Wednesday, June 14, 2017

false advertising claim based on (c) ownership not preempted, court rules

Carter v. Pallante, 2017 WL 2506419, No. 16 C 6786 (N.D. Ill. Jun. 9, 2017)

Tollie Carter has sued Maria A. Pallante (now acting Register Karyn Temple Claggett) in her capacity as the Register of Copyrights, as well as ARC/Conrad Music and related companies. The present motion dealt with Carter’s allegations that the publisher defendants infringed his copyrights in certain songs by selling unauthorized licenses to third parties, who in turn publicly performed the songs.  Carter’s father and uncle were songwriters; Carter is the heir of their copyrights; they assigned rights in many songs to ARC, but Carter asserted rights in the renewal terms/terminated transfers.  Despite this, Carter alleged that the publisher defendants “represented to numerous third parties it could license—and did license to those third parties—the performance rights and other rights to [Carter’s songs],” and collected royalties for doing so.

Carter gets a very favorable set of results, predicated in part on the court’s misunderstanding of the difference between copyright rights and individual copies.  The court found that Carter had plausibly alleged direct infringement of the distribution right by alleging unauthorized licensing. But the distribution right is not the “distribution right” right, and licensing performance and other rights is not a distribution “by sale or other transfer of ownership, or by rental, lease, or lending.”  Nor did Rule 8 require Carter to specify who the third parties are, which songs were licensed, or when the licenses were sold.  This is what discovery is for.  The same analysis held for his claims of contributory and vicarious infringement (which I would have found correctly pleaded, unlike the direct infringement claims).  Any time-barred claims could be figured out on factual development.

DMCA §1202 CMI claim: Again, a favorable result.  First, the DMCA doesn’t require any relationship with digital distribution or internet commerce, just the provision of false copyright management information with the intent to facilitate infringement. And “Carter unmistakably alleges that false copyright information was conveyed with copies of the work by way of the licensing agreements he claims the Publisher Defendants entered into with third parties.” Comment: And here the court’s initial misunderstanding compounds itself: the license agreements didn’t necessarily physically convey copies of the works, only the right to make/perform copies of the works.

The court did find many of Carter’s state law claims preempted; it seems to me that all of them should have gone.  Unjust enrichment was easy: the alleged conduct was the same as the alleged infringing conduct. Failing to pay royalties/licensing revenues is not an extra element in the absence of a contract between the parties.

Deceptive trade practices under state law: The IUDTPA lists “pass[ing] off goods or services as those of another” and “caus[ing] likelihood of confusion or of misunderstanding as to the source ... of goods” as deceptive trade practices.  Generally, reverse passing off claims are preempted.  If third parties are misled by the defendants’ misrepresentations and take licenses from them instead of Carter, that’s Copyright Act territory.  However, the court accepted Carter’s argument that the publisher defendants “could have” misrepresented that they owned the copyrighted songs in advertising material without infringing copyrights to the songs.  Comment: But the whole point of advertising would have been to exercise the rights of the copyright owner—this is silly, even if the Copyright Act lacks the “offer to sell” language in the Patent Act.  See also Dastar; if the claim would be precluded under Dastar, as it would according to many courts, it should likewise be preempted when asserted as a state-law claim.  Separately, to the extent that most states—I believe Illinois among them—interpret their trademark laws to be in pari materia with federal law, the Dastar holding should apply on the merits to block the claim.

Because making misrepresentations about a copyrighted work in advertising, “short of licensing the copyrighted works at issue or taking any other action in connection with a copyright owner’s exclusive rights” isn’t among the exclusive rights in §106, the claim wasn’t preempted.  Comment: There’s also a deeper conflict here—at a minimum, the mention of “authorize” in §106 covers secondary liability, which is properly pleaded even on my interpretation.  The advertising is inherently bound up with the authorization, even if the authorization isn’t completed until someone agrees.

Tortious interference: again, this was based on the publisher defendants’ claims that they could license the songs, not qualitatively different from the alleged infringement. Carter alleged that there was an extra element of false representations, but (1) that isn’t an element of a tortious interference claim, and (2) that doesn’t create a difference in kind from copyright infringement, “because the false statements of ownership at issue were part and parcel of selling an unauthorized license in order to deprive Carter of a business opportunity.”  Comment: How is this consistent with the false advertising holding?  Just because the statements may have been made in “advertising” doesn’t mean they weren’t fundamentally connected with the thing being sold.

No comments:

Post a Comment