California Supreme Court Clarifies Standards for Anti-SLAPP Motions to Strike So-Called “Mixed Causes of Action”

This week the California Supreme Court clarified that California’s anti-SLAPP statute, California Code of Civil Procedure § 425.16, permits the movant to strike a portion of a so-called “mixed cause of action” that combines allegations of activity in furtherance of the movant’s right of petition or free speech with allegations of unprotected activity.  The case is Baral v. Schnitt (Case No. S225090).

In reaching its conclusion, the California Supreme Court resolved a conflict among California appellate courts, and reversed Mann v. Quality Old Time Service, Inc., 120 Cal. App. 4th 90, 106 (2004), which held:  “Where a cause of action refers to both protected and unprotected activity and a plaintiff can show a probability of prevailing on any part of its claim, the cause of action is not meritless and will not be subject to the anti-SLAPP procedure. . . . [O]nce a plaintiff shows a probability of prevailing on any part of its claim, the plaintiff has established that its cause of action has some merit and the entire cause of action stands.”  In sum, Mann permitted courts to deny an anti-SLAPP motion if a portion of the cause of action is based on activity that is not protected by the anti-SLAPP statute.

In reversing Mann, the California Supreme Court noted that the Mann decision incorrectly “permits artful pleading to evade the reach of the anti-SLAPP statute” if the pleader mixes allegations of protected and unprotected activity within a single cause of action.  Such an application of the anti-SLAPP statute “cannot reasonably turn on how the challenged pleading is organized.”  Accordingly, the term “cause of action,” as used in section 425.16(b)(1), “is not concerned with how the complaint is framed, or how the primary right theory might define a cause of action.”

The practical effect of this decision is that defendants may now move to strike distinct claims within a cause of action, even if the entire cause of action cannot be dismissed in its entirety.  The California Supreme Court concluded by clarifying the two-step process of the showings and findings required by the anti-SLAPP statute:  “At the first step, the moving defendant bears the burden of identifying all allegations of protected activity, and the claims for relief supported by them.  When relief is sought based on allegations of both protected and unprotected activity, the unprotected activity is disregarded at this stage.  If the court determines that relief is sought based on allegations arising from activity protected by the statute, the second step is reached.  There, the burden shifts to the plaintiff to demonstrate that each challenged claim based on protected activity is legally sufficient and factually substantiated.  The court . . . must determine whether the plaintiff’s showing, if accepted by the trier of fact, would be sufficient to sustain a favorable judgment.  If not, the claim is stricken.  Allegations of protected activity supporting the stricken claim are eliminated from the complaint, unless they also support a distinct claim on which the plaintiff has shown a probability of prevailing.”  Based on the foregoing, an anti-SLAPP motion may operate like a conventional motion to strike, such that it may be used to strike parts of a cause of action that seek relief arising from activity protected by the statute.

Appellate Court Affirms Order Denying Anti-SLAPP Motion to Strike Claim for Libel by Implication

Plaintiff Leah Manzari, an alleged pioneer in the online adult entertainment industry and purportedly famous under her professional name, Danni Ashe, filed suit for libel and false light in California district court, alleging that an article published by defendant Associated News Ltd. in its online newspaper, the Daily Mail Online, implied that Manzari was HIV positive.  Last week, in an opinion selected for publication, the Ninth Circuit affirmed the district court’s order denying Associated News Ltd.’s motion to strike the complaint pursuant to California’s anti-SLAPP statute, California Code of Civil Procedure § 425.16(e), thereby permitting Manzari’s claims to proceed.  The case is Manzari, PKA Danni Ashe v. Associated Newspapers Ltd., No. 14-55329.

Manzari’s claims are based on an article featuring a stock photograph of Manzari next to a headline reading, “PORN INDUSTRY SHUTS DOWN WITH IMMEDIATE EFFECT AFTER ‘FEMALE PERFORMER’ TESTS POSITIVE FOR HIV.”  Underneath the photograph is a caption stating, “Moratorium:  The porn industry in California was shocked on Wednesday by the announcement that a performer had tested HIV positive.”  Neither the headline nor the article caption clarified that Manzari was not the “female performer” who tested positive for HIV, and there was no dispute that Manzari never had HIV.

In the district court, the defendants moved to strike Manzari’s complaint pursuant to California’s anti-SLAPP statute, California Code of Civil Procedure § 425.16(e).  In ruling on an anti-SLAPP motion, the court engages in a two-step process.  First, it decides whether the defendants have made a threshold showing that the challenged cause of action is one arising from a protected activity.  If they succeed in meeting this threshold requirement, the burden then shifts to the plaintiff to demonstrate a reasonable probability of prevailing on its claims, by showing that the complaint is both legally sufficient and supported by a prima facie showing of facts to sustain a favorable judgment if the evidence submitted by the plaintiff is credited.

