Reed Elsevier v. Muchnick

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Argued October 7, 2009.

Authorship: Lyle Denniston of SCOTUSblog

Docket: 08-103

Issue: Does 17 USC 411-a restrict the subject matter jurisdiction of the federal courts over copyright infringement actions?

Contents

Briefs and Documents

Oral Argument

Transcript (October 7, 2009)

Merits Briefs

Amicus Briefs

Certiorari-Stage Documents

Oral Argument Recap

Analysis

Justice Stephen G. Breyer made repeated efforts to keep open the chances that an $18 million settlement of a major copyright dispute may yet get a full hearing on its fairness in federal court, but he found little support among other members of the Supreme Court as they pondered the scope of a federal court’s power over copyright lawsuits in Reed Elsevier v. Muchnick. The initial impression of the hour-long argument was that the settlement might not survive this test.

At the center of the dispute is a deal that was intended to end a complaint by free-lance authors that articles they wrote for newspapers and periodicals were copied into electronic databases without their consent — and without extra payment. But lower federal courts found they had no jurisdiction to review the $18 million pact, because some of the authors involved never registered their copyrighted works with the Copyright Office, and thus their claims may have been beyond the court’s power to assess even as part of a settlement. The case in the Court, filed by publishers and electronic archive firms, turns on whether a federal law requiring a copyright owner to register the work before being allowed into court actually is binding — that is, whether it is a limit on the federal court’s actual jurisdiction to decide.

Much of the argument involved a focused analysis on how to read a statute, without any discussion of the soundness or fairness of the settlement deal itself. The Justices seemed to waver back and forth between the specific language of the Copyright Act provision, and the underlying public policy goals that Congress may have in mind in making registration a prior condition for suing for infringement.

On either side of that discussion, however, most of the Justices seemed skeptical that a strong enough case had been made to overturn the Second Circuit ruling that it lacked authority in the case. A strong performance by a law professor specially chosen by the Court to support the Second Circuit’s ruling fueled that skepticism. A straddling position by the U.S. Solicitor General’s office may have added to that sentiment, too.

Justice Breyer, repeatedly making a pragmatic case for allowing the lower courts to go ahead and decide whether to approve the deal, suggested that Congress could not have intended to set up a system in which copyright claims could not be resolved by settlement because of who was or was not allowed in court. Why not, he commented, let the courts look at all the factors in a dispute to decide whether settling it was fair to all concerned. Fairness, he said, was the crucial issue when a lawsuit had been settled.

While Justice John Paul Stevens joined in suggesting that the focus in such a situation should be on fairness, rather than on the issue of jurisdiction or its absence, his and Breyer’s comments and questions were the only indications that the Court might want to decide the case without settling the question of court authority.

Charles S. Sims, a New York lawyer representing the publishers, insisted that his clients were properly in court because many of the free-lance authors had registered their copyrighted works, so they clearly had a right to sue, and thus a right to reach a settlement and get it reviewed in court, even if it took in authors with unregistered works.

Sims conceded, though, that lawyers on his side “were guilty of loose language” in lower courts in using the limited power of the courts — that is, the very issue of authority now in issue — to help justify a part of the settlement that treated the authors with unregistered copyrights less favorably. It is “not fair,” Sims told Justice Ruth Bader Ginsburg, to say that they had conceded that there was a jurisdictional bar to reviewing the settlement.

Chief Justice John G. Roberts, Jr., was Sims’ most aggressive interrogator, suggesting that the Copyright Act language at issue was closely parallel to that written into other laws that the Supreme Court had determined set limits on jurisdiction, not just on courts’ discretion.

Ginger Anders, an assistant to the U.S. Solicitor General, arguing for the federal government view that the Second Circuit was wrong in viewing the language as jurisdictional in scope, suggested that the register-before-suing language was mandatory and generally could not be waived. But, Anders suggested, perhaps it was appropriate to allow it to be waived in this particular case. There was going to be a settlement, she said, so the federal judge was not going to have to decide the merits of the claim of infringement.

