Copyright Cases in 2021: A Year In Review

2021 was a roller coaster of highs and lows in copyright litigation. A much-anticipated Supreme Court decision left many scratching their heads, while the Second and Ninth Circuits brought a welcome sense of reason back to fair use analyses. Copyright owners continued to challenge sovereign immunity in state courts, and a second Supreme Court copyright case in as many years focused on a significant registration question. Whether you agreed with the results or not, it was a year of notable developments in the courts that will impact copyright law in 2022 and beyond. 

Supreme Court Delivers a Confusing but Limited Decision in Google v. Oracle

On April 5, the Supreme Court handed down its long-awaited decision in Google v. Oracle, finding that Google’s use of parts of Oracle’s API software code (known as “declaring code”) qualifies as fair use. In a 6-2 decision delivered by Justice Breyer, the Court avoided the issue of the software code’s copyrightability entirely—instead assuming that “for argument’s sake” Oracle’s underlying code was copyrightable. As to the second issue at stake in the case—fair use—the Court surprisingly found that all four fair use factors favored Google as a matter of law.

In addition to punting on the copyrightability issue, Breyer’s opinion inexplicably addressed the fair use factors out of order, starting the analysis with the second fair use factor—the nature of the copyrighted work. Considering the nature of the copied declaring code, the Court found that it is “inextricably bound together with a general system, the division of computing tasks, that no one claims is a proper subject of copyright.”

Addressing the transformative purpose and character of Google’s use, the Court found that the creation of a new platform and new products “was consistent with that creative ‘progress’ that is the basic constitutional objective of copyright itself.” Focusing on the “new computing environment” in which Google implemented the code, the opinion failed to address the cogent arguments by Oracle and its amici that the use merely shifts between computing mediums or devices.

The decision presented a troubling misapplication of the fair use factors and a greater misunderstanding of the goals of the copyright system, but some relief came in the Court’s explanation that its determination is limited in scope to the specific code at issue in the case and does not “overturn or modify its earlier cases involving fair use.” Despite that clear declaration, proponents of an ever-expanding fair use doctrine insisted the decision should be applied broadly to unauthorized uses involving all types of copyright protected works. Defendants found liable for infringement in another high-profile case even went so far as to petition the Second Circuit for rehearing, claiming that its decision was now in conflict with Google v. Oracle. As discussed below, those arguments were soundly rejected.

Second Circuit Clarifies Transformative Fair Use in Warhol v. Goldsmith

Just over a week before the Supreme Court issued its Google v. Oracle decision, the Second Circuit Court of Appeals in The Andy Warhol Foundation v. Goldsmith held that Warhol’s mid-1980s silkscreen portraits of the artist Prince, which were based on an iconic photograph by Lynn Goldsmith, do not qualify as fair use. Reversing and remanding the district court’s finding, the opinion acknowledged that courts have misapplied the standard the Second Circuit set forth in Cariou v. Prince and by doing so have greatly diminished the derivative work right.

The decision was noteworthy for two main reasons:

• First, it provided needed guidance on how to analyze what constitutes a transformative use as opposed to a derivative use (falling under the derivative work right). This is a crucial clarification that corrects case law and commentary that have increasingly blurred the line between transformative use and derivative works in recent years as to nearly eliminate a copyright owner’s exclusive right to prepare derivative works. The court clearly sought to move away from the broad notions of transformativeness that it recognized have come to skew fair use analyses. Proposing a more rational dividing line for evaluating whether a work is sufficiently transformative or simply derivative, the Second Circuit confirmed that to be transformative enough to qualify as a fair use a secondary work must be “fundamentally different and new” and embody an “entirely different artistic purpose” so that it “stands apart from the raw material.”
• Second, it rejected a transformative use test based on one person’s subjective opinion in favor of an objective test that asks how a work “may reasonably be perceived.” This shift is a meaningful development, as it replaces the point of view of one judge or critic with a more impartial standard based on how the public perceives a work. As the opinion explains, “whether a work is transformative cannot turn merely on the stated or perceived intent of the artist or the meaning or impression that a critic – or for that matter, a judge – draws from the work.” Quoting Nimmer, the opinion warns that if the transformative determination was dependent on such an objective analysis, “the law may well ‘recogniz[e] any alteration as transformative.’”

