Photography / Arts / Design

Second Circuit Limits Copyright Damages to Three-Year Period Before Suit

By Sara Gates

How do you square Psihoyos with Petrella, two of the most significant copyright statute of limitations cases in recent years?  Courts and attorneys alike have struggled with that question since the Second Circuit and the Supreme Court, respectively, handed down these two copyright decisions within the span of a month in 2014.  For the most part, courts have read the decisions separately, acknowledging the Petrella court’s three-year look-back period for a plaintiff’s recovery of monetary damages in a copyright action, while continuing to apply the Psihoyos court’s “discovery” rule, which extends the time when the Copyright Act’s statute of limitations period starts to run based on when the copyright owner “discovers” the infringement.

It was not until earlier this month that the Second Circuit took up the damages question in Sohm v. Scholastic Inc., No. 18-2110, 2020 WL 2375056 (2d Cir. May 12, 2020), and decided that, though the discovery rule is binding precedent in the circuit, the Supreme Court’s decision in Petrella counsels that there is a only a three-year lookback period from when suit is filed to determine the extent of monetary damages available.  Reversing the lower court’s decision on this point, the Second Circuit determined that a copyright plaintiff’s recovery is limited to damages incurred during the three years prior to filing suit.  The decision lends an advantage to copyright defendants where plaintiffs delay in bringing suit, yet still seek to recover expansive damages dating back as far as they can count. 

In the case, a photographer, Joseph Sohm, brought a copyright infringement action against Scholastic Inc., which had used 89 of Sohm’s photographs in various publications, outside the limited license granted by Sohm’s third-party licensing agent.  On cross-motions for partial summary judgment, the district court dealt with a host of copyright issues, ultimately finding that Scholastic only infringed the copyrights in six photographs.  Notably, the district court considered Scholastic’s arguments that the Copyright Act’s three-year statute of limitations barred Sohm’s claims as to certain uses of the photographs, and that Sohm’s damages should be limited to those incurred during the three years prior to filing suit.  The court rejected both of Scholastic’s arguments, finding the discovery rule adopted by the Second Circuit in Psihoyos v. John Wiley & Sons, Inc., 748 F.3d 120 (2d Cir. 2014), was still good law and that the Supreme Court’s decision in Petrella v. Metro-Goldwyn-Mayer, Inc., 572 U.S. 663 (2014), should not be read to establish a time limit on the recovery of damages distinct from the discovery-based statute of limitations.

On cross-appeal to the Second Circuit, Scholastic urged the court to forego the discovery rule, and to instead adopt an “injury rule” (i.e., so the three-year statute of limitations period starts to run from the time of the copyright owner’s injury), to determine when Sohm’s claims accrued for statute of limitations purposes.  Citing Psihoyos as binding precedent in the Second Circuit that had not been overturned, the court disagreed with Scholastic’s position and affirmed the discovery rule, sticking with the majority of the circuit courts that have adopted the rule.  Scholastic’s second argument, however, fared better.

Asserting that, even if the discovery rule applies, Scholastic argued that Sohm still should not be able to recover damages for more than three years prior to commencement of the action, relying on language from Petrella.  Specifically, Scholastic noted that the Petrella court stated: “[u]nder the [Copyright] Act’s three-year provision, an infringement is actionable within three years, and only three years, of its occurrence” and that “the infringer is insulated from liability for earlier infringements of the same work.”  Though Sohm opposed Scholastic’s interpretation, calling it dicta, the Second Circuit disagreed, finding that this portion of the opinion was necessary to the result, so it acts as binding precedent.  Accordingly, the Second Circuit concluded that, notwithstanding the discovery rule, the Supreme Court “explicitly dissociated the Copyright Act’s statute of limitations from its time limit on damages” and “delimited damages to the three years prior to the commencement of a copyright infringement action.”  

While the Second Circuit did not adopt Scholastic’s proposed injury rule, its holding severely limits the copyright owner’s recovery when the discovery rule is applied.  For example, if an infringement occurred ten years ago, but was only recently discovered, prompting the copyright owner to file suit, the copyright owner would only be able to recover damages for the three years prior to filing, and would not be able to “look back” through the ten years since the infringement. 

In deciding that Sohm could not recover damages more than three years prior to filing suit, the Second Circuit became the first circuit to adopt this interpretation of Petrella.  Though other district courts outside the Second Circuit have addressed the issue—including a district court in the Ninth Circuit, Johnson v. UMG Recordings, Inc., No. 2:19-cv-02364-ODW, 2019 WL 5420278 (C.D. Cal. Oct. 23, 2019), which took the opposite position and permitted damages outside the three-year period—until other circuits weigh in, it is unclear whether the Second Circuit’s interpretation will become majority rule or whether a circuit split again destined for the Supreme Court is on the horizon. 

Content in Quarantine: Copyright Best Practices During a Pandemic

By Scott J. Sholder

At a time when we are stuck at home, working or “working” (or, sadly for many, not working) the tenet that content is king has never been more relevant.  From Disney+ releasing “Frozen II” and “Onward” early to help placate restless youngsters, to DreamWorks releasing “Trolls World Tour” for “theatrical” in-house rental, to Instagram sensation DJ D Nice offering his “Club Quarantine” and “Homeschool” IG parties and Spotify playlists, there is something for everyone on one platform or another.  Musicians are even offering special live-streamed performances from their homes (thank you Dave Grohl, Billy Joe Armstrong, et al.).

