By Joshua Deutsch

On February 1, 2005, the Senate unanimously passed the Family Entertainment and Copyright Act (FECA).#160 The Act is being hailed as bipartisan, significant anti-piracy legislation and a reaffirmation of congressional intent to protect copyrighted material from new technological means of theft and infringement.#160 FECA has been referred to the House of Representatives and is awaiting further action there.

FECA is comprised of four independent bills introduced as a package.#160 The most notable provisions are found within the Artists’ Rights and Theft Prevention (ART) Act.#160 In particular, the ART Act aims at curbing Internet piracy by increasing the criminal penalties for the illegal distribution of copyrighted works before they are released.#160 It also establishes civil remedies by which copyright owners may be compensated for their losses in such a situation.

In addition, the ART Act makes it a federal crime to record a film as it is shown in a theater, with a penalty of up to 3 years in prison for the first offense or up to 6 years for a second offense.#160 Furthermore, theater owners or their agents, with reasonable cause for doing so, may detain, “in a reasonable manner and for a reasonable time,” suspected violators of the Act “for the purpose of questioning or summoning a law enforcement officer.”

Representatives from online peer-to-peer companies, collectively acting as P2P United, find the bill to be suspect.#160 Adam Eisgrau, executive director of P2P United, stated that “this package seems to be another point on a very distressingly long line of actions that ratchet up enforcements and penalties at times out of proportion with the law.#160 To camcord a movie is wrong, certainly, but the penalty (of three years in jail) and the entitlement of theater ushers and owners to physically detain people makes you have to ask whether the copyright industry is having more sway than it should over the legislative process.”#160 William Triplett, “Piracy Bills Pass Muster,” Daily Variety (Feb. 2, 2005).

FECA also includes the Family Movie Act.#160 The controversial Family Movie Act is aimed at permitting the use of technology to skip or mute content that may be objectionable to certain viewers when watching a DVD movie at home.#160 Opponents of the Act contend that it permits copyright infringement.#160 However, the Act makes clear that the technology can be used so long as no fixed copy of the edited work is made.#160 Motion picture studios further object to the Act because the technology could be used to skip over commercials inserted on DVD movies.#160 The current version of the Act does not ban use of the technology for the commercial-skipping purpose but it has been suggested that it should not be used for that purpose.

The Family Movie Act is a congressional attempt to address a lawsuit for copyright infringement filed by the seven major studios, sixteen prominent directors, and the DGA against ClearPlay, Inc., one of several companies manufacturing and selling software and services that remove language and scenes from DVDs.#160 ClearPlay contends that its technology is equivalent to a fast forward or mute button, and does not constitute copyright infringement because it never alters the actual DVD or create a fixed version of the alternate movie-watching experience.

The Family Movie Act is part of the current administration’s indecency crusade.#160 On February 17, 2005, the House of Representatives overwhelmingly passed legislation substantially increasing the penalties for broadcast indecency.#160 The Broadcast Indecency Enforcement Act of 2005 raises the maximum fine from $32,500 to $500,000 per incident, and makes artists personally liable beginning with a first offense (currently, the Federal Communications Commission is limited to issuing only a warning for a first offense).#160 The Act also permits the revocation of broadcasting licenses from repeat offenders.#160 The Senate is currently considering its own version of the bill.

The White House, believing that there is a shared view of public morality, stated that “[t]his legislation will make broadcast television and radio more suitable for family viewing by giving the FCC the authority to impose stiffer penalties on broadcasters that air obscene or indecent material over the public airwaves.”#160 Critics of the Act argue that the government’s standard for indecency is ambiguous and that the bill will indiscriminately threaten a variety of programming.

At the same time that Congress is offering additional protections for copyrighted works in response to new technologies, it is weakening traditional copyright and First Amended protections by permitting the alteration of those works and limiting the ability of the public to enjoy them via public broadcasts.#160 This current round of lawmaking evidences the problems inherent in morality-based copyright legislation.