In deciding the first step, the Ninth Circuit agreed that publishing an article regarding the public health aspects and safety of a the California adult entertainment industry was a topic of public interest, sufficient to satisfy the Daily Mail’s initial burden that the libel and false light suit targeted speech protected by the anti-SLAPP statute.

In deciding the second step, Manzari was required to show that the article was reasonably understandable to imply the defamatory statement.  Manzari was also required to show that the Daily Mail acted with actual malice, because the Court deemed Manzari a public figure, in light of her celebrity in the world of adult entertainment, “millions of Internet downloads, extensive publicity, and broad public exposure[.]”

The Ninth Circuit held that Manzari had presented sufficient evidence of the article’s defamatory implication, and that a reasonable reader could infer that the article is about Manzari, particularly given the size and placement of the photographs and text.  Even though the Daily Mail did not affirmatively state that Manzari was the performer with HIV, the court recognized that “a photograph itself can convey both an implicit and an explicit message and . . . the headline, caption and photograph taken together are also a statement.”  Moreover, the Daily Mail could not “cure the obvious message conveyed by the headline, photo and caption” by making a “passing reference buried in the article” that the performer in question had not yet been identified.

In proving actual malice, Manzari was required to present evidence that defendants acted with knowledge of falsity or reckless disregard for the truth.  In light of the combination of the headline, the stock photograph of Manzari, and the caption, the Ninth Circuit found that Manzari met her burden.  The Ninth Circuit analogized this case to a newspaper running the headline:  “High Profile Figure Accused of Murder” alongside a stock photograph of a mayor of a major city, or “Industry Shocked that Grocery Sprayed Veggies with Pesticide” alongside a stock photograph of a national-recognized grocery store name.  In such instances, “the publishers would be hard-pressed to plausibly claim that they had simply selected a ‘stock’ photograph.”  According to the Ninth Circuit, any such argument “cannot immunize publishers” and constitutes reckless disregard for the truth or falsity of the implication they are making.

In Online Defamation Case, Court Finds That Personal Jurisdiction Does Not Exist Over Blogger Who Directed Online Reviews To A Nationwide Audience

The Eastern District of Virginia recently dismissed an online defamation case on personal jurisdiction grounds.  The case related to a gun-aficionado blog, created in Arizona and aimed at a “nationwide marketplace of consumers of firearms,” which contained negative reviews about a product.  Because the operators of the blog did not specifically direct their online review to a Virginia audience, the court found that the defendants failed to satisfy the minimum contacts test needed to establish personal jurisdiction.

The court’s decision follows a long list of opinions on Internet-related personal jurisdiction, in which courts evaluate whether the defendant purposefully targeted a particular forum.  The primary takeaway from this case aligns with that prior precedent: website postings about a product or service directed to a national – or even worldwide – audience are generally insufficient to confer jurisdiction over the website’s operators. Notably, the court rejected the plaintiff’s argument that jurisdiction must lie in the state where the plaintiff experienced reputational harm.

The plaintiff in FireClean, LLC v. Andrew Tuohy, Case No. 1:16-cv-00294-JCC-MSN, 2016 WL 3952093 (E.D. Va. July 21, 2016) is a Virginia company which purports to manufacture a specialized oil reducing carbon residue buildup in firearms.  FireClean alleged multiple counts of defamation and other claims against defendant Andrew Tuohy, the operator of a firearms website called Vuurwapen Blog, after the blog performed tests that compared the chemical makeup of FireClean to canola oil and soybean oil.  After analyzing the test results, Tuohy posted that FireClean actually was “nothing more than Crisco vegetable oil.”  The blog later published other reviews criticizing the product’s chemical composition.

FireClean accused Tuohy of making defamatory statements, arguing that the blog posts intentionally misled consumers about the oil’s composition.  FireClean further alleged that Tuohy attempted to injure FireClean’s reputation while attracting more readers to the blog.

FireClean brought the lawsuit in its home state of Virginia, although Tuohy resides in Arizona. Tuohy moved to dismiss the complaint on both jurisdictional and substantive grounds.  In following a plethora of precedential cases where courts have adapted the traditional “minimum contacts” test to technological advances and Internet-related businesses, the Eastern District of Virginia dismissed the claims for a lack of jurisdiction.  A copy of the court’s order is available here.

The landmark opinion examining personal jurisdiction when an entity conducts commercial activities over the Internet is Zippo Mfg. Co v. Zippo Dot Com, Inc., 952 F. Supp. 1119, 1124 (W.D. Pa. 1997) (adopting a sliding scale approach in reasoning that jurisdiction over a website is determined by examining the level of interactivity and the nature of the exchange of information that occurs with users).  Here, the court found that the Fourth Circuit had slightly altered Zippo’s test by developing the following standard:

“[A] state may, consistent with due process, exercise judicial power over a person outside of the State when that person (1) directs electronic activity into the State, (2) with the manifested intent of engaging in business or other interactions within the State, and (3) the activity creates, in a person within the State, a potential cause of action cognizable in the State’s courts.”

