Coverage of copyright litigation in 2022 was understandably focused on the Supreme Court’s transformative fair use showdown in Warhol Foundation v. Goldsmith, but the past year saw many other significant copyright cases that could have a lasting impact on the law. In early 2022 the Supreme Court handed down a decision in a landmark case on copyright registrations, and lower courts grappled with thorny issues like the server test, unauthorized digital “lending,” and the First Amendment implications of the Digital Millennium Copyright Act (DMCA). Below are summaries of these and other cases from the past year, some of which will be decided or see important developments in 2023.
Unicolors v. H&M: SCOTUS Rules That Mistakes Will Not Invalidate a Copyright Registration
On February 24, the Supreme Court issued a landmark opinion holding that section 411(b) of the Copyright Act does not distinguish between a mistake of law and a mistake of fact in a copyright registration. In other words, a registrant’s honest mistake of either law or fact does not amount to “knowledge” and can be excused under section 411(b)(1)(A).
The case began in 2016 when Unicolors brought a copyright infringement suit against H&M for allegedly infringing 31 of its fabric designs. After Unicolors won the infringement action against H&M for unauthorized use of its designs, H&M challenged the validity of Unicolors’ copyright registration, claiming that it contained known inaccuracies related to when the group of designs were published. H&M argued that Unicolors had no standing to bring the case because a valid copyright registration is needed to bring a copyright infringement suit in federal court and Unicolors’ registration was invalid because of these known inaccuracies.
After considering the text of statute, case law, legislative history, and the plain meaning of the word “knowledge,” the Court found they all supported a holding that section 411(b) does not distinguish between a mistake of law and a mistake of fact and that a copyright registrant’s honest mistake of either does would not invalidate a registration. The 6-3 decision—written by Justice Breyer in his final term—is a significant and decisive victory for all creators and copyright owners, especially individual creators and small businesses who chose to register their copyrights on their own and sometimes must navigate complex legal questions. As Copyright Alliance CEO Keith Kupferschmid observed, “[t]he days of an infringer purposefully stealing someone’s copyrighted work only to be let off Scot-free by a court because of an administrative mistake made by the registrant are over.”
Lang Van v. VNG: Ninth Circuit Finds Foreign Pirate Website Subject to U.S. Jurisdiction
On July 21, the Ninth Circuit Court issued an opinion in Lang Van v. VNG, holding that the operators of a website base in Vietnam are subject to personal jurisdiction in the United States. Lang Van, a California corporation that produces and distributes of Vietnamese music and entertainment, sued Vietnam-based music streaming website VNG in 2014 for copyright infringement, alleging that the service offered thousands of Lang Van’s copyrighted works without authorization. In 2019, a district court in California dismissed the claims, finding that Lang Van failed to show that the foreign company had enough contacts with the state for the court to exercise jurisdiction.
Reversing and remanding that dismissal, the Ninth Circuit’s opinion explains that because VNG “purposefully targeted American companies and their intellectual property” and “purposefully availed itself of the privilege of conducting business in the United States,” that jurisdiction in the U.S. is reasonable. The opinion adopts many of the points made in an amicus brief filed by the Copyright Alliance in support of Lang Van that, among other things, warns of the burdensome barriers the district court’s decision created for copyright owners who wish to enforce their copyrights against infringing foreign websites.
Hachette v. Internet Archive: Publishers Seek to End Internet Archive’s Unauthorized Scanning and Distribution of Literary Works
Back in 2020, the Association of American Publishers (AAP) filed suit against the Internet Archive (IA) on behalf of four of its book publisher members, asking the Southern District of New York to enjoin IA’s illegal mass scanning and distribution of literary works. Under a manufactured market theory of “controlled digital lending,” IA posits that it is lawful for a library to make digital copies of any print book it acquires and distribute that digital copy over the internet, without a license. However, the theory does not excuse the clearly infringing actions of IA, which do not qualify as fair use and are not comparable to the lending practices of legitimate libraries.
On July 7, 2022, the publishers filed a motion for summary judgment, which was supported by amicus briefs by professors, copyright scholars, non-profits representing creators, creator coalitions, and international rightsholders. As I noted in a blog summarizing the briefs, it’s not often that amicus briefs are filed at the summary judgment stage of a trial in district court, but the stakes are high in a case that could have a lasting impact on the ability of copyright owners to protect and control their works. As we and others explained in the amicus briefs, the Internet Archive’s practices are clearly infringing, do not qualify as fair use, and would devastate creators and creative industries if sanctioned by the court.
In early September, both the publishers and the Internet Archive filed briefs in response to one another’s motions for summary judgment. The publisher’s brief argues that: (1) appellate courts have solidly rejected first sale and fair use arguments for digitized works; (2) the Internet Archive had no way of knowing whether physical and digital copies of a book were in circulation at the same time; (3) the Internet Archive showed contempt for authors and the rule of law; and (4) the Internet Archive is directly competing with authorized eBook channels. Oral arguments and a decision on the motions are expected in 2023.
