Newsletter - Volume 44, September 2009
A Whiter Shade of Pale Turns into Some Green for Organist
On July 30, 2009, the House of Lords upheld a 2006 High Court ruling holding
that the mere passage of time does not work to bar a claim to a share of
copyright ownership. Despite a thirty-eight-year delay in bringing his claim
for a share of copyright in the musical work A Whiter Shade of Pale,
the equitable doctrines of estoppel and laches did not work to defeat Matthew
Fisher's claim where the defendants, Gary Brooker and Onward Music Ltd.
suffered no detriment. Rather, the House of Lords held that not only Mr.
Fisher's claim was not defeated by the delay, but also that he is a co-author
and 40% joint owner of the musical copyright in the song, and that the
defendants' license to exploit his share was revoked as of May 31, 2005, when
his claim was first brought.
Background
A Whiter Shade of Pale, a cult classic of the 1960s, was originally
composed in 1967 by Gary Brooke, the lead singer and pianist of the British
rock band Procol Harum, with lyrics written by Keith Reid, the band's manager.
The band then signed a contract with Essex Music by which all of the copyrights
to the words and music were assigned to Essex in exchange for a percentage of
royalties generated from exploitation of the song. Shortly after the agreement
was signed, Fisher joined the band as organist and composed the organ solo
comprising the beginning of the song and organ melody which appears throughout
the duration. After the song was recorded, the band members entered into a
recording contract with Essex granting Essex rights to exploit any recording
the band made. Mr. Fisher left the band two years later. In 1993, Essex
assigned its rights to the song to Onward Music Ltd. In May 2005, Mr. Fisher
brought suit to claim a share of the musical copyright in the song.
2006 High Court Ruling
After rejecting Brooker's claim that a fair trial was impossible after such a
delay, the High Court found that Fisher was a joint owner of the work. The
Court looked at the circumstances under which the song was written, the
philosophy of the band being that each musician made his own musical
contributions, and specifically whether Mr. Fisher's contribution of the organ
solo could be regarded as invention separate from the song as it was originally
written. The court drew on the evidence from Mr. Fisher that the solo was
inspired by "Wachet auf, ruft uns die Stimme" by J.S. Bach, a completely
different work from the one the original song was inspired by, and Mr.
Brooker's own admissions that the solo was a result of a "careful creative
process on [Mr. Fisher's] part". Based on the facts, the Court found that
Fisher had a copyright interest in the song, but that he had granted Brooker
and Essex Music an implied license to exploit the copyright in the song, which
the Court deemed was terminated when Fisher gave notice to defendants of his
intention to claim copyright ownership.
Next, the Court considered whether any equitable defenses might apply to bar
Fisher's claim given the considerable delay in bringing it. Defendants asserted
that the defenses of estoppel, acquiescence and laches were applicable in five
instances: 1) Fisher's failure to assert his claim before the release of the
Work in 1967; 2) Fisher's decision in 1967 not to pursue his claim so as to
benefit from membership in Procol Harum; 3) the circumstances under which
Fisher left Procol Harum in 1969; 4) Brooker's efforts in continuing to promote
the Work, keeping it in the public eye; and 5) Fisher's delay in bringing his
claims. The Court first noted that for estoppel to work, detriment to the
defendant is an essential element. The Court rejected that Fisher's delay
caused Essex to rely on the fact that he was foregoing his rights. The Court
also found the second instance irrelevant as it relied on a statement in
connection with advice Fisher sought at the time, and was only raised during
these proceedings. Further there was no evidence to suggest that the defendants
suffered detriment as a result of Fisher's failure to speak out. Finally, the
Court found that not only was no detriment suffered by defendants by the delay,
but rather the defendants benefited significantly in that they received all of
the musical royalties to the Work over the years without having to pay Fisher.
The Court found that delay itself is no defense to bringing a copyright claim
under English law, especially where no equitable relief is sought. The court
found that considering the case involved a "valuable property right" it would
be "wholly unjust" to deprive Fisher for the remainder of his life and 70 years
thereafter of his interest in the Work, when the defendants have enjoyed the
fruits of the Work for years with no need to account to Fisher.
To assess what share was appropriate for Mr. Fisher's contribution, the Court
first looked to evidence provided in Fisher's case in chief, finding that when
Brooker was given a keyboard to play the song as it had been originally written
without Fisher's contributions, there was "nothing akin to the flowing organ
melody which is such a distinctive feature of the Work." The Court then went on
to reject an argument made during the presentation of evidence suggesting that
it is custom and practice in the music industry that where an arrangement is a
result of collaborative effort from band members, because the skill and labor
of each member relates to the musical elements of the arrangement of the
original work, and not to creation of the original song itself, the persons
contributing should not be entitled to any share in the copyright. The Court
stated that it is well established under Copyright Law, despite what practice
may or may not be customary, that the fact that a musical work is an
arrangement of an earlier work does not mean the arrangement cannot attract
separate copyright. Considering that Fisher's pleaded claim was for a 50% share
of the copyright and no positive case was advanced by the defendants against
this result, the Court granted Fisher a 40% share, as his share was definitely
substantial, but not as great as that of Mr. Brooker.
