Jonathan M. Eisenberg          Craig S. Rutenberg          Manatt, Phelps & Phillips, LLP
 December 2004    Volume 1, Issue 5   

 

Revolutions All The Time
By Mark A. Fischer, Principal
Fish & Richardson P.C.
Boston, MA

 

  1. The Digital Revolution and File-Swapping


    1. Background


      1. The Betamax Case
      2. In the landmark 1984 decision, Sony Corporation v. Universal Studios, Inc., the U.S. Supreme Court ruled that creators and distributors of copying devices could not be held liable under copyright law as long as the technology was capable of substantial non-copyright-infringing uses. The Court reasoned that Sony’s Betamax video recorders could be used for non-infringing purposes such as recording uncopyrighted programs or simply “time-shifting” programs that were aired on broadcast television stations. While the decision particularly addressed Sony’s sale of Betamax video recorders, for almost two decades it has been, and continues to be, applied to similar technological innovations, including file-swapping programs.

      3. Contributory and Vicarious Infringement
      4. Individuals who infringe copyright are liable for direct infringement, but people who help those individuals commit the infringement may be liable for contributory or vicarious copyright infringement. For example, the owner of a flea market may be held responsible for knowingly providing a forum for the sale of pirated recordings. Not surprisingly, this flea-market example has often been analogized to file-swapping programs. Contributory and vicarious infringement have different requirements, but the two offenses are similar enough that they often occur in tandem. In order to prove contributory infringement, the plaintiff must show that the defendant (1) had knowledge of the infringing activity, and (2) materially contributed to the infringement. For vicarious liability, on the other hand, the plaintiff must show that the defendant (1) received some financial benefit from the infringement, and (2) had the right and ability to control or stop the infringing activity.

      5. The Recording Industry and Digital Technology
      6. Before digital formatting was developed, the recording industry produced music in analog format. The nature of the process for producing or reproducing analog recordings was such that the sound quality of analog copies diminished with each subsequent generation. Further, the ability to make multiple analog copies required an investment in expensive copying equipment. There was little risk that the average music fan would set up a bootlegging shop. With the emergence of digital formatting, however, one person equipped with a computer can easily reproduce unlimited perfect copies of a recording. Furthermore, if that person’s computer is connected to the Internet, he or she can distribute that perfect copy all around the world at little to no cost. The popularity of such file-swapping has placed the recording industry in the awkward position of labeling the activities of its consumer base as “piracy.” In efforts to contain file-swapping, the recording industry has challenged both the file-swapping services and those end-users who actually swap files. The recording industry has also turned to lobbying efforts and technological measures such as digital encryption to deal with the challenges.


    2. The Record Industry’s Approach to File-Swapping


      1. The Software


        1. A&M Records v. Napster, 239 F.3d 1004 (9th Cir. 2001).

        2. In December 1999, A&M Records brought suit against Napster for contributory and vicarious infringement. On July 26, 2000, a federal trial court granted a preliminary injunction against Napster prohibiting it “from engaging in, or facilitating others in copying, downloading, uploading, transmitting, or distributing plaintiffs’ copyrighted musical compositions and sound recordings.” Napster appealed to the U.S. Court of Appeals for the Ninth Circuit which affirmed the injunction. Central to the Ninth Circuit’s finding of contributory infringement was the fact that Napster maintained a central server with the names of all of the files that were being swapped on its system and thus had actual knowledge of the infringement. Also, because this central server was an integral part of the system and its maintenance was necessary for the file-swapping to occur, the Court found that Napster could essentially control the file-swapping and thus satisfied a central requirement for vicarious liability as well.


        3. Arista Records, Inc. v. MP3Board, Inc., Copyr. L. Rep. 28,483 (S.D.N.Y 2002).

        4. Arista Records filed a suit against MP3Board, alleging that MP3Board’s website supported copyright infringement by users. The parties filed motions for summary judgment. MP3Board’s site allegedly linked users to unauthorized copies of music recordings. Arista argued that MP3Board should be held liable for both contributory and vicarious infringement. The Court denied Arista’s motion, ruling that issues of fact remained as to whether the users actually downloaded files, and whether the files were disseminated to the public. The district court also rejected MP3Board’s fair use arguments and denied its claim.

        5. In re Aimster Copyright Litig., 334 F.3d 643 (7th Cir. 2003).

        6. On June 30, 2003, the U.S. Court of Appeals for the Seventh Circuit denied Aimster’s (now called “Madster”) appeal of a federal trial judge’s entry of a preliminary injunction against the company. Aimster argued that the breadth of the injunction had the effect of shutting it down. Plaintiff owners of copyrighted popular music successfully argued that Aimster had committed contributory and vicarious copyright infringement.

          Aimster was a file-swapping service that piggy-backed off of AOL’s popular Instant Messenger and allowed users to swap their computer files containing copyrighted music. Like Napster, Aimster maintained a central server that facilitated the file-sharing, though the contents of the files were encrypted.

          The recording industry argued that Aimster provided a service and did not sell “articles of commerce” like Sony. The Seventh Circuit distinguished Sony from this case. Sony relinquished control over the use of the Betamax recorders after they were distributed. Aimster provided a “service” in maintaining the central server and as such maintained control over the service while the infringing acts were taking place.

          On January 13, 2004, the U.S. Supreme Court denied Aimster’s appeal petition. This means that the injunction issued by the trial court in 2001 and upheld by the Seventh Circuit in 2003 stands.

        7. Metro-Goldwyn-Mayer v. Grokster, 380 F.3d 1154 (9th Cir 2004).

        8. In Metro-Goldwyn-Mayer v. Grokster, a federal trial court in Los Angeles, CA granted the motions for summary judgment of Grokster and StreamCast Networks. The defendants argued in their motions that their products include substantial non-infringing uses and therefore, under the Sony decision, do not constitute contributory infringement. The trial judge agreed, and dismissed many of the claims against the defendants, stating they were not liable for copyright infringement claims resulting from use of their software. The Electronic Frontier Foundation stated that the case sends a “strong message to the technology community that the court understands the risk to innovation.” On July 2, 2003, the Court dismissed counterclaims filed by Sharman Networks (the parent company of KaZaa), one of the defendants in the suit, against the record industry and the movie studios for antitrust and copyright misuse.

