Friday, July 06, 2007

The Fourth Circuit Eats Breakfast Again

Back in February, I did a post on a Fourth Circuit opinion involving infringement of an architectural work, Christopher Phelps & Associates, LLC v. Galloway, 477 F.3d 128 (4th Cir. Feb. 12, 2007). I was critical of a few parts of the opinion, but I struggled to get the facts right and the post, I think, never quite came out right. The Fourth Circuit apparently had some reservations about its own opinion, since yesterday, in response to a petition for rehearing, it issued a new opinion that contains a number of changes from the original, 2007 WL 1933594. (HT to LKB).

Much of the discussion in the original post, and in the comments on it turned on the issue of whether the sale of an infringing house constituted a distribution, and the issue of the first sale doctrine. These were of interest because while the jury found defendant had infringed plaintiff's architectural work in building his dream house based on an unauthorized copy of plaintiff's plans, the jury awarded only $20,000 (the fee plaintiff would have charged for an authorized use), and the trial judge had refused plaintiff's request for a permanent injunction against the lease or sale of the house. My view was, and remains, that sale of an infringing house is not a distribution within the meaning of 17 USC 106(3), since only title to the infringing object is transferred, and not a transfer of a copy of the work: the plain language of the statute requires that there be a transfer of a copy of the work, and copy is defined as the physical manifestation.

In its new opinion, the Fourth Circuit acknowledges this argument, but skirts around it by subsuming it within a general discussion of entitlement to injunctive relief. I don't understand that approach: if what plaintiff is requesting is relief for a right not granted under the Act, there is no need to go through a full-blown analysis of entitlement to equitable relief. The court's oblique reference to the problem is unsatisfactory: "We agree with Phelps & Associates that Galloway will inevitably sell or transfer his house within the period during which Phelps & Associates still holds the copyright -- i.e. 95 years, see 17 U.S.C. Sesc. 302(c) -- and that such a sale could, absent this action, expose Galloway to further relief, see id. sec. 106(3); id. sec. 501(a); cf. if. sec. 109(a) permitting sale of 'lawfully' made' copies); 1 William F. Patry. Patry on Copyright, sec. 3.111 (2007)(arguing that sale fo a copyrighted structure is not a 'distribution' under section 106(3)." The references are unsatisfactory in my opinion because they acknowledge the problems, but don't address them.

No where is this more true than in the first sale issue. The prior opinion held, in a first, that when an award for infringement is satisfied, the infringing copy becomes a lawful copy, and therefore may be transferred without the copyright owner's permission. This holding is absent from the new opinion, but the same result is achieved but now without any basis in law at all:

[W]ith respect to the Galloway house as one manifestation of the Phelps & Associates' design, arising from a single infringing transaction, Phelps & Associates is limited to the other relief provided in this case. Upon satisfaction of that relief, Galloway will be entitled to peaceful ownership of the house, with good and marketable title. This is consistent with the result reached when a converter of property satisfies a judgment: if the judgment does not order return of the property, but rather other relief, the converter obtains good and marketable title to the property after satisfying the judgment. See Restatement (Second) of Torts § 222A, cmt. (c) (“When the defendant satisfies the judgment in the action for conversion, title to the chattel passes to him, so that he is in effect required to buy it at a forced judicial sale”); Lovejoy v. Murray, 70 U.S. (3 Wall.) 1, 16-17 (1866); Stirling v. Garritee, 18 Md. 468, 474 (1862) (“The measure of damages in trover, is the value of the goods at the time of conversion. The plaintiff obtaining this value, it operates as a transfer of title from the time of conversion”). The same policies of promoting clear property rights and finality apply in the case of copyright actions involving single copies of completed structures. Indeed, they are perhaps stronger, as we are promoting the alienability of real property.

There is no more precedent or support for this approach than there was for the prior opinion's first sale approach, and the danger to other forms of subject matter is just as great. The court could have easily reached the result it wanted -- permitting Galloway to sell his house in the future, by following the plain words of the statute in the distribution question: because it is not a violation of the Copyright Act to transfer title to an infringing architectural work, Galloway is free to do so. In the end, then, the new opinion, is the old breakfast served up again.


Bruce Boyden said...

I don't get your reading of the statute. How can you "distribute copies or phonorecords ... to the public by sale or other transfer of ownership" if in fact you can't "distribute" copies "by [only] sale or other transfer of ownership"? If your view is correct, shouldn't the statute read, "distribute copies or phonorecords ... to the public by sale or other transfer of ownership, in conjunction with physical movement of the copy"?

William Patry said...

Bruce, I don't understand the difference between your two ways of phrasing of the issue. I am focusing, rightly I think, on the word "copy," which is defined as a physical object. The right granted then is to distribute a physical object. I think that is as plain a reading of a statute as you can get.
The Fourth Circuit seems to be of the view that if you transfer title to a physical object, you have distributed the physical object. I don't see that, especially in the case of a house, few of which are ever physically moved. My view is you can never distribute a copy of the house.

Bruce Boyden said...