While the Disney and DreamWorks releases were clearly authorized corporate decisions, the world of quarantine content becomes murkier when one turns their overly scrubbed fingers to the keyboard.  Of course, the lead singers of Foo Fighters and Green Day, respectively, likely have the rights to publicly perform music they wrote, and reports indicate that DJ D Nice made licensing deals to avoid copyright claims stemming from his streaming discotheques.  But in the further corners of social media, the always-gray field of copyright has spawned more than its usual fifty shades in the time of COVID-19.  So, what about musicians performing other artists’ songs?  Fitness instructors on Instagram Live with their playlists thumping in the background?  The Internet Archive[i] offering its own “Emergency Library” of digital copies of books (a decision decried by the Authors Guild and Association of American Publishers, but claimed to be fair use by archive.org)?  Or DJs who, unlike DJ D Nice, did not have permission to publicly perform or remix the music featured during that IG virtual dance party?

At least in the latter case, some DJs and performers streaming on Instagram Live have reported that they’ve had their streams cut short by copyright infringement claims over use of musical content without authorization.  Lesser-known and aspiring artists (who, like many, are out of work at this time) are having their online raves canceled mid-performance.  But at the same time, artists whose content is being used may also be out of work and may be incentivized, perhaps more than usual, to enforce their copyright rights and preserve their dwindling income streams.  This presents a sensitive nuance to an already delicate balance between online content usage and rights enforcement. 

There is no timelier example of COVID-era copyright enforcement than Richard Liebowitz, the infamous plaintiff’s lawyer behind more than 2,000 copyright infringement lawsuits filed by photographers over the last four years.  His business model – which he characterizes as fighting for photographers’ rights, and much of the digital media industry characterizes as “trolling” – has, like COVID-19, mutated to adapt to its new circumstances.  It was recently reported[ii] that, despite quarantine and widespread isolation (or perhaps because of it), Liebowitz’s filings have actually increased, with his firm filing 51 lawsuits between mid-March and early April (39% of all copyright infringement lawsuits filed since the World Health Organization declared a global pandemic).[iii]  Likewise, porn studio Strike 3 Holdings is also keeping busy during the pandemic, having filed a more modest 11 new lawsuits since mid-March.[iv]  The uptick in these types of cases is potentially correlated to the increased use of content during quarantine and the reduced number of opportunities for photographers and other content creators to earn a living.  So, what’s a pandemic hermit to do?

The short answer: the same thing you’d do in pre-COVID life.  Even in these strange times of social distancing and mandatory isolation, the same rules apply even when unauthorized content use is undertaken for seemingly laudable reasons such as alleviating boredom, distracting your kids, or entertaining your Instagram followers.  For better or for worse, there is no exception in the Copyright Act for what’s going on out there, so vigilance in defense as well as enforcement is paramount.  For instance, the test for fair use set out in section 107 of the Copyright Act of 1976 requires a lot more than benevolence in alleviating boredom or even supplementing one’s income during hard times to successfully fend off a claim of infringement.  One of the keys to establishing a viable fair use defense is “transformative use” – use of existing content that adds new expression, meaning, or message to the original underlying work.  Simply using the content as intended, even in an unprecedented environment, almost certainly will not be considered transformative.  As tempting as it may be to utilize others’ content for a seemingly good cause, good intentions do not a fair use make. 

Best practices for content usage remain largely unchanged.  The first-tier best solution is to use vetted licensed content (ideally pursuant to representations, warranties, and indemnification from the licensor) or seek permission, preferably in writing, directly from the copyright owner.  There are plenty of options out there for many types of content.  Licensing agencies like Getty Images, Shutterstock, Adobe, and Pond5 are stalwarts for visual content.  Many book and journal publishers are now offering resources[v] for newly minted home teachers.  Creative Commons licenses and use of public domain material are also viable options, particularly for photographic content, although may be less useful for things like popular music and are not always fool proof.  Music licensing is a unique beast that could fill an entire treatise, but suffice it to say that several licenses may be required depending on the nature of the use, including public performance licenses from performing rights organizations like ASCAP, BMI, SESAC, and Global Music Rights, “mechanical” licenses from music publishers and “master use” licenses from labels when content is downloadable, and synchronization licenses from publishers and record labels for music that is cued up with accompanying video content.  It’s certainly worth noting that some sites offer royalty-free and low-cost licensable music, such as Freeplay Music, Audioblocks, and Free Music Archive, without the added worry of the music licensing labyrinth.

Reliance on defenses like fair use should be a last resort, and in such cases, it is always wise to seek advice from an experienced copyright lawyer.  And, on the other side of the equation, if you believe your content is being used in a way that violates your copyright rights, platforms like YouTube and Instagram have DMCA takedown forms for removal of infringing content, but recent developments in the law require at least some consideration of whether the user has potential defenses (such as fair use) before submitting a takedown notice.

As we stay vigilant against the virus that is causing so much havoc worldwide, we must also make sure that we stay within the bounds of the law and mitigate our legal risks as we mitigate our health risks.  While troubled times such as these call for cooperation, collaboration, forgiveness, and flexibility, absent content owners and users working together to reach mutually beneficial arms-length deals, or the creation of a collective effort to allow free use of IP like that of Open COVID Pledge[vi] for health-based patents and technology, the rules remain as they were even if the world outside doesn’t.   

This article appeared in the May 1st issues of LAW360 Intellectual Property, LAW360 Media & Entertainment, and LAW360 Coronavirus.


