Whether a dance routine or a martial arts demonstration, legal protection for the majority of athletic movements that will be incorporated into the forthcoming wave of motion detection-based games will likely fall under copyright law’s definition of “choreography”–a form of artistic creation which secured copyright protection in 1976 when the Copyright Act (the “Act”) was amended to include “pantomimes and choreographic works” (17 U.S.C. 102(a)). Prior to that time, choreography could only be protected under copyright statutes to the extent embodied within another copyrighted work that was eligible for protection. Although the Act extended protection to “choreographic works”, it failed to define the term and what types of movements qualified as same. Other copyrightable forms, including “architectural, audiovisual, literary, pictorial, graphic and sculptural works, motion pictures, and sound recordings” are defined in the Act, but “choreographic work” is the only copyrightable form whose meaning is left unclear. In fact, the House and Senate Reports surrounding the Act indicate that Congress’ decision not to define “choreographic work” was deliberate, as legislators believed the meaning to be “fairly well settled”. In fact, the only guidance provided by Congress with respect to the category of “choreographic works” was that it does not include “social dance steps and simple routines.”

In the absence of guidance from Congress or the copyright statutes on which activities qualify for protection under copyright law as “choreographic works”, the U.S. Copyright Office (the “Office”) offered a more technical definition of “choreography” in its Compendium of Copyright Office Practices, stating that “[c]horeography is the composition and arrangement of dance movements and patterns usually intended to be accompanied by music.”

While instructive, this interpretation is not binding on the federal judiciary, and there is little case law defining the precise scope of “choreographic works”. Moreover, even if the Office’s interpretation of a “choreographic work” does not capture the essence of certain athletic movements, the fact remains that the Act’s enumeration of copyrightable subject matter is not meant to be exhaustive, and is prefaced with the statement that “[w]orks of authorship include the following categories”; and since the Act defines the term “including” as “illustrative and not limitative,” the fact that Congress did not specifically list all athletic movements that fall within the realm of copyrightable subject matter does not mean that they are not covered (just as, for example, the absence of programming code and computer programs from the Copyright Act has not prevented the courts from finding same to be well within the range of copyrightable subject matter). Further, a separate category of copyrightable subject matter known as “dramatic works” also provides some applicability to the extent the athletic movements portray a story or narrative through action, but the underlying movements, which themselves are devoid of story, would not likely find refuge here if separated from the corresponding story or narrative in the context of an interactive game.

While some athletic movements remain close enough to the Office’s definition of “choreographic works” or “dramatic works” that they should be afforded copyright protection (e.g., figure skating, rhythmic gymnastics, synchronized swimming, etc.), there has been, in recent years, a push for the copyrightability of other athletic movements under the guise of “choreographic works.”  For instance, Open Source Yoga Unity v. Choudhury, specifically addressed the question of the copyrightability of yoga moves (see 2005 WL 756558 (N.D. Cal. Apr. 1, 2005).  While the court did not settle this question, it held that it is at least possible for individual yoga positions to be “arranged in a sufficiently creative manner” to merit copyright protection. In Ahn v. Midway Manufacturing Co., a district court held that dancers who performed martial arts routines for a software developer that later incorporated the routines into the “Mortal Kombat” video game did not become joint owners of the copyright in the game only because they assigned their rights to the copyrights pursuant to a work-for-hire contract (see 965 F. Supp. 1134 (N.D. Ill. 1997)).  The court deemed the martial art performances to be “choreographic works” and stated that these “choreographic works were all original works of authorship [and] choreographic works fall within the subject matter of copyright.”  In fact, in Baltimore Orioles, Inc. v. Major League Baseball Players Ass’n, the Seventh Circuit held that “[baseball] [p]layers’ performances possess the modest creativity required for copyrightability” (see 805 F.2d 663 (7th Cir. 1986)).

Based on the foregoing decisions, there may not be a significant enough distinction between a kung fu sequence, a skateboarding demonstration set to music and a figure skating routine that would warrant extending copyright protection to one and not the others. Ultimately, though, determining which choreography or movements actually fulfill the statutory criteria, and which on the other hand are too commonplace to qualify as copyrightable subject matter, will require a case-by-case, fact-specific analysis. That being said, as the above discussion indicates, it is certain that to qualify for copyright protection, an athletic movement will have to evince a certain degree of complexity and original expression, and routine-oriented athletic performances are more likely to warrant coverage as they generally embody sufficient amounts of artistic expression and each move is specifically choreographed and designed for repetition. As one commentator described, a sport like football, even where each play is diagrammed and practiced to some extent, depends more upon the interaction and improvisation of the participants throughout the natural course of the game. A running back, for example, may go fifty yards for a touchdown, eluding opponents, breaking tackles and navigating through the defense on one play, but the next time that play is called, he may fumble the ball or be tackled for a loss of yards. A figure skating routine, on the other hand, has a repetitive nature to it; the skater will often perform the same routine countless numbers of times with minimal variations.

