A recent decision out of a federal court in Texas (Live Nation Motor Sports Inc. f/k/a SFX Motor Sports Inc. v. Davis d/b/a TripleClamps) has ruled that a webcast of a live sporting event is protectable by copyright.  This in itself is not particularly ground-breaking.  Original content such as a webcast is expected to be the subject of copyright protection, much like a television broadcast would be.    

However, the decision has attracted attention because the court ordered the defendant to take down its link to the protected webcast.  This means that, in this case, an unauthorized hyperlink amounted to copyright infringement.  There has been much legal debate about when links should be considered copyright infringement, since links go to the heart of the functioning of the internet.  

Unfortunately, the court did not provide much guidance on the difference between merely displaying a link to the page on which the audio webcast was posted (much like the “deep linking” cases such as Ticketmaster vs. Tickets.com), as opposed to providing direct unauthorized streaming of the protected webcast.  The defendant in this case appears to have been engaged in unauthorized streaming, but the court order only dealt with the defendant’s link to the webcast. 

If you read the decision, two lessons will emerge:

1.  The plaintiff prepared its case well, made strong economic arguments to support its claim for protection, and ensured that it had adequately warned the defendant to cease and desist;

2.  By contrast, the defendant appeared disorganized, contradictory and made a baseless counterclaim for trade-mark infringement.  At one point, the defendant compared the plaintiff to Ghengis Khan.  All of which helped the plaintiff win.

Calgary - 09:46 MST

Lawyers are known for looking back, but we prefer to look ahead.  Here are some themes and developments in the rapidly evolving world of intellectual property and internet law. 

Copyright 

The courts were busy in 2006 in the copyright arena.  We can expect a few more important decisions (such as the appeal of the Toblerone copyright case) to go to the Supreme Court of Canada in early 2007.  One important theme in copyright is the attempt to use copyright to protect areas which aren’t the traditional domain of copyright: in the Toblerone case, the copyright holder succeeded. In the case of Plews v. Pausch 2006 ABQB 607, an Alberta graduate student attempted to use copyright to protect mere ideas and theories, and lost.

Privacy

Privacy is not within the realm of intellectual property but it almost always overlaps with technology issues.  Besides the regular reports of missing laptops and hacked data, consider two cases: One, the infamous Sony Rootkit case, in which Sony CDs embedded hidden software on the hard-drives of customers as part of the company’s copyright protection strategy.  The strategy landed Sony in a hornet’s nest of privacy issues.  Class action settlements were finalized in 2006. 

Second, consider the Alberta case of Doctor Dave Computer Remedies.  In that case, the Alberta Information and Privacy Commissioner found that Doctor Dave Computer Remedies used and disclosed the Complainants’ personal information (including names, email addresses, mailing addresses and phone numbers) contrary to the Alberta Personal Information Protection Act by posting that information on websites. 

Privacy issues will continue to be front and centre in 2007 as Parliament continues its review of PIPEDA, while other technologies, such as RFID tags, continue to raise privacy concerns.

IP Litigation

In 2006, the courts helped clarify enforcement issues for IP litigators.   In decisions such as Celanese Canada Inc. v. Murray Demolition Corp., an industrial espionage case, the courts helped clarify the boundaries for the use of Anton Piller orders in civil cases where evidence is being seized.  The cases of Pro Swing Inc. v. Elta Golf Inc. and Disney Enterprises Inc. v. Click Enterprises Inc, dealt with the enforcement of foreign judgements in Canada.

Calgary – 13:17 MST

In the holiday spirit, we can’t resist analyzing the intellectual property rights in the Grinch. How did a grouchy green cave-dweller become a multimillion dollar IP asset? 

Copyright

The original book “How the Grinch Stole Christmas” was written in 1957 by Theodor S. Geisel under the pseudonym Dr. Seuss. The copyright in the character and the related trade-marks is owned by Dr. Seuss Enterprises L.P., a California limited partnership created after the author’s death to handle licensing of the Dr. Seuss empire. The copyright in the original book is owned by the publisher, Random House Inc. 

An animated television special was created in 1966 by Metro-Goldwyn-Mayer, Inc., now part of the Time Warner empire; the copyright in the television production is now owned by Turner Entertainment Co.  The copyright in the music in the television production (based on the book) was originally owned by Metro-Goldwyn-Mayer, Inc. as employer for hire of Theodor S. Geisel and Albert Hague. RCA Records published a compilation of songs from the television production. 

