Potential Copyright Owners Beware: Make Sure Your Copyright Registrations Are Accurate!

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Normally, a copyright registration certificate constitutes “prima facie evidence of the validity of a copyright and of the facts stated in the certificate.”  17 U.S.C. §410(c).  But what happens if that certificate contains knowingly inaccurate information? The purported copyright owner could face not only invalidation of the copyright, but the inability to pursue copyright infringement claims or risk an award of attorney’s fees against them if they do so. This was the result in a case recently decided by the Ninth Circuit Court of Appeals titled: Gold Value International Textile, Inc. v. Sanctuary Clothing, LLC, et al., decided June 4, 2019.

Gold Value International Textile, Inc., which does business as Fiesta Fabric (“Fiesta”), designs textile patterns which it sells to customers who use the fabric to make clothing.  In October 2013, Fiesta registered what it called its Spring/Summer 2014 collection in a single registration with the Copyright Office. As part of this “collection,” Fiesta’s registration included a two-dimensional textile design known as the “1461 Design”.  In the copyright registration application, Fiesta’s president certified that none of the works in the collection had been “published” as of the filing of the registration, and thus, the Spring/Summer 2014 collection was registered as a group of “unpublished” works.

However, during the six months prior to the October 2013 registration, Fiesta apparently sold 190 yards of the fabric bearing the 1461 Design to a limited group of existing and potential customers.  Fiesta’s president would later testify that he knew about the sample sales prior to certifying the copyright registration in October 2013; although he claimed that he did not consider these sales of samples to be “publication.”

Sanctuary Clothing, LLC (“Sanctuary”) is a clothing manufacturer who Fiesta later sued claiming that its copyright in the 1461 Design had been infringed by Sanctuary’s selling of clothing that featured a design substantially similar to Fiesta’s 1461 Design. Fiesta also named several clothing retailers such as Nordstrom and Amazon as defendants in its lawsuit.

Fiesta and Sanctuary filed cross motions for summary judgment before the district court. The court granted the defendants’ summary judgment motion on the grounds that it found that Fiesta had knowingly put inaccurate information into its copyright registration and therefore the registration was invalid.  In reaching this ruling, the district court had inquired to the Copyright Office to determine whether Fiesta’s copyright registration would have been rejected if the Office had known that information had been knowingly included despite it being inaccurate. The Copyright Office responded in the affirmative.  After granting summary judgment to the defendants, the court granted their motion for attorney’s fees and awarded them attorney’s fees of more than $120,000 against Fiesta.  Fiesta appealed both of these determinations to the Ninth Circuit Court of Appeal.

The Ninth Circuit began by noting that although copyright registration is not necessarily required for copyright protection, it is “a precondition to filing an action for copyright infringement.”  In fact, a copyright registration certificate normally constitutes “prima facie evidence of the validity of the copyright and of the facts stated in the certificate.”

Prior to 2008, the Ninth Circuit had held that “inadvertent mistakes on registration certificates do not invalidate a copyright and thus do not bar infringement actions, unless the alleged infringer has relied to its detriment on the mistake, or the claimant intended to defraud the Copyright Office by making the misstatement.” However, in 2008, Congress passed the “PRO IP Act” that supplanted this Ninth Circuit precedence and provided that a registration certificate can satisfy the registration requirement regardless of whether it contains any inaccurate information, unless: (1) “the inaccurate information was included on the application for copyright registration with knowledge that it was inaccurate;” and (2) “the inaccuracy of the information if known would have caused the register of copyrights to refuse registration.”  17 U.S.C. §411(b)(1).  The Copyright Act also allows works to be registered as part of a group provided that the works in the group are either all published or all unpublished, i.e., there can be no group registration for works that are both published and unpublished.  The Ninth Circuit finally recognized that under the Copyright Act, “when copies are distributed `to the public by sale or other transfer of ownership or by rental lease or lending,’” or “offered to be distributed `to a group of persons for purposes of further distribution, public performance, or public display’”; than that particular work is considered ‘published’.

  1. Inaccurate Information

Fiesta began by arguing that the trial court erred in finding that its registration included inaccurate information. Essentially, Fiesta argued that it made an error by failing to put the publication date as to the 1461 Design in its registration and that this could be corrected by a supplemental registration. However, the Ninth Circuit rejected this argument because, to the extent that 1461 Design had been published, it could not be included in the Spring/Summer 2014 collection group, which contained unpublished works. Fiesta also argued that the Spring/Summary 2014 collection was essentially “unpublished,” including the 1461 Design, because the collection as a whole had never been “published together as a collection.”  The Ninth Circuit rejected this argument finding that there was no legal authority for it, nor did Fiesta offer any such authority.

Finally, Fiesta argued that the 1461 Design had not been published because it had only been distributed for the limited purpose of promotional activities. The problem with this argument, however, was that as a precaution, Fiesta later filed a second copyright application for the 1461 Design and stated in that application that the date of first publication of the 1461 Design was in March 2013 when it began selling sample fabrics containing the 1461 Design to its customers. Furthermore, the Ninth Circuit found it significant that Fiesta, in doing this limited distribution of the 1461 Design prior to October 2013, did not prohibit customers from distributing or reselling the fabric to others. Thus, the Ninth Circuit concluded that the 1461 Design had in fact been published prior to the October 2013 copyright registration and therefore the statements in the registration that all of the works were “unpublished” was inaccurate.

  1. Knowingly Inaccurate

Fiesta next argued that even if the Court was to conclude that the statement regarding publication was inaccurate, Fiesta did not make those statements “knowingly.”  In essence, Fiesta argued that it did not know that the limited distribution of the 1461 Design prior to October 2013 would be considered publication for purposes of copyright registration. The Ninth Circuit again rejected this argument, seeming to agree with the district court that “ignorance of the law” is “no excuse.” The Ninth Circuit also concluded that the use of the word “knowingly” in the PRO IP Act did not contain any reference to a culpable state of mind, i.e., knowing that one is doing something illegal, but rather only that the person knows that the statements are inaccurate.  Thus, there was no requirement that Fiesta had to be shown to have defrauded the Copyright Office which was the earlier Ninth Circuit standard that had supplanted by the PRO IP Act.

  1. Likely Registration Rejection

Finally, the Ninth Circuit had no trouble reaching the second prong of the PRO IP Act that the Registrar of Copyrights would have refused the registration had it known that the statements regarding the 1461 Design were inaccurate. Specifically, had the Copyright Office known that the 1461 Design had been “published” prior to the October 2013 registration, it would not have registered the copyright for Fiesta’s Summer/Spring 2014 collection because of the mixture of published and unpublished works. In conclusion, the Ninth Circuit found that because “a valid registration is a precondition to bringing an action for infringement, we affirmed the district court’s grant of summary judgment in favor of defendants” because of the invalidity of Fiesta’s copyright registration.

The Ninth Circuit also concluded that the trial court properly awarded attorney’s fees to the defendants. The Ninth Circuit found that the district court did not error in considering the various factors in favor of a fee award such as: (1) defendants were the prevailing parties; (2) they had obtained success in getting the infringement claims dismissed; (3) the purposes of the Copyright Act would be promoted by encouraging defendants to advance meritorious defenses like the defendants did here; (4) there would be no chilling effect on other plaintiffs bringing copyright infringement claims; and (5) the goal of compensating defendants and deterring plaintiffs from pursuing similar claims based upon invalid registrations.

The Gold Value International Textile case is a reminder that copyright registrants should review their registration applications carefully to make sure that they do not include any inaccurate information.  Otherwise, a copyright registrant risks having its copyright invalidated and being unable to pursue any claims for infringement.

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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