Association of American Publishers v. Frosh: Maryland Compulsory eBook Licensing Law Deemed Unconstitutional
Speaking of literary works, in 2022 a district court in Maryland granted a permanent injunction barring the enforcement of a compulsory eBook licensing law, holding that “the state of Maryland’s compulsory eBook licensing bill is unconstitutional and unenforceable because it conflicts with and is preempted by the Copyright Act.” The case was brought against Maryland by the Association of American Publishers in late 2021 after the state passed a compulsory licensing bill on May 30, 2021. The Maryland bill—and others like it that were introduced but failed in other states—would have force publishers to license their eBooks to libraries on terms that are determined individually by each state—not by the publishers. The proposals are concerning not only to publishers but to the entire copyright and creative industry since federal copyright law explicitly provides copyright owners with the right to determine whether to license a work and under what terms.
On February 7, the federal District Court in Maryland held a hearing regarding AAP’s motion for a preliminary injunction, and just ten days later granted the motion. The court noted that AAP “clearly satisfied” all four factors of the preliminary injunction test and recognized that a “forced transaction” between publishers and libraries would effectively strip publishers of their exclusive right under the Copyright Act to decide whether, when, and to whom to distribute their copyrighted works. The court ruling also made clear that forcing publishers to offer licenses for electronic literary products on terms that would enable public libraries to provide users with access to the electronic literary product will not necessarily increase access to those products for library users over time, and that it is only through the protection of copyright law that books and other creative works may be generated and distributed at all.
AWF v. Goldsmith: Transformative Fair Use Takes Center Stage at the Supreme Court
On October 12, the Supreme Court heard oral arguments in the Andy Warhol Foundation v. Goldsmith, a case that could have a lasting impact on transformative use analyses and copyright owners’ derivative works right. At issue in the case is a series of 15 silkscreen prints and pencil illustrations that the late appropriation artist, Andy Warhol, based, without authorization, on a photographic portrait of Prince taken by photographer, Lynn Goldsmith, in 1981. After the Second Circuit reversed a district court’s fair use finding, AWF filed a petition for cert, asking the Supreme Court to resolve the question of:
“[w]hether a work of art is ‘transformative’ when it conveys a different meaning or message from its source material, or whether a court is forbidden from considering the meaning of the accused work where it ‘recognizably deriv[es] from’ its source material.”
Despite AWF’s misrepresentation of what the Second Circuit actually said in its opinion, the Supreme Court accepted the petition and heard from dozens of amici—including the Copyright Alliance and several of our members—leading up to oral arguments. At oral arguments, the Justices struggled at times to better understand how “different meaning or message” fits into factor one of a fair use analysis—and what weight transformative use should be afforded overall. While the Justices pressed counsel for Goldsmith, AWF, and the U.S. Government on the merits of their briefs, unfortunately some of the most critical issues were glossed over in favor of hypotheticals that weren’t particularly illuminating.
Ultimately, the Justices seemed skeptical of AWF’s position that a mere difference in meaning or message constitutes a transformative use and appeared to understand that such a test would destroy copyright owners’ right to prepare derivate works. I summarized the oral arguments in more detail back in October, noting that a decision is expected in early 2023.
Green v. DOJ: EFF’s Constitutional Challenge to Section 1201 is Rejected
While the case has been working its way through the district court system for years, Green v. Department of Justice saw a significant development in late 2022 that will likely influence Section 1201 litigation for years to come. On December 6, the U.S. Court of Appeals for the District of Columbia rejected Appellants Matthew Green’s and Andrew Huang’s challenge of a district court’s denial of a preliminary injunction based on their claim that Section 1201 of the Digital Millennium Copyright Act (DMCA) violates the First Amendment.
The case was brought on behalf of the Appellants by the Electronic Frontier Foundation (EFF) back in 2016, claiming that Section 1201 is a facially and as-applied overbroad violation of the First Amendment. Finding that the DMCA’s antitrafficking provisions are content-neutral regulations that target conduct rather than speech, the court explained that the statute is subject to intermediate scrutiny—“a test it easily survives” due to the government’s substantial interest in protecting against infringement and “ensuring the broadest distribution of copyrighted materials.”
While the court rejected the as-applied unconstitutionality of the 1201’s anticircumvention provisions, it found that because the lower court did not rule on the statute’s constitutionality as a whole, there was no final ruling for the Green to appeal. It’s likely that Green and the EFF will continue their facial challenge to this critical part of the DMCA in 2023.
McGucken v. Pub Ocean Ltd. and Hunley v. Instagram: Courts Consider Embedding and the Server Test
2022 saw courts weigh in on the impact embedding a photo has on a copyright owner’s display right, at times struggling to come to clear conclusions over whether a website legally “displays” a copyrighted image if that website does not communicate the work to viewers from a copy of that image stored on its own servers. On March 21, the District Court for the Southern District of New York rejected a defendant’s argument that as a matter of law the embedding of an Instagram post does not infringe any of a copyright owner’s exclusive rights under the Copyright Act.
