Media Law
BULLETIN
April 2005
Grokster and the
Betamax Climax
On March 29, 2005, the U.S. Supreme
Court heard oral arguments in the
highly anticipated MGM v. Grokster
matter to determine whether distributors or developers of peer-to-peer software such as Streamcast and Grokster
are liable for contributory and vicarious
copyright infringement. After losing the
battle in the Ninth Circuit, entertainment industry heavyweights such as
MGM, Columbia Pictures and Disney
appealed to the Supreme Court - this
time with a torrent of amicis briefs in
support of both sides.
In our September and November, 2004
editions of the Media Law Bulletin, we
reported in detail the holding in the
Grokster case.
In all, 55 amicis briefs have been filed:
23 in support of the entertainment
industry, 25 in support for the software
companies and 7 in support of neither.
Not surprisingly, those in support of
the entertainment industry include various intellectual property owners and
groups, digital media organizations,
some members of the academia, the
Solicitor General of the United States
and Attorneys General from 40 states.
Representing the opposite side of the
spectrum are computer scientists,
an even larger cross section of the
academia, the American Library
Association, the American Civil Liberties Union and consumer groups.
Crucial to the outcome of the case
is the determination of whether the
peer-to-peer software has substantial
[ Highlighting legal issues affecting the
media and entertainment industries ]
non-infringing uses under the Betamax
Rule. In Sony Corporation of America
v. Universal City Studios, a landmark
dispute concerning Sony’s Betamax
video cassette recorders, the Supreme
Court ruled that a manufacturer is not
liable for creating a product which
allows for infringing uses as long as
the product is capable of substantial
non-infringing uses.
Grokster will put the Betamax Rule to
the test in an era that, some argue,
has been changed significantly by
the innovation and education that
was made possible in the 20 years
since the Sony ruling. As the Supreme
Court’s ruling in this case will likely be
the most important copyright decision
in decades, this is one climax that no
one can afford to miss. Stay tuned.
Pooh Stirs Up Trouble Again
In our May 2004 edition of the Media
Law Bulletin, we reported that the
judge in the Los Angeles County
Superior Court case between The Walt
Disney Co. and Stephen Slesinger,
Inc., the family-owned company that
purchased the rights to Winnie the
Pooh from creator A.A. Milne, threw
out the case after 13 years of contentious litigation. Slesinger claimed
Disney was cheating it out of millions
of dollars in royalties owed under the
parties’ licensing agreement. Superior
Court Judge Charles McKoy issued
terminating sanctions against Slesinger for numerous discovery abuses,
including trespassing on Disney’s
property in order to retrieve documents
from trash dumpsters.
The new judge assigned to the case,
Superior Court Judge Carolyn B. Kuhl,
recently issued a tentative ruling indicating that Slesinger will be ordered to
pay at least $250,000.00 of Disney’s
court-related costs, including a portion
of its costs for depositions, a mediation
and an accounting referee.1 However,
the court stated that Disney’s claim for
nearly $1.1 million in costs should be
reduced by at least $524,000.00.2
It appears Slesinger may not be willing
to pay Disney’s court costs no matter
what the court orders. As reported by
Garry Abrams in the March 17, 2005
edition of the Los Angeles Daily Journal, after the court issued its tentative
ruling, Pati Slesinger (one of the heirs
of Stephen Slesinger who obtained
the Pooh rights from A.A. Milne) told
Mr. Abrams that she has “no intention
of ever paying [Disney] anything.”
According to Mr. Abrams’ article,
Ms. Slesinger remarked: “If we were
ordered to pay this money [to Disney],
I would sooner hire a helicopter to drop
dollars over downtown Los Angeles.”
There you have it. Pooh dollars may
be raining down on the streets of Los
Angeles before Slesinger reimburses
Disney for its litigation costs. We’ll
keep you updated on further developments in the ongoing tug-of-war over
Pooh’s overflowing honey pot. However, we won’t share any money which
we collect if Slesinger decides to go
through with her dollar-drop threat.
[ 2 ] April 2005 Media Law Bulletin Sedgwick, Detert, Moran & Arnold LLP
Zurich
[ www.sdma.com ]
© 2005 Sedgwick, Detert, Moran & Arnold LLP
San Francisco
Media Law Bulletin is published by
Sedgwick, Detert, Moran & Arnold
LLP and affiliated entities. For copies
of the cited cases, or any other
assistance, please contact James J.S.
