Arbitration: Everything You Promised, Nothing You Didn’t

If you agree to arbitrate with a particular arbitrator, but that arbitrator won’t serve, you go to court. That is the teaching of a recent case out of the Second Circuit, Moss v. First Premier Bank. In Deborah Moss’ online contract with her payday lender she agreed to arbitrate any dispute using NAF as the arbitrator. When Moss wanted to bring a claim against the payday lender’s banking partner, NAF could not serve as the arbitrator because NAF had entered into a consent degree with the Minnesota Attorney General prohibiting it from arbitrating consumer disputes. The bank wanted to require Moss to arbitrate before a different arbitrator, reasoning that the parties had agreed to arbitrate, so if the chosen arbitrator wasn’t available, they should pick another. “Not so fast” said the district court, and then the Second Circuit. Moss only agreed to arbitrate with NAF, not anyone else. If NAF is unavailable, she can sue. She can’t be forced to choose someone else. Although there is a general policy favoring arbitration, arbitration agreements are contracts and courts can’t rewrite contracts to change the parties’ agreement. The Second Circuit noted that other Circuits (the Seventh and Third) have reached contrary results.

If you really want to arbitrate regardless of the arbitrator, either don’t identify the arbitrator in the contract or, if you do, agree to choose another if your first choice is unavailable. If you’d rather go to court than pick another arbitrator, specify the arbitrator you want in your contract.

Spirit v. Led Zeppelin, Taurus v. Stairway To Heaven

The copyright infringement lawsuit accusing Led Zeppelin of plagiarizing the song Taurus in the iconic Stairway to Heaven just got really interesting because the judge denied (in part, but in the most important part) defendants’ motion for summary judgment, and whether the songs are “substantially similar” seems like it may be a close call. If they end up with a jury like the one in the Marvin Gaye Estate lawsuit against Pharrell Williams, in which the jury ruled that Blurred Lines infringed Got to Give It Up, the case may go badly for the defendants. Here are links to some material that may help you decide for yourself.

Recordings of both songs –

Guitar analysis by TJR –

Opinion denying (in part) motion for summary judgment –

2015 Substantial Similarity in Copyright Law Supplement Available

The 2015 annual supplement to our treatise Substantial Similarity in Copyright Law is now available from PLI.


The Government Can’t Take Your Copyright

A little known and infrequently invoked feature of the U.S. Copyright Law is its prohibition against government-mandated copyright transfer from an individual author. 17 U.S.C. § 201(e) reads:

When an individual author’s ownership of a copyright, or of any of the exclusive rights under a copyright, has not previously been transferred voluntarily by that individual author, no action by any governmental body or other official or organization purporting to seize, expropriate, transfer, or exercise rights of ownership with respect to the copyright, or any of the exclusive rights under a copyright, shall be given effect under this title, except as provided under title 11 [the bankruptcy code].

Even a court cannot order a transfer. In a recent case in the District of Massachusetts, the court held that the effect of § 201(e) was to void a court ordered transfer from the defendant to the plaintiff.

Clickwraps and Browsewraps: What’s the Difference?

Clickwrap and browsewrap agreements are documents typically used by website owners to mandate the terms on which users may access their websites. The difference between the two is the manner in which the user agrees to the terms. Clickwrap agreements require an overt act of consent by the user. Typically, the user must click a button to signify acceptance. Browsewrap agreements do not require any overt consent. Rather, the website owner posts the terms of use on the site and asks that users not access the site unless they agree to those terms.

Courts treat the two differently because of the difference in the manner in which the user accepts the terms. Clickwrap agreements are generally enforceable because the user’s click is an affirmative act indicating acceptance. The enforceability of browsewrap agreements depends on the prominence of the browsewrap terms. The more prominently the terms are displayed, the more likely a court will rule that users are bound because they must have seen the terms (or deliberately ignored them) and therefore a user’s continued use of the site demonstrates consent to the terms.

Copyright Fair Use – Is “Transformativeness” The Key?

Fair use is a statutory defense to copyright infringement. The fair use statute, 17 U.S.C. § 107, suggests certain types of uses that generally may qualify as fair use, and identifies four factors a court must consider to decide when any particular use qualifies.  The statute reads as follows:

Notwithstanding the provisions of sections 106 and 106A, the fair use of a copyrighted work, including such use by reproduction in copies or phonorecords or by any other means specified by that section, for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright. In determining whether the use made of a work in any particular case is a fair use the factors to be considered shall include—

(1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;

(2) the nature of the copyrighted work;

(3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and

(4) the effect of the use upon the potential market for or value of the copyrighted work.

