Tag: court

The big bad wolf to the . . . rescue?
By Ryan Long

The big bad wolf to the . . . rescue?

If you work in technology, the big bad fair use wolf can be your best friend. Read below to find out why.

A few days ago, the U.S. Supreme court denied Google’s appeal from a decision by the United States Court of Appeals for the Federal Circuit which found that source code — written instructions that run computer software — can be protected by copyright law. In so doing, the nation’s highest court left in tact a ruling by the Federal Circuit which found Google could have infringed the copyright to Oracle’s software programming platform.

To the extent Oracle’s code is original and non-functional, then it should find protection against wolves inside a nice cozy copyright house during the cold winter. That’s because this type of source code is akin to the original combinations of words that authors use as inputs into their own hardware — books, screenplays, or plays. Because these words are original expressions of perhaps unoriginal ideas, they are copyrightable subject matter. No less should be true about original non-functional source code.

Nonetheless, the copyright house isn’t impervious to the elements outside. If you copy the idea behind a copyrighted work, then you have no liability because ideas aren’t protected by copyright law — but functional ideas can be potentially patented. That’s why, when copyrighted expression is so inextricably linked with a functional idea, many federal courts will deny copyright protection to the expression, especially in the case of functional source code. Small tweaks in code inspired by not all that original — but original enough for copyright protection — source code can keep you away from the infringement line. In such a crowded market, there are only so many ways to express a functional idea, which is why courts are remiss about extending the scope of copyright protection for any one particular expression. To do otherwise would hurt innovation. No less is true in other expressive endeavors. The scope of copyright protecting less original works — such as a “me too” drip style painting inspired by the works of Jackson Pollock — is smaller than that for pioneering ones — such as an architectural design that blends, for the first time, Frank Lloyd Wright with Frank Gehry.

Even if Oracle’s source code can jump the foregoing copyright hurdles, the story doesn’t end there.The lower court has yet to decide whether Google has a fair use defense. In the end, if Oracle’s source code is original enough for copyright but not so original so as to read that protection broadly, then Google’s fair use big bad wolf will likely huff, puff, and blow over Oracle’s copyright lawsuit to the ground.

Thank goodness for plain English.
By Ryan Long

Thank goodness for plain English.

Many love streaming their favorite artist’s songs over Pandora, Inc. (“Pandora”). Imagine a world where your favorite song, say “All Along the Watch Tower” by Bob Dylan, wasn’t listed on Pandora because the American Society of Composers, Authors, and Publishers (“ASCAP”) made his compositions unavailable to “New Media” outlets, even though his songs are available for license to traditional methods of distribution, like the radio. Keep calm. Thanks to a recent ruling by  the Southern District of New York, a federal court in New York, that won’t happen. And that’s primarily because of plain English.

In In Re Petition of Pandora, Media, Inc., ASCAP argued that it could not make all compositions available in its repertory to licensees like Pandora where the publisher of the song withdrew ASCAP’s right to license the compositions to “New Media.” In short, ASCAP argued to the Southern District of New York, that it cannot license what it does not have the right to license.

Since 1941, ASCAP has needed to comply with an antitrust consent decree. Luckily, it states in plain English that music users have the right to “perform any, some or all of the works in the ASCAP repertory.” If Mr. Dylan uses ASCAP to collect royalties for the public performances of “All Along the Watchtower,” that song is part of the ASCAP repertory. Under the decree, ASCAP must make the song available to all requesting music users, regardless of the type of medium they use to distribute the music.

The court correctly ruled that while Mr. Dylan may freely pull his song out of the ASCAP repertory and go to another performing rights society, ASCAP is restricted by the decree from offering Mr. Dylan the option of licensing his songs to some distributors but not to others in “New Media” — such as Pandora. But Pandora has only won half the battle with ASCAP. The decree still requires the court to determine the rate that Pandora will pay for using ASCAP’s stable of songs. If the court makes these rates cost prohibitively high, Pandora’s first half victory will be a moot one.

