The court's discussion (and rejection) of defendants' "copyright misuse" argument in this week's AP v. Meltwater decision

Posted by Charles Colman

As regular readers of the blog are likely aware, this writer is a zealous advocate of the copyrighttrademark misuse doctrines.  (Yes, I will finish one or both of the articles at the above links, once I start my job at NYU Law School this June: see the end of this January 2013 LOF post.)  So while most interested parties were -- quite appropriately -- focusing on the "fair use" analysis in this week's AP v. Meltwater decision, I went straight to page 72 of the opinion to read what Judge Denise Cote had to say about the defendants' invocation of the "copyright misuse" defense... and what she had to say was this (formatting from original pdf decision has been lost in transposition; block quotes now in italics, bold mine):

 

As its fifth and final affirmative defense to AP’s copyright infringement claims, Meltwater argues that AP should be barred from enforcing its copyrights because -- by engaging in price-fixing with competing news organizations in violation of the antitrust laws -- it has misused its copyrights. This final defense fails as well.

 

The Second Circuit has not yet recognized the affirmative defense of copyright misuse. See Shady Records v. Source Enters., 03 Civ. 9944 (GEL), 2005 WL 14920, at *15 (S.D.N.Y. Jan. 3, 2005). Although copyright misuse has been acknowledged as a potential affirmative defense to an action for copyright infringement in at least five circuits, only a handful of decisions have ever applied it to bar an otherwise successful claim of copyright infringement. See Video Pipeline [v. Buena Vista Home Entm’t, Inc., 342 F.3d 191, 206 (3d Cir. 2003)] (recognizing defense but finding no misuse); Alcatel USA, Inc. v. DGI Technologies, Inc., 166 F.3d 772, 795 (5th Cir. 1999) (plaintiff’s copyright misuse barred it from obtaining injunctive relief on its copyright infringement claim); Practice Mgmt. Info. Corp. v. Am. Med. Assoc., 121 F.3d 516, 521 (9th Cir. 1997) (reversing award of damages and injunction for copyright infringement because of plaintiff’s copyright misuse); Lasercomb Am. v. Reynolds, 911 F.2d 970, 979 (4th Cir. 1990) (reversing award of damages and injunction for copyright infringement due to plaintiff’s copyright misuse); United Telephone Co. of Missouri v. Johnson Pub. Co., Inc., 855 F.2d 604, 612 (8th Cir. 1988) (assuming defense exists but finding no misuse).

The defense of copyright misuse arises from the better-known defense of patent misuse described in Morton Salt Co. v. G.S. Suppiger, 314 U.S. 488 (1942). In Morton Salt, the patent holder for the design of a salt-depositing machine also produced salt tablets. Morton Salt entered into licensing agreements that required its licensees to use Morton salt tablets exclusively. When Morton Salt brought suit for patent infringement, the Supreme Court found that its suit was barred by its use of its “patent monopoly to restrain competition in the marketing of unpatented articles.” Id. at 491. The Supreme Court described the rationale behind the defense as follows:

The grant to the inventor of the special privilege of a patent monopoly carries out a public policy adopted by the Constitution and laws of the United States, ‘to promote the Progress of Science and useful Arts, by securing for limited Times to Inventors the Exclusive Rights . . . to their ‘new and useful’ inventions. But the public policy which includes inventions within the granted monopoly excludes from it all that is not embraced in the invention. It equally forbids the use of the patent to secure an exclusive right or limited monopoly not granted by the Patent Office and which it is contrary to public policy grant.

Id. at 492 (citation omitted). In 1990, the Fourth Circuit became the first circuit to expressly recognize the defense of copyright misuse. Lasercomb Am., 911 F.2d at 977-79. Relying on “[t]he origins of patent and copyright law in England, the treatment of these two aspects of intellectual property by the framers of our Constitution, and the later statutory and judicial development of patent and copyright law in this country,” the court concluded that the misuse of copyright should be available as a defense to copyright infringement. Id. at 974. It further concluded that the existence of an antitrust violation was not a pre-requisite to a viable copyright misuse claim:

[W]hile it is true that the attempted use of a copyright to violate antitrust law probably would give rise to a misuse of copyright defense, the converse is not necessarily true -- a misuse need not be a violation of antitrust law in order to comprise an equitable defense to an infringement action. The question is not whether the copyright is being used in a manner violative of antitrust law . . . but whether the copyright is being used in a manner violative of the public policy embodied in the grant of copyright. Id. at 978. Consistent with this rationale, it described copyright misuse as arising from a copyright holder’s attempt to use its copyright in a particular expression “to control competition in an area outside the copyright.”

Id. at 979.

