By way of background on the Hangover case, Whitmill created and applied Tyson’s tattoo in 2003.  At the time, Tyson signed a release acknowledging that Whitmill owned all artwork, sketches, drawings and photographs based on the tattoo.  Whitmill then registered a copyright in the tattoo in April 2011.  Whitmill’s copyright registration suggests that Whitmill registered Tyson’s tattoo, rather than the design for the tattoo, as the copyrighted work.  In the registration, Whitmill described the work as “Artwork on a 3-D Object” and registered it under the category of “Visual Arts”.  The Visual Arts category applies to designs where the work only exists in a single copy or in fewer than two hundred sequentially numbered and signed copies suggesting that Whitmill registered tattoo itself, rather than the design for the tattoo, as the copyrighted work.  This conclusion is further supported by the fact that Whitmill included a picture of Tyson as a copy of the work, rather than a copy of the design on its own.

The design of a tattoo is clearly copyrightable as a pictorial or graphic work under §102(a) of the Copyright Act.  However, the Copyright Act also requires a work be fixed in a tangible medium of expression in order for it to be copyrightable.  The novelty of Whitmill’s copyright claim is that it raises the question of whether a design is copyrightable when the medium in which it is fixed is the face of another person.

Recognizing copyright protection in a tattoo could grant the tattoo artist unintended control over the body of the recipient.  The Copyright Act grants certain exclusive rights to the copyright owner, which, in the case of a tattoo, could be interpreted as a form of ownership over the body and image of the tattoo recipient.  If Tyson changes the tattoo or adds to it without Whitmill’s permission, he could be violating Whitmill’s right to create derivative works.  Similarly, others who publish images or footage of Tyson could be held liable for violating Whitmill’s exclusive reproduction, distribution or performance rights, which may make Tyson liable as a contributory infringer if he authorized these uses of his image.  Because the tattoo is so famous, Whitmill may even be able to get a court order preventing Tyson from removing the tattoo under the additional protections works for works of visual art under § 106A (a)(3) of the Copyright Act.

In its court papers, Warner Bros. argued that, if the tattoo is copyrightable, its use constituted a parodical fair use of the copyrighted work.  Fair use permits certain uses of a copyrighted work without the copyright holder’s permission and, though there are no presumptively fair uses, parody has traditionally been granted broader protection under the fair use doctrine than other protected uses.  Warner Bros. claimed that the film is poking fun at the toughness and outrageous lifestyle manifested in Tyson’s “warrior tattoo” by placing the same tattoo on Helms, who plays a “timid, frightened and milquetoast dentist with a decidedly conservative lifestyle.”

Despite avoiding an injunction which might have interfered with the film’s theatrical release, Warner Bros. still faced the uncertainty of a trial and the possibility of incurring significant and unexpected costs, including the cost of digitally altering the film prior to its home video release.  However, whether it would have actually incurred those costs or ultimately prevailed is now merely an academic discussion as the case was settled.  Details were not disclosed.

In another high profile case, Sony Pictures recently defeated a copyright infringement claim in the Second Circuit Court of Appeals over the copyrightability of blow dryers as weapons in promotional merchandise for the film “Don’t Mess with Zohan”.  Novel claims of copyright protection are becoming more prevalent as developments in technology push copyright law into novel and previously unrecognized forms of expression.  This brings us to the larger concern for content producers–how to ensure that there is an adequate clearing process in place to encompass these newly developed forms of protected expression.

In an earlier post, we looked at the copyright issues raised by motion capture-based games.  Motion capture-based gaming creates one of the first opportunities for large-scale exploitation and monetization of choreographed movement as a separate work.  Whether it is a popular dance, a distinctive martial art sequence or a creative yoga position, in order to incorporate it into a game, the game developer must determine whether the particular movement constitutes copyrightable choreography.  However, copyright law does not provide a clear line between the types of movements that rise to the level of copyrightable choreography and those that do not.  The courts have not provided much additional guidance either.  If the work is copyrighted, the developer must seek the necessary licenses, as it would for the music-based interactive games.  However, unlike in music, there is no established framework for licensing choreographed works, making the game developer’s job much more difficult.

