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Exploring the latest in intellectual property law
Results for "Copyright appeals"
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Yo-Ho-No Vicarious Liability for Online Piracy Without Financial Benefit

by | Feb 29, 2024 |

The US Court of Appeals for the Fourth Circuit reversed-in-part, vacated-in-part and affirmed in part a district court decision that found an internet service provider liable for $1 billion in damages for vicarious and contributory copyright infringement. Sony Music Entm’t., et al. v. Cox Commc’ns, Inc., Case No. 21-1168 (4th Cir. Feb. 20, 2024) (Harris, Rushing, JJ., Floyd, Sr. J.) (per curiam).

Sony Music along with 52 other music companies filed suit against Cox Communications in July 2018, alleging both contributory and vicarious liability based on copyright infringement by Cox’s customers. Sony argued that Cox knew that some of its customers used its service to download or distribute songs over the internet without permission but chose not to cancel their subscriptions. The Digital Millennium Copyright Act (DMCA) created a safe harbor for internet service providers in such circumstances but a prior case against Cox held that it did not qualify for the safe harbor because “its repeat infringer policy as implemented was inadequate under the DMCA.” In the present case, the jury found Cox liable for vicarious and contributory infringement of all 10,017 copyrighted works alleged to have been infringed and found that Cox’s infringement was willful. The jury awarded Sony more than $99,000 per work infringed, totaling $1 billion in statutory damages. Cox appealed.

The appeal garnered noteworthy amici in support of both sides. Cox was supported by the Electronic Frontier Foundation, the American Library Association and the Center for Democracy and Technology, among others. Sony was supported by the National Music Publishers’ Association, the Songwriters of North America, the Nashville Songwriters Association International and the Copyright Alliance.

Cox raised many questions of law concerning the scope of secondary liability and what constitutes a compilation or derivative work in the digital age. The Fourth Circuit upheld the jury verdict finding Cox liable for contributory copyright infringement, rejecting Cox’s arguments that its service was also used for lawful activity and that its contribution must amount to aiding and abetting the infringement. The Court explained that “supplying a product with knowledge that the recipient will use it to infringe copyrights is exactly the sort of conduct sufficient for contributory infringement.” The Court concluded that the jury saw sufficient evidence that Cox knew specific users were repeatedly infringing but chose not to terminate their service.

The Fourth Circuit, however, reversed the jury’s verdict of vicarious liability, finding that Cox did not profit from its subscribers’ acts of infringement and so did not meet the legal prerequisite for that form of secondary liability. Reviewing landmark cases on vicarious liability, the Court explained that “the crux of the financial benefit inquiry is whether a causal relationship exists between the infringing activity and a financial benefit to the defendant . . . the financial benefit to the defendant must flow directly from the third party’s acts of infringement to establish vicarious liability.” Since Sony failed to show that Cox profited from its subscribers’ infringing activity, it failed to establish vicarious liability.

The [...]

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No Fair Use for Photo Used Without Required Attribution

by | Feb 15, 2024 |

The US Court of Appeals for the Fourth Circuit concluded that the copyright on a photograph of an entertainment icon was the subject of a valid copyright registration and that use of the photograph in an article missing the author’s required attribution language was not otherwise “fair use.” Philpot v. Independent Journal Review, Case No. 21-2021 (4th Cir. Feb. 6, 2024) (King, Wynn, Rushing, JJ.)

Larry Philpot, a professional concert photographer, photographed Ted Nugent at a concert in July 2013. In August 2013, Philpot registered the photograph with the US Copyright Office and published the photograph on Wiki Commons under a Creative Commons License specifying that anyone could use the photograph for free as long as they provided the following attribution: “Photo Credit: Larry Philpot of www.soundstagephotography.com.”

In 2016, Independent Journal Review (IJR) published an article titled, “Signs Your Daddy Was a Conservative.” One of the “signs” listed in the article was whether “your daddy” was a fan of “The Nuge.” The article used Philpot’s photo in conjunction with this list item. Rather than including the required attribution with Philpot’s photo, IJR included a link to Nugent’s Wikipedia page, which in turn linked to the Wiki Commons site where the photograph was hosted with the proper attribution. IJR generated only $2 to $3 in advertising revenue from the article.