ALS Scan, Inc. v. Digital Serv. Consultants, Inc., 293 F.3d 708, 714 (4th Cir. 2002).

In relying on ALS Scan and other Fourth Circuit cases, the court rejected FireClean’s argument that Tuohy’s contacts should confer jurisdiction in Virginia.  The court explained that the defendant had not purposefully availed himself of doing business in Virginia nor had he established any significant connections with the plaintiff’s chosen forum. The mere fact that an online server transmitting a website may be located in Virginia also failed to rise to the level of a purposeful contact, according to the court.

The court explained,

Touhy’s blog is hosted in Arizona by an Arizona company.  To the extent a hosting company transmits Tuohy’s online content through servers located in Virginia, those unilateral actions by the hosting companies are not evidence of Tuohy’s purposeful targeting of Virginia . . . Plaintiff identifies nothing to indicate that [the blog was] specifically directed to Virginia readers. All relevant exhibits and allegations indicate the websites aim to distribute Tuohy’s opinions to the nationwide marketplace of consumers of firearms.

Additionally, the court distinguished the seminal case of Calder v. Jones, 465 U.S. 783 (1984), from the Fourth Circuit’s approach to jurisdiction.  In Calder, the Supreme Court reasoned that the location of the plaintiff’s injury – and thus the state where the plaintiff suffered harm – served as an appropriate forum.  Instead, the court relied on Fourth Circuit decisions in finding that mere injury to a forum resident is not a sufficient enough connection to confer jurisdiction.  According to the court’s analysis, the focus should center on the defendant’s own contacts with the forum state, rather than targeting the place where the plaintiff suffered the alleged injury (a particularly thorny issue in cases where sales and profits have decreased nationwide, as a plaintiff then could assert that jurisdiction would be proper in any forum).

Thus, the Eastern District of Virginia dismissed FireClean’s claims on jurisdictional grounds.  If FireClean decides to continue to pursue its defamation and conspiracy claims against Tuohy, it could re-file the case in Arizona, where Tuohy would likely be subject to a court’s jurisdiction.

Third Circuit Affirms Employer’s Right To Provide Truthful Information In Response To Reference Request Without Liability To Former Employee

     In a recent unpublished decision by the Third Circuit Court of Appeals, the Court affirmed the lower court and held that a former employee could not maintain legal claims against his former employer, based on truthful statements regarding his employment provided to two prospective employers.   In its ruling, the Court emphasized that an employer has a “conditional privilege” when it provides information regarding a former employee to a prospective employer.   

     In this case (Bentlejewski v. Werner Enterprises, et al), a truck driver (James Bentlejewski) employed by Werner Enterprises resigned after one year, and later began a training course with the prospect of employment with another transportation company.  Pursuant to regulations established by the Federal Motor Carrier Safety Administration, the new company requested Mr. Bentlejewski’s driving history report.  In response, Werner provided information that Mr. Bentlejewski had been involved in several minor accidents, each of which was identified as “preventable.”  Based on this information, Mr. Bentlejewski was not offered the position.  Almost a year later, Mr. Bentlejewski began probationary employment with another company, which was discontinued after the new employer obtained the same information regarding Mr. Bentlejewski’s driving history with Werner.  Several months later, Mr. Bentlejewski filed suit in federal district court in Pennsylvania against Werner, alleging that the employment references provided by Werner to the two prospective employers contained “false and misleading” information, and asserting claims for defamation and interference with contractual relations. 

     The district court dismissed Mr. Bentlejewski’s claims, holding that Werner was protected by a conditional privilege granted to employers who provide information about employees to future prospective employers, and that Mr. Bentlejewski failed to overcome that privilege.

     On appeal, the Court of Appeals made clear that Werner’s actions were subject to a conditional privilege under both Pennsylvania law and the Federal Motor Carrier Safety Act.  The Court held that the district court erred by ruling that Pennsylvania law required Mr. Bentlejewski to show that Werner intentionally provided inaccurate information in order to defeat the privilege, rather than simply acting negligently.  The Court concluded that this error was immaterial, however, because the federal regulations pertaining to drivers specifically requires intentional conduct to establish liability, rather than mere negligence.  Looking at the evidence at hand, the Third Circuit held that it did not support Mr. Bentlejewski‘s assertion that the information provided by Werner was inaccurate as to any of the traffic incidents in which he was involved.  Therefore, the Court concluded that Werner could not be liable for providing false information regarding Mr. Bentlejewski’s employment, and affirmed the district court’s ruling. 