Court of Appeal
The Case was ultimately appealed to the Court of Appeal, which upheld that a
fair trial was possible and that Fisher was a joint owner entitled to a 40%
share of the copyright, but held that Fisher was not entitled to his share
because it was either assigned to Essex under the terms of the recording
contract, or in the alternative, if deemed an implied license rather than an
assignment, that implied license was made irrevocable by virtue of acquiescence
as a result of Fisher's "excessive and inexcusable delay" in bringing
his claim. The Court of Appeal found it would be unjust to permit Fisher to
succeed in his claim, and that Fisher's implied license to Essex Music was
irrevocable due to acquiescence and laches.
Appeal to House of Lords
Fisher further appealed the decision to the House of Lords, the highest court
for copyright infringement. Here, there were three matters left to be
considered: 1) the implied license issue; 2) the recording contract issue, and
3) the laches, estoppel and acquiescence defenses.
Defendants' argument regarding the implied license was that Essex had taken an
assignment of the copyright in the original song, and since it was intended by
Essex and the members of the band that Essex would exploit the song as
developed for the recording, it also took an assignment of the copyright in the
Work, as completed with Fisher's contribution. The House found this argument to
be based on implication, meaning that for it to be successful, the elements of
implication must be met, namely: 1) it would have to have been obvious to
Fisher and Essex that Fisher's copyright was to be assigned, and 2) the
commercial relationship between the parties could not sensibly have functioned
without the assignment. The House rejected the argument finding it undermined
by the fact that the agreement was reached between musicians in their early
twenties on the one hand and the highly-experienced music-recording company,
Essex, on the other. Further, the House found that an assignment of copyright
was not necessary for Essex to exploit the recording; all that was needed was a
license.
Turning to the recording contract issue, the House found that the High Court
judge was right to reject the contention that the recordal contract worked as
an assignment of copyright, finding that the contract operated as a provision
licensing rights to Essex to exploit the Work.
The House then addressed the arguments based on laches, estoppel and
acquiescence. First, the House noted that acquiescence does not really add
anything beyond estoppel and laches. Turning to estoppel, the House noted that
for the defense to be successful, defendants had to show that they have
reasonably relied on Fisher having no claim, have acted on that reliance, and
that it would now be unfair to permit Fisher to claim a share. The House noted
that there was no evidence that the defendants would have acted any differently
had Fisher brought his claim in 1967. Further, rather than suffer detriment,
the House agreed that defendants had benefited considerably by his delay,
collecting royalties for nearly 40 years without having to account for any part
of them to Fisher.
For laches, the House noted that there is no explicit requirement of detriment,
but suggested that it was an immutable requirement and covered by the
evaluation of the facts on equitable principles. Thus, something more than mere
delay would be required. The House found that the laches defense fails in two
ways. First, laches can only act to bar equitable relief, and a declaration as
to ownership of a property right recognized by statute is not an equitable
remedy. Second, the House found that defendants failed to demonstrate that the
delay resulted in an imbalance of justice justifying barring relief claimant
would otherwise be entitled to.
Conclusion
While Fisher cannot recoup any royalties earned over previous years, he can now
enjoy his share of the copyright in the song. He now also has a right to seek
an injunction, although this would have to be decided by a trial judge on the
merits.
For musicians and their lawyers, the decision is a victory. Musicians may now be
more confident to seek what they believe to be their fair share of the riches
from exploitation of their songs over the years. The decision will not be felt
as a victory for music companies, on the other hand, who are likely to now be
more concerned about the risks of a claim due to old poorly-drafted agreements.
In addition, music companies now may fear that the decision may open up the
prospect of countless claims from musicians who feel their rights have been
overlooked.
Microsoft v. Mal-Ads—a Summary of Unfolding Action Against Internet Marketing Abusers
On September 17, 2009, Microsoft Corporation (Microsoft) filed five lawsuits in
the Superior Court of King County, Washington, alleging that malicious online
advertisements, "malvertisements," caused users of Microsoft products to
purchase and download malicious software, or "scareware" onto their computers,
resulting in damage to consumers as well as to Microsoft's business. Microsoft
has requested relief in the form of damages and injunctive relief.