Similarly, if tattoos are copyrightable expression, content producers might have to adjust their clearance processes to make sure they’re obtaining the necessary licenses.  Previously, it may have been sufficient to obtain permission from the individual whose image is being used.  Now, content producers may want to consider whether there might be third party rights in that person’s image before displaying, altering or even making reference to it, as Warner Bros. did with Helms’ tattoo.

On the other hand, content producers have also been using novel copyright claims to protect their rights in the new technologies that have been sprouting up around their content.  Todd Blatt, a mechanical engineer from Baltimore, created a digital replica of a cube featured in the J.J. Abram’s film “Super 8”.  Within 24 hours of uploading the design to a 3D printing website, Blatt had received a cease and desist letter from Paramount claiming that the design violated Paramount’s copyright.  Creating physical recreations of on-screen objects is not a new phenomenon, but new technology makes these replicas more accurate and easier to reproduce, which means there will probably be more litigation to come over who owns the rights in this digital merchandise.

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 monitor these and other ongoing developments in copyright and licensing law to keep our clients informed and protected.

**  Kate O’Donnell, an associate at the firm, assisted in the research and preparation of this post.

OpenLogic reviewed 635 leading mobile Apple iOS and Google Android apps in a license compliance assessment.  The results show that about 10 percent of the apps contained code that was subject to an open source license (either the General Public License, Lesser General Public License (GLP/LGPL) or Apache license), and over 70% percent of these were apparently using the open source code in a manner that violated key obligations required by the open source licenses. 

While certain of the violations found by OpenLogic related to requirements for attribution and/or provision of copies of the underlying open source license with the new works, in certain instances some of the apps may have required the developers to provide the source code for the app itself (that is, the open source code caused the app to go “viral”).  OpenLogic did not identify specific apps in its review but states that it targeted the “top paid and free apps for iPad, iPhone and Android across a variety of categories,” including apps from the top 20 companies in the Fortune 500.  The apps at issue included banking, sports and game applications, as well as apps from household brands and media organizations.

Perhaps this result isn’t surprising.  Many developers–and the publishers that retain them–often don’t have a complete understanding of the open source license requirements and how they may impact the actual use of the code in a specific app.  Other confusion may arise from the proliferation of outsourcing or the inadvertent bundling of original source code with protected source code.  Even when developers were aware that their app contained open source, the End User License Agreements or documentation accompanying the apps may not have been properly drafted to fully comply with the open source license requirements.

It is unclear what the ultimate impact of these findings will be.  Violation of an open source license can form the basis of a copyright infringement claim (exposing the entity using the code to statutory damages, as well as the possibility of an injunction).  Jacobsen v Katzer, an open source copyright infringement case, established that violators of open source software may be subject to claims under copyright law, including statutory damages up to $150,000 per infringing work and injunctive relief.  Injunctive relief was granted in Software Freedom Conservancy, Inc. and Erik Anderson v Best Buy Co., Inc. et al., a case where the defendant allegedly sold and distributed electronic products embedded with firmware that contained either a copy or derivative work of the plaintiff’s open source software, BusyBox, without complying with the open source license.  In addition to awarding treble statutory damages ($90,000) for willful copyright infringement and attorneys’ fees and costs, the court entered a permanent injunction against the defendant prohibiting distribution of its infringing HDTVs and ordered the forfeit of infringing HDTVs in its possession to the plaintiff, to be donated to charity.

While it is difficult to assess the litigation risk in the app space, a more critical concern for commercial application developers is the potential diminution of value that might result from the use of open source code (i.e. non-proprietary components) that might be included in their apps.  Strategic partners or potential acquirers might become concerned about hidden claims (either with respect to ownership of the app or for violation of an open source license).  Prudence would seem to compel developers and publishers to carefully scrutinize the code being incorporated into newly-developed apps and gain mastery over any open source license requirements.

As we suspected, the response from the entertainment community has been swift, and the company has since received a barrage of cease and desist letters from television networks, movie studios, sports leagues, broadcasters, syndicators and others in the entertainment industry alleging that the operation of the service as currently conducted amounts to copyright infringement. In response, the company has now filed a complaint for declaratory judgment in Seattle district court alleging that by complying with the Act’s compulsory licensing scheme in Section 111 “it has not infringed any of the copyrights owned by the any of the Defendants.”