Take a bite out of crime — not Apple.
By Ryan Long

Take a bite out of crime — not Apple.

We all know the old saying: take a bite out of crime. Unfortunately, today a New York federal court took a bite out of Apple, Inc., instead. The court found that Apple violated antitrust laws when it entered into contracts with major book publishers to distribute e-books using the agency model. The opinion is misguided in failing to see these vertical arrangements as efficient and reasonable methods of competing against and responding to Amazon’s below cost e-book pricing, which the government has to date ignored.

The opinion says that two wrongs don’t make a right. On the one hand, Amazon has overwhelming market share in the e-book market. What is more, it can subsidize losses in that product market with profits it makes in other anything but the kitchen sink markets. On the other hand, book publishers don’t have equal e-book market power — nor do they have equal ability to finance below cost pricing of e-books with profits from other diversified product markets.

Nonetheless, in the court’s view, the fact that Amazon was pricing e-books below cost didn’t justify Apple’s contracting with the settling book publishers to stabilize the price of print and e-books at above cost levels. The reason: Apple or the publishers could have either reported Amazon to the Department of Justice, or could have filed their own lawsuit.

The court’s argument assumes that the government is an impartial observer who doesn’t favor one entity over others in this grudge match. Objections to the government’s settlement with the book publishers raised concerns that the Department of Justice was and has been aware of Amazon’s below cost pricing of e-books but didn’t lift — and hasn’t lifted — a finger to address it.

Given the inability of Apple — and the publishers — to get the police officer to take action, they took matters into their own hands. As previously explained in this blog, the market should decide who wins this billion-dollar fight between Godzilla and King Kong — not one judge sitting in the Southern District of New York.

Naked economic protectionism — constitutional?
By Ryan Long

Naked economic protectionism — constitutional?

Many of us like certainty. Death and taxes are two things we can be certain about. But should our choice of who we buy our casket from, if we buy one, when we die be dictated by the state? No, says the New Orleans based Fifth Circuit Court of Appeals in its March, 20, 2013 decision in St. Joseph Abbey v. Paul Wes Castille, et. al. This is a good thing. It means the state cannot protect an industry from competition without justification. What implications, if any, the decision on has on similar federal laws remains to be seen.

A group of Louisiana priests brought suit against members of the Louisiana State Board of Embalmers and Funeral Directors because of a law that prohibited the priests from making, and selling, caskets. According to the law, the priests needed to be funeral directors to do that. But becoming a licensed funeral director in Louisiana is expensive and time consuming. The priests claimed that the law violated the equal protection clause because it had no rational basis to a legitimate government interest, and that it was an unconstitutional taking of property without due process.

The Fifth Circuit agreed. Louisiana, after all, allows anyone to build their own casket for personal use, and doesn’t even require a citizen to be buried in a casket at all. The state also allows its citizens to buy caskets out of state. In any event, the Court reasoned, the requirements to become a funeral director have nothing to do with casket making. Thus, there was no rational relationship between the law and a legitimate government interest.

The most important part of the Court’s ruling is its rejection of naked economic protectionism. Under this view, the state has a legitimate government interest in the protection of a particular industry from competition even when there is no corresponding benefit to the public interest or general welfare. The Court said Louisiana could not protect funeral directors from competition by the priests merely because, say, they have a stronger lobby in Baton Rouge.

It remains to be seen whether the case goes to the Supreme Court. If it does and is affirmed, some federal laws and regulations may be in greater danger of being invalidated as naked wealth transfers to a special interest with strong ties in Washington D.C.

You’re fired! (But I still have to pay you?)
By Ryan Long

You’re fired! (But I still have to pay you?)

We often think that if we fire someone, they are no longer entitled to be paid. But that is not always so. This is especially true in Hollywood, as can be seen from the recent ruling in the litigation between Lisa Kudrow and Scott Howard, her former manager, reports the Hollywood Reporter. While Ms. Kudrow fired Mr. Howard, he claims he is still entited to a percentage of her income even though they had no written agreement giving him such a right. Is this is a stretch? Yes and no.