          On August 19, 2004, the Ninth Circuit found that peer-to-peer file-sharing computer networking distributors are not liable for either contributory or vicarious infringement.

          Grokster, along with similar companies such as KaZaa, distributes software that allows users to share files without using a centralized server. Instead, Grokster’s software incorporates another program, such as Gnutella or FastTrack, which creates a “peer-to-peer” network that allows users’ computers to communicate directly with each other. When a user launches KaZaa’s or Grokster’s software and searches for a file, the search request is passed from user to user until a match is found. In this way, Grokster differs from Napster because Grokster and KaZaa do not index information in the same way that Napster did. There is no centralized location where the traded material is catalogued. As configured, Grokster’s and KaZaa’s software do not enable them to know what copyrighted works are being swapped. The Court noted, “In the context of this case, the software design is of great importance.”

          Very recently, the Supreme Court agreed to review the Ninth Circuit's decision.

          In a similar case, in December 2003, the Supreme Court of the Netherlands upheld an appellate court’s holding that the file-swapping software company, KaZaa BV, was not liable for the copyright infringement of its users. The appellate court’s decision was the first anywhere to protect a file-swapping company against copyright liability. Further, the decision is comparable to the Sony decision in the United States.

      2. The Consumers


        1. Recording Indus. Ass’n of Amer. v. Verizon Internet Servs., 351 F.3d 1229 (D.C. Cir. 2003).

        2. At first, the RIAA focused on litigation targeting file-swapping services with centralized servers that could be shut down. In peer-to-peer systems, however, there are no centralized servers that the RIAA can pursue. So, the record companies sought out individual infringers using a controversial subpoena provision of the Digital Millennium Copyright Act ("DMCA"). This procedure, they argued, allowed copyright holders to compel Internet Service Providers ("ISPs") to surrender the names of alleged infringers.

          The RIAA argued this point before a federal court in Washington, D.C. in an effort to obtain the names of Verizon subscribers who were allegedly engaging in unauthorized file-swapping. Agreeing with the RIAA, the court ordered Verizon to hand over the names of its subscribers. The U.S. Court of Appeals for the District of Columbia Circuit affirmed the district court’s decision to authorize the subpoena.

          Verizon again came before the D.C. Circuit to quash a second subpoena. This time the D.C. Circuit overruled the lower court and found that both subpoenas were improper. The Court found that under the DMCA a subpoena could be issued to only an ISP that actually stored infringing material on its servers. As Verizon merely acted as a conduit to infringing material, the district court had improperly authorized the subpoena. The D.C. Circuit, therefore, granted Verizon’s order to quash the second subpoena and vacated the order enforcing the first.

          On October 12, 2004, the Supreme Court denied the RIAA’s petition for certiorari, thus leaving the D.C. Circuit’s decision to govern the use of this DMCA provision within the circuit.

        3. Surveillance

        4. In June 2003, the RIAA began large-scale surveillance of peer-to-peer networks, gathering evidence and preparing lawsuits against users who “share” a “substantial amount” of copyrighted songs over the Internet. Thousands of lawsuits could potentially be filed against alleged copyright infringers. RIAA President Cary Sherman said that “the law is clear…this activity is illegal, you are not anonymous when you do it, and engaging in it can have real consequences.” The RIAA maintains that peer-to-peer piracy is negatively affecting artists and their livelihood.

          In a lawsuit filed by BMG Music and other record labels against 203 peer-to-peer users in Philadelphia, PA, Judge Clarence Newcomer ruled that BMG had improperly joined 202 of the defendant file-swappers pursuant to Federal Rules of Civil Procedure 20-21. The Court ordered the record labels to file separate complaints against each of the defendants.

          In a similar case in Atlanta, the Court declined to rule on the joinder issue, but required that the ISP be allowed 25 days before complying with the subpoena, so that the subscribers could have extra time to object to identification if they so desired − as had subscribers in the Verizon case filed in the District of Columbia.

      3. Lobbying and Legislation


        1. Inducing Infringement of Copyrights Act of 2004

        2. On June 22, 2004, six U.S. senators introduced a bill in the Senate aimed at holding technology companies responsible for the copyright infringement allowed, or “induced,” by their devices. Sen. Orrin Hatch’s (R-UT) press release states that the proposal is directly in response to the Grokster court’s failure to “impose liability upon distributors who appeared to induce and profit from users’ infringement.”

          The language of the proposed Act in its original form is as follows:
          SECTION 1. SHORT TITLE.

          This Act may be cited as the “Inducing Infringement of Copyrights Act of 2004.”

          SEC. 2. INTENTIONAL INDUCEMENT OF COPYRIGHT INFRINGEMENT.

          Section 501 of title 17, United States Code, is amended by adding at the end the following:

          (g)(1) In this subsection, the term "intentionally induces" means intentionally aids, abets, induces, or procures, and intent may be shown by acts from which a reasonable person would find intent to induce infringement based upon all relevant information about such acts then reasonably available to the actor, including whether the activity relies on infringement for its commercial viability.

          (2) Whoever intentionally induces any violation identified in subsection (a) shall be liable as an infringer.

          (3) Nothing in this subsection shall enlarge or diminish the doctrines of vicarious and contributory liability for copyright infringement or require any court to unjustly withhold or impose any secondary liability for copyright infringement.

          In August 2004, the sponsors of the bill asked the U.S. Copyright Office for recommendations in drafting the bill and the Copyright Office responded with a longer, more detailed draft.

          On October 7, 2004, the Senate Judiciary Committee postponed a final review of the Induce Act after negotiations among the principal parties involved in crafting the bill collapsed. Sen. Hatch has promised to pursue the legislation in the next term of Congress.

        3. Consumers, Schools and Libraries Digital Rights Management Awareness Act of 2003

        4. Sen. Sam Brownback (D-KS) introduced the Consumers, Schools and Libraries Digital Rights Management Awareness Act of 2003 on September 21, 2003. This bill seeks to regulate digital rights managements ("DRM") in order to reduce widespread copyright infringement on the Internet.

          The RIAA criticized the legislation, stating that it is “weighted down with a variety of bad public policy judgments hostile to all property owners.” If the legislation is enacted, the Federal Trade Commission ("FTC") will have the power to ban DRM systems that limit a consumer’s right to resell digital media products, which may include computer software, e-books, copy-protected CDs and DVDs. The companies selling such material will also be required to label products with the anticopying technology following FTC rules.