Holmes, Esq. or John F. Stephens,
Esq. at (213) 426-6900 or send an
E-mail to james.holmes@sdma.com
or john.stephens@sdma.com.
Paris
This communication is published as
an information service for clients and
friends of the firm and is made available with the understanding that it does
not constitute the rendering of legal
advice or other professional service.
Orange County
Media Law Bulletin
Newark
Meg James, Disney Wins Some Pooh
Legal Costs, Los Angeles Times, March 15,
2005. Under California law, the prevailing
party in a case may recover a portion of
its court-related costs. Unless separately
provided by contract or statute, a prevailing
party’s attorneys’ fees generally are not
recoverable as costs.
2
Id.
1
New York
Footnotes
Los Angeles
Although the decision of the three
judge panel was vacated when the
Ninth Circuit took the appeal en banc
and is no longer good law, the decision
remains important because it was
the first time the Court attempted to
make sense of the patchwork of prior
decisions addressing internet jurisdiction. The decision gave clear insight
into the thought process and mindset
of at least three judges sitting in the
Ninth circuit who believed that L.L.
Bean’s virtual presence in California
the state was sufficient not only for
specific jurisdiction, but for a finding of
general jurisdiction. Since the decision
is no longer good law, merchants who
choose to conduct business in the
state solely via the internet are left to
wonder whether the rationale for the
decision in Gator.com will come back
to bite them and they will be again
faced with general jurisdiction, forced
to defend an action in California on
any cause of action, irrespective of any
connection to the state. Only time, and
more internet sales, will tell.
Sedgwick’s Media Law Group
attorneys obtained a favorable settlement in a copyright infringement
case involving the broadcast of an
allegedly infringing music video.
The result was due in large part to
Sedgwick’s pretrial motions to exclude
the plaintiff’s expert testimony and
damages evaluation at trial.
London
Shortly after the decision was announced, L.L. Bean sought review of
the ruling en banc. Oral argument was
held on June 22, 2004. After oral argument, but before the court rendered
its decision, L.L. Bean and Gator.com
advised that it had reached a settlement of the underlying dispute. Under
the terms of the settlement, Gator.
com agreed to a limit on the number
of advertisements it could place on
L.L. Bean’s website through November
20, 2004 and thereafter agreed to
permanently discontinue the use of all
advertisements on the L.L. Bean website. In addition, Gator agreed to make
a monetary payment to L.L. Bean.
In exchange, L.L. Bean stated that it
would not pursue any claims against
Gator arising from Gator’s use of
pop-up advertisements on its website.
Finally, the parties agreed that if the
decision from the District Court was
affirmed (that the court did not have
jurisdiction over L.L. Bean) then Gator.
com would pay L.L. Bean $10,000.00.
If the decision was overturned, no payment would be made to any party.
Sedgwick Media Law
Group Victories
Dallas
In September 2003, a three-judge
panel found that California courts
may assert general jurisdiction over
companies that do business in the
state through the internet even though
they do not have a physical presence
in the state, are licensed to do business in the state or pay state taxes.
The ruling in Gator.com v. L.L. Bean
was groundbreaking because it was
the Ninth Circuit’s first attempt at stating a cohesive policy on the issue of
jurisdiction based on contacts in the
e-commerce arena. We first reported
this case in our November, 2003
Media Law Bulletin.
On February 15, 2005, the 11-judge
panel ruled that the settlement meant
that there was no live case or controversy and thus rendered the appeal
moot. Specifically, the court found
that because Gator.com had agreed
to permanently discontinue the use of
pop-up ads, Gator.com was unable to
obtain a declaratory judgment because
it no longer wished to engage in the
activity concerning which it initially
sought declaratory relief. The court
further ruled that the $10,000.00 at
issue was insufficient to render the
claim “live,” finding that “[a]lthough
the parties have negotiated a ‘side
bet’ concerning our resolution of this
appeal, that wager does not alter the
fact that the personal jurisdiction issue
is wholly divorced from any live case
or controversy.”
Chicago
See You Later Alligator . . .
Gator.Com That Is