Author Archives: Scott J. Sholder

The 150-Year Itch: California Legislature Amends Civil Code Section 1542 but Creates More Questions in the Process

California Civil Code Section 1542 (“Section 1542”) is ubiquitous in documents relating to California deals, parties, or litigations.  For instance, nearly every severance or settlement agreement entered into in California and/or involving a California person, company, or claim, will include a Section 1542 waiver provision. The main purpose of the Section 1542 statute is to prevent the inadvertent waiver of unknown claims by signing a general release (and at least in the context of settlement and release agreements, Section 1542 often appears in the context of a waiver of the rights granted by the statute).  After nearly 150 years on the books, Section 1542 has just been revised, likely piquing the interest of any lawyer whose practice touches the State of California.

The original language of Section 1542 read:

A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her, must have materially affected his or her settlement with the debtor.

In other words, a general release under California law, no matter how broad, does not extend to claims that were unknown at the time of executing the release. Absent an express waiver of Section 1542, broad release language will not prevent these claims from being brought.

Some of the language, however, has led to debate over interpretation throughout the years.  When the statute was codified in 1872, it referred solely to monetary claims in the context of creditors and debtors. Modern case law, however, has interpreted Section 1542 to not only include monetary claims in the limited debtor/creditor context, but also in many other types of claims and scenarios, for instance, in workers compensation proceedings, personal injury cases, and employment cases. 

In an effort to clarify Section 1542, the statute was amended effective January 1, 2019 to now read:

A general release does not extend to claims which that the creditor or releasing party does not know or suspect to exist in his or her favor at the time of executing the release, which  and that if known by him or her, must would have materially affected his or her settlement with the debtor or released party.

As stated in Section 3 of California Senate Bill No. 1431, these additions of “or releasing party” and “or released party” were meant to reflect the interpretations of the terms in Section 1542 as interpreted in existing case law. The revisions are intended to ameliorate confusion as to which types of cases are covered by Section 1542 and are meant to provide greater clarity to a releasing party choosing to waive their Section 1542 rights on the scope and ramifications of that waiver. The newly amended statute now gives notice to releasing parties that Section 1542 definitively encompasses more than just monetary claims, and that if they waive their Section 1542 rights, they are waiving their ability to bring a broader swath of claims.

While the additions of “or releasing party” and “or released party” serves to indicate the full scope of Section 1542’s application, whether the changes from “which” to “that” and “must have materially affected” to “would have materially affected” make a difference to the statute’s application remains uncertain. Similarly, it is unclear whether courts will find a Section 1542 waiver using the old language but executed after January 1,2019 valid.  Due to this particular uncertainty, the amended version of Section 1542 should be used moving forward to avoid potential invalidation of a Section 1542 waiver, including in settlement agreements, contracts and amendments, and other transactional documents. A failure to do so may result in potentially costly litigation over statutory interpretation that could have been easily avoided.  Further, the continued use of the old language, even if found to be enforceable, could potentially lead to the same type of confusion regarding scope that the Section 1542 amendment was meant to fix. The potential costs in time and resources can be easily prevented by updating the provision to its amended language.

The amendment of Section 1542 appears to mark an effort by the California legislature to adapt to the litigious environment in the Golden State. Parties entering into an agreement that includes a Section 1542 waiver should ensure they know what they are agreeing to and should consult counsel for the avoidance of any doubt in light of the recent statutory amendments. Due to the uncertainties raised by the amendment, it may have the unintended (and ironic) side-effect of causing further litigation over statutory interpretation. This section may ultimately require further clarifications and the amendment may have paved the way for even more legislation to streamline Section 1542’s application.

Lombardo v. Dr. Seuss Enterprises, L.P.: Parody Hasn’t Outgrown Fair Use

On July 6, the U.S. Court of Appeals for the Second Circuit affirmed the Southern District of New York’s finding of fair use in Lombardo v. Dr. Seuss Enterprises, L.P., reiterating the protected nature of parody under the fair use doctrine even as it applies to some of the most beloved properties in entertainment – including children’s literature.

As a brief reminder of the facts, Lombardo was a copyright infringement case involving a parody of Dr. Seuss’ classic story How the Grinch Stole Christmas! The dispute centered around playwright Matthew Lombardo’s Who’s Holiday!, a one-actress play about a 45-year-old Cindy-Lou Who, the toddler-protagonist of the original story. Having long since “outgrew” her “no more than two”-year-old days and her wholesome, unflappable belief in the magic of Christmas, the play picks up where the Dr. Seuss tale left off: Cindy Lou has entered a turbulent marriage to the Grinch, borne his child, survived his untimely death, turned to drink and drugs, been incarcerated, and lost her daughter to foster care. A dark turn for Ms. Who, to say the least. Continue reading

Close v. Sotheby’s: Federal Copyright Law Preempts California State Law on Downstream Artist Royalties

The U.S. Court of Appeals for the Ninth Circuit this month held that the California Resale Royalties Act (“CRRA”) – a state statute that provided visual artists with ongoing downstream royalties for sales of their works occurring after the initial sale – is invalid as preempted by federal copyright law. The court, in Close v. Sotheby’s, — F.3d –, No. 16-56234, 2018 WL 3322222 (9th Cir. July 6, 2018), decided that visual artists are barred from receiving any ongoing royalties arising from later sales of their work due to the federal “first sale doctrine.” The decision affirms the U.S.’s long-held perspective on the limited nature of certain copyright privileges.

