Legal Matters: Infringing Imports

When a slap on the wrist didn't work, a federal judge slammed a Manhattan video retailer with a $7.35 million judgment for unlawfully selling imported copies of movies.

The U.S. District Court in New York on May 25 held that importing copies of copyrighted works into the United States for commercial purposes without authority of the owner is an infringement of the exclusive right of distribution.

San Francisco-based U2 Home Entertainment acquired exclusive U.S. distribution rights from Asian producers and distributors of certain Chinese-language motion pictures. Its contracts granted rights to import, manufacture and distribute copies of the films.

Investigators purchased copies of 49 titles from retailer Wei Ping Yuan's company, Lai Ying Music & Video Trading, that did not come from U2. An injunction had been issued against these defendants, prohibiting them from selling U2-distributed titles.

Asserting its exclusive distribution rights, U2 sued the retailer for copyright infringement and other claims.

U2's attorney, Harvey Shapiro with Sargoy, Stein, Rosen & Shapiro in New York, says there is sometimes confusion over import laws after the U.S. Supreme Court's 1998 decision in Quality King Distributors v. L'anza Research International.

In that case, the Supreme Court analyzed the "first sale doctrine." This legal theory holds that once a copyright owner authorizes the first sale of copies of a work (such as a video or DVD), the owner is deemed to have consented to subsequent sales of those particular copies—so long as the copies were lawfully made with the owner's permission.

"But that case does not provide protection for someone who is importing copies manufactured abroad," Shapiro says. It only protects those who sell copies that were manufactured in the United States, exported and then imported back into the country.

The District Court explained this distinction in its opinion, noting that the first-sale doctrine applies when copies first sold in a country were made lawfully (i.e., with the copyright owner's permission).

If the owner gave exclusive U.S. distribution rights to the publisher of a U.S. edition and exclusive British distribution rights to the publisher of a British edition, presumably copies in the United States were only made lawfully if made by the U.S. publisher.

The court held that an exclusive U.S. distributor can recover damages for infringement when copies imported into the United States were manufactured in a foreign country.

For the infringements, U2 sought statutory damages and attorneys' fees, which can only be recovered when the infringements occurred after the works were registered with the U.S. Copyright Office.

The retailer argued that U2 could not recover these damages since the registrations were in the name of the copyright owners rather than U2.

The court held that an exclusive distributor can vindicate the rights of the registration owner. As a result, the distributor may also be entitled to statutory damages and attorneys' fees without having the registration in its own name.

Since the retailer continued to sell videos of U2 titles after the injunction, the court awarded the maximum penalty—$150,000 for willful infringement of each of 47 titles registered and $150,000 for civil contempt (ignoring the prior injunction) for each of two titles not registered, plus attorneys' fees.



RIGHTS PROTECTED: Older foreign works are still protected by copyright after the U.S. Court of Appeals for the D.C. Circuit on May 24 upheld the constitutionality of the Uruguay Round Agreements Act.

This law revived U.S. copyright protection for foreign works that were protected by laws in other countries and fell into the U.S. public domain for various reasons.

These works include foreign sound recordings made before 1972 and other foreign works (such as motion pictures) that did not include a copyright notice in U.S. copies.

Luck's Music Library, which rents and sells classical orchestral sheet music, and Moviecraft, which preserves, restores and sells old footage and films, challenged the constitutionality of the law. The companies claimed that since copyrights in foreign works had been restored, they could no longer freely distribute certain works in their portfolios.

The companies argued that by removing works from the public domain, Congress violated the Copyright and Patent Clause of the U.S. Constitution, which only grants a temporary monopoly over works to motivate authors and inventors to create. The court disagreed and dismissed the lawsuit.

John Koppel with the U.S. Department of Justice successfully argued the case for the government.



CLOSE-UP ON CROOKS:

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