The decision was a welcome response to misguided interpretations that in recent years have expanded the boundaries of fair use beyond reason, but it wasn’t long before the Andy Warhol Foundation (AWF)—emboldened by its misinterpretation the Google v. Oracle decision—challenged the ruling.

Second Circuit Rejects Broad Application of Google v. Oracle

Just two weeks after the Supreme Court’s decision, AWF filed a petition for rehearing, arguing that the Second Circuit was now in direct conflict with the high Court. But on August 24, the court issued an amended opinion “emphatically” rejecting petitioner’s claims and reenforcing the clearly limited applicability of Google v. Oracle.

AWF’s petition argued that the Second Circuit erred in adopting a transformative standard that asks “how the works may reasonably be perceived,” which it claimed conflicts with the Supreme Court’s focus on the purpose of the copying in Google v. Oracle. AWF and its supporting amici also claimed that the Second Circuit’s fourth factor market harm analysis conflicts with the Google opinion because the Supreme Court found that any market harm to the copyright owner must be weighed against the benefit of the unauthorized use to the public.

In its amended opinion, the Second Circuit left no doubt that it was entirely unpersuaded by the arguments of AWF and its amici. In an early footnote addressing AWF’s petition, the opinion states that “[a]part from its reliance on the Google opinion, the petition mostly recycles arguments already made and rejected, and requires little comment.” Addressing AWF’s and its amici’s argument that the Second Circuit’s fourth-factor analysis fails after Google v. Oracle for not giving appropriate weight to the public benefit of Warhol’s copying—or the alleged chilling effect a ruling against AWF would have on the creation of art—the court explained that nothing in its opinion stifles creation “that may reasonably be perceived as conveying a new meaning or message, and embodying a new purpose.”

As to the overall effect of the Google v. Oracle decision, the Second Circuit said that “we emphatically reject AWF’s assertion that Google ‘comprehensively refutes the panel’s reasoning.’” The amended opinion called out AWF for misreading both the Second Circuit’s earlier decision and Google v. Oracle, leading to a misinterpretation that both opinions adopt “hard and fast categorical rules of fair use.” Reinforcing the limited nature of the Google v. Oracle decision, the court reminded the parties that the Supreme Court “took pains to emphasize that the unusual context of that case” make its conclusions “less applicable to contexts such as ours” that involve artistic works that serve no utilitarian function.

In Unicolors v. H&M, SCOTUS Considers the Foundations of the Copyright Registration System

On November 8, the Supreme Court heard oral arguments in Unicolors v. H&M, a case centered around when a copyright owner’s mistake on a registration application is enough to result in invalidation of the registration. The Unicolors v. H&M saga began in 2016, and for a full recap of the events leading up to oral arguments, see this earlier post. The short story is that after Unicolors won an infringement action against H&M for unauthorized use of its fabric designs, H&M challenged Unicolors’ copyright registration for having known inaccuracies related to when the group of designs were made publicly available.

After a district court rejected H&M’s argument that a constructive knowledge standard should render Unicolors’ copyright registration invalid, H&M appealed the decision to the Ninth Circuit, which found that the district court erred and that the plain language of Section 411(b) of the Copyright Act does not require the copyright owner-registrant have an “intent-to-defraud” the Office in order to invalidate a copyright registration. The Ninth Circuit essentially held that mere generalized or “constructive” knowledge of an error in the registration application is enough to invalidate the registration. Then, in early 2021, Unicolors filed a petition for a writ of certiorari asking the Supreme Court to consider whether the Ninth Circuit broke with prior precedent in holding that Section 411 requires referral to the Copyright Office where there is no indicia of fraud or material error as to the work at issue in the subject copyright registration.

