“Raging Bull”: The Conflict between Laches and the Statute of Limitations

On May 19, 2014, the U.S. Supreme Court in Petrella v. Metro-Goldwyn Mayer, Inc., found that equitable doctrine of laches (unreasonable delay) cannot be invoked for a claim legitimately brought within the 3 year statute of limitations.

This case centers around a 1973 screenplay which told the life story of boxing champion Jake LaMotta.  Although created by both LaMotta and Frank Patrella, Patrella was named as the sole author.  In 1976 Patrella and LaMotta assigned their rights in the work and ultimately MGM created the critically acclaimed motion picture “Raging Bull” which was directed by Martin Scorcese and earned Robert DeNiro an Academy Award for Best Actor.  As the Copyright Act allows, although the rights to the screenplay, including the renewal rights, had been assigned, after Frank Petrella’s death, his renewal rights reverted to his daughter, who could renew the copyrights unburdened by any earlier assignment.  Paula Petrella, Frank’s daughter, properly renewed the copyright in 1991 and in 1998 Petrella’s attorney informed MGM that Petrella was now the copyright owner and any exploitation of any derivative work infringed.  Ultimately, Petrella filed suit 9 years later in 1998.  Importantly, Petrella, despite being aware of the allegedly infringing actions for years, only sought relief for acts of infringement occurring the three years prior to bringing suit (acts occurring on or after January 6, 2006).

In its defense MGM, along with numerous others, asserted laches based on Petrella’s 18 year delay.  The District Court, granted MGM’s Motion for Summary Judgment citing “expectations-based prejudice” and “evidentiary prejudice”.  The 9th Circuit Court of Appeals affirmed.

Justice Ginsberg, for the majority, began by laying out the timing rules for copyright infringement actions.  In 1957 Congress prescribed a 3 year limitations period for all civil claims arising under the Copyright Act.  A claim accrues when an infringing act occurs.  In addition, the separate accrual rule allows, where a defendant commits successive violations, the statute of limitations runs separately for each violation.  This means that each time an infringing work is reproduced or distributed, the infringer commits a new wrong, giving rise to a new claim and a new statute of limitations period.  Justice Ginsberg pointed out that laches is a defense developed by courts of equity for claims which the Legislature has provided no fixed time limitation.  In the face of a statute of limitations enacted by Congress, laches cannot be invoked to bar legal relief.  Inviting judges to set a time limit other than the one prescribed by Congress would conflict with the uniformity sought with 507(b).  Here, because Congress had enacted a 3 year statute of limitations, it would be inappropriate to allow a judge created doctrine to trump the will of Congress.  As such, Petrella had a right to bring claims for any act of infringement that occurred the 3 years prior to filing suit.

Additionally, although Petrella admitted to delaying suit because the film was in the “red” and waited until the film was bringing in a profit, the Supreme Court found there is nothing untoward about waiting to see whether an infringer’s exploitation damages the value of the copyrighted work or even complements it.  The separate accrual rule allows a copyright owner to defer suit until she can estimate whether litigation is worth it.  The statute of limitations period limits the recovery of damages for infringing acts occurring in the 3 year look-back period and prospective injunctive relief only.  Should the copyright owner choose to wait then she will miss out on recovering for any infringement that occurs outside the 3 year statute of limitations.

However, the court emphasized that defendants were still allowed to rely on estoppel where a copyright owner engages in intentiaonlly misleading representation concerning the abstention from suit and the alleged infringer detrimentally relies on the copyright owners deception.  Additionally, the court also emphasized that in certain extraordinary circumstances the consequences, a delay in commencing suit may be of a sufficient magnitude to warrant the curtailment of the relief sought.  Such as limiting relief only to monetary damages instead of injunctive relief.

Although the Court reversed the 9th Circuit finding it erred in treating laches as a complete bar to recovery, the Court maintained that on remand, if Petrella was to prevail, the District Court may take into account her delay when considering the appropriate remedies.

