A Pattern of Deceit? SCOTUS to Consider Whether Section 411(b) of the Copyright Act Imposes a Mental State Requirement Akin to Fraud

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On June 1, 2021, the Supreme Court granted certiorari on the question of whether Section 411(b) of the Copyright Act is intended to be a “fraud” statute that requires scienter for cancellation of a copyright registration. See Unicolors, Inc. v. H&M Hennes & Mauritz, L.P., No. 20-915.

In 2008, Congress amended the Copyright Act to acknowledge the validity of copyright registrations that were based on applications with ministerial, nonmaterial errors. See 17 U.S.C. Section 411(a). However, this “safe harbor” is tempered by Section 411(b), which leaves vulnerable to cancellation registrations that contain errors that would have been material to the Copyright Office’s decision to grant registration if the inaccuracy was known to the applicant. The statute also directs a court to request that the Register of Copyrights advise the court whether the inaccurate information, if known, would have caused the Register of Copyrights to refuse registration.

Unicolors, a designer of artwork for fabric, brought suit against fast-fashion retailer H&M for copyright infringement of one of its designs. Unicolors, Inc. v. H&M Hennes & Mauritz, L.P., No. 16-cv-02322-AB(SKx). In defense, H&M contended that Unicolors’ group filing, a collective work copyright registration, was not valid for the design claimed to be infringed, because of known inaccuracies in the filing that would have been grounds for refusal of registration.

Nonetheless, a jury found the copyright registration valid; and that H&M willfully infringed the copyright, and awarded Unicolors $817,920 in profit disgorgement damages and $28,800 in lost profits. The court held that there were no valid grounds for cancellation of the registration, since fraud was not proven. On appeal, the Ninth Circuit reversed and remanded, admonishing the district court that the statute does not require proof of fraud and directing the district court to seek advice from the Register of Copyrights whether the inaccuracies in the registration application, if known, would be enough to refuse registration. Unicolors, Inc. v. H&M Hennes & Mauritz, L.P., 959 F.3d 1194 (9th Cir. 2020).

The Ninth Circuit’s decision was not surprising, since it had earlier held the plain meaning of the statute merely requires materiality and knowledge. Gold Value Int’l Textile, Inc. v. Sanctuary Clothing, LLC, 925 F. 3d 1140 (9th Cir. 2019). The Eleventh Circuit, on the other hand, requires proof of fraud, i.e., that the defendant prove that the copyright claimant/plaintiff not only knew of the inaccuracies, but that there was an intentional or purposeful concealment of those inaccuracies. Roberts v. Gordy, 877 F.3d 1024 (11th Cir. 2017).

On petition for certiorari, Unicolors argued that Section 411(b) is akin to the inequitable conduct standard for invalidating patents (Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276 (Fed. Cir. 2011)) or the fraud standard for cancelling trademark registrations under the Lanham Act (In re Bose Corp., 580 F.3d 1240 (Fed. Cir. 2009)), which requires scienter and that fraud be proved to “the hilt.”

Uncertainty as to how the Court will interpret the statute is creating concern among copyright claimants who typically file collective work applications where there is more margin for error – the collective works regimen permits registration of multiple similar in-kind works. The provision is especially popular among fabric and rug designers and other copyright claimants who have multiple works all of the same kind in type of creation, authorship and publication among common features and who coincidentally are among the most prolific copyright plaintiffs. The Unicolors work in question was not identical in kind to the others in the group – and by any account, that defect would be enough to refuse the registration.

A U.S.-domiciled copyright plaintiff cannot sue for infringement without a registration. Fourth Estate Public Benefit Corp. v. Wall-Street.com, 139 S. Ct. 881 (2019). Coupled with a copyright claimant’s ability to register collections of works in a single filing, a collective works registration is, without question, both a powerful tool against infringers, as well as a potential weapon of abuse. However, a holding by the Court will not be limited to group copyright claimants or serial copyright plaintiffs but apply equally to all claimants.

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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