Faulkner Press v. Class Notes, N.D. Fla 1:08cv49-SPM/GRJ

A copyright dispute arising from the university sector is always interesting and this one is no exception. Here we have a Dr. Michael Moulton who has assigned his two electronic textbooks on wildlife issue and biodiversity in the new millennium to Faulkner Press.

Faulkner Press has sued Class Notes, (formerly known as ‘Einstein’s Notes’, but that change was the result of a whole different dispute now resolved), which sells note packages to University of Florida students. There were eight counts of copyright infringement and DMCA copyright information management. The court dismissed three and a part of another; and allowed the remainder to go forward.

Specifically of interest are counts one, two and three which relate to the lecture outlines, exams and film study questions. The film study questions track information provided in the films that are shown during class. The questions are designed to demonstrate that the students were paying attention.

Class Notes sought to dismiss as the questions were merely calculated to generate ‘bare facts’ and ‘facts do not owe their origin to an act of authorship.’

The court held that ‘the film study questions complied by Dr. Moulton possess the minimum level of creativity required for copyright protection. Although the fact statements are taken from the various films Dr. Moulton showed in class and his questions track the sequence of the films, Dr. Moulton picked only a few facts from each film to include in his film study questions. There may be nothing innovating or surprising about his selection. His selection was possibly random and made solely to ensure that his students were paying attention to the films. Even so, the selection was original because it was not a mechanical or routine arrangement. Dr. Moulton’s selection was unique to him and unlikely to be duplicated by someone else tasked with compiling film study questions. Some creativity was involved. His selection therefore qualifies for copyright protection.’

We are living in a liminal time of copyright as we move from the non-networked world to the networked one. Big infringers are no longer sure they will be caught; little infringers worry that their small infractions will get hit with zillion dollar damages. The food chain is in flux; the metrics are dynamic by which the infringer worthy of copyright lawsuit is differentiated from the infringer not worth the effort. In this uncertain time, we are seeing a pattern of calculated risks taken. In this blog, we point to two ends of the spectrum which, in the end, come to the same place which means the two ends of this spectrum form a circle: copying content unencumbered by obligation or liability.

Project Gutenberg has declared many literary works from the 1940′s and ’50′s as being out of copyright, in the public domain. By declaring a work out of copyright, Project Gutenberg expands the works that it has available for the public to copy without consequence or monetary charge. In the opinion of many, these declarations of a work being out of copyright are based on erroneous and partial information. Project Gutenberg, through Dr. Greg Newby, CEO, has told people that it has amended its procedures for determining public domain status; and that it is putting on hold determinations of public domain status. These changes are not announced yet on the website.

In contrast, Houghton Mifflin Harcourt has a pattern of exceeding the agreed upon print run limits, sometimes by as much as a million copies in excess. One HMH executive, Donald Lankiwicz, said in a deposition that the publisher ignored print run limits in its photo licenses as meaningless numbers. In rejecting HMH’s motion to dismiss the Wood claim, the judge wrote: “The gist of Lankiewicz’s deposition testimony, in short, is that under his understanding of industry standards, a copyright license that specifies a print run of 40,000 copies simply does not limit publishers, which could reproduce over a million copies of the copyrighted work without seeking further permission from, or paying additional fees to, the copyright holder.”

The judge wrote off Lankiewicz’s testimony as “facially implausible and self-serving claims” and “perhaps even nonsense” on his way to ruling that no jury could dispute the meaning of a license limit of 40,000 copies.

The result was that the small amount of money for the agreed upon print run became a basis for an unlimited print run in practice. HMH has recently amended its licensing agreement to make explicit what had become implicit, namely that there is no print run limit. Once a license for any amount is made with HMH, HMH may print as may copies as it wants and there is no following obligation or payment.

That ruling quoted above was in 2008 in the Ted Wood v HMH case, and now there are over thirty (30) lawsuits that have been filed in federal courts in numerous states including Alaska, Florida, Pennsylvania, Massachusetts, New York, Arizona.

The news last week of Ireland’s bailout may impact this gaggle of cases. HMH was created by a series of mergers orchestrated by Barry O’Callaghan, who was a part of the ‘Irish Golden Circle’ that made loans to an Irish bank, backed by stock on the same bank. The people of Ireland and the EU now own that bank, or what’s left of it. The loans haven’t been paid back; perhaps the print overrun practice is consistent in that strategy of nonpayment.

Project Gutenberg’s aggressive reading of a work being out of copyright, and Houghton Mifflin Harcourt’s position of ‘one and done’ for unlimited print runs come to the same conclusion that content is commodity.