          The Act has been referred to the House Committee on Commerce, Science, and Transportation, where it is currently under review.

        5. The Public Domain Enhancement Act

        6. On June 25, 2003, two members of Congress introduced a new bill, the Public Domain Enhancement Act, that would require the owners of copyrighted works to pay a $1.00 fee to renew their copyrights after 50 years have passed from the date of publication. This bill would address the 1998 changes to copyright law passed in the Sonny Bono Copyright Term Extension Act.

          The Act has been referred to the House Subcommittee on Courts, the Internet, and Intellectual Property, where it is currently under review.

        7. The Piracy Deterrence and Education Act

        8. The Piracy Deterrence and Education Act seeks to create a program to deter online trafficking of copyrighted material and to include federal agents in the investigation and prosecution of copyright violations. The FBI and Departments of Justice, Education, and Commerce would work together to educate the public. Cary Sherman of the RIAA states, “The Smith-Berman legislation will strengthen the hand of the FBI and other federal law enforcement officials to address the rampant copyright infringement occurring on peer-to-peer networks.”

          The House passed this Act on September 28, 2004. It has been sent to the Senate for review.

        9. Artists’ Rights and Theft Prevention Act

        10. On November 23, 2003, Sen. Patrick Leahy (D-VT) proposed this legislation which would increase criminal penalties for copyright infringement committed by making copyrighted movies and music available online before the works are officially released.

          The unauthorized release of copyrighted materials before their intended release date has been an increasing problem for the record industry. One notable recent example was The Black Album by superstar rap artist Jay-Z.

          The Act would place a file-swapper in prison for up to three years if the swapper’s computer contains even one prerelease music recording.

          The Act passed the Senate on June 25, 2004 and is now under review in the House Subcommittee on the Judiciary.

        11. Gov. Schwarzenegger’s File-Swapping Law

        12. On September 29, 2004, Cal. Gov. Arnold Schwarzenegger signed a bill that seeks to terminate file-swapping by requiring file-swappers who share files to ten or more users to provide legitimate e-mail addresses. Those who violate the law can be charged with a misdemeanor resulting in up to $2,500 in fines and possibly jail time. Minors, however, would be charged only $250 for their first two offenses.

        13. House Resolution to Urge China to Prevent Piracy

        14. In March 2004, Rep. Diane Watson (D-CA) introduced a House Resolution urging the government of the People’s Republic of China to improve its protection of intellectual property rights.

          This resolution is designed to remedy the enormous economic loss caused by China’s production and exportation of pirated goods. The resolution would urge the Chinese government to: (1) undertake a coordinated nationwide intellectual property rights enforcement campaign, including implementing a legal framework for better protecting intellectual property rights; (2) eliminate the high criminal liability threshold that impedes criminal prosecution of infringers; (3) implement more effective customs and border measures to prevent the exportation of pirated material to the United States and other countries; (4) give greater market access to foreign producers of legitimate works to reduce demand for pirated goods; and (5) promptly accede to the 1996 World Intellectual Property Organization ("WIPO") Internet-related treaties and to harmonize its policies with these treaties.

          The resolution has been referred to House Committee on International Relations and has 27 cosponsors.

      4. Online Music Alternatives

      5. The search for a viable business model to facilitate the legitimate distribution of music over the Internet continues and copyright issues, naturally, play a central role in the quest.


        1. Apple’s iTunes

        2. Apple’s iTunes entered the market for digital distribution of songs in May 2003. It has since overwhelmed its competition, but has not ended free downloading.

          iTunes now has about 70 percent of the market in paid song downloads. The company announced on July 11, 2004 that customers have now downloaded over 100 millions songs from its service.

          Songs bought on iTunes are delivered in Apple’s proprietary AAC format. The AAC format is an extension of the MP3 format, but includes Apple’s FairPlay DRM system. With FairPlay, a user can buy music via iTunes and can share it with up to five computers.

        3. Passalong

        4. On September 23, 2004, Passalong Networks launched its unique take on the online music store model. In addition to allowing individual song purchases, Passalong incorporates a recommendation system that rewards users for persuading their friends and family members to purchase songs at their recommendation. The rewards result in discounts on future purchases for the recommending user.

        5. Virgin Digital & Microsoft

        6. Virgin Records and Microsoft have also jumped into the online music retail business with the launches of Virgin’s Digital Megastore and Microsoft’s MSN Music. Virgin’s store incorporates individual song downloads, a subscription-based on-demand service, and Virgin Radio. MSN Music works with Window’s Media Player 10.0.

        7. RealNetworks’ Rhapsody

        8. Instead of buying songs and albums on the Internet, consumers may also subscribe to a digital-jukebox service like RealNetworks’ Rhapsody. Rhapsody allows a user to pay a monthly fee in exchange for on-demand access to Rhapsody’s music library.

          Streaming Audio does not allow users to own or keep the songs to which they have access; however, the relatively affordable monthly price makes streaming audio an attractive alternative to many customers.

  2. Sampling

    1. Sampling of Unoriginal Jazz Loop Not Actionable
    2. In Newton v. Diamond, 349 F.3d 591 (9th Cir. 2003), the Ninth Circuit rejected jazz musician James Newton’s claim of copyright infringement brought against the rap/rock outfit the Beastie Boys. Newton claimed that the Beastie Boys sampled his six-second, three-note sequence without permission. The Beastie Boys, who had cleared the sound recording with ECM Records, but not the musical composition, which Newton owned, looped (repeated continuously) the sequence throughout their popular song “Pass the Mic.”

      The Ninth Circuit held that the sequence was not sufficiently original to be afforded copyright protection. The Court found that even if the sequence were original, the Beastie Boys’ use of the sequence was de minimis.