[i] “Announcing a National Emergency Library to Provide Digitized Books to Students and the Public,” Internet Archive Blogs (Mar. 24, 2020), https://blog.archive.org/2020/03/24/announcing-a-national-emergency-library-to-provide-digitized-books-to-students-and-the-public/

[ii] Bill Donahue, “During Pandemic, Prolific Copyright Lawyer Keeps Suing,” Law360 (Mar. 27, 2020), https://www.law360.com/ip/articles/1257593/during-pandemic-prolific-copyright-lawyer-keeps-suing?nl_pk=db11a53e-b04f-44a7-96e1-76824544133d&utm_source=newsletter&utm_medium=email&utm_campaign=ip

[iii] See id.

[iv] See id.

[v] “What Publishers Are Doing to Help During the Coronavirus Pandemic,” Association of American Publishers, https://publishers.org/aap-news/covid-19-response/

[vi] Open Covid Pledge (Apr. 7, 2020), https://opencovidpledge.org/

CDAS IP Group and Partner Nancy Wolff Recognized in Chambers USA 2020


The highly regarded “Guide to the Top Lawyers and Law Firms” described CDAS as a “highly skilled boutique offering excellent capabilities handling trademark and copyright infringement cases, as well as substantial portfolio management matters. [CDAS] exhibits expertise acting for market-leading entertainment, media and digital platform clients.” In addition to recognizing the firm for Intellectual Property: Trademark, Copyright & Trade Secrets (New York), Nancy Wolff was also recognized as “a leading attorney in IP issues relating to digital media, counseling clients in a broad range of matters including disputes and licensing.”


Nancy Wolff Featured in ABA Grassroots Initiative Discussing the CASE Act

As part of ABA Day, Nancy participated in a CASE Act Introduction and discussed implications of The Copyright Alternative in Small-Claims Enforcement (CASE) Act of 2019 and its creation of the Copyright Claims Board as an alternative forum to pursue low-value claims of $30,000 or less. Listen to the panel here.

S.D.N.Y. Holds that Publishers May Embed Content Publicly Posted on Instagram Platform — (Sinclair v. Ziff Davis, LLC et al.)

By Lindsay Edelstein

Since the emergence of social media, courts, content creators, and publishers alike have been grappling with legal issues concerning the practice of “embedding” copyrighted content.  Following the controversial February 2019 decision in Goldman v. Breitbart News, LLC – rejecting the Ninth Circuit’s “server test” and holding that an embed constitutes a “public display” exposing a content user to liability under the Copyright Act – the pendulum had seemingly swung in favor of content owners, creators, and licensors. 

Yesterday, however, Judge Kimba Wood of the U.S. District Court for the Southern District of New York, issued a ruling in Sinclair v. Ziff Davis, LLC et al, providing publishers and other content users with a defense to alleged copyright infringement premised on the practice of embedding in the context of social media platforms: a valid sublicense granted to the user by Instagram via the interrelated agreements available on its platform. 

Sinclair, a professional photographer, publicly shared her copyrighted photograph “Child, Bride, Mother/Child Marriage in Guatemala” on her public Instagram page, which was viewable by anyone.  Media and entertainment platform Mashable made an offer to license the photograph from Sinclair for use in an article entitled “10 female photojournalists with their lenses on social justice.”  Sinclair rejected Mashable’s offer, but Mashable proceeded to use Instagram’s application programming interface, or “API,” to embed Sinclair’s original Instagram post in its article.  The embed frame of Sinclair’s Instagram post, as it appeared in the Mashable article, was hosted on Instagram’s servers, linked back to Sinclair’s Instagram page, and included the photograph, Sinclair’s original caption, and the date of the original post.  The Mashable article specifically discussed Sinclair and her work above the embed.  Sinclair filed suit against both Mashable and its parent company Ziff Davis, LLC for copyright infringement.

Mashable’s chief argument was that Instagram’s integrated agreements (i.e., its Platform Policy, Terms of Use, and Privacy Policy) clearly granted it a sublicense to display the photograph.  Indeed, the Terms of Use stated that, by posting content to Instagram, the user “grant[s] to Instagram a non-exclusive, fully paid and royalty-free, transferable, sub-licensable, worldwide license to the Content that you post on or through [Instagram], subject to [Instagram’s] Privacy Policy.”  Pursuant to Instagram’s Privacy Policy, users can revoke Instagram’s sub-licensable right by designating the content at issue as “private.”  Because Sinclair posted the photograph publicly, Judge Wood opined, “Plaintiff made her choice.  This Court cannot release her from the agreement she made.” 

While the Court conceded that Instagram’s integrated agreements could be more concise and accessible, it declined to accept Sinclair’s contention that the agreements were unenforceable because they were purportedly “circular,” “incomprehensible,” and “contradictory.”

Judge Wood also touched upon a real dilemma faced by professional photographers: deciding whether to remain in “private mode” on one of the most popular public photo sharing platforms in the world, or to promote and share work publicly.  On the one hand, sharing content publicly allows widespread exposure and can be effectively used to market and promote one’s work.  Indeed, many photographers today use Instagram as a digital portfolio, showcasing their works to the masses.  On the other hand, if sharing content publicly grants a valid sublicense to publishers of digital content, the licensing value of such content may be diminished.

This holding is likely to send shock waves throughout the creative community as rights holders may be forced to rethink how they make their works available to the public.  Alternatively, for publishers and media entities, it allows use of publicly available content provided the publisher uses the embed API that links directly back to the Instagram account user’s full Instagram page. 