We will obviously keep an eye on future developments as this complaint now moves its way through the court system and the entertainment industry’s forthcoming response.

In October 2009, the France’ high court approved “Loi favorisant la diffusion et la protection de la création sur Internet”, or “HADOPI” (see our previous post: Three Strikes and You’re…OUTTTT! (Of French Cyberspace)).  Now almost one year into the life of the law, results have been mixed. The French government has said that it is prepared to begin issuing warnings and sanctions under the law, but no action has been taken yet. Commentators have questioned the feasibility of the law (e.g., the ease with which offenders can regain access to the Internet), and some original supporters of the legislation have qualified their original support of the law in response to adverse political reaction.

The U.K.’s Digital Economy Act  was enacted on June 8, 2010. Aimed at regulating the access of copyrighted material by end-users, one controversial section of the law establishes a system for identifying users who access illegal materials and for gradually increasing technical restrictions on their Internet access. These restrictions involve initially downgrading the quality of a user’s connection (the hope being that slower upload and download speeds will act as a deterrent to piracy) and culminate in a complete denial of Internet access.

Since the enactment of the DEA, the Office of Communication (Ofcom), an independent regulator and competition authority for the UK communications industries, has developed a protocol/obligations codefor implementing the legislation (but has said that plans to disconnect end-users from the Internet would not come into force until next year). ISPs are tasked with identifying and compiling a list of those end-users believed to be engaging in infringing conduct via a three-stage notification process, which includes sending letters to such end-users (which must include certain “standardized” information in connection with the allegations made against the end-user and what actions such end-user can take both to challenge the allegation and to protect their network). Rights’ holders can also request the ISP to identify those end-users who have breached an Ofcom-defined threshold for continued violation of access to information (i.e., following the third notification to a particular end-user), after which the rights’ holder may petition a court for identification of the user for purposes of initiating litigation.

Not surprisingly, the DEA has been subject to criticism from many perspectives.  Certain commentators have claimed that the complete denial of Internet service may violate existing European Union principles and regulations intended to preserve EU residents’ “basic rights and freedoms”, one of which is the right to access and use the Internet, and say that even worse is the manner in which the act was passed into law (which ISPs claim was rushed through Parliament with insufficient scrutiny). Further criticism focuses on the fact that the DEA provides only for an independent, limited appeals process for end-users who believe they have been wrongly accused of copyright infringement (as opposed to due process in a judicial proceeding). Consumer rights groups have raised concerns that an innocent user who has not encrypted her wireless network may be sanctioned if others access the network to engage in authorized conduct.  In addition, some have predicted that the threat of disconnection may alienate the most avid legalbuyers of entertainment content, encouraging them to switch to anonymized, encrypted alternatives so as not to reveal their identity.  Lastly, because the DEA only applies to ISPs with more than 400,000 customers, one consequenceof the law could be a flight of consumers to smaller ISPs, placing the larger ISPs at a commercial disadvantage.

Many major ISPs have recently spoken out against the DEA.  TalkTalk and British Telecom (the UK’s largest providers of broadband to homes) have initiated legal challenges, with their core claim being that the DEA conflicts with existing European Union regulations relating to individual privacy and electronics communications directives, as well as e-commerce directives.  They have also raised concerns about the role of ISPs in policing the Internet (i.e., that ISP’s are mere conduits of content and should not be held responsible for traffic on their services). 

Many reporters and commentators have also started to speculate about the practical ramifications of the DEA.  These include concerns that the increased costs borne by ISPs in identifying and notifying infringing users may be passed onto subscribers, raising access costs across the board.  Additionally, there is speculation that additional taxesmay be imposed on ISPs for transmission of pirated content by their subscribers.  Finally, the potential ramifications of long-term end-user tracking (e.g., data retention issues) have raised additional privacy concerns.

Reception of the three-strikes legislation, or graduated response, has been mixed elsewhere in the European Union and around the world.  In some countries, such as Belgium and Singapore, active or proposed legislation has tried to establish administrative oversight of illegal access to copyrighted material. In others, such as Germany, the government has taken a more laissez-faire approach by asking individual ISPs to handle content regulation and restriction without active government intervention.  

