Monthly Archives: October 2011

How Far Can a Long-Arm Statute Reach In Cases of Online Copyright Infringement?

Can a company that has an office in New York sue an Arizona company in the New York Courts solely on the basis that the Arizona company allegedly infringed upon the New York company’s copyright?

In a recent decision, the Court of Appeals of New York considered this question and answered in the affirmative, holding that the location of the copyright holder’s business is more determinative of where the lawsuit should be filed than the site of the alleged infringing action. Penguin Group (USA) Inc. v. American Buddha, 2011 NY Slip Op 2079 (N.Y. 2011).

The defendant, American Buddha, was an Oregon-based non-profit corporation with its principal place of business in Arizona. The company maintained the Ralph Nader Library website, which provided online access to classical literature and other works. Four of the works provided on the site had been published in print format by the plaintiff, Penguin Group (USA) Inc. (“Penguin”), which was based in New York. Penguin sued American Buddha in the United States District Court for the Southern District of New York, claiming that American Buddha uploaded unauthorized copies of four of Penguin’s books and, in doing so, violated Penguin’s copyrights. 

The District Court granted American Buddha’s motion to dismiss, finding that nothing made the suit amenable to jurisdiction in New York because the books were not copied there. Instead, they were (presumably) copied in Oregon and Arizona, the location of American Buddha’s servers.  Penguin appealed the decision.

The United States Court of Appeals for the Second Circuit certified to the Court of Appeals of New York the question of interpreting the scope of long-arm jurisdiction under CPLR 302(a)(3)(ii). It allows a court in New York to exercise personal jurisdiction over an out-of-state defendant when the nondomiciliary:

“(3) commits a tortious act without the state causing injury to person or property within the state, except as to a cause of action for defamation of character arising from the act, if he…(ii) expects or should reasonably expect the act to have consequences in the state and derive substantial revenue from interstate or international commerce.”

NY CLS CPLR Sec. 302.

This case involved downloading copyrighted material and allowing it to be available for public access online. Therefore, the Court focused on whether the site of injury refers to the location of the infringing action or the location of the principal place of business of the copyright holder.

The Court acknowledged that the question was more difficult because the alleged infringing behavior took place online. However, it found that “a New York copyright owner alleging infringement sustains an in-state injury pursuant to CLPR 302(a)(ii) when its printed literary work is uploaded without permission onto the Internet for public access.” Id. at 6. “The crux of Penguin’s copyright infringement claim is not merely the unlawful electronic copying or uploading for the four copyrighted books,” the Court held. “Rather, it is the intended consequence of those activities – the instantaneous availability of those copyrighted works on American Buddha’s Web sites for anyone, in New York or elsewhere, with an Internet connection to read and download the books free of charge.” Id. at 6.

Additionally, the Court held that infringing behavior harms a copyright holder in more ways than mere loss of revenue due to the unique bundle of rights granted to the holder. Infringement could diminish their incentive to want to continue to write and publish material, while also impairing their rights to reproduce and distribute copies by sale. As the Court determined, “[t]he injury to a New York copyright holder, while difficult to quantify, is not as remote as a purely indirect financial loss due to the broad spectrum of rights accorded by copyright law.” Id. at 8.

This decision is significant for the developing field of internet law because it notifies parties that their location or the location of their business assets will not shield them from being brought into other states if they are sued for illegally downloading copyrighted material. Those involved in activities that infringe – or even allegedly infringe – another party’s copyright may (under the right circumstances) be brought into the copyright holder’s domicile to defend themselves.

Comments/Questions: gdn@gdnlaw.com

© 2011 Nissenbaum Law Group, LLC

Can Anonymous Online Users Be Sued For Defamation?

Can the comments of anonymous online users provide the basis for a plaintiff’s defamation suit? If the users are expressing their opinion, the answer is probably no.

In Varrenti v. Gannett Co., Inc, the chief and three officers of the Brockport (N.Y.) Police Department sought to compel the Rochester Democrat & Chronicle to reveal the names and addresses of four anonymous individuals who had commented on two articles posted on the newspaper’s website between January 17 and January 20, 2011. Varrenti v. Gannett Co., Inc., 2011 NY Slip Op 21296 (N.Y. Sup. Ct. Aug. 3, 2011). The comments referred to the officers by nicknames and questioned the general effectiveness of the Village’s police department. The plaintiffs alleged that they were defamed by the anonymous defendants’ comments.