This ruling allows for copyright holders to play a waiting game and only sue for infringement when it may be most profitable, so long as a new act of infringement occurs.  It is important to note that if MGM had not continued to exploit the film there would likely be no case of infringement for which Petrella could seek recovery, due to the 3 year statute of limitation.

This holding should also serve to put alleged infringers on notice that claims they once thought to be barred due to laches may still be ripe for suit if there are continuing infringing acts.  Additionally, it will be interesting to see whether this holding will reach to other areas of intellectual property law, such as trademark infringement, where laches is an often asserted defense.

 

 

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Promotional Social Media Accounts: Who Owns It?

Copyright Elizabeth McQuage

Copyright Elizabeth McQuage

In today’s world, social media is an ever-increasing presence in our private lives. Taking advantage of this new outlet, many businesses are now increasingly relying on social media to promote their brand, advertise products, and connect with current and future customers.  Social media sites are a relatively cheap and effective way of promoting a business and allows for instantaneous communication to millions of people.  Facebook has over a billion active monthly users and Twitter has more than 140 million active users with over 750 tweets shared per second.  In fact, more than 50% of twitter users follow companies, brands or products on social networks and 67% of US twitter users are more likely to buy from brands they follow.  2012 marked the first time online advertising spending surpassed print advertising in total dollars.  Besides social networking accounts, businesses can advertise directly through Facebook and Twitter.  Through Twitter, advertisers can purchase “promoted tweets”, which are ordinary tweets that are automatically placed in users’ Twitter feeds.  With this kind of exposure, companies would be foolish not to take advantage and would actually risk losing business to those companies that do utilize social media.

However, as companies encourage and mandate their employees to create and maintain Twitter accounts, LinkedIn profiles, Google+ accounts, Facebook profiles, and YouTube channels to advertise their product, promote their brands, and market to potential customers, questions will arise as to who actually owns the social media account.  As you can imagine, employees do not usually stay at a company for their entire career.  What happens when an employee who was in charge of running a social media accounts leaves?  Employees will want to keep the account and followers they have established while employers will want to regain control over the account as they view the amassed followers as their property.

As using social media accounts for advertising and promotion is a fairly new phenomenon, many companies have not developed policies addressing the ownership of these accounts once an employee leaves.  With the absence of agreements, many companies may find themselves in disputes with former employees and possibly involved in litigation.

In once such case PhoneDog.com and their former employee, Noah Kravitz became entangled in litigation when Kravitz attempted to keep a Twitter account he created and ran for PhoneDog.  Using the Twitter handle @phoneDog_Noah, Kravitz amassed over 17,000 followers.  However, in 2010, Kravitz decided to leave PhoneDog.

Upon his resignation, Kravitz continued to use the Twitter account but changed the handle to @NoahKravitz.  Kravitz alleged PhoneDog gave him permission to keep using the Twitter account in exchange for posting occasionally.  Following learning Kravitz had begun working for a competing company, PhoneDog filed suit, asserting the Twitter account was its property.

PhoneDog stated, “[t]he costs and resources invested by PhoneDog Media into growing its followers, fans and general brand awareness through social media are substantial and are considered property of PhoneDog Media L.L.C. We intend to aggressively protect our customer lists and confidential information, intellectual property, trademark and brands.”

PhoneDog alleged the Twitter account passwords constituted confidential information, i.e. trade secrets, and Kravitz used that confidential information to unfairly compete against PhoneDog.

Kravitz alleged the Twitter account could not be a tradesecret as it was publically accessible.  Kravitz argues he initially created the password and there was no attempt to maintain the password’s secrecy.  PhoneDog argues, even if Kravitz created the account, he did so at PhoneDog’s request and in the course and scope of his employment. PhoneDog did not have a policy in place dictating ownership of any social media accounts.

At this time, a court has not yet determined the issue of who owns a social media account.  However, PhoneDog’s claims were able to survive motions to dismiss by Kravitz and this claim has recently settled.