In McGucken v. Newsweek, a photographer brought an infringement action against Newsweek, alleging the outlet reproduced and displayed his photograph on its website without his consent. Invoking the “server test” espoused by the Ninth Circuit, Newsweek claimed that because the image remained on a third-party’s server and was not fixed in the memory of the infringer’s computer, the embedding did not qualify as a display.
Rejecting this argument, the court explained that the server test has not been widely adopted outside of the Ninth Circuit and that “other courts have persuasively argued that such a test may be ‘contrary to the text and legislative history of the Copyright Act.’” The court went on to question the rationality of the server test, explaining that “[t]he Ninth Circuit’s approach, under which no display is possible unless the alleged infringer has also stored a copy of the work on the infringer’s computer, would seem to make the display right merely a subset of the reproduction right.” The court also held that Instagram’s terms and conditions were too ambiguous for the court to determine whether those terms granted Newsweek an express or implied license to publicly display the photograph.
The McGucken decision adds to the growing conflict between the Ninth and Second Circuit over the server test. In June, a group of photographers filed an appeal to a Northern District of California District Court’s 2021 dismissal of secondary liability claims against Instagram for providing an embedding tool that enables third-party websites to display copyrighted photos or videos posted to an Instagram. Applying the Ninth Circuit’s server test, the district court found that the embedding tool doesn’t violate the photographers’ exclusive right to display the pictures publicly because third-party websites that embed the images do not store copies on their own servers.
After finding there was no underlying direct infringement, the district court rejected the photographers’ secondary liability claims that relied on recent decisions in other circuits that have rejected the server test, explaining that it “is not free to ignore Ninth Circuit precedent.” In their appeal, the photographers claim the test applied by the district court is “outmoded and impractical” and creates a loophole that results in “use and profiteering from the unauthorized and unlicensed display of copyrighted works.”
Valancourt v. Garland: Challenge to Copyright Office Deposit Requirements Continues
On October 13, the DC Circuit Court of Appeals heard oral arguments in Valancourt v. Garland, a case involving the U.S. Copyright Office’s deposit requirements. Back in 2018, Valancourt, a small, independent book publisher, filed a complaint against the Copyright Office, seeking to enjoin the federal government from demanding deposit copies of its publications. The complaint alleged that the mandatory deposit provisions of section 407 of the Copyright Act are an unconstitutional taking of property without just compensation in violation of the Fifth Amendment and an unconstitutional burden on free speech in violation of the First Amendment.
In 2021, after cross motions for summary judgement were filed by the parties, the District Court for the District of Columbia issued a memorandum opinion, granting summary judgment in favor of the Copyright Office. Valancourt appealed to the DC Circuit, and at oral argument the government took the position that an e-mail to the Copyright Office saying the copyright owner was abandoning their copyright would free them of the deposit requirements of section 407. As Professor Zvi Rosen observed, the position “doesn’t seem terribly different from the sort of permissive deposit—where the Library of Congress asks rather than demands copies of creative works—which would amount to a victory for Valancourt.” A decision on the appeal is expected sometime in 2023.
Thaler v. Perlmutter: Registrant of AI-“Authored” Work Challenges Copyright Office’s Denial
On June 2, Stephen Thaler filed a complaint in the District Court for the District of Washington, DC against the U.S. Copyright Office, alleging that the Office’s denial of Thaler’s registration application for the AI-authored work, “A Recent Entrance to Paradise,” was an arbitrary and capricious agency action. Thaler argues that the work in question meets all requirements for copyright protection, that there is no supporting case law for the proposition that AI-authored works are not protected by copyright law, and that he is entitled to the property created by his AI under the principles of accession and first possession.
The complaint comes after the Copyright Office sent a letter in early 2022 to Dr. Ryan Abbott, one of Thaler’s attorneys, affirming its decision to deny registration to the work. That letter explained that the “Creativity Machine”—a computer algorithm that Thaler listed as the author of the work on the registration application—“lacks the human authorship necessary to support a copyright claim.”
Thaler’s attorneys have said that the attempted registration and appeal is part of a “legal test case” by the Artificial Inventor Project, which has also attempted to file a patent on behalf of an AI system. Whether AI-generated works should qualify for intellectual property protection is a policy question that is sure to garner attention in 2023 as Thaler’s case moves forward and the Copyright Office focuses on the intersection of AI and copyright.
While 2022 included some significant copyright decisions, many of the most noteworthy cases are ongoing and will continue to play out in 2023. We’ll be on the lookout for developments surrounding the viability of the server test and the manufactured “controlled digital lending” theory, as well as the constitutionality of section 1201 of the DMCA. Artificial Intelligence will be a hot button issue in 2023, and, of course, the Supreme Court will soon issue its decision in AWF v. Goldsmith that will hopefully reign in ever-expanding transformative use theories and reinforce copyright owners’ right to prepare derivative works.
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