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Second Circuit: Supreme Court Google Precedent Doesn’t Alter Copyright Law’s Fair Use Analysis

by Sarah Bro | Sep 2, 2021 | Copyrights

Addressing fair use as an affirmative defense to copyright infringement, the US Court of Appeals for the Second Circuit amended its recent opinion, reversing a district court’s summary judgment in favor of fair use. The Court did not change its original judgment but took the opportunity to address the recent Supreme Court of the United States precedent in Google v. Oracle. The Andy Warhol Foundation for the Visual Arts, Inc. v. Lynn Goldsmith, Lynn Goldsmith, Ltd., Docket No. 19-2420-cv (2d Cir., Aug. 24, 2021) (Lynch, J.) (Jacobs, J., concurring).

Lynn Goldsmith and Lynn Goldsmith, Ltd. (collectively, LGL) appealed from a district court judgment that granted summary judgment to The Andy Warhol Foundation for the Visual Arts, Inc. (AWF) on its complaint for a declaratory judgment of fair use and dismissing defendants-appellants’ counterclaim for copyright infringement. The Second Circuit reversed and remanded for further proceedings.

In 1984, LGL’s agency licensed her 1981 photograph of Prince to Vanity Fair for use as an artist reference for creating a rendering of Prince to accompany Vanity Fair‘s profile of the artist. What LGL did not learn until more than 30 years later, shortly after Prince’s untimely death, was that the artist commissioned by Vanity Fair to create the Prince drawing was Andy Warhol and that Warhol had used the photograph to create an additional 15 silkscreen prints and illustrations, known as the Prince Series. In 2017, LGL notified AWF, as the successor to Warhol’s copyright in the Prince Series, of her claims of copyright infringement. AWF responded with a lawsuit seeking a declaratory judgment that the Prince Series works were non-infringing, or, in the alternative, qualified as fair use of LGL’s photograph. LGL countersued for infringement. Relying on the Second Circuit’s 2013 holding in the copyright case Cariou v. Prince, the district court granted summary judgment to AWF, agreeing with its assertion of fair use and considering the Warhol work to be “transformative” of the original.

LGL’s appeal required the Second Circuit to consider the four fair use factors under §107 of the Copyright Act:

The purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes
The nature of the copyrighted work
The amount and substantiality of the portion used in relation to the copyrighted work as a whole
The effect of the use upon the potential market for, or value of, the copyrighted work.

In its March 2021 opinion, the Second Circuit rejected AWF’s fair use defense, concluding that the Prince Series was not transformative and substantially similar to LGL’s original photograph.

After the Second Circuit’s initial disposition of the appeal, the Supreme Court issued its decision in Google LLC v. Oracle America, Inc., which discussed the four fair use factors as applied to a computer programming language and found that Google’s copying of certain Oracle application programming interfaces (APIs) “to create new products . . . [and] expand the use [...]

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Second Circuit Rejects FTC Challenge of 1-800 Contacts, Highlighting Procompetitive Trademark Policy

by Marisa (Reese) E. Poncia and McDermott Will & Schulte | Jun 24, 2021 | Antitrust, Trademarks

The US Court of Appeals for the Second Circuit vacated a final order of the Federal Trade Commission (FTC), which had found that agreements to refrain from bidding on keyword search terms for internet advertisements violated Section 5 of the FTC Act. The Court made clear that although trademark agreements are not necessarily immune from antitrust scrutiny, they are entitled to significant deference. 1-800 Contacts, Inc. v. Federal Trade Commission, Case No. 18-3848 (2d Cir. June 11, 2021) (Per Curium). The Second Circuit held that the FTC applied an incorrect analytical framework and incorrectly concluded that the agreements were an unfair method of competition under the FTC Act.

1-800 Contacts and its competitors advertise online through search advertising. They bid on search engine keywords, which help display their websites in response to consumer searches. They also bid on negative keywords, which prevent their ads from being displayed when consumers search for specified terms.

Between 2004 and 2013, 1-800 Contacts entered into a series of settlement agreements to resolve trademark disputes with competitors, as well as one commercial agreement with a competitor, all of which included terms prohibiting the parties from using each other’s trademarks, URLs and similar terms as search advertising keywords. The agreements also required the parties to use negative keywords so that a search including one party’s trademarks would not trigger a display of the other party’s ads. 1-800 Contacts enforced these agreements when it believed them to be breached.

The FTC challenged the agreements, alleging that they “unreasonably restrain truthful, non-misleading advertising as well as price competition in search advertising auctions,” violating Section 5 of the FTC Act, 15 U.S.C. § 45. An administrative law judge (ALJ) subsequently found the agreements to violate Section 5. 1-800 Contacts appealed to the full Commission, which affirmed the ALJ’s decision. 1-800 Contacts appealed.

The Second Circuit vacated the FTC’s decision but noted that the FTC was correct to reject 1-800 Contacts’ argument that trademark settlement agreements are necessarily immune from antitrust scrutiny. Citing the Supreme Court decision in Actavis, the Second Circuit held, “the mere fact that an agreement implicates intellectual property rights does not immunize an agreement from antitrust attack.”

The Second Circuit disagreed with the FTC’s specific antitrust analysis, however. The Court held that the FTC erred by applying an “inherently suspect” analysis—also known as a “quick-look” analysis—rather than the rule of reason. The Court focused on the fact that “the restraints at issue here could plausibly be thought to have a net procompetitive effect because they are derived from trademark settlement agreements,” and the fact that the FTC acknowledged as much by finding that the company’s justifications were “cognizable and, at least, facially plausible.” The Second Circuit also noted that courts have limited experience with these types of agreements. The Court concluded that “[w]hen, as here, not only are there cognizable procompetitive justifications but also the type of restraint has not been widely condemned in our judicial experience . . . . [w]e are bound . . [...]

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Street Art Street Smarts: Second Circuit Applies VARA, Affirms Moral Rights

by Sarah Bro | Mar 12, 2020 | Copyrights

The US Court of Appeals for the Second Circuit affirmed that plaintiffs-appellees’ temporary artwork had achieved appropriate stature to be protected by the rarely invoked Visual Artists Rights Act of 1990 (VARA), and that an award of statutory damages was warranted for defendants-appellants’ willful unlawful actions. Jonathan Cohen, et al. v. G&M Realty L.P., et al., Case Nos. 18-498, -538 (2nd Cir. Feb. 20, 2020) (Parker, J).

VARA established a structure of moral rights that gives the author of a work of visual art the right to “prevent any destruction of a work of recognized stature,” and provides that “any intentional or grossly negligent destruction of that work is a violation” of VARA. The act also contains specific language prohibiting the removal or destruction of artwork incorporated into a building absent certain written waivers or notice provisions, which are detailed in the statute.

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