Thursday, March 29, 2007
Maria Glod Washington Post Staff Writer Thursday, March 29, 2007; Page B05
Two McLean High School students have launched a court challenge against a California company hired by their school to catch cheaters, claiming the anti-plagiarism service violates copyright laws.
The lawsuit, filed this week in U.S. District Court in Alexandria, seeks $900,000 in damages from the for-profit service known as Turnitin. The service seeks to root out cheaters by comparing student term papers and essays against a database of more than 22 million student papers as well as online sources and electronic archives of journals. In the process, the student papers are added to the database.
Two Arizona high school students also are plaintiffs. None of the students is named in the lawsuit because they are minors. "All of these kids are essentially straight-A students, and they have no interest in plagiarizing," said Robert A. Vanderhye, a McLean attorney representing the students pro bono. "The problem with [Turnitin] is the archiving of the documents. They are violating a right these students have to be in control of their own property."
Turnitin officials did not return calls for comment yesterday. A Fairfax County schools spokesman said the system would not comment on pending litigation.
The legal dispute comes amid a debate over the best way to ensure students are doing their own work at a time when the Internet can make it easy to cheat. Many educators, including Fairfax County school officials, say Turnitin is an effective way to police for plagiarism.
Attorneys for the company and various universities and public school systems, including Fairfax , have concluded that the service doesn't violate student rights. Turnitin is used by 6,000 institutions in 90 countries, including Harvard and Georgetown universities, company officials have said. Some public schools in Arlington, Prince George's and Loudoun counties use the service.
According to the lawsuit, each of the students obtained a copyright registration for papers they submitted to Turnitin. The lawsuit filed against Turnitin's parent company, iParadigms LLC, seeks $150,000 for each of six papers written by the students.
One of the McLean High plaintiffs wrote a paper titled "What Lies Beyond the Horizon." It was submitted to Turnitin with instructions that it not be archived, but it was, the lawsuit says.
Kevin Wade, that plaintiff's father, said he thinks schools should focus on teaching students cheating is wrong.
"You can't take a person's work and run it through a computer and make an honest person out of them," Wade said. "My son's major objection is that he does not cheat, and this assumes he does. This case is not about money, and we don't expect to get that."
Andrew Beckerman-Rodau, co-director of the intellectual property law program at Suffolk University Law School, said that although the law regarding fair use is subject to interpretation, he thinks the students have a good case.
"Typically, if you quote something for education purposes, scholarship or news reports, that's considered fair use," Beckerman-Rodau said. "But it seems like Turnitin is a commercial use. They turn around and sell this service, and it's expensive. And the service only works because they get these papers."
Wednesday, March 28, 2007
The company that licensed the US rights to Orwell's 1984 don't really understand copyright, so they're threatening the people who made the now-infamous Hillary Clinton/Apple 1984-ad mashup. Apparently, these people weren't paying attention when the carpetbaggers who bought out the Woody Guthrie estate tried to shut down Jib-Jab's "This Land" parody, and got their asses handed to them.
"The political ad copies a prior commercial infringement of our copyright," said Gina Rosenblum, president of Rosenblum Productions Inc. "We recognize the legal issues inherent under the First Amendment and the copyright law as to political expression of opinion, but we want the world at large to know that we take our copyright ownership of one of the world's great novels very seriously."
Rosenblum purchased rights to "1984" from the Orwell Estate and Sonia Orwell in 1981 and the Orwell novel is still under copyright, at least until the year 2044. The company has utilized these exclusive rights to produce a number of products based on the novel. "We produced Richard Burton's last film, '1984', which opened that year to great critical acclaim," Gina Rosenblum said. "We also authorized a number of related products such as videos and soundtracks, and later released the film for television viewing and an '1984' Opera. Currently, we are in discussions with major Hollywood companies to make a new motion picture of the classic novel."If an accurate description of the dispute, Ms. Rosenblum's remarks raise misuse concerns. Not any use that can be licensed is within copyright and not any unlicensed use is infringement. The Supreme Court held in the 2 Live Crew case that copyright owners do not possess market power over parodies. Copyright owners do not possess market power over a host of other fair uses. It is, in fact, difficult to see any protectible elements of the novel that were used in the mashup. Preserving fair use, moreover, in no way impinges upon legitimate markets, like remakes of movies or stage productions.
There have been a number of fair use cases involving political speech. A political use of copyrighted material by a right-wing politician and allied groups in connection with a campaign was found to be fair use in Phoenix Hill Enterprises, Inc. v. Dickerson, 1999 WL 33603127 (W.D. Ky. 1999). In Keep Thomson Governor Committee v. Citizens for Gallen Committee, 457 F. Supp. 957 (D.N.H. 1978), plaintiff was a political committee seeking the reelection of the incumbent governor of New Hampshire. Defendant was a political committee seeking to advance the election of the challenger. A third party had produced and marketed a song entitled “Live Free or Die,” which is the New Hampshire state motto. Plaintiff purchased the copyright to the song, which it used as part of its political advertisement.
The alleged infringement – found to be fair use - arose when defendant ran an opposing advertisement that copied portions of plaintiff's advertisement, including the song. See also Doehrer v. Caldwell, 1980 WL 1158 (N.D. Ill. 1980) (use of political cartoon in campaign literature). A gun control group's copying of a mailing list of state legislators whom the NRA had agreed its members to contact was found to be fair use by the Sixth Circuit in NRA v. Handgun Control Federation of Ohio, 15 F.3d 559 (6th Cir. 1994). But see Long v. Ballantine, 1998 WL 35156025 (E.D. N.C. 1998) (rejecting use of photograph in political campaign).
A political advertisement that used a credit card commercial to criticize the influence of money on politics was found to be a parody in MasterCard International, Inc. v. Nader 2000 Primary Committee, Inc. Ralph Nader, 2004 WL 434404 (S.D. N.Y. 2004). Nader ran advertisements based on MasterCard's “Priceless” advertisements. At the end of MasterCard's advertisements, there is a phrase identifying a trite intangible deemed priceless and therefore not capable of being purchased, e.g. “a day where all you have to do is breathe,” followed by the tag line: “Priceless. There are some things money cannot buy; for everything else there's MasterCard.” Nader believed that his “truth” was the remedy for what ails American political life, principally the evils of political contributions. To that end, his ads included a sequential display of items associated with fundraisers, followed by a price, e.g., “grilled tenderloin: $1,000 a plate,” “campaign ads filled with half-truths: $10 million,” “promises to special interest groups: over $100 billion.” As with the MasterCard ads, there was a tag line: “finding out the truth: priceless. There are some things that money can't buy.”
Whatever the merits of the mash-up ad in question, political discourse is priceless and must be preserved against Orwellian barnyard tactics.
Monday, March 26, 2007
The panel consisting of the Chancellor of the High Court, Lord Justice Jacob (the author of the opinion), and Lord Justice Lloyd affirmed the High Court opinion below by Mr. Justice Kitchin. The appeal was limited to claims in the bitmap graphics and frames displayed to the user and in the underlying program. Lord Justice Jacob's opinion recites that defendant was not alleged to have copied code, and that should have been the end of the matter on the literary works claim. From a U.S. standpoint, there appears to be a missing step: the claim that one could infringe a literary work to which one did not have access is impossible to sustain. If, on the other hand, the claim is that the visual elements are protected by the same, unified copyright (something that is true under U.S. law) then I don't see why the court had an earlier, separate review of a a graphical infringement claim. I sense I am not grasping an important UK practice point, so perhaps someone, maybe even my esteemed colleague The IPKat, will steer me in the correct direction.
