Masterfile's Copyright Registration Method Held Invalid by California Court

[Oscar Michelen]

As many of you know, I have been representing Chaga International in a case brought by Masterfile ("MF") in the California District Court. MF sued them for a whopping $6,000,000.00.  Well a few weeks ago, Judge Manuel Real of the court GRANTED our motion for summary judgment and threw out MF's complaint! We are in the process of entering the final judgment now.  I will send Matt Chan the transcript so you can read what Judge Real said, but will summarize it here. 

Basically, MF relies on compilation registrations whereby they send the Copyright office a CD containing thousands of images by various authors and list three random authors' names and then add "and other authors"  under the section where the authors' names are supposed to go. They also use one date of publication for all the images, even though they may have been published at different times. They also do not list where the images were first published.  They used this method because they relied on correspondence between Nancy Wolff, a photographer's lobbyist, and the Copyright Office, whose registrar at that time was Marybeth Peters. 

Well for years, when we first started this program, I would argue with MF and their lawyers that the Copyright Office was dead wrong! This method of registration was invalid in my opinion as it did not comply with the specific language of the Act.  I would get snide snickers and comments like "So you  think you know better than the Copyright Office?"  And I would reply "Not about everything, but about this - Yeah! It's Plain English. Read the statute.  It must list the author's name and the date and place of publication. Furthermore, the Act states that compilation registration does not provide protection for the individual images contained in the compilation."

My arguments did not get very far until I was vindicated by Judge Loretta Preska's decision in Muench v. Houghton Mifflin which basically stated word for word what I had been saying.  Muench (which was argued by my friend Russell Jackson at Skadden, Arp, Meagher & Flom) has been discussed at length on this site.  Other courts soon followed suit, most famously the Alaska District Court in the case of Alaska Stock Photography v. Houghton Mifflin (also argued successfully by Russell). Only one lone judge in Utah held that he did not agree with Muench and awarded MF a judgment against a real estate company that used an MF image (that case was called Masterfile v. Gale).  The lawyers in Utah for the Gale defendants did not argue the same argument as the lawyers in Muench for some reason, so the Utah court never really had to decide the specific issue. Instead, the court just added that it disagreed with Muench (If you want all the esoteric legal details, all of this is laid out in detail in my Memo of Law which Matt Chan uploaded or will upload soon).

Anyway, I basically stated that the same arguments as in Muench and Alaska Stock applied in this case and that the same result should apply. Motion papers and arguments were submitted back and forth and on June 18, a court date was set for submission of the motion. My local counsel advised me that there was no need to make a personal appearance as Judge Real relies almost exclusively on the papers and just wants to make sure no one has anything to add before he renders his decision on the record. MF's lawyer did attend and tried to briefly argue about an appellate case he felt was applicable.

True to his procedure, Judge Real read his decision on the record and dismissed the case stating in part:
 

Here, the registration fails to comply with section 409. The registrations have multiple deficiencies, including failure to name the authors or their nationalities or domiciles in certain instances. Further, they failed to name the titles of the individual works, the years in which the works were completed or the dates and nations of each work's first publication.

With respect to MF's argument that the Copyright Office told them it was OK to file this way, Judge Real stated:

An agency's interpretation is entitled to no deference if it conflicts with the clear intent of Congress. Here, Congress has clearly identified the registration requirements of Section 409, and thus the individual office's decision to develop procedures in conflict with those requirements is entitled to no [deference].

That courts in NY and California have now held that compilation registration is invalid shoots a poisoned arrow straight into the heart of MF's claims that it has copyrighted works and is therefore entitled to statutory penalties and attorney's fees.  They will probably continue to argue that they feel the Utah decision is right,but that is a weak argument. Looking at the Alaska Stock, Muench and Chaga decisions, it is clear the courts in those three case thoroughly analyzed the registration method and the arguments raised by counsel. The Gale decision does not have the same depth of analysis and the court was not asked to rule if the registrations complied with Section 409 of the Copyright Act, so I believe that decision is of little or no value. Unfortunately, the Alaska Stock appeal is on hold as the plaintiff has field for bankruptcy so we will not have an appellate decision on this vital issue anytime soon. I was confident that the Ninth Circuit was going to uphold the decision in Alaska Stock which would have made for an even stronger position for our side. 