    3. Bridgeport Music, Inc. v. Dimension Films, 383 F.3d 390 (6th Cir. 2004).
    4. On September 7, 2004, the U.S. Court of Appeals for the Sixth Circuit held that any unlicensed sampling of sound recordings constitutes direct copyright infringement. The case involved the song “100 Miles and Runnin'” from the soundtrack to the movie “I Got the Hook Up.” The song used a three-note, four-second sample of a guitar riff from the song “Get Off Your Ass and Jam.” The Court based its decision primarily on the text of Section 114(b) of the U.S. Copyright Act which grants sound recording copyright holders the exclusive right to “rearrange” or “remix” the recording. Given that “sampling is never accidental,” and that the defendants in this case admitted to sampling the song, the Court saw no reason to conduct the usual “substantial similarity” test for direct copyright infringement. The Court also reasoned that a bright-line rule was in the best interests of both songwriters and the courts. The message was clear: “Get a license or do not sample.”

    III. Conclusion

    Digital transmission has forever changed the landscape of the music industry, creating potential new outlets for record companies, but also new concerns about unauthorized copying and distribution. While digital transmission allows listeners anywhere in the world quickly and easily to access near-CD-quality sound files, at the same time it creates the opportunity for unauthorized copying and distribution. Copyright owners, users and lawmakers have yet to come to a common understanding on the solutions that will strike the appropriate balance between the interests of consumers and those of copyright owners. Because copyright is national and Internet distribution is inherently international, finding frameworks for legal worldwide distribution is ultimately one of the most complex and important challenges ahead. Consumers want music everywhere and the challenge to copyright owners is to find a business model that achieves that goal while supporting the creators and their distributors.

(Originally published by Fish & Richardson P.C. Reprinted with permission.)

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Webcasting Sports:
Professional Leagues Battle Real-Time Use Of Game Data

By Andrew L. Deutsch
Piper Rudnick

Mr. Deutsch is a partner in Piper’s Intellectual Property Practice Group in New York, NY. He was lead counsel for STATS, Inc. in the National Basketball Ass’n v. Motorola, Inc. litigation described in this article.


    A question dear to the hearts of sports fans and copyright lawyers is once again the subject of controversy: Do sports leagues have any exclusive rights in the statistics and scores of games?

    This question was apparently settled in 1997 in National Basketball Ass’n v. Motorola, Inc., 105 F.3d 841 (2d Cir.) (“NBA”), which permitted STATS, Inc., a sports statistics company, to continue transmitting continuously updated scores and statistics from ongoing NBA games to pagers and Internet users.

    The data had been gathered by “reporters” who watched game broadcasts on television and entered events such as baskets and fouls on computers. The U.S. Court of Appeals for the Second Circuit held that STATS had not committed copyright infringement because basketball games themselves did not fall within the subject matter of copyright, and extracting game data did not infringe the NBA’s copyright in recorded game broadcasts. Moreover, the Court found, STATS was not committing “hot news” misappropriation. NBA has been viewed by other courts of appeals and leading commentators as correctly stating the law governing rights in factual data. See, e.g., McKevitt v. Pallasch, 339 F.3d 530, 534-35 (7th Cir. 2003); Wrench LLC v. Taco Bell Corp., 256 F.3d 446, 457-58 (6th Cir. 2001).

    One important thing has changed since NBA: the economic value of online sports data. Sports data is now big business. More than 150 million Americans have access to the Internet, and what many of them want to see — particularly 18- to 34-year-old men, who make up a disproportionately large share of Internet users — is information about sports. Over 20 million Internet users play in fantasy sports leagues, which require daily updated statistics, and websites earn a reported $500 million annually from fantasy sports. Many fans follow their teams by viewing sites that provide pitch-by-pitch or play-by-play “real-time” information.

    Paralleling this growth in consumer interest has been the increasing sophistication of sports websites. Sites that complement broadcast and print sports media, such as espn.com, sportsline.com (owned by CBS) and msnbc.com, have led the way. Most of these sites offer real-time game data gathered by providers that are not licensed by the major sports leagues. The leagues and the PGA Tour have also made substantial investments in their own websites, which offer free real-time game data, as well as streaming video and audio of games for a subscription fee.

    Since NBA was decided, the leagues have come to view Internet coverage of in-progress games as unwelcome competition for their own websites. They have responded by using their property rights control over arenas and stadiums. Today, the leagues generally condition the issuance of press credentials to non-broadcast licensee media on their agreement not to transmit real-time game information from the arenas.

    While the leagues have not yet acted against sites that take data from game broadcasts, this may change. Bob Bowman, chief executive officer of Major League Baseball Advanced Media (“MLB”), was reported as challenging the right of websites to provide pitch-by-pitch “gamecasts” of major league baseball games without taking a license from MLB.

    “If someone is communicating information about a game in real time, on a pitch-by-pitch basis, that’s an exhibition of that game,” he said. “There’s no difference, in our eyes, between exhibiting a game using text or graphics and doing it on radio or television.”

    Mr. Bowman further noted that, while MLB did not challenge the conclusion in NBA, “if you’re describing what happens every time a pitcher moves his arm, that is an exhibition of the game. Anything more granular than [broadcasting scores] every half-inning is something we think might be a problem.”

    The question thus arises: Does pitch-by-pitch webcasting of baseball games (or other play-by-play accounts of other sports events) fall outside of NBA’s protections? If it does not, what can professional sports leagues do about competitive use of real-time game data taken from broadcasts?

    MLB will have difficulty distinguishing unlicensed pitch-by-pitch reporting of baseball games from the facts in NBA. The transmissions of data in NBA were already fairly “granular”: the pagers serviced by STATS displayed information such as the teams playing, the current scores, the team with possession, the quarter, and time remaining in the quarter. Scores were updated every two-to-three minutes, with a lag of two-to-three minutes between game action and when the events appeared on the pager.

    More significantly, it is unlikely that MLB can establish any legal remedy against such webcasts. Facts are not protected by copyright. NBA holds that baseball games themselves are not copyrightable. It follows that the facts of games — even at the fine “grain” of individual balls, strikes, fouls and baskets — are equally uncopyrightable. Someone who is merely transmitting data extracted from watching or listening to a public game broadcast does not infringe any rights protected by copyright or misappropriation theory.

    Broadcasts of games, in contrast, are copyrightable when recorded. Some unlicensed websites depict the data of ongoing baseball games by putting small icons of “players” on bases currently occupied by actual players, or showing the location of individual pitches in relation to the strike zone. But courts are not likely to view such displays as infringing copyrights in game broadcasts.