While the First Amendment protects anonymous speech, defamatory speech – whether by anonymous or identifiable sources, in print or online – is not protected. Id. at 6. However, as the Court discussed, “[e]xpressions of opinion, as opposed to assertions of fact, are deemed privileged and, no matter how offensive, cannot be the subject of an action for defamation.” Id. Therefore, if the Court determined that the anonymous defendants were merely expressing their opinions, the comments could not be the subject of a defamation suit.

The question of whether a particular statement reflects an opinion or an objective fact is a question of law for the court to decide. In order to determine whether a statement is an opinion or fact, courts consider the following factors:

1) Whether the specific language at issue has a precise meaning which is readily understood,

2) Whether the statements are capable of being proven true or false, and

3) Whether either the full context of the communication in which the statement appears or the broader social context and surrounding circumstances are such as to signal readers or listeners that what is being read or heard is likely to be opinion, not fact.

Id. at 7.

Courts place a particularly strong emphasis on the third factor, which requires “consider[ing] the content of the communication as a whole, as well as its tone and apparent purpose.” Id. This includes looking to the overall context in which the statements were made and determining “on that basis whether the reasonable reader would have believed that the challenged statements were conveying facts about the libel plaintiff.” Id. at 8.

In this case, the Court determined that the reasonable reader would interpret the statements as opinions of the anonymous defendants and, consequently, they could not be the subject of a defamation suit. “The tone of the comments was sarcastic, hyperbolic, and based on rumors that the anonymous posters heard around the Village of Brockport and about the Department,” the Court said. “Moreover, the apparent purpose of the comments made by the…defendants was to call for an investigation into the Department’s practices.” The Court’s finding was additionally influenced by the nature of the location in which the comments appeared: a message forum inviting readers to share their opinions on local news matters.

The Court’s decision grants strong protection for those posting critical commentary behind anonymous usernames. This decision is particularly significant for those who find themselves as the subject of criticism in online message boards. As long as opinions are deemed privileged, plaintiffs will struggle to recover on defamation grounds.

Comments/Questions: gdn@gdnlaw.com

© 2011 Nissenbaum Law Group, LLC

When Will Courts Compel a Defendant to Disclose Access to Material Posted On a Social Networking Site?

The proliferation of social media has opened up new avenues for defendants to collect evidence about parties filing claims against them. This has left courts to determine the proper balance between maintaining a plaintiff’s right of privacy and a defendant’s right to gather all relevant evidence needed to build its case. 

In the 2010 case Romano v. Steelcase Inc., a plaintiff in a personal injury suit claimed that an accident caused by the defendant resulted in a loss of her enjoyment of life. Romano v. Steelcase Inc., 2010 NY Slip Op 20388, 2 (N.Y. Sup. Ct. 2010). While assembling its evidence, the defendant reviewed the plaintiff’s Facebook and MySpace pages and argued that it found material that would suggest the plaintiff lived an active lifestyle after the accident. After failing to obtain answers from the plaintiff about the sites during deposition, the defendant moved for an order that would grant them access to current and historical pages and information from the plaintiff’s social networking accounts.

The defendant argued that the material it sought to obtain would conflict with the plaintiff’s claims of injury and loss of enjoyment of life. Under New York law, there must be full disclosure of any non-privileged matter that is material and necessary to the defense or prosecution of an action. CPLR 3101. Trial courts are generally granted broad discretion in supervising discovery and determining what matters are “material and necessary.” Romano at 2. Additionally, in an action seeking damages for personal injuries, discovery will usually be permitted with respect to materials relevant to both the issue of damages as well as the plaintiff’s injury. Walker v. City of New York, 205 A.D.2d 755 (N.Y. App. Div. 2d Dep’t 1994).

The Court determined that when the plaintiff created her Facebook and MySpace accounts, she consented to having her personal information shared with others and, in doing so, diminished her expectation of privacy. The Court held “that it is the very nature and purpose of these social networking sites” to have information shared and open to the public and “[s]ince Plaintiff knew that her information may become publicly available, she cannot now claim that she had a reasonable expectation of privacy.” Id. at 7.

The Court determined that Steelcase’s ability to defend itself in the action strongly relied on its access to Romano’s social network sites. “The materials including photographs contained on these sites may be relevant to the issue of damages and may disprove Plaintiff’s claims,” the Court held. Id. “Without access to these sites, Defendant will be at a distinct disadvantage in defending this action.” Id. Consequently, the Court found that Steelcase’s need outweighed any of Romano’s privacy concerns and granted the defendant’s order.

