Wednesday, September 29, 2010

BATTLES IN SEATTLE - Vernor v. Autodesk, Inc. Decision

A couple of months ago, Copyright Chronicle covered the 3 cases (UMG Recordings v. Augusto, Vernor v. Autodesk, Inc., and MDY Indus. v. Blizzard Entertainment) involving the first sale defense heard in Seattle by the Ninth Circuit in our First Sale Frenzy: Battles in Seattle series of posts.

The first decision has been made in the Ninth Circuit in the Vernor v. Autodesk case.

Procedural History/Summary: Vernor sold copies of Autodesk’s software on eBay. Autodesk filed several DMCA takedown notices with eBay. After several notices, Vernor’s account was suspended. Vernor filed a declaratory judgment action against Autodesk.

Autodesk alleged that it had licensed its software to CTA. Part of the license included that when updates were provided to its customers, they were to destroy the previous versions. However, CTA sold Version 14 to Vernor.

Autodesk was able to trace the software available on eBay to CTA. Autodesk maintained activation codes and serial numbers to verify registrations of its software. Portions of Autodesk’s agreements with its customers include use restrictions associated with the software.

The district court granted Vernor summary judgment finding that Vernor did not infringe on Autodesk’s software because Vernor was protected by the first sale defense under Section 109 and the essential step defense. The primary issue and question in the case was whether the transaction between Autodesk and CTA was a license or a sale. The first sale under Section 109 and the essential step defense do not apply to licenses but only to sales. The district court found that the transaction between Autodesk and CTA was a sale and therefore, Vernor was free to sell Version 14 on eBay. Vernor v. Autodesk, Inc., 2009 U.S. Dist. LEXIS 90906, *42-44 (W.D. Wash. 2009).

The case was appealed to the Ninth Circuit. The Court found the following factors relevant to the inquiry of whether a transaction is a license or a sale: (1) whether the copyright owner specifies that the user has a license; (2) whether the copyright owner significantly restricts the user’s ability to transfer the software; (3) whether the copyright owner places restrictions on use by the user. The Court found that the district court erred in finding that a sale occurs when a transferee is entitled to keep the work. Because Autodesk did not require a return of its work, the district court found there was a sale. Vernor v. Autodesk, Inc., 2010 U.S. App. LEXIS 18957, *25-26 (9th Cir. Wash., Sept. 10, 2010).

The Ninth Circuit reversed and remanded, holding that a software user is a licensee where the copyright owner: (1) specifies that the user is granted a license; (2) significantly restricts that user’s right to transfer the work; and (3) imposes restrictions on use. As these criteria were met in the transaction between Autodesk and CTA, Vernor was in the same position as CTA and had no right to sell Autodesk’s software. (CTA has previously settled with Autodesk.)

There were several amici involved in the case who had indicated that there were significant policy considerations; however, the Court found its ruling based on its precedent and Congress was free to amend or modify the law based on policy considerations. Vernor at *37.

Friday, September 17, 2010

Should Fashion be Protected by Copyright? - Guest Post by Oren Gelber

The American fashion industry often points out that the United States is the only industrialized nation that does not provide protection for fashion designs.

Back in August, New York Senator Charles Schumer sought again to change that fact when he introduced new legislations intended to provide protection to fashion designs. The Innovative Design Protection and Piracy Prevention Act (IDPPPA), was sponsored by Mr. Schumer and ten other senators. See the entire IDPPA here. (via Counterfeit Chic)

The IDPPPA is proposed as an amendment to Chapter 13 of the Copyright Act (which currently applies only to vessel hulls). If passed, the IDPPPA would provide some intellectual property protection to fashion designs.

There have been some who criticize the IDPPPA as unnecessary. However, some of these critiques of the proposed legislation ignore the fact that this legislation is rather limited in what it protects.

In its present form, the proposed legislation only covers the most original fashion designs. This means that while the bill covers all fashion designs, including clothing and products like handbags, belts and sunglasses, in order to qualify for protection, the item must be original, unique, distinguishable, non-trivial and a non-utilitarian variation over prior designs—in essence it must be original and novel. Any original design which predates this legislation and anything that does not meet this high standard of originality remains in the public domain.

Factors that cannot be used to determine the uniqueness of a design are color, patterns and a graphic element (patterns on cloth and graphic elements may be eligible for copyright protection separately even without this amendment).

Clearly, this is a rather high standard for protection. Moreover, the protection itself is limited to a three-year period from the time the item is first seen in public, such as during a runway show. Three years is short when compared with the normal term of a copyright—for individual authors, copyright protection is granted for a term of the life of the author, plus 70 more years; work made for hire copyrights are protected for a term of 120 years from the date of creation.

A designer seeking to enforce a copyright-protected design must also bear a heavy burden. The IDPPPA provides that a designer asserting infringement of his/her design will have to plead an infringement with particularity—that is, the Complaint must allege specific facts establishing that the design was protected (“a unique, distinguishable, non-trivial and non-utilitarian variation over prior designs”) and an infringement occurred. Such a heightened pleading standard is intended to discourage frivolous lawsuits. The designer would further bear the burden of proving that the copy is “substantially identical” to the protected design. The substantially identical standard is more stringent that the “striking similarity” requirement for copyright infringement of literary, visual or musical works under current U.S. law.

As with existing U.S. Copyright Law, the IDPPA also has exceptions and defenses. Independent creation is a defense to a cause of action under the new proposed legislation. If an alleged infringer can establish that the design he is claimed to have copied was actually conceived of and created independently, there will be no liability for infringement, even if the works are identical. There is also a fair use “home sewing” exception, which would allow individuals to sew a single copy of the protected work for their personal use (not to be sold or used in commerce until after the expiration of the protection period).

The IDPPA is thus not as far reaching or all encompassing as its opponents would lead us to believe. In actuality, this proposed legislation is very limited in the scope of its protection (only the most original designs will actually be protectable) and the term of protection is short.

As most commentators familiar with the legislation will point out this new bill represents a compromise between the two sides of the fashion copyright debate. Unlike previous legislation, the American Apparel and Footwear Association and Council of Fashion Designers of America both took part in the crafting of this legislation and are both supporters of this legislation. The collaboration of the American Apparel and Footwear Association and Council of Fashion Designers of America on this legislation is a large step in the right direction.

However, even if the Innovative Design Protection and Piracy Prevention Act does become law, designers will still face an uphill battle in combating knock-offs given the limited protection that IDPPPA grants and the heavy burden of proof for establishing infringement.

Considering the creativity and ingenuity that go into crafting some of these fashion designs (on par with traditional subjects of copyright protection), the argument that fashion designs do not merit this limited protection is unpersuasive.