However, under Copyright Act Section 501, a non-exclusive licensee may not bring an action for copyright infringement. See, e.g.,  HyperQuest, Inc. v. N’Site Solutions, Inc., 632 F.3d 377 (7th Cir. Jan. 19, 2011). Accordingly, a Web site provider that seeks to litigate based on an improper use of user-generated content may need more. They may in fact need an exclusive license or an actual transfer of ownership in the underlying copyright.  The question is, can one obtain an exclusive license or assignment of copyright through online terms of use?

Precisely this scenario is presented in a current dispute between a real estate multiple listing service and an online real estate information aggregator over the copying of photographs and listing information. The service provider is asserting claims with respect to user-generated content as a copyright owner, based upon an agreement presented by the provider to its users when they upload photographs to the provider’s database.

Metropolitan Regional Information Systems, Inc. (MRIS), the plaintiff, operates a multiple listing service that serves licensed real estate brokers and agents. Brokers and agents who enter into a subscriber agreement with MRIS can upload their listing information, including photographs of properties, to the MRIS site, and then display those and other listings on their own Web sites.

The defendant, American Home Realty, Inc. (AHR), is an online service provider that aggregates real property listing information on its www.neighborcity.com site. According to AHR, the information that it presents comes from a variety of public domain and other sources, including the MRIS online database.

In March 2012, MRIS brought suit against AHR in federal court, asserting that material from its online listings was included on the AHR site without authorization, and, therefore, that AHR infringed MRIS copyright rights in those materials. According to an affidavit submitted in support of its motion for a preliminary injunction, MRIS relies on the following provision in its agreement with its users as the basis for its claim of ownership of the copyright in uploaded photographs:

All images submitted to the MRIS Service become the exclusive property of Metropolitan Regional Information Systems, Inc. (MRIS). By submitting an image, you hereby irrevocably assign (and agree to assign) to MRIS, free and clear of any restrictions or encumbrances, all of your rights, title and interest in and to the image submitted. This assignment includes, without limitation, all worldwide copyrights in and to the image, and the right to sue for past and future infringement.

The court granted a preliminary injunction against AHR in August 2012. Metropolitan Regional Information Systems, Inc. v. American Home Realty Network, Inc., 2012 U.S. Dist. LEXIS 121352 (D. Md. Aug. 24, 2012). In November 2012, the court reiterated its ruling while narrowing the previous scope of the injunction to cover only photographs.

AHR argued before the District Court in August that the MRIS agreement does not comply with Section 204(a) of the Copyright Act, which provides that, except where copyright ownership is transferred by operation of law, the transfer “is not valid unless an instrument of conveyance, or a note or memorandum of the transfer, is in writing and signed by the owner of the rights conveyed or such owner’s duly authorized agent.” AHR argued that Section 204(a) has not been satisfied because, among other things, when a user uploads an image to the MRIS database, “no document is signed” and the assignor is not specified. Further, it is not clear whether the purported assignor has any rights to assign, and if so, what the basis is for those rights. See Reply Memorandum of Defendant American Home Realty Network, Inc.’s Rule 12(b) Motion to Dismiss, Metropolitan Regional Information Systems, Inc. v. American Home Realty Network, Inc., No. 12-cv-954(D. Md. filed June 15, 2012), p. 4.

In its August ruling, the district court rejected AHR’s argument, finding that the “MRIS TOU constitutes credible evidence that MRIS’s users intended to assign their copyrights to MRIS through the electronic submissions of photographs, which would satisfy the relevant provisions of” the federal Electronic Signatures in Global and National Commerce Act, 15 U.S.C. §§ 7001 et seq. (“E-SIGN”).

Following the district court’s August ruling granting the preliminary injunction, AHR filed an interlocutory appeal in the Fourth Circuit challenging the order, and that appeal currently is pending in the Fourth Circuit. As part of that challenge, AHR asserts that Copyright Section 204(a) requires “a signed writing on paper for a valid copyright assignment.”  Supplemental Opening Brief of Appellant, Metropolitan Regional Information Systems Inc. v. American Home Realty Network, Inc., No. 12-1202 (4th Cir. Dec. 7, 2012) (emphasis added). The assertion that a signed writing on paper is required is predicated on AHR’s analysis of Copyright Office regulations concerning the recordation of copyright assignments.

AHR further argues that federal E-SIGN does not validate the purportedly defective clickwrap assignments at issue, because the lower court failed to make any factual findings that MRIS’s clickwrap process satisfies E-SIGN’s formal requirements. Specifically, AHR asserts that the district court made no finding that there was any “electronic sound, symbol or process that was “attached to or logically associated with a contract” as required by E-SIGN.

We await the Fourth Circuit’s guidance on this issue.

Why is this an important issue? For many Web site owners, a transfer of copyright ownership is not necessary, as a broad license grant from the user is sufficient to provide the rights needed for business purposes.  However, as illustrated in the MRIS case, business-to-business sites are often engaged in struggles with competitive sites that scrape, spider or otherwise use content (including user-generated content) without permission.  To the extent a business-to-business site uses user-generated content, the assertion of a copyright claim against unauthorized users of that content can be a valuable tool in those struggles, and can be a powerful argument in any legal action that ensures.

If this general strategy sounds familiar, perhaps you have read our recent post on the Oracle v. Google dispute over Google’s use of Oracle’s Java technology in the Android operating system. In that case, the court ruled that Google had done it right, and that the rules and functionality of the Java technology that Google copied were not subject to copyright.

