On March 2, 2009, the Supreme Court granted a writ of certiorari in Reed Elsevier Inc., et al. v. Muchnick, et al., No. 08-103, to answer whether 17 USC §411(a)—the requirement of registering a copyright before suing for its infringement—restricts subject matter jurisdiction of the Federal Courts over copyright infringement claims. The class-action case is an offspring of the decision in New York Times Co. v. Tasini, which held that the first publisher of a literary work written by a freelance writer does not, absent an explicit agreement, obtain rights to license the work for use in electronic databases, such as LexisNexis. The Court's answer could have a profound effect on the actual impact of the Tasini ruling.
In Tasini, six authors wrote articles for the New York Times, Newsday, and Time, which had engaged the authors as independent contractors. The publishers thereafter licensed the copy to LexisNexis and two other companies who made the articles available on CD-ROM without obtaining separate permissions from the authors. When the authors sued the print publishers for copyright infringement, publishers argued that no permission was needed because of §201(c) of the Copyright Act, which allows the owner of copyright in a collective work to reproduce and distribute authors' contributions as part of that particular collective work, any revision of that collective work, and any later collective work in the same series. The District Court sided with the print publishers, finding the articles' later inclusion in the electronic databases to be a reproduction "as part of a revision of that collective work" because the databases preserved the print publishers' "selection of articles" by copying all of the articles originally assembled in the periodical's daily or weekly issues. When the case reached the Supreme Court in 2001, however, it was ultimately decided in favor of the freelance authors. The Supreme Court concluded that §201(c) did not assist the print publishers because "the Databases reproduce[d] and distribute[d] [the] articles standing alone" and not "as part of that particular collective work" to which the author contributed; "as part of... any revision" thereof; or "as part of... any later collective work in the same series."
After Tasini was decided, several of the affected authors along with the National Writers Union and American Society of Journalists and Authors filed a consolidated class action suit against a group of forty publishers, including Reed Elsevier Inc. (owner of LexisNexis), The Gale Group Inc., and West Publishing Corporation to recover compensation for the freelance authors. After four years of negotiation the parties reached an industry-wide settlement, and sought its approval in the federal court of the Southern District of New York, filed under In re Literary Works in Electronic Databases Copyright Litigation, MDL No. 1379. The complex settlement divides the claimants into 3 groups: A) those who had obtained copyright registration for their works prior to the alleged infringement; B) those who had obtained copyright registration for their works before December 31, 2002, but after the alleged infringement; and C) those whose works were not registered with the Copyright Office. The settlement was later approved by the District Court.
Present case was filed by Irvin Muchnik, an official of the National Writers Union and affected author, who organized a slate of similarly-situated objectors and appealed the District Court's approval of the settlement on the grounds that it provides grossly-inadequate compensation and is unfair to Class C authors who comprise over 99% of the claimants. The objectors took issue with the schedule for paying out the $18 million (max) settlement.
In the settlement, Class A members were eligible for statutory damages because their works had been registered with the Copyright Office at the time of the infringement. Compensation for members of Classes B and C, on the other hand, was to be dependent on the original sale price of the work. These claimants would receive either a flat fee or a percentage of the original sale price, whichever was greater; the flat fee and percentage set for Class C was much lower than that for Class B. In addition, under the settlement, should the total amount of the claims exceed $11.8 million (the cap amount permitted for awards after deducting attorneys' fees and administrative costs), the C Class award would be reduced first, all the way to zero if necessary, before either Class B or Class A awards are affected. If this were to happen, the objectors argued, it would be equivalent to Class C members granting the publishers an irrevocable, worldwide and continuing license to reproduce, license, and sell their works without any compensation. The objectors argued that allowing the named plaintiffs to grant such a right on behalf of all claimants included in Class C was a denial of due process.
The proponents of the settlement defended that the settlement was fair because members of Class C had no copyright registrations for their works, and thus, pursuant to §411(a), no standing to initiate an infringement action. Section §411(a) reads in relevant part: "...no action for infringement of the copyright in any United States work shall be instituted until preregistration or registration of the copyright claim has been made in accordance with this title..."
The Court of Appeals for the 2nd Circuit overturned the settlement based largely on this very provision, ruling that the lower court lacked jurisdiction over Class C claims. The Court concluded that §411(a) is a jurisdictional requirement limiting district court's subject matter jurisdiction to claims arising out of registered copyrights only, and that the phrase "the copyright claim" in §411(a) should be interpreted to mean all of the claims in the Class, and not just the claims of the named Plaintiffs.
The Court of Appeals further found that the District Court lacked supplemental jurisdiction pursuant to 28 U.S.C. §1367(a), which reads: "Except as... expressly provided otherwise by federal statute, in any civil case of which the district courts have original jurisdiction, [they] shall also have supplemental jurisdiction over all other claims that are so related... that they form part of the same case or controversy." Here, the Court focused on the phrase "except as... expressly provided otherwise by federal statute", reasoning that because §411(a) of the Copyright Act requires copyright registration for initiating an infringement suit, §1367(a) cannot confer supplemental jurisdiction over the claims involving unregistered copyrights simply because they are asserted together with other, jurisdictionally-proper claims. In other words, the Court found §411(a) to expressly provide otherwise. Thus, the Court of Appeals held, the District Court lacked jurisdiction to certify Class C and approve the settlement.
Of note is a dissent by Judge John Walker who argued that "Congress passed §411(a) to facilitate enforcement of copyrights", and that "... compliance with §411(a) is a mandatory prerequisite to the accrual of a cause of action for damages, but not a prerequisite to the possession of constitutional standing."
In response to the 2nd Circuit decision, a group of publishing companies asked the Supreme Court to review the case, arguing that the decision of the Court of Appeals conflicts with the high court's ruling in Tasini and leaves a vast majority of the affected authors without redress. The publishers also argue that §411(a) is not a source for jurisdictional limitation, noting that copyright registration is not a precondition for copyright protection.
The Supreme Court, on March 2, 2009, granted the writ of certiorari on the following question only, "Does 17 U.S.C. §411(a) restrict the subject matter jurisdiction of the federal courts over copyright infringement actions?" The case is expected to be argued in the fall of 2009, and will present the unusual situation where both sides of the original dispute are arguing to the same end—reinstatement of the settlement. The publishers who petitioned for a writ of certiorari would like to see the settlement reinstated so as to avoid the risk of more claimants coming forward, and having to continue to search and remove millions of articles from their databases. For the objectors, a reinstatement would not only mean that Class C claimants will have a chance to collect, but also that they would be able to appeal the approval of the settlement on its merits and argue for greater compensation.
Vol. 53, June 2010