Once the determination is made that the athletic movement likely falls within a class of protectable subject matter under the Act, the next step is licensing the rights for inclusion in the interactive game. The clearance process for music-based interactive games, for example, relies on a well-established framework with the licensing arms of the major labels, publishers, performing rights organizations and other collectives serving as long-standing clearing houses for securing rights from multiple artists and writers. However, there are no analogous industry clearing houses or collectives for licensing choreography rights and each applicable copyright, together with any corresponding moral, publicity or privacy rights, need to be licensed from the individual owner.

In fact, this may well be the first time that movements deemed “choreography” under the Act, whether in the form of modern dance or complex wrestling moves, will be exploited and licensed as individual works on a large scale–separate and apart from the play, the music video, the movie or even the person through which it entered the public consciousness. In other words, in order to develop an interactive title based on choreography on an operational level, each individual movement will need to be reperformed and recast by professionals and technicians who will recreate the movements in a green screen-reminiscent environment using motion sensors that will allow advanced computers to precisely track a new range of activity, in particular depth-based movement, which will then be digitized and incorporated into the video game. This process will ultimately allow for the comparison of the professional recreation against the end users’ movement on a television screen and allow the game to rate and track performance, alter difficulty settings, offer training functionality, etc., all of which have become standard functionality in interactive titles. Having now extracted and recreated the choreography as a stand-alone artistic creation, the publishers and developers of motion detection games will need to begin the process of securing the rights to those popular movements crucial to a successful gaming title.

This is where the legal confusion begins for licensing athletic movements and choreography. As an example, consider the implications of the inclusion of modern or popular dance into a motion capture video game. Dances have never been the subject of lucrative licensing outside the realm of dance companies and on-stage performances because dancers were often placed at a severe disadvantage for demonstrating ownership of copyrights. As a result, attribution and credit for a dance in the dance community is frequently not equated with ownership of the copyright given the lack of economic incentive in establishing and maintaining an accurate chain of title. In these muddy waters, who holds the necessary rights required to license the dance? The music label that owns the music video? The artist who performed the dance? The artist’s choreographer who conceived of the dance? Is it jointly owned by contributing dancers and the artist? Was it created pursuant to a work for hire agreement or within the scope of employment without an agreement? Was the dance based on a pre-existing dance which could invalidate ownership? Was the dance created outside the United States thus leaving the creator with moral rights over the work that cannot be assigned? Was it previously performed and recorded on stage or in dance studio, so that the movie studio or music label is left without ownership outside of their movie or video?

The foregoing dance hypothetical is just one example of the complications associated with one form of athletic movement destined to be incorporated into motion capture games. Once the worldwide popularity of a new line of these games takes hold and creators of all forms of movements claim copyright protection after realizing the new found economic value of their works, legal disputes over the nature of copyright and the bounds of statutory protection will force the courts to take a series of bold moves–ones that can be repeated.

As always, we will keep an eye out for developments in this area of the law, particularly as the technological bounds of interactive gaming continue to expand with the introduction of gesture-based gaming.

In its complaints against Smokewood Entertainment Group (the producers of Precious) and Cinetic Media, Inc. (which negotiated with The Weinstein Company on behalf of Smokewood), Weinstein Co. stated that several of its executives met with Cinetic and Smokewood during the 2009 Sundance Film Festival.  The complaint goes on to allege that on January 27, 2009, two days after Precious won three prestigious awards at the festival, Cinetic offered the distribution rights to Precious to Weinstein Co. provided that Weinstein Co. agree to several specific terms.  Weinstein Co. claims that it promptly and “unequivocally” accepted the deal.  Weinstein Co. also claims that Cinetic promised that it would provide the written licensing and distribution agreement detailing the terms of the deal. 