Needless to say, its always nice to win. But to have this legal position upheld is even more important (at least to everyone but the folks at Chaga!). Let's wait and see what MF will do now in light of this decision.         

I want to thank Russell Jackson and his team at Skadden, Arps for paving the way on this issue.
         

[SoylentGreen]

Thanks for the report, Oscar!! (and many congrats!)
This must be a huge relief for your client, and a huge blow for Masterfile.
With the large amount of money that MF was seeking, I would imagine that they'd would have needed a very solid case indeed.
I guess that this was their big test of the system.  By now, the only thing that the stock image houses can do is properly register their images.

S.G.

[Mulligan]

That was great news and excellent reading, Oscar. Thank you so much for the work that you do which enables individuals like me to stick to our convictions that these payment extraction schemes need to be stopped because they are not only morally questionable but also, in most instances, clearly illegal.

[Robert Krausankas (BuddhaPi)]

What a welcome back present this is!! I also got another welcome back present which I will share in a new thread..

In regards to this thread Masterfile will most likely think twice before pulling the lawsuit trigger again! and Congrats go out to Nancy Wolff from PACA, as well as Marybeth Peters, it was ultimately there direction that lead to this loss of huge proportions!...Way to go girls!

[Greg Troy (KeepFighting)]

Congratulations Oscar! Thank you for all that you do and I am so glad that you are on our side!

[Moe Hacken]

Congratulations, Oscar! This is HUGE. This is a big step towards taking away the gill nets that are an important part of the "strategic litigation business model."

Now they have to register the images individually and properly follow the guidelines set by the law. It's the least they could be forced to do in the asymmetrical playing field they're currently abusing.

Thanks for your hard work in making this happen!

[Matthew Chan]

The Transcript from June 18, 2012 has been posted. It's very direct and concise to the registration issue at hand.

http://www.scribd.com/doc/99957273/Masterfile-vs-Chaga-Transcript-of-Proceedings-June-18-2012

That Transcript followed the numerous arguments and heavy opposition presented by parties in support of Masterfile.

Masterfile vs. Chaga: Plaintiff's Oppose Defendants' Motion for Summary Judgment
http://www.scribd.com/doc/99956234/Masterfile-vs-Chaga-Plaintiff-s-Oppose-Defendants-s-Motion-for-Summary-Judgment

Masterfile vs. Chaga: Nancy Wolff Declaration Opposing Defendants' Motion Summary Judgment
http://www.scribd.com/doc/99955844/Masterfile-vs-Chaga-Nancy-Wolff-Declaration-Opposing-Defendants-Motion-Summary-Judgment

Masterfile vs. Chaga: Tanya Gangursky Declaration Opposing Defendants' Motion Summary Judgment
http://www.scribd.com/doc/99956021/Masterfile-vs-Chaga-Tanya-Gangursky-Declaration-Opposing-Defendants-Motion-Summary-Judgment

Masterfile vs. Chaga: Mary Beth Peters Declaration Opposing Defendants' Motion Summary Judgment
http://www.scribd.com/doc/99956109/Masterfile-vs-Chaga-Mary-Beth-Peters-Declaration-Opposing-Defendants-Motion-Summary-Judgment

I will be doing my own assessment of this case soon. Suffice it to say, this was tremendously damaging to the reputations of PACA, Nancy Wolff, the Copyright Office, and Masterfile.

They lost on registration issues that were so basic and specifically spelled out in the Copyright Law, it is really embarrassing. This should never have gone in front of the judge.

Masterfile tried to scare Chaga into submission and when that didn't work, Masterfile tried to push the issue except that they were demolished over lazy, overly-simplified registration instructions that Nancy Wolff gave to PACA members.

Those PACA members, including Masterfile, that blindly followed Nancy's advice have been handed a big dish of bittermelon.

[SoylentGreen]

Thanks a lot for the case files, Matt.
I'll have to take some time and read those over.