But in Tetris Holding, LLC v. Xio Interactive, Inc., 2012 U.S. Dist. LEXIS 74463 (D.N.J. May 30, 2012), Judge Freda Wolfson ruled that Xio, Ms. Golden’s development company, got it wrong. By wholesale copying not only the rules and functionality of the original Tetris game but also its copyrightable expression, Xio’s“Mino” app crossed the line into copyright infringement.

The key to the ruling in Tetris Holding v. Xio is the court’s deconstruction of the elements of the Tetris game into protectable and non-protectable elements. In doing so, Judge Wolfson referenced the same universe of software copyright rulings relied upon by Judge Alsup in Oracle v. Google.

Based upon these precedents, Xio argued in its moving papers that: “where a feature of a videogame is dictated by functional considerations, regardless of whether there may be a number of different ways to implement that feature’s functionality, copyright does not protect that feature.” Judge Wolfson rejected that theory as incorrect as a matter of law and logic:

“If an expressive feature is dictated by functional considerations then there cannot be a number of ways to implement it. Rather, one’s original expression is protected by copyright—even if that expression concerns an idea, rule, function, or something similar—unless it is so inseparable from the underlying idea that there are no or very few other ways of expressing it.”

The court also rejected Xio’s argument that the Mino game’s visual elements fell under the doctrines of merger and scenes a faire. The court pointed to testimony of Xio’s own expert, that, due to the fanciful nature of the game, there are an almost unlimited number of ways to design the game’s boards, pieces, movement and rotation.

Summary judgment was granted in favor of Tetris on its copyright infringement and trade dress claims.

And so, for Mino, it’s game over.

As appropriate to a dispute that presiding judge William Alsup referred to as “the World Series of technology litigation,” the API ruling is world-class.  The opinion will quickly make its way into technology law textbooks, not only for the clarity of the court’s discussion of how the Java programming language functions, but for its mini-treatise on software copyright law.

Whether the ruling will survive the already announced appeal is another issue, of course. But it should be noted that the due to the patent issues in the case, the appeal will be heard in the Federal Circuit, where familiarity with complex technology issues may, in general, be assumed.

That Judge Alsup’s dissection of the Java programming environment would be both extremely granular and technologically astute was no surprise to anyone who followed the trial. The court’s questioning of key witnesses, coupled with a series of technically detailed questions to the litigants and numerous rounds of briefs on software copyright issues, showed a judge who was deep into the details of software programming.

But the dramatic reveal of Judge Alsup’s technology chops came well into the trial, in an off-hand comment. In the course of debunking Oracle’s argument that Google had gained an advantage in copying a small amount of code into the Android operating system (A function called “rangeCheck,” not the APIs that are central to the dispute), Judge Alsup commented: “I have done, and still do, a significant amount of programming in other languages. I’ve written blocks of code like rangeCheck a hundred times before. I could do it, you could do it.”

A judge who codes.  Not your ordinary federal district court judge.

Here are some of the high points of the opinion.

• As noted above, the court’s explanation of the functioning of the Java computer programming language was a tour de force. If you don’t know what an API is when you start reading the opinion, you’ll know what it is when you’re done. One former computer science instructor, commenting on the ruling, remarked that Judge Alsup had “explained the technical basis of his ruling more clearly than many a CompSci professor could do.”
• The technical explanation was a necessary precedent to the deconstruction of the Java API into individual, potentially protectable elements, each of which required separate analysis under copyright law. Four separate elements were identified and analyzed: The names of the methods, classes and packages in the API; the structure, sequence and organization of these elements; the method specifications; and the implementation of the methods. This iteration of the Second Circuit’s “abstraction, filtration comparison” test is likely to be the roadmap for analyzing similar software copyright issues in future cases.
• Oracle’s copyright claim in the names of the methods, classes and packages failed under the merger doctrine and the short phrases rule.  Similarly, the copyright claim in the method specifications failed because the specifications in the Android API were required by the rules of the Java programming language to be identical to those in the Java API in order for the Android API to function with the Java language. Accordingly, the court held that the merger doctrine barred Oracle’s copyright claim.
• Analysis of the tension between copyright law and patent law was central to the claims in the structure, sequence and organization of the API. The court relied on Copyright Act Section 102(b), which precludes copyright protection of an idea, procedure, process, system, method of operation or concept. The court held that allowing Oracle to claim copyright in functional aspects of the API, even though they were the product of a creative endeavor, would bypass the 20 year limitation on patent claims.
• The court cited commentary suggesting that broader patent protection for software has lessened the need for copyright protection for potentially patentable elements such as the structure, sequence and organization of programs. (One may wonder how that comment will go down in the Federal Circuit, which has just had the Supreme Court remand back to it a software patent case for reconsideration of its breadth.)
• The court recognized Oracle’s claim in the implementation of the methods embodied in the API. However, it was conceded that these elements were not copied, that Google had written its own implementations of the Java API.
• The court did not mention the recent ruling of the European Court of Justice in SAS Institute Inc. v World Programming Ltd. Case C-406/10 (May 2, 2012) (See prior blog post.)  This was surprising, as the court requested comment on the ruling, and some reference to its relevance, or lack of relevance, to the Oracle v. Google dispute might have been expected.

Note also that in a separate ruling, Judge Alsup rejected Google’s equitable defenses of implied license and waiver. The court found that the failure of Sun (Oracle’s predecessor in interest) to take action against Google when it learned of its use of the Java technology was mere inaction, not the affirmative grant of permission necessary for an implied license, nor the overt act indicating an intention to abandon a known right necessary to establish a waiver. The court reserved decision on the defenses of equitable estoppel and laches in the event of a remand.