Philpot sued IJR for copyright infringement in May 2020. IJR moved for summary judgment based on its fair use defense and alternatively for a finding that Philpot’s registration was invalid. Philpot moved for summary judgment of valid registration and that IJR’s use did not meet the requirements of fair use. The district court found that there was a genuine issue of material fact regarding the validity of Philpot’s registration but granted IJR’s motion for summary judgment of fair use. Philpot appealed both findings.

Following the statutory four-prong fair use framework and the Supreme Court 2023 fair use analysis in Andy Warhol Foundation for the Visual Arts v. Goldsmith, the Fourth Circuit considered whether IJR’s use of the photo was transformative and of a commercial nature or for nonprofit educational purposes. A secondary use is transformative when it has a “further purpose or different character” than the original work. The larger the difference is, the more likely a court is to find that the use constitutes “fair use.” The district court found the work transformative because IJR placed the photo in a new context (i.e., a list of “Signs Your Daddy Was a Conservative.”) The Fourth Circuit, however, found that IJR’s use was not transformative because the two uses “shared substantially the same purpose,” which was to depict Ted Nugent. Beyond cropping negative space in the photo, IJR did not alter or add new expression to the photo and did not “add new purpose or meaning.”

In considering whether the work was for a commercial purpose, the Fourth Circuit questioned whether IJR stood to profit from its use of the photo, not whether IJR was successful at that venture. While the article [...]

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TikTok Makes It Out of West Texas to Sunny Northern California

by | Nov 16, 2023 |

The US Court of Appeals for the Fifth Circuit granted a writ of mandamus ordering the transfer of a case, finding that the district court’s denial of the motion to transfer “was so patently erroneous” that the extreme measure was appropriate. In re TikTok, Inc., Case No. 23-50575 (5th Cir. Oct. 31, 2023) (Smith, Southwick, Wilson, JJ.)

In the underlying case, Beijing Meishe Network Technology Co. sued TikTok in the US District Court for the Western District of Texas, alleging infringement, trade secret misappropriation and false advertising. All claims stemmed from the theory that a former Meishe employee disclosed copyrighted source code for video and audio editing software to TikTok, which TikTok then implemented into its app. Meishe and TikTok are Chinese companies, and both the alleged disclosure and TikTok’s alleged code implementation occurred in China, assisted by TikTok engineers in California. TikTok has no engineers in Texas but does maintain a business office there, although not within the Western District.

TikTok moved under 28 U.S.C. § 1404 to transfer the case to the Northern District of California. The district court took 11 months to rule on the motion, and in the meantime the case continued through discovery. After the district court denied the motion, TikTok petitioned the Fifth Circuit for a writ of mandamus.

The sole issue on mandamus was the propriety of the district court’s refusal to transfer venue. To succeed on a writ of mandamus, a petitioner must satisfy the reviewing court regarding the following questions:

  1. Are there other ways to obtain the desired relief?
  2. Is the reviewing court’s right to issue the writ “clear and indisputable”?
  3. Is the writ appropriate, given the circumstances?

The Fifth Circuit focused on the second question, its right to issue the writ. In the Fifth Circuit, the 2008 en banc In re Volkswagen case mandates an eight-factor test that a district court must consider in deciding a § 1404 transfer motion. No one factor is dispositive, and the Fifth Circuit has cautioned against tallying the yes/no results or denying transfer just because most factors are neutral. Unsurprisingly, in the 15 years since Volkswagen, district courts applying these factors have reached inconsistent results. Even the Fifth Circuit has reached “conflicting outcomes” when reviewing these cases. The Fifth Circuit therefore took the opportunity to address each factor.

The Fifth Circuit found that two factors weighed in favor of transfer:

  • The relative ease of access to sources of proof
  • The cost of attendance of willing witnesses

Regarding ease of access to proof, the Fifth Circuit clarified that factfinders analyze “relative ease of access, not absolute ease of access” to documents and other physical evidence. The district court had determined that this factor was neutral, given that most documentation was electronic. The Fifth Circuit disagreed, explaining that while the source code was electronically stored, it was protected by a high level of security clearance. Only certain TikTok employees based in California and China were able to access the code. Using the relative metric, [...]