      This decision is consistent with laws in most jurisdictions (including New York and California) that provide a qualified or conditional privilege to employers who provide information regarding its employees to prospective employers.  Indeed, the prevailing standard is that an employer cannot be liable for defamation or other claims regarding employment references without evidence that it acted “with malice” in providing incorrect information to a prospective employer; that is, the employer acted intentionally or with reckless disregard for whether the information was accurate.  Therefore, although the safest approach adopted by many employers is to only confirm dates of employment, last positon held, and (with the employee’s permission) salary information, such a conservative approach is not strictly necessary in order to avoid liability.  Nevertheless, in cases where information provided in response to a reference request does appear to be inaccurate, it may be difficult to establish whether the employer was simply negligent or acted with malice, making courts reluctant to dismiss such claims.  Therefore, the legal landscape presents pitfalls for employers who are not careful and deliberate when responding to requests for employment references.  Although circumstances vary, it may be prudent for employers responding to requests for information regarding former employees to consider taking the following steps:

          1.         Adopt a consistent policy regarding the information disclosed.  If employers go beyond the “name, rank, and serial number” approach to references, it should be clear and consistent as to what information will be provided (i.e., whether termination was voluntary/involuntary, reason for termination if involuntary, performance rating, etc.).  Disclosing the same information regarding all employees ensures fairness and reduces legal risk.

          2.         Require that all information be provided by a single source.  In order to reduce the risk of inaccurate and inconsistent information, all reference requests should be handled by one source, usually HR.  Company managers should understand this policy, and all prospective employers should be made aware that if a former employee’s supervisor discloses any additional information beyond that provided by the policy, it should not be considered a communication on behalf of the company.

          3.         Insist that reference requests be in writing.  Disputes sometimes develop regarding what information has been requested regarding a former employee, and by whom.  Requiring that reference requests be in writing creates a written record that may later prove useful.

 

Airbnb Faces Suit for Using Julia Child’s Name in a Contest

Earlier this year, Airbnb ran a contest in which one winner could “come stay in the former home of Julia Child.”  The company advertised that entrants could imagine themselves “walking the halls of Julia Child’s former home,” and “channeling the culinary genius of Julia Child,” while “combing over the knick knacks in her kitchen exactly as she left them.”  Although the contest may have been a hit with travelers and fans of the original celebrity chef, the chef’s estate was less enthused.  This week, The Julia Child Foundation for Gastronomy and the Culinary Arts sued Airbnb and its publicity firm, arguing that contest violated Child’s right of publicity.

According to the complaint, Airbnb contacted the Foundation in April, and sought permission to use Child’s name and likeness in connection with the contest.  Consistent with Child’s longstanding policy of refusing requests to associate her name or image with commercial products or brands, the Foundation expressly declined the request.  Nevertheless, Airbnb moved forward with the promotion, and used Child’s name on its website, on social media, and in an e-mail campaign. As a result, Airbnb won a trip to the California court system, where it can walk the same halls that many celebrities have walked.

Here, the plaintiff Foundation brought its “right of publicity” claim under California’s Civil Code statute.  California recognizes both a common law and statutory right of publicity.  A defendant may be liable for a common law “right of publicity” claim if (1) the defendant uses the plaintiff’s identity (2) to the defendant’s advantage (commercially or otherwise) (3) without the plaintiff’s consent and (4) the plaintiff is injured as a result thereof.  Eastwood v. Super. Ct., 149 Cal. App. 3d 409, 417 (1983).  Pertinent here, California Civil Code section 3344 adds two additional elements to the common law claim, including (1) knowing use of the plaintiff’s likeness and (2) a direct connection between the defendant’s use and the commercial purpose (i.e. that the use was directly connected with advertising or sales).  Cal. Civ. Code §3344.

Unlike defamation and privacy torts, California’s statutory claim for right of publicity is descendible, and California’s postmortem right of publicity is 70 years.  Cal. Civ. Code § 3344.1. California common law does not recognize a common law postmortem right of publicity.  Bruce Lee Enterprises, LLC v. A.V.E.L.A., Inc., No. 10-CIV-233- LTS, 2011 WL 1327137, *7 (S.D.N.Y., Mar. 31, 2011) (noting that the postmortem right is provided by statute).

However, the postmortem right of publicity under Section 3344.1 is limited to individuals who were domiciled in California at the time of their death.  Bruce Lee Enterprises, LLC v. A.V.E.L.A., Inc., No. 10-CV-2333-KMW, 2013 WL 822173 (S.D.N.Y., Mar. 6, 2013), citing Cairns v. Franklin Mint Co., 292 F.3d 1139, 1147-49 (9th Cir. 2002) (denying defendants’ motion for summary judgment where there was an issue of fact as to whether Bruce Lee died a domiciliary of California or Hong Kong); Diana Princess of Wales Memorial Fund v. Franklin Mint Co., 1999 WL 1278044, *1 (9th Cir. 1999) (no postmortem right of publicity for Princess Diana under California law because she was domiciled in Britain at the time of her death).

Here, plaintiff claims that Ms. Child was domiciled in California at the time of her death.  Assuming that is correct, her postmortem right of publicity will not expire until 70 years after her death.

