IP/Entertainment Law Weekly Case Update for Motion Picture Studios and Television Networks -- September 7, 2012

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Petrella v. Metro-Goldwyn-Mayer Inc., USCA 9th Circuit, August 29, 2012
 Click here for a copy of the full decision.

  • Ninth Circuit affirms grant of summary judgment in copyright action alleging that defendants infringed plaintiff’s interests in a book and two screenplays that plaintiff claimed formed the basis of the 1980 motion picture Raging Bull, concluding that plaintiff’s claims were barred by the equitable defense of laches.

After retiring from boxing, Jake LaMotta collaborated with Frank Peter Petrella to produce a book and two screenplays about LaMotta’s life. In 1976, Petrella and LaMotta assigned all their respective copyrights for the book and screenplays to Chartoff-Winkler Productions, Inc., and in 1978 defendant Metro-Goldwyn-Mayer Studios Inc. acquired the motion picture rights to Raging Bull from Chartoff-Winkler. Plaintiff, Petrella’s daughter, brought suit, alleging that, following her father’s death in 1981, she became the sole owner of his interest in the book and the two screenplays. In 1991, plaintiff filed a renewal application for the 1963 screenplay. In 1998, plaintiff’s attorney contacted the defendants, asserting that plaintiff had obtained the rights to the 1963 screenplay and that the exploitation of any derivative work, including the motion picture Raging Bull, was an infringement of these exclusive rights. Although plaintiff repeatedly threatened to take legal action, she did not file suit until 2009. The district court granted summary judgment in favor of the defendants, holding that plaintiff’s claims were barred by the equitable defense of laches. The district court also denied the defendants’ motions for sanctions and attorney’s fees. On appeal, the Ninth Circuit affirmed.

At the outset, the circuit court considered whether plaintiff’s conduct constituted laches. Laches, instructed the court, prevents a plaintiff who, with full knowledge of the facts, acquiesces in a transaction and sleeps on her rights. To prevail on a defense of laches, a defendant must prove that (1) the plaintiff delayed in initiating the lawsuit, (2) the delay was unreasonable, and (3) the delay resulted in prejudice. The court held that, applying either an abuse of discretion or a clear error standard, the district court’s decision to grant summary judgment was proper because defendants had established that no genuine issue of material facts existed as to these three elements.

First, the court found that plaintiff, who was aware of her potential claims since 1991 and did not file her lawsuit until 18 years later, delayed in initiating the lawsuit. Second, the court concluded that plaintiff’s explanations for the delay – that her mother was ill and that her family could not afford to bring suit – were unsupported by evidence, and in any event, were insufficient to demonstrate that the filing delay was reasonable. The court also noted that while a delay to determine whether the scope of proposed infringement would justify the cost of litigation might be reasonable, delay for the purpose of capitalizing on the value of the alleged infringer’s labor by determining whether the infringing conduct will be profitable is not, and the evidence suggested that the true cause of plaintiff’s delay was that Raging Bull had not made any money during the delay period.

Third, the court found that plaintiff’s delay resulted in prejudice to the defendants, given that defendants expended substantial financial resources to distribute the Raging Bull film in the United States and abroad; spent $3 million to create, promote, and distribute a 25th Anniversary Edition of the film; incurred $100,000 in costs to convert Raging Bull to the Blu-Ray format; and entered into numerous agreements to license the film through 2015. During the 18-year period of plaintiff’s delay, defendants made business decisions and entered into contracts relying on their belief that they were the rightful owners of the right to exploit Raging Bull. This, concluded the court, is the essence of expectations-based prejudice.

The court also held that laches barred plaintiff’s state law claims for unjust enrichment and accounting claims. Plaintiff argued, in the alternative, that defendants, as co-owners, rather than infringers of the book, had an ongoing duty to account to and pay her for any monies derived through the exploitation of the book and its derivatives. The court explained that, because unjust enrichment and non-contract-based accounting claims are equitable remedies, they are also subject to and can be barred by the defense of laches.

Finally, the court affirmed the district court’s ruling that defendants are not entitled to sanctions under Rule 11 and attorney’s fees for plaintiff’s alleged unjustified filing and prosecution of the action. The court agreed with the district court that plaintiff had a reasonable belief that she could overcome the laches defense because laches is an equitable doctrine involving many variables. In addition, the court noted that plaintiff’s attempt to distinguish applicable case law was not legally and factually unreasonable, and no evidence of improper motive existed.