In an e-mail exchange with Cinetic regarding the delay the written agreement, Weinstein Co. indicated that it was “glad to confirm” the deal.  In response, an executive with Cinetic neither confirmed nor denied the deal but said that he was “explaining every detail” to the producers.  A few days later, on February 2, Smokewood and Cinetic announced an agreement with Lions Gate to distribute Precious.

On February 4, 2009, Weinstein Co. filed three separate suits in New York: one against Lions Gate, one against Cinetic, and one against Smokewood for breach of contract, alleging that Weinstein Co. had obtained the exclusive right to distribute the film.  (The Smokewood case was removed to Federal court on March 4.)  Smokewood responded with a motion to dismiss for failure to state a claim.  In response, Weinstein Co. filed an opposition to Smokewood’s motion asserting, amongst other things, that Weinstein Co. had acquired an exclusive license to distribute the film through either oral negotiations with Cinetic or the January 27th e-mail exchange.

In late September, District Judge Naomi Reice Buckwald ruled against Weinstein Co.  Specifically with regard to the claim of an exclusive license to distribute based on an oral agreement, the court held to the traditional rule that a writing signed by the copyright holder is required to transfer ownership interests, including an exclusive agreement for distribution rights.  The court also found the e-mail exchange, submitted by Weinstein Co. as evidence of an agreement, failed to meet the statutory requirements to transfer distribution rights.  The court noted that the intention of the copyright owner to transfer ownership interests “must be clear and unequivocal”  In this case, the court found that the friendly e-mail exchange did not endorse Weinstein Co.’s e-mail statements regarding confirmation of the deal and fell far short of the required unequivocal written intent to transfer.  In an attempt to bolster its case, Weinstein Co. asserted that it is entertainment industry custom to negotiate distribution agreements orally then follow-up with a note confirming the agreement.  But the court was unimpressed and remarked that “Congress did not exempt parties in the film industry from the requirements of the copyright act.”

It is also important to note that the court left open the possibility that an agreement involving a non-exclusive license to copyrighted material does not require a writing.  However, the court indicated that an “implied non-exclusive license” can be found only in a circumstance where one party created a work at the request of another and then delivered the work to the requesting party with the intent that the requesting party copy and distribute the work.  The court found that the facts alleged in this case did not warrant a finding of an implied non-exclusive license because Weinstein Co. clearly stated that negotiations for distribution rights began after Precious debuted at Sundance.

The court’s decision is consistent with many cases emphasizing the importance of protecting copyright interests through signed writings manifesting the clear intent of the copyright holder.  While the decision in this case, like all others involving copyright disputes, was based on its specific–and perhaps unique–set of facts, the lesson to be drawn is still useful.

*  Stuart Mitchell, who recently joined the Firm, assisted in the preparation of this article.

When it initially purchased Skype, eBay attempted to purchase Joltid as well but Friis and Zennstrom refused to sell, wanting instead to retain the intellectual property rights in GI.  They also refused to sell or directly license the GI source code to eBay.  eBay therefore purchased Skype subject to a license agreement for the GI code between Skype and Joltid.  That decision appears to be coming back to haunt eBay.

According to Friis and Zennstrom, the license agreement granted Skype the right to use an executable-only form of the GI code, known as the object code, which is un-editable.  Skype did not obtain any rights or license to the source code of the GI software.  This arrangement worked so long as Friis and Zennstrom remained with Skype because they were authorized to use and tinker with the GI source code.  However after their departure in 2007, Friis and Zennstrom began challenging eBay’s use of the GI technology, claiming that Skype (at that point owned by eBay) obtained unauthorized versions of the GI source code and breached the terms of its licensing agreement by continuing to modify and create derivatives of the source code.

In March of this year, Skype filed a claim in a U.K. court asking for declaratory relief and a finding that it is lawfully accessing, in possession of, using and modifying the GI code in accordance with the terms of the agreement.  Joltid disagreed, terminated the license agreement and filed defenses and counterclaims against Skype alleging that Skype had repudiated the license agreement, infringed upon Joltid’s copyright, and misused confidential information.  The case is scheduled for trial in June 2010.