Generally speaking, agreements can be for a term or at will. If they are for a term, say five years, they cannot usually be terminated before the term unless it is for cause — which means one of the parties breached the contract. If the agreement is at will, it can be terminated at anytime. Most agreements are at will. Regardless of which agreement you enter into, you can always negotiate for residual rights that exist after termination. For example, if you manage Mick Jagger and give him a management agreement which gives you the right to 5% of this income for five years even after the term of the agreement is over, which is called a “sunset clause,” then you get paid even when he is touring and you are no longer his manager.

The crinkle in Ms. Kudrow’s case is that there is no written agreement. Instead, the parties only had a verbal understanding of their relationship. This makes for tough proof at trial concerning the contours of this agreement. That’s why Mr. Howard sought to introduce what is called “custom and usage” evidence in the trial court. This evidence basically shows that some rule is so widely known in an industry and accepted that a party consents to the rule in any contract even if it isn’t explicitly written — or said — in the contract. The lower court rejected this argument because, in its view, the proffered expert in the case only entered the industry in 1998, which is after the parties made their agreement in 1991. The appellate court reversed and allowed the testimony.

Whether Mr. Howard wins at trial remains to be seen. However, in allowing the testimony of a custom and usage expert such as this one, the appellate court signaled to the entertainment industry that it is better to specifically contract out of these type of sunset clauses or else they may be presumed to exist in your contract even if it is not so written.

Aereo’s service — a public performance?
By Ryan Long

Aereo’s service — a public performance?

Recently, in American Broadcasting Companies, Inc., et. al., v. Aereo, Inc., the Southern District of New York denied the plaintiff’s motion to immediately stop Aereo, Inc. (“Aereo”), from retransmitting television programming, like NBC’s Saturday Night Live, to its users. While the Court took great pains to justify its conclusion that Aereo was not publicly performing, or “transmitting,” plaintiff’s copyrighted works within the meaning of the Copyright Act, its reasoning is likely flawed.

The best place to begin is the Copyright Act’s definition of “public performance.” Section 101 of the Act gives a copyright holder a government condoned monopoly to “perform or display a work ‘publicly,'” which means to “transmit or otherwise communicate a performance or display of the work to the public, by means of any device or process, whether the members of the public capable of receiving the performance or display receive it in the same place or in separate places and at the same time or different times.”

In its decision denying the plaintiff’s motion for preliminary injunction, the District Court found that Aereo’s method of distribution is similar to Cablevision’s Remote Storage DVR (“RS-DVR”) device. In Cartoon Network LP, v. CSC Holdings, Inc., 546 F.3d 1212 (2d Cir. 2008) (“Cablevision“), the Second Circuit Court of Appeals held that the RS-DVR device did not publicly perform copyrighted works. As the reader may know, the RS-DVR device allows users to save their favorite programming for viewing at another time. If I am not home when Saturday Night Live is on, I can set my RS-DVR to record the program, in whole or in part, so that I can watch the program later on. And so the RS-DVR is similar to the Betamax recording device — which is like a VCR that allows you to record programs — that was upheld as a “fair use” of copyrighted materials in Sony Corp. of America v. Universal City Studios, Inc., 464 U.S. 417 (1984).

But unlike the RS-DVR in Cablevision or the Betamax in Sony Corp., Aereo’s system not only allows the user the option of recording a program on its system for later viewing. It also permits the viewer to watch Saturday Night Live contemporaneously with its distribution from NBC. Because Aereo’s system doesn’t only permit their viewers to time shift their viewing of Saturday Night Live, but acts as a substitute for viewing the program live on NBC, its method of distribution looks, talks, and acts like a public performance.

Stick and stones may break my bones, but calling me gay when I’m not doesn’t — or can it?
By Ryan Long

Stick and stones may break my bones, but calling me gay when I’m not doesn’t — or can it?