As we’ve noted before, the risks of using a celebrities name in ads without permission can be significant.  And although there may be cases in which a company can argue that it doesn’t need permission – such as when the use is protected by the First Amendment – it might be hard for a company to argue that permission isn’t necessary, when it had previously asked for it.  While we monitor this case, we encourage you to read our three-part series on Right of Publicity claims (available here: Part I, Part II, and Part III).

Rejecting First Amendment And Communications Decency Act Arguments, California Appellate Court Affirms Order Requiring Non-Party Yelp To Take Down Defamatory Reviews

In a published decision filed on June 7, 2016 in Dawn Hassell v. Ava Bird, Case No. A143233, the Court of Appeals for the State of California, First Appellate District, determined that the trial court’s order requiring Yelp to take down content – which had been posted by the Defendant Ava Bird and which the court found to be defamatory – from its website did not violate Yelp’s First Amendment rights.  The Court noted, however, that to the extent that the trial court’s order required Yelp to take down subsequent posts from Bird or anyone else, it was an overbroad prior restraint on speech.

The Court’s order, which touched upon a number of issues, notes that Yelp was a nonparty to the underlying action. The plaintiffs – a lawyer and her law firm – alleged that Bird, under various usernames, had posted defamatory reviews on Yelp after the plaintiffs had withdrawn from representing Bird.  In that action, the trial court entered a default judgment against Bird after she had failed to answer the plaintiffs’ complaint.  Subsequently, the plaintiffs filed a notice of hearing on the default judgment and a request for injunctive relief, and argued the merits of the case.  The court held a default prove-up hearing, in which it considered all the evidence and arguments put forth by plaintiffs, and entered judgment against Bird, finding her posts on Yelp to be defamatory.  As part of its judgment, the trial court ordered non-party Yelp to remove all reviews posted by Bird under her various usernames, as well as “any subsequent comments” posted under those usernames.  (Order, p. 6.)

After the plaintiffs attempted to enforce the judgment, Yelp objected, eventually moving the trial court to vacate and set aside the judgment.  The court denied Yelp’s motion, finding, among other things, that the injunction could be applied to a non-party (i.e., to Yelp).  Yelp appealed.

Yelp argued that the trial court was without authority to include a provision in the injunction that ordered Yelp to take down Bird’s posts.  The appellate court disagreed.  “[O]ur Supreme Court has explicitly confirmed that injunctions can be applied to nonparties in appropriate circumstances.”  (Id., p. 19 (citing Ross v. Superior Court (1977) 19 Cal.3d 899, 906).)  Yelp also argued that the First Amendment protected its right “to distribute the speech of others without an injunction” and that such rights could not be denied without notice of a proceeding and an opportunity to be heard.  (Id., p. 21.)  The court rejected Yelp’s argument, finding that (1) Yelp had not itself engaged in protected speech, nor did the removal order “treat Yelp as a publisher of Bird’s speech,” instead finding that, in this context, Yelp acted more like “the administrator of the forum that Bird utilized to publish her defamatory reviews”; (2) even if Yelp was acting as a distributor of Bird’s content (and therefore entitled to have its speech constitutionally protected), applicable authority did not support Yelp’s argument that a “distributor of third party speech has an unqualified due process right to notice and a hearing before distribution of that speech can be enjoined”; and (3) unlike the authority cited by Yelp, the speech at issue here was found to be defamatory, rather than just being suspected of being unlawful.  (Id., pp. 22-23.)  In addition to these findings, the appellate court agreed with Yelp that the portion of the trial court’s order requiring Yelp “to remove subsequent comments that Bird or anyone else might post” was “an overbroad restraint on speech.”  (Id., p. 25.)

Finally, the appellate court rejected Yelp’s argument that Section 230 of the Communications Decency Act – designed to further “First Amendment and e-commerce interests on the Internet” (Id., p. 26) – applied to Yelp and that Section 230 voided the trial court’s removal order.  To be eligible for Section 230 immunity, a defendant must show that: it is a provider or user of an “interactive computer service”; the cause of action treats the defendant as a publisher or speaker of information; and the information at issue must be provided by another information content provider.  (Id. at pp. 27-28 (citing Delfino v. Agilent Technologies, Inc. (2006) 145 Cal.App.4th 790, 804-05).)  The appellate court rejected Yelp’s claim of Section 230 immunity, reasoning that the plaintiffs “filed their complaint against Bird, not Yelp; obtained a default judgment against Bird, not Yelp; and was [sic] awarded damages and injunctive relief against Bird, not Yelp.”  (Id., p. 28.)  In other words, the removal order imposed no liability on Yelp, so Section 230 did not apply.

The Double-Edged Sword: Supreme Court Holds “Objective Reasonableness” Important But Not Dispositive in Copyright Act Fee Awards

It is a common misperception that a party will automatically recover its attorneys’ fees if it prevails in an action for copyright infringement. First, certain statutory requirements must be met in order to qualify for the recovery of “reasonable” attorneys’ fees. Second, even where such pre-requisites are met, an award of attorneys’ fees pursuant to Section 505 of the Copyright Act is discretionary, not mandatory.