In any event, Lord Justice Jacob's discussion of the idea expression dichotomy would resonate well with U.S. lawyers and judges. Of particular interest to international lawyers is his discussion of the application of EU directives into U.K. domestic law, and status of TRIPs as a later international treaty. He notes that "[a]lthough ordinarily a UK Act is not to be construed by reference to a later international treaty, I note that Lord Hoffman considered TRIPs to be of relevance to our domestic copyright law in Designers Guild. Here the position is clearer because we are dealing with EU law. The ECJ has held that TRIPs (to which the EU as well as its Member States is a party) is relevant to the construction of earlier EU legislation concerned with intellectual property)."
The trip down the TRIPs lane turns out to be a digression, though, as the court held that all three bases for law: domestic UK law, the EU software directive, and TRIPs precluded protection at the broad level sought by plaintiff. Eight ball in the side pocket.
The cornerstone of that strategy consisted of suing for direct infringement, not secondary liability. This had the intended effect of excluding the staple article of commerce defense. Having excluded that defense, one would think the role of Sony would be zero, but one would be mistaken:
To Cablevision, the RS-DVR is a machine, just like a VCR, STS-DVR, or a photocopier. Relying on Sony and other cases, Cablevision argues that it cannot be liable for copyright infringement for merely providing customers with the machinery to make copies. At most, it contends, its role with respect to the RS-DVR establishes indirect infringement, but plaintiffs have waived such a claim. ( See June 7, 2006 Order). Plaintiffs, on the other hand, allege direct infringement-that is, they claim that it is Cablevision that is “doing” the copying here. Plaintiffs characterize the RS-DVR as a service-one that requires the continuing and active involvement of Cablevision.
I agree with plaintiffs. The RS-DVR is clearly a service, and I hold that, in providing this service, it is Cablevision that does the copying.
In Sony, programming owners sued Sony and others for copyright infringement based on defendants' marketing and sale of Betamax VCRs. The record showed that consumers primarily used VCRs for home “time-shifting”-the practice of recording a program to view it at a later time, then erasing it. The Supreme Court held that time-shifting is “fair use” and does not violate the Copyright Act. 464 U.S. at 456. The Court held that Sony's manufacture of Betamax VCRs therefore did not constitute contributory infringement.
Cablevision's reliance on Sony is misguided. First, Cablevision has waived any arguments based on fair use. ( See June 7, 2006 Order).Second, apart from their time-shifting functions, the RS-DVR and the VCR have little in common, and the relationship between Cablevision and potential RS-DVR customers is significantly different from the relationship between Sony and VCR users.
A VCR is a stand-alone piece of equipment. A consumer purchases the VCR and owns it outright. The consumer can then pick the VCR up, transport it, connect it to someone else's television and, assuming both devices are in working order, record programming. The RS-DVR does not have that stand-alone quality. An RS-DVR customer would not be able to disconnect his or her home set-top box, connect it elsewhere, and record programming. This is because the RS-DVR is not a single piece of equipment; it consists of a multitude of devices and processes. Unlike a VCR, the simple push of a button by the RS-DVR customer does not produce a recording. The pushing of the “record” button on the remote control merely sends a request to Cablevision's head-end to set the recording process in motion. The various computers and devices owned and operated by Cablevision and located at its head-end are needed to produce a recording.
Indeed, ownership of the RS-DVR set-top box remains with Cablevision and the RS-DVR requires a continuing relationship between Cablevision and its customers. In Sony, “[t]he only contact between Sony and the users of the Betamax ... occurred at the moment of the sale.” 464 U.S. at 438. In stark contrast, Cablevision would not only supply a set-top box for the customer's home, but it would also decide which programming channels to make available for recording and provide that content, and it would house, operate, and maintain the rest of the equipment that makes the RS-DVR's recording process possible. Cablevision has physical control of the equipment at its head-end, and its personnel must monitor the programming streams at the head-end and ensure that the servers are working properly. (Tr. 52-54, 75-76). Cablevision determines how much memory to allot to each customer and reserves storage capacity for each on a hard drive at its facility, and customers may very well be offered the option of acquiring additional capacity-for a fee. On the other hand, once Sony sells a VCR to a customer, Sony need not do anything further for the VCR to record.
The ongoing participation by Cablevision in the recording process also sets the RS-DVR apart from the STS-DVR.
I have never understood Cablevision's decision not to assert fair use, but I also don't understand the relevance of any of the above discussion to a claim of direct infringement. None of the facts recited matter to whether there is direct infringement. Leaving aside the buffering claim, the direct infringement claims are simply stated: (1) when a consumer pushes the remote control button and requests that a copy be stored, who makes the copy? (2) when the consumer uses the remote control button and requests that the copy stored be sent for viewing, was the resulting transmission a public or a private performance?
The court, based I think on its fascination with the back-end of these straightforward questions, bought into plaintiffs' analogy to VOD, rejecting defendant's analogy to TIVOs and other STS-DVRs (set-top storage). In one important respect, RS-DVRs are less of a threat than STS-DVRs, namely with RS-DVRs, there is no ability to download the show to an external hard-drive. Neither of these analogies though have a bearing on the basic legal questions. I find it far less impressive than the court did that the copying issue should turn on the back-end of how the copy is stored. with both STS-DVRs (whose legality was not at issue nor conceded by plaintiffs), it is the consumer who pushes a remote control button that initiates the process. Similarly, on the performance issue, I do appreciate the analogy to hotel transmissions; yet there is an important difference between a hotel room that is open to the public and that will be inhabited by a great number of people throughout the year and one's own living room which receives a dedicated stream created at your request and available only to you.
Thursday, March 22, 2007
There are reports that music has played similar roles in Iraq. Suzanne C. Cusick has this article in 2006 called "Music as Torture/Music as Weapon." I find the article well over the top, but there are some interesting links. In a particularly nasty incident, Barney the Purple Dinosaur's song "I Love You" is alleged to have been used by U.S. soldiers in May 2003 in the interrogation of Iraqi detainees. The song is reported to have been played at a loud volume inside shipping containers. It is unknown whether the detainees understood English or appreciated the nuanced cultural message being sent by invoking such a beloved figure.
An article posted in yesterday's The Register, a UK publication, is entitled "Fighting Torture with Copyright." The author of the article advocates a novel approach to dealing with music as a pys-ops tool. He first advocates use of droit moral, although quoting Larry Lessig as dismissing moral rights as "a French idea." Zoot alors! The author next advocates that artists who object to this use of their music (as Barney may well) should work with their labels to sue and demand royalties. Hopefully the royalties could then be assigned to the detainees, or at we could give them DVDs of children's shows with great music, like the Backyardigans (assuming they have electricity and a TV).
In any event, since the events occurred in a foreign country, it is most likely any suit would have to be filed there. Iraq does have a copyright law, thanks to Paul Bremer, and the unauthorized public performance of music is a fundamental right under all copyright laws. Whether the performance of music by soldiers to a single detainee in a shipping container is a public performance in a difficult question, as compared say to the Noriega example.
Wednesday, March 21, 2007
Plaintiff's work was "Pull My Finger Fred." As described by Judge Wood: "He is a white, middle-aged, overweight man with black hair and a receding hairline, sitting in an armchair wearing a white tank top and blue pants. Fred is a plush doll and when one squeezes Fred's extended figure on his right hand, he farts. He also makes somewhat crude, somewhat funny statements about the bodily noises he emits, such as 'Did somebody step on a duck' or 'Silent but deadly.'"
As for defendant's work, she wrote: "Fartman could be Fred's twin." The district court ruled for plaintiff; the Seventh Circuit affirmed. Defendant's president Mr. Green admitted he saw and photographed plaintiff's work. The artist who drew defendant's work denied seeing plaintiff's work and testified she drew the work based on Mr. Green's directions. Despite the very close similarities between the parties' works, Defendant argued it only copied ideas, archetypes.