The statute gives us a general category of exclusive right -- to distribute copies to the public -- but then limits the general category to five specified subcategories: distribution by sale, distribution by other transfer of ownership, distribution by rental, distribution by lease, and distribution by lending. You seem to be reading "distribute" as "physical distribution," but none of the five subcategories necessarily includes physical movement, even when they apply to physical objects. Sale of grain does not require movement of the grain. Leasing a backhoe does not require movement of the backhoe. If the statute said, "distribute copies by truck or by airplane," then it would be clear that "distribute" means physical distribution. But it says "distribute copies by sale" etc. You can sell something without moving it. And since you can "distribute ... by sale," ipso facto, that means you can distribute something without moving it.

William Patry said...

Thanks for the clarification, Bruce. I do, however, now see how you get to your alternative reading of the statute. I don't think, though, that the illustrative examples you give change that because none of those examples arise in a statute that makes a sharp distinction between an intangible thing - the sole concern of the statute -- and a physical embodiment of that thing.

Bruce Boyden said...

Thanks Bill. Let me take one more stab at it. We're agreed that distribution of the physical manifestations of the work is what counts for 106(3) purposes. The question is whether the distribution itself has to be physical too. You say it does. I don't see that in the statute. In particular, I don't understand how you could distribute something "by sale," if "distribute" means physically moving something, when a sale doesn't move anything. It looks to me like you're reading the statute to say, "distribute and sell," instead of "distribute by sale." What the copyright owner has the exclusive right over in 106(3) is not movement (conveyance) of the copy -- that would be distribution by truck or by airplane -- it's conveyance of the possessory interest in the copy: distribution by sale, by gift, by lease, etc.

It seems like the wrong result to me to bar sale of a house, even if it infringes on an architectural work, but I don't think 106(3) gets us there.

William Patry said...

Bruce, great discussion, thanks. What i would say is that the sale of a book to be a distribute of a copy of the book does require a physical movement of it. Let's sale that there is a warehouse full of infringing books. Someone buys the warehouse and all the books, but the books don't move. I don't think that is an infringing distribution of the books and can't imagine any court thinking so. I think that is also the same as the sale of an infringing house since it doesn't move: in both cases there has been a transfer of title, but that's it.

Bruce Boyden said...

"Let's sale that there is a warehouse full of infringing books. Someone buys the warehouse and all the books, but the books don't move."

Well, that's interesting -- I think that's what is counterintuitive about this case, but I disagree that you can read 106(3) the way you are. I.e., the sale of the house is like the sale of the warehouse in your hypo; perhaps the infringing books are important to the buyer, but in most cases they probably wouldn't be, so it would be weird to call that an infringing distribution, especially if the buyer was entirely unaware of the books. Same with the house, I think -- maybe the buyer is primarily motivated by the design, but it's more likely other factors are coming into play (e.g., location, size). You don't typically have these issues with other copyrighted works. That makes an injunction inappropriate here, as there is a lot more to the property than the architectural work contained therein.

William Patry said...

There is a typo in my earlier comment, maybe a Freudian one. I meant to say "Let's say" instead of "Let's sale." But this time let's say that the buyer of the warehouse buys the warehouse because of the books, but does nothing with them. They stay there and rot. Still a distribution, Bruce?

Anonymous said...

[Disclosure: I represented appellant in the CPA v. Galloway case]

While I agree with Bill Patry that the Fourth Circuit's latest opinion is, shall we say, less than intelligible in many ways, I think Bruce's critique of Bill's unique "106(3) 'distribution' requires movement" thesis is quite cogent.

As noted in the comments to the earlier post on this case, there are all sorts of absurd results that arise from this thesis -- not to mention the huge loopholes it would open for commercial piracy.

More fundamentally, as I've remarked to Bill many times before, no court has ever adopted or even suggested his interpretation of 106(3), and indeed the legions of AWCPA cases that have held that sales of infringing houses *are* acts of infringement flatly contradicts it. For the Fourth Circuit to have adopted this thesis would have required them to overrule two or three of its prior opinions. Bill's thesis never addresses the impact of such decisions; indeed, I've chided Bill before for not noting in his treatise the cases that contradict his thesis.

The only support that Bill has ever articulated for his thesis is that the "plain reading" of "distribute" in 106(3) necessarily implies a movement of the copy. Like Bruce, I and every other copyright specialist I've discussed this with don't think so, especially given the 106(3) language that distribution can be "by sale or other transfer of ownership."

Again, while there's much that is very, very wrong in the Fourth Circuit's latest opinion, their refusal to buy into Bill's unique thesis wasn't one of them.

LKB in Houston

William Patry said...

In my treatise I have criticized opinions taking the no physical movement view and obviously by citing them and critizing them I am noting the other side, so I reject the suggestion by my good friend LKB that I haven't noted the opposing view. Nor, outside of the AWCPA has any other court taken such an approach. The AWCPA courts have hardly distinguished themselves in taking this view, as even LKB admits. I have spoken to other copyright lawyers who agree with my view, so I think LKB must be talking in an echo chamber. One thing is clear though: one person's plain meaning interpretation need not be another's.