Video Pipeline, Inc. v. Buena Vista Home Entertainment, Inc.

Opinions of the United
2003 Decisions States Court of Appeals
for the Third Circuit
8-26-2003
Video Pipeline Inc v. Buena Vista Home
Precedential or Non-Precedential: Precedential
Docket No. 02-2497P
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PRECEDENTIAL
Filed August 26, 2003
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 02-2497
VIDEO PIPELINE, INC.
v.
BUENA VISTA HOME ENTERTAINMENT, INC.
BUENA VISTA HOME ENTERTAINMENT, INC.;
MIRAMAX FILM CORP.,
Counterclaim-Plaintiffs
v.
VIDEO PIPELINE, INC.,
Counterclaim-Defendant
Video Pipeline, Inc.,
Appellant
Appeal from the United States District Court
for the District of New Jersey
(D.C. Civil Action No. 00-cv-05236)
District Judge: Honorable Jerome B. Simandle
Argued January 21, 2003
Before: BECKER,* NYGAARD, and AMBRO, Circuit Judges
(Opinion filed August 26, 2003)
* Judge Becker concluded his term as Chief Judge on May 4, 2003.
2
Paul R. Fitzmaurice, Esquire
(Argued)
Lisa A. Sabatino, Esquire
Pelino & Lentz
1650 Market Street
One Liberty Place, 32nd Floor
Philadelphia, PA 19103
Attorneys for Appellant
Gary A. Rosen, Esquire (Argued)
Akin, Gump, Strauss, Hauer & Feld
2005 Market Street
One Commerce Square, Suite 2200
Philadelphia, PA 19103
Attorney for Appellee
Jon A. Baumgarten, Esquire
William M. Hart, Esquire
Proskauer Rose LLP
1585 Broadway
New York, NY 10036
Attorneys for Amicus Curiae
Motion Picture Association of
America, Inc.
OPINION OF THE COURT
AMBRO, Circuit Judge:
In this copyright case we review the District Court’s entry
of a preliminary injunction against Video Pipeline, Inc.’s
online display of “clip previews.” A “clip preview,” as we use
the term, is an approximately two-minute segment of a
movie, copied without authorization from the film’s
copyright holder, and used in the same way as an
authorized movie “trailer.” We reserve the term “trailer” for
previews created by the copyright holder of a particular
movie (or under the copyright holder’s authority).
Video Pipeline challenges the injunction on the ground
that its internet use of the clip previews is protected by the
fair use doctrine and, alternatively, that appellees Buena
3
Vista Home Entertainment, Inc. and Miramax Film Corp.1
may not receive the benefits of copyright protection because
they have engaged in copyright misuse. We reject both
arguments, and affirm.
BACKGROUND
Video Pipeline compiles movie trailers onto videotape for
home video retailers to display in their stores. To obtain the
right to distribute the trailers used in the compilations,
Video Pipeline enters into agreements with various
entertainment companies. It entered into such an
agreement, the Master Clip License Agreement (“License
Agreement”), with Disney in 1988, and Disney thereafter
provided Video Pipeline with over 500 trailers for its movies.
In 1997, Video Pipeline took its business to the web,
where it operates VideoPipeline.net and VideoDetective.com.
The company maintains a database accessible from
VideoPipeline.net, which contains movie trailers Video
Pipeline has received throughout the years. Video Pipeline’s
internet clients — retail web sites selling home videos —
use VideoPipeline.net to display trailers to site visitors. The
site visitors access trailers by clicking on a button labeled
“preview” for a particular motion picture. The requested
trailer is then “streamed” for the visitor to view (because it
is streamed the trailer cannot be downloaded to or stored
on the visitor’s computer). The operators of the web sites
from which the trailers are accessed — Video Pipeline’s
internet clients — pay a fee to have the trailers streamed
based on the number of megabytes shown to site visitors.
Video Pipeline has agreements to stream trailers with
approximately 25 online retailers, including Yahoo!,
Amazon, and Best Buy.