Things don't look good for "Uncle" Glen Carner, "red-headed stepchild" Tylor and H.A.N. et al.
Most should recall that Tylor has his evidence registered in a compilation just as Masterfile has.

S.G.

[Robert Krausankas (BuddhaPi)]

Thanks a lot for the case files, Matt.
I'll have to take some time and read those over.

Things don't look good for "Uncle" Glen Carner, "red-headed stepchild" Tylor and H.A.N. et al.
Most should recall that Tylor has his evidence registered in a compilation just as Masterfile has.

S.G.

Just when Uncle Glen starts to recede into the back of my brain, someone mentions him, and the missing him starts all over again..

[stinger]

This is wonderful news from where I sit, but I keep having a perturbing thought.

My understanding of copyright law (which I hope is wrong) is that they can properly file the registration paperwork and then go back and pursue the cases again (if the 3 year statute of limitations has not run).  Filing the paperwork is, after all, a clerical task.

If they are serious about being trolls, wouldn't they do this?  Or is there something I am missing about why they didn't properly file the paperwork in the first place?  Was it laziness or are they missing something important to the registration process?

[SoylentGreen]

Good point, Stinger.
Righthaven actually tried that.
They were unsuccessful, however:

"Judge Dawson also addresses the "amended agreement" that Righthaven made with Stephens Media on May 9th in its attempt to get around the sham transfer, but the judge doesn't buy it (Judge Pro and Judge Hunt both expressed skepticism about this amendment), noting that it only matters what the facts were when the complaint was filed, and this attempt to change the rules later in the game is not allowed:"
 
"This amendment, however, cannot create standing because “[t]he existence of federal jurisdiction ordinarily depends on the facts as they exist when the complaint was filed.” Lujan v. Defenders of Wildlife, 504 U.S. 555, 571 n.4 (1992) (quoting Newman-Green, Inc. v. Alfonzo- Larrain, 490 U.S. 826, 830 (1989)) (emphasis in Lujan). Although a court may allow parties to amend defective allegations of jurisdiction, it may not allow the parties to amend the facts themselves. Newman- Green, 490 U.S. at 830. As an example, a party who misstates his domicile may amend to correctly state it. This is an amendment of the allegation. However, that party is not permitted to subsequently move in order to change his domicile and amend accordingly. This would be an amendment of the jurisdictional facts, which is not allowed. See id. Here, Plaintiff and Stephens Media attempt to impermissibly amend the facts to manufacture standing. Therefore, the Court shall not consider the amended language of the SAA, but the actual assignment and language of the SAA as it existed at the time the complaint was filed."

http://www.techdirt.com/articles/20110713/23203415083/righthaven-loses-again-yes-again-with-another-judge-immediately-refiles-lawsuit.shtml

S.G.

[Oscar Michelen]

Two things MF could do: (1) MF may appeal (likely); (2) MF could now properly register each and every picture individually (provided it has proper assignments from the photographers) and file a new lawsuit provided it's still within three years of the alleged infringement. However, since the pictures were not properly registered at the time of the alleged infringement, MF would only be able to get its "actual damages" and would not be able to get attorney's fees.  This makes it unlikely that they will pursue the claim in this fashion. This is especially so since there were a number of other substantive defenses we were prepared to raise in the event the court allowed the lawsuit to proceed. I suspect they will put all their eggs into the appeal basket and I expect that like the plaintiffs in Alaska Stock, they will bring out all the guns and get supporting briefs from the Dept of Justice, and many others.       

[Robert Krausankas (BuddhaPi)]

Two things MF could do: (1) MF may appeal (likely); (2) MF could now properly register each and every picture individually (provided it has proper assignments from the photographers) and file a new lawsuit provided it's still within three years of the alleged infringement. However, since the pictures were not properly registered at the time of the alleged infringement, MF would only be able to get its "actual damages" and would not be able to get attorney's fees.  This makes it unlikely that they will pursue the claim in this fashion. This is especially so since there were a number of other substantive defenses we were prepared to raise in the event the court allowed the lawsuit to proceed. I suspect they will put all their eggs into the appeal basket and I expect that like the plaintiffs in Alaska Stock, they will bring out all the guns and get supporting briefs from the Dept of Justice, and many others.       

and I suspect, you'll beat them silly AGAIN! It's not whom has the bigger guns that wins, it's he who aims more accurately..