The point of restriction of content access varies as well. Graduated response, such as the process promulgated by HADOPI, puts the onus upon the individual end-user (i.e., if the end-user infringes upon copyright and accesses copyrighted material, she suffers the potential sanction of denial of Internet service). In other proposals, this remedy is rejected in favor of putting the burden on ISPs: the service provider must actively block websites known to provide copyrighted material illegally. Yet other proposed regulations include targeting the website itself and have imposed (or have tried to impose) sanctions against individual websites for their presence within a certain country.

These alternate approaches clearly reveal the competing, deeply-rooted political philosophies and interests engaged in the debate.  Is digital piracy something that should be primarily policed by the government through stringent regulatory schemes?  Or should the responsibility fall to commercial stakeholders, such as content owners and ISPs?  How does one resolve the competing interests between content owners (who seek the most stringent protections available) and ISPs (who may view themselves as a passive provider of a basic service, not an active enforcement agency)?  And will innocent end-users find that they are adversely impacted by the actions of true infringers?

While there may be universal agreement that infringing activity must be inhibited, it is unlikely that a single, unified approach to the problem will emerge any time soon.  However, through trial and error and the experience of “early adapter” nations such as France and the UK, it is possible that a consensus will emerge on a scheme that achieves a balance among the concerns and interests of the various stakeholders.

We will obviously keep an eye on future developments in this area of the law and relevant industry practices.

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.

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• Late last week,  Judge Louis Stanton of the US District Court for the Southern District of New York ruled that plaintiffs in the high-profile copyright class action case against YouTube could not seek statutory damages for videos that are not registered under US copyright law.   Judge Stanton also dismissed plaintiffs’ punitive damages claim, but did permit claims based on live broadcast footage, which were brought by the English Premier Football League, the lead plaintiff in the case, to proceed. 
• After a lengthy battle, record labels and online radio stations reached an agreement on new royalty rates for music streaming.  The new agreement treats web sites differently based on their size and model.  It only applies to sites making most of their money from streaming music, excluding webcasters that run online music services as a small portion of their total business.  Pure-play internet radio providers will have to pay the greater of 25 percent of revenue or a fee each time a listener hears a song.  The new per stream fees start at .08 cent for each song streamed in 2006 and increases to .14 cent in 2015.  Smaller sites will pay 12 to 14 percent of revenue in royalties.  The new agreement replaces a 2007 royalty rate decision. 
• Rosetta Stone, maker of the popular foreign language software programs, filed a trademark infringement suit against Google alleging that its AdWords program, which lets companies buy advertisements that show up as “sponsored links” next to search results, results in consumer confusion.  The complaint alleges that Google is letting companies attach their ads to trademarked words they do not own, as well as allowing companies to use those trademarked terms in the headlines of their ads.  As a result, a search for a trademarked company name may bring up that company, but it may also bring up results for the trademarked company’s competitors.  In recent years Google has been facing other similar lawsuits over its AdWords program but in April, the 2nd Circuit provided trademark owners with some clarity when it held that Google’s use of the trademarks were “acts of commerce”, reversing a trial court’s ruling and permitting trademark owners to proceed with their suits. 

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.

Tomorrow a Swedish court is expected to announce it’s ruling in a criminal case that has been closely watched by nearly everyone with a stake-financial or otherwise-in the free-wheeling world of P2P file swapping.  At its core, the ruling will determine whether the operators of the Pirate Bay, the popular torrent search and indexing site, are guilty of violating Sweden’s copyright law.  A conviction-which many observers expect-could lead to imprisonment and a possible fine, as well as a shut-down of the site.  However, despite the potential immediate impact on the Pirate Bay and its operators, the broader implications of a guilty verdict, including whether or not it will serve as a deterrent against unauthorized file-sharing, are a little less certain.

For the uninitiated, a little background:  the Pirate Bay is a Swedish web site that bills itself as the world’s largest BitTorrent tracker.  According to various measurements, the site ranked 105th for daily traffic over the past three months and an estimated 2.7 million people from the US visit every month.  

BitTorrent is a peer-to-peer file sharing protocol used to transfer files, which accounts for approximately 35% of all traffic on the Internet according to one study.  BitTorrent differs from traditional P2P file-sharing in that a single file may be downloaded from numerous sources, each providing small packets of data, rather than from a single source.  A client implementing the protocol creates a small file called a “torrent” which contains metadata about the files to be shared and about a tracker computer that coordinates file distribution.  A user seeking to download the file must first obtain the torrent file associated with it and connect to the tracker computer, which then tells the user’s computer which other computers on the network have pieces of the file to be downloaded.