As noted, Video Pipeline also operates
VideoDetective.com. On this web site, visitors can search
1. Buena Vista holds an exclusive license to distribute Miramax and Walt
Disney Pictures and Television home videos. Buena Vista, Miramax, and
Walt Disney Pictures and Television are subsidiaries of The Walt Disney
Co. Because of this connection and for simplicity’s sake, we refer to the
appellees collectively and individually as “Disney.”
4
for movies by title, actor, scene, genre, etc. When a search
is entered, the site returns a list of movies and information
about them, and allows the user to stream trailers from
VideoPipeline.net. In addition to displaying trailers,
VideoDetective.com includes a “Shop Now” button to link
the user to a web site selling the requested video. Visitors
to VideoDetective.com can also win prizes by playing “Can
You Name that Movie?” after viewing a trailer on the site.
Video Pipeline included in its online database trailers it
received under the License Agreement from Disney.
Because the License Agreement did not permit this use,
Disney requested that Video Pipeline remove the trailers
from the database. It complied with that request.
On October 24, 2000, however, Video Pipeline filed a
complaint in the District Court for the District of New
Jersey seeking a declaratory judgment that its online use of
the trailers did not violate federal copyright law. Disney
shortly thereafter terminated the License Agreement.
Video Pipeline decided to replace some of the trailers it
had removed at Disney’s request from its database. In order
to do so, it copied approximately two minutes from each of
at least 62 Disney movies to create its own clip previews of
the movies. (Again, to distinguish between the previews
created under the copyright holder’s authority and those
created by Video Pipeline, we call the former “trailers” and
the latter “clip previews” or “clips.” We use the term
“previews” generically.)
Video Pipeline stores the clip previews in its database and
displays them on the internet in the same way it had
displayed the Disney trailers. In content, however, the clip
previews differ from the trailers. Each clip preview opens
with a display of the Miramax or Disney trademark and the
title of the movie, then shows one or two scenes from the
first half of the movie, and closes with the title again.
Disney’s trailers, in contrast, are designed to entice sales
from a target market by using techniques such as voice-
over, narration, editing, and additional music. Video
5
Pipeline’s clip previews use none of these marketing
techniques.2
Disney also makes its trailers available online. It displays
them on its own web sites in order to attract and to keep
users there (a concept called “stickiness”) and then takes
advantage of the users’ presence to advertise and sell other
products. Disney has also entered into agreements to link
its trailers with other businesses, and, for example, has
such a link with the Apple Computer home page.
Video Pipeline amended its complaint to seek a
declaratory judgment allowing it to use the clip previews.
Disney filed a counterclaim alleging copyright infringement.
The District Court entered a preliminary injunction, later
revised, prohibiting Video Pipeline from displaying clip
previews of Disney films on the internet. See Video Pipeline,
Inc. v. Buena Vista Home Entertainment, Inc., 192 F. Supp.
2d 321 (D.N.J. 2002). Video Pipeline appeals.3
2. We have reviewed as part of the record several of the clip previews and
trailers.
3. The District Court’s jurisdiction arose under 28 U.S.C. § 1331 and 28
U.S.C. § 1338. We have jurisdiction over this interlocutory appeal
pursuant to 28 U.S.C. § 1292(a)(1).
On August 7, 2003, the District Court entered summary judgment in
Disney’s favor as to various claims and counterclaims, some of which
overlap with what is before us. See Video Pipeline, Inc. v. Buena Vista
Home Entertainment, Inc., 2003 WL 21811891 (D.N.J. Aug. 7, 2003). The
obvious question is whether this appeal is moot. We have concluded,
however, that a live controversy remains because the District Court has
not entered a final judgment or a permanent injunction in place of the
preliminary one and has not otherwise revoked or altered the injunction
on appeal. See generally Grupo Mexicano de Desarrollo, S.A. v. Alliance
Bond Fund, Inc., 527 U.S. 308, 313-18 (1999).
