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The U.S. Copyright Office is commencing a study at the request of Congress to assess whether and, if so, how the current legal system hinders or prevents copyright owners from pursuing copyright infringement claims that have a relatively small economic value. In connection with the study, the Office has issued a notice seeking public comment on how copyright owners have handled small copyright claims and the obstacles they have encountered, as well as potential alternatives to the current legal system that could better accommodate such claims. See Remedies for Small Copyright Claims, 76 Fed. Reg. 206 (Oct. 27, 2011). Comments are due January 16, 2012.

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The U.S. District Court for the Northern District of California declined to dismiss putative class actions by two groups of recording artists and music producers who claimed that UMG Recordings, Inc. , the recording industry’s largest group of record labels, failed properly to account for and pay them for income it received from licensees of its recorded music catalog for the sale of digital downloads and ringtones. James v. UMG Recordings, No. 11-civ-1613 (N.D. Cal. Nov. 1, 2011).  The plaintiffs alleged that UMG violated California’s Unfair Competition Law by improperly characterizing certain transactions as sales made under “resale” agreements, rather than as “licenses,” which would have netted the artists and producers higher revenues under their agreements with UMG. Among other things, the court rejected UMG’s contention that the plaintiffs’ claims alleged nothing more than a basic breach of contract claim rather than unfair competition. The court explained that,

The Court finds that plaintiffs have alleged more than just a breach of contract because the complaints allege that UMG engaged in a broad scheme to underpay numerous royalty participants, including formulating “an opaque and artificial method for accounting for and paying its royalty participants for income derived from such licenses,” and engaging in a “sustained public relations effort designed to convince the public that it had employed ‘groundbreaking’ and ‘enlightened’ accounting practices that actually benefited (rather than cheated) the Class.”

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In an unpublished opinion, the U.S. Court of Appeals for the Fourth Circuit affirmed a Maryland federal court’s denial of Bethesda Softworks, LLC’s motion for preliminary injunction on claims that defendant Interplay Entertainment Co. infringed its copyrights relating to the “Fallout” video game series. Bethesda Softworks, LLC v. Interplay Entertainment Co., No. 11-1860 (4th Cir. Oct. 26, 2011). The Fourth Circuit agreed with the district court’s conclusion that Bethesda Softworks failed to establish a likelihood of irreparable harm–a prerequisite for preliminary injunctive relief. In its non-precedential decision, the court held that–

• A provision in the parties’ agreement stating that a breach would “result in irreparable injury for which there is no adequate remedy at law,” was not binding upon the district court.
• The defendant’s alleged insolvency did not mandate a finding that damages would be an inadequate remedy or that preliminary injunctive relief was proper, because the “injunctive relief that Bethesda seeks would not preserve Interplay’s assets such that Interplay could satisfy a judgment in the event Bethesda prevails on the merits.”
• The U.S. Supreme Court’s decision in eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006), which held that courts should not presume that permanent injunctive relief is appropriate whenever a plaintiff establishes a case of patent infringement, applies with equal force to requests for preliminary injunctions in copyright infringement cases.
• The district court did not err in rejecting Bethesda Softworks’s contention that its alleged loss of intangible rights in the copyrighted material alone established irreparable harm, because “[t]here is no evidence that the development has been made public to anybody.”

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A state court judge in New York City declined to dismiss claims that publisher Arianna Huffington and others misappropriated the idea to create the Huffington Post, a liberal political blogging website. Daou v. Huffington, No. 651997/2010 (N.Y. Sup. Ct. Oct. 25, 2011). Although the court found that the plaintiffs—a pair of bloggers formerly associated with the 2004 presidential campaign of U.S. Senator John Kerry—failed adequately to allege the existence of a joint venture agreement between Huffington and themselves, Supreme Court Judge Charles E. Ramos concluded that the allegations of the complaint were sufficient to state a claim for idea misappropriation under New York law.