A few weeks ago, Friis and Zennstrom opened another front in the dispute by filing a lawsuit in Northern California U.S. District Court against eBay that also names the investors as defendants.  These investors include private-equity firm Silver Lake, venture-capital firms Index Ventures and Andreesen Horowitz and the Canada Pension Plan Investment Board.  The suit claims that the investors were aware of Skype’s copyright violations during negotiations of the deal and seeks an injunction on Skype’s use of the GI technology in addition to damages and profits that Skype has made while using the technology in breach of its license. Such damages are allegedly “amassing at a rate of more than $75 million daily”.  The pair also filed another lawsuit shortly after which alleges that new software being developed by Skype incorporated confidential information that was misappropriated by a former executive at one of Friis and Zennstrom’s companies who recently joined Index Ventures, part of the investor group paying $1.9 billion for Skype.

With the benefit of hindsight, many have wondered why eBay would have paid $2.6 billion for Skype without better securing rights to its underlying technology in a manner that would not be interrupted.  While the precise reasons eBay structured the deal in this manner may not be clear, the opportunities it missed to protect itself are apparent.

First, by allowing Joltid to retain rights to the GI code, eBay’s use of the code was subject to the restrictions and limitations that Joltid and Friis and Zennstrom placed on such use as set forth in the license agreement. 

Additionally, without obtaining rights to the source code, eBay was at the mercy of Friis and Zennstrom, the two individuals who understood how the GI code functioned.  While eBay likely felt that having Friis and Zennstrom on its payroll would mitigate any concerns, perhaps additional thought should have been given to what would transpire if and when Friis and Zennstrom were no longer affiliated with eBay.

eBay also apparently did not acquire sufficiently clear rights to develop derivatives and modifications of the GI technology.  Therefore, any next generation versions of the GI technology that eBay wished to develop would have been subject to the restrictions of the original license agreement, including the rights that Joltid, Friis and Zennstrom had in the technology and source code.

While the intrigue and tangled nature of this dispute are in many ways unique, the lesson is clear: the treatment of IP rights in an M&A transaction involves consideration of multiple factors, contingencies and interests.  Careful and deliberate analysis of possible future scenarios–however likely or unlikely–is necessary to avoid losing the competitive advantage that is one of the foundations of the underlying transaction.

The suit, originally filed in 2001 by several labels owned by Sony BMG, including Arista, Bad Boy and Zomba, alleged that LAUNCHcast, a webcasting service run by Yahoo’s Launch Media unit, which enables users to create “stations” that play songs within a particular genre or similar to a particular artist or song, violated provisions of the DMCA that required payment of licensing fees for the use of sound recordings in an “interactive” service.” 

The DMCA 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 . . . which is selected by or on behalf of the recipient.”   The provision was intended to distinguish individual playbacks from transmissions “whose primary purposes . . . is to provide to the public such audio or other entertainment programming.” 

That distinction was critical.  The DMCA requires payment of royalties, based on a negotiated license, to the owner of a sound recording (in most instances, a record label) for use in an interactive service.  For non-interactive services, webcasters need only pay a compulsory or statutory licensing fees set by the Copyright Royalty Board, which are considerably lower than individual, negotiated license fees. 

The rationale behind the differing licensing schemes was to protect the recording industry from lost sales.  As the Second Circuit stated “If the user has sufficient control over the interactive service such that she can predict the songs she will hear, much as she would if she owned the music herself and could play each song at will, she would have no need to purchase the music she wishes to hear.” 

In affirming the jury’s finding that LAUNCHcast’s service is not “interactive” under the DMCA, the Second Circuit analyzed the functions and features of the service itself, focusing on whether a user can receive a transmission of a program “specially created” for him or her.  For the Court, the key issue was “predictability”–to fall within the provisions requiring payment of a sound recording license fee, a service must provide “a degree of predictability-based on choices made by the user-that approximates the predictability the music listener seeks when purchasing music.”  The appellate panel found that the LAUNCHcast service does not provide sufficient control to users such that the playlists selected are so predictable that users will choose to listen to the service instead of purchasing music. 

The court reached that conclusion based on three primary factors.  First, the rules governing what songs are pooled in a playlist ensure that the user has no ability to control–much less predict–which songs are pooled for selection.  The panel noted that at least 60% of the songs are generated by factors entirely beyond the user’s control. 

Second, the service’s rules prevent a user’s explicitly rated songs–presumably the ones he or she wants to listen to–from being anywhere near a majority of the songs on a playlist.  At a minimum, 20% of the songs are unrated.  In addition, when a user rates a particular song, the service “implicitly” rates all the other songs by that artist, subjecting the user to many songs the user may never have heard or may not like.

