Omega S.A. vs. Costco Wholesale Corp: First Sale Doctrine vis-à-vis Imported Goods

On January 20, 2015, a three judge panel from the United States Court of Appeals for the Ninth Circuit passed a decision which is a victory for Costco and other similar retailers alike. The Court affirmed the decision of the Central District of California which had granted summary judgment to the defendant, U.S retailer Costco. The defendant had been sued by the Swiss Luxury Watches manufacturer, Omega for copyright infringement.

Omega manufactures luxury watches in Switzerland, which it distributes around the world. One of Omega's high-end watches, the Seamaster, often bears an engraving of the Omega Globe Design (“Omega Globe”). Omega obtained a copyright for the Omega Globe in March 2003 and began selling watches with the engraving in September 2003. In 2004, Costco purchased 117 Seamaster watches bearing the Omega Globe on the so-called “gray market”. Omega sold the watches to authorized foreign distributors. Unidentified third parties then bought the watches and sold them to ENE Limited, a New York company. It was from ENE Limited that Costco then purchased the watches. Furthermore, Costco sold the watches to its members in California.

Omega sued Costco for copyright infringement claiming that it had authorized the initial sale but did not approve of the importation of the watches into the U.S.   Costco defended on the grounds of the first sale doctrine, which currently provides a defense for reselling goods manufactured in the United States that are resold by retailers or distributors. Costco claimed that the doctrine applies to foreign-manufactured goods as well. The Central District of California granted summary judgment to Costco, noting that Omega had engraved the Globe Design on its watches at least in part to control importation of the watches, and thus had misused its copyright. According to Costco, the first sale doctrine allows a copyright holder to control the initial distribution of his product, but prevents the copyright holder from controlling a copy’s distribution once it has entered the stream of commerce. Costco argued that copyright holders would be able to eliminate both secondary markets for copyrighted products and the market for used goods. According to Costco, copyright holders would also be able to restrict rental-, lease-, and other lending-based markets.

While the Costco suit was under way, the Supreme Court held in 2013, in Kirtsaeng v John Wiley & Sons that the first sale doctrine also applies to copies of protected works lawfully manufactured abroad. Since the Kirtsaeng judgment retroactively applied in Costco, the Ninth Circuit found that Omega had no copyright infringement cause of action against Costco.

“Omega’s right to control importation and distribution of its copyrighted Omega Globe expired after that authorized first sale, and Costco’s subsequent sale of the watches did not constitute copyright infringement”.

- Nayanika Singhal

Facebook's new policies

The modifications made by Facebook in the statement of Rights and Responsibilities, forms the foundation to understand the ownership of the content of that you upload on Facebook. Facebook, being a social networking site, has become the sharing centre for people across the globe.

The social networking giant does not take the ownership of the content and information posted. The person who is posting  and uploading is the rightful owner and the visibility depends on the privacy and application settings .

Facebook is granted, as per the privacy and application settings, non-exclusive, transferable, sub-licensable, royalty-free, worldwide license to use any content that is covered by Intellectual Property rights that you post in connection with Facebook. The condition is terminated once the content is deleted unless the content has been shared with others and they have not deleted it.

A person may contact the individual who has infringed copyright or trademark before complaining and filing out the form. A person having a Facebook account or a person having no Facebook account can also file copyright infringement. Report can be filed against third party made apps as Facebook does control the content made available through those apps.

-Shambhavi Mishra

Google lands into controversy

Google has landed into controversy with regard to its services, Google Books and Google News. Authors Guild has filed a lawsuit contending copyright violation and objecting three sentence “snippet” of a book that is reproduced by the search engine.

The 2nd Circuit U.S. Court dismissed the contention and held that the concept of snippet is highly transformative and falls within the ambit of “fair use” in copyright law. The Manhattan Court heard the arguments by way of an appeal. The approach of the bench seemed to favour the defendants stressing on extreme liberal approach of fair use. Judge Level is of the view that most classic fair use cases were based on activities that were commercial in nature.

The aspect that needs to be focused here is the traditional jurisprudence on fair use. According to it, mere reproduction in the absence of any value addition would not constitute fair use in such a profit-making scenario. Google Books makes no value addition to the book.

-Shambhavi Mishra

The Tale behind Fait d' Hiver

Jeff Koons for his porcelain sculpture Fait d’ Hiver (created in 1988) is likely to be sued by Frank Davidovici for plagiarism. Fait d’ Hiver is also the title of 1985 Naf Naf ad. The sculpture somewhat resembled the ad where a woman was lying in the snow with a pig and a Saint Bernard barrel around its neck.

Jeff Koons was sued for copyright infringement in the United States in 1992. He took the defense of fair use and subsequently lost it but won case on similar grounds in 2006. French law does not have a fair use defense as exhaustive as the United States and only certain articles provide for several uses of a protected work which the owner cannot oppose (for the purpose of caricature, parody or pastiche)

In the CJEU Deckmyn case, it was held that parody is an autonomous concept of European law and must be interpreted uniformly throughout the Union. Parody is an expression of humour and mockery and evokes an existing work (noticeably different from it).

