Second Circuit: Copyright Class Action Settlement Fails - Unregistered Copyrights Not Adequately Represented

The Tasini v. New York Times drama has been going on for many, many years. The issue: freelancers wrote articles for the New York Times and other publications. When technology permitted the articles to be put into searchable electronic databases, could the publishers do this without seeking permission from the copyright holder? The U.S. Supreme Court's 2001 decision in Tasini taught us that doing so without getting the copyright owner's permission was copyright infringement. So in the decade that followed, we had Reed Elsevier v Muchnick in which the US Supreme Court decided that 17 USC 411 (the requirement that a copyright be registered before a federal claim for copyright infringement may be filed) was not jurisdictional.

Now following remand from the Supreme Court's decision in Muchnick, we have In re Literary Works in Electronic Databases Copyright Litigation (2d Cir. August 17, 2011) - a decision deciding a matter that was originally argued on March 7, 2007.

The decision is embedded below.   In it the Second Circuit rejects the district court's certification of a class action for settlement purposes because the holders of unregistered copyrights were not adequately represented.  Holders of unregistered copyrights were classed as "Category C".

Category A -  Holders of copyrights registered in time to qualify for statutory damages.  To be paid $1,500 for first 15 works written for any one publisher, $1,200 for the second fifteen works for that publisher, and $875 for all works written for that publisher after the first 30.

Category B - The greater of $150 or 12.5% of the original price of the work.

Category C,  The greater of $5 or 10% of the original price of the work with sliding scale for works over $249  ($25- $60).

The settlement capped the publishers' total exposure at $18 million.  Key to the Second Circuit's reasoning was that only Category C would be reduced if the global settlement exceeded $18 million.

This decision is an important one in interpreting Rule 23 of the Federal Rules of Civil Procedure, which governs certification of class actions and requires that each class or subclass be adequately represented.

Judge Straub wrote a 16 page dissent in favor of class certification.


In Re Literary Database Litigation

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In Reed Elsevier v. Muchnick, 08-103 (March 2, 2010) the U.S. Supreme Court, in a decision by Justice Clarence Thomas, held that a failure to register a copyright under Section 411 of the Copyright Act did not deprive a District Court of jurisdiction to approve a settlement agreement involving unregistered copyrights.   The decision is found here.

The case arose out of Tasini v. New York Times, a claim by freelance authors against the New York Times and other publishers, alleging that publishers infringed copyrights by including articles in which freelancers retained copyrights in electronic databases.  Irving Muchnik objected to a settlement in the wake of Tasini (affirming the claim of copyright infringement).  The Second Circuit vacated that portion of the settlement relating to unregistered copyrights, claiming that the district court lacked jurisdiction over the controversy (over the dissent of Judge Walker).  I agreed with Judge Walker's dissent in my blog post of December 2, 2007.



The language from the Court:

Subject to certain exceptions, the Copyright Act requires copyright holders to register their works before suing for copyright infringement. 17 U. S. C. A. §411(a) (Supp. 2009). In this case, the Court of Appeals for the Second Circuit held that a copyright holder’s failure to comply with §411(a)’s registration requirement deprives afederal court of jurisdiction to adjudicate his copyrightinfringement claim. We disagree. Section 411(a)’s regis-tration requirement is a precondition to filing a claimthat does not restrict a federal court’s subject-matterjurisdiction.

Importantly for copyright litigators, the Supreme Court did NOT address the split between the Circuits over whether judges may or are required to sua sponte dismiss copyright actions where a copyright registration certificate was not obtained prior to the filing date of the action.

Becase the subject matter of copyright is completely preempted by federal law, I think that the result is a correct one in the class action context.

Unregistered Foreign Copyrights in US Courts: No Statutory Damages and Attorneys Fees

In Elsevier B.V. v. United Healthgroup, Inc., S.D.N.Y. January 14,2010, Judge William Pauley considered a plaintiff's claim that a provision of the Copyright Act requiring copyrights to be registered prior to an infringement violated the Berne Convention and thus was "preempted" by the U.S. Constitution.

The plaintiff commenced a declaratory judgment action that Section 412 of the Copyright Act violated Article IV of the U.S. Constitution because Section 412 conflicted with Article 5 of  the Berne Convention.

The problem comes up in the following context:  many foreign publishers of copyrighted materials do not register their copyrights in the United States, even if they publish or sell copyrighted works in the United States.   So when their works are infringed, they do not enjoy the protections of the sections of the Copyright Act that give statutory damages and attorneys fees to persons who have timely registered their works (Sections 504 and 505).

Elsevier provides access to a database on which many of the unregistered copyrighted works can be accessed.  Elsevier alleged that the defendant permitted others to access the database in violation of a subscriber agreement.

The provision challenged was Section 412 of the Copyright Act, which provides:

§ 412. Registration as prerequisite to certain remedies for infringement12



In any action under this title, other than an action brought for a violation of the rights of the author under section 106A(a), an action for infringement of the copyright of a work that has been preregistered under section 408(f) before the commencement of the infringement and that has an effective date of registration not later than the earlier of 3 months after the first publication of the work or 1 month after the copyright owner has learned of the infringement, or an action instituted under section 411(c), no award of statutory damages or of attorney’s fees, as provided by sections 504 and 505, shall be made for —

(1) any infringement of copyright in an unpublished work commenced before the effective date of its registration; or

(2) any infringement of copyright commenced after first publication of the work and before the effective date of its registration, unless such registration is made within three months after the first publication of the work.

Find Section 412 and the rest of the Copyright Act here.

The doctrine of "preemption" is used in a number of different ways in copyright practice, but here the Plaintiff was arguing that the doctrine of preemption provides that where the Exective Branch has validly committed the U.S. under treaty powers and Congress has ratified such commitments, any inconsistent laws are "preempted" by the treaty.

The Plaintiff pointed to  Article Five of the Berne Convention which states:  “the enjoyment and the exercise of [rights under the Convention] shall not be subject to any formality.”   Find the full text of the Berne Convention here.

The District Court analyzed whether the Berne Convention was "self-executing" and found that it was not.  In other words, for any provisions of the Berne Convention to be binding, enabling legislation has to be adopted by Congress.  The Court looked at the legislation implementing the Berne Convention and noted that Congress decided not to change Section 412.

Noting that no federal appellate court has ruled on the question of whether the Berne Convention is self-executing, but that other courts in the district found it not to be self-executing, the Court found that it cannot serve as a basis for a preemption claim under Article IV of the US Constitution.

Since the District Court found the Berne Convention not to be self-executing, it found that Article 5 could not serve as the basis for a preemption.    The question of whether Article 5 and Section 412 conflict were not reached, leaving the question in the hands of diplomats.

SCOTUS: Does Failure to Register A Copyright Deprive a Court of Subject Matter Jurisdiction?

In re Electronic Database Litigation, 509 F.3d 116 (2d Cir. 2007) cert. granted March 2, 2009.

Does 17 U.S.C. §411(a) restrict the subject matter jurisdiction of the federal courts

over copyright infringement actions?

Section 411 is the "register before you sue" rule.

The U.S. Supreme Court has granted a petition for certiorari on this question.   The Second Circuit, over the dissent of Judge Walker, vacated a class action settlement that authors and media companies had entered into after four years of negotiations.

The Second Circuit found that since the settlement covered unregistered copyrights (most of the authors writing for these publications), the federal court did not have jurisdiction to settle these claims.  

I indicated my agreement with Judge Walker's dissent in my December 2, 2007 post here

If you are interested in the rights of freelancers and the pros and cons of various settlements, check out Irvin Muchnik's Freelance Rights blog here