    To establish copyright infringement, a plaintiff must show that (1) a defendant had access to the copyrighted work, and (2) there is substantial similarity between the protected expression of the original work and the defendant’s work. The expression that is protected in a sports broadcast are things such as the camera angle, the producer’s decision to isolate a particular moment of game play, or the broadcaster’s color commentary, according to NBA.

    None of these elements are taken in the current versions of unlicensed sports websites. A graphic representation of scoring data does not substantially replicate the depictions shown on a television broadcast.

    Despite the enduring vitality of the NBA case, proprietors of professional sports events have some natural advantages over their unlicensed competitors that can be protected by legal means.

    One widely-followed event — the PGA Tour — has an advantage in the very nature of the sport. The relevant action in a baseball, basketball or football game takes place before the camera’s eye, but a professional golf tournament (most of which is not televised) is played over 18 holes of a course. Scoring and other data is gathered by tournament volunteers on wireless devices who send it to a central location, where the data is compiled, then transmitted to leaderboards on the course, to the media center at the tournament, and to the PGA Tour’s website, pgatour.com.

    The PGA Tour protects itself against competition by barring spectators and media from using wireless devices on the course, and limiting access to its media center to organizations that agree to delay publication of scoring information on their own sites until after the information is posted on the PGA Tour’s site.

    The PGA Tour also lawfully prohibits credentialed media organizations from selling the real-time scoring information to non-credentialed Internet publishers without permission, the U.S. Court of Appeals for the Eleventh Circuit ruled in Morris Communications Corp. v. PGA Tour, Inc., 364 F.3d 1288 (2004).

    The Eleventh Circuit wrote that these restrictions, which effectively eliminate competition in the transmission of real-time golf scores, do not violate federal antitrust law.

    The plaintiff was a media organization that published newspapers and operated a website, and wanted to sell real-time tournament scoring information to other site operators. It claimed that the PGA Tour’s restrictions on resale of scoring information violated Section 2 of the Sherman Act.

    The Eleventh Circuit rejected this assertion. It held that the antitrust claims failed because the PGA Tour had a “valid business justification” for its restrictions: the need to prevent others from “free-riding” on the Tour’s investment in “compiled real-time golf scores.”

    The Morris Court characterized the scores as the derivative product of the PGA Tour’s proprietary score compilation system. It further held that Morris had not met the burden of showing that this business justification was pretextual.

    While a victory for the PGA Tour, Morris is unlikely to be read as weakening the holding in NBA. Golf is the only professional sport in which the event proprietor can exercise an effective monopoly over the compilation of scoring information.

    The Eleventh Circuit also emphasized the narrowness of its decision, noting that the case was not about copyright law, the First Amendment or the right of the press to report sports news, but was concerned with just the sale of real-time golf scores to non-credentialed media outlets.

    The Morris Court also noted that it was not addressing the plaintiff’s right to disseminate those scores to its own newspapers or have them report scores on their own sites after they appear on pgatour.com. Moreover, the PGA Tour conceded that once it posts scores on its site, they are in the public domain.

    Even sports leagues that televise their games in full have a competitive advantage that unlicensed sports websites lack: the ability to gather richer, more detailed data at the arena than any viewer can extract from a TV broadcast.

    MLB, for example, is installing a multi-camera system in ballparks to capture pitch speeds, pitch selections and ultimately such information as how far players must move to field hit balls.

    The NBA’s GAMESTATS system posts a series of statisticians at courtside who capture such data as whether a player dunked the ball, whether it was a running, reverse or slam dunk, and so forth; the data feed is then transmitted to the NBA’s own website.

    This league-compiled data is protected from competitive use under the “hot news” misappropriation doctrine. See International News Serv. v. Associated Press, 248 U.S. 215 (1918); NBA, 105 F.3d at 854.

    In NBA itself, the Second Circuit considered an early version of the NBA’s GAMESTATS system. It held that STATS was not “free-riding” on the NBA’s investment in GAMESTATS because STATS was collecting game data at its own expense, not using the data gathered by the NBA.

    In contrast, a competitor’s use of data from a league-compiled system would be misappropriation because the leagues would bear costs to collect facts that the competitor did not, and because allowing such free-riding would deter leagues from investing in the systems needed to collect and transmit real-time game data.

    As a result of the legal landscape, sports websites are likely to evolve into a two-tier system. The casual fan will still be able to follow the score of an in-progress game on free websites that are not licensed by the leagues. The leagues will compete in this market by offering free scores and basic statistics, possibly enhanced with selections of their proprietary data streams.

    However, fantasy-team managers and other hardcore sports fans will pay for premium access to enhanced data, as well as the streaming audio and video, that only the leagues and league-licensed sites can provide.

(This article originally appeared in New York Law Journal. Reprinted with permission.)


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Cyber-Griping: Complain, But Don't Go Commercial
Jonathan Hudis
Oblon, Spivak, McClelland, Maier & Neustadt, P.C.

Mr. Hudis is a partner in Oblon’s Trademark and Copyright Department in Alexandria, VA. This article is an excerpt from a longer piece, which may be found at
www.oblon.com/Pub/Hudis-Cyber-Griping-Article.pdf. Reprinted with permission.

 

    The freedom of speech granted by the U.S. Constitution gives us the right to complain. We are given the right to send a critical letter to our newspaper editor, express our displeasure in a television interview, or produce an entire movie critical of our government (e.g., “Fahrenheit 9/11”).

    Introduction

    On the Internet, it has become fashionable to register a domain name incorporating the trademark or company name of the target of one’s ire. The domain name is then used to identify the location of website content critical of the target’s products, services, beliefs or business practices. Other common tactics have been to incorporate the target’s trademark or company name as part of the critic’s website content, or into the metatags of computer code used to create a derogatory website, so that search engines will find the sites when the target’s trademark or company name is used as a search term. These practices have come to be known as “cyber-griping.” This phenomenon has become so prevalent that the website webgripesites.com was established to collect links to numerous online grumblers.

    Early trademark infringement and dilution actions against domain name and web gripe sites (circa 1997-1999) were brought generally under the Trademark Act, 15 U.S.C. §§ 1114(1), 1125(a), or the Federal Trademark Dilution Act (“FTDA”), 15 U.S.C. §§ 1125(c), 1127, and related state laws. In 1999, the Anti-Cybersquatting Consumer Protection Act (“ACPA”), 15 U.S.C. § 1125(d), was enacted specifically to target domain-name-related trademark claims. Lately, trademark owners seeking to use these statutes to take down critical websites are encountering increased judicial resistance.

