Copyright Misuse: An Overview

The doctrine of copyright misuse is a fairly recent development in copyright law. Since it was first recognized less than 20 years ago, the judicially created doctrine has emerged as a valid defense in at least several circuits, while other courts have been reluctant to accept it. In those courts that have recognized it as a defense, there is a split among the circuits as to when it can be maintained. Some courts require a defendant to show that the plaintiff's misconduct directly relates to the merits of the controversy involved in the litigation, while other courts have concluded that if the alleged misuse contravenes public policy that copyright law seeks to protect (i.e., 'to promote the Progress of Science and useful Arts'), the defense will not be stricken. Beyond the use of the doctrine as a defense, some litigants have also sought to raise copyright misuse as a counterclaim. However, at least two courts have refused to accept this theory, rejecting such an application outright.

Generally

Copyright misuse derives from the patent misuse defense, which the U.S. Supreme Court created in Morton Salt Co. v. G. S. Suppiger Co., 314 U.S. 488 (1942). In Morton Salt, the patent holder had used its patent to restrain competition in an unpatented product. Id. at 404. Consequently, the Court held that as a result of this misuse a trial court may 'rightly decline to entertain a suit for infringement, and should do so at least until it is made to appear that the improper practice has been abandoned and that the consequences of the misuse of the patent have been dissipated.' Id at. 493.

Unlike patent misuse, there is no Supreme Court decision that clearly establishes copyright misuse as a defense, so this defense has been less uniformly applied among those courts that have accepted it. Generally speaking, the affirmative defense 'forbids the use of [a] copyright to secure an exclusive right or limited monopoly not granted by the Copyright Office.' Microsoft Corp. v. Computer Support Services of Carolina, Inc., 123 F. Supp.2d 945, 955 (W.D.N.C. 2000). In addition, the doctrine serves as an extension of the equitable doctrine of unclean hands, and will 'bar enforcement of a valid copyright when a plaintiff commits wrongdoing of serious proportions.' See Saxon v. Blann, 968 F.2d 676, 680 (8th Cir. 1992). Misuse, however, is not cause to invalidate the copyright, but instead precludes its enforcement during the period of misuse. Practice Management Info. Corp. v. American Med. Assoc., 121 F.3d 516, 520 n.9 (9th Cir. 1997).

Applicability

In 1990, the Fourth Circuit became the first circuit court to recognize the copyright misuse defense in Lasercomb America, Inc. v. Reynolds, 911 F.2d 970 (4th Cir. 1990), a case that concerned a dispute between a software maker and a licensee over unauthorized copies of software. Although the court noted that there was a 'paucity of precedent in the copyright misuse area,' it still explicitly adopted copyright misuse as a defense, relying heavily on parallels to the patent misuse defense Id. at 973-977.

After having determined that copyright misuse was a valid defense, the court was confronted with its applicability, namely, whether a successful defense required the plaintiff's misconduct to have affected the equitable relations between the parties to the litigation or whether it is sufficient that the copyright is being used in a manner contrary to public policy. Ultimately, the court determined that even if the defendants themselves have not been injured by the misuse of the copyright, the defense remained available, finding support by relying on the patent misuse defense, which can bar a suit for infringement based only on public policy grounds. Accordingly, the court held that it was irrelevant that the licensees in the case were not parties to one of the plaintiff's standard license agreements or were not themselves injured by the misuse for purposes of the affirmative defense. Id. at 979. Ultimately, the court found that the plaintiff software company had misused its copyright in attempting to control competition in an area outside the copyright, yet still found the defendants liable for fraud.

Thirteen years later, the Third Circuit, in Video Pipeline, Inc. v. Buena Vista Home Entertainment, Inc., 342 F.3d 191 (3d Cir. 2003), extended the patent misuse doctrine to copyright law. The case involved whether Video Pipeline's online display of 'clip previews' of the entertainment company's movies constituted copyright infringement, with the defendant arguing that the relevant licensing agreements that governed the clips, which restricted any derogatory expression toward the entertainment company, were a misuse of copyright. The court stated that a 'copyright holder's attempt to restrict expression that is critical of it (or of its copyrighted good, or the industry in which it operates, etc.) may, in context, subvert ' as do anti-competitive restrictions ' a copyright's policy goal to encourage the creation and dissemination to the public of creative activity.' Id. at 205-206. Although the court held that the doctrine was inapplicable to the instant case since the licensing agreements did not interfere with the Web site owner's right of expression on other Web sites, the court recognized that under appropriate circumstances, 'it might operate beyond its traditional anti-competition context.' Id. at. 206.