Lastly, the court noted that LAUNCHcast randomly orders playlists–taking into account the DMCA’s restrictions on the consecutive play of artists or albums–further restricting the user’s ability to choose artists or albums they wish to hear.

The court concluded that the only thing a user can predict with certainty is that by rating a song at “zero” the user will not hear that song on that station again.

The decision is significant for several reasons.  It is the first time a federal appeals court has undertaken a careful, detailed and well-reasoned analysis of the DMCA’s provisions related to sound recording performance rights.  The decision clearly sets forth the rationale for the different licensing schemes for web transmission of music established by the DMCA, removing a considerable amount of uncertainty to webcasters and others who feared that their business models might be in jeopardy if they faced additional licensing fees.  And it parsed the features and functions of the LAUNCHcast service.  In doing so, the court has provided significant guidance on the legal, business and technical fronts which may enable future growth and innovation in the space.

This is yet another in a long list of cases brought by former athletes from the NFL, MLB, and NCAA seeking limits on the right to exploit players’ likenesses. In fact, just last year, a number of retired NFL players won a class action lawsuit against the NFL Players Association, arguing that the union conspired with Electronic Arts to use their likenesses in the Madden video game series without proper compensation, in which the retired players earned a $26 million settlement.

This time around, the league itself, not the union, is being sued by retired players who are challenging the exploitation of their images, names and likenesses in connection with the promotion of the league and the packaging, advertising and sales of products distributed by NFL Films–a division of NFL Properties which produces feature films, commercials, television programs, and documentaries on the NFL.

Each side is now preparing to do battle over both the scope (how broad) and term (how long) of the rights the players granted the NFL in the standard form player contracts and the corresponding collective bargaining agreements. The case will no doubt hinge on good old fashioned contract analysis and whether the NFL’s exploitation of the players’ likenesses falls squarely within the four corners of the documents. According to the players’ lawyer, “During [the players’] time in the league the players’ contracts gave the NFL authority to use their names and pictures for publicity and promotion in news, television and motion pictures, but they included no perpetuity clauses.” The players’ attorney also stated that beginning in 1993, the NFL’s collective bargaining agreement with the NFL Players Association altered the standard form player contract to contain broader rights to use the players’ names, images, and likenesses, apparently plugging the loophole.

The court’s contract analysis will have its own share of intricacies. First, the statute of limitations for right of publicity violations and other contract-based claims will bar a considerable amount of the alleged infringements and possibly reduce the amount of the “fair share of the revenue the NFL has earned”, which the players demand in their complaint. Second, the provisions granting the NFL a license to the players’ images, names, and likenesses may not have expired when the individual contracts themselves expired, as the plaintiffs claim, since the license grants incorporated therein may have been perpetual or drafted to survive any termination or expiration of the contract.

The court will also have to address another thorny issue.  Specifically, even if the players granted the NFL a perpetual license to their likenesses, was that grant broad enough to encompass distribution across platforms and media, such as the internet, wireless devices, and other technologies that did not exist at the time the grants were made?  This is an especially tricky issue because the grants were made in connection with what amounts to the players’ employment or services agreements with the league.  

We will keep an eye out for developments in this case which, regardless of its outcome, will likely provide useful and interesting guidance on drafting similar license grants in the future.

The program enables individuals and companies to register a Facebook URL with an address format of www.facebook.com/[username].  Applicant for usernames are generally allowed to choose them freely, without need to prove any connection or ownership to the name itself.  This wide-open nature raises potential concerns for intellectual property rights holders, particularly trademark owners, worried about unauthorized use of their trademarks in connection with the service. 

Facebook has sought to maintain as much of control over the usernames as possible, including the right to remove or reclaim a username at any time for any reason.  This strong proactive stance is probably partially motivated by a desire to preempt and prevent widespread buying or selling of usernames, and the cyber-squatting practices that follow.  (Such concerns are not unfounded; Facebook usernames are already up for sale on Assetize, an online website specializing in the buying and selling of online accounts.)

But back to the ownership issue–Can Facebook actually “own” a username that contains a registered and widely used trademark owned by someone else?  And if Facebook “owns” the username, what happens when a trademark owner seeks to register the username containing its mark?  Is “ownership” (i.e., title) to the username conveyed?  Or does Facebook license the username?  Take for example the username “facebook.com/burgerking”.  As of the date of this posting, Burger King has not yet registered the username, but if it does choose to register it, is it accurate to say that Facebook is transferring ownership over the username to Burger King?  Or is it licensing it?  Either way, how can Facebook transfer to Burger King something Burger King already owns?