At its most basic, a prima facie case of infringement consists of two elements, copying and material appropriation of expression. Copying is just that; copying of anything, even ideas since it is the fact of copying that matters at that stage, not how much and of what. Judge Posner wrote in Ty, Inc. v. GMA Accessories, Inc., 132 F.3d 1167, 1169-1170 (7th Cir. 1997): "The issue of copying can be broken down into two subissues. The first is whether the alleged copier had access to the work that he is claimed to have copied; the second is whether, if so, he used his access to copy." There are good reasons for separating the analysis this way: as for copying, as Judge Posner points out, "access does not entail copying. An eyewitness might have seen the defendant buy the copyrighted work; this would be proof of access, but not copying." The separate requirement of access is also important. First, there is the common sense point that one cannot copy something you do not have access to. Second, independent creation is a cornerstone of copyright: two works may be identical, but this fact is irrelevant unless defendant copied, and defendant cannot copy without access.
Regrettably, courts sometimes elide over this last point by remarking, as Judge Posner did in Ty (quoted by Judge Wood in the Fartman case): "If, therefore, two works are so similar as to make it highly improbable that the later one is a copy of the earlier one, the issue of access need not be addressed separately, since if the later work was a copy its creator must have had access to the original." Judge Posner adds that the "inference of access, and hence of copying could be rebutted by proof that the creator of the later would could not have seen the earlier one ..."
Classically, though, the inference that arises is an inference of copying that springs into existence when plaintiff proves evidence of access and substantial similarity. The Ty, Inc. - Fartman approach inverts this by making similarities act as an inference of access which then does double duty as an inference of copying. By so doing, court relieve plaintiffs of their burden of proving both access and copying: the high degree of similarities are enough by themselves; that strikes a dagger through the heart of independent creation.
This is of course precisely what happens in striking similarity allegations, and it happens because despite all evidence showing there was neither access nor copying, plaintiffs attempt to raise an inference of both based solely on an expert's testimony that "not since the time of the Phoenicians have two works borne such similarities, similarities that could only arise through copying." An expert's opinion cannot though be based on an absence of supporting acts and surely cannot be contrary to them.
In Ty and the Fartman case, given the concession of both access and copying, one would think that the copying step of the infringement analysis could be conceded, and that one could move straight to the material appropriation stage. Alas this didn't happen, although I believe both courts' discussion of the issue is dicta and is probably meant to reflect nothing more than a commonsense observation that where a mass-produced work is at issue and the two works are virtually identical, one need not waste time on access. That's quite true, but the conceptual problem is that access can readily be found by the mere fact of a work being mass-produced: the requirement of access is not one of direct proof but may be established by a reasonable opportunity to have seen the work, something that existed in Ty and the Fartman case and then some.
On the merits, the court per Judge Wood found, and properly so, that the two works were substantially similar and rejected defendant's claim that it was only copying ideas: "Novelty wants us to take the entity that is Fred, subtract each element that it contends is common, and then consider whether Novelty copied whatever leftover elements are creative. But this ignores the fact that the details -- the appearance of Fred's face or even his chair - represent creative expression. It is not the idea of a farting, crude man that is protected but this particular embodiment of that concept. Novelty could have created another plush doll of a middle-aged farting man that would look nothing like Fred. He could, for example, have a blond mullet and wear flannel, have a nose that is drawn on rather than protruding substantially from the rest of the head, be standing rather than ensconced in an armchair, and be wearing shorts rather than blue pants."
Tuesday, March 20, 2007
As a fact matter - and in the case itself -- it is very likely that the architect is the author because of the nature of the contributions he or she makes. Clients may provide concepts and ideas, but it would be rare indeed for the client to be the sole author: why hire an architect then? Conversely, saying in a contract that one party is the author is ineffective by itself: a contract cannot establish authorship, only ownership (via transfer). Either someone is or isn't an author, a determination made by examining the nature of the contribution.
When it comes to joint authorship, though, the situation is different. In the Freedenfeld case, the client argued that it was a joint author. There are isolated cases, where a client contributes enough expression - in the form of drawings - to qualify as a joint author if the element of intent is there. And it is here that the Freedenfeld court rightly relied on the contractual provision as a strong sign of the lack of an intent by the architect to be a joint author.
What one does with the contributions of a non-joint author is problematic and was left somewhat unresolved in the Second Circuit's Thomson v. Larson case. In most cases there will be an implied license for the immediate use, but how far beyond that is uncharted territory,
Sunday, March 18, 2007
NEW YORK (Reuters) - Two artists sued NBC Universal and the creators of the network's superhero drama "Heroes" in U.S. district court this week, claiming their work had been wrongfully copied on the television show.
New York-based artists Clifton Mallery and his wife Amnau Karam Eele charged in a suit filed on Thursday in Manhattan that "Heroes" creators based their plot line -- about an artist who can paint the future -- on a short story, a painting series and a short film the couple exhibited in 2004 and 2005.
A spokesman for NBC, a unit of General Electric Co., said in a statement the network believes the suit is without merit. "We intend to defend it vigorously and expect to prevail."
The artists said in the lawsuit that two people who identified themselves as writers from NBC's "Crossing Jordan," which also developed by "Heroes" creator and executive producer Tim Kring, attended an April 2005 exhibition of their work at Hunter College in New York City. The two were believed to have taken copies of the couple's work, the lawsuit said.
The artists said their work focused on an artist who paints the future and who specifically paints the destruction of two landmark buildings in New York City. They alleged this was "strikingly similar" to the character of Isaac Mendez on "Heroes," whose paintings of the future depict an explosion in New York City. "Heroes," a serial thriller about a group of ordinary people who discover they have special abilities, has been credited with helping to boost NBC's ratings this season.
Friday, March 16, 2007
Burnett's language is X-rated now, due to use of her character in a very different setting in Fox's animated series "Family Guy." The segment in which her character appears is said to be only 18 seonds long. Here is the story from ABC:
Carol Burnett Sues Fox for 'Family Guy' Copyright Infringement
Charwoman Portrayed as Porno Shop Maid
LOS ANGELES, Mar. 15, 2007 - Comedian Carol Burnett sued 20th Century Fox Thursday, seeking more than $2 million in damages for her portrayal on an episode of the Fox Broadcasting animated series "Family Guy."Burnett's copyright infringement lawsuit states the show's creators did not have her consent to include her cleaning woman character -- known as the Charwoman -- in an April 2006 episode.
In the episode, the Charwoman is the maid in a pornography shop. The segment also incorporated an "altered version" of Burnett's theme music, and the characters in the show perform Burnett's signatur ear tug, her suit states.
In addition to her copyright infringement claim, Burnett, 73, alleges 20th Century Fox violated her publicity rights.
The studio has been quoted as follows:
"`Family Guy,' like `The Carol Burnett Show,' is famous for its pop culture parodies and satirical jabs at celebrities. We are surprised that Ms. Burnett, who has made a career of spoofing others on television, would go so far as to sue `Family Guy' for a simple bit of comedy," said 20th Century Fox Television spokesman Chris Alexander.
Thursday, March 15, 2007
Europe is facing difficulties too, which added layers of complexity based on national interests and the different ways that collecting societies operate. A recent article in MacWorld augurs no better future:
EU tackles online copyright law
European regulators begin planning online copyright laws
The European Parliament urged the European Commission on Tuesday to propose a law that would force the dismantling of the current method of distributing online copyright fees to Europe's songwriters and musicians.
The Commission also wants to change the fee-distribution regime to open up the market to greater competition. However, it has said it would be enough for collecting societies, which operate in each European country on behalf of artists and publishers, to reform the way they work online themselves.
But in a show of hands, rather than an actual vote count, at the plenary session of the European Parliament in Strasbourg on Tuesday a large majority of parliamentarians said this wasn't enough.