    Early cyber-griping decisions showed a willingness by the judiciary to allow plaintiffs to use U.S. trademark law as a means of stamping out critical online content. These early decisions more readily found cyber-gripers to have engaged in online “commercial” activity, so as to bring unauthorized online uses of others’ trademarks within the reach of the Trademark Act. Judicial efforts to curb unauthorized uses of trademarks on the Internet, whether as domain names, website banners, or website metatags, took precedence over First Amendment/free speech and fair use concerns. Disclaimer language posted on the cyber-griper websites did not detract from the courts’ zeal to find trademark liability. See, e.g., Planned Parenthood Federation of Amer., Inc. v. Bucci , 1997 U.S. Dist. LEXIS 3338 (S.D.N.Y. 1997), aff’d mem., 152 F.3d 920 (2d Cir. 1998); Jews for Jesus v. Brodsky, 993 F. Supp. 282 (D.N.J. 1998); OBH, Inc. v. Spotlight Magazine, Inc., 86 F. Supp. 2d 176 (W.D.N.Y. 2000); People for the Ethical Treatment of Animals v. Doughney, 263 F.3d 359 (4th Cir. 2001).

    More Recent Efforts to Disable Critical Websites Have Been Less Successful

    The early cyber-griping opinions finding in favor of plaintiff trademark owners are fading into case law history. Recently, the courts have been much less willing to allow use of the Trademark Act to silence free and open critical expression.

    One of the lone cyber-griping opinions of the late 1990s finding in favor of the defendant cyber-griper was Bally Total Fitness Holding Corp. v. Faber, 29 F. Supp. 2d 1161 (C.D. Cal. 1998). In this case, Bally Total Fitness (“Bally”) was the owner and user of the marks BALLY, BALLY’S TOTAL FITNESS, BALLY TOTAL FITNESS and others in connection with health club services. Andrew Faber was a website designer who posted his website content under numerous sub-domains from his main domain name compupix.com. One such sub-domain was the URL http://www.compupix/ballysucks. On his “Bally Sucks” website, Faber posted information dedicated to complaints about Bally’s health club chain. Bally’s mark appeared prominently on Faber’s site with the word “sucks” superimposed over it. The site also stated that it was “unauthorized.”

    Seeking to halt the derogatory postings on Faber’s website, Bally sued Faber for trademark infringement, trademark dilution and unfair competition. The Court, however, found no liability as a matter of law, and ruled in Faber’s favor on summary judgment.

    In the course of its opinion, the Bally Court noted that the manner in which Faber used the BALLY mark on the Internet was not commercial in nature. Faber did not use the BALLY mark to sell his services or to promote his goods in commerce, but rather to express his views of Bally’s business practices. The Bally Court also opined that Bally was asserting its trademark rights in a manner that would “eclipse [Faber’s] First Amendment rights.”

    For a while, the Bally decision was one of the few cyber-griping cases in which a defendant cyber-griper had prevailed. In the last several years, however, the Bally opinion has been joined by an ever-growing number of decisions finding in favor of the right to express critical online content.

    In Bihari v. Gross, 119 F. Supp. 2d 309 (S.D.N.Y. 2000), Marianne Bihari was a well-known, high-end interior designer who served the New York City market under the mark BIHARI INTERIORS. Craig Gross contracted for Bihari’s services, but their relationship soured and the contract for services was never completed. Dissatisfied with Bihari’s business practices, Gross registered four domain names, bihari.com, bihariinteriors.com, designscam.com, and manhattaninteriordesign.com, and at various times posted content to websites under these domain names that disparaged Bihari. Shortly after being served with Bihari’s complaint, Gross relinquished his registrations of the bihari.com and bihariinteriors.com domain names. Gross, however, continued posting his disparaging content to the other two websites, and also embedded the phrase “Bihari Interiors” within the metatags of his websites so that Internet search engines would locate these sites when the phrase was used as a search term.

    Bihari sued Gross, alleging violations of the ACPA, trademark infringement, and state-law claims for dilution, unfair competition, interference with prospective business relations and common law libel. The district court denied Bihari’s motion for a preliminary injunction on her federal claims and on her state-law claim for libel.

    Gross’s sites themselves did not offer commercial transactions. Gross was not an interior designer, and did not purport to sell website visitors any products or services. However, Gross’s websites contained hyperlinks promoting the services of other interior designers. Gross admitted that he designed his website to steer potential customers away from Bihari and toward her competitors. The Bihari Court therefore concluded that Gross had “transform[ed] his otherwise protected speech into a commercial use.”

    On the other hand, the Bihari Court found that any likelihood of confusion created by Gross’s websites was minimal, and that Bihari failed to prove a likelihood of initial interest confusion. Confusion was unlikely because the disparaging content of Gross’s websites made it unlikely that Internet visitors would believe the sites were sponsored by Bihari. Gross’s metatag use of “Bihari Interiors” was not a bad-faith attempt to trick Internet users into visiting his websites, but rather a means of cataloging the content of those sites. Therefore, Gross did not engage in conduct that would create a likelihood of initial interest confusion.

    The Bihari Court also found Gross’s metatag use of “Bihari Interiors” to be protected fair use. Gross did not use “Bihari Interiors” in a trademark manner, but rather in a descriptive sense to identify and catalog the content of his websites for Internet search engines. That Gross had prior knowledge of “Bihari Interiors” as a trademark did not detract from his good faith metatag use. The Bihari Court upheld Gross’s fair use defense in part on First Amendment/free speech grounds. The Court also found Bihari’s requested preliminary injunction for libel would be an unconstitutional prior restraint on Gross’s free speech rights.

    In The Taubman Co. v. Webfeats, 319 F.3d 770 (6th Cir. 2003), The Taubman Co. (“Taubman”) was in the process of building a shopping mall to be called “The Shops at Willow Bend.” Henry Mishkoff was a web designer who did business under the trade name “Webfeats.” Upon hearing that Taubman was erecting The Shops at Willow Bend shopping mall near his home, Mishkoff registered the domain name shopsatwillowbend.com. On his website under that domain name, Mishkoff featured information about the mall and its individual stores. Mishkoff used a prominent disclaimer on his site stating that it was “unofficial.” Mishkoff also provided a link to Taubman’s official website for the mall. Additionally, Mishkoff posted links to the website of his girlfriend’s business, shirtbiz.com, and to the website for his own business, Webfeats.