Also, Facebook claims that when a Facebook account is cancelled, that account’s username will not become available to anyone else.  If Burger King registers for the user name, and then cancels it, can Facebook prevent Burger King from re-registering the user name if it later changes its mind?  In the end it is not clear or likely that Facebook can legitimately assert power over trademark holders when it comes to the use of their trademarks in the Usernames program. 

Facebook’s terms of service do not help to clarify the matter.  They make no mention of the Usernames program.  On the other hand, Facebook’s “Help Center” does have a section devoted to answering common questions about the program.  When the program was launched, the Help Center materials contained a few scant paragraphs of information.  Since that time, it has become much more developed, but that initial lack of clarity exemplifies the legal ambiguity with which the initiative got off the ground.  The uncertainties surrounding the Usernames program may be of particular concern for businesses in light of their increasing reliance on Facebook as an avenue through which to connect with customers (and concerns about businesses’ dependence on Facebook are not new).

We will eventually see if Facebook’s experience with the Usernames program proves a cautionary tale as to the pitfalls of rolling out new programs without fully anticipating the potential legal issues.  As the Username feature develops and more companies become aware of it, Facebook may see both disputes and angry markholders multiply. 

This may turn into yet another cyber-battleground over trademarks.  Numerous trademark infringement claims have been brought against Google in connection with its search ad business.  The claims are based on Google’s sale of trademarked keywords through its AdWords program.  In large part, the plaintiffs have asserted that such sales constitute trademark infringement because consumers could be confused by links to competitors’ ads that pop up alongside a search for the plaintiff’s marks.  While Google suffered a litigation setback in April when the Second Circuit reversed a dismissal of a suit brought by Rescuecom Corp., two separate actions against Google, one by Daniel Jurin and the other by Ascentive LLC, were both recently dismissed.

We will continue to monitor these matters and keep an eye out for developments.  In the meantime, our group would be happy to discuss any specific questions you might have about the impact of Facebook’s Usernames program on your trademark portfolio and help you develop strategies to protect your intellectual property rights.

*  We would like to thank Yoshinori Sasao, a summer associate at the Firm, who assisted in preparing this article.

The question of retroactive licensing has been considered in a number of district court cases, however, Daviswas the first time the issue had been considered by an appellate court.  The case centered around two songs written by Mary J. Blige, Bruce Miller and others, all of whom were defendants in the case.  The plaintiff, Sharice Davis, claimed that Blige’s songs infringed her copyright in two songs she co-authored with Bruce Chambliss, the step-father of Blige and father of Miller.  Miller however, claimed that Chambliss, who was not a party to the case, wrote the disputed compositions on his own and orally agreed to give all rights in the music to Miller.  However, the crux of the case turned on a written agreement between Miller and Chambliss, created two days before Chambliss’ first deposition.  The agreement purported to retroactively transfer all rights in Chambliss’ works to Miller from the date of their composition.  This would make Miller a co-owner in the two disputed compositions and validate the licenses he gave to Blige to use the works.  If the Court of Appeals had upheld the agreement, as the District Court did, Davis would have lost all of her claims for past infringement against the other defendants. 

The Second Circuit overturned the District Court decision, holding that a co-author cannot immunize a third party for past infringements by retroactively issuing a license for the infringed work.  To support its decision, the Court of Appeals used the property theory of joint tenancy as a model for the rights of copyright co-owners.  Each copyright co-owner had independent rights to use and license the work, subject only to a duty to account to the other co-owners for any profits that are made.  A co-owner can only convey as much as he possesses and cannot, therefore, transfer or assign the rights of other co-owners.  The court held that a retroactive transfer would effectively allow a co-owner to assign away another co-owner’s right to sue for accrued infringements.  While Chambliss could release Miller and the others from liability from him for past infringements, he could not transfer or assign any rights Davis had against the defendants for accrued causes of action. 

By holding that licenses can only be issued prospectively, the court drew a line between a co-owners right to sue for past and future infringements.  A copyright co-owner can unilaterally issue a non-exclusive license which prevents a co-owner from suing the licensee for any future use.  However, a co-owner cannot issue a retroactive license that would prevent a co-owner from suing for infringements that have already occurred.  This holding, the court believed, provides certainty for co-owners dealing with infringement actions and discourages infringement by ensuring that retroactive licenses aren’t used to lower the cost of infringement.   