All five suits name anonymous defendants, as Microsoft has been unable to locate
the true identities of the persons driving this alleged activity. Microsoft
has, however, identified the individuals by the fictitious business names
believed to be used by the unknown individuals, namely, DirectAd Solutions,
Soft Solutions Inc., Qiweroqw.com, ITmeter Inc., and ote2008.info, noting that
Microsoft will amend the complaints once the true identities of the individuals
behind the alleged activities are known. The discussion below is limited to the
discussion of Microsoft's complaint against DirectAd Solutions.
Microsoft alleges in its complaint against one defendant, JOHN DOES 1-20, d/b/a
DirectAd Solutions ("DirectAd"), that DirectAd posed as an ad agency working on
behalf of Global Travel International, a legitimate company. DirectAd allegedly
placed an ad with Microsoft for display on the MSN network of websites.
Microsoft alleges that, according to information and belief, DirectAd has no
affiliation to Global Travel International.
Microsoft alleges that DirectAd used this advertising space to direct consumers
to a website which created the impression that the consumer's machine was being
scanned for infection by Microsoft security software. The scan returned a list
of "dangerous files" and urged consumers to purchase fake security software to
eliminate them and protect against future problems. According to the complaint,
Microsoft has determined that each scan was preprogrammed, and thus false, as
was the furnished software. In addition, Microsoft alleges that DirectAd's
website, where the false security software or "scareware" was made available,
resembled the "look and feel" of Microsoft's Windows XP operating system, that
the website generated a look-alike Windows Security pop-up alert and
deceptively used Microsoft's trademarks. Microsoft alleges that these instances
created the impression that this website, the warning, and the software
available for purchase were associated with Microsoft.
Microsoft's prayer for relief requests temporary and permanent injunctive relief
against DirectAd, actual damages in amounts to be proven at trial, disgorgement
of DirectAd's ill-gotten profits, statutory damages as available, enhanced
damages in an amount to be proven at trial under Washington law, and attorneys'
fees and costs. Microsoft's claims against DirectAd, which constitute the force
behind Microsoft's prayer for relief, are summarized as follows:
1) Violation of §4 of Washington Computer Spyware Act, alleging
that DirectAd induced consumers to install software, deceptively
misrepresenting the extent to which the software was necessary. As a result,
Microsoft has been adversely affected and is entitled to injunctive relief and
actual or statutory damages (whichever is greater) in addition to attorneys
fees.
2) Violation of the Washington Consumer Protection Act, alleging that
DirectAd's activities in targeting Microsoft's programs and customers
constitute deceptive practices affecting the public interest.
3) Breach of Contract, alleging that DirectAd entered into a contractual
agreement with Microsoft in purchasing ad space, and that DirectAd's submission
of a malvertisement breached numerous terms of the agreement and has damaged
Microsoft.
4) Fraud, alleging that DirectAd knowingly and with intent to deceive
made false and misleading representations, knowing that Microsoft would rely
upon them.
5) Trademark Infringement under the Lanham Act 15 U.S.C. § 1114, alleging
that DirectAd's use of Microsoft's trademarks was unauthorized and constituted
counterfeits of Microsoft's trademarks to promote, market or sell products and
services, thus damaging Microsoft.
6) False Designation of Origin under the Lanham Act – 15 U.S.C. §1125(a),
alleging that DirectAd used Microsoft's trademarks in a manner that is likely
to cause confusion, mistake or deception as to the origin, sponsorship or
approval of such goods or services, thus damaging Microsoft.
7) Unfair Competition/False Advertising under the Lanham Act – 15 U.S.C. §1125(a),
alleging that DirectAd has used Microsoft's trademarks in connection with goods
or services with false, misleading descriptions in commercial advertising,
thereby misrepresenting the nature or qualities of their, or another person's
goods or services.
8) Violation of the Federal Computer Fraud and Abuse Act – 18 U.S.C. §1030(a)(2),
(4), and (5), alleging that DirectAd knowingly and with the intent to
defraud accessed a protected computer without authorization, attempting to
obtain value. Microsoft also alleges that DirectAd knowingly caused the
transmission of a program or other information via computer with the intent to
cause damage, resulting in loss of at least $5000 to one or more persons during
a one-year period.
9) Intentional Interference with Contractual Relationships and Business
Expectancies, alleging that Microsoft has contractual relationships and
business expectations based upon the programs, services and software it
provides to consumers; that DirectAd knew of these relationships; that DirectAd
promoted and sold scareware targeting Microsoft programs, knowing that this
activity would interfere with Microsoft's existing and prospective contracts
with consumers.
10) Unjust Enrichment, alleging that DirectAd's conduct constitutes
unjust enrichment at Microsoft's expense in violation with Washington common
law.
DirectAd's response, as well as the response from the other John Doe defendants
has yet to be seen.
In addition to Microsoft's own battle against malvertisements and scareware, in
the days before these actions were filed, the New York Times claimed that it
unintentionally ran an advertisement on its website for a supposedly legitimate
company. This ad redirected consumers to a promotional website for anti-virus
software, persuading them to purchase additional protection, much like the
activity alleged in the Microsoft complaints.