"I am not happy with the softer approach taken by the Commission in regulating this area, which is of growing economic importance," said Hungarian Socialist member of the European Parliament, Katalin Levai.
"It requires more than just soft law to open up this market. A binding legal instrument is needed," said Federico de Girolamo, a spokesman at the Parliament.
At the moment musicians and publishers must choose the collecting society in the country where they are based to handle the collection of the royalties generated from both online and offline music distribution.
These collecting societies collect royalties generated from around Europe on behalf of the artists in their countries. They argue that this form of co-operation is sufficient to create a properly functioning, competitive single market across the 27 countries in the EU.
The Commission has been examining the way collecting societies operate for many years. It stopped short of proposing a law to pry open the market because it said this might stifle progress in the fast evolving space.
"The Commission wishes to note that the online market is still only in a stage of development – we need to be especially careful not to limit its potential by adopting an overly inflexible approach," said Vladimir Spidla, the European commissioner for employment, who was standing in for Single Market Commissioner Charlie McCreevy at a meeting with members of the European Parliament on Monday.
Parliamentarians rejected Spidla's fears.
"We don't want unrestrained competition at any cost. We feel a law is needed to ensure competition, while at the same time guaranteeing cultural diversity around Europe and protecting the interests of smaller, lesser-known artists who might suffer if competition drove down royalties too far," said de Girolamo.
The Commission didn't rule out introducing a proposal for a law along the lines the Parliament is calling for. However, people close to Commission president Jose Mauel Barroso said the Commission – the EU's executive body – has no appetite for pursuing a law.
"Barroso has been approached by companies in the music industry who have urged him to avoid proposing a law," said one source close to the Commission who asked not to be named.
In a separate but related matter concerning copyright levies charged on blank CDs, photocopiers, printers and the like, Barroso last year ordered McCreevy to abandon a plan to harmonise rules across the EU after he was lobbied heavily both by copyright owners including record companies, and by the French government.
The Parliament stopped short of giving precise instructions to the Commission concerning an online copyright law. "It's not for us to dictate the content of the framework directive we want to see. That's for the Commission to do," de Girolamo said.
Wednesday, March 14, 2007
The Copyright Act has no provision regarding arbitrable of claims that arise under title 17. Based on the grant of original and exclusive jurisdiction to district courts, litigants in the past argued that no copyright dispute can be arbitrated. The issue was settled long ago, most prominently in Judge Posner's opinion in Saturday Evening Post Co. v. Rumbleseat Press Inc., 816 F.2d 1191 (7th Cir. 1987). Motions to compel arbitration for a wide variety of claims arising under the Copyright Act are now routinely granted, so long as the dispute is encompassed by the agreement to arbitrate, so it is surprising to hear the "copyrght claims can't be arbitrated" argument raised.
In Packeteer Inc. v. Valencia Systems, Inc., 2007 WL 707501 (N.D. Cal. March 6, 2007), Judge Whyte rejected the argument that DMCA claims (as well as traditional copyright infringement claims) are not arbitrable regardless of the language of the arbitration provision:
Valencia contends that the issue is simply whether the agreement to arbitrate encompasses the copyright and DMCA claims in dispute. Valencia, naturally, asserts that the arbitration clause requires these claims to be arbitrated. Packeteer, on the other hand, argues that the arbitration clause only requires arbitration of breach of contract and other claims related directly to the SLADA.
The relevant language in the arbitration clause, “any dispute concerning this Agreement or the Parties' respective obligations hereunder,” creates a broad scope of arbitration and encompasses all claims which arise from the parties' obligations under the SLADA. The copyright and DMCA claims at issue are based upon Packeteer's alleged creation and distribution to its customers of a patch based on having reverse-engineered a portion of Valencia's object-code, which was distributed to Packeteer under the terms of the SLADA.
Monday, March 12, 2007
The availability of fair use for sexually-themed works has had a mixed reception in the courts. In MCA, Inc. v. Wilson, 677 F.2d 180 (2d Cir. 1981) defendant’s off-off Broadway show entitled Let My People Come—A Sexual Musical" was described as an “erotic nude show” with “sex content raunchy enough to satisfy the most jaded porno palate." Despite that remark, fair use was rejected, the majority holding: “We are not prepared to hold that a commercial composer can plagiarize a competitor’s copyrighted song, substitute dirty lyrics of his own, perform it for commercial gain, and then escape liability by calling the end result a parody or satire on the mores of society.” Judge Mansfield dissented, 677 F.2d at 191: "In my view the defendant’s use of ‘dirty lyrics’ or of language and allusions that I might personally find distasteful or even offensive is wholly irrelevant to the issue before us, which is whether the defendant’s use, obscene or not, is permissible under the fair use doctrine as it has evolved over the year. We cannot, under the guise of deciding a copyright issue, act as a board of censors outlawing Xrated performances." In Walt Disney Prods. v. Air Pirates, 581 F.2d 751, 753 (9th Cir. 1978), involving a parody of Mickey and Minnie Mouse engaging in explicit activity, fair use was again rejected with the court making explicit its disapproval of defendant's depiction of Mickey and Minne. In Pillsbury Co. v. Milky Way Prod., 215 USPQ 124, 131 (N.D. Ga. 1981) Screw magazine’s parody of the Pillsbury doughboy and doughgirl engaging in sexual activity was rejected, as it was in DC Comics, Inc. v. Unlimited Monkey Business, Inc., 598 F. Supp. 110 (N.D. Ga. 1984) where a singing telegram service did an obscene take-off on Superman and Wonder Woman. On the other hand, in Elsmere Music, Inc. v. NBC, 482F. Supp. 741 (S.D.N.Y) aff’d per curiam, 623 F.2d 252 (2d Cir. 1980) an “I Love Sodom” skit on Saturday Night Live parodying the "I Love New York" ad campaign was approved.
And then there are the more recent cases Professor Tushnet discusses, including 2 Live Crew, the Leslie Nielson/Demi Moore parody (Leibowitz), Blanch v. Koons, and two of the Barbie cases (Walking Mountain, Pitt). Professor Tushnet argues that "non-sexual transformativeness arguments are noticeably less likely to succeed," and that "Judges see parody more readily when parodists use female bodies to show the uncontrollable multiplicity of interpretation." I don't see the empirical evidence behind those assertions; indeed, at least in the past, as noted above, sexual-themed works have historically been less likely to be held fair use: for example, fair use claims for use of Minnie Mouse and Wonder Woman were rejected. And, it might be noted that in Mattel, Inc. v. Pitt, 229 F. Supp.2d 315 (S.D.N.Y. 2002), involving a very sexualized take-off on Barbie, the parodist was a woman and the judge was a woman.
In supporting her argument, she contrasts two Koons cases from the Second Circuit, the Puppies case (Rogers v. Koons), Blanch v. Koons (Niagra), and a third district court opinion involving the cartoon dog "Odie." The Puppies and Odie cases were pre-2 Live Crew. The point of the alleged parodies in those cases was, as Professor Tuhsnet points out, the alleged banality that Koons sees around him (look within I say). Both courts properly rejected fair use for lack of a transformative effort. The Blanch case did involve a transformative effort and I say this not just as a conclusion: Koons in that case used only part of the original, altered the way the original appeared, and combined it with other compositional elements. That, I believe accounts for the different results, and not the content of the subject matter appropriated. (Nor do I credit in the least his explanation for his works, so that is not a factor in my opinion).
Professor Tushnet's thesis is, I believe, to the contrary, and she may rejoin that my emphasis on a value-free transformative test blinds me to the ways in which sex and gender play a role in the decision making process. As noted above, her thesis deserves more attention than I have given it in this posting, and I intend to study her article in depth before coming to an actual conclusion.