We are troubled that the attorneys for neither side (the same counsel
that came before us) appear to have alerted the District Court to this
appeal and instead went forward with motions for summary judgment.
We are also concerned by the failure of counsel to notify this Court of
the District Court’s decision (they still have not done so). The attorneys
should have known that the August 7 decision raised a question whether
this appeal had become moot — a question for us, not counsel, to
decide. By continuing to litigate the case in the District Court after the
appeal was taken and by failing to inform either Court of the ongoing
actions of the other, counsel risked a needless waste of judicial
resources as well as the resources of their clients.
6
DISCUSSION
We review for an abuse of discretion the District Court’s
decision to grant Disney’s request for a preliminary
injunction. Adams v. Freedom Forge Corp., 204 F.3d 475,
484 (3d Cir. 2000). Under this standard, questions of law
receive de novo review, and questions of fact are reviewed
for clear error. Id.To obtain a preliminary injunction, a party must show (1)
that it is “reasonably likely to succeed on the merits” of its
copyright infringement claim and (2) a likelihood that it will
suffer irreparable harm if the injunction is denied. Id. Other
issues to consider if relevant are (3) the likelihood of
irreparable harm to the non-moving party and (4) the
public interest. Id. Video Pipeline presents no arguments
for issues (3) and (4), so we shall not discuss them,
assuming instead that the District Court correctly held that
these factors favored issuing the injunction. We therefore
address the first two issues.
I. Likelihood of Success on the Merits
Subject to the fair use exception discussed below (and
other exceptions not relevant here), copyright owners have
the exclusive right (1) to reproduce the copyrighted work,
(2) to prepare derivative works, (3) to distribute copies, (4)
to perform publicly a copyrighted motion picture, and (5) to
display publicly the individual images of a copyrighted
motion picture. 17 U.S.C. §106. To make out a prima facie
case of copyright infringement for preliminary injunction
purposes, Disney needed to show that the display of the
clip previews likely violates any provision of § 106. See 17
U.S.C. §§ 501(a), (b).4 The District Court held that Video
Pipeline’s clip previews likely infringe Disney’s exclusive
rights under three of § 106’s provisions: subsection (2),
concerning derivative works; subsection (4), dealing with
public performance of motion pictures; and subsection (5),
relating to public display of individual images of a motion
picture.
4. There is no dispute as to Disney’s copyright ownership in the full-
length motion pictures at issue.
7
On appeal, Video Pipeline challenges the District Court’s
holding that the clip previews likely violate § 106(2),
asserting that the clips cannot properly be classified as
derivative works. It does not contest the Court’s
determination as to subsections (4) and (5). Because proof
of a violation of any one subsection of § 106 states a case
of illegal infringement, the District Court’s decision that
Disney made a prima facie showing of infringement on the
basis of subsections (4) and (5) would not be affected by
any conclusion we might make as to whether the clip
previews are derivative in nature. As Video Pipeline’s
display of excerpts taken from the copyrighted movies
clearly comes within the prohibition on public display of
motion pictures, and images from a motion picture, we turn
to whether Video Pipeline’s use should nonetheless be
countenanced on the ground that it falls within the “fair
use” doctrine.
A. Fair Use
Congress’s constitutional power to provide for copyright
protection “is intended to motivate the creative activity of
authors . . . by the provision of a special reward, and to
allow the public access to the products of their genius after
the limited period of exclusive control has expired.” Sony
Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417,
429 (1984). At times, however, “rigid application of the
copyright statute . . . would stifle the very creativity which
that law is designed to foster.” Campbell v. Acuff-Rose
Music, Inc., 510 U.S. 569, 577 (1994). When that is the
case, the fair use doctrine may be implicated.
