Canadian writers’ class action on copyright reaches tentative settlement 28/02/2011

A tentative settlement has now been reached in a long-running Canadian copyright dispute, which culminated in a class action by freelance writers whose works were disseminated in online databases without permission [1].

This dispute was initiated by Canadian journalist and writer Heather Robertson, in 2003, and was certified a class action in 2008. The defendants included the Toronto Star Newspapers Ltd., Rogers Publishing Limited, Canwest Publishing Inc., CEDROM-SNi Inc. and ProQuest Information and Learning LLC, although the case against Canwest was settled in June 2010 for C$7.5 million.

Robertson alleged that while her work had been lawfully published in print, her copyright had been subsequently infringed because she did not give the publishers permission to disseminate the work in online databases. The publishers countered that this was within the scope of the licences she had granted.

The tentative settlement amounts to C$5.475 million (including legal costs) and if the court gives its approval (the hearing is scheduled for April this year), a claims-based system of compensation will be put in place to handle claims from the class members. In return, the publishers will be granted licences to reproduce and sub-license the works to others, in addition to being released from any legal claims.

While this may seem like a win for the writers, there has reportedly been a backlash from the publishers, with larger publishers including Thomson Publishing and Rogers Publishing now requiring 'all rights' contracts with freelancers, to avoid having to clear additional rights further down the track [2]. Such agreements are in contrast to 'first rights' contracts, which generally allow for a one-off publication in a specified format only. While contracts should reflect a bargain or agreement between the respective parties, freelancers often feel compelled to acquiesce to publisher demands in order to secure work.

The Canadian dispute is not the only one of its kind. A similar class action was brought in the US in 2000 against a group of electronic database and print publishers, including Proquest Information and Learning Company, the Thompson Corporation and the New York Times Company. As with the Canadian dispute, the freelance works had been lawfully published in the print publications but had been disseminated in electronic databases without permission. In the decision of New York Times v. Tasini [4], the U.S. Supreme Court held that it was not lawful to disseminate the freelancers’ work in electronic databases without specific authorisation.

[1] http://www.kmlaw.ca/Case-Central/Overview/?rid=81

[2] http://canadianmags.blogspot.com/2011/01/last-part-of-long-running-robertson.html#links

[3] http://www.copyrightclassaction.com/index.php3

[4] New York Times v. Tasini, 533 U.S. 483 (2001); http://www.law.cornell.edu/supct/html/00-201.ZS.html

Who owns promotional music CDs? 28/02/2011

The second-hand market for CDs was the ultimate winner in an interesting US copyright infringement action brought by record company UMG Recordings.

On January 4th of this year, the US Ninth Circuit Court handed down its decision in the case of UMG Recordings v. Augusto [1], which considered the re-sale on eBay of the record company’s promotional (promo) CDs.

Common music industry practice is for record companies to send out free, unsolicited promo CDs to music critics and radio stations. The CDs often carry a sticker stating, “For Promotional Use Only – Not For Sale”, or in some cases a stronger warning notice: “This CD is the property of the record company and is licensed to the intended recipient for personal use only. Acceptance of this CD shall constitute an agreement to comply with the terms of the licence. Resale or transfer of possession is not allowed and may be punishable under federal and state laws” [2]. Many of these promo CDs end up on the second-hand music market.

Under the United States’ first sale doctrine, once a lawfully made copyright item is sold, given away or has its title of ownership transferred, the new owner can sell or otherwise dispose of that copy without requiring permission from the copyright owner. The doctrine is of interest both to consumers who participate in the second-hand market, and the businesses dealing in such second-hand goods.

Enter Troy Augusto. Whilst not a direct recipient of UMG Recording’s CDs, Augusto would acquire them via a variety of means and then sell them on eBay as ‘promo’ or ‘industry’ editions. UMG tried unsuccessfully to stop Augusto’s eBay sales and the matter escalated, with UMG suing Augusto for copyright infringement. UMG argued that Augusto had infringed its exclusive right to distribute the copyright material; that the statements on the CDs amounted to a licence and not a transfer of ownership of the CDs, so that Augusto could not avail himself of the first sale doctrine.

In his defence, Augusto argued that firstly, the way in which UMG distributed the CDs effected a transfer of ownership and secondly, even if this was not the case, the receipt of the CDs fell under a US law called the Unordered Merchandise Statute.

The court summarised the principal question as follows: “Did UMG succeed in creating a license in recipients of its promotional CDs, or did it convey title despite the restrictive labelling on the CDs?” [3] In answering this question the court decided in Augusto’s favour, concluding that, “UMG transferred title to the particular copies of its promotional CDs and cannot maintain an infringement action against Augusto for his subsequent sale of those copies”. [4]

Two reasons were given for the decision: Firstly, when distributing the promo CDs, “Universal’s transfer of possession to the recipients was without meaningful control or even knowledge of the status of the CDs after shipment.” [5] UMG made no effort to track or monitor the promo CDs once sent out; UMG did not actively pursue an agreement with the recipients; UMG had no way of knowing whether a recipient agreed to be bound by the licence terms and a receiver could keep the CDs with or without acceptance of the licence terms. Thus, the court decided, in addition to the statements on the CDs not being a binding agreement, the way in which UMG distributed the CDs transferred ownership to the recipient.