Joshua I. Deutsch is an attorney with Weintraub Genshlea Chediak Tobin & Tobin Sproul in Sacramento, California.#160 His practice#160 focuses on entertainment and intellectual property matters.#160 Mr. Deutsch can be contacted via telephone at (916) 558-6077 or by electronic mail at jdeutsch@weintraub.com.

Are you tired of all of the letters inviting you to refinance your home mortgage?#160 Have you ever been shocked and a little angry when you receive such a letter and see the name of your lending institution, your account number and the amount owed on your mortgage?#160 You are not the only one that was upset.#160 The financial institutions carrying consumer mortgages grew increasingly upset as a number of customers refinanced.#160 They also grew tired of explaining to irate customers who believed the bank had disclosed private financial information that the information was publicly available.#160 So, in an attempt to deal with the situation, the banking industry in California, literally, wrote its own law.

SB 1150, which was passed by the California Legislature in 2004 and became effective January 1, 2005, places significant restrictions on the use of names, trade names, logos and taglines of lending intuitions as well as consumer loan information. The bill adds to California Business and Professions Code sections 14700 through 14704.#160

The new statutes prohibit the use of the name, trade name, logo, or tagline of a lender in a direct mail advertisement for financial services that is sent to#160 a consumer who has obtained a loan from the lender without the consent of the lender, unless the advertisement clearly and conspicuously states that the party is not sponsored by or affiliated with the lender and that the advertisement is not authorized by the lender, which must then identify by name.#160 This statement must be made in close proximity to, and in the same or larger font size as, the first and the most prominent use or uses of the name, trade name, logo, or tagline in the solicitation, including on an envelope or through an envelope window containing the advertisement.

The new statutes also prohibit the use of a consumer’s loan number or loan amount, whether or not publicly available, in a solicitation for services or products without the consent of the consumer, unless the solicitation clearly and conspicuously states, when applicable, that the party is not sponsored by or affiliated with the lender and that the solicitation is not authorized by the lender, and states that the consumer’s loan information was not provided by that lender.#160 This statement shall be made in close proximity to, and in the same or larger font as, the first and the most prominent use or uses of the consumer’s loan information in the solicitation, including on an envelope or through an envelope window containing the solicitation.

In addition to the above, the new statutes prohibit the use of use the name of a lender or a name that is similar to that of a lender in a solicitation for financial services if that use could cause a reasonable person to be confused, mistaken, or deceived initially or otherwise as to either (a) the lender’s sponsorship, affiliation, connection, or association with the sender; or (b) the lender’s approval or endorsement of the sender.#160 The above “could cause” confusion standard differs from the traditional “likelihood of confusion” standard under both the Lanham Act and California‘s chapter of the Business and Professions Code that addresses Trademark Law.

This statute poses a number of problems.#160 First, it proposes a new standard for judging consumer confusion without giving the court guidance.#160 The courts have a well developed test for determining whether there is a likelihood of confusion in a trademark case; here they have nothing to guide them.#160 In addition, the new statute does not provide a mechanism for dealing with marks that lack distinctiveness and thus otherwise would not be entitled to a great deal of trademark protection.#160 For example, a financial institution could rename itself “The Bank” and then use B&P Code �� 14700 et al to prevent other financial institutions from using the words “The Bank” because it could cause confusion.#160

The new statute makes it rather easy for a financial institution that believes another lender is using a mark that could cause confusion to obtain an injunction.#160 The aggrieved bank is not required to show actual damages in order to obtain an injunction as irreparable harm and interim harm are presumed.#160 In addition to injunctive relief, an aggrieved bank would be entitled to recover actual damages, if any, as well as reasonable attorney’s fees.

Although the new law lessens the burden for bringing what otherwise could be considered a trademark action, it does attempt to preserve some fair use elements.#160 The new statutes provide that it is not a violation to use the name, trade name, logo, or tagline of a lender without the disclaimer statement described above in comparison advertising or in a manner that otherwise constitutes nominative fair use.