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Just How Similar Must Competing Marks Be to Survive Dismissal?

by | Oct 5, 2023 |

After a de novo review, the US Court of Appeals for the Sixth Circuit affirmed in part and reversed in part a district court’s motion to dismiss, finding the competing marks sufficiently similar to avoid dismissal, and the attorneys’ fee award. Bliss Collection, LLC v. Latham Companies, LLC, Case Nos. 21-5723; -5361 (6th Cir. Sept 21, 2023) (Mathis, Bush, JJ.) (Larsen, J., dissenting).

This case between Bliss and Latham was the latest installment in a series of cases between the children’s clothing companies after a Bliss founder left to start Latham as a competitor company. Here, Bliss sued Latham for infringement of three trademarks for Bliss’s stylized lowercase “b” logo, appearing as if stitched out in thread. Bliss sued for federal copyright infringement, federal trademark infringement, federal trade dress infringement, federal false designation of origin and misappropriation of source, federal unfair competition, trademark under Kentucky law and unfair competition under Kentucky law.

The competing marks are depicted below:

Latham moved to dismiss, and the district court dismissed the federal copyright and trade dress claims. The district court did not initially dismiss the remaining claims, but later did so after a motion for reconsideration. The district court determined that Latham was not entitled to attorneys’ fees because the case was not exceptional, and Bliss had brought the suit in good faith. Bliss appealed the federal trademark infringement, federal trade dress infringement and trademark infringement under Kentucky common law only.

The Sixth Circuit focused its analysis on whether the amended complaint properly alleged that Latham’s logo was a use of Bliss’s trademark. The Court noted that dismissal was not warranted for anything but the most extreme cases, concluded that this was not such a case and reversed.

The Sixth Circuit found that Latham used the accused mark “in a trademark way” (i.e., to identify goods). Then, weighing the Frisch factors to determine likelihood of confusion between the marks, the Court found that the similarity between the marks and their “impression” favored Bliss despite the fact “that the logos share no words or homophones.” Overall, the Court found that five of the eight factors favored Bliss and that two were neutral. Only the likelihood of purchaser care factor was found to favor Latham. The Court thus found that Bliss had plausibly alleged a likelihood of confusion and that its complaint stated a federal trademark infringement claim. Applying the same logic to the state trademark claims, the Court also reversed the dismissal of those claims.

The Sixth Circuit affirmed the dismissal of the trade dress claim, however, because Bliss failed in its affirmative duty to plead facts in support of nonfunctional trade dress.

Turning to the attorneys’ fee award, the Sixth Circuit found that the mere fact that Bliss sued Latham was not sufficient to warrant an “exceptional” case finding in terms of an award for fees. The Court was also unpersuaded that the trade dress claim was worthy of a fee award [...]

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Rimini, Meeny, Miny, Moe: Ninth Circuit Affirms Most PI Violation Findings, Reverses Others

by | Sep 7, 2023 |

Addressing the boundaries of a permanent injunction awarded to a major software developer, the US Court of Appeals for the Ninth Circuit largely agreed that the defending developer was in contempt for violating the order but reversed on certain issues where the district court overextended the injunction. Oracle USA, Inc. v. Rimini St., Inc., Case No. 22-15188 (9th Cir. Aug. 24, 2023) (Bybee, Bumatay, JJ.; Bennett, Dist. J., sitting by designation).

Oracle creates enterprise software to carry out business functions. Oracle’s customers buy licenses to its products, which require updates and technical support. These necessary support services can be outsourced to third-party vendors, such as Rimini.