Congress codified the judicially created “fair use” defense
at §107 of the 1976 Copyright Act, which permits a “fair
use of a copyrighted work.” 17 U.S.C. § 107. A fair use,
although not specifically defined by the statute, is one
made “for purposes such as criticism, comment, news
reporting, teaching . . . , scholarship, or research.” Id. It is
an affirmative defense for which the alleged infringer bears
the burden of proof.
In judging the fairness of a particular use, courts must
take into account the following non-exhaustive list of
factors:
8
(1) the purpose and character of the use, including
whether such use is of a commercial nature or is for
nonprofit educational purposes;
(2) the nature of the copyrighted work;
(3) the amount and substantiality of the portion used
in relation to the copyrighted work as a whole; and
(4) the effect of the use upon the potential market for
or value of the copyrighted work.
Id. The four statutory factors “do not represent a score card
that promises victory to the winner of the majority.” Pierre
N. Leval, Toward a Fair Use Standard, 103 Harv. L. Rev.
1105, 1110 (1990). Rather, each factor is “to be explored,
and the results weighed together, in light of the purposes of
copyright.” Campbell, 510 U.S. at 578 (citations omitted).
Thus, as we apply copyright law, and the fair use doctrine
in particular, we bear in mind its purpose to encourage
“creative activity” for the public good. Sony Corp., 464 U.S.
at 429.
This focus on copyright’s purpose makes relevant a
comparison of the copy with the original: where the copier
uses none of his own creative activity to transform the
original work, holding the fair use doctrine inapplicable will
not likely interfere with copyright’s goal of encouraging
creativity. Thus, in the typical fair use case, the analysis
under each statutory factor concentrates on the copy and
the original work from which it derives. In this case,
however, our analysis of the four statutory factors will take
into account where relevant Disney’s original full-length
films and its trailers. We examine in this way the fairness
of the online display of the clip previews because, among
other things, the statute directs our attention under factor
four to the effect of the allegedly infringing uses on both the
potential market for any derivative works (the parties do not
dispute that Disney’s trailers qualify as derivative works)
and the potential market for the originals. See Campbell,
510 U.S. at 590.
1. Purpose and Character of the Use
Once again, the first factor requires that we consider “the
purpose and character of the use, including whether such
9
use is of a commercial nature or is for nonprofit
educational purposes.” § 107(1). The District Court
concluded that the purpose and character of Video
Pipeline’s clip previews weigh against finding fair use. We
agree.
If a new work is used commercially rather than for a
nonprofit purpose, its use will less likely qualify as fair.
Campbell, 510 U.S. at 585. As Video Pipeline charges a fee
to stream the clip previews, its use of the copies is
commercial (as the District Court found).
The commercial nature of the use does not by itself,
however, determine whether the purpose and character of
the use weigh for or against finding fair use. Id. at 583-84.
We look as well to any differences in character and purpose
between the new use and the original. We consider whether
the copy is “transformative” of the work it copied because
it “alter[ed] the first with new expression, meaning, or
message,” or instead “whether the new work merely
supersedes the objects of the original creation.” Id. at 579(citations and alteration in original omitted).
Video Pipeline asserts that its use of the clip previews
substantially transforms the full-length films from which
they derive because the clips and the movies have different
purposes. According to Video Pipeline, the original works
have an aesthetic and entertainment purpose while the clip
previews serve only to provide information about the movies
to internet users or as advertisements for the company’s
retail web site clients.5 To the extent that the character and
5. We note that the clip previews do not constitute mere “information”
about the movies, as would, for example, a list of the names of the
actors starring in a film, or a statement of the rating it received. Were
Video Pipeline dealing only in this type of information, the fair use
doctrine might not be implicated at all because copyright protection does
not include facts and ideas, but only their expression. See Harper & Row
Publishers, Inc. v. Nation Enters., 471 U.S. 539, 547 (1985); 17 U.S.C.
§ 102(b). Regardless, the clips are part of — not information about —
Disney’s expressive creations. See id. at 569 (“Any copyright infringer
may claim to benefit the public by increasing public access to the
copyrighted work.”).