There have not yet been any lawsuits brought under this new law.#160 However, given the competitive nature of the home mortgage industry, it is only a matter of time.

Scott Hervey is a shareholder with Weintraub Genshlea Chediak Tobin & Tobin Sproul.#160 Scott represents clients in numerous industries on intellectual property matters and issues concerning the Internet in both transactions and litigation.#160

In 2004, the Ninth circuit heard the case Metro-Goldwyn-Mayer Studios Inc. v. Grokster; an appeal from the District court’s granting of motions for summary judgment by Grokster and StreamCast Networks and finding that their products include substantial non-infringing uses and therefore, under the decision in Sony Corp v. Universal City Studios (more commonly known as Sony-Betamax), do not constitute contributory infringement.#160 #160

The Motion Picture Studios and Recording Companies, in petitioning the Supreme Court for review of the Ninth Circuit’s decision, argue that the Ninth Circuit misread the holding of the Sony-Betamax case.#160 They claim that the Ninth Circuit’s decision emptied all meaning from Sony-Betamax’s concept of “commercially significant noninfringing uses.”#160 Specifically, the petitioners claim that the court did not attempt to ascertain whether there is a substantial market for a#160 non-infringing use of Grokster’s or StreamCast’s services that could commercially support their advertisement-dependent business.#160 #160The petitioners claim that this case presents the issue expressly left open in Sony-Betamax; whether noninfringing uses can be “commercially significant” when the defendant’s business depends on infringing uses and is not sustainable without them.

The Sony-Betamax case found the 1984 US Supreme Court facing the question whether the betamax video tape recorder subjected its manufacturer, Sony Corp., to contributory copyright infringement.#160 The court acknowledged that uses of the video tape recorder include acts of copyright infringement. However at least some of the uses by the public were noninfringing, such as time shifting or copying public domain works that were broadcast over the air.#160 Based on these non-infringing uses, the court found that Sony could not be held liable for secondary copyright infringement.#160 In#160 doing so, the court set forth a new standard for determining secondary copyright infringement when it held that:#160 ” the sale of copying equipment, like the sale of other articles of commerce do not constitute contributory infringement if the product is widely used for legitimate, unobjectionable purposes.#160 Indeed, it need merely be capable of substantial noninfringing uses.”

The Ninth Circuit’s decision in Grokster relied on its interpretation of Sony-Betamax as set forth in#160 A&M Records v. Napster.#160 Namely, if a defendant could show that its product was capable of substantial or commercially significant noninfringing uses, then constructive knowledge of the infringement could not be imputed and there would be liability for contributory copyright infringement.#160 Grokster was able to show that 10% of its use was for a non-infringing purpose.#160 The Ninth Circuit found that this usage was “substantial” and, therefore, Grokster could not be liable for contributory copyright infringement.

The Movie Studios and Recording Companies contend that the Ninth Circuit misread or misapplied the Sony-Betamax test. They point to the Seventh Circuit’s decision in In re Aimster Litigation which held that a court must assess a system’s actual and probable potential infringing uses, and then must balance the costs and benefits to accommodate the interests of copyright holders in preventing infringement while protecting the right of the public to use products specifically for noninfringing uses.#160 #160While acknowledging that the Aimster system was capable of at least five different types of noninfringing uses, the court noted that the controlling issue was the ratio of legitimate use to unlawful use.#160

The Ninth Circuit specifically rejected the approach taken by the Seventh Circuit in deciding Grokster, stating that the Seventh Circuit has read Sony-Betamax differently.#160 In petitioning the United States Supreme Court for review, the Movie Studios and Record Companies claim there is a split between the Seventh and Ninth Circuit, that the Ninth Circuit is incorrect in its analysis, and that the Court should adopt the Seventh Circuit’s balancing test.

Grokster and StreamCast argue that the Movie Studios and Record Companies have misread Aimster, and that it does not apply to this case.#160 They point out that the Aimster court found that Aimster had failed to introduce any evidence whatsoever that its technology was capable of noninfringing uses and therefore could not avail itself of the Sony-Betamax defense.#160 Also, they point out that the Seventh Circuit made it clear that evidence of either “present or prospective” noninfringing uses would satisfy the requirements of Sony-Betamax.