The defendants in the Pirate Bay case are relying on the underlying nature of the BitTorrent protocol to serve as the basis for their defense.  Specifically, they claim that since the Pirate Bay website only serves as an index for torrent files, and does not actually store any copyrighted materials, the site’s operations cannot be deemed to be infringing.  Taking the argument a bit further, they claim that because many sites and services on the Web point to or link to infringing content or allow users to upload such content-including Google-the infrastructure and inherent nature of the Internet are at issue in the case.  The defendants used the analogy of roads and telephones that sometimes are used for illegal activities: no one suggests destroying the road network or hauling phone companies into court due to offenses committed by one or more individuals using such roads or telephones.

Prosecutors countered that search services like Google, and the roads and telephone lines, were established to foster legal activities.  In contrast, the Pirate Bay’s entire raison d’être appears to be to foster primarily illegal activity in the form of infringing file-sharing. 

The trial itself, which was held over three weeks in February and March, was a bit of circus.  The defendants and their supporters posted daily accounts of the trial on the Web.  And, after the web site of the International Federation of the Phonographic Industry, the trade group for the music industry, was hacked during the trial, one of the defendants posted a note on his Twitter account saying, “Whoever is hacking the IFPI websites, please stop doing that.  It only makes us look bad!”

In many ways, the Pirate Bay’s notoriety is an “only in Sweden” affair.  Until recent amendments, the Swedish copyright law did not prohibit downloading copyrighted material for personal use.  Nearly every Swedish household has a cheap broadband connection, and polls have found that over 10% of the population engaged in some sort of P2P file-sharing and downloading.  A political party dedicated to legalizing P2P file sharing-regardless of copyright issues-was formed and has made credible efforts to gain seats in the Swedish Parliament.

However, in response to international pressure, the Swedish government has begun to take a tougher stance against illegal file-sharing.  Earlier this month, a law came into effect allowing content owners to obtain from Swedish ISPs the names and addresses of people suspected of sharing copyrighted materials without authorization.  The law, which brings to Sweden an investigation and enforcement tool available throughout the EU, had an immediate impact. On the day the law went into effect, total Internet usage decreased by 40% and has remained suppressed since such time.

During the trial, the head of the IFPI testified that 30% of the losses suffered by the global music industry were a result of illegal file sharing, citing several academic papers.  He also testified that, following successful court actions in recent years which led to the shut-down of P2P file-sharing sites Grokster and Kazaa, the Pirate Bay had become the No. 1 source for illegal music on the Web. 

Despite the fact that early in the trial prosecutors dropped charges alleging that the operators were “assisting copyright infringement”-leaving the primary allegation based on “assisting in making available” copyrighted material-it appears that the prosecution will ultimately prevail. 

However, it is unclear what impact, if any, shutting down the Pirate Bay will have on illegal file-sharing as a whole.  As has been seen numerous times over the past decade, every time a prominent P2P site or service has been successfully challenged and shut down (see Napster, Kazaa, Grokster, etc.), downloaders have simply found other sites to use.  Moreover, the Pirate Bay is merely one of many BitTorrent search and tracking services currently available to end users, including Mininova, isoHunt and btjunkie.  (Ironically, while none of these sites have become a high-profile target of the entertainment industry, Mininova actually has a higher traffic ranking than the Pirate Bay (86^th v. 105^th).  And the others aren’t shy about self-promotion:  isoHunt says it is the “most comprehensive BitTorrent search engine”; and btjunkie bills itself as “the largest and most advanced BitTorrent search engine” with over 1.5 million active torrents.)  [As an aside, in researching the information above and merely visiting the home pages of those sites via Google links, the PC we were using was apparently infected with a virus (notwithstanding the fairly extensive systems in place here).  Perhaps the media industry's strategy vis a vis these sites is based on its awareness of this "deterrent" we unwittingly and regretfully stumbled upon.]

However, in light of the brazen attitude that the Pirate Bay’s operators have taken toward illegal file-sharing, a conviction will enable the entertainment industry to claim a major victory in its fight against Internet piracy.

