New Year's Words of Wisdom from the Supreme Court

The 2001 Supreme Court ruling in favor of freelance writers in Tasini v. New York Times included a comment that remains increasingly relevant as 2007 turns to 2008, and as the sellout settlement negotiated by three authors' organizations in 2005 looks more and more like its headed to defeat in the courts.

In the new year I'll be discussing in depth just how relevant this remark is, and why. But let me close the old year by simply reproducing it again:

The Publishers’ warning that a ruling for the Authors will have "devastating" consequences, punching gaping holes in the electronic record of history, is unavailing.... The Authors and Publishers may enter into an agreement allowing continued electronic reproduction of the Authors’ works; they, and if necessary the courts and Congress, may draw on numerous models for distributing copyrighted works and remunerating authors for their distribution.

Happy New Year ...

... to all blog readers, and be sure to follow important developments here in 2008. The settlement administration's 800 number still hasn't been updated to report the November 29 appellate ruling.

Thanks to Library Journal

Having made the media blackout of the real news of the copyright class action settlement one of the themes of this blog, I feel duty-bound to extend sincere thanks to Library Journal and online contributing editor Andrew Albanese for giving me the opportunity to throw a few facts into the fire in today's "newsmaker interview" at LJ Academic Newswire. (See the link in the post below.)

I should also note, with appreciation, that Library Journal's parent company, Reed Elsevier, is one of the core defendants in the lawsuit.

We'll post a facsimile of the whole piece as soon as the current issue of Academic Newswire cycles off the LJ website.

Library Journal Interviews Author-Objector Muchnick

LibraryJournal.com's Academic Newswire today published an interview with Irvin Muchnick about the objections to the freelance authors' copyright class action settlement. See the top two items at:

http://www.libraryjournal.com/info/CA6514628.html?nid=2673#news1

IP for Me but Not for Thee, Part 347

The Prioritizing Resources and Organization for Intellectual Property Act (or PRO IP Act) was debated a week ago before the House Subcommittee on the Courts, the Internet, and Intellectual Property. It would allow courts to assess copyright infringement damages for each piece of a compilation or derivative work found to infringe copyright, instead of treating the compilation as one infringement, and jack up fines for infringement.

Publishers support the measure.

Musicians Union Hails Legislation to Bring Fairness to Radio

Analogies, anyone?

***************

AFM Hails Legislation to Bring Fairness
to Radio

December 18, 2007 -- The American Federation
of Musicians applauded the introduction today
of the "Performance Rights Bill" designed to
require large radio stations to fairly
compensate musicians for broadcasting their
recordings, while protecting songwriters,
small radio stations and noncommercial and
religious broadcasters.

"For performers, music is hardly ever wealth
and glamour," said AFM President Thomas F.
Lee.  "For most, it is hard work and a modest
living.  It is only fair that corporate radio
compensate musicians when it uses their
recorded work to attract listeners and
advertising dollars.  This bill strikes a
great balance. It will provide fair
compensation for performers, fair
accommodations for small, noncommercial and
religious radio stations, and fair
protections for songwriters.  It will help us
all to survive and bring great music to the
American public."

The bill was introduced in the House by
Representatives Berman, Issa, Conyers,
Shadegg, Harman and Blackburn, and in the
Senate by Senators Leahy, Hatch and Feinstein. 
"Professional musicians are deeply grateful
to  the legislation's sponsors for their
leadership and foresight in trying to bring
the U.S. in line with the developed world,
where performers routinely are paid royalties
for radio broadcasts," said Lee.  The AFM
pledged its support for the legislation and
called for swift enactment.

Founded in 1896, the American Federation of
Musicians of the United States and Canada
(AFM) is the largest organization in the
world dedicated to representing the interests
of professional musicians. With more than
90,000 members, the AFM represents all types
of professional musicians, including those
who record music for sound recordings, film
scores, radio, television and commercial
announcements, as well as perform music of
every genre in every sort of venue from small
jazz clubs to symphony orchestra halls to
major stadiums.  Whether negotiating fair
agreements, protecting ownership of recorded
music, securing benefits such as health care
and pension, or lobbying legislators, the AFM
is committed to raising industry standards
and placing the professional musician in the
foreground of the cultural landscape.

Let the Sun Shine in on the C Reduction Question

As explained at length elsewhere, the objectors are appealing the approval of the settlement on several grounds. One of them is the so-called C Reduction – the structuring of the settlement so that holders of unregistered copyrights, a super-super-majority of the class, can see their claims payouts reduced or eliminated altogether. If registered (A and B) claims exceed $11.8 million, that is exactly what will happen.