However, the primary argument made by Grokster and StreamCast is that finding the proper accommodation between new technology and copyright is a task best left for Congress.#160 They point out that the primacy of Congress in our federal intellectual property system was at the heart of Sony-Betamax:#160 “In a case like this, where Congress has not plainly marked out a course, we must be circumspect in construing the scope of rights created by a legislative enactment that never contemplated such a calculus of interests.”#160 They point out that Congress has not failed to adjust copyright laws when faced with new technologies, and that Congress has the resources and institutional ability to weigh the competing concerns of the technology and copyright industries, as well as the interests of society in general.

During the last legislative session, various Senators sponsored the Inducing Infringement of Copyright Act of 2004.#160 This act was in direct response to the Ninth Circuit’s decision in Grokster.#160 #160Senator Hatch, one of the Bill’s main sponsors, asserted that the Bill is supposed to be “technology-neutral,” focusing instead on the circumstances under which the technology is deployed.#160 Second, the Bill should provide copyright owners with the ability to bring causes of action against#160 P2P services that enable massive copyright infringement, but also be adaptable to new, unforeseen technological developments.#160 Third, the Bill should not unnecessarily chill technology innovators, through fear of liability.#160 Finally, the Bill should not preempt the decision in Sony-Betamax and related common law doctrines with regard to secondary liability for copyright infringement.

This Bill has been the subject of much debate and lobbying.#160 The U.S. Copyright Office was invited to mediate the conflicting opinions and positions, and as a result of these consultations, the Copyright Office proposed a different version of the Bill.#160 At the close of the 108th Congress, the Bill was still in the Senate’s Judiciary Committee.

In granting certiorari to Grokster, the United States Supreme Court has taken on a number of issues.#160 It could decide to address the claimed split between the Circuits with regard to the standard for contributory infringement liability; this is the approach favored by the American Intellectual Property Law Association.#160 However, even if the Supreme Court decides that substantial non-infringing uses must be probable (7th Circuit) rather than requiring that a device be capable of substantial noninfringing uses (9th Circuit), this would not necessarily mean a reversal of the Grokster decision.#160 (The evidence inferred ten percent (10%) of Grokster’s product’s use was for a noninfringing purpose.)#160 The Supreme Court could also defer to Congress.#160 After all, the Betamax test is judge-made law; the Court could find that expanding its scope from analogue to digital is too far to stretch.

By Scott Hervey

Real estate lawyers take heed.#160 Waiting in the tall grass of your client’s real estate development project may be a thorny copyright issue that could cost your client all of the profit it earned on the project, and would probably buy you a serious malpractice claim.

In the course of developing a real estate project, whether it is a residential community or a commercial project, a central component of the project is the architectural plan.#160 Unless the developer (and the developer’s counsel) are aware of how the Copyright laws affects what the developer can (and more importantly, can’t) do with the plan, the developer may find itself on the receiving end of a Copyright infringement lawsuit.#160 Why?#160 Because an architectural plan, as well as other architectural works, are protected under Copyright laws, and these laws govern who owns the plans and what can and can’t be done with the plan.

Scope of Protection Granted Architectural Works

In 1990, Congress enacted the Architectural Works Copyright Protection Act (the “Act”).#160 The Act increased the scope of protection architectural works are entitled to under United States Copyright laws.#160 The Act was passed in efforts to make United States Copyright laws more compatible with the Berne Convention For The Protection of Literary And Artistic Works.#160

According to a report prepared by the then Register of Copyrights, pre Act copyright laws provided adequate protection for architectural blueprints, plans, drawings and models.#160 However, the adequacy of protection under Berne Convention standards for the constructed design of architectural structures was in doubt.#160 Although the Act, when it was in Bill form, was intended to address this perceived gap, the legislative history provides us with insight into the intended scope of protection accorded to architectural works, including blueprints and plans.