Because neither side in the free-lancers’ copyright case was willing to defend the Second Circuit ruling putting the settlement outside of court review, the Court had named Ohio State law professor Deborah Jones Merritt to offer a defense. She offered a full-scale defense, suggesting that the restriction at issue was jurisdictional but, even if it was not, there was no reason for the Justices to overturn the Second Circuit.

She sought to undercut the arguments of the publishers and database companies by criticizing them for failing to try to locate all of the free-lance authors, to get their permission for electronic re-publication of their works and thus avert the legal dispute that ensued. University libraries, she said, often have to obtain many more permissions for re-publication than any electronic database in the case ever had to do. She also said it was a “red herring” for the databases to contend that their electronic archives would be decimated if they could not have the settlement of all of the free-lancers’ infringement claims. In any event, she said, more advanced technology had overtaken their argument that copyrighted works would be put beyond the public’s access if the settlement did not go forward.

Pre-Argument Articles

Argument Preview

The Supreme Court will hear oral argument at 11 a.m. Wednesday in Reed Elsevier Inc., et al., v. Muchnik, et al. (08-103). Only eight Justices will hear the case, since Justice Sonia Sotomayor is recused. Arguing for newspapers and periodical publishers and for companies that operate electronic databases will be Charles S. Sims of Proskauer Rose in New York. That side is supported by the federal government, to be represented by Ginger D. Anders, an assistant to the U.S. Solicitor General. At the invitation of the Court, Ohio State law professor Deborah Jones Merritt will defend the Second Circuit ruling at issue, since neither side in the case would do so.

.....

A Digital Age case that may have a broad cultural impact, could revive an $18 million deal, and may clarify federal judges’ power to approve settlement of a major lawsuit comes before the Supreme Court in a lingering dispute over the legal rights of those who make their living as free-lance writers.

Background

Individual authors who work as free-lancers, with no specific publishing home, often contribute their articles for publication in newspapers, magazines and other periodicals. They do so for a fee, usually under some form of written agreement. When the authors create their works, they instantly own the copyright to them, giving them the sole right to copy or distribute the articles. Copying without their consent is considered an infringement of copyright. An author may register an article with the U.S. Copyright Office, and there are benefits from doing so, but registration is not necessary to create ownership rights. In fact, it is estimated that only about 1 percent of free-lancers do register their articles.

From time to time over the years, free-lancers have sold articles for publication in newspapers or other periodicals. Paying a free-lance fee, the publishing companies get a right to provide the article to their own readers. They have permission to do that. But a dispute arose in the 1990s when a group of free-lance authors found that the articles they sold for print publication actually had also been copied into electronic databases. That had been done, the free-lancers contended, without their consent, so it amounted to infringement of their copyright — by the print publishers in allowing electronic copying of the articles into databases maintained by other companies, and by those other companies — the electronic publishers — for putting the articles into their databases. under licenses from the publishers who had no right to allow re-publication.

The publishers, both print and electronic, insisted that they had not infringed the authors’ rights, contending that the electronic publishing was simply another form of revision of the original print publication of the articles. The publishers contended that the millions of pages of articles now constituted, in electronic form, a large chunk of contemporary American history, and that giving the free-lancers a new layer of rights threaten to put much of that record beyond public access, contrary to the basic goal of the Copyright Act of wide access to original creations. A lawsuit led to a victory in a federal trial court for the publishers, finding that they had not infringed. The Second Circuit Court, however, disagreed finding that the free-lancers’ rights to their works had been violated.

That dispute ultimately reached the Supreme Court, in the case of New York Times Co., et al., v. Tasini, et al. In a decision on June 25, 2001, the Court ruled by a 7-2 vote that the federal Copyright Act does not allow the electronic copying, thus finding infringement by both the print publishers and the electronic database companies. What that meant, in practice, was that the free-lancers would have a right to a separate license — and, presumably, a separate fee — for the electronic reproduction. The Court said it would leave to lower courts the question of how to remedy the infringement. It suggested that the two sides might work out a deal to allowed continued electronic archiving of the articles.

