Amateurism Lives To Fight Another Day in O’Bannon v. NCAA

This five year old lawsuit asked if the NCAA’s amateurism rules against compensation for student athletes were in violation of the antitrust laws. The core that made the litigation possible in the first place was the expanding willingness of state legislatures and courts to recognize and enforce rights of publicity─the right to control commercial exploitation of your life if the public is even slightly interested in it. No one questioned the idea that big time college athletes, their faces, numbers, uniforms, and moves were valuable.  

Last year the federal district court in the case decided the amateurism rules violated antitrust law and went beyond that to order a detailed deferred compensation scheme of up to $5000 a year for top football and basketball players to be held in trust and paid to them after they leave school. The Ninth Circuit Court of Appeals today agreed there was an antitrust violation, but the compensation scheme is gone. 

Bose McKinney & Evans LLP attorney Gary R. Roberts is also Dean Emeritus & Gerald L. Bepko Professor of Law at the Indiana University McKinney School of Law. He’s been involved in sports and antitrust law throughout his career and is spending the day today talking to media about the decision.  

He shared this quick comment with me between calls, and if you wonder what the decision really means for the future please read this: 

“Even though the NCAA and its Division I member institutions will breathe a sigh of relief that they now do not have to create those $5,000 per year trust funds for all their football and men’s basketball players (so it’s essentially status quo for now), the decision portends a difficult future for the NCAA in that it finds that any rule the NCAA adopts that limits what student-athletes can do or what they can receive is subject to being held illegal under the antitrust laws if a federal judge thinks a “less restrictive” rule is more fair or better policy. Unless the Supreme Court takes up this case and reverses this decision (which would be a long shot), I think there will now be a big push for Congress to grant some type of antitrust exemption to protect college athletics from an avalanche of antitrust lawsuits beyond the many already filed.”

O’Bannon v NCAA 9th Circuit decisions Sept 30 2015

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The Tortuous Path to Fashion Design Copyright Protection

There is a steady stream of music copyright cases in federal court. Lawsuits over clothing designs are few and far between. Depending on the source, US music industry revenue is about $15 to $30 billion. Clothing industry revenue in the US is at least ten times more. Knock-off clothing designs are a way of life. Why aren’t there ten times as many copyright lawsuits in the fashion industry?

Part of the answer may be popular hits are as short-lived as the latest fashion design, but the music can keep playing and producing money for decades while old clothing designs must be hunted down in estate sales and vintage clothing shops. Until the designs come back in updated versions.

But the biggest reason fashion design infringement lawsuits are rare is the Copyright Act. It gives apparel no respect. Designers can try to protect their creations under trademark law too, but today’s post is just about the Act.

It covers eight categories of creations or “works.” Music gets two of the eight, “musical compositions” and “sound recordings.” Fashion designs get none.

Companies determined to protect their designs must force them into the category called “pictorial, graphic, and sculptural works.” To make it as hard as possible, the designs must be identifiable “separately from” and be “capable of existing independently” from the “utilitarian” aspects of the useful article. 17 U.S.C. §101,102 (a). They must be a fish that can live out of water.

The European Union has the Regulation on Community which allows registration at the Office for Harmonization in the Internal Market (OHIM) and gives monopoly protection to original designs for renewable periods of five years for a maximum of 25 years. And there is an unregistered right which is automatic and protects against deliberate copying for three years. So everything is protected.

Despite the degree of difficulty under the Copyright Act, Varsity Brands sued Star Athletica for knocking off its cheerleader outfits. And despite a trial court loss, Varsity persevered and was rewarded with a victory at the Sixth Circuit Court of Appeals last month which revived the lawsuit just in time for football season. Varsity Brands, Inc. et al. v Star Athletica LLC, No. 14-5237 (6th Cir. Aug. 19 2015). It goes back to the trial court for another round.

Judge Karen Nelson Moore’s meticulous decision is a roadmap of all the dead ends and detours a design must navigate to get copyright protection. After surveying the approaches to the issue in the various federal appeals courts, she offers a five-question procedure for deciding if a design is protectable.

The five questions sound easy until you realize you’re not dealing with the ordinary meanings of words. The questions use words as they are defined in the Copyright Act and interpreted by the courts.

First, you ask if the design is a pictorial, graphic, or sculptural work. The Act’s definition of the phrase is full of questions with terms like “artistic craftsmanship”

If the answer to the first question is Yes, you must ask if you’re dealing with something with “an intrinsic utilitarian function.” Clothing should give you a Yes, but what does a bow tie do? That is question three, what are the utilitarian functions?