Allegations of the Complaint

Reciting the allegations of the complaint, the court explained that plaintiffs Peter Daou and James Boyce met while working on the Kerry presidential campaign. After the campaign ended, Daou and Boyce formulated a blueprint for a joint business venture to develop a website “collective of blogs by notable personalities, non-partisan news aggregation, issue-specific web pages, scoops and exclusives derived from the founders’ personal relationships with Democratic Party and media insiders, and online community-building.” Daou and Boyce included the details of their plan in a memorandum entitled “1460″—to reflect the number of days until the next presidential election—and allegedly presented it to writer Arianna Huffington. Huffington purportedly agreed to become involved in the project as a strategic partner and investor, and she allegedly met with Daou and Boyce on other occasions to discuss details. The plaintiffs claimed that Huffington and her co-defendant, Kenneth Lerer, asked them for a refined blueprint and strategic plan for the proposed website. Believing they were partners in a joint venture, the plaintiffs purportedly complied with this request. Huffington and Lerer allegedly used the plaintiffs’ ideas, plans, and materials to raise funds and to develop the website. The website was launched as the Huffington Post on May 9, 2005.

Daou and Boyce contributed content to the Huffington Post but from an early date, Huffington purportedly excluded them from the management of the website. They eventually sued Huffington, Lerer, and TheHuffingtonPost.com, Inc., alleging that the defendants were liable for breach of contract, breach of fiduciary duty, idea misappropriation, fraud, and negligent misappropriation. In the alternative, the plaintiffs asserted claims for breach of implied contract, unjust enrichment, and quantum meruit. The defendants moved to dismiss the complaint.

Joint Venture, Fiduciary Duty, Negligent Misrepresentation Claims

The court dismissed the plaintiffs’ claim that the defendants breached an agreement to establish and operate a joint venture. Such an agreement, the court wrote, must manifest the “intent of the parties to be associated as joint venturers” by combining “property, financial resources, effort, skill or knowledge, [and] a measure of joint proprietorship and control over the enterprise,” and by providing “for the sharing of profits and losses.” The alleged oral agreement between the plaintiffs and the defendants did not “rise to the level of an agreement to join property, skills and risk, and is otherwise too indefinite to be enforceable.” Moreover, the court found the plaintiffs’ actions to be inconsistent with those of joint venturers. The court observed that Daou and Boyce were not involved in the management or financing of the Huffington Post and, prior to filing their lawsuit, they did not attempt to assert their purported ownership rights. Similarly, the court found that the complaint did not adequately allege a breach of fiduciary duty or negligent misrepresentation, because both of those claims were premised on an assumption that the court had already rejected — that the plaintiffs and the defendants were joint venturers.

Idea Misappropriation Claim

New York law recognizes the tort of misappropriation of ideas when the plaintiff establishes that the misappropriated ideas were both “novel and concrete.” For this purpose, novelty refers to true innovation, rather than merely that the idea has not previously been used. Even if the idea combines existing elements, it may still be novel if the idea itself is not in the public domain. Whether an idea is novel is generally a question of fact that is inappropriate for resolution in connection with a motion to dismiss.

The court concluded that Daou and Boyce’s complaint sufficiently alleged a novel and concrete idea which the defendants misappropriated. The court noted that the plaintiffs claimed that at the time of the misappropriation, no website had yet combined the elements of a “collective of blogs by notable personalities, non-partisan news aggregation, issue-specific web pages, scoops and exclusives derived from the founders’ personal relationships with Democratic Party and media insiders, and online community-building.” In addition, they alleged that Huffington herself acknowledged the novelty of the idea in a March 2010 interview in Wired magazine, in which Huffington purportedly stated that the specific combination of elements that went into the Huffington Post “had never been done.” Huffington also allegedly told Playboy magazine that, “We were the first hybrid of news and group blog.” Although such allegations did not establish that the idea was in fact novel, the court found them adequate to survive a motion to dismiss.