Whatever the metes and bounds of the defense, it is one that is applied “sparingly.” Apple Inc. v. Pystar Corp., 658 F.3d 1150, 1157 (9th Cir. 2011). Its focus is on the improper stifling of competition. Id. at 1157-59.

Meltwater contends that it has offered sufficient evidence that AP engaged in a per se violation of the antitrust laws to raise a question of fact that prevents summary judgment being granted on AP’s copyright infringement claim. Specifically, Meltwater asserts that it has offered evidence that AP violated antitrust law “[b]y foisting a pricing structure and minimum target prices upon a licensing entity, and by sharing its own pricing information” with that licensing agency and its members.

The licensing entity to which Meltwater is referring is NewsRight. NewsRight is a joint venture between AP and other publishers formed in 2011 and publicly launched in 2012. NewsRight’s stated aim is to “work with third parties -- such as commercial aggregators and media-monitoring companies -- to license content from a large set of major publishers and to allow both publishers and third-party licensees to track and analyze the use of news content online.” Those news publishers that are members of NewsRight have authorized NewsRight to license their content on a nonexclusive basis. So far, NewsRight has entered into two license agreements, but it has not yet licensed any AP content.

Even assuming that this circuit were to adopt the affirmative defense of copyright misuse to a claim of copyright infringement, and assuming further that Meltwater had raised a question of fact as to whether AP shared its own pricing information with NewsRight and “imposed” a pricing structure on and minimum prices for the licenses offered by the joint venture, Meltwater has not shown that summary judgment should not be granted to AP on its copyright infringement claim. AP’s alleged conduct does not amount to copyright abuse. Nothing in the conduct alleged by Meltwater suggests that AP has improperly leveraged its copyrights to exert control over competition in the delivery of news. Every one of its competitors, whether a member of NewsRight or not, retains the power to issue its own licenses according to whatever pricing scale it chooses. AP does not create the news, control access to the news, or have any power to restrict any other party’s entry into the business of reporting the news. Meltwater has not explained how AP’s supposed actions would have interfered with the Copyright Act’s goal of “increas[ing] the store of creative expression for the public good.” Video Pipeline, 342 F.3d at 205.

Moreover, Meltwater’s proffered evidence does not even suggest any misconduct by AP. Meltwater’s argument that AP has used its participation in NewsRight to engage in price fixing relies on essentially three documents. The most significant of these is an email from 2011, in which AP suggests that the aggregator market be divided into three segments (Top players; Premium Institutional Specialists; and PR Community/Press Clipping Services) and then suggests minimum target licensing fees for NewsRight’s licenses within each of the segments.25 NewsRight ultimately rejected this approach and developed a different licensing structure. Nothing in this opening gambit about the appropriate pricing structure for the creation of a new product by a joint venture suggests a violation of the antitrust laws. In sum, Meltwater has not shown that the doctrine of copyright misuse, even if adopted in this circuit, should prevent summary judgment being awarded to AP on its claim of copyright infringement.

[Footnote 26:]

 

Meltwater contends that the evidence it has gathered raises a triable issue of fact on its copyright misuse defense, but argues in its Rule 56(d) motion that if the Court disagrees with Meltwater that Meltwater should be permitted to take further discovery about AP’s relationship with NewsRight since AP only produced documents “sufficient” to show NewsRight’s role in licensing AP content and did not respond completely to the document requests posed by Meltwater.

 

Meltwater made a limited request of AP for documents concerning NewsRight, and that request related to the licensing of the Registered Articles by NewsRight. It is undisputed that the Registered Articles were never licensed by NewsRight. Despite Meltwater’s narrow document request, AP searched all of its e-discovery custodians for communications with NewsRight concerning licensing efforts generally and produced such documents. It also searched for hard-copy documents from those same custodians and produced documents sufficient to show NewsRight’s role in licensing AP content, among other things. Meltwater examined AP deponents at length about NewsRight. In sum, Meltwater has not shown that it is entitled to further discovery on this issue before summary judgment may be entered for AP.

 

Ouch.  For your reference, the case docket (current as of March 24, 2013) is posted here.  Full opinion and order posted below and at Scribd:

 

 

Associated Press (AP) v. Meltwater, 12-CV-1087 (S.D.N.Y. Mar. 21, 2013)

 

 

[Like everything on LAW OF FASHION, this post is for entertainment and informational purposes only, and does not constitute legal advice or create an attorney-client relationship among any individuals or entities. Any views expressed in this post or at the linked web pages are those of the relevant writer(s) on a particular date, and should not necessarily be attributed to Charles Colman, his law firm, or its agents or clients. Neither the writer of this post nor LAW OF FASHION (or any person or entity associated with it) can or will warrant the thoroughness or accuracy of the content here or at the cited sources.]