We were all told when we were younger that sticks and stones can break our bones, but that words could not. While it is still true that words cannot break our bones, words can be actionable as defamation under the law. Until recently, it was defamation per se in New York to falsely accuse someone of being a homosexual. This means that all one needed to prove was that the statement was made and that is was false. Special damages were assumed. The recent decision by the Appellate Division, Third Department, in Yonaty v. Mincolla, changed all of that.

In Yonaty, the plaintiff, a male, alleged that a defendant, a female, falsely accused him of being a homosexual. As a result, the plaintiff alleged, he lost his girlfriend. The defendant moved to dismiss the plaintiff’s defamation claim on the ground that he did not allege special damages, such as lost profits or revenues, even assuming he was not a homosexual. The lower court denied the motion because of long standing law in New York, such as in cases like Klepetko v. Reisman, 41 A.D.3d 551, 552 (2d Dep’t 2007), which have held that falsely accusing someone of homosexuality was defamation per se, which means that damage was assumed. Examples of other defamation per se categories include accusing someone of being a felon or having a loathsome disease, such as herpes.

The Third Department in Yonaty ordered the dismissal of the plaintiff’s complaint because he did not allege damages. In so holding, the Court contravened cases like Klepetko. That’s because, these prior decisions were, in the words of the Court, “based upon the flawed premise that it is shameful and disgraceful to be described as lesbian, gay or bisexual. In fact, such a rule necessarily equates individuals who are lesbian, gay or bisexual with those who have committed a ‘serious crime’  – one of the four established per se categories.”

Nevertheless, the Court’s ruling still leaves the door open for defamation claims arising from false allegations of homosexuality that may, in fact, involve special damages. Assume, for example, that someone falsely claims a boy scout leader is a homosexual. Under the Court’s ruling in Yonaty, the leader may be able to claim defamation if he can show that (1) he is not a homosexual and (2) that he lost his job because of the false statement. The Boy Scouts of America currently prohibit homosexuals from occupying positions of leadership. Thus, the Court’s reasoning accepts that while society has changed in some areas concerning stereotypes surrounding sexual preference, it has not changed in others.

Doth not a rose by any other name smell as sweet?
By Ryan Long

Doth not a rose by any other name smell as sweet?

Doth not a rose by any other name smell as sweet? Of course it does. The same is true of an isolated gene. It may have different uses and molecular characteristics once separated from the human genome. However, the genetic code within the gene remains the same. Because such code is found in nature, the isolated gene should not be patentable subject matter. And yet the United States Court of Appeals for the Federal Circuit recently ruled in The Assoc. for Molecular Pathology, et. al. v. Myriad Genetics, Inc. (“Myriad”) that such a gene is patentable.  In so holding, the Court went too far.

Myriad filed a patent over BRCA, which is an isolated gene from the human genome. Think of the BRCA as a link from a chain link fence. The company then used BRCA for various purposes, including the treatment for breast cancer. Indeed, the company filed a patent for such uses and applications. This patent was not the subject of the dispute.

Instead, the dispute centers on whether Myriad has the right to a government sanctioned monopoly over BRCA. A majority of the Federal Circuit held that it did. The majority’s reasoning: while the genetic code that underlies the BRCA is the same as the genetic code found in the human genome, the molecular nature of the BRCA changes once isolated from its chain. This is akin to saying that a link from a chain link fence can be heated and bent into forms that would not be possible if the link were still in the chain link fence.

However, the fact remains that the link still is made of the metal from which it came, just as the BRCA has the same generic code. Of course, Myriad should be — and was — rewarded with a patent for new and non-obvious applications or uses of the BRCA for the treatment of breast cancer. And the Court rightly upheld Myriad’s patent over a genetically modified gene that the company constructed in the laboratory and which did not naturally occur in nature.

In the end, allowing Myriad to monopolize the BRCA gene with a patent precludes others from experimenting with the gene in order to find new commercial and non-commercial applications that benefit society. In so doing, the Federal Circuit has placed too much undeserved power over a naturally occurring item in the hands of one company.