This case is the byproduct of a 13-year battle that Oracle initiated on the grounds that Rimini’s support services constituted copyright infringement. Rimini made generic versions of Oracle software on Rimini computers to develop updates and bug fixes (local hosting) and supported clients by using development environments created pursuant to a different client’s license (cross-use). After multiple appeals and remands, the case resulted in a permanent injunction prohibiting Rimini from reproducing or cross-using Oracle software unless pursuant to a customer license. Rimini revamped its support services and sought a declaratory judgment of noninfringement. After Oracle was permitted to conduct discovery into potential violations of the injunction, the district court held a bench trial on 10 possible violations. The district court found Rimini in contempt for five of the 10 alleged violations (issues 1–4 and 8). On two others (issues 7 and 9), the district court found no contempt but enjoined Rimini from continuing a specific copying practice. The district court sanctioned Rimini $630,000, calculated according to statutory damages available under the Copyright Act.

Rimini appealed each contempt finding, the injunction and the sanctions.

First, the Ninth Circuit addressed the five contempt findings, sorted into three groups:

  • Local hosting (issue 1)
  • Cross-use (issues 2–4)
  • Database copying (issue 8).

On issue 1, the Ninth Circuit affirmed. The lower court had found that Rimini received copyrighted files from its clients. Instead of following internal policies requiring them to quarantine or report these files, Rimini employees forwarded and saved them locally. Based on the plain language of the PI, this was a clear violation.

On issues 2–4, regarding cross-use, the Ninth Circuit also affirmed. Rimini used one client’s environment to modify and test updates that the client did not need and were intended for other clients. Since the injunction specifically prohibited cross-use, this was a violation. Rimini lodged multiple failed arguments, including that the injunction only prohibited cross-use in “generic” (non-client) environments, so its use of one client’s environment to support another client was allowed. The Court disagreed that the injunction was so specific.

On issue 8 (database copying), however, the Ninth Circuit reversed. The district court held Rimini in contempt for making copies of an Oracle database file on Rimini systems. When the client uploaded the file to Salesforce for Rimini to provide technical assistance, a copy was automatically created on Rimini’s system. Here, the [...]

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Change in Law Leading to Case Dismissal Doesn’t Preclude Attorneys’ Fees

by | Aug 24, 2023 |

Addressing the symmetrical fee-shifting provision of the Copyright Act and whether a prevailing defendant was entitled to fees even when the plaintiff moved to dismiss the case in response to a change in law, the US Court of Appeals for the Seventh Circuit reversed the district court’s denial of attorneys’ fees and remanded the case for reconsideration. Live Face on Web, LLC v. Cremation Society of Illinois, Inc., et al., Case No. 22-1641 (7th Cir. Aug. 11, 2023) (Scudder, Kirsch, Jackson-Akiwumi, JJ.)

The Cremation Society of Illinois and its co-defendants (collectively, CSI) licensed software from Live Face on Web. Live Face on Web then sued CSI for copyright infringement, seeking damages of more than 1,000 times the initial license fee. Five years later, while summary judgment was pending, Live Face on Web moved to dismiss the case, arguing that the Supreme Court’s 2021 decision in Google LLC v. Oracle America, Inc. “made the defendants’ fair-use defense insurmountable.” The district court granted the motion to dismiss, and CSI filed a motion to recover fees. The court denied the motion for fees, in part because “awarding fees would neither encourage nor discourage other defendants from maintaining valid defenses against copyright claims.” CSI appealed.

The Copyright Act allows prevailing parties to recover costs and fees. The Seventh Circuit examined the nonexclusive factors that guide this analysis:

  • The frivolousness of the lawsuit
  • The losing party’s motivation for bringing or defending the lawsuit
  • The objective unreasonableness of the losing party’s claims
  • The need to advance considerations of compensation and deterrence.

The Seventh Circuit noted that the last factor relates to the purpose of the fee-shifting provision: “[b]y encouraging parties to stand on their rights, the Act’s symmetrical fee-shifting provision advances its core purposes.” A successful copyright infringement litigant “encourages others to use the copyright system, fostering further innovation,” whereas a defendant “who successfully protects his rights to use things in the public domain necessarily gives others a license to do the same.” The Court stated that prevailing defendants in particular benefit from a strong presumption that they are entitled to recover attorneys’ fees: “Without an award of attorney’s fees, a defendant faces pressure to abandon his meritorious defenses and throw in the towel because the cost of vindicating his rights (his attorney’s fees) will exceed the private benefit he receives from succeeding (a nonexcludable right to continue doing what he was already doing).”