Sunday, March 11, 2007
The proposed WIPO broadcast treaty had to date followed this track, and as it morphed at the end of last week into a full-blown draft instrument proposing not only a transmission right but a reproduction right, and a requirement of retroactive protection going back 20 years, I was prepared for the worst. Coincidentally, last week I had received an email from a friend in DC whose views I have always respected saying that I of all people should know that trade negotiators only negotiate after having received instructions from Congress. At the lunch we are having this upcoming Wednesday, I was going to good-naturedly ask him, in the case of the broadcast treaty, who in the Congress had given U.S. negotiators instructions for the meetings that had preceded the formulation of the draft, when those instructions were given, what the instructions were, and who had input about what the instructions were. I was pretty sure there had been none up prior to the issuance of the draft.
A letter sent last week by Senators Leahy and Specter to the Register of Copyrights and the PTO in response to the draft seems to make my point, but also to give me faith that the correct process and result will occur. Here is an article from Ars Technica on the letter and what has occurred so far:
For almost two years, the World Intellectual Property Organization (WIPO) has been hard at work drafting a broadcast treaty. Designed originally to limit signal theft from broadcasts, the scope of the treaty has at times narrowed and widened significantly throughout the process of drafting the treaty. The US Senate, which is tasked with the responsibility of approving treaties, has weighed in the Broadcast Treaty, encouraging the US delegation to work towards limiting the scope of the treaty.
In a letter sent to the Register of Copyrights and the director of the US Patent and Trademark Office, Sen. Patrick Leahy (D-VT), the chairman of the Senate Committee on the Judiciary, and Sen. Arlen Specter (R-PA), the ranking Republican member of the Committee expressed their concerns about the scope of the treaty. "The Revised Draft Broadcasting Treaty appears to grant broadcasters extensive new, exclusive rights in their transmissions for a term of at least 20 years, regardless of whether they have a right in the content they are transmitting," read the letter.
The Copyright Register and Director of the USPTO make up the US delegation to the WIPO, and the senators want them to work towards a treaty that is "significantly narrower in scope," one that would provide no more protection than that necessary to protect the signals of broadcasters. Sens. Leahy and Specter want them to advocate for the position when the next meeting of the Standing Committee in June.
The WIPO Broadcast Treaty is a complex beast. Originally, the treaty was just meant to cover signal theft—cases where a broadcast is retransmitted without authorization. As treaty discussions continued, broadcasters began pushing towards a rights-based approach, one that would allow them to specifically authorize and deny the use of their signal to others. Over the months of discussions, the treaty has changed many times, but there have been some consistent areas of concern.
One of those is public domain material, which could potentially be locked up by broadcasters just by showing it. By doing so, they could gain exclusive rights over the content. At one point, the treaty contained no provision for fair use—another significant problem with the treaty. In the US, one of the biggest concerns is that the Broadcast Treaty would be unconstitutional, as IP rights in the US are restricted to creative works and not extended to broadcasters.
Last October, the WIPO dropped the rights-based approach for the time being. With Sens. Leahy and Specter expressing their concern with the treaty—saying that it "would needlessly create a new layer of rights that would disrupt United States copyright law"—it appears that the rights-based approach is truly dead.
The article contains a number of inaccuracies. First, it suggests that the treaty was originally meant only to cover signal theft. In fact, it began as a rights-based document, as it was designed to update and expand the similarly rights-based 1961 Rome Convention. There were differences among, say the United States and Europe over the existence of post-fixation rights, but I think it clear that the approach was not at the time limited to signal theft. Part of the problem may be that "signal protection" appears to be a constructive ambiguity that means whatever one wants it to mean. The article also says "at one point" the treaty contained no provision for fair use. The usage of the past tense implies that the treaty contains such a provision now. It doesn't: Limitations and exceptions, as always, remain "optional," order to "preserve flexibility for member states."
As with almost all treaties, this one would likely apply only to foreign signals, but as a domestic, political matter, extending rights only to foreigners is unpalatable, and hence the importance of early Congressional involvement, since the formulation of domestic policy is Congress’s domain.
RUSH: Here is Tony in Mesa, Arizona. Thank you for calling, sir. It's nice to have you on the EIB Network.
CALLER: Hey, Rush. Mega dittos from Arizona.
RUSH: Yes, sir.
CALLER: I wanted to ask you about a problem with our antiquated copyright laws. It seems if you show any copyright material like an episode of “24” on a TV larger than 55 inches to company, it may constitute a "public performance" and therefore break copyright law. I know you have a big screen TV. I have a big screen TV. The copyright law currently goes under anything that has more than four speakers in one room, constitutes a public performance and will break a copyright law. The NFL was the one that brought this to my attention when they had their big what to-do with the whole Super Bowl party in churches.
RUSH: Yeah, but there's a reason for this, and that is that these sports bars that have all these TV screens in there showing the Super Bowl are paying for it. They are paying. There's a rights fee for this, or they may be using smaller screens, but it's just like... Let me tell you, if you have a restaurant and you play music in there, the first people you're going to hear from are the BMI and ASCAP gang, and they're going to want royalties for every bit of music. You're using that to draw customers and make money, and the people that own that property want their cut. The Super Bowl, the National Football League, they're not giving the product away. The 54-inch thing is, I think, just an arbitrary number maybe, but it's designed to keep people from using big screens to attract large crowds and perhaps try to make money on the side in their own way. What do you think is "antiquated" about that?
CALLER: Well, I don't think there's any problem with protecting one's rights to the material. I just think with our technology, with TVs getting bigger at home, it does seem to leave a loop for private citizens to get into legal troubles by, you know, just having parties and showing it. RUSH: No, that's not going to happen.
CALLER: I don't think it's going to happen, but they seem to threaten that.
RUSH: Well, where? Where have you seen any evidence of that?
CALLER: I just read an article over at TechDirt.com that the NFL wants to remind you that having people over to watch the Super Bowl on a big screen is copyright infringement, and they're alluding to the possibility if you have a big screen in your house --
RUSH: -- and you're showing “24” or the Super Bowl, and somebody learns about it, they can come and shut you down?
CALLER: Well, that's what they're saying the law leaves loopholes for. It doesn't say it can happen. I don't know of anyone who's been sued over this, but it seems to be a good possibility. RUSH: I don't see how. The privacy of your own home is different than a public place. Church is a public place.
RUSH: A sports bar is a public place. You have the Fourth Amendment protecting you against illegal searches and seizures, unless Bush is tapping your phone and then, of course, all bets are off. But, no, I've got a giant screen in my place, and I have people over to watch the Super Bowl and the last round of the Masters and “24,” and I'm not worried about it. We're not making any money off of it. I'm not sending out a public invitation.
CALLER: Sure. But you talk about it a lot on the air. I thought if anything happens, it will happen to you first.
RUSH: (Laughing.) You know, this is interesting. This just goes to show you the natural inherent fear people have of government. You actually have a genuine fear this could happen, right?
CALLER: Well, not a genuine fear. I work at a church, and I've been studying copyright laws so that we don't break it, because we are a public forum and we buy certain licenses through certain or organizations to make sure that we don't.
RUSH: You know what they're thinking? The church wants to invite people in to watch the Super Bowl, fine, and the church isn't going to pass the plate, but the church thinks that maybe the next time they do pass the plate there will be a little bit more in it because of appreciation. CALLER: You never know.
RUSH: You never know. You never know what they are thinking. Speaking of this, you want to talk about copyright and all that. People who listen to this program on our daily podcasts, which are distributed about a half hour after the program is over each day, we do not put in commercials in the podcast because the advertisers are not buying that.