In 2000, the movie rights were acquired by Universal and the copyright in the movie “Dr. Seuss’ How the Grinch Stole Christmas!”, directed by Ron Howard, is owned by Luni Productions, a Universal production company. A novelization of the movie (based on the original book) was written by Louise Gikow and copyright is owned by Universal Studios Licensing Inc.

Inevitably, someone decided that the story was fit for a musical production: “Dr. Seuss’ How the Grinch Stole Christmas! The Musical” opened in San Diego in 1998 and moved this year to Broadway.  The copyright in the musical (lyrics and music) is owned by Timothy Mason and Mel Marvin.

All under license of course.

Trade-marks 

The word GRINCH is a registered trade-mark of Dr. Seuss Enterprises L.P. in Canada.  In the US, the GRINCH trademark was registered by Dr. Seuss Enterprises LP in 2000 for T-shirts, shirts, tops, sweaters, hats, headwear, aprons, sweatshirts and any other merchandising category you could think of. Interestingly, an individual by the name of John Christopher Chlebowski, Jr. obtained the first trademark registration for the word GRINCH, claiming a date of first use in 1991 for “entertainment, namely, live performances by a musical band.”

Domain Names

The domain name grinched.com  is owned by Universal Studios for use with its movie-related website, under license from Dr. Seuss Enterprises.  The domain name howthegrinchstolechristmas.com is registered by an unknown registrant and currently resolves to a “domain for sale” site (which would make a good case for “bad faith” registration under the Uniform Dispute Resolution Policy arbitration procedure).

Patents

The Grinch is mentioned in several U.S. patent applications, although no-one has yet found a way to make the character himself the subject of a patent.  For example, United States Patent No. 6,982,780 (filed by inventors Steven Morley, et al.) which issued on January 3, 2006, claims patent rights in a method for creating a playlist for a digital cinema system.  The work “How the Grinch Stole Christmas” is mentioned in the claims description as an example of the use of the invention.

Licensing

Dr. Seuss Enterprises L.P. with Audrey Geisel at the helm, appears to control all trade-mark and copyright licensing of the original Grinch character and related paraphernalia as well as the entire Dr. Seuss line of products, and has licensing deals for countless spin-off products.  The movie licensing is handled by Universal Studios Licensing, Inc., which is itself originally under license from Dr. Seuss Enterprises L.P.   Although Dr. Seuss died in 1991, he has consistently made the Forbes list of top-earning deceased celebrities due to the marketing engine of Dr. Seuss Enterprises L.P. It generated $10 million last year.  For the movie version of the Grinch, the licensing company took 4 percent of the box-office gross, 50 percent of the merchandising revenue and music-related material, and 70 percent of the income from book tie-ins.  We haven’t even touched on the licensing for Universal’s theme-park.

Infringement

Alas, we have uncovered no Grinch lawsuits, although few literary characters would be more suitable as a plaintiff.  It seems to us that Mr. Chlebowski, armed with a trademark registration for the word GRINCH in association with “entertainment, namely, live performances by a musical band” would have a claim against the producers of the live musical version of the Grinch story, but we have seen no effort on the part of Mr. Chlebowski to pursue that action. Perhaps the prospect of shutting down a family Broadway musical during the Christmas season is a bit too unpalatable, even for a GRINCH trademark owner.

Calgary - 23:11 MST

Early in November, Universal Music Group announced an innovative deal with Microsoft.  As part of the negotiations leading up to the launch of Zune (Microsoft’s competitor to the iPod), Universal cut a deal to get a royalty payment for every Zune player sold by Microsoft.  This is separate from the royalties generated by the sale of downloaded music from Universal’s catalogue. 

How did Universal negotiate this and why did Microsoft agree to share its (probably slim) margins on the device?  Let’s call it an alignment of interests.  Microsoft needs the big music catalogues on side if its Zune is going to put a dent in Apple’s mighty iPod.  Secondly, the Zune is marketed by Microsoft as a “social” vehicle: the wireless capability of the Zune player allows users to share their music with other Zune owners.  In legal terms, this means that content subject to copyright can be distributed to unnamed users who have not directly acquired any rights to the music.  Sound like a recipe for a copyright lawsuit?  Not if you cut a deal that aligns interests.  If Universal enjoys a cut of sales of the device, then it has a vested interest in having as many Zune owners as possible.  To answer any fears that one Zune owner can distribute music infinitely, the technical protection measures kick in.  The device can only share with other Zune devices within range, and the shared music actually times out after three days.  Music sharing?  It’s more like a short-term loan. 

