Licensing

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For the film and media distribution industries, this year has been action-packed.  Production budgets are skyrocketing and new digital services have been announced or are launching with each passing month. The streaming wars are upon us. Moreover, the FCC recently voted to treat streaming services as “effective competition” to traditional cable providers (or MVPDs), thereby triggering basic cable rate de-regulation in parts of Hawaii and Massachusetts.

The distribution landscape took yet another unexpected legal twist this week. On November 18, Assistant Attorney General Makan Delrahim announced that the Antitrust Division of the Department of Justice would ask a federal court to terminate the “Paramount Consent Decrees” (the “Decrees”), which have prohibited movie studios from engaging in certain distribution practices with movie theaters since the 1940s. The DOJ filed a motion to terminate the Decrees in federal court in the Southern District of New York on November 22, 2019.  Notably, the DOJ cites streaming services and new technology as a few of the many reasons that the Decrees may no longer be necessary in what the DOJ official sees as today’s highly competitive, consumer-driven content market. Given the volatility of the content licensing space, film licensors and licensees will have to carefully consider how the DOJ’s actions will affect their content rights and options going forward.

UPDATE: In March 2021, the Second Circuit reversed the lower court’s ruling on fair use. On March 28, 2022, the Supreme Court granted cert. and agreed to hear the case. On May 18, 2023, the Supreme Court handed down its much‑anticipated opinion in the case. For a writeup of the opinion, please see our firm’s Minding your Business blog.

Earlier this month, in The Andy Warhol Foundation for the Visual Arts, Inc. v. Goldsmith, No. 17-cv-2532 (S.D.N.Y. July 1, 2019), a New York district court granted the Andy Warhol Foundation for the Visual Arts’ (“AWF”) motion for summary judgment that Warhol’s series of screen prints and silkscreen paintings (the “Prince Series”) did not infringe Lynn Goldsmith’s (“Goldsmith”) original 1981 photograph of the musician Prince, ruling that the Warhol works were transformative and qualified as fair use.

On May 20, 2019, in Mission Product Holdings, Inc. v. Tempnology, LLC, 587 U.S. ___ (2019), the Supreme Court resolved an area of ongoing concern for parties to trademark licenses. The court addressed a circuit split on whether a trademark licensee may continue to use a trademark for the term of the license, after the license has been rejected in bankruptcy.  In Mission, the debtor-licensor rejected a trademark license agreement and sought to terminate the licensee’s right to use the debtor’s trademark. This decision has important ramifications to parties to trademark licenses.

Licensors of software typically utilize software license agreements providing for their ownership of the licensed software and related IP, as well as restrictions barring licensees from reverse engineering the code at issue.  The scope of protection, of course, depends on the final language of the licensing agreement and disputes can arise when licensees decide to develop similar software in-house, or with a third party.  Indeed, a recent case, Ford Motor Co. v. Versata Software Inc., No. 15-10628 (E.D. Mich. Sept. 7, 2018), tackled some of these issues. 

UPDATE: On September 27, 2018, the Supreme Court granted Rimini Street, Inc.’s petition for a writ of certiorari asking the Court to review part of the multi-million dollar damage award against it for costs and resolve an apparent circuit split over whether so-called “non-taxable costs” may be awarded under the Copyright Act (which allows for the recovery of “full costs”).  The question presented is: “Whether the Copyright Act’s allowance of “full costs” (17 U.S.C. § 505) to a prevailing party is limited to taxable costs under 28 U.S.C. §§ 1920 and 1821, as the Eighth and Eleventh Circuits have held, or also authorizes non-taxable costs, as the Ninth Circuit holds.”  On March 4, 2019, the Supreme Court ruled that the term “full costs” in §505 of the Copyright Act is limited to the six categories of taxable costs as specified at 28 U.S.C. §§1821 and 1920.

Earlier this month, the Ninth Circuit issued a noteworthy ruling in a dispute between an enterprise software licensor and a third-party support provider.  The case is particularly important as it addresses the common practice of using automated means to download information (in this case, software) from websites in contravention of website terms and conditions.  Also, the case examines and interprets fairly “standard” software licensing language in light of evolving business practices in the software industry. (Oracle USA, Inc. v. Rimini Street, Inc., No. 16-16832 (9th Cir. Jan. 8, 2018)).

In a dispute that touches on the intersection of copyright, contract law and cloud technology, the Second Circuit affirmed the dismissal of copyright claims against Barnes & Noble (“B&N”) related to ebook samples stored on a user’s B&N-provided cloud-based locker. Notably, the Second Circuit dismissed the case on contractual grounds, declining the opportunity to opine on two important modern copyright doctrines that are often implicated when users store copyrighted content on the cloud.

In Smith v. BarnesandNoble.com, LLC, 2016 WL 5845690 (2d Cir. Oct. 6, 2016), an author contracted with Smashwords, an online ebook distributor, to market his book.  In accordance with this contract, the book was offered to B&N, which listed the book for sale on bn.com and made free samples available.  When a B&N customer downloaded a free sample (or purchased an ebook) the content was stored on a cloud-based digital locker associated with the customer’s account from which the content could be downloaded to devices whenever and wherever the user wanted.

We previously wrote about a Virginia federal magistrate judge’s report recommending dismissal of a declaratory judgment action brought by several radio stations asking the court to rule that webcasts limited in scope via geofencing technology to 150 miles from the site of the transmitter should be exempt from liability for…

New technology continues to generate business models that test the limits of intellectual property laws enacted before such technologies were ever contemplated.  The latest example is the use of “geofencing” in an attempt to avoid certain obligations to pay certain digital performance royalties.

In February 2014, VerStandig Broadcasting, the owner…

It’s a problem that has vexed website owners since the days of the dot-com boom – how to make certain user-generated content available to users or subscribers, but also prevent competitors and other unauthorized parties from scraping, linking to or otherwise accessing that content for their own commercial purposes.

The…

Playing World of Warcraft, the world’s most popular massively multiplayer online role-playing game (MMORPG), can be, well, a drag. As the parents, teachers and spouses of gamers know all too well, playing through the 70 or more levels of the game in order to amass desired virtual currency, weapons and armor can be extremely time-consuming. So some gamers have resorted to the use of bots (automated game-playing software robots) to make their way more quickly from the more tedious early levels of the game to the more interesting upper levels. Michael Donnelly developed WoW bot software (Glider) for his own use and it worked so well that he decided to sell it to other gamers. And that worked well, too. In a few years, Donnelly (incorporated as MDY Industries) had gross revenues of $3.5 million from sales of Glider licenses.

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.