Of course, if the current Second Circuit Court of Appeals ruling stands, barring jurisdiction of claims of unregistereds even for the purpose of approving a global settlement, then the C Reduction will be moot. The entire settlement, or any settlement remotely like it, will be moot.

We think the latest ruling will be reversed. There’s a ton of existing law suggesting that the two of the three judges on the panel got it wrong. (Judge Walker, in dissent, got it right.) Both the appellants appellants (objectors) and the appellees (defendants and plaintiffs) are working to make the fundamental global structure of the settlement viable again.

If and when we succeed, the C Reduction will loom again. And here’s the thing. Unlike the objectors’ other two issues – inadequate representation and the “license by default” – the C Reduction is, at this point, an empirical question. Claims closed in 2005. Leaving aside whether the C Reduction could have happened by the way the settlement was designed, there is no doubt that the C Reduction either did or did not happen.

The parties holding the information to answer that question are the defendants and the plaintiffs. As the appeal faces its hiatus to resolve the jurisdiction issue, we think everyone would be served by publishing the claims data. And we call on the appellees to do so.

Holiday Update on Copyright Class-Action Scenarios

As we approach the holidays in the third year of the copyright class-action objections, let’s review where things stand as a result of the November 29 ruling by the Second Circuit Court of Appeals.

In a 2-1 decision, the court said the settlement approved by the district court (which we were and are appealing) was invalid because the settlement included the claims of holders of unregistered copyrights. Infringements of unregistered copyrights constitute more than 99% of all potential claims. In this case, they are called “C” claims.

The jurisdiction question was not part of our objections; it was raised by the judges on their own initiative. When asked to brief the court on this issue, we argued that unregistered copyright holders – who do not have standing to sue – do have standing to be part of a settlement. The defendants and the plaintiffs made the same argument. Every other circuit court on record agrees with our position, but two of the three judges on the three-judge panel did not. One, Judge Walker, issued a strong dissent.

All of the parties to the appeal are now working, separately and together, to reverse this decision, which would prohibit not only this settlement but any comprehensive settlement. The next step in these efforts will take one of two forms: either a request for reconsideration by the three-judge panel or a motion for a hearing “en banc,” by all the circuit judges. (There are 13 active judges and nine semi-retired senior judges.) If those efforts fail, an appeal to the U.S. Supreme Court is contemplated.

This development may take a year or more to play out.

If this decision is not ultimately reversed, class members with “C” claims could register their works and become part of new actions against the defendants – individual, mass action, or class action. For that reason, we strongly encourage all freelancers to register all of the works included in the now in-limbo settlement.

If this decision is reversed, the Second Circuit will go back to dealing with the issues of our appeal. We assert that the settlement is fatally flawed for various reasons, which have been well developed on this blog. I will return to one of those reasons in the next post.

Counsel for All Sides Confer on Next Steps

Charles Chalmers, attorney for the objectors, spoke today and communicated by email with Charles Sims, counsel for the defendants. (Michael Boni, counsel for the plaintiffs, was included in their email communications.) They discussed a line of authority that they both believe holds great promise to obtain reversal of the decision that the district court does not have jurisdiction to consider a settlement including unregistered copyrights.

Counsel agreed to jointly request a three-week extension of the 14-day period for requesting reconsideration by the Second Circuit Court of Appeals.

NWU's Colby: 'This Is About All Writers'

Good stuff from Gerard Colby, president of the National Writers Union, in Publishers Weekly's coverage of the ruling:

[I]n a dissenting opinion, Chief Judge John M. Walker, argued that registering for a copyright was more of a “claim-processing rule,” rather than a “jurisdictional prerequisite.”

[Colby] said the second circuit was “making new law.” Colby said the ruling essentially means that “unregistered writers can’t sue for anything, even compensatory damages.” Colby said the ruling “cuts off writers from all access to the Federal courts. The issue of unregistered writers had been agreed to by all parties to the settlement.” He cited Walker’s dissent and said, “he lays it all out. We think we can appeal it to Second Circuit and if not, we’ll appeal to the Supreme Court. This isn’t just about our settlement. This is about all writers.”

Objections to Settlement Were and Are a Tale of Two Constituencies

The thunderbolt that was Thursday’s ruling by a three-judge panel on the appeal of the approval of the class action copyright settlement affects darn near everyone. An entire industry of new-tech publishers that have been flouting the law and need closure on their misdeeds. The freelance authors who are first in line for claim awards, some of them substantial. The battery of plaintiffs’ lawyers looking to collect their shares of millions of dollars in fees.

