Digital Used Music Sales Infringing, Not Protected by First Sale Doctrine

Posted by Tonya Gisselberg on April 05, 2013

ReDigi Inc. claims that it is “the world’s first and only online marketplace for digital used music.”  (Opinion pdf page 1).  Capitol Records is the copyright owner for numerous songs sold on ReDigi’s website and did not authorize the sales.  Capitol Records sued ReDigi for copyright infringement, alleging direct copyright infringement, inducement of copyright infringement, contributory copyright infringement, vicarious copyright infringement and common law copyright infringement. 

The copyright owner’s exclusive rights under the Copyright Act include the right to make copies, distribute the work and publicly perform the work.  These rights are limited by the first sale doctrine, which allows the lawful owner of a particular copy of the work to sell the work without the permission of the copyright owner.  Last week’s blog post, First Sale Doctrine Not Limited by Geography, Rules U.S. Supreme Court, describes the first sale doctrine in detail.  “The novel question presented in this action is whether a digital music file, lawfully made and purchased, may be resold by its owner through ReDigi under the first sale doctrine.”  (Opinion pdf page 4.)  The district court ruled that it cannot.

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Significant Damages and Attorney's Fees Award in Music Performance Copyright Infringement Case Upheld by Ninth Circuit

Posted by Tonya Gisselberg on February 21, 2012

Seven music company members (Music Companies) of the American Society of Composers, Authors, and Publishers (ASCAP) sued East Coast Foods, Inc. and its sole officer and director, Herbert Hudson, for copyright infringement arising out of musical performances of eight works at the Long Beach, California, Roscoe’s House of Chicken and Waffles restaurant.  The Ninth Circuit Court of Appeals upheld the district court’s grant of summary judgment and award of $36,000 in damages in favor of the Music Companies and the district court’s award of $162,728.22 in attorney’s fees to the Music Companies.

East Coast owns the Roscoe’s restaurant chain.  The Long Beach Roscoe’s restaurant opened in 2001.  The Sea Bird Jazz Lounge is attached to the restaurant.  ASCAP is a nonprofit music licensing organization that collects royalties for its members.  ASCAP contacted East Coast shortly after the Long Beach Roscoe’s opened to offer East Coast a license to perform music in the restaurant and lounge.  East Coast did not obtain a license and between 2001 and 2007, ignored ASCAP’s recurring requests to pay licensing fees. 

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Corporate Officer Found Liable for Copyright Infringement in Online Copying Case

Posted by Tonya Gisselberg on August 16, 2011

This case discusses the potential liability of a corporate officer for the infringing acts of the corporation.  Defendant Larry Chasin, CEO of the corporate defendant IDS, filed a motion for summary judgment against Plaintiff Blue Nile.  Blue Nile filed a cross motion for summary judgment against defendant Chasin on the issue of Chasin’s liability for copyright infringement.  Judge Thomas S. Zilly, Western District of Washington, Seattle, denied Chasin’s motion for summary judgment and granted Blue Nile’s motion for summary judgment, finding Chasin liable for copyright infringement (pdf).

Facts

Blue Nile, Inc. is an online jewelry and diamond retailer.  It alleged that defendants Ideal Diamond Solutions, Inc. (IDS) and Larry Chasin infringed its copyrights by posting Blue Nile’s copyrighted images of diamonds and jewelry on websites owned and operated by IDS and Chasin.

Chasin created IDS to provide brick and mortar jewelry retailers with web services to enable them to compete online.  The court determined from declarations and the parties’ moving papers that IDS was the “brainchild” of the defendant Chasin, that it is a small company and that defendant Chasin controlled the company’s corporate affairs.

Chasin did not dispute the allegations of infringement in Blue Nile’s moving papers.  The bases for Chasin’s motion for summary judgment and his defense to Blue Nile’s motion were “1) he cannot be held liable for copyright infringement because he had no role in creating the infringing websites and no knowledge that content used on the websites was copyrighted by Blue Nile; and 2) he cannot be held liable for IDS’s alleged infringement.”  (Opinion pdf pages 2-3).

The court found that Chasin was mistaken as a matter of law and that no genuine issue of material fact existed and therefore granted Blue Nile’s motion and denied Chasin’s motion.  (Opinion pdf page 3).  The court did not rule on whether IDS infringed Blue Nile’s copyrights, but the order is written on the assumption that IDS did infringe.

Summary Judgment

Summary judgment shall be granted if no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law.  Fed.R.Civ.P. 56(c).

(Opinion pdf page 3). 

The non-moving party must demonstrate that there is a genuine issue of material fact for trial by identifying “specific facts” to establish a genuine issue.

This blog also discusses the standard for granting summary judgment in Ninth Circuit Upholds Ruling that Sony’s God of War Video Game Not Infringing in Dath v. Sony, Photograph of Model Dancing Copyrighted Bronze Dance Steps Could be Fair Use and Copyright Infringement Suit Regarding Precast Concrete Vault Drawings Yields Summary Judgment Rulings.