In Kirtsaeng v. John Wiley & Sons Inc., 579 U.S. ____ (2016), the Supreme Court examined the standard for awarding attorneys’ fees to prevailing parties under Section 505 of the Copyright Act. Specifically, the Court focused on the proper weight district courts should give to the “objective reasonableness” of the losing party’s legal positions during the litigation in determining whether an award of attorneys’ fees to the prevailing party is appropriate.  The Supreme Court held that a finding of reasonableness should not amount to a presumption against awarding fees and that other relevant circumstances should also be considered. It remanded the case to the district court for consideration of all applicable factors. The Court also confirmed that prevailing party attorneys’ fees are equally available to plaintiffs and defendants, based upon the same analysis.

In Kirtsaeng, academic publishing company John Wiley & Sons Inc. sued individual Supap Kirtsaeng for copyright infringement, based upon his unauthorized resale of foreign editions of Wiley’s textbooks in the United States. Wiley claimed that Kirtsaeng’s activities violated its exclusive right to distribute the textbooks.  Kirtsaeng argued that his activity was protected by the “first sale doctrine”.[1] At the time the complaint was filed, the law on this issue was unsettled. Some courts held that the resale of foreign-made books was protected by the first sale doctrine, while others ruled that the defense did not apply to such a situation. The lawsuit made its way to the Supreme Court, where, in a 6-3 decision, the Court established that the first-sale doctrine did indeed permit the resale of foreign-made books. Kirtsaeng v. John Wiley & Sons Inc., 568 U.S. ____ (2013).

Armed with this legal victory, Kirtsaeng returned to the district court and sought an award of over $2 million in attorneys’ fees from Wiley, pursuant to Section 505 of the Copyright Act. The district court denied Kirtsaeng’s motion, relying on Second Circuit precedent allowing the district court to give “substantial weight” to the “objective reasonableness” of Wiley’s position on the infringement claim during the litigation. The district court found that Wiley’s position—that Kirtsaeng was infringing because the first sale doctrine did not apply—was reasonable in light of the state of the law at the time.  See John Wiley & Sons, Inc. v. Kirtsaeng, No. 08-cv-07834, 2013 U.S. Dist. LEXIS 179113, *7 (S.D.N.Y. Dec. 20, 2013). The district court also held that an imposition of a fee award against a copyright holder with an objectively reasonable litigation position would not generally promote the purposes of the Copyright Act. Id. The Second Circuit affirmed the district court’s denial of Kirtsaeng’s application for a fee award, finding that the district court had properly placed “substantial weight” on the reasonableness of Wiley’s position. See John Wiley & Sons, Inc. v. Kirtsaeng, 605 Fed. Appx. 48, 49 (2d Cir. 2015).

Kirtsaeng appealed, and the Supreme Court granted review of the decision to “resolve the disagreement in the lower courts about how to address an application for attorney’s fees in copyright cases.” Kirtsaeng v. John Wiley & Sons Inc, 579 U.S. ____ (2016) (slip op., at 3). In its argument to the Supreme Court, Wiley maintained that courts should give substantial weight to the reasonableness of a losing party’s position. Kirtsaeng argued that courts should give “special consideration” in awarding attorneys’ fees to lawsuits resolving “an important and close legal issue” that clarified copyright law. (slip. op., at 5).

In a unanimous decision, the Supreme Court ruled that “objective reasonableness can be only an important factor in assessing fee applications—not the controlling one.” (slip op., at 10). The Supreme Court held that while a district court may give that factor “substantial weight”, it may not give it “dispositive weight”. (slip op., at 11).

The Supreme Court explained that “[a]lthough objective reasonableness carries significant weight, courts must view all the circumstances of a case on their own terms, in light of the Copyright Act’s essential goals.” (slip. op., at 11).  The Court cited its prior opinion in the Fogerty v. Fantasy case, noting that other nonexclusive factors courts may consider in deciding whether to award prevailing party attorneys’ fees include “frivolousness, motivation… and the need in particular circumstances to advance considerations of compensation and deterrence.” (slip op., at 4 quoting Fogerty v. Fantasy, Inc., 510 U.S. 517, 534 n. 19 (1994)).  Accordingly, the Court explained that “in any given case a court may award fees even though the losing party offered reasonable arguments (or, conversely, deny fees even though the losing party made unreasonable ones).” (slip. op., at 10).  By way of example, the Court noted that a party’s litigation misconduct could warrant a fee award, whatever the reasonableness of its claims or defenses.

As the Supreme Court noted in its decision: “[f]ee awards are a double-edged sword: They increase the reward for a victory—but also enhance the penalty for a defeat.” (slip. op., at 7). Copyright litigants should therefore take note of the Supreme Court’s confirmation that objective reasonableness is entitled to significant (though not dispositive) weight in determining whether prevailing party attorneys’ fees should be awarded in a copyright infringement case. Absent other particular circumstances, including bad faith behavior, a party should not count on a recovery of its attorneys’ fees where its adversary has an objectively reasonable legal position. However, courts should continue to exercise their discretion to award attorneys’ fees to those qualified parties who prevail with a clearly valid copyright infringement claim or defense.