The Ninth Circuit Court of Appeals has held that a party need not prove an antitrust violation to prevail on a copyright misuse defense. See Practice Management Information Corp. v. American Medical Association, 121 F. 3d 516, 521 (9th Cir. 1997). The issue of whether there must be a nexus between the parties to sustain a copyright misuse defense, however, has never been squarely addressed by the circuit. Still, two district courts have ruled that the defense applies 'if a copyright is leveraged to undermine the Constitution's goal of promoting invention and creative expression.' See e.g., MGM Studios, Inc. v. Grokster, Ltd., 454 F. Supp. 2d 966, 995 (C. D. Cal. 2006); In re Napster, Inc. Copyright Litigation, 191 F. Supp. 2d 1087, 1113 (C.D. Cal. 2002).

Most recently, in Shloss v. Sweeney, No. C 06-03718 (N.D. Cal. Feb. 9, 2007), the plaintiff sought a declaratory judgment that the use of certain written works in an electronic supplement to her book, if published, would not infringe any copyrights controlled or owned by the estate of the writer James Joyce. In denying the defendant's motion to dismiss, the district court judge followed the Central District of California's precedent by summarily requiring a nexus between the copyright holder's actions and the public policy embedded in the grant of a copyright. Slip opinion at 15.

In contrast to the Third, Fourth, and Ninth Circuits, the Eleventh Circuit has neither applied, nor definitively rejected the copyright misuse defense. However, the district court in Microsoft Corp. v. Jesse's Computers & Repair, 211 F.R.D. 681 (D. Fla. 2002), a case involving the alleged distribution of unauthorized and infringing Microsoft software, found the defense was not available and granted the plaintiff's motion to strike.

Although the court dismissed the plaintiff's copyright misuse defense because it was insufficiently pled, it took the liberty to discuss the merits of the defense and ultimately determined that the dismissal was with prejudice. In its brief analysis, the court noted that even assuming the doctrine were valid, the plaintiff's failure to set forth facts sufficient to establish a 'nexus' between the defendant's alleged infringing conduct and the plaintiff's purported copyright misuse warranted a dismissal. Id. at 683-685 (citing Saxon v. Blann, 968 F.2d 676, 680 (8th Cir. 1992) (no copyright misuse where plaintiff's misconduct is not directly related to the merits of the controversy between the parties, but only where the wrongful acts affect the equitable relations between the parties with respect to the controversy).

Counterclaim

In some instances, litigants have sought to employ copyright misuse as a counterclaim. For example, this past summer, Interscope Records v. Kimmel, 2007 U.S. Dist. LEXIS 43966 (N.D.N.Y. June 18, 2007), held that copyright misuse is an affirmative defense, concluding that it could not be pled as a counterclaim in the defense of a music file-sharing copyright infringement action. The court dismissed defendant's counterclaims seeking a declaratory judgment of copyright misuse, as well as the defendant's counterclaims seeking a declaration of non-infringement. Relying on other district courts in the Second Circuit, the court also noted that the copyright misuse was 'dubious at best' in the Second Circuit and that to the extent it is cognizable, it is 'not a vehicle for affirmative relief.' Id. at *16-17.

Similarly, although referred to as copyright 'abuse' as opposed to 'misuse,' the district court in Schoolhouse, Inc. v. Anderson, 2000 U.S. Dist. LEXIS 22524 (D. Minn. Nov. 8, 2000), dismissed the defendant's counterclaim in an infringement action involving the Web site publication of factual and statistical information taken from a magazine. In dismissing the counterclaim, the court noted that 'abuse of copyright is generally recognized as an equitable defense to a copyright infringement claim and is rarely recognized as an independently justiciable cause of action' Id. at *24.

Conclusion

Given the lack of uniformity and complexities surrounding the doctrine of copyright misuse, parties should be cognizant of its availability and applicability in copyright litigation. Indeed, for those circuits in which the doctrine has been explicitly recognized, parties need to understand the pleading requirements within that particular circuit. In those jurisdictions in which the law is unclear or the doctrine has never been examined, parties will need to consider the likelihood that a court may adopt such a doctrine, and if so, what necessary elements will
be required for the defense to be maintained.

Kyana R. McCain and Michael Cestaro are associates in the Technology, Media and Communications Department of the New York City office of Thelen Reid Brown Raysman & Steiner LLP.