In Sybersound, the Ninth Circuit dealt with the question of a co-owner’s right to license their copyright from a different perspective.  Where Davis dealt whether a co-owner could unilaterally issue a retroactive license in order to cure past infringements, the question in Sybersound was whether a co-owner can unilaterally grant an exclusive license that gives the licensee co-ownership in the copyright. 

Sybersound had brought claims of infringement against five of its competitors in the karaoke industry for allegedly infringing Sybersound’s copyrights in nine songs.  Sybersound had acquired its rights in these songs by way of agreement with TVT, a co-owner the copyrights along with other publishing companies.  The agreement stated that TVT was making Sybersound the “exclusive assignee of TVT’s copyrighted karaoke use interest and of TVT’s right to sue,” purportedly making Sybersound a co-owner in the copyright.  The Ninth Circuit held that the agreement was invalid because TVT could not exclusively assign what it did not exclusively possess.  TVT was only a co-owner of the copyright, and therefore, “as a co-owner of the copyright, TVT could not grant an exclusive right interest.”  For Sybersonic to acquire an exclusive license, each of the co-owners of the copyright would have to agree to the transfer.  Since TVT could only unilaterally grant a non-exclusive license, Sybersonic did not have standing to sue and the infringement claims were dismissed.    

It had been a common practice in the media industry to obtain licenses after the fact.  However, after Davis, that practice has become much more uncertain.  The Sybersound decision might have a dampening effect on similar transactions as it seemingly makes it impossible for a copyright co-owner to grant an exclusive license of his proportional share in a copyright without the consent of his fellow co-owners.   

Left undiscussed in these decisions was the issue of the representations made by the co-owner of the copyrights in the underlying license agreements.  One can assume that the licensees sought and obtained a representation that the licensors had the authority to grant the underlying rights and that use by the licensee of the copyrighted works would not infringe or violate any third party’s rights.  Obviously these rulings have rendered those representations false, exposing the co-owners to potential claims under the license agreements, including claims for indemnification.

In confronting the commercial landscape created by these rulings, it is critical for licensees to carefully consider the rights they are obtaining in copyrighted works with multiple owners, particularly when rights are being granted on a retroactive or exclusive basis, to ensure that they will be able to exploit the rights as intended.  For copyright co-owners, it is important that any representations they make be tailored to reflect their limitations on the rights they can grant so that they are not promising more than they can deliver.

Our New Media, Entertainment and Technology practice group has extensive experience assisting our clients in understanding and analyzing the impact of new developments in the law on the design, development, implementation and operation of their respective business initiatives across all new media platforms, and we will continue to stay apprised of and routinely report on further developments in the treatment of co-ownership by the courts in this regard.     

* We would like to thank Kate O’Donnell, a Summer Associate at the Firm, for her assistance in preparing this article.

While consumer DVRs have been used for years, Cablevision sought to launch a service for the remote storage of shows recorded by consumers.  Cablevision’s argument in favor of such service was that, as long as consumers were still in control of the recording, playback and deletion process, the location of the hard drive on which the content was stored didn’t matter.  Broadcasters disagreed, however, claiming that by archiving and retransmitting the content, Cablevision was engaging in copyright infringement.

A district judge initially agreed with the broadcasters and, in March 2007, entered an injunction preventing Cablevision from rolling out its program.  Cablevision appealed and in August 2008, the Second Circuit reversed the district court ruling in a sweeping opinion.  The circuit court found that, while Cablevision employed a 1.2 second storage buffer, that “embodiment” of the work was only transitory and failed to constitute copyright infringement.  The circuit court also found that Cablevision did not own the copies on its servers, which were controlled by the users and therefore fell within the scope of the fair use doctrine.

The Supreme Court’s denial of cert brings to an end the litigation.  Cablevision announced that it plans on beginning a roll-out by the end of the summer.

Of course, in the alternative, AT&T claims that to the extent AT&T is not directly liable, secondary liability attaches via the doctrines of inducement, vicarious and contributory liability—essentially, liability for contributing to and benefiting from the unlawful performance of ringtones by AT&T customers. This argument is likely designed to cut against the exemption codified in the Copyright Act allowing the “performance of a nondramatic literary or musical work … to the public without any purpose of direct or indirect commercial advantage… if there is no direct or indirect admission charge.” (see 17 U.S.C. § 110(4)). This would, in theory, prevent ASCAP from proceeding against individual consumers who, although they may be publicly performing a musical work according to Copyright Act, are doing so without commercial advantage and thus not infringing.

