June 17, 2024

Litigation Round-Up

The courts have been busy with copyright and other library-adjacent issues! This Litigation Round-Up will provide quick hits of each case that affects the library community. 

First up is X Corp. v. Bright Data Ltd.. The Northern District of California held that the X (previously known as Twitter) cannot bring a suit for breach of contract against Bright Data. X sued Bright Data for scraping X’s website against X’s Terms of Service, typically considered within the purview of contract law. The court held that X cannot bring this claim because it impermissibly conflicted with the rights granted under the Copyright Act. In other words, X cannot sue Bright Data for breach of contract under state law because it is just trying to vindicate the same rights as granted by the federal Copyright Act. The Copyright preempts or trumps any state law claims that attempt to achieve the same goals. The decision in this case  has two important ramifications:

First, companies may no longer be able to rely on their Terms of Service to prevent unwanted data scraping. Judge Alsup made it clear that he is concerned with “a massive regime of adhesive terms imposed by X that stands to fundamentally alter the rights and privileges of the world at large.” This holding may weaken the control websites have wielded over their users through Terms of Service. 

Second, Judge Alsup distinguished between these contracts of adhesion--contracts you have no option but to accept without any room to negotiate--from those contracts “between two sophisticated parties in which one or the other adjusts their rights and privileges under federal copyright law.” This means that only contracts between parties who understand and can negotiate their rights can be enforced over the Copyright Act; contracts of adhesion no longer can. The decision is relatively good news for entities forced into contracts that strip them of their rights without room to negotiate. It is unclear at this time whether X will appeal.

Up next is Warner Chappell v. Nealy. The Supreme Court held that there is no time limit on the damages that a plaintiff can receive for infringement of their copyright. The discovery accrual rule refers to the idea that time to bring a claim begins when the plaintiff has or should have discovered the infringement, rather than when the infringement actually took place. Circuit courts were split on how long damages should extend back. The Second Circuit believed that a copyright claimant should only be able to recover three years’ worth of damages. The Supreme Court disagreed. 

Warner Chappell v. Nealy was a rare instance where the library community and the publishing community were on the same side. The Association of American Publishers, the Recording Industry Association of America, and Electronic Frontier Foundation (EFF), Authors Alliance, and American Library Association, and the Association of Research Libraries all filed amicus briefs arguing that the Supreme Court should follow the Second Circuit’s lead and limit damages to three years because of the threat of copyright trolls trying to game the system. 

The Supreme Court ultimately denied a request to hear Hearst v. Martinelli, a related case that asked the larger question of whether the discovery rule should apply at all in copyright cases, leaving the ruling from the Fifth Circuit intact. For now, the discovery rule applies in copyright cases and there is no limit on how far back a copyright holder can claim damages. 

Finally, the 10th Circuit agreed to rehear arguments in Whyte Monkee Productions v. Netflix. Back in March, the court ruled that the documentary Tiger King: Murder, Mayhem, and Madness’s use of clips copyrighted by Whyte Monkee Productions was not a valid fair use of because it did not comment on the underlying work at all and was therefore not “transformative,” which is one consideration of a fair use inquiry. Judge Holmes based his assessment on the discussion in the recent Supreme Court case of Warhol v. Goldsmith. The 10th Circuit’s first opinion significantly narrowed what it means for a work to be “transformative” when it held that something must provide commentary or critique on the underlying work to be “transformative.” The Supreme Court’s definition of transformative from Campbell v. Acuff-Rose is much broader and looks at whether the new work adds something new, with a different purpose or character, instead of merely replacing the original. Providing commentary and critique is just one way of many to be transformative. And while the transformative question is influential under the first factor, a use does not have to be transformative in order to be a fair use. The first factor privileges those works that have a purpose that aligns with the goal of fair use - to use copyrighted works to facilitate the sharing and use of culture and knowledge. 

The 10th Circuit has specifically asked for additional briefing on the impact of their first opinion and the opinion in Warhol v. Goldsmith may have on documentary filmmakers specifically. This case will be one to watch.

And last but certainly not least, the oral arguments in the Hachette v. Internet Archive appeal will be heard on Friday, June 28th in the Second Circuit. This case has very large ramifications for the library community, especially if they rely on controlled digital lending to offer any services to their patrons. We will be discussing the arguments more in depth at the end of the month.

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