Given the certain appeal, this is not the last we will hear of this important case. Whether the appellate judges agree with Judge Alsup or not, he has laid out the issues with a remarkable clarity that will aid them in their review.

The dispute in SAS Institute Inc. v World Programming Ltd. Case C-406/10 (May 2, 2012) involves the SAS Language that was developed by SAS for scripts, or application programs, that are run in conjunction with SAS’s Base SAS database program to extract data. Using commercially available SAS products, World Programming developed alternative software capable of running scripts originally written in the SAS language.

SAS brought an action against World Programming in the UK, alleging that World Programming infringed its copyrights by copying SAS manuals and other components of the SAS software. Central to the case is certain provisions of the European software copyright directive, Council Directive 91/250/EEC of 14 May 1991 on the legal protection of computer programs (OJ 1991 L 122, p. 42). The UK High Court referred issues concerning the scope of that directive to the EU Court of Justice for resolution.

The software copyright directive extends to “expression in any form of a computer program,” but it excludes “ideas and principles which underlie any element of a computer program, including those which underlie its interfaces.” The Court of Justice concluded that World Programming’s activities for the most part fall on the non-copyright side of this equation, because “neither the functionality of a computer program nor the programming language and the format of data files used in a computer program in order to exploit certain of its functions constitute a form of expression of that program.”

The Court of Justice also ruled that a licensee of a computer program may use reverse engineering techniques to determine the program’s principles and functionality. The court referred the question of infringement resulting from the copying of the SAS manuals back to the UK court for decision under UK law, ruling that under the software copyright directive such copying “is capable of constituting an infringement.”

The entire case will now be returned to the UK High Court for decision. This ruling by the EU Court of Justice is interpretive only; it is up to the national court to implement it.

The SAS Institute v. Word Programming dispute is well-known to the parties in Oracle, Inc. v. Google, Inc., who have disagreed on its potential relevance even before the court’s May 3 order asking them for comment. See, e.g., Google, Inc.’s Copyright Liability Trial Brief (Apr. 12, 2012) and Oracle’s Brief Regarding Copyright Issues (Apr. 12, 2012).

We should learn very soon whether the result in Oracle, Inc. v. Google, Inc., will be consistent with this latest development in EU intellectual property law.

This of course generates yet a new series of online copyright issues. Although Pinterest can drive traffic to the third-party sites, and some content owners are happy about that, the love of Pinterest is not universal. Many believe that traffic coming from Pinterest as a result of their images being pinned on the site is minimal. One commentator has referred to Pinterest as “the new Napster” and suggested that 99% of the “pins” on the site are in violation of the site’s Terms of Service (requiring the user to have right to “pin” an image.)  

Pinterest announced in February that it had implemented a technological measure to address copyright concerns, the “nopin” tag. The code, when implemented on a content-owner’s Web site, blocks attempts to pin that site’s images via inline linking. When a Pinterest user attempts to pin an image from the target site, the code generates a message informing the Pinterest user that the target site doesn’t allowing pinning. (Note that the “nopin” code does not inhibit the ability of a Pinterest user to download an image from a target site and then upload the image to Pinterest as the user’s own image.)

The availability of the “nopin” tag raises many legal issues. Does a site have an obligation to use the “nopin” tag to prevent pinning of its images?  Does the failure to use the tag constitute the grant of an implied license to pin?  What role do the restrictions on use found in the target site’s terms and conditions play in all of this?  Could the failure to deploy a “nopin” tag impair a copyright holder’s ability to utilize the DMCA takedown procedure to remove infringing images from Pinterest?

Although many copyright holders would quickly say “no, of course I do not have an obligation to use the nopin tag,” it is interesting to look at a similar issue that has been litigated in the context of the “robots.txt” protocol. The robots.txt protocol allows site owners to indicate whether, and to what extent, they consent to having their sites crawled and cached by Web crawlers and spiders that are utilized not only by major search engines like Google and Yahoo! but also by price comparison sites or even the competitors of the crawled sites.

In Field v. Google, Inc., 412 F. Supp 2d. 1106 (D. Nev. 2006), a claim of copyright infringement stemming from search engine crawling and caching was rejected based upon the lack of a robots.txt file on the copyright owner’s site. The court concluded that the content owner’s knowing failure to deploy a robots.txt file that said “no” to crawling and caching had given search engines an implied license to crawl and cache. It should be noted that the court believed the plaintiff had deliberately invited the crawling and caching and was acting in less than good faith.  However, a similar result was reached on more balanced facts in Parker v. Yahoo!, Inc., 2008 U.S. Dist. LEXIS 74512 (E.D. Pa. Sept. 26, 2008). In neither of these cases did the courts consider the crawled sites’ terms of use, if any.

Is the failure to use robots.txt a grant of an implied license to spider and cache? Could the failure to deploy the nopin tag similarly be considered the grant of an implied license?  If so, when the non-deploying copyright holder sends a DMCA takedown notice, could Pinterest or the user argue that they were acting pursuant to an implied license (and thus the notice was improper)?  To the extent that the terms of use prohibit commercial use or linking, would that be viewed as superseded by the site’s failure to deploy the “nopin” tag?