Secondly, whilst not directly applicable to Augusto himself, the unsolicited distribution of the CDs fell within the scope of the Unordered Merchandise Statute and was an effective transfer of title to the initial recipient from UMG, thus allowing the recipient to dispose of the goods in any way they saw fit.

Regular readers will remember our October 2010 newsletter, which covered the Ninth Circuit's decision in Vernor v Autodesk [6], which also considered the implications of the first sale doctrine. In that case, the licence was ruled to be valid and ownership was not transferred, but there was a much clearer process of acceptance between the licensor and licensee.

The questions raised by UMG Recordings v. Augusto come at an interesting time in the marketplace for copyright material: as the first sale doctrine does not apply to licensees, it will be interesting to see how the increasing trend of licensing rather than owning digital content affects people’s dealings with such material. If this becomes the dominant model of content consumption, what flow-on effect will this have on downstream markets? Also, will US companies wanting to retain more control over the material they are distributing look at more formalised licensing and distribution procedures for such products?

[1] UMG Recordings, Inc. v Troy Augusto, No. 08-55998 (9th Cir. Jan. 4, 2011)

[2] UMG Recordings, Inc. v Troy Augusto, No. 08-55998 at [335]

[3] UMG Recordings, Inc. v Troy Augusto, No. 08-55998 at [332]

[4] UMG Recordings, Inc. v Troy Augusto, No. 08-55998 at [332]

[5] UMG Recordings, Inc. v Troy Augusto, No. 08-55998 at [336]

[6] Vernor v. Autodesk Inc No. 09-35969 (9th Cir. Sept. 10, 2010)

Federal Court’s iiNet Decision Leaves the Door Open 28/02/2011

Whilst last week’s appeal decision of the Full Federal Court in Roadshow Films Pty Limited v iiNet Limited found in favour of ISP iiNet, the decision leaves the door open on the question of ISP responsibility. [1]

In a 2-1 judgment handed down on 24th February, Justice Emmett and Justice Nicholas found in favor of dismissing the appeal whereas Justice Jagot was in favor of allowing it. The decision was another loss for the coalition of film and television companies behind the copyright infringement action against the ISP.

The appeal decision, however, was not a complete setback for the film and television companies as the question of ISP responsibility has been left open. Justice Emmett clearly indicated that a finding of authorisation was not an impossibility stating that, “It does not necessarily follow from the failure of the present proceeding that circumstances could not exist whereby iiNet might in the future be held to have authorised primary acts of infringement on the part of users (at 274).”

Two such circumstances may be, firstly, rights owners adopting a more specific and acceptable notification system and secondly, ISPs having ineffectual repeat offender policies. In a piece on the decision, Melbourne Law School academic David Brennan observed that, “Copyright dependent industries now have guidance on how to give ISPs notices that will require ISPs to take reasonable steps to limit the notified infringing activity, or else be liable for authorising its continuance.” [2]

The case against iiNet was brought by several major film and television studios with the assistance of the Australian Federation Against Copyright Theft (AFACT). They alleged that iiNet had authorised the infringing activities of some of its users who engaged in illegal peer-to-peer file sharing.

The first instance decision in favour of iiNet was handed down in February 2010, and the case was subsequently appealed. The litigation has been keenly observed in Australia and around the world, as online copyright infringement continues to erode the revenue streams of creative industries such as music and film.

The matter is far from settled, however, as the film and television studios may well seek special leave to appeal the Full Federal Court decision to the High Court.

[1] – Roadshow Films Pty Limited v iiNet Limited [2011] FCAFC 23

[2] – Brennan, David “iinet’s Hollow Victory Over Hollywood” The Sydney Morning Herald, (online) 25/2/2011 - http://www.smh.com.au/opinion/society-and-culture/iinets-hollow-victory-over-hollywood-20110225-1b7qa.html

Federal Court finds in favour of iiNet 24/02/2011

The Full Bench of the Federal Court once again found in favour of iiNet today, defeating an appeal by a coalition of film and television companies behind a copyright infringement action against the ISP provider.

This may not be the end of the matter, however, as the film and television studios may well seek special leave to appeal the Federal Court decision to the High Court.

Telstra takes phone books fight to the High Court 14/01/2011

A representative of Telstra has confirmed that Telstra will be seeking special leave to appeal to the High Court against a Full Federal Court decision that copyright did not subsist in its White and Yellow Pages phone directories.

Telstra lost the case in the first instance in the Federal Court in February 2010, and then lost its appeal to the Full Federal Court in December last year. Key issues in the case include the applicability of copyright to databases, as well as the importance of originality and authorship when it comes to determining subsistence.

If special leave is granted, the case will be keenly watched to see if the High Court will approve the reasoning in the previous decisions.