In considering this question, among others, the Justices were sympathetic to Unicolors’ position—which was supported by the Solicitor General—that honest mistakes of law on a registration application should not result in invalidation, and that H&M’s position would threaten the operation of a streamlined and predictable copyright system that incentivizes creators to register their works. As Unicolors’ counsel explained, in roughly one hundred years of common law cases, no court has ever done what H&M asks the Court to do and impose a standard that would invalidate a copyright registration based on general or constructive knowledge of an error. Moreover, he warned that a ruling for H&M would enable opportunistic infringers (who have no other defense) to get off the hook if there is any error in a registration.

As the Copyright Alliance amicus brief explains, copyright registration is intended to be a voluntary, easily accessible system used by hundreds of thousands of creators every year to register their works in a centralized database. Despite being designed to be accessible by non-lawyer creators, there are complexities inherent in the registration process and consequences that flow from invalidating a registration. At oral arguments, the Supreme Court seemed to appreciate that a rule that would allow registrations to be invalidated on a standard of constructive knowledge of an inaccuracy would undermine the interests and rights Congress intended the system to protect. A decision is expected by June 2022, and whatever the Court decides, it’s critical that alleged infringers are not able to transform Section 411(b) into a vehicle to defeat meritorious copyright suits and that creators remain incentivized to register their works.

Olive v. University of Houston Proves Copyright Owners Have No Recourse Against State Infringement

On June 18, the Texas Supreme Court held that a violation of copyright is not an unconstitutional taking of property. The decision stemmed from a years-long battle by Jim Olive to hold the University of Houston accountable for unauthorized use of one of his iconic photographs, and it is further proof that creators have no meaningful legal recourse when a state entity steals their work.

After discovering the infringement in 2012, rather than sue the University for copyright infringement under federal copyright law, Olive sued the University of Houston system and claimed an unlawful taking under the Texas Constitution because he knew the University would invoke sovereign immunity under the Eleventh Amendment to the Constitution and thus render any copyright infringement claims ineffective against the state. In 2019, the Court of Appeals for the First District of Texas held that although copyright is considered property, infringement by a state entity does not constitute a taking under either the U.S. or Texas constitution.

Olive petitioned the Texas Supreme Court for review, arguing that the court of appeals erred in failing to hold that the Takings Clause of the U.S. Constitution protects copyrights just as it does tangible forms of property. Addressing whether copyrights constitute property protected by the Fifth Amendment, the Texas Supreme Court cited Ruckelshaus v. Monsanto, a U.S. Supreme Court case that found trade secrets (and other forms of intellectual property) are protected. “Assuming for our purposes” that copyright is property protected by the Fifth Amendment, the Court then focused on whether a copyright infringement claim against a state entity also encompasses a “per se” takings claim under the federal and state constitutions.

Likening the University of Houston’s theft of Olive’s intellectual property to a “transitory common law trespass,” the Court found that the infringement did not rise to a level of unconstitutional taking for which sovereign immunity would be waived. It reasoned that “[a] compensable taking does not arise whenever state action adversely affects private property interests.” Going on to distinguish between a “per se” taking that involves the government’s physical occupation of a property, the Court explained that infringement of intellectual property requires an ad hoc analysis to determine whether there was a taking.

The Court then found there was never any possession or control, physical occupation, or confiscation of Olive’s copyright, and that at no time did he lose his ability to exclude others from using his work or to commercialize it through licensing. Addressing Olive’s argument that the University’s unauthorized reproduction and display of his work deprived him of his exclusive right to control his work, the Court focused on the “nonrivalrous” nature of copyright and found that Olive could still exclude third parties from using the work. Because Olive retained some key legal rights in the bundle of rights granted by copyright protection, the Court concluded no taking had occurred.