In this case, the district court reasoned that CSI’s success was due to the change in the law rather than meritorious defenses and, therefore, awarding fees to CSI would not advance or deter any conduct. The Seventh Circuit disagreed, stressing that Live Face on Web did not demonstrate that it would have prevailed but for the Supreme Court’s decision in Google. Moreover, the Court noted that CSI had raised multiple other defenses that were not impacted by Google. In any event, the Court reasoned, “[i]n litigation, both sides accept that as the case evolves, the law might, [...]

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A Textbook Example: Single Online Sale Does Not a Minimum Contact Make

by | Aug 10, 2023 |

The US Court of Appeals for the Eighth Circuit affirmed a district court’s grant of a motion to dismiss for lack of personal jurisdiction, finding that a single online sale did not establish minimum contacts to support personal jurisdiction. Kendall Hunt Publishing Company v. The Learning Tree Publishing Corporation, Case No. 22-1885 (8th Cir. July 24, 2023) (Smith, Wollman, Loken, JJ.)

Kendall Hunt Publishing filed a copyright infringement lawsuit against The Learning Tree Publishing in the District of Iowa. Before founding Learning Tree, Frank Forcier and John Coniglio worked remotely for Kendall Hunt from their homes in California. Both individuals traveled to Iowa for work, had regular contact with Iowa co-workers during their tenures and accessed files on an Iowa-based server. Nicholas Baiamonte teaches in California, where he wrote an online ethics textbook. Forcier negotiated with Baiamonte on behalf of Kendall Hunt from 2014 to 2016, and as a result, Baiamonte entered into contracts with Kendall Hunt to publish his textbook as Course Pack 4: Ethics. Baiamonte assigned publication rights to Kendall Hunt.

In 2019, Forcier and Coniglio incorporated Learning Tree in California to sell online textbooks to post-secondary students. Learning Tree targeted its advertising to California professors and educational institutions, as well as some limited sales to Colorado and Oklahoma. One of these textbooks was an ethics textbook that included some copyrighted portions of Baiamonte’s ethics textbook.

Kendall Hunt’s lawsuit alleged that a single purchase of the ethics textbook by an Iowa-based Kendall Hunt employee established the requisite minimum contacts with Iowa to support personal jurisdiction. Kendall Hunt also alleged that the prior contacts Forcier and Coniglio established with Iowa through their employment with Kendall Hunt should be attributed to Learning Tree. These contacts included Coniglio regularly traveling to Iowa from 1995 to 2006 and Forcier traveling to Iowa in 2005 and 2006. The district court rejected Kendall Hunt’s jurisdictional arguments and dismissed the complaint. Kendall Hunt appealed.

Reviewing de novo, the Eighth Circuit set out the factors to analyze Iowa’s long-arm statute, which is permissive up to the extent of due process. These factors include the nature and quality of Learning Tree’s contracts with Iowa, the quantity of the contacts, the relation of the cause of action to the contacts, the interest of the forum state and the convenience of the parties. They also include the additional factors for intentional torts: the intentionality of the acts; whether the contacts were uniquely or expressly aimed at the forum; and whether the contacts caused harm, or the defendant knew they were likely to cause harm, of which the majority occurred in the forum state.

The Eighth Circuit concluded that Learning Tree did not expressly aim at or target Iowa because it did not advertise in Iowa. The Court found that Kendall Hunt’s litigation-based purchase was the only sale, and the infringing conduct occurred in California. Based on this fact and the Court’s 2022 decision in Brothers & Sisters in Christ v. Zazzle, which was decided under similar facts, the Court [...]

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Burst That Bubble: Specific Knowledge Necessary to Prove Contributory Trademark Infringement

by and | Aug 3, 2023 |

The US Court of Appeals for the Ninth Circuit addressed contributory trademark infringement for the first time, finding that specific knowledge is required for liability to attach. Y.Y.G.M. SA, DBA Brandy Melville v. Redbubble, Inc., Case Nos. 21-56150; -56236 (9th Cir. July 24, 2023) (Callahan, Nelson, Thomas, JJ.)