After the Second Circuit had ruled in that case, but before the Supreme Court decision came down, some two-dozen free-lancers filed their own infringement lawsuits, seeking to proceed in a “class action.” Those cases were put on hold until after the Supreme Court had ruled in Tasini. After that ruling, the federal judge presiding over those cases suggested the two sides try to agree on a settlement.

The publishers initially resisted the idea of settling, saying the District Court could not approve a deal because it would not have the authority to approve such a deal because some 99 percent of the free-lancers had never formally registered their copyrights. If so many claims were beyond the Court’s reach, no “class action” settlement could emerge, the publishers contended. That argument was based upon a section of the Copyright Act that says that no claim for copyright infringement can be filed in a federal court for any work that has not been registered.

Even so, it appeared that both sides were interested in a deal. So, over a period of more than three years, a settlement was worked out, in sometimes heated negotiations. Under the industry-wide deal, an $18 million settlement fund was set up to pay the free-lancers for electronic publication rights. Nearly 40 publishers joined in the deal. In return for payments, free-lancers would release all future claims of infringement for articles already in the databases. That allowed restoration of articles previously taken out of the databases, and retention of those still there. The deal could become final only with the approval of the District Court.

By one estimate, the electronic archive that was covered by the deal was huge. “It includes,” according to that assessment, “every published English language work, regardless of where published, that has been on a database since 1997 without the copyright owner’s permission. It is not limited to ‘freelance’ contributors to magazines and newspapers, nor to the United States. The class size is unknown. There are over 26,000 publications covered by the settlement. Many are not periodicals. Thirty-five encyclopedias are included.”

Ten free-lance authors, however, objected to the deal, saying their might get no payment at all under the arrangement. The District Court upheld the settlement, and treated the deal as a class-action. The objecting authors took the case on to the Second Circuit, complaining that the payments they stood to receive were too low, or might not even be made. The Second Circuit, on its own, raised the question of whether the District Court had the authority to rule on claims so far as they involved articles that had not been registered with the Copyright Office — again, about 99 percent of the claims. The Second Circuit found that the provision in federal law did not permit jurisdiction to approve a class that included owners of unregistered copyrights. This, the Circuit Court said, is a jurisdictional bar, so only owners of registered copyrighted could be covered by any deal.

The publishers, believing that only a settlement of all the claims — that is, a “global settlement” — would clear the way legally to preserve the electronic record, took the case on to the Supreme Court.

Petition for Certiorari

The publishers’ petition, docketed July 22, 2008, as 08-103, raised two questions: did the Copyright Act clause on registering-before-suing take away the usual power of federal courts to approve a comprehensive settlement that release all claims, even those beyond a court’s jurisdiction, and did the Second Circuit ignore the Supreme Court’s suggestion in Tasini that the two sides could settle in order to allow continued electronic copying of free-lancers’ work.

The authors who fully supported the settlement urged the Court to hear the case. The objecting free-lancers opted not to respond. But, after initially examining the case, the Court asked the objectors for their views. They urged the Court to review only the first question raised, on the question of jurisdiction in the District Court.

Over the next four months, the Justices examined the case at nine separate Conferences. Finally, last March 2, they agreed to hear the case, but wrote for itself the issue it would decide: whether the provision of the Copyright Act restricted federal court jurisdiction “over copyright infringement actions.” A month later, with no one involved defending the Second Circuit’s answer to that question, the Court selected Professor Merritt to do so. After briefing, the case was scheduled for oral argument on Oct. 7.

Merits Briefs

The publishers, again stressing the “exceptional importance” of the case, argued in their merits brief that allowing the Second Circuit ruling to stand would mean that “the nation’s electronic databases and archives will be permanently depleted, a result Congress surely did not intend, and contrary to this Court’s expectation [in the Tasini decision] that the archives would be restored by ‘an agreement allowing continued electronic reproduction of the Author’s works.’ ”

Contending that the Second Circuit ruling, if upheld, would make it doubtful that any new settlement could be reached, “given the prevalence of non-registration among freelance authors, the cost and burden of registration for works of such modest economic value, and the publishers’ lack of information as to which articles were freelance and how to locate those freelance authors years after their articles were first published.”