Remaining Claims

The court dismissed the plaintiffs’ implied contract claims, finding that the complaint did not allege conduct by the defendants reflecting an intent to be bound by an agreement to purchase the plaintiffs’ idea. Likewise, because the fraud allegations of the complaint lacked specific averments that the defendants made promissory statements which they did not intend to honor, the court dismissed the fraud claim. Lastly, the court found inadequate the plaintiffs’ claims of unjust enricnment and quantum meruit. However, the court granted the plaintiffs leave to re-plead the dismissed claims in order to attempt to state actionable claims.

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The High Court of England and Wales held that a foreign company that has a reputation but no actual customers in the United Kingdom does not possess the goodwill necessary to create enforceable trademark rights under the UK law of “passing off.” Plentyoffish Media Inc. v. Plenty More, LLC [2011] EWHC 2568 (Ch). The foreign company, a U.S.-based online dating company, claimed rights in the unregistered mark PLENTYOFFISH under the law regarding passing off. The court found that even though many visitors to the company’s website were from the UK, this fact did not confer upon the company any UK trademark rights in the mark, because there was no proof that the company had any actual customers in Britain. The site was funded by advertising, and the company offered its services free of charge to registered users. The court “accept[ed] that the concept of ‘customers’ required by the English cases must include the people to whom the relevant services are actually provided even if, in a case like this, they receive the services for free.” However, the missing essential element for the U.S. company was that it could not demonstrate that it actually provided dating services to persons in the UK. The court explained that,

A reputation in the UK is not sufficient, customers in the UK are required and that is so whether the business provides products or services. Deciding who constitutes a UK customer from the point of view of a services business may involve tricky questions in some cases but as a matter of law … customers of some kind are required.

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A federal court in Los Angeles, California ruled that the song “Boom Boom Pow,” by the pop music group the Black-Eyed Peas, did not infringe the copyright in the song “Boom Dynamite,” which was written earlier by songwriter Ebony Latrice Batts a/k/a Phoenix Phenom. Batts v. Adams, 2:10-cv-08123-JFW-RZ (C.D. Cal. Oct. 21, 2011).

The court explained that “[b]ecause direct evidence of copying is rarely available, and copying can therefore be difficult to prove, a plaintiff ‘may establish copying by showing (1) circumstantial evidence of access to the protected work and (2) substantial similarity of ideas and expression between the copyrighted work and the allegedly infringing work.” For this purpose, “[s]ubstantial similarity refers to similarity of expression, not merely similarity of ideas or concepts.” To determine whether two works are substantially similar, the U.S. Court of Appeals for the Ninth Circuit employs a two-part analysis – an extrinsic and an intrinsic test. “The ‘extrinsic test’ is an objective comparison of specific expressive elements” which “‘focuses on articulable similarities’” between the two works. “The intrinsic test is a subjective test that focuses on whether the ordinary, reasonable audience would recognize the [Defendants’] work as a dramatization or picturization of the [P]laintiff’s work.”

In the Ninth Circuit, courts place the initial burden on the plaintiff to identify the sources of the alleged similarity between the two works. If the plaintiff meets this first burden, the court must the court must determine whether any of the allegedly similar features are protected by copyright. When analyzing the similarity of musical compositions under the extrinsic test, a variety of compositional elements may be considered, including melody, harmony, rhythm, timbre, structure, instrumentation, meter, tempo, and lyrics. However, in comparing these elements, the Court must first filter out any “unprotectable elements”—such as ideas rather than the expression of ideas, and expressions which have essentially merged with the idea they express.

The court analyzed the allegedly similar elements in the two songs—including (among others) repeated uses in both songs of the phrase “I got that” and the word “boom,” and use of the phrase “let the beat rock” in one song, compared with “make the beat go” in the other. The court concluded that,

[W]hile “Boom Boom Pow” and “Boom Dynamite” contain similarities, those similarities encompass elements that are not protectable and Plaintiffs have failed to demonstrate that the selection, coordination, and arrangement of those nonprotectable elements created an original, protectable expression that was then copied by the Adams Defendants.

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