As with the Goldman case, the Sinclair holding is not binding on other courts and does not create a per se rule with respect to the practice of embedding, and each case will likely depend on the specific circumstances present. In Goldman, the photographer never posted to Twitter, but rather shared his image of Tom Brady in a private Snapchat, with one friend capturing a screen grab and further distributing it on the Twitter platform.  Twitter’s terms, unlike Instagram’s, do not grant publishers a sublicense to embed using the Twitter environment.  Users of content should note that the Instagram Privacy Policy requires the user to obtain consent before using content in an ad.

Moving forward, courts will likely consider the terms of service (including the content owner’s choice of privacy settings) and the type of embedding at issue (i.e., the “framing” of standalone images as in Goldman, versus the prototypical “embedding” using Instagram’s API as in Sinclair).  Courts may also consider the context of the use at issue as well, such as whether the use of the image transformed the purpose of the original work, or whether it is merely illustrative of the article.   Before considering embedding any content, publishers should carefully review all relevant terms of service and seek legal counsel as platform policies are not uniform and there is uncertainty in the law.

Allen v. Cooper: Supreme Court Upholds State Sovereign Immunity in Copyright Row Over State’s Unauthorized Use of Videos and Images of Blackbeard’s Famed Shipwreck

By Lindsay R. Edelstein

In a technical win for states facing federal claims under the Copyright Act, on Monday, March 23, 2020, the United States Supreme Court struck down the Copyright Clarification Act of 1990 (the “CRCA”), which had allowed states to be sued in federal court for copyright infringement.  Allen v. Cooper, No. 18-877, 2020 WL 1325815 (U.S. Mar. 23, 2020).  The Supreme Court, however, did not foreclose the possibility of later abrogating such sovereign immunity, should Congress draft a tailored, constitutional statute addressing infringement by states.  The decision is available here.

The underlying action was brought by videographer Frederick Allen, who was hired by marine salvage company Intersal, Inc. to document the recovery of Queen Anne’s Revenge, a vessel commandeered by Edward Teach (better known as Blackbeard), and shipwrecked nearly 300 years ago off the North Carolina Coast.  Allen registered the copyrights in all his works created during the ten-year excavation with the U.S. Copyright Office, including videos and photographs of guns, anchors, and other remains on the ship.

The state of North Carolina, which had engaged and contracted with Intersal to conduct the recovery efforts but did not have authorization or a license to use certain of Allen’s works, published some of Allen’s photographs and videos online and in a newsletter.  In response to the unauthorized publications, Allen sued the state for copyright infringement in federal district court.

North Carolina moved to dismiss, invoking the doctrine of sovereign immunity, which precludes federal courts from hearing suits brought by individuals against nonconsenting states.  According to Allen, however, the doctrine was abrogated in the copyright context by Congress with its enactment of the CRCA, which provides, in pertinent part, that states “shall not be immune, under the Eleventh Amendment [or] any other doctrine of sovereign immunity, from suit in Federal court” for copyright infringement.  17 U. S. C. § 511(a).  The district court agreed with Allen and denied North Carolina’s motion. 

North Carolina appealed the case to the U.S. Court of Appeals for the Fourth Circuit, which reversed the district court’s ruling, relying heavily on Florida Prepaid Postsecondary Ed. Expense Bd. v. College Savings Bank, 527 U. S. 627 (1999), which had repudiated the Patent and Plant Variety Protection Clarification Act (“Patent Remedy Act”); the Patent Remedy Act was modelled after the CRCA with identical language concerning sovereign immunity. While the district court had conceded that Florida Prepaid precluded Congress from using its Article I powers (the power to “[t]o promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries”) to take away a state’s sovereign immunity, it opined that abrogation of a state’s immunity could still be achieved under Section 5 of the Fourteenth Amendment, which authorizes Congress to “enforce” the commands of the due process clause. 

In reversing the district court’s ruling, the Fourth Circuit cited the requirement that a Section 5 abrogation be “congruent and proportional” to the Fourteenth Amendment injury.  Because the Supreme Court had previously rejected Congress’s attempt, in the Patent Remedy Act, to abolish the states’ immunity in patent infringement suits, the Fourth Circuit held that there was nothing to distinguish the situation in Allen in the context of copyright, which involved a statute with identical language, and related allegations of intellectual property infringement.  

In an opinion authored by Justice Kagan, the Court unanimously sided with the Court of Appeals, holding that “Florida Prepaid all but prewrote our decision today.”  The Court agreed that Article I did not give Congress the authority to enact the CRCA, per the reasoning in Florida Prepaid.  While Allen argued that the Court’s post-Florida Prepaid decision in Cent. Virginia Cmty. Coll. v. Katz, 546 U.S. 356 (2006) – abrogating sovereign immunity with respect to Article I’s bankruptcy clause – changed the analysis, the Court distinguished Katz as “a good-for-one-clause-only holding” that only concerned the bankruptcy clause.  

The Court’s central issue with the CRCA was informed by language found in Section 5 of the Fourteenth Amendment which requires that Congress enforce limitations on states’ authority when they violate due process with “appropriate legislation.”  The word “appropriate” in this context has been interpreted to mean that there must be “a congruence and proportionality between the injury to be prevented or remedied and the means adopted to that end.”  Because, the Court explained, an infringement must be intentional, or at least reckless, to come within the reach of the due process clause, and because the CRCA would impermissibly abrogate states’ sovereign immunity for merely negligent infringement or honest mistakes (which would not violate due process, according to the Court), the CRCA was unconstitutional.  