To the extent that there was any confusion among the district courts across the nation about how they should exercise their broad discretion in making attorneys’ fees award decisions in copyright cases, there is more clarity now.  And for parties, it provides even more clarity and predictability in assessing risks that they will be hit with an attorneys’ fees award.

Moreover, in reviewing the Supreme Court’s opinion, it is also clear that the chances that Wiley will be hit with having to pay the other side’s attorneys’ fees is just about nil.  In 2013, the district court had denied the prevailing defendant’s application that Wiley pay his attorneys’ fees.  In making its decision, the district court already went through all of the appropriate factors that the Supreme Court identified today, laid out its reasoning in great detail, and determined that Wiley was not required to pay the other party’s attorneys’ fees.  There is no reason to think that the district court will reach a different conclusion now, and the United States Supreme Court explicitly mentioned that it was not intimating that Wiley should pay its opponent’s fees.

[1] The first sale doctrine affords the owner of a lawfully made copy of a copyrighted work the right to resell that copy without authorization from the copyright owner. See 17 U.S. Code § 109.

Appellate Court Rejects Defamation Lawsuit Targeting Statements Made In American Hustle

Plaintiff Paul Brodeur, a well-known author, filed suit in California state court against the producers and distributors of the motion picture American Hustle, asserting claims for defamation, slander, and false light.  The case is Paul Brodeur v. Atlas Entertainment, Inc., et al., Case No. B263379.

Mr. Brodeur’s claims were based on a single statement made by Jennifer Lawrence’s character, Rosalyn, who has an argument in the film with her husband regarding their new microwave oven.  Rosalyn states that she read an article by Paul Brodeur that said that cooking food in microwaves takes all of the nutrition out of food.  Mr. Brodeur alleged that this statement suggested to the movie audience that he made a scientifically unsupportable statement, thereby damaging his reputation.

The defendants moved to strike Mr. Brodeur’s complaint pursuant to California’s anti-SLAPP statute, California Code of Civil Procedure § 425.16(e).  In ruling on an anti-SLAPP motion, the court engages in a two-step process.  First, it decides whether the defendants have made a threshold showing that the challenged cause of action is one arising from a protected activity.  If they succeed in meeting this threshold requirement, the burden then shifts to the other party to demonstrate a reasonable probability of prevailing on its claims, by showing that the complaint is both legally sufficient and supported by a prima facie showing of facts to sustain a favorable judgment if the evidence submitted by the plaintiff is credited.

Although the Los Angeles Superior Court denied defendants’ motion over a year ago, the California Court of Appeal reversed last week.

First Step:  Did Defendants Make A Threshold Showing Of Protected Activity?  YES

In a non-published decision, the appellate court determined that the anti-SLAPP statute applied because the statements made in the movie were made “in connection with a public issue or an issue of public interest” within the meaning of the anti-SLAPP statute.  The court initially noted that, “it is beyond dispute that movies involve free speech.”  Dyer v. Childress, 147 Cal. App. 4th 1273, 1280 (2007).  The court also recognized that “any issue in which the public is interested” is an issue of “public interest” for purposes of the anti-SLAPP statute.  Nygard, Inc. v. Uusi-Kerttula, 159 Cal. App. 4th 1027, 1042 (2008) (emphasis in original).

In reliance on Tamkin v. CBS Broadcasting, Inc., 193 Cal. App. 4th 133, 144 (2011) – a decision successfully argued by Andrew M. White and David E. Fink of Kelley Drye’s Los Angeles office – the appellate court agreed that there is a public interest “‘in the writing, casting and broadcasting’ of a popular television program.”  Indeed, Tamkin held that that a screenwriter’s use of the plaintiffs’ real names in a screenplay was an act in furtherance of free speech rights because it “helped to advance or assist in the creation, casting, and broadcasting of an episode of a popular television show.”  Id. at 143.

With regard to the statements made about Mr. Brodeur in American Hustle, the appellate court held the microwave scene plainly drew on an issue of public interest in the 1970’s – i.e., health hazards associated with exposure to microwave radiation – and that Mr. Brodeur was an integral part of that issue at the time.  Although the court characterized American Hustle broadly as “‘a 21st century screwball farce about 20th century con men,’” and a film that “uses the reality of a late 1970’s FBI sting operation known as Abscam (which led to bribery convictions of a number of elected officials) as a ‘taking off point[,]’” the court rejected Plaintiff’s argument that the public-interest topic addressed in American Hustle is limited to the Abscam scandal.  Accordingly, the court determined that Mr. Brodeur’s lawsuit fell squarely within the province of California’s anti-SLAPP statute.