RUSH: And we don't put in any music. We don't put in any parodies that use licensed music because there isn't... Well, there's permission to do it, but the cost is prohibitive, and they just raised the rates. The copyright tribunal -- the broadcast people, the music people -- just announced their rates. I want to tell you how this works. It just happened early this week or late last, and it's going to affect everybody that plays music on the Internet. We're already covered here the way we do the music with BMI and ASCAP with a broadcasting contract. The Internet is a whole new thing, and podcasts are delivered via Internet. This is going to affect everybody who plays licensed music in any form on the Internet. Here's the formula -- and I don't have all of the years, but I ran the numbers for us. I think it's 0.00008¢ -- four zeros and an eight, so eight-thousandths of a cent -- for every time you play the tune, times the number of people in your audience.
So, if this were applied to us, we would have to pay something like -- in this year, next year it goes up, and eventually it gets up to 19-hundredths of a cent per audience member. Every time we play a parody here or something, if the podcast audience was as large as the radio audience (and it's going to be someday) would be about $6,000. Now, you might think, “Well, you're EIB. Six grand is nothing.” Times how many times a day, times how many broadcasts a year -- and the rates go up. It adds up. You know, I think these people are actually shorting themselves. They're going to see to it that fewer and fewer Internet broadcasters or streamers are going to use licensed product because that's going to add up. Now, for small operators that don't have large audiences, they may be able to afford it, but that's what we've been trying to negotiate with ever since we started our podcasts and that's why they are music-free. Even bumper music is covered. You can't put bumper music on or any parody that uses music. We just played John Edwards singing “I am Woman.” We cannot put that on the podcast. People listening to the podcast this afternoon are going to hear me intro it. They will not hear the song, and they're going to hear me say, “Man, that was funny as hell,” and they want to know why they can't hear it and send me e-mails. That's why I'm explaining this. This is not going away. In fact, the intellectual property owners are getting even more vigilant about theft because of things like YouTube and MySpace. There's all kinds of stuff going up there, and the people posting it don't own it. These guys are going to go like banshees to gain control of it because it is their property. They are creating it, be it “24,” be it any other network show or what have you. But I don't think they're going to invade our homes, not for that. They may eventually invade our homes to see if we have any Bush paraphernalia in there, but beyond that I'm not worried.
Thursday, March 08, 2007
The dispute in the case is not particularly complicated: it turned on whether a pass-code protected license to access a database had been materially breached (leading to infringement). Defendants bought a restricted (and therefore cheaper) license; plaintiff alleged defendants gave out the pass-code to a number of individuals well beyond that authorized by the license terms. Plaintiff's complaint alleges that defendants "willfully and without permission infringed copyrights by engaging in the systematic, regular, and repeated authorized access to" its work.
Defendant brought an FRCP 12(b)(6) motion, arguing that infringement via unauthorized access "is not the type of conduct subject to protection by the copyright laws - the allegation simply has nothing to do with Defendants copying Plaintiff's work." I agree. The court though, noted that plaintiff also alleged, factually, that one of Defendants' employees "pasted the text from the [Plaintiff's Work] into an email and forwarded it to three employees... ." The court concluded:
"Plaintiff's claim of 'unauthorized access,' including allegations regarding pasting text from the copyrighted work into an email, sending of emails to unauthorized users and improperly accessing the [work] for purposes of of preparing FDA notifications, sufficiently alleges a violation of Plaintiff's exclusive rights to display, reproduce and distribute.... "
Wednesday, March 07, 2007
Ms. Durantaye, in 76 pages, carefully reviews the ranks of authors in the context of their social and political standing. The abstract, which is a pretty good summary, states:
The Rome of classical antiquity had no copyright law to protect literary works. This study shows that literary works were not for as much unprotected. This protection came, however, in another form than the strictly legal. It was effected through a system of social conventions and codes that served to protect the literary work. So effectively, in fact, that no law needed supplement them.
Plagiarized, corrupt, or unauthorized publications of literary works called forth immediate and lively opposition. The ancient Romans saw the author as having received inspiration for his or her work from the gods. It was this higher authority which determined the right to decide upon the conditions of the presentation of this work to the public. To violate this right was tantamount to violating the will of the inspiring gods. To do so might bring shame and even retribution with it.
Once the author had given form to his or her inspiration and made his or her work public, the work was given over to the public domain. From this point onwards, independent reproductions of texts, as long as they were faithful ones, met with no opposition, or even resentment from the readers and writers of the day. As the author's goal was never the making of money—considered an unworthy aim for a writer—such reproductions served the true aim of the writer—achieving immortality in the memory of his generation, and of future ones.
One wonders how Cicero would regard our current copyright regime and whether he might apply his saying: "The strictest law often causes the most serious wrong."
In 2003, the district court held that Section 301 of the Copyright Act did not preempt the state law, the argument being apparently that the state law interfered with the federal right to grant exclusive licenses. The district court held that the state law reached only the manner in which betting occurred and did not per se regulate the simulcast itself. 294 F. Supp.2d 1291 (M.D. Fla. 2003). After appeal to the Eleventh Circuit, that court referred the following question to the Florida Supreme Court:
"Does the Florida Pari-Mutual Wagering Act prohibit an agreement between a Florida thoroughbred racetrack and an out-of-state racetrack that grants the Florida racetrack the exclusive right to disseminate the out-of-state track's simulcast to other Florida wagering sites permitted to receive them?"
Phrased that way, it is not a stretch to see why preemption could be an issue. The Florida Supreme Court answered the question in the affirmative - meaning that the agreement was void, 2006 WL 2690152 (Fla. Sept. 21, 2006). The Eleventh Circuit then affirmed the district court, noting briefly in a footnote (#3) that there was no conflict.
If the state law was directed solely toward the taking of bets within the state and not a transmission by itself, the decision is correct.
Sunday, March 04, 2007
As a consequence of the improvements in the legal system, the power of church courts waned. The church naturally opposed this and found its most vehement spokesman in Thomas Becket, the Archbishop of Canterbury, formerly a close friend of Henry's and his Chancellor.
The conflict with Becket effectively began with a dispute over whether the secular courts could try clergy who had committed a secular offence. Henry attempted to subdue Becket and his fellow churchmen by making them swear to obey the "customs of the realm", but controversy ensued over what constituted these customs, and the church proved reluctant to submit. Following a heated exchange at Henry's court, Becket left England in 1164 for France to solicit in person the support of King Louis VII of France and of Pope Alexander III, who was in exile in France due to dissension in the college of Cardinals. Due to his own precarious position, Alexander remained neutral in the debate, although Becket remained in exile loosely under the protection of Louis and Pope Alexander until 1170. After reconciliation between Henry and Thomas in Normandy in 1170, Becket returned to England. Becket again confronted Henry, this time over the coronation of Prince Henry. The much-quoted, although probably apocryphal, words of Henry II echo down the centuries: "Will no one rid me of this meddlesome priest?" Although Henry's violent rants against Becket over the years were well documented, this time four of his knights took their king literally and travelled immediately to England, where they assassinated Becket in Canterbury Cathedral on 29 December 1170
Everytime I read yet another case in which copyright is effectively asserted in stock indices and the like via state law claims, I feel Henry II's pain: will someone please rid me of such ridiculous claims? I think not, if the most recent decision on point is an indication. Each case has its own little twists in the way the allegedly non-preempted claim is case, but the bottom-line is always the same: a complaint that non-copyrightable has been copied. In today's case, from Chicago, Count I is described this way: "Count I asserts that permitting ISE to list and trade options on the Indexes, causing OCC to clear trades in and settle the exercise of those options, would be a misappropriation of the proprietary interests of plaintiffs Dow Jones and McGraw-Hill, as well as a misappropriation of CBOE's exclusive rights under the license agreements it has with Dow Jones and McGraw-Hill. Further, defendant ISE would “wrongfully reap” the benefits of the efforts, time, and money expended by plaintiffs in creating their Indexes and license rights." Count III is described this way: "Count III alleges that defendant ISE's threatened acts and defendant OCC's participation “constitute unfair competition under the common law of the state of Illinois.”