Allen asserted that the CRCA’s legislative record – namely, a 1988 report by the then-Register of Copyrights arguing that individuals would suffer immediate harm if they were unable to sue infringing states in federal court – was enough to distinguish it from the Patent Remedy Act at issue in Florida Prepaid.  But the Court found the purported evidence of states’ infringement in that legislative record to be unimpressive because, despite undertaking an exhaustive search, the Register only came up with a dozen possible examples of state infringement, some of which were not corroborated.  The CRCA, the Court opined, was enacted to “guard against sloppiness,” not correct constitutional wrongs, and this justification was not sufficient to withstand constitutional scrutiny. 

Significantly, the Court did leave an opening for Congress to pass a valid copyright abrogation law and “effectively stop states from behaving as copyright pirates” or “digital Blackbeards” in the future, if it “appreciate[s] the importance of linking the scope of its abrogation to the redress or prevention of unconstitutional injuries – and of creating a legislative record to back up that connection.”

While the Allen decision certainly sets a limitation on an individual’s ability to prosecute certain copyright claims, it has left the door open for Congress to draft a statute abrogating state sovereign immunity where a state’s infringement is intentional or reckless.  Furthermore, because such a determination is often fact-specific, if such a statute is enacted, federal courts may see an increase in cases filed against states that proceed, at the very least, to the discovery stage.  But for now, copyright owners do not have any recourse against states for copyright infringement, which likely will cause concern to publishers and others in the creative community as to whether state governments will take advantage of the safe passage the Court has provided them at least in the short run.

Contractual Disruptions: How They Arise and How to Prepare

By Elizabeth Altman and Tyler Horowitz

With the recent spread of the novel coronavirus COVID-19 and its unprecedented precipitation of social-distancing, work-from-home policies, shelter-in-place orders, and limitations on foreign travel, many individuals may be questioning whether certain contractual obligations are excused. This article provides a primer on the contract concepts of force majeure, impossibility and impracticability, and related provisions that affect, and may in certain instances excuse, performance of contractual duties owing to changed circumstances outside any signatory’s control.

Force Majeure

A force majeure clause is a contract provision that excuses a party’s performance of its obligations under a contract when events beyond the party’s control make performance impossible. To invoke a contract’s force majeure clause, a party must typically demonstrate that (1) a disruptive event enumerated by the force majeure clause has occurred; (2) the risk of nonperformance was not foreseeable; and (3) that the event has rendered the party’s performance impossible.

A party looking to invoke a force majeure clause must follow several steps:

First, a party must examine the contract’s definition of what constitutes a “force majeure” event and demonstrate that the change in circumstances was included within the definition. Force majeure events will have been enumerated within a force majeure clause and generally include: Acts of God; severe acts of nature or weather events including floods, fires, earthquakes, hurricanes, or explosions; war; acts of terrorism; epidemics; acts of governmental authorities such as expropriation or condemnation; changes in laws and regulations; and strikes and labor disputes.

Determining whether a force majeure clause applies is a highly fact-intensive exercise, because whether a party is excused for non-performance stems from the specific contractual language used within an agreement. For example, some contracts’ force majeure provisions may specify disease, epidemics, or pandemics as cause for non-performance, while others may only refer to disease-related disruptions by reference to “Acts of God” or catch-all phrases such as “any event or circumstance beyond the reasonable control of the affected party.”

Where disease-related occurrences have been specifically enumerated, a party may find it easier to invoke its force majeure clause in the context of COVID-19. It may be more challenging where, instead, there is only catch-all language in place; however, a catch-all phrase, or similarly broad language (such as a force majeure clause that begins its list with “including, but not limited to”), may provide some protection, particularly if courts relax their traditional preference for excusing performance solely based on clearly enumerated circumstances, in response to an onslaught of COVID-19 related contract disputes. Additionally, where a party can point to a governmental restriction in place because of COVID-19, it may have additional grounds to defend nonperformance. 

Second, an affected party must demonstrate a causal link between the force majeure event and its failure to perform. In other words, a party’s performance must be impossible because of the changed circumstances surrounding the contract. For example, in light of COVID-19, the owner of a performing arts venue may successfully argue that recent government orders in his or her state have made it impossible to continue under contract with scheduled performances and obligations to performers, considering the widespread uptick in closures of non-essential businesses. On the other hand, should both parties to a contract be capable of conducting transactions online and/or having a history of remote online transactions, it may be more difficult to argue that COVID-19 has rendered performance impossible (at least without demonstrating other exigent circumstances).

Upon successfully invoking a force majeure provision, a party may either suspend performance or terminate the contract outright, depending on the scope of its force majeure clause. It is thus important to verify the terms of the clause, which may also dictate that force majeure coverage will only kick in after a certain period has elapsed, such as 90 days.

If the contract does not contain a force majeure clause, a party may turn to the common law defenses of impossibility or impracticability to excuse performance (though note that New York only recognizes impracticability in rare circumstances, such as in connection with sales of goods under the Uniform Commercial Code). A party may also invoke additional contract provisions where present, such as the “Material Adverse Effect” provision common to many commercial contracts.

