Tuesday, October 6, 2009

Can't Sue -- Can't Settle

Tomorrow morning, the Supreme Court will hear oral argument on an interesting copyright jurisdiction case that promises to cast a long shadow over the ongoing Google book settlement negotiations. Tomorrow’s Supreme Court case, Reed Elsevier, Inc. v. Muchnick, deals with Section 411(a) of the 1976 Copyright Act. This section provides that “no civil action for infringement of the copyright in any United States work shall be instituted until preregistration or registration of the copyright claim has been made in accordance with this title.” In short, a copyright owner of a work subject to the U.S. Copyright Act cannot sue for infringement unless the work is preregistered or registered. There are several exceptions to this strict rule. Infringement of a work of visual art need not be preregistered or registered in order to sue. Owners of foreign, non-U.S., works can sue without registration. And, if registration has been properly applied for, but rejected by the Copyright Office, then the owner of the work can sue but only if the owner notifies the Copyright Office (in this event the Copyright Office has the right to become a party to the lawsuit on the issue of registrability).

The Reed Elsevier case arrives at the Supreme Court in an interesting context. Almost all of the parties now argue that Section 411(a) is not jurisdictional or that its requirements can be waived. Not having an adequate voice in support of Section 411(a), the Supreme Court asked Deborah Merritt, a professor at Ohio State’s Moritz College of Law and a clerk to former Justice O'Connor, to appear as amicus curiae in support of the badgered Section 411(a).

The litigation that is now Reed Elsevier commenced years ago in the Southern District of New York. Generally, freelance writers who submitted work to publishers complained when the publishers sold the work to electronic databases. The Supreme Court’s 2001 opinion in New York Times Co. v. Tasini held that such conduct on the part of publishers constituted infringement absent agreement from the freelancers. The Tasini case recommended that the publishers enter into direct agreement with freelancers so as to define agreeable expansion of publication rights that the freelancers would permit.

Following Tasini, many publishers did enter into new or revised publishing agreements with freelancers so as to permit the republication of freelance articles by electronic databases, or in other contexts, beyond the initial publication. But many freelance articles published by the publishers were not the subject of consent agreements with writers, and some publishers did a poor job keeping records of which freelancers they bought articles from and which of these freelancers consented to republication. As such, the class action litigation that has now become the Reed Elsevier case proceeded forward and the class representatives and publishers eventually entered into a class settlement agreement. The settlement sought to resolve royalty issues based, in part, on whether the freelancer had obtained copyright registration for the work. Unregistered freelance works received the lowest level of compensation under the class settlement.

The class settlement was approved by the district court over the objection of some writers. An appeal to the Second Circuit followed. Both the class representatives and the publishers argued that the difference in treatment between copyright registered works and unregistered works was justified in part because of Section 411(a). That is, the parties argued in favor of the class settlement by observing that unregistered works cannot sue for infringement and, as such, these owners are not entitled to the same compensation as registered copyright owners. The parties made other argument in support of their settlement, but this Section 411(a) issue is highlighted here because it now serves as the basis for the Supreme Court’s certiorari. The Second Circuit, noting the Section 411(a) prohibition on litigating infringement claims by unregistered copyright owners, rejected the district court’s approval of the class settlement agreement. The Second Circuit took the position that, with regard to the application of Section 411(a), a class party that cannot sue cannot be a covered party to the class settlement.

Now, before the Supreme Court, both the class representatives and the publishers are arguing against the position they took in the district court and the Second Circuit. They now assert that the Section 411(a) litigation limitation is not jurisdictional but can be waived. Because of the lack of advocacy in support of the Second Circuit’s holding, the Supreme Court invited amicus participation. The brief by court-appointed amicus curiae is set out here and provides a good background of both the Reed Elsevier litigation together with the history of the registration requirement.

As observed correctly by the court-appointed amicus, the overwhelming judicial view of the registration requirement is that it is jurisdictional and, as such, non-waivable. Indeed, the obligation to register in order to sue for infringement was contained in every copyright act since the founding of the country. Against this statutory and case background, it is hard to see how the Reed Elsevier parties are going to be successful in overturning some two hundred years of jurisprudence.

But consider what all of this may mean to the ongoing Google book settlement. Two weeks ago the parties in that case agreed to go back to the drawing board and renegotiate over the numerous issues that the public and the DOJ criticized. It appears that the issue of unregistered work should be right at the top of the redo list. If the Supreme Court upholds the Second Circuit and affirms that Section 411(a) establishes a non-waivable jurisdictional requirement, then how will it be possible for the Google parties to craft a settlement that includes nonregistered works? And if nonregistered works cannot be the subject of the Google settlement until these works pass into the public domain, any resulting settlement with Google will not be as beneficial to the extent a rather large subset of writings are not covered. In this circumstance, Google will not receive the settlement benefit it was hoping for as to all of the books it has copied, and hopes to copy in the future. Further, the desire to digitalize will not be as strong given the potential liability for nonpermitted copying.

Since we are now in the midst of the college football season and it is common to rate weekend games, I’m willing to rate the likely outcome of the Reed Elsevier case and its effect on the Google book resolution. I’m thinking that Section 411(a) will be upheld by two touchdowns and that the Reed Elsevier class settlement cannot include nonregistered works. I’m further thinking that the Google parties will view the Reed Elsevier case as providing a difficult challenge to a settlement modification. The big question is whether Google will still be willing to pay $125 million for a much smaller piece of the game.

Thursday, October 1, 2009

61 in 61

On this date, the last day of baseball's 1961 regular season, Roger Maris blasted a home run over the right field fence at Yankee Stadium, besting Babe Ruth's single-season record of 60 home runs set in 1927. Three players have "officially" surpassed Maris' feat: Mark McGwire, Sammy Sosa and Barry Bonds. Each of these three are under suspicion for steriod use.

"As a ballplayer, I would be delighted to do it again. As an individual, I doubt if I could possibly go through it again." Roger Maris.

"Now they talk on the radio about the record set by (Babe) Ruth, and (Joe) DiMaggio and Henry Aaron. But they rarely mention mine. Do you know what I have to show for the sixty-one home runs? Nothing, exactly nothing." Roger Maris.