Neither claim contains elements qualitatively different from the rights granted in 17 USC 106; they are preempted. In Count I, what are "proprietary interests" other than a claim in the uncopyrightable data? The court's decision to the contrary is based on this conclusion: "[Plaintiffs] claims are based on defendants' intended use of plaintiffs' research and development used to create the Indexes, in addition to goodwill, skills, labor, reputation, and necessary expenditures." In other words, sweat of the brow, rejected on constitutional grounds as a basis for copyright in Feist. Since preemption extends to material that fails the test for originality, such claims are black-letter law preempted. It is disappointing to see courts fall for the mumbo-jumbo of pleading. Nor is the court's other ground persuasive: plaintiff is complaining not about copying but "using': "Plaintiffs are concerned not with defendants' intended copying of the Index values, but of their use of the unlicensed material for defendants' profit." What use that does not involve copying is at issue?
Here is the entirety of the opinion:
United States District Court,
CHICAGO BOARD OPTIONS EXCHANGE, INC., Dow Jones & Co., Inc., and the McGraw-Hill Companies, Inc., Plaintiffs,
INTERNATIONAL SECURITIES EXCHANGE, LLC and the Options Clearing Corp., Defendants.
No. 06 C 6852.
Feb. 23, 2007.
MEMORANDUM OPINION AND ORDER
ROBERT W. GETTLEMAN, Judge.
*1 Plaintiffs Dow Jones & Co., Inc. (“Dow”), The McGraw-Hill Companies, Inc. (“McGraw-Hill”), and Chicago Board Options Exchange, Inc. (“CBOE”) filed a three-count complaint in state court against defendants International Securities Exchange, LLC (“ISE”) and Options Clearing Corp. (“OCC”) alleging: misappropriation (Count I); tortious interference with prospective economic advantage (Count II); and unfair competition (Count III). Defendants removed the action to federal court, claiming that Counts I and III are completely preempted by Section 301 of the Copyright Act, 17 U.S.C. § 301(a), and that Count II is similarly preempted or within the court's supplemental jurisdiction pursuant to 28 U.S.C. § 1367. Plaintiffs filed a joint motion to remand the action to state court. Defendants filed a motion to stay the proceedings until the Southern District of New York rules on a similar action, as well as a motion to transfer this litigation to the Southern District of New York. For the reasons set out below, the court grants plaintiffs' motion to remand and denies defendants' motions to stay and transfer as moot.
Plaintiff Dow is the producer of the Dow Jones Industrial Average (“DJIA”). Plaintiff McGraw-Hill, a New York corporation, is the producer of the Standard & Poors 500 Composite Stock Price Index (“S & P 500”) and has a principal place of business in New York City. The DJIA and the S & P 500 will be referred to collectively as the “Indexes.” Plaintiff CBOE operates a national securities exchange and specializes in the trading of standardized securities options. Plaintiff CBOE holds the exclusive license to list standardized options contracts (“index options”) on the Indexes. Defendant ISE is an all-electronic securities exchange that offers trading in securities options and proprietary index options products. Defendant OCC is the sole clearing agency for standardized securities options in the United States. Both plaintiff CBOE and defendant ISE must clear all trades through defendant OCC.
The Indexes track the United States stock markets and measure stock market performance. Plaintiff Dow Jones licenses use of the DJIA to certain securities exchanges and investment companies, which create financial products that track the DJIA and depend on the DJIA for their settlement value. Additionally, plaintiff Dow Jones publishes the official value of the DJIA on a real-time basis. It calculates the DJIA whenever one of its underlying components is transacted and disseminates the DJIA every two seconds.
Plaintiff McGraw-Hill produces the S & P 500 and other financial indexes. Plaintiff McGraw-Hill licenses the use of the S & P 500 to securities exchanges and investment companies, which create, manage, and sell financial instruments. Plaintiff McGraw-Hill (through S & P, one of its divisions) calculates S & P 500 values throughout the trading day and disseminates updated values every fifteen seconds.
*2 Investors use the published values of the Indexes to make investment decisions. These published values also form the basis for index options contracts. An index options contract confers on the holder the right, but not the obligation, to exercise the option and receive cash for the difference between the “strike price” of the option (the price as stated in the options contract) and the value of a designated index on a specified expiration date. Unlike an equity option contract, in which an equity security (a share of common stock or exchange-traded fund) is the underlying interest, the financial index itself is the underlying interest for index options contracts. Securities exchanges, such as plaintiff CBOE and defendant ISE, offer trading in standardized securities options, which means that all terms of the contract are fixed except the price of the option itself. All standardized securities options must be traded on a national securities exchange registered with and regulated by the United States Securities and Exchange Commission (“SEC”). All exchange-traded options must also be cleared through defendant OCC, the sole issuer of standardized options contracts traded by U.S. options exchanges.
Plaintiff CBOE is registered with the SEC as a national securities exchange. It is the only exchange authorized by plaintiff McGraw-Hill to offer options on the S & P 500 Index. Plaintiff CBOE also holds the exclusive right to offer options based on the DJIA in the United States and options based on other Dow Jones Indexes.
Defendant ISE is an options trading exchange. Additionally, like plaintiffs Dow Jones and McGraw-Hill, defendant ISE creates and disseminates its own indexes. It also offers index options on its own indexes, as well as licensing the use of proprietary indexes created and disseminated by others. On November 2, 2006, defendant ISE announced its intention to commence unauthorized options trading on DJIA and S & P 500 options, although it does not have licenses from either plaintiff Dow or plaintiff McGraw-Hill. Defendant ISE seeks to offer these products in direct competition with the licensed S & P 500 and DJIA options offered by plaintiff CBOE, in which plaintiffs McGraw-Hill and Dow Jones have a financial stake.
On November 2, 2006, defendant ISE and its parent company, International Securities Exchange Holdings, Inc., filed a declaratory judgment against plaintiffs Dow Jones and McGraw-Hill in the United States District Court for the Southern District of New York, seeking a declaration that: (1) defendant ISE will not infringe any rights of plaintiffs Dow Jones and McGraw-Hill by listing DJIA and S & P 500 options without licenses; and (2) such conduct by defendant ISE will not infringe plaintiffs' trademarks by using the marks in connection with the unlicensed listing of unlicensed options. Defendant ISE has also taken steps to begin listing these options without authorization, including: (1) adding DJIA and S & P 500 options to its central database; (2) preparing to allocate unauthorized DJIA and S & P 500 options among its members; and (3) drafting notices to its allocation committee regarding its allocation of unauthorized DJIA and S & P 500 options.
*3 On November 15, 2006, plaintiffs filed a three-count complaint in the Circuit Court of Cook County, Illinois against defendants ISE and OCC. Count I asserts that permitting ISE to list and trade options on the Indexes, causing OCC to clear trades in and settle the exercise of those options, would be a misappropriation of the proprietary interests of plaintiffs Dow Jones and McGraw-Hill, as well as a misappropriation of CBOE's exclusive rights under the license agreements it has with Dow Jones and McGraw-Hill. Further, defendant ISE would “wrongfully reap” the benefits of the efforts, time, and money expended by plaintiffs in creating their Indexes and license rights. Count II alleges that allowing defendant ISE to list options on the Index would cause member firms and customers to stop doing business with plaintiff CBOE and potentially damage its reputation, which constitutes tortious interference with prospective economic advantage. Count III alleges that defendant ISE's threatened acts and defendant OCC's participation “constitute unfair competition under the common law of the state of Illinois.”