Impossibility & Impracticability

Impossibility and impracticability exist where circumstances extraneous to a contract render a party’s performance either impossible or impractical. Although the contract itself was adequately formed and would otherwise maintain its binding effect, these defenses recognize that a post-formation change in circumstances has fundamentally altered the ability of the parties to perform under it. A party’s performance will be excused if the following elements are met:

  • An unforeseen event has occurred. Akin to the events enumerated in force majeure clauses, these may include natural disasters, strikes, and other major events.
  • The nonoccurrence of this event was a basic assumption of the contract. At the time of contracting, the parties did not foresee the event that has since occurred, regardless of whether it was theoretically “foreseeable”. This assumption of nonoccurrence need not be explicitly outlined within the contract, but must be generally apparent from the nature, terms, and purpose of the contract. Under the Uniform Commercial Code, which governs sales of goods, a “[d]elay in delivery or non-delivery in whole or in part by a seller . . . is not a breach of his duty under a contract for sale if performance as agreed has been made impracticable by the occurrence of a contingency the non-occurrence of which was a basic assumption on which the contract was made.” U.C.C. § 2-615. For example, this provision may apply in the event of a labor dispute where striking workers fail to deliver a shipment of the seller’s goods. In such cases, a seller must seasonably notify the buyer of the delay or non-delivery, and, where a seller may still partially perform, must allocate production and deliveries among customers in a “fair and reasonable” manner.
  • The effect of the event has rendered the party’s performance impossible or impracticable. The changed circumstance must be extreme, such that it is unduly burdensome or impossible for the party to comply as originally planned; where impossibility is concerned, under New York law, the subject matter of the contract must have been destroyed or the means of performance must have been rendered objectively impossible. The party seeking relief from its obligations under the existing contract must also show that it was not at fault in causing the event. The reasoning behind this requirement is clear: a party should not be able to take advantage of his or her own misconduct. Here, it is also important to determine how risk has been allocated between the parties under the contract. Even where the other requirements are met, if the adversely affected party assumed the risk of the occurrence of the changed circumstances during contract formation (impliedly or explicitly), it will not be able to invoke impossibility or impracticability. To gauge risk allocation, a party should examine the express language of the contract (i.e., what disruptive events the parties contemplated, and which party was to bear the associated loss and expense), or even the parties’ course of business and dealings. Industry customs may also provide clues to proper risk allocation. For example, industry custom in property rentals is for a premises owner to obtain casualty insurance rather than the party hosting its event on site. As such, risk for the loss of the property would flow more naturally to the owner.

Other Contract Clauses

Various additional contractual provisions may relate to an unexpected event like COVID-19.

  1. Material Adverse Change (MAC) Clause

Many commercial contracts include a material adverse change clause (otherwise known as “material adverse effect”). Where present, this clause could excuse performance or allow a party to suspend performance should a materially adverse change occur. Events constituting a materially adverse change are, as with force majeure provisions, commonly enumerated specifically within the contract and typically also involve wide-scale disruptions.

Historically, MAC clauses have been difficult to enforce, as courts are wary of excusing contractual performance for short-term changes in circumstances, but as is possible with force majeure and related defenses, courts may shift their stance in the coming months. For example, following the September 11, 2001 attacks, New York courts were more amenable to viewing declining rental prices in Manhattan as grounds to declare a material adverse change (See In re Lyondell Chem. Co., 567 B.R. 55, 123 (Bankr. S.D.N.Y. 2017), aff’d, 585 B.R. 41 (S.D.N.Y. 2018) (citing River Terrace Assocs., LLC v. Bank of N.Y., 10 Misc. 3d 1052(A), 2005 WL 3234228 (N.Y. Sup. Ct.), aff’d, 23 A.D.3d 308 (N.Y. App. Div. 2005))). Further, New York courts have allowed commercial parties to cease contractual performance based on demonstrated extensive financial losses during the pendency of a merger (see Katz v. NVF Co., 100 A.D.2d 470, 471 (N.Y. App. Div. 1984)).

  • Covenants

Commercial contracts commonly contain covenants obligating parties to undertake or refrain from certain behavior. While it is unlikely that parties would have allocated obligations or risk regarding COVID-19 in a covenant, it is worth revisiting covenants within a contract to gauge whether they will affect or be affected by current circumstances. For example, many agreements include covenants obligating parties to provide notice that they are invoking force majeure or that material events have occurred that could give rise to litigation or loss beyond the ordinary course of business.

  • Termination Provisions

Even if parties may not utilize force majeure or other contractual provisions to justify non-performance under a contract, there may be termination provisions that kick in based on the occurrence of certain contingencies, whether at-will or otherwise, such as for late delivery or a breach of a “time is of the essence” clause. It is worth viewing any such provisions within the context of the larger defenses of impossibility, impracticability, and force majeure excusal of nonperformance, in case the other party nonetheless attempts to invoke these doctrines to negate invocation of a termination provision.

This is not the law’s first brush with the unexpected, and although this is a time of wide-reaching uncertainty, woven into contract law, particularly, is a system to guide parties through the serious impacts that unexpected events may have. Our team at Cowan, DeBaets, Abrahams & Sheppard LLP will continue to provide updates on legal developments related to the present circumstances and we are available should you request further or specific guidance.

CDAS Mourns the Passing of Author and Illustrator Tomie dePaola

Our sincere condolences go out to Tomie dePaola’s close colleagues, including literary agent Doug Whiteman and personal assistant Bob Hechtel, his friends, and generations of fans throughout the world. We know his legacy will live on in the imaginations of young readers everywhere who are charmed by his words and images.

Moving the Needle Part II: Court Inks Decision in Favor of Defendants in Solid Oak Sketches, LLC v. 2K Games, Inc. (S.D.N.Y.)

By Scott J. Sholder

Four years ago, we reported on a headline-worthy copyright infringement lawsuit filed in the U.S. District Court for the Southern District of New York dealing with tattoos in video games. The case was brought by a licensing entity for tattoo artists against the makers of the popular NBA 2K games over depictions of real-life basketball players’ tattoos on their digital game avatars.  Last week, after full discovery and extensive motion practice, Judge Laura Taylor Swain granted the defendants’ summary judgment motion dismissing the plaintiff’s copyright infringement claim on grounds of de minimis use and implied license and granted their cross-motion for a declaration that the depiction of the tattoos in the game constituted fair use.  This was the result that we speculated as being the likely outcome in light of the dearth of on-point case law, and it seems to be the correct decision both as a legal and practical policy matter.

