Monday, February 25, 2019

Selling copyright-infringing content isn't trademark infringement or false advertising

Joint Stock Co.“Channel One Russia Worldwide” v. Russian TV Co., 2019 WL 804506, No. 18 Civ. 2318 (LGS) (S.D.N.Y. Feb. 21, 2019)

Channel One produces and broadcasts TV programming in the Russian Federation and its neighboring states, and granted third parties the “exclusive right to broadcast and re-broadcast [its] Programming and other copyrighted materials in the United States.” Russian TV allegedly runs a website through which it provides unauthorized access to the programming in the United States in exchange for a subscription fee, having decrypted or acquired unencrypted signals carrying the programming. The Russian TV website also sells set-top boxes (STBs) that facilitate unauthorized access to the Programming.  The website invites customers to “Watch Russian TV online” and advertises over 200 television channels; the complaint didn’t show use of Channel One’s marks on the website, but when unauthorized users stream the programming using Russian TV’s services, Channel One’s marks appear at the corner of the screen.

After dismissing a couple of defendants whose involvement wasn’t sufficiently pled, the court easily found that the complaint stated claims for direct copyright infringement and (in the alternative) secondary/contributory liability. In terms of unauthorized reproduction, it was reasonable to infer that the programming data remained on Russian TV’s US equipment for “at least several minutes” as required under Cartoon Network because the complaint alleged that defendants “store” Channel One’s programming signals “via equipment, including computer servers, located in the United States.” For secondary liability, given the allegations that Russian TV offered its streaming services “at far lower prices than lawfully licensed services,” it was plausible that Russian TV knew or had reason to know it was selling programming acquired through infringing activity and materially contributed to the unauthorized reproduction “by creating demand for it, advertising access to it on the Russian TV website and distributing it to subscribers.”

Trademark and false advertising claims were, however, dismissed. The complaint didn’t plausibly plead that Russian TV’s acts were likely to confuse consumers as to whether Channel One originated or sponsored Russian TV. Nor were facts alleged to show that consumers are likely to be confused about whether Russian TV or Channel One was the source of the programming. Instead, the allegation was merely that Russian TV displayed Channel One’s marks. “[A]s a general rule, the Lanham Act does not impose liability for the sale of genuine goods bearing a true mark even though the sale is not authorized by the mark owner because such a sale does not inherently cause confusion or dilution.”  

Comment: this analysis skips over a lot of detail that is fought out in other cases, particularly the various Phoenix Entertainment cases, but it gets to the right result.  There’s no such thing as a “counterfeit” digital signal in the way there can be a counterfeit purse, as long as the signal contains the content that is promised (here Channel One content).  A deepfake might be a counterfeit in the purse sense, but that’s not what’s alleged. The fact that the goods/services are intangible shouldn’t change this result (especially since the pixels on your screen don’t “come from” the broadcaster in any physical sense; the directions for how to configure them ultimately have the content creator as their source, but only through multiple intermediaries—and that’s true whether or not there’s an unauthorized rebroadcaster in the middle).  Dastar would be another way to get to this result, but it’s unnecessary where the court can see clearly the core issue, which is copyright.

False advertising: the complaint failed to plead anything that was false and advertising. Russian TV’s website states “Watch Russian TV online[.] Over 200 ... channels.” “Although this may be advertising, it is not alleged to be false.” The actual broadcasts of Channel One content weren’t “advertising or promotion” nor were they alleged to be false. Even the display of Channel One trademarks at the corner of the screen when consumers streamed the content wasn’t “commercial advertising or promotion” because that wasn’t an organized campaign by defendants to penetrate the relevant market. To the extent the false advertising claim was based on the theory that Russian TV misled consumers by “making it appear that Defendants have the right to rebroadcast [Channel One] Programming and Channels,” that didn’t work because claims about licensing aren’t misrepresentations about “the nature, characteristics, qualities, or geographic origin of ... goods or services,” as required by §43(a)(1)(B).

The DMCA anti-trafficking claim was also dismissed. The DMCA relevantly bars people from providing or otherwise trafficking in any “technology, product, service, device, component, or part thereof, that is ... designed or produced for the purpose of circumventing a technological measure.” 17 U.S.C. §§ 1201(a)(2), (b)(1). But the complaint carefully didn’t plead that the STBs provided to customers themselves circumvented any encryption, as opposed to receiving the results of prior circumvention. Accessing what’s already been obtained is not circumvention.

State law claims for unfair competition and infringement were, of course, preempted by the Copyright Act. Channel One tried to argue that Russian TV was “passing off the Russian version of Channel One Programming as the edited version of the Channel One Programming that is licensed to cable companies and IPTV providers.” First, relevant underlying facts weren’t alleged in the complaint, but more importantly, that wasn’t a passing off theory: “this alleged misrepresentation does not deceive consumers into believing they are watching Channel One programming when they are in fact watching Russian TV content.” So this theory was still preempted.

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