For its part, Universal had two other motivators: one, the Diamond Rio case in the U.S. made it clear that MP3 players were not subject to the type of copyright levy applied to blank CDs and other digital recording media.  In Canada, the Federal Court of Appeal came to the same decision in 2004. So iPods and Zunes are not generating tariffs for copyright owners the way blank CDs are.   Second, Universal also has its eye on upcoming negotiations for the renewal of its contract with Apple. With the Microsoft deal in its back pocket, Universal will very likely look to Apple for a cut of iPod sales.  Unfortunately for Universal, it does not have the upper hand in that round of negotiations.  Apple’s iTunes accounts for the lion’s share of the legal download market and any threat by Universal of pulling its catalogue from iTunes would be akin to shooting the goose that’s laying the golden eggs. 

Instead of positioning themselves for a future battle over copyright, Universal and Microsoft used a little creative thinking to align business interests.  It will be interesting and instructive for business owners to watch as the deal-making unfolds.  

Calgary - 08:38 MST

The use of copyright as a tool to control distribution channels and protect product lines is not new. Neither is it confined to the traditional fields of music or software. Take for example the 2005 case of Euro Excellence, Inc. v. Kraft Canada Inc., 2005 FCA 427, where the Federal Court of Appeal upheld an injunction against an unauthorized distributor of “gray market” Toblerone chocolate bars, based on a claim of copyright infringement. Gray marketing refers to the distribution of genuine goods by a distributor who is outside the manufacturer’s official supply channel.

Manufacturers of all stripes seem to be employing copyright as a way to control unauthorized uses of their product. Take for example Viacom’s well-drafted copyright license terms on the back of its “Dora the Explorer” branded stickers: “This product is intended solely for non-commercial home use. No license has been granted to apply this product to decorate articles which will thereafter be sold. Any such use is an infringement of copyright in the characters portrayed and is specifically prohibited.” Viacom’s Dora figure is big business. In 2005, Viacom’s revenues in Canada alone were $214 million, generated in part from licensing and merchandising of branded products such as Dora stickers. Copyright can be a very useful tool which should be considered when developing a strategy for product distribution.

Just don’t let your pre-schoolers put any Dora stickers on the cups at their sidewalk lemonade stand.

Calgary – 16:04 MST

In the ongoing copyright wars, some of the most memorable battles were fought by Sony BMG and Universal against upstarts like Napster and Grokster.   Napster and Grokster were ahead of their time.  Alas, like many pioneers, they were effectively litigated out of existence.  Today, dozens of industry-sanctioned sites like iTunes and Puretracks are flourishing. 

With the upsurge in video file-sharing sites, are we going to see a new round of battles, this time over copyright in video and movie content?  The answer to this question will lie in the degree to which the industry becomes successfully enmeshed in the success of video-sharing.  Yes, we are already seeing copyright lawsuits against YouTube and MySpace.  However, the difference is that these popular video-sharing sites aren’t operated by rogue individualists.  They are part of well-established corporate empires: Google bought YouTube; MySpace is owned by News Corp., the parent company of Fox Interactive.  YouTube has already negotiated deals with CBS, Universal, Sony BMG, Warner Music and NBC.  The content industry is enmeshed.  If industry can generate profit through these distribution models, the battles will be between competing empires over who has the most successful distribution model and the most effective copyright protection measures. 

For Canadian video content producers, the questions remain the same as always: can content be distributed profitably or will profits leak out through copyright infringement?  If copyright infringement is occurring, can it be stopped and at what cost?  We’ll continue watching the latest YouTube and MySpace lawsuits to find some of the answers.

Calgary – 12:16 MST

Many companies want some basic guidance on copyright. This discussion provides some practical tips and information on copyright in Canada.

Q. What is copyright?

Copyright is at its most basic level the “right to make copies”. It was originally developed to give writers and artists a measure of control over who can rightfully copy their works.  Copyright protects original creations such as books, music, images, photographs, and has evolved to provide protection for software, layout and design of websites, broadcasts and performances.  Copyright is a function of the law set out in the Copyright Act and in the court decisions which interpret that Act.

Q. How is copyright created?

Someone who creates an original work automatically enjoys copyright protection in that work by virtue of the Copyright Act.  For copyright to subsist, the work must be original and it must be reduced to a fixed form (for example, copyright does not protect mere ideas which are not expressed in writing). 