The Act amended the definition section of the Copyright Act (17 USC 101) by adding the following definition of “architectural works:”

An ”architectural work” is the design of a building as embodied in any tangible medium of expression, including a building, architectural plans, or drawings. The work includes the overall form as well as the arrangement and composition of spaces and elements in the design, but does not include individual standard features.

The House Report on the Copyright Amendments Act of 1990 (which includes the Act) (the “Report”) provides a section by section analysis and discussion of the Act.#160 In discussing the definition of architectural works, the Report identifies the elements of a protected architectural work.#160 The Report states that “protection does not extend to individual standard features, such as common windows, doors and other stable building components.”#160 The Report makes clear, however, that the provision is not intended to “exclude from copyright protection any individual feature that reflects the architect’s creativity.”

Commenting on the meaning of “arrangement and composition of spaces and elements in the design” the Report noted that this phrase recognizes that creativity in architecture frequently takes the form of selection, coordination or arrangement of unprotectable elements into an original, protectible whole, and that a architect may incorporate new, protectible elements into standard features that might not otherwise be protectable and create an original, protectible whole.

The Report sets out a two step analysis to be engaged in when determining the scope of protectability for an architectural work.#160

First, an architectural work should be examined to determine whether there are original design elements present, including overall shape and interior architecture.#160 If such design elements are present, a second step is reached to examine whether the design elements are functionally required.#160 If the design elements are not functionally required, the work is protectible without regard to physical or conceptual separability.

Protection would be denied for the functionally determined elements, but would be available for the nonfunctional elements.#160 The Report states that courts must be free to decide the level and scope of protection, and evidence that there is more than one method of obtaining a given functional result may be considered in evaluating the scope of protection.#160 The Report notes that the Act incorporates the general standards of originality applicable for all other copyrightable subject matter, and the determination of infringement is to be made according to the same standard applicable to all other forms of protected mater.

How Issues of Infringement Can Arise and How to Avoid Them

Poor planning and a lack of understanding can lead to a developer finding itself in hot water with regard to architectural plans.#160 Just because a developer paid an architect to come up with drawings does not mean that the developer can do whatever it wants with the drawings.#160 Granted, case law has held that in certain circumstances the developer may have an implied license to perform the acts that are the subject of the infringement suit.#160 However, defending an infringement claim can be quite expensive. Preventing the situation from arising will be much easier on the pocketbook.

Anytime your client is working with an architect, make sure that there is an engagement letter in place and it is clear on exactly what can and can’t be done with plans or other drawings created by the architect.#160 #160Also, make sure that the engagement letter is crystal clear on exactly who owns the plans.#160 I have seen engagement letter from architects that state that the architect is the owner of the copyright in the plan and that any contributions by the developer to the plan is a work made for hire and made on the architect’s behalf.#160 As long as the developer understands the implication of these provisions, major problems can be avoided.#160 Representing developers, I would rather have my client own the rights to its contributions.#160 I can just imagine the horror a developer would experience upon finding out that the architect he worked with in developing a completely unique floor plan is now selling the plans to all the other major builders in the area.

Developers can find themselves facing copyright infringement issues if they change architects mid project and continue to use the drawings created by the first architect.#160 To preserve the right to do this, the developer should make sure that this right is specifically reserved in the engagement letter.#160 Usually most reasonable architects will allow the developer this right in exchange for being indemnified against any claims related to work performed by the new architect.

Some engagement letters I have seen from architects allow a developer to freely reuse a plan or other drawing without having to pay a reuse fee as long as it is being used for the same development.#160 If a developer wishes to reuse a drawing for multiple developments, the developer should bring that up as soon as possible and make sure that it finds its way into the engagement letter.

The real estate developer and his counsel should give serious consideration of how to incorporate the requirements of the Copyright laws into the company’s best practices.#160 While hand shake deals are still commonplace in the real estate and construction industries, they just won’t cut as far as the Copyright laws are concerned.