The issue before Jeff Koons is to prove that the 1985 ad is still remembered and the sculpture is recognized as a parody of the Naf Naf ad. He may also contend that people were aware of the ad at the time of creation of the sculpture and current knowledge of the ad is irrelevant.

-Shambhavi Mishra

Battle of the Titans

Computer programs are subject to constant new developments, making issues like Copyright infringement a subject matter of pertinence. Presently, Oracle and Google is battling on similar grounds. In August, 2010 Oracle filed a complaint that Google has copied verbatim the literal elements of the API packages in its mobile operating system. API packages form the platform for mobile software development; in this case Google went to the extent of replicating the exact elements of the declaring source code. The issue which was dealt with most was about the non-literal elements of 37 packages out of 166 packages.

Northern District of California decided the case in favor of Google and held that API is not a subject matter of Copyright. The Ninth Circuit in this case endorsed the principle of Abstraction-Filtration-Comparison which was developed in Computer Associates Int. Inc. v. Altai Inc. . Copyright protection cannot be denied for the lines of the declaring code because Sun/Oracle did not provide only a single technique of writing the declaring code. Secondly, those phases used in it are creative and original in terms of selection and arrangement and certain expressions in the programs are subject to copyright protection.

Google filed a petition in the U.S. Supreme Court to the review the decision of the subordinate court on 6th October, 2014. Thus, a lot is at stake in terms of money, reputation which will be depending on the Supreme Court.

-Shambhavi Mishra

Bollywood copying Hollywood: Protection of Intellectual Property in Film Industry

The phenomenon of remaking and borrowing ideas is not new to the film makers around the world. It has been present in the film making process since the birth of cinema. Earlier the audience reach of film industries was restricted to certain geographical areas. As Hollywood[i] was restricted to English speaking countries, likewise Bollywood[ii] was restricted to India and its neighboring countries. But globalization and the record breaking developments in Information Technology and the worldwide reach of internet has taken the films beyond nations.

At present, copyright infringement of the protected film scripts has become the main conflict between the two largest film industries of the world Hollywood & Bollywood. Hindi films have often been accused of copying entire frames from their Hollywood predecessors; leading legal scholars recognize this practice as copyright infringement. Until the summer of 2008, no lawsuit was ever filed by a US studio against an Indian film for violation of the studio’s intellectual property rights. The reason was Bollywood’s lack of profitability, India’s status as a third world country and traditionally distinct audiences, which never allowed Bollywood movies to get surfaced on Hollywood’s radar. But recent boom in Indian economy, increase in the profitability of Bollywood and overlapping audiences reversed the views of Hollywood studios towards Bollywood movies.

A long list of Bollywood movies is present where they have been accused of being copied from some Hollywood blockbuster. In 2007, Sony Entertainment, holding the copyright of Hitch (2005), threatened a lawsuit against Partner (2007), a Bollywood film, for infringing content.

In August 2008, Warner Bros. filed suit against the producers of a Bollywood film Hari Putter: A Comedy of Terrors, claiming that the title was too similar to the Harry Potter brand. The Delhi High Court ruled in favour of the defendants largely on Warner Bros. delay in filing the suit[iii].

In 2010, for the first time, a successful suit was filed by Twentieth Century against Sohail Maklai Entertainment for the unlawful remake of Twentieth Century’s 2002 thriller Phone Booth, into Knock Out. It was for the first time when an Indian court ruled that Bollywood infringed a Hollywood copyright. The Bombay High Court awarded Twentieth Century injunctive relief until Sohail Maklai Entertainment paid $340,000 in damages[iv].

On being accused of copyright infringement by Hollywood studios, Indian filmmakers argue that when they adopt a Hollywood film for remake for the Indian audience they make the film undergo a transitory process of “Indianisation” by adding songs, dance and other Indian stuffs which in all together results in an inherently distinct product from the original. 

Legal framework available

India’s copyright law, as laid down in the Indian Copyright Act, 1957 later amended by Copyright (Amendment) Act, 1999, is compatible to the Berne Convention on Copyrights, to which India is a party. Copyright consists of the following rights:

1. Economic Rights – Right of reproduction, public performance, adaptation, broadcasting, translation etc.
2. Moral Rights – Right of author against any alteration in his work that might be injurious to his reputation.

 The following come under the purview of copyright protection:

1. Original literary, dramatic, musical and artistic works
2. Cinematograph films
3. Sound recordings
4. Computer programmers 

The Paris Convention for the Protection of Industrial Property (1883) and the Berne Convention for the Protection of Literary and Artistic Works (1886) are the two conventions which serve as the basis of current international standards regarding intellectual property rights. The Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement, 1994, is built on these century old principles. United States and India being a member of World Trade Organization (WTO) are bound by the TRIPS[v] Agreement.