New Your Courts have denied similar requests in other cases by defendants seeking access to plaintiffs’ social networking information, holding that the requests were overly broad. See McCann v. Harleysville Ins. Co., 2010 NY Slip Op 8181 (N.Y. App. Div. 4th Dep’t 2010), Adams v. Pecile, 2011 NY Slip Op 3108 (N.Y. App. Div. 1st Dep’t 2011). The decisions suggest that parties that seek access to such material should be required to make a prima facie showing that the information is relevant to the case and particularly important to their defense.

This is an interesting decision because it begins to give an idea of how courts will balance two significant but competing interests. As individuals begin to include more information about themselves online, this balance will likely be one that courts are faced with quite often. The decisions by various New York Courts suggest that, while they are likely to infringe on a plaintiff’s right of privacy in order to let a defendant build a fair case, defense teams will still need to be able to make a strong demonstration of why such information is important to the discovery process.

Comments/Questions: gdn@gdnlaw.com

© 2011 Nissenbaum Law Group, LLC

What Is the Significance of Recent Patent Law Reform?

For the first time in almost sixty years, patent law is receiving a major update.

On September 16, 2011, President Obama signed the Leahy-Smith America Invents Act (the “Act”), providing the most significant change to patent law since the Patent Act of 1952. The Act (H.R. 1249) shifts the underlying legal framework for patents from a “first-to-invent” to “first-to-file” system. It  places a greater emphasis on the date of patent application is filed. By doing so, it puts United States law more in line with the patent laws used in other countries. The Act seeks to ensure that the first person to file the patent application and have it approved will be the owner of that patent.

Under the “first-to-invent” system, companies generally wait until patents are close to marketability before they file applications for them. The new “first-to-file” system will alter incentives and expedite the process. Companies and individuals with sufficient resources will be more likely to file patent applications earlier during the development process. A company or individual that waits to file an application will now run the risk that another company or individual will invent and file for protection of the same product and thus be granted patent protection over it. The delay that had become common under current law should diminish when the new law takes effect. The Act will apply to patents with priority claims after March 2013.

The Act also eliminates the ability for plaintiffs to sue unrelated entities in a single case. Under previous patent law, plaintiffs were able to join in one lawsuit all defendants who allegedly infringed on the plaintiff’s patent. For cases filed after September 16, 2011, plaintiffs will only be able to join defendants if the alleged infringement is based on the same product or process.

In addition to the shift to a first-to-file system, the Act makes several other significant changes to the patent system. These include:

  • Creating two additional ways for a person or company to contest an issued patent: post-grant review and inter partes review.
  • Specifying who can file a false-marking lawsuit. Under the Act, either the United States government or a competitor who can prove actual injury can sue for false marking.
  • Eliminating the “best mode” requirement. Under the Act, an applicant’s failure to disclose a “best mode” of accomplishing the invention is not a basis for invalidating an issued patent.
  • Expanding the prior commercial use defense. The defense was previously only available for method claims. It is now available for any type of claim, so long as it meets certain time requirements.
  • Scheduling the opening of additional satellite offices for the Patent and Trademark Office. Four offices are scheduled to open in the next five years, including an expected opening in Detroit.

The Act can be read in its entirety here.

Comments/Questions: gdn@gdnlaw.com

© 2011 Nissenbaum Law Group, LLC

What Remedies Would Be Allowed If New Jersey Adopts the Uniform Trade Secrets Act?

New Jersey is currently one of just four states that has not passed a version of the Uniform Trade Secrets Act, but that could all change soon.

On September 19, the Senate Commerce Committee unanimously recommended passage of A-921/S-2456. An amendment included by the committee required the bill to be returned to the Assembly for final legislative approval after it is approved by the state Senate. It has now been submitted to the Governor, who is expected to sign it.

Under current New Jersey law, trade secrets are largely protected by common law and the Computer Related Offenses Act. N.J.S.A. 2A:38A-3(a). The adoption of the Uniform Trade Secrets Act would grant trade secret protection in a manner that federal law does not provide. Currently, federal law protects patents, copyrights and trademarks. In New Jersey, there is no statute that directly protects trade secrets. The adoption of this uniform law would provide plaintiffs with the opportunity to receive civil remedies under New Jersey state law if their trade secrets are misappropriated.

New Jersey, New York, Massachusetts and Texas are the only states that have yet to pass versions of the Uniform Trade Secrets Act. However, the law is pending in Massachusetts.