The Uniform Trade Secrets Act defines a trade secret as information that derives independent economic value from not being generally known to or readily ascertainable through appropriate means by others and reasonable efforts are used to maintain its secrecy.  As this issue has not yet been determined, it’s unclear if courts are willing to extend trade secret protection social media account login information.  Courts will likely look to see who set up the accounts and directed/controlled the content, when the account were created (before or after employment), who had access to account passwords, who had access to the account, and whether the handle include the employer’s name or brand.

As the line between personal and professional social media accounts continues to blur, it is absolutely necessary for companies to address the issue of social media ownership at the beginning of the employment relationship.

While it is unclear whether courts will extend trade secret protection to social media account, what companies can take away from this situation is that adopting social media policies and guidelines that clearly address and outline social media ownership is essential.  Employers should consider: (1) whether the employer or employee may create a social media account to be used for business marketing and branding; (2) the definition of who owns and controls the employee account; (3) whether the account name should incorporate the company name; (3) who has access to account setting and passwords; (4) who may edit or add content to the account; and (5) the procedure to relinquish use of an account at the end of the employment period.

Employers should also contemplate post-employment non-compete and non-solicitation agreements to safeguard against a former employee using social media accounts for competing business, such as Kravitiz did.  A clearly written non-compete agreement outlining what post-employment social media activities an employee may and may not engage in, prohibiting an employee from conducting business with competing businesses on the internet and prohibiting employees from using other social media platforms for purposes of competition will help reduce confusion, disputes and potential future litigation.

Businesses, to stay competitive in this day and age must take advantage of social media accounts to market and promote their companies.  However, this new form of marketing compels employers to take necessary steps to ensure the issues surrounding social media ownership are addressed or risk ending up in court.

Cover Song Arrangements: Jonathon Coulton v. Glee

Glee , the popular teen musical, once again has found itself at the center of controversy.  On Thursday, 01/24/13, the show aired a dramatically different version of Sir-Mix-A-Lot’s hit “Baby Got Back”.  This version, unlike the straight rap Sir-Mix-A-Lot original, is a banjo-infused, acoustified country jam.  One may think the powers-to-be at Glee (Fox Broadcasting Company) creatively came up with this version, however, musician Jonathan Coulton is claiming Glee used his version of the song without crediting him.  The versions are staggeringly similar and the videos to each version are embedded below for your listening pleasure.  (This is not the first allegation against Glee.  Previously, Glee was accused of covering Greg Laswell’s “Girls Just Want to Have Fun” arrangement without issuing credit.)  The question is, if Glee did use Coulton’s cover, did it engage in copyright infringement?

It’s important to note that Coulton’s work is not an original work but actually a cover of a copyrighted work.  Section 106 of the Copyright Act provides that the owner of a copyright has the exclusive rights to reproduce the copyrighted work in copies, prepare derivative works, distribute copies to the public, perform the work display the work and in the case of sound records, and perform the work publicly by means of digital audio transmission.  To distribute a recording of someone else’s copyrighted work, a compulsory license must be obtained or there’s a risk of copyright infringement.

As Coulton’s work is a cover of “Baby Got Back” he needed to obtain a license that would allow him to legally release his version.  Coulton asserts he purchased the statutory license necessary to distribute his version of the song.   Section 115 of the Copyright Act provides for a compulsory license to make and distribute records of a work under the authority of the copyright owner.  A compulsory license includes the ability to make a musical arrangement of the work to the “extent necessary to confirm it to the style or manner of interpretation of the performance involved.”  However, the arrangement “shall not change the basic melody or fundamental character of the work, and shall not be subject to protection as a derivative work…except with the express consent of the copyright owner.”

This provision prohibits the licensee from claiming an independent copyright in the arrangement as a “derivative work” without the express consent of the copyright owner.  Unfortunately, as Coulton released his dramatically different version of “Baby Got Back” under a compulsory license, he has not secured a copyright in his arrangement.

