|IFP probably regrets not pursuing those licences with more vigilance|
Tuesday, 3 May 2016
This Kat hates long-haul flights, but is grateful that airlines have improved entertainment packages in an effort to make the journey less dull. She recently learnt that this in-flight entertainment is not just a source of boredom relief, but also, copyright contention. A group of record companies and music publishers brought a claim for copyright infringement against IFP, a producer of these entertainment packages. The plaintiffs, which included UMG Recordings, Capitol Records and Universal Music Publishing Group, claimed that IFP infringed copyright in numerous works by failing to secure appropriate copyright licences. The court’s tentative ruling which granted the plaintiffs summary judgment was subsequently adopted as the final judgment.
It is difficult to believe that a company supplying major airlines such as American Airlines and United Airlines with in-flight entertainment would not ensure it had obtained the necessary copyright licences, but this is exactly what occurred. IFP went about creating the entertainment packages by buying CDs and digital tracks and then copying them on to their internal hard drives. IFP then sent the copied files to an “integrator” to encode them according to an airline’s technical requirements. Following this, a copy of the encoded file was imported back into the United States for sale and distribution to US airlines. Based on these actions, the court found that IFP had infringed the plaintiffs’ exclusive right to reproduction and distribution under s.106 of the US Copyright Act 1976, (USCA) and their importation rights under s.602(a)(1)
The Court did not consider whether IFP also infringed the performance right because “any works implicated in performance-related infringement are covered by IFP’s other infringements.”
Did IFP not think about copyright at all? They did in fact, and for many years at that. In 2008, IFP hired a licensing expert, Mark Isherwood, to assess IFP’s position with regard to licensing creative content. Isherwood advised that IFP had no US licences and it risked legal action. In the years that followed, Isherwood was tasked with securing licences from the respective copyright owners. Isherwood failed to secure any licences, despite piecemeal attempts at negotiation over a six year period. He nevertheless did advise IFP to collect royalties from the airlines because, “In such an, albeit unlikely, event that proceedings are taken, having royalties accrued would mitigate IFP's position before a court.” On receiving the plaintiff’s cease-and-desist letter in November 2013, IFP's relationship with Isherwood was terminated.
In the face of the undeniable fact that IFP had known for a long time that they should have secured licenses, but failed to do so, IFP advanced a panoply of defences, including statute of limitation, estoppel, waiver, implied licence, and pre-emption. Perhaps the most plausible was its argument that infringements which occurred before November 2010 were time barred because by that point, the plaintiffs should have known that the infringements were occurring. Copyright claims are time barred three years after the claim accrues under s.507(b) USCA 1976. However, this defence ultimately failed because of the ‘discovery rule’. According to this rule, the limitation period does not begin to run until “the plaintiff discovers, or with due diligence should have discovered, the injury that forms the basis for the claim.” IFP argued that the plaintiffs were aware that IFP was using their copyright works without permission, based on communications between Isherwood and the plaintiffs. The court found, however, that Isherwood’s emails were vague to the extent that it was not apparent that IFP was already using works without authorisation.
IFP also claimed that it had an implied oral licence with the plaintiffs, created during the communications with Isherwood. The court noted that implied licenses are found only in exceptional circumstances, such as when a work has been commissioned, but the commissioning party then fails to obtain an assignment of copyright. The court found that evidence regarding the communications showed that the parties had discussed various terms but no final agreement was reached. There was no implied licence between the parties.
The plaintiffs were accordingly granted summary judgment against IFP for copyright infringement. Notable is the court's finding of willful infringement. Willful infringement occurs when the defendant “knew or should have known it infringed the plaintiff's copyright.” As discussed above, e-mail evidence had shown that IFP consciously continued to infringe copyright of the plaintiffs for several years. This may have an impact on the award of damages, scheduled for May 10th, as the court can increase damages up to $USD 150,000 for willfull infringements of any one work under s.504(c)(2) USCA 1976. With 4500 works allegedly infringed, IFP may have a serious financial burden coming its way.