Defendants removed the case to federal court, asserting that Counts I and III are preempted by Section 301 of the Copyright Act. Plaintiffs filed a motion to remand the case to state court, and defendants filed a motion to stay the proceedings pending resolution of the matter before the Southern District of New York. Defendants also filed a motion to transfer the litigation to the Southern District of New York.
Currently before the court are plaintiffs' motion to remand and defendants' motion to stay. The court must decide which motion to consider first. Defendants argue that the court should first decide their motion to stay because the declaratory judgment action in the Southern District of New York was filed first in time, and “[t]wo identical lawsuits should not proceed in federal court in different districts.” Colborne Corp. v. MC Retail Foods, 1996 WL 470226 (N.D.Ill.1995). This circuit, however, “has never adhered to a rigid ‘first to file’ rule.” Tempco Electric Heater Corp. v. Omega Eng'r, Inc., 819 F.2d 746, 750 (7th Cir.1987). Further, “the mere fact that [a] party filed its declaratory judgment action first does not give it a ‘right’ to choose a forum.” Id. The court therefore finds that the “first to file” rule is not a sufficient basis on which to decide the motion to stay before the motion to remand.
Further, “a federal court must assure itself that it possesses jurisdiction over the subject matter of an action before it can proceed to take any action respecting the merits of the action.” Cook v. Winfrey, 141 F.3d 322, 325 (7th Cir.1998). Additionally, this district recently held, in considering a procedural matter similar to the instant case, that the court's “first step should be to make a preliminary assessment of the jurisdictional issue” before considering defendants' motion to stay. Alegre v. Aguayo, 2007 WL 141891, *3 (N.D.Ill.2007), citing Meyers v. Bayer AG, 143 F.Supp.2d 1044, 1048 (E.D.Wis.2001). The court will therefore consider plaintiffs' motion to remand before defendants' motion to stay.
*4 In their motion to remand this case to the Circuit Court of Cook County, plaintiffs argue that each of their three claims arises exclusively under state law. Defendants argue that Counts I and III are preempted by Section 301 of the Copyright Act, 17 U.S.C. § 301. As discussed by both parties, there are two types of preemption: conflict preemption and “complete” preemption. Defendants concede that conflict preemption applies only as a defense to a claim in state court and is therefore not applicable in the instant case. See, e.g., Beneficial Nat'l Bank v. Anderson, 539 U.S. 1, 6 (2003) (“a defense that relies on ... the preemptive effect of a federal statute will not provide a basis for removal”); People v. Northbrook Sports Club, 1999 WL 1102740, *2 (N.D.Ill.1999) (“federal preemption that merely serves as a defense to a state law action, i.e. ‘conflict preemption,’ cannot alone confer federal question jurisdiction”).
The instant case was properly removed to this court, therefore, only if plaintiffs' claims are “completely preempted” by federal law, that is, when “federal law so occupies the field that it is impossible even to frame a claim under state law.” Ceres Terminals, Inc. v. Industrial Comm'n of Illinois, 53 F.3d 183, 185 (7th Cir.1995). In other words, complete preemption applies when the applicable federal statute “so thoroughly occupies a legislative field” that Congress intended to leave “no room for the states to act,” thereby precluding all state claims in favor of federal law. XL Specialty Co. v. Village of Schaumburg, 2006 WL 2054386, *1 (N.D.Ill.2006). The complete preemption doctrine has “limited applicability.” Leto v. RCA Corp., 341 F.Supp.2d 1001, 1008 (N.D.Ill.2004). It applies only when “the preemptive force of a statute is so ‘extraordinary’ that it converts an ordinary state common-law complaint into one stating a federal claim for purposes of the well-pleaded complaint rule.” Caterpillar Inc. v. Williams, 482 U.S. 386, 393 (1987), quoting Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 65 (1987).
A state claim is preempted by federal law under the complete preemption doctrine if it “provide[s] the exclusive cause of action .” Beneficial Nat'l Bank v. Anderson, 539 U.S. 1, 6 (2003). Section 301(f)(1) of the Copyright Act, 17 U.S.C. § 301, specifically provides that the statute will preempt claims of state law rights that, (1) “come within the subject matter of copyright as specified by sections 102 and 103,” and (2) “are equivalent to any of the exclusive rights within the general scope of copyright as specified by § 106 in works of authorship that are fixed in a tangible medium of expression.” The statute also states explicitly that unless both of these requirements are satisfied, the state law claim is not preempted: “Nothing in this title annuls or limits any rights or remedies under the common law or statutes of any State with respect to ... subject matter that does not come within the subject matter of copyright ... or ... activities violating legal or equitable rights that are not equivalent to any of the exclusive rights within the general scope of copyright.” 17 U.S.C. § 301(b). Additionally, the statute's legislative history states unequivocally that “[s]tate law causes of action such as those for misappropriation [and] unfair competition ... are not currently preempted under § 301, and they will not be preempted under the proposed [amendments to the Copyright Act].” H. Rep. No. 101-514, at 21 (June 1, 1990).
*5 The text and legislative history of the statute do not provide for complete preemption of state law misappropriation and unfair competition claims in general. The court must therefore analyze whether plaintiffs' specific claims satisfy the Copyright Act's two requirements for preemption. The statute's first requirement is that plaintiffs' state law claims “come within the subject matter of copyright as specified by sections §§ 102 and 103.” These sections protect as copyright subject matter “original works of authorship fixed in any tangible medium of expression.” Section 102 enumerates categories that meet this definition: literary and musical works; motion pictures; sound recordings; and other modes of creative expression.
Plaintiffs' claims for misappropriation and unfair competition are not based on defendants' threatened use of the published Index values themselves as “works of authorship.” Instead, their claims are based on defendants' intended use of plaintiffs' research and development used to create the Indexes, in addition to goodwill, skills, labor, reputation, and necessary expenditures. In Board of Trade of the City of Chicago v. Dow Jones & Co., Inc., 98 Ill.2d 109, 121-22 (1983), the Illinois Supreme Court recognized that “publication of the indexes involves valuable assets of [Dow Jones], its good will and its reputation for integrity and accuracy,” which entitled it to “protection against their misappropriation” under state law. The property interests that plaintiffs seek to protect have been recognized by the highest court of the state as state law claims, and thus do not fall within the subject matter of copyright as required by 17 U.S.C. §§ 102 and 103.
Plaintiffs' claims also fail to meet the second preemption requirement: that the rights plaintiffs seek to protect are equivalent to any of the exclusive rights within the general scope of copyright as specified by § 106 of the Copyright Act, which include reproduction, preparation of derivative works, distribution of copies, public performance, public display, and public transmission. 17 U.S.C. § 106. Defendants argue that plaintiffs' claims are based on defendants' intended “copying and distributing [of] factual information embodied within works such as Internet websites and newspapers.” This statement is a gross oversimplification of plaintiffs' claims. Plaintiffs are concerned not with defendants' intended copying of the Index values, but of their use of the unlicensed material for defendants' profit. For this very reason, the Second Circuit found that the use of Index values “does not fall within the scope of federal copyright law.” Dow Jones & Co. v. Int'l Sec. Exch., 451 F.3d 295, 302 n .8 (2d Cir.2006). Plaintiffs' claims therefore do not meet the second requirement for complete preemption by the Copyright Act.
Because plaintiffs' claims for misappropriation and unfair competition do not meet the requirements for complete preemption by the Copyright Act, this court has no jurisdiction. Plaintiffs' motion to remand the case to the Circuit Court of Cook County is granted. Defendants' motions to stay and transfer are denied as moot.
*6 For the reasons stated above, the court grants plaintiffs' motion to remand and denies defendants' motion to stay and transfer.