gawker remove leaked pages of Sarah Palin's new book, America By Heart, from it's website. The order came after a tweet from Palin's Twitter account stating

"The publishing world is LEAKING out-of-context excerpts of my book w/out my permission? Isn't that illegal?"

Had Gawker fought the order, they would have had to resort to the doctrine of fair use. However, many legal commentators have stated that Gawker had nowhere to run following a 1985 US Supreme Court decision of Harper & Row Publishers v Nation Enterprises which held that The Nation's unauthorized publication of a 400 word excerpt from an over 600 page autobiography of former President Ford did not qualify as fair use. Although the now removed Gawker post had their own commentary interspersed between Palin's work, which could have arguably benefited from the fair use defence due to its transformative nature, it is the fact that the leak came just days before the book's publication that would have been the nail in any defence. Like in Nation Enterprises and in the recent Salinger case (see previous AmeriKat posts here), US courts take a dim view of publication of literary excerpts prior to actual publication due to the US court's recognition of the potential economic impact that such leaks may have on the initial sales of a book - copyright law, if it has anything in the US, has an entrenchment in economic philosophy after all.

According to a statement by Palin's publisher, the Murdoch-owned HarperCollins, the two parties have come to a settlement whereby Gawker will remove and will not post any excerpts from the book online. According to The New York Times, the rival to Murdoch-owned Wall Street Journal (see AmeriKat posts here), the editor in chief of Gawker, Remy Stern, stated in an email that

"HarperCollins' decision to file suit against us and seek a temporary restraining order generated a good deal of press for Ms. Palin's book in advance of its publication. Now that the book is out and destined to appear on the best-seller list, we're pleased that HarperCollins proposed settling this case as is, thus avoiding lengthy litigation for both sides."

The AmeriKat agrees with Stern. Had Gawker not been subject to the injunction, she would not have even known Palin was coming out with another book. The AmeriKat is annoyed that Gawker allowed itself to be used as a promotional vehicle to move books off shelves due to failing to comply with copyright law. Gawker may however not see it that way given that their profile has undoubtedly been raised by this matter and can continue to promote itself as a provider of unedited and unadulterated content to its readers, even if on the wrong side of copyright law in this case.

This case is a lesson to those tempted to publish unpublished excerpts of biographies, especially political ones - report on its content, don't just publish its content.

Microsoft win in China over pirated software

If you are like the AmeriKat and are increasingly monitoring IP enforcement in China, last week's news of Microsoft winning a copyright infringement lawsuit against a Chinese internet cafe chain in China may come as a welcome surprise. According to the China Briefing website, Microsoft was reported to have been seeking a reported 1.5 million yuan or $225,000 (although this number varies drastically between different reports) for use of unauthorized software, however the actual award was not disclosed. For more information please see these reports here and here, or indeed if anyone has any better information on this case please let tytoc collie know.