Interesting New Developments About Which All Practitioners Should Be Aware
By Neville L. Johnson and Douglas L. Johnson
Protecting your rights abroad can be a tricky prospect. Procedural hurdles continue to develop and compound depending on the right being vindicated and the country of the transgression. For example, most attorneys who deal with copyright are aware that United States copyright law does not apply exterritorial, but defendants love to seize on this and take it one step further to say that plaintiffs cannot sue for any damages that occur outside U.S. borders. However, when infringement happens both domestically and abroad, you can sue for both in U.S. courts.
I. Copyright Infringement
The U.S. Supreme Court held in Fourth Estate Public Benefit Corp. v. Wall-Street.com1 that a copyright infringement suit must wait until the copyright is successfully registered by the United States Copyright Office before a lawsuit can commence in U.S. courts.
Suing internationally, there is no such registration requirement. Under the Berne Convention Article 5(2), “The enjoyment and the exercise of these rights shall not be subject to any formality” and members of the World Trade Organization (WTO) have implemented this provision. However, this requires a party to actually go to the country where infringement is happening and litigate in that foreign court. Alternatively, a plaintiff could sue in a U.S. forum applying the law of the country where the infringement is taking place.2 Both are daunting and potentially expensive propositions.
In Levitin v. Sony Music Entertainment,3 Levitin sued Sony and its foreign affiliates in the United Kingdom, Italy, Germany, Mexico, Spain, Canada, Australia, France, and South Korea. The court dismissed the domestic defendants because Sony had a license from a song co- owner. The foreign defendants also moved to dismiss, arguing that the copyright laws of the foreign countries, which require all co-owners of a copyright to agree to license, did not apply. The court rejected this argument under the Second Circuit’s decision in Itar-Tass v. Russian Kurier News Agency,4 which stated that copyright owner- ship is determined under U.S. copyright law and issues of infringement are decided under the law where the alleged infringement occurred. To litigate such a case, Levitin would have had to navigate nine different countries’ copyright systems against defendants on four continents.
Levitin was unable to allege any actionable “predicate acts” of infringement. However, if as in Unicolor could then recover actual damages for that extraterritorial infringement.s, Inc. v. H &M Hennes & Mauritz, L.P.,5 a defendant “copies a work in the United States and disseminates copies in another country, a plaintiff can collect damages for the foreign exploitation of the copyright.” Therefore, the work is not an infringement happening abroad, subject to foreign copyright laws, but an extension of an infringing act that occurred in the United States.6
A. Attorneys’ Fees
After the court dismissed Levitin’s claims against do- mestic defendants under the Copyright Act, the domestic defendants moved for attorneys’ fees from him as the prevailing party under 17 U.S.C. § 505. The Levitin court reasoned that attorneys’ fees are “are available to prevail- ing parties . . . but are not automatic.”7
The defendants argued and the court agreed that attorneys’ fees are granted as a form of deterrence to prevent frivolous and unmeritorious litigation.8 Therefore, as the prevailing party, the defendants argued that Levitin could never possibly recover on his claims, thus entitling them to attorneys’ fees. The court disagreed, however, stating that Levitin’s claim was not “objectively unreason- able,” and furthermore “Plaintiffs’ suit served to further define the contours of the predicate act doctrine.”9
B. Tying Foreign Damages to Domestic Claims
In Ellington v. EMI Music, Inc.,10 a New York state court reviewed an agreement regarding royalty payments between a songwriter and publisher where a foreign sub- publisher subtracted monies to pay itself before the song- writer’s 50% royalty was calculated. EMI later acquired this sub-publisher and continued to subtract monies, a situation that appeared to be self-dealing to the plaintiffs. The New York court disagreed, concluding that the unambiguous language of the contract did not prohibit EMI from deducting from gross receipts monies paid to affiliated foreign sub-publishers. These sub-publishers were performing the same role as previously and were paid the same amount.
However, the court in Stewart v. Screen Gems-Emi Mu- sic, Inc.11 found that there was jurisdiction over a foreign defendant and distinguished the case from Ellington,12 under Alter Ego or Agency Theory. EMI UK was not merely a sub-publisher, parent-subsidiary or mere sister- sister entity, it was an “Alter Ego” of Screen Gems-EMI, operating as part of a single enterprise.13 With that link the plaintiffs could state “a claim for breach of contract against [Defendants] since the ‘Publisher,’ i.e., the single enterprise EMI Music Publishing, of which Screen Gems- EMI is one arm, is contractually obligated to pay Plaintiff 50% of ‘any and all net sums actually earned and actually received’ by it,” which, based on the single enterprise allegation, includes sums that the foreign sub-publishers received, as well.”14
In a recent ruling, Europe’s top court, the European Court of Justice (ECJ), held that individual countries can order Facebook to take down defaming posts, photo- graphs, and videos worldwide. Not only specific defaming posts, but all similar posts must be removed.15 This is a powerful remedy for a defamation suit, as it puts the onus on Facebook to monitor and filter content, rather than forcing plaintiffs to hunt down and report every instance of the defaming material.
