IP/Entertainment Law Weekly Case Update for Motion Picture Studios and Television Networks -- August 9, 2012

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Flava Works, Inc. v. Gunter, USCA 7th Circuit, August 2, 2012
 Click here for a copy of the full decision..

  • Seventh Circuit vacates preliminary injunction against social bookmarking site myVidster, finding that plaintiff Flava Works was not likely to succeed on its claim of contributory infringement because no evidence existed of any direct infringement by myVidster users.

Plaintiff Flava Works, Inc. specializes in the production and distribution of a specific genre of adult-content videos. myVidster is a website through which users who have similar tastes can point one another to and provide access to online materials by “bookmarking” the materials on myVidster. Flava sued myVidster for contributory copyright infringement, alleging that by providing a connection to websites that contain illegal copies of its copyrighted videos, myVidster is encouraging its subscribers to circumvent plaintiff’s paywall. The district court granted Flava’s request for a preliminary injunction, finding that Flava had established a likelihood of success at trial. The Seventh Circuit, in a decision written by Judge Posner, vacated that preliminary injunction. The Seventh Circuit first noted that the district court erred at the outset by saying that the analysis boiled down to a single factor – the plaintiff’s likelihood of success – and ignoring that the “irreparable harm” requirement for the granting of a preliminary injunction is no longer assumed in copyright cases following the Supreme Court’s decision in eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 392-93 (2006). Because the “likelihood of success” factor was the only one that the parties discussed, however, the Seventh Circuit confined its analysis to it, concluding that, based on the evidence presented, Flava had failed to demonstrate a likelihood of success at trial, as the facts suggested that myVidster did not encourage any direct infringement.

In order to access any of the Flava videos, a user must pay a fee in advance. Paying the fee also allows the user to download any Flava videos to his computer for his own personal noncommercial use. Users who downloaded Flava videos are prohibited from, but often do upload video to the Internet. myVidster users then bookmarked those unauthorized Internet copies of Flava’s copyrighted content. When another myVidster user accesses the bookmarked video, the viewer watches the video on the myVidster site, through a frame that myVidster has put around it, and that contains information including ads. The video is not stored on myVidster’s servers, however, and streams from the servers of the website onto which the video was originally uploaded.

The Seventh Circuit vacated the district court’s preliminary injunction. Using the most succinct definition of contributory infringement – “personal conduct that encourages or assists the infringement” – the court found that myVidster does not encourage or assist infringement because it does not facilitate any actual infringing conduct. Because myVidster’s servers do not host any of these videos, neither myVidster nor its users are creating a copy of the video being viewed, and there is no violation of Flava’s reproduction right. While, obviously, the person who illegally uploaded Flava’s copyrighted video to the Internet in the first place is an infringer, the Seventh Circuit held that a myVidster users who views such videos on the infringers’ websites is no more a copyright infringer than someone who sneaks into a movie theater and watches a copyrighted movie without buying a ticket. While these actions are “bad,” they do not constitute copyright infringement, and the facilitator of such conduct that does not constitute copyright infringement is not a contributory infringer.

The Seventh Circuit also held that simply knowing that some of the videos bookmarked on its site infringed copyright does not automatically mean that myVidster facilitated illegal copying. Users viewing the videos do not pay for them and therefore are not encouraging the infringing uploader. And no evidence existed that the unauthorized uploaders of the copyrighted videos were members of myVidster and uploaded the Flava videos for the sole purpose of bookmarking them, and somehow getting credit either for the bookmarking or the ensuing viewing of the video.

The court also considered the possibility that myVidster might be liable for facilitating the infringement of Flava’s exclusive right to public performance of its copyrighted videos under 17 U.S.C. §106(4). According to the court, under one interpretation of public performance – that performance occurs only when the video is transmitted to the viewer’s computer, or in other words, when it is communicated to the public in a form in which the public can visually or aurally comprehend the work – plaintiff could (but didn’t) make the argument that even though the video uploader is responsible for the transmitting, myVidster is assisting the transmission by providing the link between the uploader and the viewer, facilitating public performance. The court ultimately concluded, however, that even under this interpretation, based on the evidence presented, myVidster would not be considered to be contributorily liable. myVidster was not encouraging infringing conduct by creating or providing a market for pirated Flava works, since the infringers did not receive any payment for the uploaded videos from myVidster viewers, nor did myVidster have a pecuniary motive for pushing the viewing of Flava’s videos by visitors to the site, such that the bookmarking service actually contributed significantly to the unauthorized performance of Flava’s copyrighted works. The court also noted that no admissible evidence existed that the videos were actually being accessed via myVidster, rather than via other websites. Absent this evidence, myVidster was not contributing to their unlawful performance.

Quirk v. Sony Pictures Entertainment, Inc., USDC N.D. California, July 5, 2012
 Click here for a copy of the full decision.