Second Step:  Did Plaintiff Show A Reasonable Probability Of Prevailing?  NO

In examining Mr. Brodeur’s probability of prevailing on his defamation claim, the court found that the record was devoid of any evidence of whether he made the statement attributed to him in American Hustle.  In any event, the Court found that the comments about Mr. Brodeur in the film are not reasonably susceptible of a defamatory meaning, particularly because the movie is a “farce,” and it opens with a caption stating “[s]ome of this actually happened.”  Moreover, the character who utters the allegedly defamatory statements is consistently portrayed throughout the movie as “slightly unhinged” and “a font of misinformation.”

Because Mr. Brodeur failed to carry his burden of showing a probability of prevailing on his defamation claim, the remaining claims based on the same publication also failed.  The Court therefore ordered the trial court to enter an order granting the motion to strike.

Although it took over a year to obtain this result, decisions like this one will continue to permit artists to take liberties with historic facts in creative works, particularly when those works are only loosely based on historic events.  Indeed, the court expressly recognized that “‘[t]he creative process must be unfettered, especially because it can often take strange turns, as many bizarre and potentially offensive ideas are suggested, tried, and, in the end, either discarded or used. . . . . [¶] . . . We must not permit juries to dissect the creative process in order to determine what was necessary to achieve the final product and what was not, and to impose liability . . . for that portion deemed unnecessary.  Creativity is, by its nature, creative.  It is unpredictable.  Much that is not obvious can be necessary to the creative process.’”  Tamkin, 193 Cal. App. 4th at 144-45 (quoting Lyle v. Warner Brothers Television Productions, 38 Cal. 4th 264, 298 (2006) (conc. Opn. Of Chin, J.)  The Brodeur opinion reinforces Tamkin and its progeny, thereby permitting artists to take creative liberties with their works of authorship.

Appeals Court Clarifies Idea Submission Claims

A case against the makers of the wildly successful movie Avatar shows how California courts examine and decide fraud in the context of idea submission claims. In the Intellectual Property Magazine article “Appeals Court Clarifies Idea Submission Claims,” Lee Brenner and Andreas Becker examine Eric Ryder v. Lightstorm Entertainment, et al., and analyze Ryder’s fraud, fiduciary duty, and contract claims.

According to the court’s opinion, director James Cameron created the concept for Avatar in 1995, and circulated his 102-page “scriptment” in 1996.  By 1997, he ceased pitching the project due to technology limitations, but continued work on the project in the mid-2000s. Avatar was released in 2009. In the meantime, plaintiff Eric Ryder authored the sci-fi story KRZ 2068 and, although KRZ 2068 underwent development and was turned into a treatment, Cameron never saw it and his production company, Lightstorm, passed on the project.

In comparing the works, the court filtered out those elements of Avatar that preexisted the KRZ 2068 story, and ultimately rejected each of the remaining 12 supposedly similar elements. The court rejected Ryder’s allegations of impropriety from Cameron and Lightstorm and upheld summary judgment as to fraud, contract and fiduciary duty claims, finding that the works were not substantially similar and that Ryder had not been damaged.

Read full article.

NAD Addresses Disclosures in Native Ads

When the FTC issued its guidance on native advertising last year, the Commission emphasized the importance of ensuring that consumers are able to distinguish ads from editorial content. If the line between the two gets blurred, companies may need to label ads as such. Where the label is placed can be critical, because the FTC believes that consumers should know that something is an ad before they interact with it. Last week, the NAD issued a decision that addresses the placement issue.

Joyus is an e-commerce platform for various lifestyle products including fashion, beauty, personal care, fitness, and home products. Many of these products are featured in the “Stuff We Love” section of People magazine, which appears in the Style Watch section of the magazine’s website. Consumers can read a description of each product and watch a video – which is jointly produced by Joyus and People – that advertises the product. If consumers like what they see, they can easily purchase the product on the same screen.

Joyus and People took various steps to separate the magazine’s editorial content from Joyus’ advertising content. For example, the product videos all include the Joyus logo in the upper-left corner of the video player’s frame. This logo – along with a discount offer – can be seen before the video is played, as well as during the entire time the video is played. Joyous argued that these labels clearly let consumers know that the videos were ads, rather than editorial content.

PeopleStyle Image

Although the NAD agreed that the videos themselves were clearly labeled as ads, the NAD was concerned that the pages leading up to the videos were less clear. For example, the “Style” page link to “Stuff We Love” doesn’t disclose that the feature is a partnership with Joyus and promotes products for sales. As a result, the NAD opined that consumers could believe these pages represent selections by people’s editors, rather than paid ads. Thus, the NAD recommended that Joyus (in collaboration with People) revise the link so that it is clear that by clicking on the “Stuff We Love” link, a consumer will be taken to a list of items for sale by Joyus.

Although the FTC’s guidance on native ads is helpful, it’s often useful to see “real life” examples. We expect to see more of them from the NAD in the coming months.

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