Until recently, case law identified the fourth factor, the effect of the use on the potential market for the original work, as the most important.  But in a 2012 case, Cariou v. Prince, the Second Circuit arguably shifted emphasis to the first factor, and particularly whether the new use qualified as “transformative” .

Cariou is a professional photographer who published an anthology of photographs of Rastafarians.  Years later, the self-styled “appropriation artist” Prince, copied Cariou’s photographs and altered them to varying degrees to create a series of works of his own.  The alterations ranged from wholesale changes that left Cariou’s images barely recognizable to mere pasting of colored ellipses over the subjects’ eyes.  The district court found Prince guilty of copyright infringement ,but the Second Circuit reversed.  The most significant factor in the Second Circuit’s decision was the court’s finding that many of Prince’s works were undoubtedly “transformative”, defined as “add[ing] something new, with a further purpose or different character.”  The Second Circuit held that a number of the Prince works “manifest an entirely different aesthetic from Cariou’s photographs.”

A recent decision from the Seventh Circuit, however, suggests that emphasis on “transformativeness” may not take hold elsewhere.  In Kienitz v. Sconnie Nation the Seventh Circuit pointed out that the Second Circuit approach risks interfering with one of the rights the Copyright Law grants to copyright owners: the exclusive right to create derivative works.  Derivative work is defined in the Copyright Act as  “a work based upon one or more preexisting works, such as a translation, musical arrangement, dramatization, fictionalization, motion picture version, sound recording, art reproduction, abridgment, condensation, or any other form in which a work may be recast, transformed, or adapted.”  The Seventh Circuit asked, basically: what else is a derivative work but a transformative use of an existing work?  The court wrote: “We’re skeptical of Cariou ‘s approach, because asking exclusively whether something is “transformative” not only replaces the list in § 107 but also could override 17 U.S.C. § 106(2), which protects derivative works. To say that a new use transforms the work is precisely to say that it is derivative and thus, one might suppose, protected under § 106(2). Cariou and its predecessors in the Second Circuit do not explain how every “transformative use” can be “fair use” without extinguishing the author’s rights under § 106(2).  We think it best to stick with the statutory list, of which the most important usually is the fourth (market effect).”

These recent cases should cause parties analyzing their likelihood of success on a fair use defense to consider most carefully how they think they will fare on the first factor (purpose and character of the use, the factor in which courts consider whether a work is transformative) and the fourth factor (effect on the market).  Once they decide that, they may then seek to gain advantage by steering their case to, or away from, the Second Circuit and its emphasis on “transformativeness.”

2014 Substantial Similarity in Copyright Law Supplement Available

The 2014 annual supplement to our treatise Substantial Similarity in Copyright Law is now available from PLI.

Inter Parties Review

This video from Perkins Coie is a helpful primer on inter parties review in the U.S. Patent and Trademark Office.

Do You Know What’s In Your NDA?

You’d better.  If you don’t you’re going to screw it up.  Earlier this year, Convolve lost a trade secrets case against Seagate and Compaq because the personnel involved either didn’t know or forgot what was in the NDA.  The NDA required that in order to trigger any obligation of confidentiality, disclosed information must be: “(1) marked as confidential at the time of disclosure; or (2) unmarked, but treated as confidential at the time of disclosure, and later designated confidential in a written memorandum summarizing and identifying the confidential information.” Why they included the second provision is beyond me.  In this post I wrote that it is important to have a bright line test concerning what is confidential because you don’t want to litigate whether about whether the information was appropriately identified.  What does it mean for information to be treated as confidential at the time of the disclosure?  Who is going to remember to send a memorandum and why would one want such a memorandum describing the confidential information to exist?

In any event, sure enough Convolve disclosed unmarked information in meetings and failed to follow-up with a written memorandum, and then sued based on alleged misuse of that information.  Convolve lost summary judgment.  Convolve tried to argue that, notwithstanding the words in the written contract, everyone knew the information at issue was confidential and marking wasn’t necessary.  The Federal Circuit would have none of it.  The court wrote:  “the NDAs do not appear to be reasonably susceptible to the interpretation Convolve urges. Convolve’s assertion that the parties understood that all oral and visual disclosures were under the purview of the NDAs absent a written follow-up memorandum so stating is contrary to the terms of the NDAs. Thus, Convolve’s interpretation is unreasonable and would render paragraph 7 of the NDA a dead letter.”

Copyright Litigation: Analyzing Substantial Similarity

A new article I’ve written, Copyright Litigation: Analyzing Substantial Similarity has just been published by the Practical Law Company.  Think of it as Substantial Similarity in Copyright Law light.  It discusses just the very basics of what you need to know when evaluating a copyright infringement claim.  If you want detailed information, you still have to get the book.

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