There is a very significant difference between Pinterest’s “nopin” code and the robots.txt protocol, at least at the present time. The robots.txt protocol is a long-established and widely accepted standard acknowledged by Web professionals. The courts in Field v. Google and Parker v. Yahoo! both relied on the widespread acceptance of the robots.txt protocol in their rulings. The Pinterest “nopin” code, however, is being promulgated unilaterally by a single Web site operator with an obvious interest in putting the burden on content owners to take action to protect their content. But given the widespread popularity of Pinterest, and the inevitable launch of numerous copycat sites with similar nopin-type codes, this type of code has the potential to develop into a de facto standard for controlling content sharing.

The interplay between codes like “nopin,” the robots.txt precedent, the doctrine of implied licensing, the DMCA and the role of Web site terms of use, is likely to receive increased legal attention and could be the basis of some interesting litigation in the near future.

The case is important because the issue of UNIX copyright ownership underlies the copyright litigation campaign that SCO commented in 2003, targeting the LINUX open source operating system. When SCO filed multiple lawsuits claiming that the LINUX OS infringed its UNIX copyrights, it raised concerns that users of LINUX could be held liable for infringement, and subject to the payment of royalties to SCO. The ruling that SCO does not own the copyrights that it asserted in those litigations puts an end to that threat.

Despite the concerns raised in 2003 that the threat of copyright litigation and royalty payments would stall not only the adoption of the LINUX OS but also other open source software, users appeared to factor in the threat of future liability. Both LINUX and other open source software projects marched on as the SCO litigations ground on.

Last week, the LINUX OS turned 20. As this CNN article observes, LINUX is now invisible and ubiquitous. While its share of the desktop operating system remains miniscule, LINUX code is present in 30% and 43% of tablets and smartphones, respectively, as part of the Android operating system.  And LINUX code is present in the firmware of countless other devices, and is pervasive in enterprise data systems.

As for open source generally, as long as we’re keeping score, it’s a good time to note that the Apple operating system is based on open source code as well. In fact, it has the same roots as the code at issue in SCO v. Novell – the earliest versions of the UNIX operating system.

Notwithstanding that SCO may seek en banc review and even file a petition for certiorari to the U.S. Supreme Court (it’s done that before), the SCO v. Novell case appears to be, finally, over. Ultimately, the related SCO litigations, including its copyright infringement case against IBM, will fold up as well.

There are a few lessons for technology lawyers in the SCO v. Novell litigation, which you can read about in our prior blog post.

The SCO v. Novell endgame doesn’t seem to have gotten a lot of press, at least so far. Perhaps this is because attention has already turned to the next big “open source” battle – the complex web of litigations involving Google’s Android operating system. This time, the battle isn’t for the desktop, it’s for mobile market share.

There are a few differences between the bench ruling, as reflected in news reports, and the opinion as issued. The opinion includes a number of conclusions that are likely to be controversial, including the following:

• The defandant’s re-posting of an entire news article to educate the public is transformative from the current copyright holder’s use, which is "nothing more than litigation-driven."  Thus, the court said, the defendant’s use “does not constitute a substitution for plaintiff’s use.”  (The court did note, however, that the former copyright owner did use the article for news-reporting purposes.)
• The purpose of the use was non-commercial because the defendant was an educational, non-profit organization.
• The purpose of the news article is informational and thus the work entitled to less copyright protection than a “creative work of entertainment.”
• The use of the entire article was reasonable because the purpose was to educate the public and the factual nature of the information made it "impracticable" to cut the article or edit it down.
• No market harm was demonstrated by the plaintiff.

Righthaven, LLC v. Jama and Center for Intercultural Organizing, 2:10-cv-01322-JCM -LRL (D. Nev. April 22, 2011).

*****  ORIGINAL POST ****

We recently wrote on the copyright enforcement lawsuits brought by Righthaven LLC, the intellectual property enforcement firm, and in particular, on a pending ruling on the issue of fair use in the Righthaven litigation against the Center for Intercultural Organizing (CIO).

On Friday, March 18, Judge James Mahan, who is presiding over Righthaven LLC v. CIO in the District of Nevada,  announced that he would dismiss Righthaven’s lawsuit on the grounds of fair use. The lawsuit involves the posting of an entire article from the Las Vegas Review-Journal on the organization’s Web site. According to a news article in the Las Vegas Sun, Judge Mahan indicated the following in a ruling from the bench:  

• that the CIO was using the article for educational purposes and not to raise money;   
• that the article was primarily factual as opposed to creative;  
• that its use did not harm to the market for the article.   
• that Righthaven was remiss for not notifying CIO in advance of the lawsuit.  
• that the copyright in the article, once transferred to Righthaven by the Las Vegas Review-Journal, was entitled to lesser protection under the Copyright Act.   
• that the use of the copyright in the article (presumably as the basis for a lawsuit) has a chilling effect on free speech and doesn’t advance the purposes of copyright. 

In response to the statement by Righthaven’s attorney that the company intended to appeal, the judge commented, according to the Las Vegas Sun article: "I realize this is going to be appealed. I tell litigators ‘that’s why God created San Francisco," (i.e., the location of the U.S. Court of Appeals for the Ninth Circuit.
 
See Steve Green, "Righthaven loses second fair use ruling over copyright lawsuits," (Las Vegas Sun, March 18, 2011), available here.
 

Righthaven LLC is an intellectual property enforcement firm that was formed by a group of copyright attorneys and Stephens Media, the publisher of the Law Vegas Review-Journal. The company has been making a name for itself; since early 2010, has brought two hundred copyright infringement suits in the District of Nevada alone against Web site owners, forum operators and bloggers alleged to have unauthorized copies of the Review-Journal’s articles on their sites. Recently, it has added other media company clients and expanded its enforcement efforts to other federal districts.
Righthaven is also drawing considerable fire from critics who have denounced the company as a copyright troll, and an attack dog. The criticism is directed at Righthaven’s business model.