However, if Coulton had obtained the permission to create a derivative work then he would have been able to secure a copyright in his new arrangement.  If a cover alters the original song in a significant way, it may qualify as a derivative work but derivative works are not covered under a compulsory license.  Under §101 of the Copyright Act,  a derivative work “is a work based upon one or more preexisting works, such as a…musical arrangement…in which a work may be recast, transformed, or adapted.  A work consisting of editorial revisions, annotations, elaborations, or other modifications which, as a whole, represent an original work of authorship is a derivative work. “

If Coulton had obtained the necessary permission from the copyright holder to make a derivative work, he would likely have a legitimate copyright claim against Fox.  However, with only a compulsory license, Coulton has no copyright in his musical arrangement and no legal basis to pursue a copyright infringement claim.

What’s interesting is there is a possibility his version of “Baby Got Back” could be viewed as a derivative work and not merely a cover, protected under the compulsory license.  In fact, if Coulton’s version is considered a derivative work, which has changed the “basic melody” or “fundamental character” of “Baby Got Back” then ironically he would have infringed the copyright by creating a derivative work without permission.  (Note an exception exists for Fair Use).

Now, Coulton is speculating Glee may have “used some or all” of his original audio.  If that were the case, then he may have a legitimate copyright claim.  However, it is highly unlikely that Fox would have been ignorant enough to actually sample Coulton’s audio track.   Until Mr. Coulton can prove that Glee sampled some (or all) of his original recording, he will unfortunately be out of luck.  An identical sound recording of his arrangement would not infringe.

Although Fox likely did not do anything illegal, it stands to question whether their use of his arrangement (although unlikely the actual recording) without providing credit is ethical or morally right.  Glee will be profiting from Coulton’s version without any acknowledgment of Coulton’s creativity.  Perhaps the right thing to do in this situation would be for Fox to issue a press release acknowledging Coulton’s arrangement.  Although Fox is within its rights and Coulton has no copyright protection in his arrangement, Coulton deserves to be credited.  It might even bring some positive press Fox/Glee’s way.  Although Fox/Glee is receiving a fair amount of negative publicity right now, isn’t it the saying that “all publicity is good publicity.”  Unfortunately, I strongly doubt Fox will issue a statement apologizing to Coulton or acknowledging Coulton’s arrangement.

However, on the bright side, Coulton, despite Glee’s failure to actually acknowledge him by name, is receiving a great deal of positive publicity.  Many news outlets have picked up on the story, including most recently CNN.  My guess is, despite the lack of formal recognition, Coulton, may gain additional fans and receive an uptick in his music sales.  In fact, my own sister, who had never heard of Jonathon Coulton, has now purchased his version of “Baby Got Back” on itunes.  Additionally, other bands and celebrities have come out in support of Coulton, including: Chris Hardwick (host of “The Nerdist”), author John Green (“Looking for Alaska”, “The Fault in Our Stars”), and the band “They Might Be Giants”.  Maybe this will make up for the slight he feels.  Then again, maybe not.  Coulton posted on his blog that representatives of Fox were in touch “to basically say that they’re within their legal rights to do this, and that I should be happy for the exposure (even though they do not credit me, and have not even publicly acknowledged that it’s my version – so you know, it’s kind of SECRET exposure).”

In response to Fox’s continued failure to provide a public acknowledgment, on 1/26/13, Coulton, released “Baby Got Back (In The Style of Glee)”,  stating “[i]t’s a cover of Glee’s cover of my cover of Sir Mix-a-Lot’s song, which is to say it’s EXACTLY THE SAME as my original version.”  Coulton has also pledged to donate the proceeds from all sales, between now and the end of February to The VHI Save the Music Foundation and The It Gets Better Project.  The song is available on itunes, Amazon and Googleplay.  It might provide some satisfaction that the Glee version of “Baby Got Back” is no longer ranked on the itunes top 200, while Coulton’s “new” “Baby Got Back (In The Style of Glee)” is sitting at #154.

Coulton’s Version

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Glee’s Version

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