The fourth question asks if a viewer can identify the pictorial, graphic, or sculptural work separately from the utilitarian functions. The last question asks if the separately viewable work can “exist” independently. This all makes great sense if you have a PhD in philosophy, but you must go through it since it’s the only, stingy gift of the Act to apparel.

The decision, over dissent, recognizes the cheerleader outfits as protected by copyright primarily because the protectable elements are mostly fabric design. Fabric designs are the reasons for the oldest European laws which are the ancestors of the EU community regulation.

So if you think you’re about to launch a fashion hit and you want to go after the knock-offs while the hit lasts, the design of the fabrics you use could be the critical factor.

“I know it when I see it” is a 50 year old classic from the pornography wars that immortalized Justice Stewart. Jacobellis v. Ohio, 378 U.S. 184 (1964). It is about as unhelpful as law can be as a guide for the future. And it may be as close as federal courts can get to generalize about copyright protection for fashion designs until the Copyright Act is changed to explicitly protect them.

Blog Varisty Brands cheerleading costume copyright 6th Cir August 19 2015

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Village Person Wins Legal Fees in Key Copyright Termination Case

Victor Willis is a songwriter and original member of the Village People. He wore the police and naval officer costumes. His writing credits include “Y.M.C.A.” Like most then and many now, he transferred his copyrights to others.

Village People songs are still valuable. Spotify shows 13 million plays of “Y.M.C.A.” by Village People alone. The Copyright Act allows creators to cash in on lasting success by getting their rights ownership back after a minimum of 35 years. Willis sent copyright termination notices in 2011 to do just that.

The idea behind the right to terminate copyright grants was partly to fix the old copyright act’s failure. There was a “renewal term” that was supposed to give copyright ownership back to the creators. After business people got to exploit the works for a first term, the creators were to get their chance in the renewal term. It didn’t work that way. Publishers, record labels, managers and others in the music industry got the creators to sign away their renewal term rights most of the time.

When the current law was written, the termination procedure was supposed to be a slam dunk for creators. So what happened when Willis sent his termination notices as required by the law? He got sued.

Trying to recreate what happened 35 years ago, there are going to be missing pieces. Legitimate questions come up about who wrote what and who played what. Memories and resumes get embellished. In this case, there were questions about what percentage of songs Willis owned and what percentage belonged to co-authors.

But the people whose rights were being terminated sued Willis and claimed he was entitled to nothing. That was only the beginning.

After defeating the argument he could not unilaterally terminate his copyright grants despite the fact the law says he can, he had to win a series of summary judgment motions saying the statute of limitations killed his rights or he just waited too long. He had to win a jury trial on most of the songs earlier this year.

The Copyright Act allows for the “prevailing party” to be awarded legal fees. Fees are not automatic. It’s up to the Court. Two days ago, Judge Moskowitz who is the chief federal judge in San Diego, ordered the parties that fought the Willis terminations to pay him every penny he requested for four years of litigation, more than half a million dollars. The order is careful to say that the parties resisting the terminations did not act frivolously, with an improper motive, or make unreasonable factual or legal arguments “on the whole.”

Judge Moskowitz’ explanation of a key factor favoring an award of legal fees to Willis comes straight out of congressional hearings almost forty years ago when the current law was on the table. They say the termination section was designed to “safeguard authors against unremunerative transfers” and address “the unequal bargaining position of authors, resulting in part from the impossibility of determining a work’s value until it has been exploited.”

The people who must pay the legal fees may appeal or try to work out a deal with Willis to take less. It would hardly be surprising if the fight goes until there are no legal options left. Yet it seems clear that if termination rights under the current law are to succeed where the old renewal term failed, creators must be able to enforce their rights without getting more than half a million dollars of legal help to do it.

Blog Willlis Fee Award Order September 15 2015

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Record Labels Make Sirius XM Deal While Flo & Eddie Keep Fighting

Last Friday SiriusXM filed a report with the Securities Exchange Commission saying it was paying $210 million to the three major labels and ABKO records to settle the labels’ me-too Flo & Eddie lawsuit against it. It’s the closest thing to a news release any of them made. The news got out a few minutes later, however, and the only real question remaining unanswered is what this does to the Flo & Eddie lawsuits.

Capitol, Sony, Warner and ABKO won a court ruling in California state court on the heels of Flo & Eddie’s federal court victory there. The labels excel in making deals, and they must have been happy to let someone else do the heavy legal lifting on the question of whether California’s copyright laws covering pre-1972 sound recordings require licensing internet radio spins from the rights owners.

Flo & Eddie had the legal arguments. The labels had 80% of the pre-1972 recordings played on SiriusXM.