The provision of the CRRA at issue in Close granted artists an un-waivable right to 5% of the proceeds on any resale of their artwork under certain circumstances. Specifically, the CRRA required the seller of a piece of artwork (or the seller’s agent) to withhold 5% of the resale price and pay it to the original artist, or if the artist cannot be found, to the California Arts Council. The purpose behind the statute was to help visual artists capitalize on the appreciation of their work by requiring payments following the work’s first sale. The statute was effective on January 1, 1977 as “the first and thus far only, American recognition of the droit de suit,” or “right of following on” as recognized by France and other civil-law jurisdictions. Continue reading

Curb Appeal: Ninth Circuit Explains § 1202 State-of-Mind Requirements in Stevens v. CoreLogic

Nearly two years ago we wrote about a California case involving the alleged removal or alteration of copyright management information (“CMI”) in the context of real estate Multiple Listing Service (“MLS”) software.  Stevens v. CoreLogic, Inc. has since winded its way up to the U.S. Court of Appeals for the Ninth Circuit, which ruled last week in favor of MLS software developer CoreLogic and affirmed the lower court’s dismissal of the plaintiffs’ copyright infringement suit.

A quick refresher on the facts is warranted given the passage of time.  The plaintiffs are professional real estate photographers who photograph homes that are being put up for sale.  They retain the copyrights to their images but license them to real estate agents, who upload the images to MLS platforms through software programs like those created by CoreLogic.  The plaintiffs sued CoreLogic, claiming that CoreLogic’s resizing and processing of their images for upload to MLS platforms constituted purposeful alteration or deletion of CMI-containing metadata under § 1202 of the Copyright Act.  The district court disagreed and dismissed plaintiffs’ claims on a motion for summary judgment, holding that the photographers had failed to prove that CoreLogic provided or distributed false CMI; that any CMI was embedded in their photographs; that CoreLogic took any action that removed or altered any CMI (assuming it was embedded); or, if such actions were taken, that they were intentional, as required by the statute. Continue reading

GDPR and the UDRP: Opposites Don’t Attract

If you’ve checked your email at all in the past month, you’ve likely been inundated by messages with titles like “Privacy Policy Updates.” These updates come en masse in the wake of the European Union’s new General Data Protection Regulation (GDPR), which regulates the processing of personal data relating to individuals in the EU. While the GDPR was intended to protect the privacy of European citizens, it has already had an impact on intellectual property enforcement across the world, particularly on ICANN’s Uniform Domain Name Dispute Resolution Policy (UDRP) and similar services, as well as the integral “WHOIS” search function.

WHOIS is a protocol used to search online databases and identify domain name registrants. Rather than being centrally managed in a single database, WHOIS data is collected and administered by various registries and registrars according to the terms of their contracts with the Internet Corporation for Assigned Names and Numbers (ICANN). ICANN has agreements with thousands of domain registrars around the world such as GoDaddy and HostGator which require registrars to post WHOIS data – such as names and contact information like emails and phone numbers – for every person who registers a domain with their service. Through WHOIS, anyone can then look up the contact information of a website domain name registrant (unless that registrant has opted to hide their information through an online privacy service). This set of tools has proven to be invaluable to trademark owners pursuing domain name disputes against cybersquatters –those who register Internet domain names containing trademarks belonging to others with the intent to extort money by selling the domain name to the trademark owner or a third party    Continue reading

CDAS’s Copyright Photo/Video Claims Defense Checklist for Media Platforms

Copyright infringement claims from photographers and image licensing companies have become increasingly common with the widespread use of easily accessible digital content on the Internet and in social media.  Photo copyright owners discover these claims en masse by way of image recognition software, and often pursue them using high-volume contingency fee-based law firms, claiming that any number of posts from time immemorial constitute infringements justifying large settlement demands.  But just because you’ve received an unreasonably high demand that far exceeds any typical license fee doesn’t mean you’re liable for that amount.  Some due diligence can help you gain leverage in these disputes, and possibly even avoid further litigation.  To be sure, content creators should be fairly paid if their content has been misused, but the extremely aggressive way some of these claims are pursued calls for a nuanced and informed approach.  You should contact a firm with experience in copyright and litigating image claims if you find yourself on the business end of one of these demands (especially a formal lawsuit), but for now, here are the basic steps you should take to preserve your best defenses and minimize potential exposure to costs and damages: Continue reading