On the statutory provision directly at issue, the publishers’ brief contended that it does not restrict federal courts’ jurisdiction at all — that it is not even a jurisdictional clause. “The text, structure, purpose, and legislative history of the Copyright Act, as well as over 200 years of copyright legislation, lack the faintest suggestion that registration is jurisdictional.” The Second Circuit, the brief said, relied almost exclusively on Second Circuit precedent and did not even discuss a 2006 Supreme Court ruling (Arbaugh v. Y&H Corp.) that clarified when a federal law is to be treated as jurisdictional. Applying the test laid down in that ruling, the brief added, the provision at issue here “plainly does not qualify as jurisdictional.” The fact that registration must precede filing of an infringement lawsuit, the brief said, only makes that a mandatory condition for filing, and does not determine whether the court has jurisdiction to hear a case when some of the parties do have a right to be in court.

In addition, the publishers asserted that there are “legions of decisions” holding that courts may release claims that they do not have the authority to decide, and to approve a settlement deal providing relief that they could not grant. Once the infringement lawsuits were filed, that gave the courts jurisdiction to approve the settlement even though it reached the claims of authors whose works were not registered, according to the brief.

The consent free-lancers’ merits brief essentially parallels the arguments made by the publishers. The objecting authors, however, go beyond that in their brief, urging the Court not to rest a ruling in favor of court authority to review the settlement solely on the customary power of courts to approve settlements that release claims not directly before the court. That brief suggested that the Court should allow owners of unregistered works to pursue their own infringement claims in a context other than a proposed settlement. Without that option, the objectors said, their claims would be worth less as a practical matter.

The Justice Department joined in the case in June, primarily because of the federal government’s role in the registration of creative works under the Copyright Act and a similar registration system at the Patent and Trademark Office. The Justice Department itself, the amicus brief asserted, is interested because it pursues civil remedies for copyright violations. The provision at issue, the brief contended, is an important feature of copyright law, because it serves “public and governmental interests,” but it does not deprive a federal court of all authority to decide. When Congress intends a restriction on federal court power to be jurisdictional in nature, the Department argued, it uses language to that effect specifically.

Professor Merritt’s brief on the merits, supporting the Second Circuit’s interpretation, argued that Congress “drew an emphatic jurisdictional line” in putting the disputed provision into the Copyright Act. It has been viewed “for a full century,” by Congress, the courts and copyright experts “as an unwaivable constraint on federal jurisdiction.” It would defy Congress’ intent and “undermine a complex statutory scheme” to change this view, the professor asserted. The provision, she said, lies “at the heart of copyright law.” Congress designed it “to further free trade in copyrighted works; shield the courts from ill-defined infringement claims; protect defendants from frivolous suits penalizing expression; and maintain the world’s largest library.”

She summed up on the general point: “Congress did not trust any of these public goals to the caprice of private litigants. It imposed an unwaivable mandate requiring authors of United States works to register their copyrights publicly before invoking federal judicial power to enforce their claims.” The brief added that, even if the Court were to allow the jurisdictional provision to be waived, the publishers and the settling authors could not do so because they relied upon it in fashioning a compensation scheme that treats registered works as most-favored. If the provision is now set aside, that scheme will be undermined, and the fairness of the deal put into question, the professor asserted.

Finally, Merritt contended that there is no public interest factor justifying waiver of the restriction on court authority. She asserted that those involved have no obligation to preserve the historical archives. The settlement is so complex it will not save courts’ time but rather will add to court administrative burdens, and the conduct of the parties in making “flip-flopping arguments” during contentious settlement talks should not now be rewarded because it would encourage similar litigation tactics in the future.