Personal Liability for Copyright Infringement

Copyright is a strict liability tort; therefore there is no corporate veil and all individuals who participate are jointly and severally liable.

(Opinion pdf page 4.)

Corporate officers are liable as joint tortfeasors with the corporation when the corporate officer is the dominant influence in the corporation and determines the policies that produce the copyright infringement.

Because Chasin controlled the corporation, his argument that he did not create the infringing websites or know that infringing material was posted was not a defense.  The court stated that

[t]he Copyright Act is a strict liability regime under which any infringer, whether innocent or intentional, is liable.

(Opinion pdf page 5).

The court also indicated that there is a genuine question of material fact regarding whether Chasin is an “innocent infringer.”  Innocent infringement is discussed in my post Fair Use in AP Fairey Dispute but not in Cooks Source Magazine Controversy.  The distinction between an innocent infringer and an intentional infringer is important in calculating damages under the Copyright Act.  17 U.S.C. §504(c)(2).  Regarding innocent infringement, §504(c)(2) states:

In a case where the infringer sustains the burden of proving, and the court finds, that such infringer was not aware and had no reason to believe that his or her acts constituted an infringement of copyright, the court in its discretion may reduce the award of statutory damages...

Vicarious Liability for Copyright Infringement

The court ruled that Chasin is alternatively “liable for vicarious copyright infringement because he had the right and ability to supervise the infringing activity and also had a direct financial interest in such activities.”  (Opinion pdf page 5).  Chasin admitted that he had the ability to remove infringing content, that he controlled corporate affairs, that he invested his own money in IDS and that he received a salary and benefits from IDS.

Vicarious liability is also discussed on this blog in Game Developer Alleges Copyright and Computer Fraud and Abuse Act Violations in Suit Against Unknown Defendants.

This case is Blue Nile, Inc. v. Ideal Diamond Solutions, Inc., et al., No. C10-380Z, Western District of Washington at Seattle.

Game Developer Alleges Copyright and Computer Fraud and Abuse Act Violations in Suit Against Unknown Defendants

Posted by Tonya Gisselberg on July 01, 2011

Plaintiff Square Enix Limited develops, distributes and markets copyrighted computer video games worldwide.  This case concerns “Deus Ex: Human Revolution” (the Game), the eagerly awaited sequel to Square Enix’s “Deus Ex.”  Square Enix is preparing to commercially release the Game around August 2011.  Square Enix is a British corporation located in London, England.

Square Enix alleges the following facts (pdf):  To generate prerelease publicity, Square Enix created an unpublished version of the Game for limited preview to select video game media representatives.  It distributed the Game preview through Steam.  Steam is an Internet game distribution platform operated by Valve Corporation.  Valve is headquartered in Bellevue, Washington, in the Western District of Washington.  “Steam delivers game content using a proprietary file transfer protocol and protects it with digital rights management software.”  (Complaint pdf page 4).  Steam is believed to collect and store information about user accounts, including IP addresses and hardware identification numbers.

Square Enix authorized a reviewer from the Italian video game review magazine “Giochi per il Mio Computer” (GMC) to preview the Game using Steam.  Media representatives who previewed the Game, including GMC and its reviewer, signed nondisclosure agreements agreeing not to reproduce or disclose the Game preview.  Square Enix preregistered its copyright for the Game with the United States Copyright Office.

On May 29, 2011, one or more of Defendants Does 1-15 used the GMC reviewer username and password to log onto the restricted Steam account from an IP address not associated with GMC or its parent company.  One or more of the Defendants accessed and copied the Game preview from the Steam server without authorization and “distributed it to other Defendants and third parties using the peer-to-peer file sharing protocol BitTorrent.”  (Complaint pdf page 4).  Defendants and others then made unauthorized copies of the Game preview.

Square Enix claimed direct, contributory and vicarious infringements of its copyright by the Defendants.  Direct infringement occurs when someone copies a copyrighted work without authorization.  Contributory infringement occurs when someone who knows of the infringing activity assists in someone else’s infringing activity.  Vicarious infringement occurs when someone who has the right and ability to control the infringer’s conduct receives direct financial benefit from the infringement.  “Defendants copied, distributed, displayed, exhibited, performed, and/or created derivative works of the Game Preview, which consisted of a significant and material portion of the Game.”  (Complaint pdf page 5).  Square Enix alleges that Defendants also participated in each other’s infringing conduct and that some of the Defendants who had the ability to control the infringing conduct of others received direct financial benefits from the infringement.

Square Enix also claimed that Defendants violated the Computer Fraud and Abuse Act (CFAA).  The CFAA (18 U.S.C. §1030) protects against a variety of computer abuses arising out of unauthorized access or exceeding authorized access to a computer.  Square Enix alleges that Valve’s server is the computer which Defendants accessed without authorization and/or exceeded authorized access to obtain information they were not entitled to access.  Square Enix stored its proprietary information on Valve’s computer, limited authorized access to the information and was damaged by Defendants’ unauthorized access and/or access exceeding authorization.

This case is Square Enix Limited v. Does 1-15, C11-1045 MJP, Western District of Washington at Seattle.