It has been suggested by some that the incident with the New York Times and the
instances involving Microsoft are linked. Whatever the case, these situations
point to potential vulnerability in even the most trusted online sources, and
raise an increased need for consumers' own skepticism in online marketing.
Although safety in exposure to internet marketing has increased substantially,
thanks to policing efforts by entities such as Microsoft and the New York
Times, among others, if consumers operate with a heightened sense of awareness
and responsibility, purveyors of malvertisement and scareware scams will see
their profit base dissipate.
Swiss Trademark Special
The Swiss PTO has announced its plans to abolish fee reductions for electronic
applications, which will effectively increase the filing fees by 60%. Starting
January 1, 2010, official filing fee for a trademark in up to three classes
will be CHF 550 instead of the current rate of CHF 350. The fee for each
additional class will become CHF 100 instead of the current CHF 60. In light of
these changes, brand owners considering applying for trademark protection in
Switzerland may wish to file their applications before the end of the year.
The current filing fees date back to 2002 when they had been lowered to
encourage electronic filing. Because over 95% of new applications are now filed
electronically, the Office feels that the incentive is no longer necessary and
plans to use the additional revenue to finance further development of its
electronic services.
FCC Proposes Rules That Support Net Neutrality
On September 21, the Federal Communications Commission (FCC) proposed new rules
that would require internet service providers to treat all content equally in
terms of transmission speed. More recently, an announcement came that the rules
may have proponents in Congress— Sen. Byron L. Dorgan (D- North Dakota) and
Sen. Olympia J. Snowe (R-Maine) have both announced a possible proposal for new
legislation in line with the new rules proposed by the FCC.
The principle of net neutrality is ensuring that consumers have unhindered
access to all legal content, regardless of actual subject matter, its source,
or the amount of bandwidth it requires. The intent is to ensure that network
operators allow access to all content equally, regardless of whether it is
bandwidth-heavy (e.g., music or video streamed from YouTube), or , like an SMS
text message, only requires minimal amounts of network resources to transmit.
The proposed rules attempt to codify principles of openness, beyond the current
regulations, which many find problematic because although these regulations
require network service providers to enable access to all legal content, they
do not mandate that a network operator could not impede certain traffic because
of its heavy bandwidth usage.
The issue prominently came to light when Comcast was accused of slowing some
peer-to-peer traffic, asserting that it monopolized a disproportionate amount
of bandwidth. Comcast maintained that it was not violating any laws and was
merely managing its network resources, but nonetheless did change its practice.
The proposed rules aim to officially make such action impermissible, whether
the access is being hampered on the basis of content or on the basis of
bandwidth usage. Another aim is to prevent a network operator from blocking
content provided by a competitor. For example, AT&T and Apple have attempted to
prevent iPhone users from accessing competitor's VoIP services, blocking access
to the internet phone service Skype, maintaining that its use only clogs the
network for other users. If proposed rules pass, AT&T may be forced to open up
access.
The proposed rules would not only be applicable to ISPs, but also to mobile
phone service providers, affecting access to content using mobile phones and
other wireless devices. Such new rules would be a boon to content providers
like Google, who owns YouTube, but would come under strong objections from
network providers, like AT&T and Comcast, who view the proposed rules as a
hindrance. Network providers are concerned that new rules may interfere with
tiered pricing structures for faster connections and argue that there is no
need for interference into how they manage their networks.
Wireless phone carriers are perhaps amongst the strongest objectors, as it often
benefits them to slow or block data-heavy sites, so that their networks are not
clogged or slowed when users are accessing sites that require a
disproportionate amount of bandwidth, as compared to users accessing
mobile-specific sites or receiving text messages. For example, many iPhone
users in areas with a significant concentration of iPhones are finding that
their service is slowing, as the increased use of such devices drains the
network resources. AT&T has attempted to approach this issue by blocking access
to some bandwidth-heavy applications.
It remains to be seen whether these rules will be adopted. In the meantime,
content providers and network operators will continue to debate how to balance
unimpeded access against smooth network operation and the need to manage
network traffic so as to avoid bottlenecks and slowdowns across the board.
Disclaimer: The contents of this newsletter are presented for information purpose only, and as such are not intended to constitute legal advice and should not be construed as such or acted upon without seeking advice of legal counsel. This information is not intended to and shall not create an attorney-client relationship of any kind or nature with IpHorgan Ltd. Please contact the firm with queries, concerns or for further details regarding the information presented herein. The entire contents are current only as of the date of the newsletter and are not to be interpreted as the opinions of our clients past, present, pending or future. (c)2009, IpHorgan Ltd. All Rights Reserved.
Newsletter Volume 49, February 2010
