Monday, August 17, 2009

Once again: Copyright misuse is not a cause of action

Today a federal judge in Delaware ruled on Universal Studios Home Entertainment's motion to dismiss Redbox's suit against it. Here's the Wall Street Journal's story on the ruling. The court permitted Redbox's antitrust claims to proceed, while dismissing its claim for tortious interference with Redbox's contracts with USHE's distributors.

I want to highlight the court's other ruling, dismissing Redbox's affirmative claim for copyright misuse. The court's ruling was consistent with ample precedent (see pages 7-9 of this brief), and correct. So for the umpteenth time: There is no such thing as an affirmative claim for copyright misuse. Copyright misuse is an affirmative defense to a claim of copyright infringement. When a defendant is sued for copyright infringement, it may assert a defense of copyright misuse, arguing that the plaintiff has improperly sought to extend the scope of its copyright, usually through overly restrictive licensing practices or similar anti-competitive behavior. If successful, the defense, which is derived from the equitable doctrine of unclean hands, bars the enforcement of the copyright until the abusive practice is purged. See, e.g., Video Pipeline v. Buena Vista Home Entertainment, 342 F.3d 191 (3d Cir. 2003).

Copyright misuse is a real doctrine, but it simply is not an affirmative cause of action. At some point, plaintiffs will stop pleading it as such. But it's taking a while.


  1. Is not a claim for a declaratory judgment that copyright misuse was practiced, and not purged, a permitted pleading?

  2. @Thomason: If a party is threatened with a suit for copyright infringement, it may file a DJ action, and have copyright misuse adjudicated as one of its "defenses." (I put "defenses" in quotes, because it's all backwards in the DJ context.) But here, as USHE argued, and the court found, there was no threat of a copyright infringement suit here.

    The point is that you can't have a free-standing misuse claim; it only exists as a defense to an infringement allegation.

  3. Let me just point out two things here.

    First, there are courts that have recognized copyright misuse as an affirmative cause of action. (On vacation right now, else I'd add cites here.) The district court failed to provide any analysis at all for its holding here.

    Second, the Redbox case makes a pretty compelling argument for recognizing such a cause of action, notwithstanding the district court's ruling. If we accept that copyright misuse extends beyond the limits of antitrust, and that Universal and Fox are using their copyright rights indirectly to attack Redbox, antitrust claims alone don't address all the wrongs misuse was intended to reach.

    Wonder if there will be an interlocutory appeal in this issue?

  4. @Fred:

    You should really be spending your vacation doing something more enjoyable than this!

    I haven't done a full search on this recently. But it's notable that Redbox's brief cites only one case for the proposition that copyright misuse can be an affirmative cause of action: Apple, Inc. v. Psystar Corp., 2009 WL 303046 (N.D. Cal. February 6, 2009). But, as USHE pointed out in its reply, "The court in Apple did nothing more than permit the defendant, who had been sued for copyright infringement, to assert misuse as a counterclaim in that same infringement suit." USHE goes on to say:

    "The Apple court observed in dicta that the defendant in that case might have an interest in
    seeking a declaration regarding misuse even if Apple had not sued it for infringement, “for
    example, to clarify the risks it confronts by marketing the products at issue in this case or others it may wish to develop.” See Apple, 2009 WL 303046 at *2. This dicta actually underscores
    why Redbox'’s request for a declaration regarding Universal’s purported misuse is misplaced
    here. Unlike the defendant in Apple, Redbox has not alleged (and Universal does not contend)
    that anything about the Redbox business model -- renting and selling DVDs to consumers (FAC
    ¶ 1) -- might be viewed as constituting copyright infringement, so there is no need for the Court
    to exercise its discretionary jurisdiction under the Declaratory Judgment Act to decide a nonexistent
    question. Thus, even if the law in this Circuit were to permit a stand-alone claim for
    declaratory relief regarding copyright misuse (and there is no case in this Circuit so holding or
    suggesting), the claim would be inapposite on the facts alleged here."

    As to whether there should be an affirmative misuse claim, and whether it should extend beyond antitrust, I'm persuaded by Judge Posner's words in Saturday Evening Post Co. v. Rumbleseat Press, Inc.
    816 F.2d 1191 (7th Cir. 1987):

    "What is needed is a balancing of the pros and cons of the [contract] clause in each case. That balancing is best done under antitrust law. Section 1 of the Sherman Act, 15 U.S.C. § 1, forbids contracts that restrain trade. If Rumbleseat had wanted, it could have attacked the no-contest clause under that statute. It did not do so. We decline to create a federal common law rule that would jostle uncomfortably with the Sherman Act. Noting the convergence of patent-misuse principles with antitrust principles, we said in USM Corp. v. SPS Technologies, Inc., 694 F.2d 505, 512 (7th Cir.1982): 'If misuse claims are not tested by conventional antitrust principles, by what principles shall they be tested? Our law is not rich in alternative concepts of monopolistic abuse; and it is rather late in the date to try to develop one without in the process subjecting the rights of patent holders to debilitating uncertainty.' This point applies with even greater force to copyright misuse, where the danger of monopoly is less. We hold that a no-contest clause in a copyright licensing agreement is valid unless shown to violate antitrust law."

  5. Fred and Ben -

    What is your take on the current status of 'copyfraud' as an affirmative federal claim? (i.e., instances where parties claim copyright protections for works, when in fact they are either not the copyright holder or the work is not covered by copyright protections to begin with.)

    While 'copyfraud' isn't synonymous with copyright 'misuse', I see them as close legal cosuins which has bearing on this discussion.

    I'm with Fred in that if a 'misuse' claim cannot be established through case law, then Comgress certianly needs to establish one ASAP.

  6. @Anonymous 11:27:

    I've seen the word "copyfraud" used colloquially, but I'm unaware of any court that has embraced the term. Of course no one should make meritless copyright claims. But there are already remedies for those falsely sued for copyright violations, including sanctions under Rule 11 and attorneys' fees under 17 USC sec. 505, and, in the DMCA takedown context, 17 USC sec. 512(f).

    And just to be clear: USHE has not accused Redbox of any copyright violations.


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