The law would allow plaintiffs the opportunity to seek the following remedies:

  1. There would be damages for both actual loss suffered by the plaintiff and for any unjust enrichment enjoyed by the defendant as a result of the misappropriation. Damages may also include the imposition of reasonable royalty for unauthorized disclosure or use.
  2. There would be injunctive relief for actual or threatened misappropriation of a trade secret. (Under certain conditions, an injunction may condition future use upon payment of a reasonable royalty.)
  3. Where there is willful and malicious misappropriation of a trade secret, punitive damages in the amount of double the compensatory damages would be available under the statute to be awarded by the court;
  4. The award of attorney’s fees would be authorized if
    1. Willful and malicious misappropriation exists;
    2. A claim of misappropriation is made in bad faith; or
    3. A motion to terminate an injunction is made or resisted in bad faith.

http://www.njleg.state.nj.us/2010/Bills/A1000/921_S2.PDF

The amended bill also states that if a public entity or employee is the defendant in any action brought for the misappropriation of a trade secret, the provisions of the state’s Tort Claims Act supersede any conflicting provisions of the bill. So the very short deadlines for providing notice of a claim against a governmental entity would apply to this cause of action. Additionally, an amendment to the bill removes the presumption in favor of granting protective orders in connection with discovery proceedings pursuant to section 4:10-3(g).

The passage of this bill would be significant for New Jersey businesses because it would provide both legal relief if there is actual misappropriation of trade secrets and also injunctive relief if one believes there might be an actual or potential misappropriation. Of course, this law has not yet been passed, and even if it is (as is expected), it would be wise for businesses to still consider whether to include language in service and employment agreements that account for how trade secrets and similar confidential information is handled.

Comments/Questions: gdn@gdnlaw.com

© 2011 Nissenbaum Law Group, LLC

Will the Use of Common Elements and Themes Leave Filmmakers Susceptible to Copyright Infringement Suits?

Tales of drug-dealing, jail time and growing up in the ghetto are too common to be considered original elements of a copyrighted work.

The United States District Court for the District of New Jersey recently granted hip-hop artist 50 Cent’s motion to dismiss a suit brought by a plaintiff who sued the rapper for copyright infringement. Winstead v. Jackson, 2011 U.S. Dist. LEXIS 107560 (D.N.J. 2011).

The plaintiff, Shadrach Winstead (“Winstead”), claimed that 50 Cent (also known as Curtis Jackson) (“Jackson”) used words and plot themes from Winstead’s copyrighted autobiography “Preacher’s Son – But the Streets Turned Me Into a Gangster” (the “book”) in a CD/DVD set produced by Jackson in 2009. Winstead asserted that several elements from the autobiography – including jail time for the main characters, committing crimes for money, and the death of a parent – were also present in Jackson’s production “Before I Self-Destruct” (the “film”). Winstead also claimed that portions of dialogue were taken from his book and used in the script of the film.

Jackson filed a motion to dismiss the suit, arguing that Winstead failed to state a claim upon which relief can be granted. The Court granted Jackson’s motion, determining that the elements that Winstead argued he had copyright protection over were so common that they could not be considered copyrighted material. The decision relied on a copyright law doctrine known as “scenes a faire” which essentially means that there are certain elements to a work that are not protected by copyright since they are essential to express the character of the work itself.

To establish a claim of copyright infringement, a plaintiff must establish:

  1. ownership of a valid copyright; and
  2. unauthorized copying of original elements of the plaintiff’s work.”

Dun & Bradstreet Software Servs. v. Grace Consulting, Inc., 307 F.3d 197, 206 (3d. Cir. 2002).

Though Winstead was able to prove ownership of a valid copyright in his book, the Court found that he could not prove any copying of original elements from his work. “[G]eneral plot ideas and themes lie in the public domain and are not protected by copyright law,” the Court stated. Id. at 6. “In addition, all situations and incidents which flow naturally from a basic plot premise, known as scenes a faire, are not entitled to copyright protection.” Id.

While the Court acknowledged the similarities between the two works’ characters, themes and settings, it held that these common features have been part of the public domain for some time and have provided the themes for many films and television programs before. “[A]ny common themes of a young male whose tumultuous upbringing leads him to resort to a life of crime and violence in order to gain power and money are scenes a faire.” Id. at 7.

Winstead also argued that Jackson lifted dialogue from his book – including phrases such as “ringing,” “stash,” and “get the dope, cut the dope” – for use in the film. However, the Court also found this language too common to be the protected under Winstead’s copyright. “The average layman, who would be observing these phrases in the context of an overall story or song, would not regard these minute snippets as unique or protectable,” the Court held. Id. at 9.

The Court’s decision is significant because it demonstrates that there are limits to how much copyrighted material is protected. Winstead’s copyright protection over his book did not extend to plot themes and generic language used in it. The Court’s holding gives copyright holders an example of elements in the public domain that are not included within the scope of copyright protection.

Comments/Questions: gdn@gdnlaw.com

© 2011 Nissenbaum Law Group, LLC