2K Games’ NBA 2K series is an annual blockbuster that simulates professional basketball with lifelike depictions of teams, players, arenas, and the sights and sounds of a real NBA game.  The goal is a realistic and faithful rendering of the NBA experience.  One of the lifelike aspects of the game is the re-creation of players’ distinctive tattoos.  Plaintiff claimed that five tattoos for which it owns rights were depicted on NBA players Eric Bledsoe, LeBron James, and Kenyon Martin in the 2014-2016 versions of the game and that such public display violated the Copyright Act of 1976.  Solid Oak owns an exclusive license to the five tattoos but does not have permission to recreate them and does not have publicity or trademark rights in the NBA players’ likenesses.  On the other hand, the players provided the NBA with the right to license their likenesses to third parties, and the NBA granted such a license to defendants.

The court described the tattoos and explained that, for each one, the tattoo artist “knew and intended that when” the NBA player receiving the tattoo “appeared in public, on television, in commercials, or in other forms of media, he would display” the tattoo; that the artist intended that the tattoos would “become a part of [the player’s] likeness”; and that the player “was and is free to use as he desire[d], including allowing others to depict it, such as in advertisements and video games.”  The artists also admittedly knew that the men at issue were NBA players and would likely appear in the media, as well as in video games.

These admissions by the artists were critical to the court’s decision concerning implied license, a critical defense in the context of tattoo copyrights.  An implied license can be found “where one party created a work at the other’s request and handed it over intending that the other copy and distribute it.”  The court held that such was the case here, explaining that that tattooists admittedly granted the NBA players nonexclusive licenses to use the art as part of their likenesses, prior to granting any rights to Solid Oak, and in turn, the players (through the NBA) implicitly granted defendants the right to depict the tattoos as part of their likenesses.

The court also spent significant time explaining its de minimis infringement ruling.  To prove copyright infringement, the plaintiff must prove that the amount copied was not “so trivial as to fall below the quantitative threshold of substantial similarity.”  To make this determination, the court analyzed the amount copied; the length of time the work can be seen; and other factors such as focus, lighting, and prominence, as seen through the eyes of an ordinary observer.  The court held that all three factors weighed definitively in favor of the defendants and that “no reasonable trier of fact could find the Tattoos as they appear in NBA 2K to be substantially similar to the designs licensed to Solid Oak.” 

Laying the foundation of its analysis by describing the many graphical, visual, auditory, and dramatic elements of the 2K games, the court put the overall prominence of the tattoos into stark relief.  The five tattoos comprised between 0.000286% and 0.000431% of the total game data; were never depicted separately from the players (who comprised only 3 out of over 400 avatars); appeared between 4.4% and 10.96% of their actual size; and were only visible when a user selected a particular player, and even then were not fully visible, and were indecipherable during actual gameplay given the speed and erratic nature of the avatars’ movement.  The court, agreeing with the defendants’ statement of undisputed facts, characterized the tattoos as appearing as nothing more than “visual noise,” and found that, even in the rare event the tattoos were displayed, such display was “small and indistinct” and “cannot be identified or observed.”   

Finally, the court engaged in a fair use analysis, holding that all four statutory factors weighed in defendants’ favor.  As to the first factor (purpose and character of the use), the court held that the defendants’ use was undisputedly “transformative,” a critical element of fair use.  While the games depicted exact copies of the tattoos, its purpose in doing so was not the same as the tattoos’ original purposes of self-expression through body art.  Rather, defendants depicted the tattoos to accurately depict the players, notably without even making the details of the tattoos observable.  Moreover, the size of the tattoos was significantly reduced and distorted, such that the game offered no “more than a glimpse” of the tattoos’ expressive value and made up an “inconsequential portion of NBA 2K” on the whole.  And while NBA 2K was undoubtedly a commercial product, the tattoos were incidental to the commercial value of the game and were not used in the game’s marketing.

The court’s analysis of the second factor (nature of the copyrighted work), was more detailed than a typical analysis of this element of fair use.  The second factor asks whether the work is more expressive/creative or factual, and whether the work is published or unpublished, and is typically glossed over by courts as immaterial to the analysis.  While the published nature of the tattoos tipped the second factor in defendants’ favor, the court went on to hold that the tattoo designs themselves were actually more factual than expressive “because they are each based on another factual work or comprise representational renderings of common objects and motifs that are frequently found in tattoos.”  Downplaying the creative and expressive nature of each of the tattoos based on the circumstances behind their creation, the court observed that the tattooists had admitted that each work “copied common tattoo motifs or were copied from designs and pictures [the artists] themselves did not create.”

The third factor (amount and substantiality of the work used) is also typically glossed over, and this case was no exception.  The court noted that even copying the entire work sometimes will fail to weigh against fair use where, as here, the use is deemed transformative.  Even so, the court reiterated that the tattoo renditions were reduced in size and barely recognizable on the game screen.