    Taubman sued Mishkoff for, inter alia, infringement and cybersquatting under the ACPA, seeking a transfer of the shopsatwillowbend.com domain name. After Taubman commenced its lawsuit, Mishkoff registered five additional domain names using combinations of the terms “taubman” or “willowbend” followed by the word “sucks.” Mishkoff’s “sucks” sites all linked to the same content; his running commentary about, and a posting of pleadings relating to, Taubman’s lawsuit.

    The district court granted Taubman’s two preliminary injunction motions, the first enjoining Mishkoff’s use of the shopsatwillowbend.com domain name and the second enjoining Mishkoff’s use of the “sucks” domain names. The U.S. Court of Appeals for the Sixth Circuit reversed the district court and dissolved both injunctions.

    The Sixth Circuit determined that the links Mishkoff established between the shopsatwillowbend.com site and the shirtbiz.com and Webfeats sites were commercial. However, Mishkoff had removed the shirtzbiz.com link prior to the issuance of the district court’s injunction (what, if anything, Mishkoff had done about the Webfeats link was unclear). The Sixth Circuit concluded that so long as Mishkoff had no links to commercial website content advertising any goods or services, the Trademark Act could not be used to enjoin the shopsatwillowbend.com site.

    The Sixth Circuit additionally found that the parties’ unsuccessful negotiations for Taubman to buy the shopsatwillowbend.com domain name did not render Mishkoff’s use of the domain name commercial, because the negotiations commenced with an offer by Taubman, not Mishkoff. Further, Mishkoff’s use of a disclaimer and a link to Taubman’s official website effectively dispelled any likelihood of confusion.

    The Sixth Circuit also held that the content on Mishkoff’s “sucks” sites was purely an exhibition of his free speech rights. Further, Mishkoff’s use of the term “sucks” in the domain names of these sites removed any confusion as to source. On these facts, the Sixth Circuit determined that the First Amendment protected Mishkoff’s use of the Internet for critical commentary when there was no confusion as to source.

    In Mayflower Transit, LLC v. Prince, 314 F. Supp. 2d 362 (D.N.J. 2004), Mayflower Transit, LLC (“Mayflower”) was an interstate moving company. With few exceptions, Mayflower was not licensed to provide intrastate moving services. Mayflower’s various agents, however, could and did provide intrastate moving services using the MAYFLOWER service mark with Mayflower’s permission.

    Brett Prince, allegedly by referral from a Mayflower sales manager, engaged one of Mayflower’s agents, Lincoln Storage Services (“Lincoln”), to provide moving and storage services for a move wholly within the State of New Jersey. The truck and boxes for, and some of the paperwork associated with, the move bore the MAYFLOWER trademark. While Prince’s possessions were stored in one of Lincoln’s trucks overnight, many of them were stolen. Prince sued Lincoln and its insurance carrier in state court, and that matter ultimately was settled.

    After the unfortunate moving incident, Prince registered the domain name mayflowervanlinebeware.com and posted a website under this name containing content critical of Mayflower, Lincoln, and their businesses. Later, Prince registered the domain names mayflowervanline.com and lincolnstoragewarehous.com containing identical critical content. At some point thereafter, Prince discontinued using the mayflowervanlinebeware.com domain name, but continued using the latter two domain names for his disparaging website content. In ensuing communications between Mayflower and Prince, Mayflower claimed it had no responsibility for the move conducted by Lincoln. Prince responded that he would not change his website content until he received a satisfactory settlement from Mayflower.

    Mayflower sued Prince, alleging violations of the ACPA, trademark dilution, and state-law claims for libel and trade libel. The parties both moved for partial summary judgment on Mayflower’s ACPA and libel claims. The Court granted Prince’s motion on Mayflower’s ACPA claim, but denied his motion regarding Mayflower’s state-law libel claims because of unresolved issues of material fact. The Court denied Mayflower’s motion in its entirety.

    The Court found in favor of Mayflower on the first two of the three prongs of its ACPA claim. The MAYFLOWER mark was distinctive for Mayflower’s services, and Prince’s mayflowervanline.com domain name was confusingly similar to the MAYFLOWER mark. However, as to the third element, the Court held that Prince did not have a bad-faith intent to profit from his registration of this domain name and thus escaped liability.

    Central to the Court’s decision in Prince’s favor was that his use of the mayflowervanline.com domain name was non-commercial and for the purpose of critical commentary that Prince had reasonable grounds to believe was lawful. Moreover, nothing contained on Prince’s website or any of his other accused actions (including his refusal to change his website content until he obtained a satisfactory settlement) showed that he registered the domain name for the purpose of selling it to Mayflower or anyone else. Additionally, none of Prince’s websites contained advertising or commercial offers to sell anything for a profit.

    In Bosley Med. Institute, Inc. v. Kremer, 2004 U.S. Dist. LEXIS 8336 (S.D. Cal. 2004), Bosley Med. Institute, Inc. (“Bosley”) provided hair transplantation and restoration services. Michael Kremer was a dissatisfied former patient. Kremer brought a medical malpractice claim against Bosley, which was dismissed on summary judgment.

    Kremer then registered the domain names bosleymedical.com and bosleymedicalviolations.com. Bosley claimed that Kremer threatened in writing to publish commentary critical of Bosley’s medical practice on these websites unless Bosley complied with Kremer’s demands for money. Ultimately, Kremer used the domain names to establish websites under the domain names that contained content critical of Bosley’s medical business practices.

    Bosley brought an administrative complaint before the World Intellectual Property Organization (“WIPO”) Arbitration and Mediation Center, seeking transfer of the domain names. The WIPO panel denied the complaint because Kremer did not register the domain names for a commercial purpose. Bosley thereupon brought a civil action against Kremer asserting claims for trademark infringement, unfair competition, dilution, cybersquatting and related state law claims.