The lawsuits target individuals and small, usually non-profit entities and other Web sites that have failed to take advantage of the DMCA safe harbor protection against liability for material posted by a third party. Righthaven makes no takedown demands prior to filing its complaints, which seek not only damages but transfer of the defendant’s domain name. The company then presses for a quick settlement.

So far, about half of the Righthaven lawsuits have settled, probably for the low four figures. Righthaven Lawsuits, a Web site that tracks the Righthaven litigation, estimates that Righthaven has taken in about $364,000 thus far.  But some Righthaven targets are fighting back, raising defenses such as copyright fair use and implied license, in several cases with the assistance of the Electronic Frontier Foundation.

Righthaven’s lawsuits in the District of Nevada have so far yielded two rulings on the copyright fair use defense and the doctrine of implied license, and may soon yield further rulings on those issues. These opinions should be noted by content owners. The opinions in Righthaven v. Klerks and Righthaven v. Realty One Group suggest a broad view of the fair use doctrine in the online context, and perhaps a potentially even broader view of the application of the doctrine of implied license.

Righthaven v. Klerks – Fair Use a  “Meritorious Defense”

Jan Klerks raised the defense of fair use after he learned from a newspaper reporter that Righthaven had brought an action against him and was about to obtain a default judgment. Klerks, the complaint alleged, was the registrant of a domain name at which an online forum was hosted; the article in question had been posted by a third party user of the forum. In Righthaven v. Klerks, in an opinion rendered on September 17, 2010, Judge Gloria Navarro agreed that Klerks’s fair use defense was "sufficiently meritorious" to warrant reopening the case.

Judge Navarro found that the use of the entire article weighed against a finding of fair use, but concluded that two of the other fair use factors weighed in favor of Klerks. Regarding the purpose and character of the use, Judge Navarro concluded that "it could be found" that the third-party user who posted a complete copy of the news article did so "for the non-commercial purpose of sharing information and not for making a profit for the reader or the site." Regarding the nature of the copyrighted work, the court found that the article was "primarily informational," and, therefore, favored a fair use finding. The court left for future consideration, as a question of fact, what effect the posting of the article had on the market for or value of the copyrighted work.

The Defense of Implied License

Judge Navarro also found that Klerks had made a plausible argument that his use fell under the doctrine of implied license, pointing to the fact that the newspaper publisher "encouraged people to save and share the article with others without restrictions, and permitted users to "right-click" and copy the article from its website." Judge Navarro found that Klerks had made a plausible argument that there was an implied license "especially in light of the established and accepted custom of users freely and openly sharing certain information posted on the Internet."

Righthaven v. Realty One Group – Fair Use as a Matter of Law

Righthaven sued Realty One Group and its agent Michael Nelson, who maintained a blog on which he posted an eight-sentence excerpt from a thirty-sentence Las Vegas Review-Journal article, along with a link to the source. On October 19, in Righthaven v. Realty One Group, Judge Larry Hicks dismissed the action as to Nelson, finding that the his use of the article was fair as a matter of law.

Judge Hicks found that while Nelson’s blog was both educational and commercial, its underlying purpose was to promote Nelson’s business, thus this factor weighed against a finding of fair use. But the three other fair use factors weighed in favor of Nelson. Judge Hicks found that the article contained both factual news reporting and reporter commentary, and the broker copied only the factual portion of the article, not the commentary. As to the amount used, the court pointed to the fact that only eight out of thirty sentences were used.

In contrast to Judge Navarro, who found that the effect of the use upon the potential market for the work requires fact-finding, Judge Hicks concluded as a matter of law that this factor favored Nelson. He reasoned that because Nelson did not copy the reporter’s commentary, "his use does not satisfy a reader’s desire to view and read [the entire article including] the author’s original commentary and thereby does not dilute the market for the copyrighted work." The court also noted that Nelson had included a link to the source of the article containing the full text.

Although Righthaven ultimately settled with Nelson, the company deliberately suffered the entry of an adverse judgment with respect to Nelson’s employer, Realty One, and filed a notice of appeal to the Ninth Circuit on February 11.

Righthaven v. Democratic Underground – The Copyright Troll Defense

Righthaven v. Democratic Underground is one of the cases in which the EFF has become involved. The defendants are an online political forum and its operator, David Allen. Righthaven seeks to hold them responsible for the posting of an article by a third party user of the forum. In addition to raising fair use and implied license, the EFF’s answer and counterclaim filed in the case challenge every aspect of Righthaven’s litigation campaign, describing is as "a particularly abusive instance of a broad and aggressive strategy" by a "sham" plaintiff.

The EFF has focused on Righthaven’s status as an assignee of the rights that it asserts, alleging that it has filed multiple lawsuits, that it is in the business of enforcing copyright rights, and that it does not otherwise exploit the assigned rights. As to Stephens Media, the original copyright owner, the answer and counterclaim details at length various aspects of its online presence, including the fact that, according to the EFF, Stephens Media has not properly filed a proper designation of agent to receive notices of infringement under the DMCA. The legal relevance of these and other assertions going to the conduct of Righthaven and Stevens is left unstated.

The EFF has also raised the implied license defense noted by Judge Navarro in the Klerks case, asserting that the Law Vegas Review-Journal makes its news articles available for copying and downloading "at least 19 different ways," including bookmarking them on social media sites, e-mailing them, and printing physical copies.