The Second and Ninth Circuit courts of appeals are the next venues for the Flo & Eddie lawsuits, and it seems unlikely those courts will fail to notice that Sirius’ argument against pre-1972 royalties should be taken with 210 million grains of salt. At the same time, Flo & Eddie’s chances for optimizing settlement dollars may have gone down.

If you buy 80% of a business in one transaction, the price of the remaining 20% usually goes down. But unlike a single business where you buy a substantial majority of ownership, all the pre-1972 songs played on Sirius are not a single lump and their quality and popularity vary widely. So Flo & Eddie may have some disproportionally valuable recordings to bargain with. They also have a settlement tool minority owners of a business often have—the ability to make the majority’s life miserable.

Finally, the SiriusXM deal may mean that Flo & Eddie won’t try to settle and instead go for a jury trial on the amount of damages their class members are entitled to. In California, a jury trial would be in the same federal court where a jury awarded Marvin Gaye’s heirs $7.3 million against Pharrell Williams and Robin Thicke for “Blurred Lines.” So it might not be the worst place to be.

The SiriusXM settlement announcement is in the Form 8-K they filed June 26, and this is the entire statement:

On June 17, 2015, our subsidiary, Sirius XM Radio Inc., entered into an agreement with Capitol Records LLC, Sony Music Entertainment, UMG Recordings, Inc., Warner Music Group Corp. and ABKCO Music & Records, Inc. to settle the case titled Capitol Records LLC et al. v. Sirius XM Radio Inc., No. BC-520981 (Super. Ct. L.A. County), which challenged our use of sound recordings fixed prior to February 15, 1972 (“pre-1972 recordings”). Pursuant to the settlement, we will pay the plaintiffs, in the aggregate, $210 million on or before July 15, 2015 and the plaintiffs will dismiss their lawsuit with prejudice. The settlement resolves all past claims as to our use of pre-1972 recordings owned or controlled by the plaintiffs and enables us, without any additional payment, to reproduce, perform and broadcast such recordings in the United States through December 31, 2017. As part of the settlement, we have the right, to be exercised before December 31, 2017, to enter into a license with each plaintiff to reproduce, perform and broadcast its pre-1972 recordings from January 1, 2018 through December 31, 2022. The royalty rate for each such license will be determined by negotiation or, if the parties are unable to agree, binding arbitration. The plaintiffs have represented and warranted to us that in the United States they own, control or otherwise have the right to contract with respect to approximately 80% of the pre-1972 recordings we have historically used.

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Flo & Eddie Lose in Florida

When I learned Flo & Eddie filed lawsuits in California, New York and Florida seeking internet radio royalties for their pre-1972 Turtles recordings unprotected by federal copyright law, my first reaction was California and New York make a lot of sense. But Florida? The federal district court in Miami saw it the same way and threw the lawsuit out two days ago. Flo & Eddie, Inc. v Sirius XM Radio, Inc. Case No. 13-23182 (2015 SD Fla.)

Flo & Eddie and their legal team have been unstoppable against Sirius and Pandora until now. In addition to winning in the courtroom, they increased awareness of these arcane copyright issues beyond the music industry where checks are written and cashed based on how the law is interpreted.

Judge Darrin P. Gayles is a distinguished young jurist whose decision in the Florida case is frank and succinct. He surveys the Flo & Eddie lawsuits with almost the same claims in the three states and writes it “is common knowledge that California and New York are the creative centers of the Nation’s art world.”

So California has a statute recognizing and protecting pre-1972 sound recordings which is the cornerstone of Flo & Eddie’s wins there. New York has a well-developed group of common law copyright cases which supported the win there. But “Florida is different.”

Florida lacks specific legislation covering sound recording property rights. It has almost no judicial opinions interpreting common law copyright related to the arts. So the only way for Flo & Eddie to win was if the court created “a new property right in Florida…The Court declines to do so.”

The decision defers to the Florida legislature for that task. Softening the blow, it takes the time to knock down one of Sirius’ arguments which might have interfered with arguing for new legislation. It’s the only point Sirius gave up in the victory.

Flo & Eddie did not just lose an argument in the lawsuit, they lost the lawsuit. The decision says that and the online docket shows the lawsuit terminated as of Tuesday.

The Flo & Eddie team’s success up till now persuades me they had good reasons to sue in Florida, but the reasons aren’t obvious. If there are grounds for appealing this decision, they are not obvious either. Sirius was 0 and 2 going into this round, so they must be relieved. Appeals to the Ninth Circuit federal appeals court in California and the Second Circuit in New York will be the next venues in this playoff series. Now it’s 2 to 1.