Oracle USA, Inc. v. Sap AG et al., No. 07-CV-01658 PJH (EDL) (N.D. Ca. 24)

An eight person jury in Oakland California awarded Oracle the largest copyright infringement judgement of 1.8 Billion Dollars, in U.S. history. This judgement exceeds even the largest patent infringement award of $1.67 billion in the 2009 patent case against Abbott Laboratories.

The jury was given the choice of making an award based upon a fair market value license or lost profits. If the jury had looked at lost profits then it is difficult to conceive how they could have awarded anything approaching this amount.

This case is related to the Rimini case that we reported here in the Cobalt News blog last week. SAP acquired TomorrowNow which was a third party support and maintenance service company, in 2007, as a way to attract business customers at companies acquired by Oracle, including others, to SAP. TomorrowNow is now out of business, but one of the goals when it was operational was to use software robotics to get the requisite information needed to perform third party support and maintenance on Oracle systems. Oracle objected to TomorrowNow getting that information on behalf of Oracle Licensees and claimed that the downloading itself as well as the means of accessing the information and copyrighted content constituted copyright infringement.

While some industry analysts are stating that this opinion will not impact the third party service provider market, we are less optimistic. This case is an emphatic effort by Oracle to preserve its most profitable part of its business. In 2010, Oracle in SEC filings reported that the profit margin on that service and maintenance sector of its business is over 80%.

An appeal is likely given the size of this award.

Softech Worldwide v. Internet Tech, (ED Va. 11/8/10)

Softech develops specialized software that facilitates streaming video onto the internet; and Softech accepted a sub-sub-subcontractor contract from Internet Tech (IT) which was a sub-subcontractor to Fedstore, a primary contractor to the U. S. Department of Veteran Affairs (VA). The project was to design and implement a platform for scaling electronic media to various electronic devices. Softech allegedly achieved its assigned goals and stood ready to continue; however, after Softech delivered relevant software, including source code, to IT, IT ceased payment to Softech.

After learning that the VA was continuing to use the Softech copyrighted code, Softech sued both IT and Fedstore for copyright infringement. Softech sued Fedstore as both a contributory and as a vicarious copyright infringer. Fedstore moved to dismiss itself as not a proper defendant under either theory of secondary liability.

After reviewing all the papers in support of the motion to dismiss, the trial court granted the motion as to Fedstore as a contributory infringer, and denied the motion to dismiss Fedstore as a vicarious infringer. The court’s analysis focused on knowledge and participation after reading the Complaint as a whole, and taking all the facts asserted as true.

With regard to granting dismissal of the contributory infringer theory, the court finds that Fedstore was without knowledge of Softech’s copyright ownership as IT claimed to the public that IT owned the copyright; and that, as IT was a rogue subcontractor, that Fedstore lacked the requisite participation to be a contributory infringer.

In denying the motion to dismiss the vicarious infringement theory, Fedstore is found by the court to have possessed the right and the ability to better supervise the subcontractor IT; and, that Fedstore financially benefited from IT’s alleged infringement.

The case goes forward and Fedstore remains in the case. Doubtless, there is an indemnification conversation happening between IT and Fedstore.

Sellify, Inc. v. Amazon.com, Inc., (SDNY 11/3/10)

Sellify, aka ‘One Quality’, went in and out of business minimally while buying and re-selling used electronics on eBay.

Cutting Edge Design (CED), an Amazon associate, purchased the keyword “onequality.com” and several close variants from Google, Inc. When a Google user searched for these keywords, the search results were accompanied by an ad stating “Don’t Buy from Scammers” or “Beware the SCAM Artists” and linking to Amazon’s website. CED alone and without the knowledge of Amazon designed, implemented and purchased these ads. After a second demand letter from Sellify, Amazon terminated CED’s account.

Sellify sued both CED and Amazon for false advertisement. Amazon moved for a dismissal of Amazon from the suit as it had neither direct or secondary liability. Amazon pointed to an absence of all knowledge plus demonstrated that there was no agency between CED and Amazon.

The court granted Amazon’s motion to dismiss finding no direct or secondary liability. The court noted that the mere act of allowing another to link to one’s website, even if undertaken for commercial gain, could not support a finding of apparent authority.

Forest River, Inc. v. Heartland Recreational, USDC Northern Indiana 3:10-CV-11-TS

Competitors in the travel trailer industry, Forest sued after Heartland copied the Forest floor-plan and did two separate things with the plans. First, Heartland used the Forest floor-plans to create Heartland travel trailers allegedly in violation of the Architectural Works Copyright Protection Act (AWCPA); and second, that Heartland copied into a Heartland advertisement the Forest floor-plan in violation of Section 106 rights (which Heartland defends as protected by the fair use doctrine).