EFF v. Righthaven

Following the ruling in the Realty One case in which Judge Hicks found fair use as a matter of law, Righthaven sought to voluntarily dismiss the complaint in the Democratic Underground case, which is factually similar in that it involves a five-sentence excerpt from a 54-sentence article. Stating that it disagreed with the Realty One ruling, Righthaven asserted that it was nevertheless moving to dismiss “in the interest of judicial economy.” The EFF objected, arguing that the action was "meritless from its inception" and should only be dismissed on the condition that the defendants be permitted to apply for an award of attorney fees. The respective motions are pending.

The EFF is also involved in the representation of the defendants in Righthaven v. Center for Intercultural Organizing, which involves the posting of an entire article by the operator of the CIO site. On the same day that Righthaven filed its motion to dismiss the Democratic Underground case, Judge James Mahan, who is presiding over the CIO case as well, sua sponte ordered a hearing on whether that case should be dismissed on grounds of fair use as well. The parties are now contesting the need for further proceedings, with Righthaven arguing that further fact-finding is needed before the fair use issue is decided and the EFF pressing for an immediate decision. The court has allowed the submission of a amicus brief on the issue of whether further fact-finding is needed to determine the fair use issue, over Righthaven’s objection that the amici, Professor Jason Schultz of Boalt Hall School of Law, is affililiated with the EFF.

The motion in the CIO case is set for hearing before Judge Mahan in March.

The resolution of the motions in the Democratic Underground and CIO cases are likely set the direction of Righthaven litigation in the District of Nevada for the foreseeable future, at least until the Ninth Circuit rules on the appeal filed in the Realty One case.

What’s Missing from the Righthaven Rulings

Regardless of one’s position on the issues raised by the Righthaven litigation, the opinions rendered thus far are unsatisfying and incomplete in their treatment of the fair use and implied license doctrines. That may be understandable in the Klerks case, where the court was determining only whether the fair use defense was meritorious as a threshold matter. Nevertheless, some of the statements in the opinion are troubling in that they express a less than complete view of the jurisprudence on fair use.

For example, the court in Righthaven v. Klerks found that the use of an entire work merely weighs against a finding of fair use. But there is significant authority that use of an entire work weighs heavily against such a finding, even where the purpose of the use is not for profit. An example may be found in Los Angeles Times v. Free Republic, decided in the District of California in 2000, in which the court ruled that the online posting of full-text copies of newspaper articles for the purpose of criticism and comment was not fair use. "There is little transformative about copying the entirety or large portions of a work verbatim," the court in the Free Republic case found, citing numerous opinions.

As evidenced by the Free Republic ruling, fair use determinations are notoriously fact-sensitive and require careful weighing and balancing of the fair use factors, including the over-arching issue of whether the use is tranformative. Yet in the Realty One opinion where fair use was found as a matter of law, there is no discussion of whether the copying of an article excerpt was transformative.

The treatment of the implied license issue in the Klerks case was also truncated by the preliminary nature of the court’s ruling. But it is nevertheless concerning, in that it presents only one aspect of the implied license doctrine, that is, conduct on the part of a copyright owner from which consent to a use may be inferred. The court’s preliminary treatment of the issue suggests that any copyright owner that makes its content available on the Internet is, by that act alone. consenting to the unrestricted copying and dissemination of the work by third parties, in unlimited venues and contexts, including online posting. The court’s sweeping reference to the “established and accepted custom” of information-sharing on the Internet ignores the role of online terms of use in limiting the dissemination and use of works posted online.

Conclusion

There will be more to come from Righthaven, the EFF, and the courts, on the issues of fair use and implied license. But important lessons can be taken from these cases, even at this stage.

Online publishers should consider the argument the EFF is making that allowing users to share content gives rise to a very broad implied license to distribute publications online, and revisit the substance and presentation of their online terms of use. Making clear to users what kinds of sharing is permitted and what is prohibited may guard against a similar argument being made with respect to their content. For example, the Las Vegas Review-Journal’s online terms includes an express license to reproduce the headline and the first paragraph of a story, along with a link back to the source article. The effect of that provision has yet to be addressed.

The simplest lesson is for Web site owners. Those who have been sued by Righthaven as a result of material posted by users of their site could have avoided litigation by adopting DMCA-compliant terms of use and designating a DMCA agent. It costs nothing, it is simple to do, and (assuming all DMCA requirements are met), it is effective protection against copyright infringement lawsuits resulting from third-party posting.

In MDY Industries, LLC v. Blizzard Entertainment, Inc., the Ninth Circuit commenced its analysis of the DMCA issues by parsing the complex interconnection between the two parallel prohibitions in the anticircumvention provisions: the prohibition in Section 1201(a) against the circumvention of a technological measure that “effectively controls access to a work protected under this title,” i.e., a copyrighted work; and the prohibition in Section 1201(b) against the circumvention of a technological measure that “effectively protects a right of a copyright owner.” It is important to note the difference between the two sections: Section 1201(a) protects measures that limit access to a copyrighted work, while Section 1201(b) protects measures that protect a right of a copyright owner.

The appeals court concluded that a copyright owner’s rights in Section 1201(a) are, in effect, broader than a copyright owner’s rights under Section 1201(b) because “preventing ‘access’ to a protected work in itself has not been a right of a copyright owner arising from the Copyright Act.” And thus, the court said, “we read this term as extending a new form of protection, i.e., the right to prevent circumvention of access controls, broadly to … copyrighted works.”