The language of the European Union Court of Justice reads, in relevant part:
Today’s judgment . . . does not preclude a court of a Member State from ordering a host provider: . . . to remove information which it stores, the content of which is equivalent to the content of information which was previously declared to be unlawful, or to block access to that information, provided that the monitoring of and search for the information concerned by such an injunction are limited to [identical material] . . . (thus, the host provider may have recourse to automated search tools and technologies)16
This ruling comes as a surprise, as only a week prior the ECJ affirmed a 2014 ruling that Google must respect the “right to be forgotten” by delisting content by region, but not outside the EU, and certainly not globally.17 Google’s “Geoblocking” feature delists content by country, so a French citizen enforcing his/her/their right to be forgotten could delist content on “Google.fr,” but residents of England and Germany could still find the content on “Google.uk” and “Google.de.”
A. Conflict With U.S. Law
It will be interesting to see if this global delisting can be applied in the United States, as a similar battle happened in Google Inc. v. Equustek Solutions Inc.18 In Equustek, the Canadian Supreme Court ordered Google to block infringing websites worldwide, not just “Google.ca.”
Google filed an action in the Northern District of California, seeking “a declaratory judgment that the Cana- dian court’s order cannot be enforced in the United States and an order enjoining that enforcement.” The federal court granted Google’s injunction, holding: “By forcing intermediaries to remove links to third-party material, the Canadian order undermines the policy goals of Section 230 and threatens free speech on the global internet.”
If a U.S. plaintiff sought a worldwide delisting of defaming material, it is unclear if U.S. courts would also enjoin the enforcement of such a remedy on the grounds that the order undermines the U.S. law and threatens freedom of speech. However, a U.S. plaintiff who has won its U.S. claim could ask the European courts to order Face- book to remove all defaming materials worldwide.
This strategy of enforcing judgments in other jurisdictions was employed in so-called “libel tourism,” where plaintiffs would pursue liable suits in the preferential fo- rum of England and Wales. When plaintiffs tried to bring these judgments back to the U.S., Congress passed the “Securing the Protection of Our Enduring and Established Constitutional Heritage” (SPEECH) Act in response.
The SPEECH Act makes foreign libel judgments un- enforceable in U.S. courts, but the ECJ ruling is not telling libel and defamation plaintiffs to go to the U.S. forum and have U.S. courts enforce their judgments. The ECJ ruling instead states that EU courts can order companies to remove material in U.S. jurisdictions, without getting U.S. courts involved.
B. International Ramifications
It is also interesting to speculate about what rogue nations like Russia and China might do with the ability to delist content. Could Russian courts, on behalf of Vladimir Putin, order Google and Facebook to delist content worldwide that they find defamatory? Could China try to silence criticism outside its own borders? It is possible that these nations could use the ruling as a justification for cracking down on political dissidents.
III. Fraud and Self-Dealing
There are two cases regarding underpayment of net profits that are important for attorneys to know. Twentieth Century Fox Film Corporation (TCFTV), as a multi-media company that moves assets between affiliate companies, included an “Affiliate Transaction Protection” provision in its contracts with the actors and staff of the hit TV show “Bones,” that read:
Dealings with Affiliates: Each of Company and Artist acknowledges that Fox is part of a diversified, multi-faceted, international company, whose affiliates include, or may in the future include [various companies, producers, and distributors] (individually or collectively, “Affiliated Company or Companies”). In consideration thereof, Fox agrees that Fox’s transactions with Affiliated Companies will be on monetary terms comparable to the terms on which the Affiliated Company enters into similar transactions with unrelated third-party distributors for comparable programs.
As Fox did not abide by this agreement, it wound up in arbitration with the cast of Bones, which led to a $179,000,000 arbitration verdict against it, of which $128,000,000 was punitive. Fox appealed, and the Superior Court rejected the punitive damages award, saying that punitive damages were expressly forbidden by the contract.19 This issue was on appeal when the case settled.
