Predatorix possibly defamatory but not infringing

Super Future Equities, Inc. v. Wells Fargo Bank Minnesota, N.A. (N.D. Tex. Mar. 17, 2008)

As part of a lawsuit alleging a grab bag of business torts, one defendant counterclaimed for copyright infringement. Along with filing suit, plaintiffs created www.predatorix.com, which said nasty things about defendant Orix. (For all that appears from this opinion, plaintiffs have little to recommend them, but I must credit them for a better-than-average choice of protest domain name.) Predatorix.com also contained a copy of a webpage from Orix’s site, on which Orix had advertised T-shirts with a slogan touting Orix’s aggressive collection practices, “Just Pay.”

Orix counterclaimed for libel per se, based on statements basically accusing Orix of financial improprieties of various sorts. The court easily rejected the defense that the statements were mere opinion, since they recited various alleged specific facts. Even an “anonymous outrageous posting on an Internet message board” might be perceived by the audience as a statement of fact. Here, the site linked to court documents, deposition videos, news articles, etc., heightening the fact-like nature of the claims despite the formal statement that this was the creator’s personal opinion. The creator even said “I am verifying the accuracy [of one claim] and intend to post it within a few weeks.”

Defendants also argued that the heated rhetoric (“magic tricks,” “lies,” etc.) were satire or parody. The issue was “whether the publication could be reasonably understood as describing actual facts.” Again, the answer was yes.

Further, the court found that Orix was a private figure. The three relevant factors for corporations: (1) the notoriety of the corporation to the average person in the relevant area; (2) the nature of the corporation’s business (whether it makes or markets consumer goods); and (3) the frequency or intensity of media scrutiny. Orix is a “leading provider of loan servicing and asset management/loan workout services” and its customers include “some of the nation’s largest institutional investors, portfolio owners, and loan originators. But that doesn’t mean average people would be familiar with it. Orix doesn’t deal with the public. Nor does it advertise, though it occasionally issues press releases. It’s mostly discussed in business publications. Thus, the court determined that Orix was a private figure. Plaintiffs argued that the website detailed “complex schemes that may affect the well-being of untold numbers of borrowers and purchasers of mortgage backed securities, clearly a public issue.” But the court found that the statements were focused on a lawsuit between private parties, not a matter of public concern.

Because of the private figure finding, truth was an affirmative defense, and Orix didn’t need to prove falsity. Moreover, Orix need only show negligence, not actual malice.

On Orix’s business disparagement counterclaim, however, the resolution was different. The counterdefendants argued that there was no evidence of pecuniary damages, a required element. Orix argued that it was litigating the collection of a fraud judgment it obtained against another person, Avram Cimerring, and that one of the counterdefendants had testified against Orix in that litigation and used materials posted on Predatorix to support Cimerring’s claims. Thus, Orix argued, it was damaged in the amount of the attorneys’ fees it spent defending against Cimerring’s claims. Texas law, however, requires that special damages be shown in specific lost sales or “loss of trade or other dealings,” and Orix’s litigation expenses didn’t qualify. Even if attorneys’ fees could qualify as special damages, Orix was the party that sued Cimerring, so Predatorix wasn’t the cause of the lawsuit.

Orix’s copyright claim was a lot more aggressive than the rest of its litigation strategy, which seems to be saying something. Predatorix copied a page from Orix’s website (quickly removed by Orix, apparently) which offered Orix apparel for sale. The clothing bore the slogan “Just Pay” (reference here). The webpage had “three small picture images and text describing [the] apparel, offering a sale on the apparel, describing how to obtain the apparel, and describing a contest involving the apparel.” The Predatorix version had a caption stating, “Orix is determined to recover. So determined in fact, that they are willing to spend more in the pursuit of recovery, than the recovery itself.”

Totally unsurprisingly, the court found fair use. Though the use was not parodic, and was minimally transformative—it added little new expression and had no direct commentary on the webpage itself—the use was also noncommercial. Absent transformation, the relevance of commerciality was heightened. Orix argued that the copying “profited” counterdefendants by bringing them notoriety, but the court rejected that reasoning—they didn’t claim credit for the copied work and there was no evidence that they profited “professionally.” If mere peer recognition could count as profit for commerciality purposes, fair use would be gutted.

Without transformation, but with an obvious critical purpose and noncommercial nature, the first factor weighed in neither side’s favor. (Which meant, and I think the court should have said, that it weighed in the counterdefendants’ favor; noncommerciality favors fair use. Given what the court did in factor four, it’s plain that it actually weighed factor one in favor of fair use) Orix also argued that counterdefendants acted in bad faith, but bad faith for fair use purposes has involved “unauthorized use of an unpublished work or using a work for free when it could have been obtained for a fee.” Here, the Orix page was published on the internet, and there was no showing that Orix would have licensed the use for a fee.

On factor two, the court emphasized that there were only three small images on the webpage, and the majority was text. The photos didn’t rise to high levels of creativity, and the text was “more factual than creative fiction”—it instructed readers on how to get the “Just Pay” apparel and enter the contest. Moreover, the free availability of the page on Orix’s site “strongly favor[ed]” fair use. Minimal creativity plus widespread availability tilted factor two in favor of fair use.

On factor three, the court agreed with Orix that the relevant unit of analysis was the webpage, not the entire site. (The court didn’t reference the line of cases holding that what counts as a work depends on what elements have their own independent economic lives; under those decisions, the work would probably have been the entire site, not a single page.) Because the use wasn’t transformative, copying the whole thing wasn’t justified, so that disfavored fair use.

The court concluded that Predatorix’s use had no effect on the market for or value of the copyrighted work. Because the use was noncommercial, Orix had the burden of showing market harm; this it did not do. The fourth factor weighed “strongly” in favor of fair use.