The fourth factor (effect of the allegedly infringing work on existing or potential markets for the work) tends, like the first factor, to receive more weigh in the analysis, and the court found this factor to definitively favor defendants.  The court held that the game’s depiction of the tattoos was not a competing substitute for the original.  In light of the “transformative” use of the works, the tattoos featured in the games would not serve as market substitutes for the use of the tattoos in any other medium, and plaintiff even conceded that NBA 2K was not a market substitute for the tattoos.  The court therefore decided that potential purchasers of the tattoo designs were unlikely to “opt to acquire the copy [in the game] in preference to the original.”  Even so, the court found that there was no evidence in the record that a market for licensing tattoos for use in video games or other media was likely to develop. 

While the Solid Oak case proceeds because defendants’ counterclaim for fraud on the Copyright Office remains in play, a solid precedent has been set in the new frontier of tattoo-based copyright law.  While it is not yet binding (and would only be regionally binding if affirmed on appeal), this decision will be extremely important to digital media companies nationwide given its solid legal analysis and common-sense reasoning.  The Solid Oak opinion should be at the top of this year’s cases-to-know list when it comes to content clearance, vetting, and risk assessment, and should ease the concerns of those scratching their heads when facing the potential licensing nightmare that could arise from attempting to clear all body art depicted in popular media.  It will also likely prove to be a boon to the stock image industry during an era when tattoos are increasingly common and may appear in more images of people than ever before.   On the other hand, artists, and tattoo artists especially, may decry the opinion, in particular the second-factor analysis, which may be interpreted as diminishing the copyrightability of tattoos that depict certain “typical” artistic elements like faces, flames, wizards, and sports equipment.  But it is important to note that the ruling on that factor was context-specific, and every work of art will be different and will be created under unique circumstances.  Overall, any feared risk to future creators is minimal and is significantly outweighed by the practical benefits afforded to established as well as new and developing forms of media.

Judge in Amateur Photojournalism Case Rejects Lack of Originality Argument

By Sara Gates

In a decision that will likely be seen as a victory for photojournalism, a judge in the Eastern District of New York recently rejected the legal argument that an iPhone photograph, taken by a passerby who was in the right place at the right time, lacked originality.  The decision represents a turn away from what the photography community would undoubtedly perceive as a slippery slope, i.e., if a court embraced a broad view that photographs captured by amateur photographers on their iPhones are not entitled to copyright protection.

The case pitted Alex Cruz, a passerby who captured a photograph of police apprehending a terrorist attack suspect in the Tribeca neighborhood of New York City in October 2017, against Cox Media Group, which holds a large portfolio of TV and radio stations, newspapers, and websites.  After the photograph was posted to Instagram, Cruz licensed the image to media companies including CNN and NBC (https://www.nbcnews.com/slideshow/terrorist-truck-attack-shocks-new-york-city-n816236).  Cox, without seeking permission, published the photograph in a gallery on one of its websites, accompanying an article about the suspect, as well as on its social media channel.  Facing a copyright infringement claim, Cox later argued that Cruz’s photograph lacked sufficient originality to entitle it to copyright protection and support a copyright infringement claim.

Specifically, Cox alleged that Cruz did not make any creative choices in capturing the photograph, arguing that the photograph therefore did not possess a “modicum of creativity,” citing the oft-used language from Feist Publications, Inc., v. Rural Telephone Service Co., 499 U.S. 340 (1991).  Judge Garaufis did not agree with this argument, finding that Cruz’s photograph reflected several creative choices, including timing (i.e., being in the right place at the right time) and his decision to take the photograph when he did (when law enforcement was apprehending the suspect, who was lying on the ground).

The judge applied the law of the Second Circuit, citing precedents such as Mannion v. Coors Brewing Co., 377 F. Supp. 2d 444 (S.D.N.Y. 2005), in which the Southern District of New York held that a photograph may be original in three respects: (1) rendition, (2) timing, and (3) creation of the subject, and Rogers v. Koons, 960 F.2d 301 (2d Cir. 1992), in which the Second Circuit recognized that “original” elements of a photograph may include “posing the subjects, lighting, angle, selection of film and camera, evoking the desired express, and almost any other variant involved.”

Though there may be instances in which a photograph is a slavish copy (such as in cases involving a photograph of a photograph), or a photograph serves a purely utilitarian purpose (such as showing what a standard Chinese menu item dish contains), where a photographer (whether amateur or professional) exercises any creative choices to capture the photograph, this decision supports the principle that photographers should be deprived of copyright protection.  Judge Garaufis recognized at least two creative choices relating to the timing of the photograph, but there were likely others, such as the angle and set-up of the shot.  With technological advances, the abilities of iPhone (or other mobile device) users to capture creative photographs with their devices, rather than a traditional camera, are greatly increased.  Aspects like depth of field, lighting, and frame can all be adjusted with a click of a button.  In this instance, notwithstanding whether Cruz used additional iPhone features to capture the photograph, the court found that he still exercised sufficient creative choices in deciding when, where, and from what angle to take the photograph to capture an inherently newsworthy event. Indeed, some of the most memorable moments of photojournalism are based on the photographer being at the right place at the time and knowing how to frame a compelling image (https://www.digitalphotomentor.com/20-most-famous-photographs/). 

Lack of originality is a difficult defense particularly in photo cases, as most photographs will be protected by copyright law, even if that protection is thin. Though judges should not place themselves in the situation of being arbiters of what is and is not art, oftentimes they are faced with the question of whether a work contains sufficient creative authorship to qualify for copyright protection, one of the prima facie elements of a copyright infringement claim.  This case represented a reasoned application of well-settled law despite an unconventional defense that may have prevailed under different circumstances and as applied to different forms of art.

This case is Alex Cruz v. Cox Media Group, LLC, Case No. 2:18-cv-01041-NGG-AKT (E.D.N.Y. March 13, 2020).

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