ASCAP also reveals in its motion that it has consistently licensed other mobile carriers’ sale and distribution of ringtones, charging “2% of revenue and an alternative usage-based fee calculation.” In fact, ASCAP claims that prior to the Second Circuit’s 2007 decision that digital downloads of sound recordings do not trigger the public performance right (see United States v. ASCAP, 485 F. Supp. 2d 438 (S.D.N.Y. 2007)) (the “Download Decision”), “very few parties ever questioned or challenged ASCAP on the question of whether ringtones required public performance licenses.”

For business people and transactional lawyers alike, perhaps the most notable takeaway from ASCAP’s motion stems from AT&T’s claim that the ringtone providers (e.g., Jamster, ThumbPlay, etc.), not AT&T, “bear contractual responsibility for securing public performance rights.” In other words, AT&T is stating that if public performance royalties are due, it is the responsibility of content providers, aggregators, and ringtone creators to make payments to the performing rights organizations, not distributors like AT&T and other mobile carriers/network operators. Put simply, this contention highlights the need for parties to these types of agreements to be more explicit than ever about which party will be responsible for performance royalties if and to the extent any public performance rights are implicated. Here, AT&T is pointing the finger at the providers, and to the extent this tactic works, the providers would be responsible for paying royalties based not only on their own revenue, but the mobile carriers’ revenue, which, according to the ASCAP’s standard licensing agreements, is deemed part of the provider’s “client revenue” that is included in the “royalty base” for calculating provider payments to ASCAP. Moreover, any party ultimately saddled with responsibility for making performance payments would not only be required to pay 2% of revenue to ASCAP, but would also be required to remit similar amounts to the two other major performing rights organizations in the U.S. (i.e., BMI, SESAC), raising the total performance royalty rate to more than 6% of revenue–a sizeable payment, and in addition to the mechanical reproduction fees due to those same publishers and writers that are members of the performing rights organizations.

Ultimately, ASCAP, in its attempt to receive royalties from AT&T, devotes the majority of its motion to arguing the extensive nature of ASCAP’s control over the ringtone in an effort to distinguish ringtones from full-audio downloads addressed in the Download Decision, as the outcome of this case may very well turn on the question of the party responsible for triggering the performance. In other words, if an ongoing connection is maintained or required whenever the ringtone is played on a consumer’s phone (e.g., similar to the connection required when a sound recording is streamed over the internet), then the second kind of public performance (i.e., the digital transmission performance) may be triggered. On the other hand, if AT&T can successfully argue that the ringtone is downloaded only once to a consumer’s phone (similar to an iTunes track) without simultaneous or near simultaneous playback and continues to reside on the device exclusively, then merely prompting the playback of same by AT&T for an incoming call should fall more squarely within the confines of the Download Decision.

No matter what side you come down on, ASCAP’s PR machine has been slammed in the past for seeking payment from less than profit driven adversaries, including campfire balladeers such as the Girl Scouts. This time around though, eager to combat a slew of negative news reports trashing ASCAP’s pursuit of ringtone monies, ASCAP moved quickly to address the matter with its own membership, dispatching the following clarification to its writers and composers:

“Bottom line, ASCAP is striving to license those that make a business of transmitting its members’ music. This holds true for any medium where businesses have been built by using this music as content or a service – whether terrestrial broadcast, satellite, cable, Internet or wireless carriers providing audio and video content. To be completely clear, ASCAP’s approach has always been to license these businesses – not to charge listeners/end-users.”

Also, noteworthy in ASCAP’s response, is the fact that ASCAP states that it is “in Federal Rate Court with the two largest U.S. wireless carriers,” evidencing that ASCAP will be staging this battle for ringtone royalties on multiple fronts, including with Verizon, AT&T and possibly ringtone providers supplying the mobile carriers.

Needless to say, this will be a long, hard-fought battle and the public performance organizations, still reeling from the Download Decision (which incidentally is still in the appeals process), will not go quietly when the mobile carriers continue to enjoy revenue in the billions from the sale of ringtones. As always, we will continue to closely monitor this case given the potential impact on our clients’ businesses and the need for licensing and distribution contracts that accurately delineate each party’s roles and responsibilities in this constantly evolving digital space.