From the standpoint of the class members who began objecting to this settlement in early 2005, and who took the district court’s subsequent approval of the settlement up to the Second Circuit Court of Appeals later that year, there are two main groups affected that we continue to advocate for. One group consists of those either affected by or concerned about the principle of the settlement’s provision for a “license by default.” The second group consists of those either affected by or concerned about the principle of the way the settlement fund was structured to pay, or not pay, holders of copyrights that were not (or not yet) registered with the U.S. Copyright Office – the “C” subclass..

Let’s tease those out.

LICENSE BY DEFAULT

This extraordinary and unprecedented provision of the settlement would give the publisher-infringers the right to continue to reuse in perpetuity all works they have been infringing for which the rights holders did not inform them, by the opt-out or claims deadlines, that they could not.

Everything, by everyone. A few, a very few, of these rights holders belong to one or more of the three “associational plaintiff” authors’ organizations; others heard about the settlement, whether they understood it or not, from trade press articles and slapdash notice initiatives. But many, very many, did not, including writers in foreign countries and dead writers and their heirs. And who knows how many others “defaulted” on this ceding of rights because the provision was buried in fine print and they didn’t bother to read further or do anything after noting that their own potential claim awards were as low as $5?

Folks, the license by default is hecka wrong. It dynamites the foundations of copyright law and it thumbs its nose at the hard-earned 2001 Supreme Court decision in Tasini v. Times.

Thanks to the appellate decision, the license by default is dead for now – but it is not dead permanently and it is not dead as a result of an affirmative ruling on our objection to it. The settlement has simply been vacated and remanded to the district court for further proceedings, which means that this horrible provision could be exhumed in a future reconstituted settlement or in other settlements. In my opinion, we must continue to resist it.

THE ‘C’ SUBCLASS

Let’s start by noting that the settlement fund – $10 million to $18 million – is absurdly low for the scale of damages inflicted and for the documented willfulness associated with them. Indeed, it’s a joke. It reminds me of the bad guy in Austin Powers: International Man of Mystery, who is in a time capsule between 1967 and 1997, and emerges with an apocalyptic nuclear device over which he blackmails the United Nations for the princely sum of “one million dollars.”

But there’s more. For the purposes of claims awards, the fund is really capped at $11.8 million (after attorneys’ fees and various administration costs).

Now we get to the settlement provision that absolutely kills holders of Subclass C claims (unregistered works). If total claims overload the $11.8 settlement fund cap, then Subclass A and Subclass B claimants (registered works) get paid; Subclass C claimants get zilch. Though we don’t know the distribution of filed claims, we do know that potential Subclass C claims constitute more than 99 percent of the universe of infringements.

The claims deadline is years past. By analogy, that means that all the votes have already been cast and we’re just waiting for the tallies to be certified and announced.

During the briefing of the Second Circuit, objectors’ attorney Charles Chalmers uncovered compelling evidence that the settlement fund was, in fact, busted, kicking in the “C Reduction”; and, further, that the lawyers for the plaintiffs and the defendants misled the courts about that. Appellees' counsel even took the extraordinary measure of “correcting” mistakes in their court filings, something almost unheard of at the level of the defendants’ heavily staffed corporate law firms in particular. In the wake of that fiasco, their refusal to be transparent about the closed, real-world, but still unrevealed claims data speaks volumes.

People who read Chalmers’ August 2006 motion to strike (http:/muchnick.net/StrikePart1.pdf, http://muchnick.net/StrikePart2.pdf, and http://muchnick.net/StrikeMisc.pdf) and maintain that the C Reduction issue is a figment of the objectors’ imaginations should themselves apply for immediate membership in the Flat Earth Society.

Now the Second Circuit has invalidated the possibility/probability of a C Reduction by vacating the settlement – but not on the grounds we argued. Instead, two members of the three-judge appellate panel (with the third, Judge Walker, dissenting) broke entirely new ground by simply throwing out the settlement because it included redress not only for holders of registereds, who already have standing to sue, but also unregistereds, who only potentially have standing to sue. Neither the appellants (objectors) nor the appellees (plaintiffs and defendants) had taken such a position; when asked to brief the court on this issue, all three parties had argued that the federal courts do have jurisdiction for unregistereds for the purpose of settlement.

This ruling, if it stands, has enormous – and I believe, bad – implications for copyright law, for class action law, and just for the idea that the court system is a leveling and democratizing force.

Therefore, stay tuned.

Irv Muchnick