Monday, June 26, 2006

Named Plaintiffs Mary Sherman and Paula 'Pinocchio' McDonald -- The Category B Goldust Twins (Introduction)

"It wasn't about money," [named plaintiff] James Gleick said. "Well," he added, "of course it's about money." -- New York Observer, April 4, 2005

The settlement agreement, whose approval the objectors have appealed, created a curious third category of subject works. It was intuitive that there would be Categories A (for works whose copyrights were registered prior to the filing of the copyright class actions in August 2000) and C (for works whose copyrights were not registered by then). Category B, however, is not intuitive: it covers works registered before December 31, 2002.

The differences in the settlement in claim awards for regular non-pre-registered works (C's) and for the puzzlingly defined Category B's are substantial. The range of C awards, depending on the original sale price, is from $5 to $60; the range of B awards is the greater of $150 or 12.5 percent of the original sale price.

There's also the complicated C Reduction provision, which makes C claim awards uniquely vulnerable to being lowered or even eliminated altogether if the volume of claims busts the $10-million-to-$18-million settlement fund (a sum that is also to include attorneys' fees and administration costs).

Category B claimants are further advantaged by a hastily thrown together amendment to the settlement agreement. This confers Category A status (with claim awards scaling down from $1,500 to $875) on all Category B works whose registrations were secured prior to first infringement by HighBeam or Amazon, two brands added to the Defense Group.

So the significance of the 12/31/02 date is manifest. But the rationale for it is mysterious. Copyright law provides for levels of damages for works that were registered upon publication or within three months of publication, or before first infringement, and levels of damages for works that were not. Copyright law does not provide for "almost pregnant" registration scenarios.

What's up? Here was the explanation of mediator Kenneth Feinberg:

All mediation participants were concerned that without an express registration cutoff date, class members could take advantage of the announced settlement and attempt to register works in order to enjoy the benefits of the settlement. The negotiated date of December 31, 2002 was designed with this concern in mind, to prevent anybody from "gaming the system" by taking advantage of the announced settlement.

As our appeal heads for consideration by the Second Circuit, it is gratifying to behold how the cutoff date prevented insiders from gaming the system. Especially two particular insiders: named plaintiffs Mary Sherman and Paula McDonald. For details on how these two writers profited from the creation of Category B, from securing registrations of old works before the Category B cutoff date, and perhaps from the 11th hour settlement agreement amendment that converted some or many of their B claims into A claims, read on.


Post a Comment

<< Home