Oracle America Inc. v. Google, LLC: Oracle Prevails in Fair Use Case before Federal Circuit; CDAS Provides Amicus Support

Last week the U.S. Court of Appeals for the Federal Circuit reversed the U.S. District Court for the Northern District of California’s ruling of fair use in Oracle America, Inc. v. Google LLC, and held that a verbatim and non-transformative taking in the presence of an actual or potential licensing market fatally undermined the defense.  Oracle had sued Google for copyright infringement, alleging that Google had unlawfully used 37 packages of Oracle’s Java application programming interface – “pre-written Java source code programs” that serve as shortcuts for various computer functions to save programming time – in its Android-powered devices.  Google copied verbatim 11,500 lines of Oracle’s copyrighted computer code as well as the structure, sequence, and organizing of the packages.  After a second jury trial on fair use, Google prevailed on its fair use defense, and Oracle appealed after the district court rejected its post-trial motion for judgment as a matter of law. Continue reading

Fox News Network, LLC v. TVEyes, Inc.: Second Circuit Rejects Fair Use Defense for Mass Archiving and Re-Distribution of Copyrighted TV Content

A panel of the U.S. Court of Appeals for the Second Circuit today issued its much-anticipated opinion in the TVEyes appeal, reversing the decision of the U.S. District Court for the Southern District of New York, and holding that TVEyes’ copying, storage, and re-distribution for viewing, downloading, and sharing, of massive amounts of copyrighted TV content was not fair use.

TVEyes is a for-profit media company offering a service that allows its clients to “sort through vast quantities of television content in order to find clips that discuss items of interest to them.”  TVEyes records 1,400 channels’ worth of TV broadcasts, 24 hours a day, and makes the copied content searchable by also copying the closed-captioned text that accompanies the videos.  Clients can search for videos based on keywords and play unlimited video clips, each up to ten minutes in duration, and may archive, download, and share clips by e-mail.  Clients pay $500 per month for these services. Continue reading

Goldman v. Breitbart News, LLC: The Embedding Balance Has Tipped

Update to November 17, 2017 Post.

Last week, Judge Forrest of the U.S. District Court for the Southern District of New York in Goldman v. Breitbart News, LLC – one of a pair of cases pending in Manhattan federal court concerning the practice of “embedding” copyrighted content – issued a ruling in favor of the plaintiff, photographer Justin Goldman, holding that embedding (or framing) does not immunize content users from copyright infringement claims.  The court declined to adopt the Ninth Circuit’s “server test” as set forth in Amazon v. Perfect 10, holding that the location of the allegedly infringed work does not determine whether a defendant has “publicly displayed’ that work in violation of the copyright owner’s exclusive rights.  Put another way, “the fact that the image was hosted on a server owned and operated by an unrelated third party . . . does not shield” defendants from a finding that a plaintiff’s display right had been violated.

The court chiefly relied on the language of the Copyright Act, including § 101’s definition of “display,” which includes showing a copy of a work by any “device or process,” and transmitting or communicating a display by means of any “device or process.”  The court explained that the Copyright Act does not require a user to possess, or to store at their own physical location, a copy of the work in order to display it within the meaning of the statute.  The court further looked to legislative history and the 2014 decision in Aereo to note the application of the Copyright Act to new technologies.   Continue reading

Three Music Industry Reform Bills to Watch: Congress Introduces Legislation to Modernize Music in the Digital Age

In a rare show of bipartisanship, Congress has proposed legislation that would financially benefit music creators who have either been overlooked in the past or are compensated on inconsistent terms.  Three bills –  the Fair Play, Fair Pay Act, the CLASSICS Act and the Music Modernization Act (all of which have bipartisan support) – were introduced in 2017 to reform Copyright laws and bring balance to the music industry.  As copyright reform has gained much traction in the past month, with a House Judiciary field hearing that took place in New York City on January 26, 2018, the three bills represent hope for change and needed updates in the digital music era.

Fair Play, Fair Pay Act

The Fair Play, Fair Pay Act, introduced March 2017, aims to extend a copyright owner’s rights to include the right to perform a sound recording publicly by means of any transmission – including traditional broadcast.  Currently, the Copyright Act affords the owners of musical compositions (the underlying music and lyrics) the right to perform a sound recording publicly, but only provides a much narrower public performance right for owners of sound recordings, limited to performance by means of digital transmissions by cable, satellite, and internet radio stations.  For instance, when an internet radio station such as Pandora streams a song, the artist and record label receive a statutory royalty for the performance of the sound recording, but when that same song is played on terrestrial AM/FM radio, the artist and record label are not compensated (in both scenarios the writer and/or publisher of the song is paid for the performance of the composition, though).  The radio industry has consistently defended the lack of monetary compensation for radio air play, citing the promotional value that radio uniquely brings an artist and record label. Continue reading