The doctrine of copyright misuse is a fairly recent development in copyright law. Since it was first recognized less than 20 years ago, the judicially created doctrine has emerged as a valid defense in at least several circuits, while other courts have been reluctant to accept it. In those courts that have recognized it as a defense, there is a split among the circuits as to when it can be maintained. Some courts require a defendant to show that the plaintiff's misconduct directly relates to the merits of the controversy involved in the litigation, while other courts have concluded that if the alleged misuse contravenes public policy that copyright law seeks to protect (i.e., 'to promote the Progress of Science and useful Arts'), the defense will not be stricken. Beyond the use of the doctrine as a defense, some litigants have also sought to raise copyright misuse as a counterclaim. However, at least two courts have refused to accept this theory, rejecting such an application outright.

Generally

Copyright misuse derives from the patent misuse defense, which the U.S. Supreme Court created in Morton Salt Co. v. G. S. Suppiger Co ., 314 U.S. 488 (1942). In Morton Salt, the patent holder had used its patent to restrain competition in an unpatented product. Id. at 404. Consequently, the Court held that as a result of this misuse a trial court may 'rightly decline to entertain a suit for infringement, and should do so at least until it is made to appear that the improper practice has been abandoned and that the consequences of the misuse of the patent have been dissipated.' Id at. 493.

Unlike patent misuse, there is no Supreme Court decision that clearly establishes copyright misuse as a defense, so this defense has been less uniformly applied among those courts that have accepted it. Generally speaking, the affirmative defense 'forbids the use of [a] copyright to secure an exclusive right or limited monopoly not granted by the Copyright Office.' Microsoft Corp. v. Computer Support Services of Carolina, Inc ., 123 F. Supp.2d 945, 955 (W.D.N.C. 2000). In addition, the doctrine serves as an extension of the equitable doctrine of unclean hands, and will 'bar enforcement of a valid copyright when a plaintiff commits wrongdoing of serious proportions.' See Saxon v. Blann , 968 F.2d 676, 680 (8th Cir. 1992). Misuse, however, is not cause to invalidate the copyright, but instead precludes its enforcement during the period of misuse. Practice Management Info. Corp. v. American Med. Assoc ., 121 F.3d 516, 520 n.9 (9th Cir. 1997).

Applicability

In 1990, the Fourth Circuit became the first circuit court to recognize the copyright misuse defense in Lasercomb America, Inc. v. Reynolds , 911 F.2d 970 (4th Cir. 1990), a case that concerned a dispute between a software maker and a licensee over unauthorized copies of software. Although the court noted that there was a 'paucity of precedent in the copyright misuse area,' it still explicitly adopted copyright misuse as a defense, relying heavily on parallels to the patent misuse defense Id. at 973-977.

After having determined that copyright misuse was a valid defense, the court was confronted with its applicability, namely, whether a successful defense required the plaintiff's misconduct to have affected the equitable relations between the parties to the litigation or whether it is sufficient that the copyright is being used in a manner contrary to public policy. Ultimately, the court determined that even if the defendants themselves have not been injured by the misuse of the copyright, the defense remained available, finding support by relying on the patent misuse defense, which can bar a suit for infringement based only on public policy grounds. Accordingly, the court held that it was irrelevant that the licensees in the case were not parties to one of the plaintiff's standard license agreements or were not themselves injured by the misuse for purposes of the affirmative defense. Id. at 979. Ultimately, the court found that the plaintiff software company had misused its copyright in attempting to control competition in an area outside the copyright, yet still found the defendants liable for fraud.

Thirteen years later, the Third Circuit, in Video Pipeline, Inc. v. Buena Vista Home Entertainment, Inc. , 342 F.3d 191 (3d Cir. 2003), extended the patent misuse doctrine to copyright law. The case involved whether Video Pipeline's online display of 'clip previews' of the entertainment company's movies constituted copyright infringement, with the defendant arguing that the relevant licensing agreements that governed the clips, which restricted any derogatory expression toward the entertainment company, were a misuse of copyright. The court stated that a 'copyright holder's attempt to restrict expression that is critical of it (or of its copyrighted good, or the industry in which it operates, etc.) may, in context, subvert ' as do anti-competitive restrictions ' a copyright's policy goal to encourage the creation and dissemination to the public of creative activity.' Id. at 205-206. Although the court held that the doctrine was inapplicable to the instant case since the licensing agreements did not interfere with the Web site owner's right of expression on other Web sites, the court recognized that under appropriate circumstances, 'it might operate beyond its traditional anti-competition context.' Id. at. 206.