With regard to the first copyright claim, the Court noted both that travel trailers are useful articles and that AWCPA explicitly excludes recreational vehicles from the definition of architectural works. 37 C.F.R. § 202.11(d). Moreover, the Regulations implementing the Copyright Act, as amended by the AWCPA, define the term “building” as “humanly habitable structures that are intended to be both permanent and stationary, such as houses.” 37 C.F.R. § 202.11(b)(2).

“The legal issue before the Court is whether a copyright in a technical drawing of a non-architectural useful article precludes another party from using copies of that drawing to construct the useful article.”

In dismissing the claim, the court held:

“The Court could locate no post-AWCPA decision that recognized the distinction the Plaintiff requests when referring to useful articles depicted in drawings protected under § 102(a)(5) as technical drawings. To the extent the Plaintiff’s Amended Complaint attempts to assert a claim for copyright infringement on the basis that the Defendant manufactured travel trailers using copies of its Floor Plan, that claim fails as a matter of law. The Defendant was entitled to manufacture and market its own travel trailer, even one with the same layout as the Plaintiff’s.”

While the court dismissed the first copyright claim, the second copyright claim, “Use of the Floor Plan in Comparative Advertising” is allowed to go forward toward trial. This travel trailer case is moving on down the road. Discovery and a fair use analysis will be just around the corner. Stay tuned.

Oracle v. Rimini Street, USDC D. Nevada 2:10-CV-00106-LRH-PAL

Oracle sued Rimini, a third party support and maintenance service provider, for having illegally downloaded Oracle’s software and support materials by logging on to Oracle’s password protected web-database using an Oracle customer’s individual login credentials, and downloading support materials in excess of that customer’s authorized license agreement. Rimini is owned by Seth Ravin, who is a top executive at TomorrowNow, another cut-rate provider of Oracle support services, until SAP acquired the company in 2007.

The much bigger issue here is whether the decades-old enterprise software model can hold up against the forces of upstart competition and price arbitrage; and, of course, copyright is the first beachhead in resolving that controversy. Really what has Oracle riled up is the challenge that Rimini and others (SAP for one) are threatening to eat the 80 plus percent profit margin that Oracle has in those yearly maintenance and support fees.

Rimini defended claiming that Oracle is using its existing software copyrights to unlawfully leverage a monopoly in its uncopyrightable after-market support services. Specifically, Rimini Street claims that Oracle prohibits the use of automated tools which effectively prevents customers from accessing large volumes of Oracle’s support materials which are integral to the licensee having the ability to make changes related to the technical design.

The court evaluated Rimini’s defense of copyright misuse; a powerful defense when effective as it halts the plaintiff’s case against that defendant. The equitable defense of copyright misuse “forbids a copyright holder from securing an exclusive right or limited monopoly not granted by the Copyright Office” by preventing “copyright holders from leveraging their limited monopoly to allow them control of areas outside the monopoly.”

Breaking the defendant’s claim into two parts, the court identified the two specific aspects of the alleged copyright misuse to be:

1) Oracle imposed limits on download, specifically the technical design of the Oracle website that licensees must access to get information, prohibits the licensee from accessing and differentiating the additional support information that is needed from that which is superfluous; and,

2) Oracle prohibits and literally stops any use of automated tools (bots) on its website with the result that customers are prevented from downloading large volumes of Oracle’s support material and collecting copyrighted content.

As to both aspects that Rimini claims comprised copyright misuse, the court “finds that the licensing restrictions alleged by Rimini Street are well within Oracle’s statutory rights as a copyright holder and therefore do not constitute copyright misuse.”

Stagecraft Costuming v. Househaunters Limited, Case No. 1:10-cv-197, Southern District of Ohio

Halloween is increasingly a national holiday of mega-proportions…. and here’s a case to prove that where there is a fabulous success, there also will be the flattery of imitation.

Stagecraft Costuming of Cincinnati Ohio took umbrage when it discovered that Househaunters, a competitor in the illusion costume market, had copied the most successful Stagecraft costume, “The Man in the Cage”. Stagecraft created the winning costume in 1985 and only registered it with the U.S. Copyright Office in 2010 after unsuccessfully persuading Househaunters to cease and desist their sales of the knock-off that rolled off the Househaunter’s design floor in 2008. Not surprisingly, Househaunters claims that the Stagecraft copyright registration is invalid as the costume is unprotectable under Section 102(b) of the Copyright Act as a useful article. The complaint includes counts of trade dress as well as copyright.

The motion for summary judgment that Househaunters filed in June appears to be still awaiting the judge’s ruling; and in the meantime, we were all free to wear our costumes of choice this past weekend.