NEW PERSPECTIVE ON COPYRIGHT MISUSE DOCTRINE IN THE US

The IPKat welcomes Alan Cunningham back as a guest blogger. Alan, a Herchel Smith Research Scholar at the QM Intellectual Property Research Institute, is researching the cutting edge of digital rights management. Says Alan:

A (relatively) recently decided case, that only last week came to my attention, has some important implications for the continuing development of the nascent concept of copyright misuse in the US. Video Pipeline, Inc. v. Buena Vista Home Entertainment, Inc. 342 F.3d 191 [2003] concerns the application of this equitable defence by a company that began life compiling film trailers into videotape for home video retailers to display in their stores. Video Pipeline gained the right to distribute such trailers by entering into agreements with a variety of entertainment companies. In 1988 Video Pipeline entered into such an agreement with the Disney Corporation. After the completion of the agreement, Disney proceeded to provide Video Pipeline with a number of movie trailers.

Video Pipeline soon established an online presence, creating two websites, VideoPipeline.net and VideoDetective.com. A movie trailer database was made available on VideoPipline.net. With its websites, Video Pipeline was able to extend the scope of its business; the Internet clients of Video Pipeline were usually retail websites selling home videos or DVDs and they used VideoPipeline.net to display trailers to site visitors.

VideoPipeline had included on its online trailer database trailers it had received under licence from Disney. However, Disney considered such activity to be in breach of its licence. As a result of this interpretation, Disney requested that VideoPipeline remove the trailers from the website; VideoPipeline subsequently complied with this request. However, in 2000, Video Pipeline filed a complaint in the District Court of the District of New Jersey, seeking a declaration that the online use of the trailers did not violate federal copyright law. Disney shortly after terminated the licence agreement. Before this termination, Video Pipeline decided to replace some of the trailers it had removed at Disney’s request – in doing so, however, it simply copied a number of minutes’ worth of film from a number of Disney movies in order to create its own clip previews of the movies. Similarly to the licensed trailers, Video Pipeline stored the clip previews on its website database and amended their complaint in the District Court to seek a declaration allowing the use of the clip previews. Disney filed a counterclaim alleging copyright infringement. The District Court entered a preliminary injunction, later revised, that prohibited Video Pipeline from displaying Disney films on the Internet.

When appealing against this injunction, Video Pipeline claimed that Disney misused their copyright by placing conditions in their licence that prevented Disney trailers from being shown on websites that attempted any criticism of the Disney Corporation. The Disney licence agreement stated:

“Websites in which trailers are used may not be derogatory to or critical of the entertainment industry or of Disney (and its officers, directors, agents, employees, affiliates, divisions and subsidiaries) or of any motion picture produced or distributed by Disney…….or of the materials from which the trailers were taken or of any person involved with the production of the underlying works. Any breach of this paragraph will render the licence null and void and the licensee will be liable to all parties concerned for defamation and copyright infringement, as well as breach of contract.”

While the Court of Appeal affirmed the judgment of the District Court, two important points, were made in summary, have important implications for the doctrine of copyright misuse.

First the Court (3rd Circuit) explicitly recognised the existence of copyright misuse. This is important because the very existence of copyright misuse has long been a contentious issue, with some courts withholding judgment because the Supreme Court had not decided on its existence. Second, and to my mind more importantly, the copyright misuse defence was essentially distinguished from an historic reliance on antitrust. The Court stated:

“it is possible that a copyright holder could leverage its copyright to restrain the creative expression of another without engaging in anti-competitive behaviour or implicating the fair use and idea/expression doctrines”.

Previously, in many cases and much academic literature, it was suggested that a defence of copyright misuse could only be applied where the activity in question also contravened anti-trust law, i.e. if it was also anti-competitive. The distinction is important because the modern interface between technology and copyright has ensured that the mere misuse of a copyright grant (as opposed to the anti-competitive use of a copyright grant) has become more possible in practice. For example, the control of digital copyright works by technological systems that rely on conceptual legal protection can be seen as extending the grant of copyright. How? By the simple fact that the nature of the contract constructed by the system allows a greater specification of the grant of copyright, thus removing some of the equities that emerge from the complexity and fluidity of a non-digital, non-computational contractual scenario. Such “misuse” may not be anti-competitive, but it may be misuse nonetheless. Video Pipeline recognises that a copyright grant may be misused in such an anti-public policy fashion. Importantly, it suggests the removal of the previously burdensome requirement of the existence of anti-competitive behaviour in copyright misuse cases.

Of course, an important question, even if one accepts the distinction between anti-competitive behaviour and misuse, is how one arrives at a suitable definition of such public policy misuse for legal purposes. As such, even though Video Pipeline provides much of benefit for the continuing development of copyright misuse doctrine, it also ensures further controversy regarding this most interesting aspect of U.S. copyright law.