Despite the disappointing outcome for Olive and all copyright owners encountering state infringement, not long after the decision was handed down, the U.S. Supreme Court issued an opinion that may revive takings claims in copyright infringement cases. On June 23, in Cedar Point Nursery v. Hassid, the Supreme Court found that a California regulation granting labor organizations a “right to take access” to an agricultural employer’s property to solicit support for unionization constitutes a per se physical taking.

On November 15, Olive filed a petition for certiorari with the Supreme Court, arguing that the Texas Supreme Court would have decided differently in light of Cedar Point Nursery. Specifically, the petition claims that the “right to exclude” is the core property interest created by the Copyright Act and violated by acts of copyright infringement. Further, the petition explains that, as recognized in Cedar Point, whether a property owner retains additional rights to utilize the same property subject to the government’s interference should have no effect on a finding of a per se taking. The Supreme Court will decide whether to hear the case in early 2022, but regardless of its decision, Olive’s case is clear evidence that state law remedies for state infringement are non-existent and that abrogation of state sovereign immunity in copyright infringement cases is necessary.

EFF Suffers Another Defeat in its Challenge of the Constitutionality of Section 1201

On July 15, a Judge in the U.S. District Court for the District of Columbia issued an opinion

denying a motion for a preliminary injunction filed by the Electronic Frontier Foundation (EFF) in an attempt to stop the Department of Justice from enforcing section 1201’s anticircumvention provisions. The court’s denial was the latest loss for the EFF in a case it brought back in 2016 on behalf of computer scientists who sought to distribute decryption tools that can circumvent digital locks protecting access to copyrighted work.

Evaluating whether the government’s interest in enforcing section 1201 is substantial, and whether it relates to the censorship of free speech, the court found the government’s interest in protecting copyrighted works online with section 1201 is “unquestionably substantial” and “unrelated to the suppression of free expression.” The court also explained that “the government has met its burden to demonstrate that the anti-circumvention and anti-trafficking provisions . . . do not burden substantially more speech than is necessary to further the government’s interest.” As to the EFF’s claim that an injunction against enforcing section 1201 is in the public interest, the court was unequivocally clear that Congress intended to protect copyright owners from digital piracy and that “the government’s interest is the public interest.”

While the case isn’t over, the failure of the motion is a major setback that does not bode well for the EFF. In 2019, the court issued opinion in the case dismissing the EFF’s attempts to strike down section 1201 on its face, and the current denial is yet another sign of the court’s recognition of the EFF’s flawed First Amendment challenge and the need for copyright owners to utilize digital locks to protect their works.

Supreme Court Rejects Petition for Certiorari in Dr. Seuss v. ComicMix

Finally, on June 21, the Supreme Court rejected a petition appealing a late 2020 Ninth Circuit decision in Dr. Seuss Enterprises v. ComicMix, which found that ComicMix’s mashup of the famous Seuss work “Oh the Places You’ll Go” with characters and elements from the Star Trek franchise did not qualify as fair use. ComicMix’s petition asked the court to resolve (1) whether fair use is an affirmative defense or a “right of authors” and (2) whether the defendant bears the burden of production on the fourth fair use factor. The high Court chose not to address those questions or review the Ninth Circuit’s opinion, keeping in place an important clarification of the limits of transformative fair use. A few months after the rejection, on October 5, the parties reached a settlement agreement that included a permanent injunction against any sales or distribution of the book and a stipulation that ComicMix’s book constitutes infringement of Seuss’s work.  

Crossing Fingers In 2022

As mentioned before, the Supreme Court will issue its decision in the Unicolors v. H&M case early next summer. It’s difficult to predict how the Court would rule in any given case, but in the oral arguments the Justices seemed to understand the problematic implications of a constructive knowledge standard for creators simply looking to register their works. There’s also a chance we see the Supreme Court take on another copyright case in Olive v. University of Houston. As to fair use, we hope that the limited application of Google v. Oracle stays limited in 2022 and other courts follow the Second Circuit’s wise analysis in Warhol v. Goldsmith.