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Common Sense Wins on Expired Patent Royalties at Supreme Court

The US Supreme court just issued its opinion in Kimble v Marvel Entertainment affirming its 1964 decision which applied common sense to the question of whether patent royalties can still be owed after the patent expires. The answer is still No.

Kimble had a patent on a toy called the ‘Web Blaster” which sprays foam strings like Spider-Man sprays webs in the comics. Marvel brings us the comics and licensed the “Web Blaster” to sell as another item of Spidey gear for kids, Halloween, and general silliness.

Patents usually last 20 years from date of their application date. The patent laws are exclusively federal. They give a 20 year monopoly to the owner of the patent, but the owner gives something in exchange for the monopoly. The patent goes into the public domain the date it expires. It then belongs to anyone and everyone who wants to use it.

But people grow fond of the patent royalties they receive every year and want it to never end. The 1964 Supreme Court decision was Brulotte v. Thys and it involved a hop-picking machine invention with either a flat royalty or one based on every 200 pounds of hops picked, whichever was greater. Like the Web Blaster contract, the hop picker royalties agreement had no end date. The inventors wanted to keep those royalties coming in both cases after the patents expired.

Justice Kagan writing for a majority of 6 relies in the decision on the ancient legal principle we call stare decisis. “Stare decisis—in English, the idea that today’s Court should stand by yesterday’s decisions—is ‘a foundation stone of the rule of law.’’ Yesterday’s decisions do get reversed from time to time, but it takes powerful reasons to do so. Based on the majority opinion, Kimble didn’t even come close.

Justice Kagan was careful to unravel the antitrust arguments from the patent arguments in her decision. Federal antitrust law is based on a handful of broad provisions in the statutes which the courts are constantly interpreting and applying to specific situations. Patent law is different and has many bright line boundaries, like the end of the patent’s life.

The common sense in ending patent royalties when the patent expires is seen in one simple example. Imagine Company A having a license requiring it to pay royalties after a patent expires and having to compete against Company B which can use the expired patent for free because it’s in the public domain. Which company do you want to run?

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Flo & Eddie’s California Class Action is Certified

Remember Flo & Eddie are the artists famous for being The Turtles and working with Frank Zappa who are the pioneer avengers seeking internet radio royalties for artists who made great pre-1972 recordings. Federal judge Philip S. Gutierrez in Los Angeles ruled last year they were correct that California’s state copyright statute filled the huge federal copyright gap running from the first sound recordings to 1972 and covered streaming services like defendant SiriusXM’s. He ruled again last week that Flo &  Eddie’s class action has been “certified.” This is another big deal.

I’ve written about me-too lawsuits filed with the same arguments Flo & Eddie are making. Many of them also were filed as class actions, but they’ve been quickly settled and the classes the other artists wanted to represent were not certified. The settlements are confidential, but common sense says the plaintiffs received enough money to make them want to end the litigation. Common sense also says the settlements had a small price tag compared with what a successful class action would cost.

A class action certification is a process with several technical requirements plaintiffs often fail to meet. Judge Guttierez’ decision goes through the requirements in a 25 page decision that also covers an unusual extra issue.

The normal sequence is class certification > decision on the merits of the plaintiff’s claim. In this case it was summary judgment in favor of Flo & Eddie on the merits of their state copyright claim > class certification. SiriusXM objected to the backwards proceedings, and the objection was received like most of their arguments so far. The court denied it because they were the party that wanted a ruling on the merits of the claim first.

One of the technical requirements for a class action to be certified is called “numerosity.” The idea of a class action is that there are so many individual plaintiffs with basically the same claim against the same defendants that it makes sense to have a single lawsuit instead of one lawsuit per plaintiff. The decision says in the Ninth Circuit which includes the California federal courts, over 40 plaintiffs is usually enough.

Flo & Eddie submitted evidence identifying 273 separate owners of pre-1972 recordings who could file the same lawsuit, and it is probably a number in the thousands.

Two very different roads will now be taken. Flo & Eddie will go through identifying class members and putting a number on the damages claimed . SiriusXM will be responding to those efforts, but most likely its eyes will be on the road to courts of appeal—Ninth Circuit and U.S. Supreme.

The class certification has one more interesting effect. If Flo & Eddie settled the lawsuit with SiriusXM before the certification, it could have been another confidential deal announced by a nondescript public statement. Like “the parties have mutually agreed to resolve the litigation.” But now any settlement must be presented to the court which is bound to determine if the settlement is “fair, reasonable, and adequate.” The whole world, especially owners of pre-1972 recordings, will learn most if not 100% of the terms of the settlement.

 

 

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