The court explicitly rejected the argument that Section 1201(a) should be more narrowly construed, and should only be applied where there is a “nexus” between the access sought to be prevented and a copyright owner’s rights under the Copyright Act. Such a nexus was required by the U.S. Court of Appeals for the Federal Circuit in Chamberlain Group, Inc. v. Skylink Technologies, Inc. (Fed. Cir. 2004), where a manufacturer of garage door openers that contained copyrighted firmware unsuccessfully sought to use the anticircumvention provisions to bar the use of third-party replacement controls that required access to the firmware in order to activate the opener.

As the Ninth Circuit in MDY v. Blizzard acknowledged, in Chamberlain, the Federal Circuit “feared that Section 1201(a) would allow companies to leverage their sales into aftermarket monopolies, in tension with antitrust law and the doctrine of copyright misuse.” The Ninth Circuit concluded that the policy concerns that the Federal Circuit relied on in Chamberlain were not present in MDY v. Blizzard, and that the potential interplay between antitrust law and Section 1201(a) could be reserved for future cases. And in any event, the Ninth Circuit concluded, those policy concerns should not prevail over the plain language of the statute, and the legislative history that it carefully and extensively examined.

The Ninth Circuit also left for future consideration the issue of whether fair use is a defense to a prima facie violation of Section 1201, because MDY did not claim that the use of Glider was protected by the doctrine of fair use.

The next question the court tackled is whether Blizzard’s Warden software either “effectively controls access” to a copyrighted work or “effectively protects a right of a copyright owner.” And that requires understanding of how the WoW software is structured, and how the Warden program works.

The WoW software consists of two components: a game client that is installed on the user’s computer, and game elements that are available only when the user is connected to the WoW servers. The court divided the protectable elements of the WoW software into three “buckets”: the literal elements of the software (the game client’s software code that resides on the user’s computer), the individual non-literal elements (individual components, such as recorded sounds and images that are stored locally and called up by the game client software in the course of play) and the game’s dynamic, non-literal elements, the “real-time experience of traveling through different worlds, hearing their sounds, viewing their structures, encountering their inhabitants and monsters, and encountering other players.” This last element is only available when the user is connected to the WoW servers.

The Warden program has two functions: first, it scans the random access memory (RAM) of a user’s computer before the user connects to WoW’s online game servers to see if a bot is running, and second, it periodically scans the user’s RAM to look for patterns of code that it has identified as belonging to bots and other cheating software. When it detects a bot before the user has connected to a game server, it prevents the user from logging on to the server, and if it detects a bot during play, it boots the player from the server.

Given the manner in which Warden functions, the court concluded that it does not prevent access to either the of the WoW elements that are stored locally on a user’s computer, because those elements are accessible to a user despite the presence of Warden. But Warden does prevent access to WoW’s dynamic, non-literal elements that are accessible only when connected to Wow’s servers. Accordingly, the appeals court found that Warden is a technological measure that “effectively controls access” to a copyrighted work, and that MDY had engaged in trafficking in a technology, Glider, that circumvents that control, in violation of Section 1201(a)(2).

MDY was not found to violate Section 1201(b). Blizzard argued that Warden effectively protected its right against unauthorized copying in various respects, but the court disagreed. Because WoW gamers are authorized to load the game code into RAM, a user of Glider who continues to load code into RAM despite Warden’s efforts to interrupt that process are not infringing, the court found. And, because WoW players using Glider who are able to log on to the game server and access the dynamic non-literal elements of the game despite Warden’s efforts, Warden doesn’t “effectively” protect against copying.

For Blizzard, although the ruling is a mixed bag, the result is certainly not a total loss. At the end of the day, its Section 1201(a) trafficking claim survived with respect to protecting WoW’s dynamic, non-literal elements from copying, and is likely to be sufficient basis for the district court to reissue an injunction and award of damages. Although summary judgment on Blizzard’s tortious interference claim was vacated, it may still press that claim on remand.

For users of software and other copyrighted works, the aspects of the ruling dealing with the issue of contract covenants and copyright conditions narrows the circumstances under which they might be found to be copyrighted infringers, should they violate a provision in a Terms of Use or similar document. Accordingly, service providers may be limited in using the stern remedies of the Copyright Act to control unwanted access to their systems, at least in the Ninth Circuit. In that respect, see, e.g., Facebook, Inc. v. Power Ventures, Inc. (N.D. Cal. May 11, 2009), discussed here.

For device manufacturers who, like the garage door opener manufacturer in Chamberlain, wish to use the DMCA anticircumvention provisions for competitive advantage, the ruling may present new possibilities for structuring their products. And of course, copyright owners generally will be advantaged in their efforts to use technical means to block unauthorized access to their works.

For the DMCA itself, the ruling in MDY v. Blizzard sets up a circuit split on the construction of the anticircumvention provisions, and presents the possibility of U.S. Supreme Court review. Or possibly, a reexamination of the ruling by the Ninth Circuit en banc, a remedy that either or both sides in the case might well seek.
 

For Blizzard Entertainment, the distributor of WoW software and the operator of the servers that enable online game play, bots are, well, a drag. Other gamers complain that they constitute cheating, and Blizzard potentially loses revenue when gamers finish the game sooner rather than later. So Blizzard added a provision to the WoW Terms of Use prohibiting the use of bots and similar third-party software. WoW also deployed a software solution, WoW Warden, that checks gamers’ computers for prohibited software and prevents their access to the server if it is present. Warden works only so-so at blocking Glider-using players, though, and it costs a lot of money to deploy and maintain.