  • District court denies motion to dismiss breach of implied contract claim alleging that defendants used plaintiff’s novel Ultimate Rush, and screenplay derived from his book, in creating motion picture Premium Rush, finding that plaintiff adequately alleged facts under which a Desny claim plausibly could arise, notwithstanding that plaintiff did not allege that his novel was submitted directly to any of the moving defendants.

Plaintiff Joe Quirk brought suit for copyright infringement and breach of implied contract against a number of defendants, asserting they used his 1998 novel Ultimate Rush and a screenplay derived from the book (commissioned by a motion picture studio not named as a defendant in the case) as the basis for the motion picture Premium Rush. Defendants brought a motion to dismiss arguing that Quirk could not pursue his claim for breach of an implied contract against those defendants that were not alleged to have directly received a copy of his novel as part of his agent’s efforts to obtain a movie deal. The district court denied defendants’ motion, finding that while it was “far from clear” that he ultimately would be able to prevail on his claim of breach of implied contract based on any use by defendants of either the novel or a screenplay derived from the novel, Quirk had adequately alleged facts under which an implied contract plausibly could arise.

Quirk wrote his novel between 1994 and 1997. Prior to its publication in 1998, Quirk’s agent allegedly distributed pre-release copies and synopses of the novel widely “among entertainment industry participants.” Of the named defendants, however, only Columbia Pictures Industries, Inc. (not a party to the motion to dismiss) allegedly received a pre-release copy and entertained a “pitch” of a possible film project based on it directly from Quirk’s agent. In his complaint, Quirk alleged in detail a number of “relationships” between the defendants and others in the motion picture industry, in support of his theory that a copy of the novel or the notion of making it into a film, or both, passed through one or more routes between those to whom his agent submitted the novel directly and the defendants. In the late 1990s, Warner Brothers (not a defendant) also obtained an option to make a film from Quirk’s novel and commissioned a screenplay (the Hefter Screenplay), which Quirk alleged circulated widely throughout the industry. Acknowledging that he owns no copyright in the Hefter Screenplay, Quirk asserted that because it is a derivative work of the novel, it cannot be used as the basis for a film without his consent, and that the Premium Rush script bears evidence of copying from both from the Hefter Screenplay and his novel.

Defendants argued that Quirk could not state a claim for breach of an implied contract to compensate him for the use of his novel because he did not submit his novel to any of the defendants directly, under circumstances that would warrant finding a "bilateral expectation" of compensation, as required by the California Supreme Court’s decision in Desny v. Wilder and Ninth Circuit cases applying it. In other words, according to the district court, defendants argued that “unless a writer can show that he gave a work directly to an individual defendant, or to an employee or agent of a corporate defendant with express authorization to bind the entity, there can never be a claim sounding in implied contract.” Quirk argued for a much broader rule permitting a plaintiff to bring a Desny claim “whenever a plaintiff can ‘trace’ a copy of a work allegedly used by a defendant, back to the recipient of plaintiff's initial movie proposal, notwithstanding the number of intervening hands that touched it.”

The district court declined to accept either argument, noting that neither party pointed to controlling precedent directly addressing the issue. Noting that the essence of an implied contract claim is a “bilateral understanding” that the use of the idea requires compensation, the district court rejected Quirk’s theory that all he needs to do is “trace” a particular copy of his novel found in defendants’ possession to one that was submitted in a context that might support an implied contract, stating that Quirk ultimately would have to prove not only that a copy of the novel originally provided by his agent ended up in the defendants' hands, but also that “each person who accepted it along the way did so with the expectation that payment would be due if the ideas were utilized.” The court also rejected defendants’ argument, however, that Quirk could not maintain an implied contract claim based only on the fact that they were not the precise entities to which Quirk’s agent allegedly submitted the novel. According to the court: “There are circumstances under which the expectation of payment may survive the transfer of a book from one person or entity to another.”

Noting that Quirk’s allegations that his novel was transferred with such a bilateral expectation were both conclusory and speculative, and that Quirk conceded that he needed to develop additional facts through discovery to support his theories, the court nevertheless concluded that dismissing Quirk’s claims prior to the development of a more complete factual record would be inappropriate, particularly because Quirk’s allegations relating to the Hefter Screenplay more strongly supported the inference that any person or entity receiving a copy of the screenplay would have had an expectation that using it would require compensation, and that Quirk had alleged sufficient facts to warrant the presumption that the defendants had used the Hefter Screenplay in developing Premium Rush.

Recognizing that Quirk does not own a copyright in the screenplay, the district court held that Quirk could not pursue an infringement or implied contract claim to the extent defendants’ film contained protectable elements of expression or ideas found in the screenplay but not the novel. The court held, however, that the moving defendants had not met their burden of establishing, as a legal matter, that the author of an underlying work uses his right to pursue a Desny claim where the ideas embodied in the underlying work happen to be transmitted to the defendants through the vehicle of a derivative work.



 

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.

Published In: Art, Entertainment & Sports Updates, Civil Procedure Updates, Civil Remedies Updates, General Business Updates, Intellectual Property Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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