The Arbitrator found so heavily against Fox because, among other things, Fox violated the above portion of its own contract, “assert[ed] an interpretation [of its contract] that strains credulity and [is] devoid of common sense,” effectuated a plan to minimize “leakage” by ensuring that 100% of revenue was funneled to the Fox Broadcasting Company (FBC) even though TCFTV had never licensed it the rights, and effected a similar scheme which licensed the show to domestic and foreign affiliate entities to hide the revenue.20 For the Foxed owned streaming service, Hulu, the licensing agreement was signed by the same executive, Dan Fawcett, who was simultaneously the President, Digital Media of Fox Entertainment Group and the Vice President of Hulu. When the former Chairman and CEO Peter Chernin was asked how this was possible, he replied “I have no idea.”21
These fraudulent dealings claims can reach across national borders. French corporation Vivendi recently agreed to go to mediation with the creators of Spinal Tap after the California Central District Court declined to dis- miss claims that Vivendi had fraudulently hidden profits from the movie by shifting and bundling the rights and profits. 22
The beauty of the legal profession is that it is an ever- changing landscape. One day the courts can create extra hurdles to pursuing a copyright infringement claim, and the next they enable worldwide enforcement of defamation remedies. These changes can directly impact your transactional and litigation practices and in the expanding entertainment world, it is necessary to stay on top of the latest developments of international and domestic law.
1.Fourth Estate Public Benefit Corp. v. Wall-Street.com, 586 U.S. _ (2019).
2. See Roberto Garza Barbosa International Copyright Law and Litigation: A Mechanism for Improvement, marq. intEll. prop. l. rEv. (2007), 82-84.
3. Levitin v. Sony Music Entertainment, 101 F.Supp.3d 376 (S.D.N.Y. 2015).
4. Itar-Tass v. Russian Kurier News Agency, 153 F.3d 82 (2d Cir. 1998).
5. Unicolors, Inc. v. H &M Hennes & Mauritz, L.P., No. 2:16-cv-02322- AB (SKx), 2017 U.S. Dist. LEXIS 222511, at *16-17 (C.D. Cal. Nov. 15, 2017) (citing L.A. News Serv. v. Reuters Tel. Int’l, Ltd., 340 F.3d 926, 992 (9th Cir. 2003)).
6. Marderosian v. Warner Bros. Entm’t, No. 2:17-cv-01062-CAS(GJSx), 2017 U.S. Dist. LEXIS 66173, at *7-8 (C.D. Cal. May 1, 2017) (citing L.A. News Serv., 149 F.3d at 992).
7. Citing Medforms, Inc. v. Healthcare Mgmt., Sols., Inc., 290 F.3d 98, 117 (2d Cir.2002).
8. Fogerty v. Fantasy, 510 U.S. 517, 534 (1994).
9. Levitin v. Sony Music Entertainment, 2015 WL 5577565 at 1-2; see also Matthew Bender, 240 F.3d at 122 (“When close infringement cases are litigated, copyright law benefits from the resulting clarification of the doctrine’s boundaries. But because novel cases require a plaintiff to sue in the first place, the need to encourage meritorious defenses is a factor that a district court may balance against the potentially chilling effect of imposing a large fee award on a plaintiff, who, in a particular case, may have advanced a reasonable, albeit unsuccessful, claim.”).
10. Ellington v. EMI Music, Inc., 24 N.Y.3d 239 (2014).
11. Stewart v. Screen Gems-Emi Music, Inc., 81 F. Supp. 3d 938 (N.D. Cal.
12. Ellington, 24 N.Y.3d at 239.
13. Id. at 960-64.
14. Id. at 960.
15. Court of Justice of the European Union press release No 128/19, Luxembourg, 3 October 2019.
16. Emphasis in original.
17. Court of Justice of the European Union press release No 112/19, Luxembourg, 24 September 2019.
18. Id. at 4.
19. Wark Entertainment Inc v. Twentieth Century Fox Film Corp.,
20. Twentieth Century Fox Film Corporation v. Wark Entertainment, Inc., JAMS Arbitration Case Reference No. 1220052735 (Feb. 4, 2019), at 16 and 37.
21. Twentieth Century Fox Film Corporation v. Wark Entertainment, Inc., JAMS Arbitration Case Reference No. 1220052735 (Feb. 4, 2019), at 43.
22. Century of Progress Productions v. Vivendi S.A., 2018 WL 4191340, (C.D. Cal. at *14) (“Plaintiffs have sufficiently alleged a fraudulent scheme that involves UMG, and which sufficiently puts Defendants on notice of the import of the allegations against them.”).
Neville L. Johnson and Douglas L. Johnson are partners at Johnson & Johnson LLP, in Beverly Hills, CA, practicing entertainment, media, business and class action litigation. Max Segal is a law clerk there and helped in drafting this document.
Reprinted with permission from: Entertainment, Arts and Sports Law Journal, Winter 2020, Vol. 31, No. 1, published by the New York State Bar Association, One Elk Street, Albany, NY 12207.