 

WPIX, Inc. v. ivi, Inc., USCA 2nd Circuit, August 27, 2012
 Click here for a copy of the full decision.

  • Second Circuit upholds preliminary injunction enjoining defendant from streaming television programs live over the Internet, holding that defendant is not a “cable system” under §111 of the Copyright Act and not entitled to a compulsory license to stream plaintiffs’ copyrighted programming.

Plaintiffs, television stations and owners of copyrighted programming, brought suit for copyright infringement against defendants, ivi, Inc. and its chief executive officer, asserting that defendants’ live streaming of copyrighted programming over the Internet infringed plaintiffs’ rights to the public display of copyrighted content under the Copyright Act. Defendants captured broadcast signals from stations in New York City, Seattle, Chicago, and Los Angeles, and retransmitted the copyrighted television programming live and over the Internet to paying subscribers who had downloaded ivi’s “TV player” on their computers for a monthly fee. Shortly after ivi launched its service, plaintiffs sent cease-and-desist letters, and defendants responded by asserting that ivi was a cable system entitled to a compulsory license under §111 of the Copyright Act. The district court granted plaintiffs’ motion for a preliminary injunction enjoining ivi from streaming the copyrighted programs pending the outcome of the lawsuit. On appeal, the Second Circuit affirmed, holding that the district court did not abuse its discretion in granting the preliminary injunction.

The circuit court agreed with the district court’s determination that plaintiffs had established a likelihood of success on their copyright claims. The Copyright Act grants television broadcasters the exclusive rights to authorize the public display of copyrighted programming, including the retransmission of broadcast signals, subject to an express exception under §111 of the Copyright Act permitting “cable systems” to publicly perform and retransmit signals of copyrighted television programming to its subscribers, provided they pay royalties at government-regulated rates and abide by the act’s procedures. Defendants argued that ivi was a “cable system” under the Copyright Act and therefore entitled to a compulsory license to stream plaintiffs’ copyrighted programming.

The Second Circuit rejected defendants’ argument. Looking first to the text of the statute, the court concluded that, based on the statutory language alone, “It is simply not clear whether a service that retransmits television programming live and over the Internet constitutes a cable system under §111.” This ambiguity required the court to examine other indicia of congressional intent, including the legislative history of the act. Noting that Congress has neither specifically included an express statutory exclusion for Internet retransmissions, as it had for satellite carriers in 1988, nor included the Internet as an “acceptable communication channel” under §111, as it had for microwave retransmissions in 1994, the court concluded that Congress did not intend for the compulsory license provisions to apply to Internet transmissions. “Indeed, the legislative history indicates that if Congress had intended to extend §111’s compulsory license to Internet retransmissions, it would have done so expressly – either through the language of §111 as it did for microwave retransmissions or by codifying a separate statutory provision as it did for satellite carriers.”

The Second Circuit also found that the fact that the U.S. Copyright Office – the administrative agency charged with overseeing §111’s compulsory licensing scheme – had consistently and repeatedly concluded that Internet retransmission services do not constitute “cable systems” and therefore do not qualify for §111 compulsory licenses entirely eliminated any further doubt.

The appeals court also held that the district court did not err in finding that plaintiffs would suffer irreparable harm in the absence of a preliminary injunction, including the diminution of the value of their programming and advertising revenue. In fact, according to the court, “ivi’s actions – streaming copyrighted works without permission – would drastically change the industry, to plaintiffs’ detriment.” In addition, not only would the loss to plaintiffs be difficult to measure, and monetary damages would be insufficient to remedy the damage, because it affects the operation and stability of the entire industry, but ivi had acknowledged that it would be unable to pay any substantial award of damages if plaintiffs prevailed. Finally, the court concluded that the balance of hardships weighed heavily in favor of granting the preliminary injunction, and that preliminary injunction did not disserve the public interest.


For more information, please contact Jonathan Zavin at jzavin@loeb.com or at 212.407.4161.

Westlaw decisions are reprinted with permission of Thomson/West. If you wish to check the currency of these cases, you may do so using KeyCite on Westlaw by visiting http://www.westlaw.com/.

Circular 230 Disclosure: To assure compliance with Treasury Department rules governing tax practice, we inform you that any advice (including in any attachment) (1) was not written and is not intended to be used, and cannot be used, for the purpose of avoiding any federal tax penalty that may be imposed on the taxpayer, and (2) may not be used in connection with promoting, marketing or recommending to another person any transaction or matter addressed herein.

 

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