The relevant provisions of Berne Convention which is embodied in the TRIPS Agreement provide exclusive rights to author to grant or allow for reproductions and adaptations of their original work. When a film’s storyline is borrowed which is recognizably borrowed is known as “derivative work”.[vi],[vii] But when it is used without the knowledge or authorization of the author/creator it is known as unauthorized derivative works which is not only harmful for the author/creator but it will adversely affect the demand for the original work.

In both the U.S. and India, infringement of copyright takes place when a party engages in actions reserved for the copyright owner. In US, for copyright infringement the copyright owner needs to prove that he holds the ownership of the copyright and that substantial matter has been copied from his protected material. In India, copyright infringement takes place if the work of the defendant is a substantial and material copy of the first. Substantiality is measured by weighing both quantity and quality of the work copied.

The Indian and U.S courts had used the “ordinary observer” test to determine the presence of substantial similarity between two works. According to the “ordinary observer” test two works are considered as substantially similar if an ordinary viewer of reasonable attentiveness concluded that the defendant unlawfully encroaches the protected expression of the plaintiff.

The U.S. courts originated the “ordinary observer” standard from the audience test in Daly v. Palmer (1868)[viii]. In this case the Court observed, “If enough random original elements are copied, even if individually insubstantial, they may constitute copyright infringement in the aggregate”.

The Supreme Court of India established the same standard test in the R.G.Anand vs. Delux Films (1978)[ix]. The Supreme Court observed that, “...in order to be actionable, a copy must be a substantial and material one that immediately demonstrates that an infringement has occurred. While simple additions, omissions, or modifications to the original work do not defeat the infringement claim, if the similarities between the two works appear coincidental and enough dissimilar elements exist to negate the intention to copy the original, infringement cannot be said to have occurred”. Courts in both countries thus analyze the quantity as well as quality of the copying in applying their respective versions of the ordinary observer tests.

Article 9.2 of TRIPS confirms that copyright protection shall extend to expressions and not to ideas, procedures, methods of operation or mathematical concepts as such. This concept has been incorporated in both the legal system of US and India.  This Agreement empowers the author/ creator to bring private cause of action for infringement in any member country where the infringement is occurred or occurring. Further, this Agreement says that member countries are bound to accord same rights to the author/ creator of other member country as it gives to their own[x]. Hence, it can be understood that Indian or American film-makers could bring a suit of infringement in either nation’s domestic courts.

Conclusion

Bollywood’s appeal is no longer limited to the South-Asian subcontinent. Bollywood’s international appeal is on the rise. The success of recent movies pertaining to South-Asian themes and culture such as Slumdog Millionaire and Bend It Like Beckham, while not Bollywood productions, have helped Bollywood receive more international attention. Therefore, Bollywood’s reputation and viewership among international audiences will benefit from original scripts and productions. Originality will ultimately lead Bollywood to greater revenues than copying does. Remaking and borrowing ideas from other countries is nothing new and is not altogether a bad phenomenon, so long as proper authorization is obtained from the right holder. Borrowing ideas, scripts and remaking them in different cultural contexts are a part of international cinema but the right way to do it is to obtain the proper license. It should also be noted that mere copying of idea cannot be considered as copyright infringement, as under TRIPS agreement only expressions are protected and not the ideas. So, for proving the infringement the plaintiff should prove that there is copying of both ideas and expression.

By Arvind Kumar

For Biswajit Sarkar

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[i] Film industry of USA.

[ii] The mainstream Indian film industry based in Mumbai, formally Bombay.

[iii] Warner Bros. Entertainment Inc. v. Harinder Kohli and Ors. [IA No.9600/2008 in CS(OS) 1607/2008]

http://delhicourts.nic.in/Sep08/WARNER%20BROS%20ENTERTAINMENT%20VS.%20HARINDER%20KOHLI.pdf

[iv] Twentieth Century for Film Corp. v. Sohail Maklai Entm’t Pvt. Ltd., NM-2847 (Bombay H.C. 2010)

http://bombayhighcourt.nic.in/data/original/2010/NMS284710141010.pdf.

[v] TRIPS: A More Detailed Overview of the TRIPS Agreement

http://www.wto.org/english/tratop_e/TRIPS_e/intel2_e.htm

[vi] 17 U.S.C. Section 106- copyright owner has exclusive rights to prepare derivative works based upon the copyrighted work;

Copyright Act of 1957 Section (14)(a)(vi) (India)-a copyright owner has the exclusive right to authorize adaptations of the work.

[vii] 17 U.S.C. Section 101-Defines a derivative work to be one based upon one or more preexisting works;

Copyright Act of 1957 Section 2(a)(v) (India)-defines an adaptation as:  “in relation to any work, the use of such work involving its rearrangement or alteration.”.

[viii] Daly v. Palmer, 6 F. Cas. 1132 (C.C.S.D.N.Y. 1868) (No. 3,552)

[ix] R.G. Anand v. Delux Films (1978) 4 SCC 118

[x] Article 5 (1) of Berne Convention. This requirement is in compliance with the WTO’s goal of guaranteeing most-favored nation status to member countries and non-discriminatory treatment by and among members.