false advertising claim based on (c) ownership not preempted, court rules

Carter v. Pallante, 2017 WL 2506419, No. 16 C 6786 (N.D.
Ill. Jun. 9, 2017)
Tollie Carter has sued Maria A. Pallante (now acting
Register Karyn Temple Claggett) in her capacity as the Register of Copyrights,
as well as ARC/Conrad Music and related companies. The present motion dealt
with Carter’s allegations that the publisher defendants infringed his
copyrights in certain songs by selling unauthorized licenses to third parties,
who in turn publicly performed the songs.  Carter’s father and uncle were songwriters;
Carter is the heir of their copyrights; they assigned rights in many songs to
ARC, but Carter asserted rights in the renewal terms/terminated transfers.  Despite this, Carter alleged that the
publisher defendants “represented to numerous third parties it could
license—and did license to those third parties—the performance rights and other
rights to [Carter’s songs],” and collected royalties for doing so.
Carter gets a very favorable set of results, predicated in
part on the court’s misunderstanding of the difference between copyright rights
and individual copies.  The court found
that Carter had plausibly alleged direct infringement of the distribution right
by alleging unauthorized licensing. But the distribution right is not the
“distribution right” right, and licensing performance and other rights is not a
distribution “by sale or other transfer of ownership, or by rental, lease, or
lending.”  Nor did Rule 8 require Carter
to specify who the third parties are, which songs were licensed, or when the
licenses were sold.  This is what
discovery is for.  The same analysis held
for his claims of contributory and vicarious infringement (which I would have
found correctly pleaded, unlike the direct infringement claims).  Any time-barred claims could be figured out
on factual development.
DMCA §1202 CMI claim: Again, a favorable result.  First, the DMCA doesn’t require any
relationship with digital distribution or internet commerce, just the provision
of false copyright management information with the intent to facilitate
infringement. And “Carter unmistakably alleges that false copyright information
was conveyed with copies of the work by way of the licensing agreements he
claims the Publisher Defendants entered into with third parties.” Comment: And
here the court’s initial misunderstanding compounds itself: the license
agreements didn’t necessarily physically convey copies of the works, only the
right to make/perform copies of the works.
The court did find many of Carter’s state law claims
preempted; it seems to me that all of them should have gone.  Unjust enrichment was easy: the alleged
conduct was the same as the alleged infringing conduct. Failing to pay
royalties/licensing revenues is not an extra element in the absence of a
contract between the parties.
Deceptive trade practices under state law: The IUDTPA lists
“pass[ing] off goods or services as those of another” and “caus[ing] likelihood
of confusion or of misunderstanding as to the source … of goods” as deceptive
trade practices.  Generally, reverse
passing off claims are preempted.  If
third parties are misled by the defendants’ misrepresentations and take
licenses from them instead of Carter, that’s Copyright Act territory.  However, the court accepted Carter’s argument
that the publisher defendants “could have” misrepresented that they owned the
copyrighted songs in advertising material without infringing copyrights to the
songs.  Comment: But the whole point of
advertising would have been to exercise the rights of the copyright owner—this
is silly, even if the Copyright Act lacks the “offer to sell” language in the
Patent Act.  See also Dastar; if the claim would be precluded
under Dastar, as it would according to many courts, it
should likewise be preempted when asserted as a state-law claim.  Separately, to the extent that most states—I believe
Illinois among them—interpret their trademark laws to be in pari materia with
federal law, the Dastar holding should
apply on the merits to block the claim.
Because making misrepresentations about a copyrighted work
in advertising, “short of licensing the copyrighted works at issue or taking
any other action in connection with a copyright owner’s exclusive rights” isn’t
among the exclusive rights in §106, the claim wasn’t preempted.  Comment: There’s also a deeper conflict
here—at a minimum, the mention of “authorize” in §106 covers secondary
liability, which is properly pleaded even on my interpretation.  The advertising is inherently bound up with
the authorization, even if the authorization isn’t completed until someone
agrees.
Tortious interference: again, this was based on the
publisher defendants’ claims that they could license the songs, not
qualitatively different from the alleged infringement. Carter alleged that
there was an extra element of false representations, but (1) that isn’t an
element of a tortious interference claim, and (2) that doesn’t create a
difference in kind from copyright infringement, “because the false statements
of ownership at issue were part and parcel of selling an unauthorized license
in order to deprive Carter of a business opportunity.”  Comment: How is this consistent with the false
advertising holding?  Just because the
statements may have been made in “advertising” doesn’t mean they weren’t
fundamentally connected with the thing being sold.

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