Brandy Melville manufactures clothing and home goods and owns multiple trademarks, including the Brandy Melville Heart and LA Lightning marks. Redbubble is an online marketplace where individual artists upload designs for printing on demand on various articles and Redbubble handles payment, manufacturing and shipping.

In 2018, on two consecutive days, Brandy Melville notified Redbubble of infringing products on its marketplace. Redbubble removed them. One year later, Brandy Melville sued Redbubble for trademark infringement. The district court granted summary judgment to Redbubble on several of its claims. The case then went to trial on Brandy Melville’s contributory infringement and counterfeiting claims. The jury found Redbubble liable for contributory counterfeiting of the Brandy Melville Heart and LA Lightning marks, contributory infringement of those marks and contributory infringement of various unregistered trademarks. However, the court granted Redbubble judgment as a matter of law (JMOL) as to the contributory counterfeiting claim for the Heart mark. Brandy Melville moved for a permanent injunction, attorneys’ fees and prejudgment interest. The district court denied each of Brandy Melville’s motions.

Redbubble appealed the denial of JMOL on contributory infringement claims and the finding of willful contributory counterfeiting of the LA Lightning mark. Brandy Melville appealed the grant of JMOL on contributory counterfeiting of the Brandy Melville Heart mark and the denial of permanent injunction, attorneys’ fees and prejudgment interest.

Addressing Redbubble’s appeal, the Ninth Circuit considered contributory infringement and contributory counterfeiting together. The issue of the applicable standard in questions of contributory liability was novel for the Ninth Circuit. The Lanham Act provides a cause of action when a party intentionally induces trademark infringement or when the party continues to supply products to a third party, despite knowing or having reason to know that the third party is engaging in trademark infringement. This case dealt with the latter.

In other contexts, the Ninth Circuit has applied the “knows or has reason to know” standard as satisfying the willful blindness (in lieu of actual knowledge) element. Willful blindness requires a subjective belief that infringement is likely occurring and deliberate actions were taken to avoid knowledge of that infringement. Redbubble argued that willful blindness requires specific knowledge, while Brandy Melville argued that there is a duty to take reasonable corrective action once a party obtains general knowledge of infringement. The Court noted that for contributory copyright infringement, specific knowledge is not required. In keeping with its sister circuits, the Court held that “willful blindness for contributory trademark liability requires the defendant to have specific knowledge of infringers or instances of infringement.” The Court, therefore, vacated and remanded for the district court to reconsider Redbubble’s JMOL motion under this standard for contributory trademark infringement.

The Ninth Circuit next considered Brandy Melville’s appeal, beginning [...]

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Serving a Perfect 10: No Protection for Embedding

by and | Jul 27, 2023 |

The US Court of Appeals for the Ninth Circuit found that a photo- and video-sharing social networking service could not be liable for secondary copyright infringement because embedding a photo does not “display a copy” of the underlying image. Hunley v. Instagram, LLC, Case No. 22-15293 (9th Cir. July 17, 2023) (Bybee, Bumatay, Bennett, JJ.)

Embedding is a method of displaying images on a website by directing a browser to retrieve an image from the host server. Instead of hosting an image file on a home server, a website merely pulls the image, along with any other content, from an external server and displays it.

Alexis Hunley and Matthew Brauer are photographers who brought a class action lawsuit against Instagram on behalf of copyright owners whose work was “caused to be displayed via Instagram’s embedding tool on a third party website without the copyright owner’s consent.” Hunley alleged that Buzzfeed News and Time embedded Hunley’s Instagram posts (copyrighted photos and videos) within news articles. Hunley also alleged that Instagram’s embedding tool violated her exclusive display right under the Copyright Act by enabling third-party websites to display copyrighted photos posted to Instagram.