So Blizzard also sent its lawyers to Donnelly’s home to personally demand that he cease selling the Glider program. (Whether he called them Worgen and tried to repel them with his Corpse-Impaling Spike is not part of the record.) Donnelly subsequently filed an action seeking a declaratory judgment that his sale of the Glider program did not infringe Blizzard’s copyrights, and Blizzard responded with counterclaims under copyright law, the Digital Millennium Copyright Act and state law.

Game on.

The dispute between MDY and Blizzard raises a multiplicity of interesting issues under copyright law and the DMCA, issues on which the U.S. Court of Appeals for the Ninth Circuit ruled last month in MDY Industries, LLC v. Blizzard Entertainment, Inc. (9th Cir. Dec. 14, 2010). The ruling was largely, although not completely, favorable to Blizzard, but either way it is an important ruling for content and software licensors who seek to control their use of their copyrighted works.

Recall that the case was argued on the same day, and before the same panel, as Vernor v. Autodesk (which we blogged about previously), in which the court defined the circumstances under which a purchaser of software is a licensee, not an owner of a copy, for purposes of the copyright first sale doctrine. That ruling comes into play in MDY v. Blizzard; in a slam-dunk application of Vernor, the court found that the WoW gamers are licensees, not owners of a copy of their WoW software, But in this post, we’ll look at a different issue addressed by the court: whether gamers who use the Glider software in violation of Blizzard’s ToU are infringing Blizzard’s copyrights. That was an essential question, because if the gamers were not directly infringing Blizzard’s copyrights, then MDY and Donnelly could not be held secondarily liable for copyright infringement for selling them the means by which to infringe, i.e., the Glider software.

MDY and Donnelly conceded that the use of Glider by WoW players violated the ToU, but they argued that Glider users were not infringers. Rather, they argued, the ToU’s prohibition against the use of bots is a covenant, not a license condition, and a breach of a covenant gives rise only to a claim for breach of contract, not copyright infringement.

The appeals court agreed with MDY and Donnelly, holding that “a potential for infringement exists only where the licensee’s action (1) exceeds the license’s scope (2) in a manner that implicates one of the licensor’s exclusive statutory rights.” The use of Glider did not implicate any of Blizzard’s exclusive rights, the court found, because its use did not, for example, either alter or copy the WoW software. For there to be infringement, the court concluded, there must be a “nexus” between the license condition and an exclusive right of copyright:

Were we to hold otherwise, Blizzard — or any software copyright holder — could designate any disfavored conduct during software use as copyright infringement, by purporting to condition the license on the player’s abstention from the disfavored conduct. The rationale would be that because the conduct occurs while the player’s computer is copying the software code into RAM in order for it to run, the violation is copyright infringement. This would allow software copyright owners far greater rights than Congress has generally conferred on copyright owners.

So, the appeals court overruled the district court’s grant of summary judgment in favor of Blizzard on its claims of contributory and vicarious copyright infringement.

Interestingly, in a footnote, the court raises a point not at issue in the case: whether the continued use of a licensed work without making required payments constitutes copyright infringement. The court comments that such a licensee:

… arguably may commit copyright infringement by continuing to use the licensed work while failing to make required payments, even though a failure to make payments otherwise lacks a nexus to the licensor’s exclusive statutory rights. We view payment as sui generis, however, because of the distinct nexus between payment and all commercial copyright licenses, not just those concerning software.

Well, maybe ALL commercial copyright licenses don’t have a nexus with payment – consider the case of open source licenses. In Jacobsen v. Katzer (Fed.Cir. 2008) (discussed here), the Federal Circuit rejected the argument that an open source license was not enforceable under copyright law because the licensed software was distributed free of charge. Further, the court held that a provision in an open source license requiring the inclusion of author, license and copyright information if the software was modified and redistributed was a condition enforceable under copyright law, not a mere covenant. The appeals court relied upon language in the license identifying the attribution requirements as a condition, and a general policy favoring the enforcement of open source licenses. The result in Jacobsen v. Katzer, if not its reasoning, is probably consistent with MDY v. Blizzard, as the rights which were being conditioned were the right to modify and distribute the software, rights that are unquestionably exclusive rights of the copyright holder.

Back to MDY v. Blizzard. Although MDY and Donnelly escaped liability for copyright infringement, the court’s ruling had the effect of boosting Blizzard’s related state law claim that MDY tortiously interfered with its contracts with WoW licensees, because, the court ruled, the Copyright Act does not preempt a breach of contract claim that is not equivalent to any exclusive right of copyright. But while the district court had granted summary judgment against MDY and Donnelly on the breach of contract claims, the Ninth Circuit reversed the entry of judgment, finding that there were outstanding material issues of fact on one of the elements of such a claim: whether MDY’s actions were “improper” under the seven-factor test of Restatement (Second) of Torts Section 767. Accordingly, among the issues to be considered on remand are “the social interests in protecting MDY’s freedom of action and Blizzard’s contractual interests,” about which the court commented:

Blizzard argues that it seeks to provide its millions of WoW players with a particular role-playing game experience that excludes bots. *** In contrast, MDY argues that Glider is an innovative, profitable software program that has positively affected its users’ lives by advancing them to WoW’s more interesting levels. MDY has introduced evidence that Glider allows players with limited motor skills to continue to play WoW, improves some users’ romantic relationships by reducing the time that they spend playing WoW, and allows users who work long hours to play WoW.

Glider has a positive effect on gamers’ romantic lives? That should be an interesting trial on the merits. 

In our next post, we will examine the Ninth Circuit’s DMCA-related rulings in MDY v. Blizzard.