The Ninth Circuit Court of Appeals has held that a party need not prove an antitrust violation to prevail on a copyright misuse defense. See Practice Management Information Corp. v. American Medical Association , 121 F. 3d 516, 521 (9th Cir. 1997). The issue of whether there must be a nexus between the parties to sustain a copyright misuse defense, however, has never been squarely addressed by the circuit. Still, two district courts have ruled that the defense applies 'if a copyright is leveraged to undermine the Constitution's goal of promoting invention and creative expression.' See e.g. , MGM Studios, Inc. v. Grokster , Ltd., 454 F. Supp. 2d 966, 995 (C. D. Cal. 2006); In re Napster, Inc. Copyright Litigation, 191 F. Supp. 2d 1087, 1113 (C.D. Cal. 2002).

Most recently, in Shloss v. Sweeney, No. C 06-03718 (N.D. Cal. Feb. 9, 2007), the plaintiff sought a declaratory judgment that the use of certain written works in an electronic supplement to her book, if published, would not infringe any copyrights controlled or owned by the estate of the writer James Joyce. In denying the defendant's motion to dismiss, the district court judge followed the Central District of California's precedent by summarily requiring a nexus between the copyright holder's actions and the public policy embedded in the grant of a copyright. Slip opinion at 15.

In contrast to the Third, Fourth, and Ninth Circuits, the Eleventh Circuit has neither applied, nor definitively rejected the copyright misuse defense. However, the district court in Microsoft Corp. v. Jesse's Computers & Repair, 211 F.R.D. 681 (D. Fla. 2002), a case involving the alleged distribution of unauthorized and infringing Microsoft software, found the defense was not available and granted the plaintiff's motion to strike.

Although the court dismissed the plaintiff's copyright misuse defense because it was insufficiently pled, it took the liberty to discuss the merits of the defense and ultimately determined that the dismissal was with prejudice. In its brief analysis, the court noted that even assuming the doctrine were valid, the plaintiff's failure to set forth facts sufficient to establish a 'nexus' between the defendant's alleged infringing conduct and the plaintiff's purported copyright misuse warranted a dismissal. Id. at 683-685 (citing Saxon v. Blann , 968 F.2d 676, 680 (8th Cir. 1992) (no copyright misuse where plaintiff's misconduct is not directly related to the merits of the controversy between the parties, but only where the wrongful acts affect the equitable relations between the parties with respect to the controversy).

Counterclaim

In some instances, litigants have sought to employ copyright misuse as a counterclaim. For example, this past summer, Interscope Records v. Kimmel, 2007 U.S. Dist. LEXIS 43966 (N.D.N.Y. June 18, 2007), held that copyright misuse is an affirmative defense, concluding that it could not be pled as a counterclaim in the defense of a music file-sharing copyright infringement action. The court dismissed defendant's counterclaims seeking a declaratory judgment of copyright misuse, as well as the defendant's counterclaims seeking a declaration of non-infringement. Relying on other district courts in the Second Circuit, the court also noted that the copyright misuse was 'dubious at best' in the Second Circuit and that to the extent it is cognizable, it is 'not a vehicle for affirmative relief.' Id. at *16-17.

Similarly, although referred to as copyright 'abuse' as opposed to 'misuse,' the district court in Schoolhouse, Inc. v. Anderson, 2000 U.S. Dist. LEXIS 22524 (D. Minn. Nov. 8, 2000), dismissed the defendant's counterclaim in an infringement action involving the Web site publication of factual and statistical information taken from a magazine. In dismissing the counterclaim, the court noted that 'abuse of copyright is generally recognized as an equitable defense to a copyright infringement claim and is rarely recognized as an independently justiciable cause of action' Id. at *24.

Conclusion

Given the lack of uniformity and complexities surrounding the doctrine of copyright misuse, parties should be cognizant of its availability and applicability in copyright litigation. Indeed, for those circuits in which the doctrine has been explicitly recognized, parties need to understand the pleading requirements within that particular circuit. In those jurisdictions in which the law is unclear or the doctrine has never been examined, parties will need to consider the likelihood that a court may adopt such a doctrine, and if so, what necessary elements will
be required for the defense to be maintained.

Kyana R. McCain and Michael Cestaro are associates in the Technology, Media and Communications Department of the New York City office of Thelen Reid Brown Raysman & Steiner LLP.