    Kremer’s websites under the domain names bosleymedical.com and bosleymedicalviolations.com contained content critical of Bosley’s business, information about government investigations of Bosley and disciplinary proceedings brought against its founder, and commentary about Bosley’s lawsuit against Kremer. While Kremer’s websites did not contain any paid advertising or commercial content, they did contain links to sites that advertised the medical services of Bosley’s competitors.

    The Court ultimately found no evidentiary support for Bosley’s allegations that Kremer used these websites and their content for extortion or any other evidence of an intent to profit. Adopting the reasoning of Taubman, the Court also found no likelihood of confusion given Kremer’s use of a prominent disclaimer and a link to Bosley’s authorized website. Based upon these observations, the Court granted Kremer’s motions to dismiss and for summary judgment on Bosley’s federal claims. In view of California’s anti-SLAPP (Strategic Lawsuit Against Public Participation) statute, lack of Kremer’s commercial use of the domain names, and the absence of a likelihood of confusion, the Court also struck Bosley’s state-law claims. The Court denied Bosley’s cross-motion for summary judgment on its trademark infringement and dilution claims.

    In TMI, Inc. v. Maxwell, 368 F.3d 433 (5th Cir. 2004), TMI, Inc. (“TMI”) was a company that built houses under the mark TRENDMAKER HOMES. TMI advertised its services at a website under the domain name trendmakerhomes.com. Joseph Maxwell intended to buy a house from TMI, but he was unhappy with alleged misrepresentations about the availability of a certain model. Maxwell registered the domain name trendmakerhome.com and created a website under that name containing the story of his experiences with TMI. Maxwell used a disclaimer on his site stating that it was unaffiliated with TMI. Maxwell received, through his website, some e-mail intended for TMI, which Maxwell forwarded to TMI.

    Maxwell also provided a separate section of his website called “Treasure Chest,” at which readers could share information about reliable contractors and trades people. The “Treasure Chest” contained only a single listing of one contractor who had previously done work for Maxwell. Maxwell never charged money for a listing on the "Treasure Chest," or for viewing it, or for any other use of his site. Maxwell’s site contained no advertising and no links to other websites. Maxwell also was not in the business of selling domain names.

    Maxwell maintained the trendmakerhome.com domain name and website for one year. After that time, he removed the site and let his domain name registration expire. Shortly after Maxwell’s registration expired, TMI sent him a letter demanding that he take down the site and transfer the domain name to it. Maxwell then tried to reregister the domain name, but TMI obtained the registration after Maxwell let it expire. Maxwell next registered the domain name trendmakerhome.info, prompting a lawsuit by TMI. Maxwell never posted any content to a website under the trendmakerhome.info domain name.

    TMI’s claims against Maxwell included trademark dilution and unfair competition, and a violation of the ACPA. After a bench trial, the district court found that Maxwell had violated the ACPA and had engaged in trademark dilution. The district court issued an injunction against Maxwell’s use of marks or domain names similar TMI’s marks, and directed Maxwell to transfer the trendmakerhome.info domain name to TMI. The district court later signed a judgment submitted by TMI, containing additional relief not discussed in the district court’s prior opinion, including an expanded injunction, and imposing awards of monetary damages and attorneys’ fees.

    On appeal, the U.S. Court of Appeals for the Fifth Circuit reversed the district court’s judgment and issued its own judgment in Maxwell’s favor. The Fifth Circuit determined that, for TMI to obtain relief under the Federal Dilution Act, Maxwell’s use of the trendmakerhome.com or trendmakerhome.info domain names had to be commercial in nature. The Fifth Circuit declined to decide, however, whether the ACPA required Maxwell’s use of the domain names to be of a commercial nature. Rather, the ACPA required proof of only a bad-faith intent to profit from the use of the domain names.

    The Fifth Circuit held that Maxwell’s website under the trendmakerhome.com domain name was not commercial in nature, and the domain name was not used with a bad-faith intent to profit. Because the state dilution statute under which TMI sued did not cover non-trademark uses for comment, parody or disparagement of another’s goods or services, it did not apply to Maxwell.

    Concluding Thoughts and Observations

    In some early Internet cases, plaintiff trademark owners were successful in their efforts to stamp out critical website content. Courts often found that the defendant’s use of the plaintiff's mark was a commercial use, which violated the plaintiff’s trademark rights. The significance of this early line of cases fashioning liability is diminishing with the passage of time.

    Cyber-griping decisions of more recent vintage have come to opposite conclusions. Where the accused website does not post advertising or invite sales activity, and does not establish links to other websites that engage in commercial pursuits, trademark liability will not arise. If all that the cyber-griper does, using the plaintiff’s trademark online, is post content critical of the trademark owner’s products, services, beliefs or business practices, First Amendment/free speech and fair use concerns will be paramount over the trademark owner’s rights. The judiciary also is placing greater importance upon an accused party’s use of a disclaimer to ameliorate possible confusion among website visitors.

    The poet John Milton noted, “[W]hen complaints are freely heard, deeply considered, and speedily reformed, then is the utmost bound of civil liberty attained that wise men look for.” The judiciary appears to have taken Milton’s 17th century admonition to heart. The right of free expression has taken on greater importance over a trademark owner’s efforts to control the use of its trademarks on the Internet. When the conduct does not involve matters of unfair competition or the improper usurpation of customer goodwill bound up in trademark rights, but rather the constitutional right to be heard, cyber-griping is a phenomenon that trademark owners may have to live with in the future.


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This is the final issue of CIPerati for 2004. Beginning in March 2005, CIPerati will be published quarterly. We continue to seek original submissions or previously published submissions with republication rights, concerning any and all aspects of Cyberspace-related Intellectual Property law. We hope you will take the time to write if you have comments or suggestions about CIPerati.

Sincerely,


JONATHAN M. EISENBERG
Co-Editor
jeisenberg@manatt.com
CRAIG S. RUTENBERG
Co-Editor
crutenberg@manatt.com

The Intellectual Property Subcommittee of the Cyberspace Committee is devoted to the study of intellectual property issues as they relate to the Internet and electronic commerce. The Cyberspace Committee will have its Winter Working Metting at Stanford Law School, Stanford, CA, on January 28 and 29, 2005. For more information, contact I.P. Subcommittee co-chairs Eric Goldman or John E. Ottaviani.
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