Q. Do I need to register copyright and if so, how do I do that?

Technically, you do not need to register copyright in order to enjoy the protections under the Copyright Act.  However, you can benefit from registration because a registration entitles the copyright owner to the benefit of certain presumptions.  In other words, you are presumed to be the owner of a work in which you have a copyright registration without having to prove that you were the author of the work.  Whereas, without a registration, you would have to prove authorship and ownership of that work in the event of any dispute.  Copyright registration is easy to do (relative to patents or trade-marks, for example).  The Canadian Intellectual Property Office provides more detailed guidance on that process.

Q. What can I do if someone else uses my copyrighted works without my permission? 

When someone else uses works in which you enjoy copyright protection and they don’t have your permission, this is what we call copyright infringement.  There are a number of exceptions in the Copyright Act which permit copying under certain circumstances, but if those exceptions are inapplicable, then you may be able to sue the infringer to prevent the unauthorized copying.  The Copyright Act permits copyright holders to collect statutory damages of up to $20,000 in certain cases where infringement can be shown.

Internet Service Providers (ISPs) are often on the front lines of the battles taking place in internet law.  In the BMG case (BMG Canada Inc v. John Doe) (which was referred to in our October 30th post), it was the ISP community which took the brunt of the recording industry’s efforts to stop online peer-to-peer file-sharing. In that decision, the court denied the request by copyright holders to force ISPs to disclose their customers’ identities where copyright infringement was alleged.  ISPs fought to for the right to protect their client’s identities (or framed in a business context, they fought for the right to avoid expensive disclosure obligations) and won.

The Modernization of Investigative Techniques Act , a proposed federal law which was first introduced in 2005 by the Liberal government, would impose stricter obligations on ISPs to permit “lawful interception of communications by law enforcement agencies and the Canadian Security Intelligence Service.”  This bill died before being passed into law, but it is certainly cause for concern for ISPs who are navigating the line between privacy rights, legitimate concerns over illegal activity, the interests of copyright holders… and the dictates of profitability in a competitive marketplace.

In a recent case in Ontario [see story link] the quick response of an ISP led to the disclosure of the identity of a subscriber and a speedy arrest by investigators.  That case (involving sexual assault) highlights the issue but does not provide much guidance for ISPs in the more nuanced area of alleged intellectual property infringement.  We will be monitoring developments to see whether the Conservative government will introduce legislation in this thorny area.

In October 2006, open source software company OpenLogic announced that it is offering an indemnity against lawsuits for customers using its code [story link].  The indemnity covers intellectual property infringement claims (including defense of claims, replacement of infringing software, and up to four times the value of the contract for damage awards) for claims arising out of the use of certain open-source software products. These products are listed in its Certified Library.  Of course, there are limitations to the coverage, one of which is that the indemnity does not cover code which is modified by the customer.

The business issue? For licensors, offering such an indemnity is a calculated risk. In this case, it’s designed to give customers confidence in the face of the questions swirling around the open-source community in the wake of the SCO Litigation. Software licensors, whether in the open-source or traditional software market, need to balance the costs associated with risk allocation. The risk allocation analysis has to take into account the potential threat posed by software patents.  Different companies will take different approaches depending on their overall strategy.  For example, Red Hat has developed its own strategy on such litigation, and has taken out a number of software patents for defensive purposes. 

We will be watching these developments closely as open source software legal issues continue to be front-and-centre for many software companies. 

That’s right. Jail time. Grant Stanley is the latest casualty in the file-sharing wars.  The 23-year old network administrator for peer-to-peer file sharing site Elite Torrents has been handed a 5 month prison term [story link] for copyright infringement for the part he played in operating the online file-sharing system.  Elite Torrents used the BitTorrent file-sharing application and was shut down in May 2006 by US federal investigators [link].

In Canada, the law on P2P file sharing activity has been in legal limbo since the court in the BMG case [BMG Canada Inc v. John Doe] indicated that downloading music files does not infringe copyright under the private copying exemption. As the court said: “Under [the Copyright] Act, subsection 80(1), the downloading of a song for a person’s private use does not constitute infringement.” So don’t expect anyone to be spending time in a Canadian jail for copyright infringement. Not any time soon, anyway. Mr. Stanley will have to wait for a Canadian pen pal on this issue.

It is the BMG decision which is referred to in the US government’s Special 301 Report which monitors countries whose intellectual property protection regime does not live up to the standards of the United States.  The report, which identifies trading partners who “do not provide an adequate level of IPR [intellectual property rights] protection or enforcement”, refers in a disappointed tone to the “Canadian court decision finding that making files available for copying on a peer to peer file sharing service cannot give rise to liability for infringement under existing Canadian copyright law…”

We can expect changes to the Canadian copyright regime when Parliament gets around to it. This issue will very likely be front and centre, but probably not until 2007.