Regardless of the outcome, the trial-and similar enforcement efforts-should not be viewed by the entertainment and media industry as a substitute for a viable P2P business strategy.  Current and future technologies are making the digital distribution of music, video and book files faster, simpler and more ubiquitous.  Initiatives such as collective licensing-under which ISPs would pay an independent agency a fee based on its user base (presumably passed on as a fee to the users), which would in turn be pooled by the agency and used to pay royalties to content owners-are being considered viable alternatives that may effectively compensate content owners, foster the wide distribution of entertainment assets and move the digital space to a less adversarial environment.

The protected work at issue in Capcom Co. v. The MKR Group Ltd. was George A. Romero’s Dawn of the Dead, a film about a small group of people who are trapped in a shopping mall overrun by zombies.  Dead Rising is a video game that shares the same basic premise and many of the same details.  Both works are set in rural towns and feature protagonists who are tough, cynical journalists with short brown hair and a leather jacket.  Similarly, in both works, the protagonist arrives by helicopter and survives by utilizing food and weapons located inside the mall.  The game even shares the film’s unexplained tendency to dress an inordinate number of zombies in plaid shirts.  Gamedaily, a popular website that reviews video games, even commented that “Dead Rising is about as close as you’ll probably get to being a part of George Romero’s film, Dawn of the Dead.” 

A cynic might conclude that Capcom, the company that created Dead Rising, was attempting to cater to the Dawn of the Dead fan base by capturing the movie experience and presenting it in video game form.  In fact, as noted in the decision, Capcom approached MKR Group, the owners of the rights to Dawn of the Dead, to enquire about licensing the film’s elements for the video game.  It is unclear why no agreement was ever reached but Capcom went ahead with the release and took the somewhat unusual step of placing a disclaimer on the box stating that “THIS GAME WAS NOT DEVELOPED, APPROVED OR LICENSED BY THE OWNERS OF GEORGE AV. ROMERO’S DAWN OF THE DEAD TM.”  However, this strategy also came with certain risks. 

Recognizing the potential for litigation, Capcom sought a declaratory judgment that no copyright infringement had taken place, arguing that the differences between the two works far outweigh the similarities.  MKR Group countered by alleging copyright infringement. 

To succeed on its claim, MKR Group would have had to show that Dawn of the Dead and Dead Rising were “substantially similar” in their “protected elements.”  To meet this standard, the Ninth Circuit requires that the copyright holder satisfy both an “intrinsic test” and an “extrinsic test.”  The “intrinsic test” examines an ordinary person’s subjective impressions of the similarities between the two works and is exclusively within the province of the jury.  When a court finds that the claim fails the “extrinsic test,” as was the case here, it is dismissed before the jury is faced with this inquiry.

The “extrinsic test” is described as an “objective” test of similarity in the “expression of protectable ideas.”  To simplify this abstract legal concept, courts generally require that similar elements be present and that these elements be “expressed” in analogous ways.  If similarities exist but are outweighed by accompanying differences, this standard is not met.  This is a difficult standard for copyright holders, as evidenced by this case. 

In ruling in favor of Capcom, the court identified several differences between the game and film.  For example, with regard to plot, the court noted that the helicopter rides occur at different points in each story.  Similarly, the journalist in Dawn of the Dead is middle-aged and non-athletic, while his counterpart in Dead Rising is young and physically fit.  The two characters also possess contrasting personalities.  Furthermore, the game lacked anti-consumerism themes present in the film and proceeded at a faster pace.  Differences in dialogue, mood and setting were also noted.  Distinctions such as these were sufficient to defeat the infringement claim.  In contrast, the district court viewed the parallels between the game and film as a “string of disconnected facts.”

Copyright infringement cases are always fact-specific.  It is therefore difficult to draw clear conclusions about how this case might impact other situations involving video games containing themes and plot lines that resemble films or other dramatic works.  However, because of the uncertainty facing both game developers and publishers like Capcom-which was concerned enough about the case to take the pre-emptive step of a declaratory judgment action-and film owners, these parties should carefully evaluate possible infringement claims.  They also may want to explore entering into licensing agreements that will provide the certainty of an agreed-upon royalty scheme and provisions related to the scope and use of the licensed property, rather than risk, cost and uncertainty of litigation.