Hunley’s argument was unsuccessful, and the district court granted Instagram’s motion to dismiss. The district court determined that the Ninth Circuit’s 2007 holding in Perfect 10 precluded relief to Hunley. The court explained that under the “server test” set forth in Perfect 10, embedding websites that do not store an image or video does not “communicate a copy” of the image or video and therefore does not violate the copyright owner’s exclusive display right. The court explained that because Buzzfeed News and Time do not store images and videos, they do not “fix” the copyrighted work in any “tangible medium of express” (a copy), and therefore when they embed the images and videos on a website, they are not displaying “copies” of the copyrighted work. Hunley appealed.

Hunley argued that Perfect 10 was inconsistent with the Copyright Act, but the Ninth Circuit declined to consider the argument in detail as the proper procedure was to seek a rehearing en banc. While the Court was sympathetic to policy arguments advanced by Hunley (as well as other amici), the Court stated it was not its place to create a policy solution. Hunley’s final major argument questioned the validity of Perfect 10 in light of the Supreme Court’s 2014 decision in American Broadcasting Co. v. Aereo, but this too was rejected. The Ninth Circuit failed to see sufficient similarities between the performance and display rights, holding them as two distinct rights with few parallels.

Applying the server test to the facts presented, the Ninth Circuit found that Instagram could not be found secondarily liable for displaying images on third-party sites. Since Buzzfeed News and Time embedded the images and no copy was stored, they could not be liable for direct infringement. Because there was no direct infringement, there could be no secondary infringement, and the Court found that the district court properly [...]

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The Game of Life: Winner Gets Everything Except Attorneys’ Fees

by | Jul 13, 2023 |

The US Court of Appeals for the First Circuit agreed with the trial court regarding the reasonableness of the plaintiff’s legal positions and found that the trial court did not abuse its discretion in denying the defendants, as the prevailing party, attorneys’ fees. The First Circuit determined that the positions advanced by the unsuccessful plaintiffs were not objectively unreasonable. Markham Concepts, Inc. v. Hasbro, Inc., Case Nos. 19-1927; 21-1957; -1958 (1st Cir. June 22, 2023) (Kayatta, Lipez, Thompson, JJ.)

The underlying case involved a copyright action concerning ownership rights to The Game of Life, a board game that has been widely popular since its launch in 1960. The Game of Life became the center of a long-standing dispute between its creators, Reuben Klamer and Bill Markham. Klamer, a toy developer, conceived the initial idea for the game and enlisted Markham to design and create the game prototype. Markham believed he deserved greater recognition for his contribution and felt the royalty he received was unfairly low.

In its previous ruling on the merits, the First Circuit affirmed the district court’s decision in favor of the Hasbro defendants (including Klamer). The Hasbro defendants then sought attorneys’ fees, which the district court denied. Hasbro appealed and moved for appellate attorneys’ fees.

Although both the district court and the First Circuit examined various factors, such as Markham’s motivations and the need for compensation or deterrence, the key factor for both courts in determining whether to award legal fees hinged on the reasonableness of Markham’s litigation arguments.

The merits of the underlying case revolved around the termination right provided by the Copyright Act of 1976 (1976 Act), which allows authors to terminate copyright grants after a certain period and thereby disentangle themselves from agreements made before the true value of their work became apparent. This right does not apply to works made for hire. In this instance, the issue of whether The Game of Life qualified as a work made for hire was determined under the Copyright Act of 1909 (1909 Act), as the game was created long before the 1976 Act took effect. Under the 1909 Act, Markham had to meet the “instance and expense” test, which treats contractors as employees of the party commissioning the work, thereby presuming copyright ownership in the latter. The district court held that The Game of Life was a work for hire because it was created at Klamer’s instance and expense.

Markham’s primary argument relied on the 1989 Supreme Court decision in Reid, which interpreted “employee” for purposes of the work-for-hire test as being defined according to “the general common law of agency.” Although Markham acknowledged that Reid was directed to the 1976 Act, he contended that the logic of Reid should extend to the 1909 Act, thereby nullifying the “instance and expense” test in favor of the general common law of agency.

Four years after the Supreme Court’s decision in Reid, however, the First Circuit applied the “instance and expense” test in Forward to a work covered [...]

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