[SoylentGreen]

It's always nice to see the "Jedi Master" Oscar chime in here.
The young padawans are listening intently, I'm sure.

Two things MF could do: (1) MF may appeal (likely); (2) MF could now properly register each and every picture individually (provided it has proper assignments from the photographers) and file a new lawsuit provided it's still within three years of the alleged infringement. However, since the pictures were not properly registered at the time of the alleged infringement, MF would only be able to get its "actual damages" and would not be able to get attorney's fees.  This makes it unlikely that they will pursue the claim in this fashion. This is especially so since there were a number of other substantive defenses we were prepared to raise in the event the court allowed the lawsuit to proceed. I suspect they will put all their eggs into the appeal basket and I expect that like the plaintiffs in Alaska Stock, they will bring out all the guns and get supporting briefs from the Dept of Justice, and many others.       

Logical arguments can be made for or against the validity of registering images in bulk.
But, by and large, the courts are not favoring this method of registration, and I think that it's just a matter of time before it's simply accepted as universally "invalid".
Bulk registration has been plagued with problems as it's often used to strategically hide different kinds of deficiencies pertaining to legal "ownership".
In cases wherein disputes cannot be resolved "amicably" (I hear people snickering, by the way), the courts end up having to sort out the entire mess.
Given the astonishingly high settlements demanded by copyright extortionists, the public at large and indeed the justice system deserve much more proof than bulk registrations provide,
which are very cursory at the best of times.
The concept of "I'm sure that it's in there somewhere... trust me... and send me ten thousand dollars by the way" is laughable.
I'm reminded of the comment about this being an "issue of substantial public importance, given the size and scope of the plaintiff’s alleged image collections",
 made by the judge in the Getty vs Advernet" case.

I'm quite willing to bet that there are some big problems in MF's bulk registration.
But, I suspect that MF will try and have another go at it in the hope of simply finding a judge that will simply render a different verdict.
However, if MF loses on appeal, then that sets a very strong precedent against faulty registrations in that court circuit.  So, the stakes are quite high overall.

Of course, this always brings up the topic of "damages".
The trend among corporations appears to be based on a model created to offset not only the losses created by infringements, but also all other losses due to all other causes,
plus a tidy profit margin tacked on.
That doesn't sound like a realistic assessment of damages, if you ask me.
The trend among private individuals seems engineered to place them in the six-figures income bracket, even if their creative content is so lacking in value as to make them homeless,
 if they had to rely on actual sales.

Like I said before pertaining to copyright extortionists: "Get a haircut and get a real job".

S.G.

[jstar]

Today (July 18th, after court decision being discussed) I received a follow-up threat email from Masterfile. I'm wondering if this is improper or worse in light of the court decision that was issued within 10 days of my initial notification.

The letter warns that I have not responded within 10 days to the first letter by paying many thousands of dollars, acknowledging that I did remove the image immediately. It is a claim of infringement of a single image the size of a thumbnail, about 70x70 pixels, that appears to have been derived from one of their catalog images without my knowledge.

The letter threatens that if I don't accept the retroactive license and pay many thousands of dollars within 5 days they will rescind "that retroactive license and initiate a legal action for copyright infringement" and states that "pursuant to the Copyright Act, civil remedies for this infringement include compensatory, statutory and punitive damages, injunctive relief, delivery of destruction of infringing copies, and if litigation is involved, recovery of legal costs. Copyright infringements are subject to statutory damages up to $30,000 per work infringed."

I have not yet responded because I've been busy educating myself on this web site. But it does seem that the court decision of this thread would preclude their ability to seek statutory damages and legal costs at least. Do I understand that correctly? And if so, isn't continuing to make that threat improper? or even contemptuous of the decision? Any thoughts?

I was considering offering a market value sum for a retroactive license to resolve the matter, but this heavy-handed additional threat, based on legal leverage they now might know they do not have, makes me rethink even that.