The publishers and the settlement deal itself have drawn amici support from various news organizations and other publishers, and by the Intellectual Property Law Association. The Second Circuit’s ruling is supported by the Computer & Communications Industry Association and “Netcoalition,” a trade group that speaks for Google, Yahoo, Amazon, eBay, Wikipedia and other Internet-based entities.

Analysis

The fact that only eight Justices will be reviewing the case (because of Justice Sotomayor’s prior involvement in one phase of the electronic database controversy) raises at least the prospect of a 4-4 split on the Court, which would uphold without comment the Second Circuit ruling scuttling the settlement.

That does not seem like a realistic prospect, however; four Justices still on the Court were in the majority when the Court decided the Tasini case in 2001 (indced, Justice Ruth Bader Ginsburg was its author), and those four supported the idea of pursuing a settlement. They seem to have at least a chance of picking up a fifth vote, if they see the Second Circuit ruling as undercutting Tasini. Perhaps that is why the publishers and the settling free-lancers stress that point heavily.

Moreover, a majority of the Court has seemed, in recent years, to be skeptical of treating ambiguous federal laws setting conditions for lawsuits as if they determined basic jurisdictional authority. That would clearly work against the Second Circuit decision, too.

On the other hand, Professor Merritt has submitted a soundly reasoned brief favoring the jurisdictional ruling, that raised the stakes for Copyright Act understanding beyond the factual confines of this specific case, and leveled telling criticism of the conduct of the parties in working out a deal that clearly favored their interests in an arguably unfair way.

Grant Write-Up

Lyle Denniston originally wrote the following for SCOTUSblog.

After examining the case multiple times, the Supreme Court agreed to rule on the scope of federal court authority to decide cases involving copyright infringement, when the claims have been settled. The Court limited its review to a question it had composed: “Does 17 USC 411 (a) restrict the subject matter jurisdiction of the federal courts over copyright infringement actions?”

As stated, the question appears to be a variation on the first question raised by the petition: “Whether the usual power of lower courts to approve a comprehensive settlement releasing claims that would be outside the courts’ subject matter jurisdiction to adjudicate, confirmed in Matushita Elec. Indus. Co. v. Epstein, 516 U.S. 367 (1996), was eliminated in copyright infringement actions by 17 USC 411 (a).”

As a practical matter, the case involves whether the courts had authority to scuttle an $18 million, nationwide settlement of copyright infringement claims that authors made when their free-lance articles or photos in major publications were made freely available in those publishers’ electronic databases. This was a class-action lawsuit.

A District Court had approved the settlement, but the Second Circuit Court ruled that the federal law limiting copyright lawsuits to those who have registered their works meant that the District Court had no jurisdiction over the lawsuit, and thus had no authority to approve the settlement. Some 99 percent of the claims covered by the settlement were by creators of unregistered works. A group of publishing companies then took the issue on to the Supreme Court, arguing that the nullification of the settlement contradicted the Supreme Court’s decision in 2001 in New York Times, et al., v. Tasini, et al.

Replying to the petition, two groups that had objected to the settlement joined in urging the Court to rule on the jurisdictional issue. Thus, the Circuit Court ruling was left without counsel who would participate in the oral argument.

Ohio State University law professor Deborah Jones Merritt has been chosen by the Supreme Court to join in a major case on copyright infringement, to defend a federal appeals court ruling that others in the case want overturned. The case is Reed Elsevier, et al., v. Muchnick, et al. (08-103), granted on March 2; it will be argued in the Term starting Oct. 5.

Merritt is not a specialist in copyright law, but has taught a course in patent law. Her most recent major publication is a teacher’s manual on educating students about evidence. The case she will brief and argue before the Court is primarily one about court jurisdiction, specifically, the federal courts’ authority to approve a settlement and release of claims over copyrights.

A graduate of Harvard and from Columbia Law School, she clerked on the D.C. Circuit Court for then-Judge (now Justice) Ruth Bader Ginsburg. She then clerked on the Supreme Court for now-retired Justice Sandra Day O’Connor.

It is a common practice for the Court to name counsel to speak for a lower court ruling when the parties do not do so. The choice of counsel is within the Court’s discretion.

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