If you can’t bear to listen to another electronic rendition of Beethoven’s 9th while you’re watching a movie or enjoying a moment at the theatre, then this decision may give you some satisfaction. In a decision from August 2006 [link], the Canadian Copyright Board decided that ringtones do constitute a “substantial part” of a musical work, and so deserve a tariff all their own. The Board certified a new tariff for downloading ringtones for 2003 – 2005. The royalty is set at 6% of the price paid by the customer or a minimum of $0.06 per ringtone. The fact that the royalties generated by the new tariff will be about $1,570,000 for 2005 shows just how many ringtones are being downloaded annually. The royalty represents a small slice of the pie: revenues generated by ringtone retail sales in Canada are predicted to reach $30 million in 2006. So it probably won’t deter ringtones users, and you won’t ever see a dime (unless you’re a copyright owner) but it may help to ease the pain the next time you hear another electronic ditty on your trip to the movies.

If a US company obtains a judgement from a US court for intellectual property infringement in the US, can the judgement be enforced in Canada?

Several American movie studios sued a Canadian company Click Enterprises Inc. (“Click”), and its principal, an Ontario resident named Philip Evans, for infringement of intellectual property rights.  Specifically, the lawsuit involved allegations of copyright infringement arising from unauthorized movie downloads.  The movie studios obtained default judgement in New York state and sought to enforce their judgement against the Ontario company in Canada.  In the decision in Disney Enterprises Inc. v. Click Enterprises Inc. the Ontario court decided that there was a “real and susbstantial connection” between Click’s conduct and the United States, where the original judgement was granted.  The court said “it is inescapable that Click was making its services available to residents of the United States who wished to illegally download American films.”  Because of this connection, the US court had exercised proper jurisdiction in the eyes of the Ontario court, and the US judgement was upheld in Ontario.  In effect, the US judgement was enforced as though it was the judgement of a Canadian court.

The lessons for business?  The use of the internet was instrumental in cementing the “real and substantial connection” between Click’s conduct and the United States.  Click had US customers and accepted online payments in the US.  Any online business must take into account the risks of intellectual property infringement which might actually take place south of the border.  If a Canadian business infringes IP rights in the US, the long arm of the law does have a way of reaching across the border.

Calgary – 13:26 MST – “Newspaper publishers are not entitled to republish freelance articles acquired for publication in their newspapers in [databases] without compensating the authors and obtaining their consent.”

Today the Supreme Court of Canada (SCC) released its decision in Robertson v. Thomson Corp., 2006 SCC 43 [link], the copyright battle pitting freelance writer Heather Robertson against the Globe and Mail publishers. The decision came out in favour of Robertson.  The majority of the court decided that the publisher’s right to copy and reproduce the freelance articles was restricted to the specific layout or the “essence” of the newspaper. Republishing the articles in a database or other form which did not preserve the “essence” of the newspaper was not part of the publisher’s copyright.  For such a reproduction, the author’s consent was required.  However, the publisher was permitted to reproduce the artlcles in a CD-ROM which preserved the essence of the newspaper. We’re still reviewing this decision, but judging by the split in the Court’s analysis, it looks like the copyright debate is continuing.

The impact on business? Just because you think you own the copyright in a particular work, don’t assume that right includes the right to reproduce the work in any and all media.  As a result of the Tasini decision (a decision on comparable facts in the US), we have been advising clients to include contractual language to clarify the rights of reproduction to include any and all media.  This Canadian decision reinforces that advice.

Calgary – 10:22 MST – The Supreme Court of Canada (SCC) has been very active on the copyright battlefield: its decision in the CCH case (link) has breathed new life into the “fair dealings” exceptions under the Copyright Act. “Fair dealing” is the carve-out in the Copyright Act giving users (including students, educators and others whose use is considered “fair”) certain rights to use works protected by copyright. This week, the SCC is expected to enter the fray again when it renders its decision in the case of Robertson v. Thompson Corp., a case pitting a freelance writer against a newspaper publisher. This case deals with the rights of publishers to copy works and rebublish them in databases. Robertson is the Canadian version of the famous 2001 US decision in New York Times v. Tasini (famous for copyright lawyers anyway). We’re eagerly awaiting the Supreme Court’s latest offering.