10
purpose of the clip previews and the original full-length
films diverge, however, the clips share the same character
and purpose as Disney’s derivative trailers. Whatever
informational or promotional character and purpose the
trailers possess, so do the clip previews. Consequently, the
clips are likely to “supersede the objects of” Disney’s
derivatives. Campbell, 510 U.S. at 579 (citations omitted).6
Although the clips are copied from Disney’s original rather
than its derivative works, it is highly relevant to our inquiry
here that the clips will likely serve as substitutes for those
derivatives.
Video Pipeline also urges us to take into account the
functional character and purpose of the database in which
it stores trailers and clip previews, apparently hoping we
will discern no significant difference between its database
and the internet search engine used in Kelly v. Arriba Soft
Corp., 336 F.3d 811 (9th Cir. 2003).7 In Kelly, Arriba Soft
Corp.’s search engine located images on other web sites in
response to a user’s request and displayed the results in
Additionally, it is not clear to us that the use of a copy — not
accompanied by any creative expression on the part of the copier — as
an advertisement for the original would qualify as a type of use intended
to be recognized by the fair use doctrine. See Campbell, 510 U.S. at 578-
79 (“The enquiry [under the first factor] may be guided by the examples
given in the preamble to § 107, looking to whether the use is for
criticism, or comment, or news reporting, and the like . . . .”); id. at 585
(“The use, for example, of a copyrighted work to advertise a product,
even in a parody, will be entitled to less indulgence under the first factor
of the fair use enquiry than the sale of a parody for its own sake, let
alone one performed a single time by students in school.”).
We need not resolve these issues, however, because (as we conclude in
the text) the purpose and character of the use of the clip previews and
that of Disney’s derivative works — its trailers — are the same.
6. We see little significance in whether the trailers use marketing
techniques that the clip previews do not.
7. A database is a discrete collection of data (here, previews) set up for
efficient retrieval. By comparison, a search engine refers to a system that
locates data (or images, etc.) from other web sites; thus, a search engine
will retrieve data that is not in the engine operator’s control.
VideoPipeline.net is a database, not a search engine.
11
thumbnail-size pictures, with a link that would take the
user to the web site on which the image was found. Id. at
815. The Court held that the display of the thumbnail
images was a fair use. Id.
Video Pipeline’s database does not, however, serve the
same function as did Arriba Soft’s search engine. As used
with retailers’ web sites, VideoPipeline.net does not improve
access to authorized previews located on other web sites.
Rather, it indexes and displays unauthorized copies of
copyrighted works. VideoDetective.com does permit viewers
to link to legitimate retailers’ web sites, but a link to a
legitimate seller of authorized copies does not here, if it ever
would, make prima facie infringement a fair use.
Finally, we note that Video Pipeline’s clip previews — to
reiterate, approximately two-minute excerpts of full-length
films with movie title and company trademark shown — do
not add significantly to Disney’s original expression. Video
Pipeline itself asserts, and the District Court found, 192 F.
Supp. at 337, that the clip previews “involved no new
creative ingenuity.” The Court did recognize that deciding
which scene or scenes to include in a clip preview requires
some creative choice. Id. But as Video Pipeline disclaims
the use of any creative ingenuity, we have no difficulty
viewing those decisions as involving creativity only in a
theoretical, and most narrow, sense. Hence, it is dubious
what “new expression, meaning, or message” Video Pipeline
has brought to its copies. Campbell, 510 U.S. at 579.
It is useful to compare the clip previews with a movie
review, which might also display two-minute segments
copied from a film. The movie reviewer does not simply
display a scene from the movie under review but as well
provides his or her own commentary and criticism. In so
doing, the critic may add to the copy sufficient “new
expression, message, or meaning” to render the use fair. Id.Here, in contrast, the fact that “a substantial portion,”
indeed almost all, “of the infringing work was copied
verbatim from the copyrighted work” with no additional
creative activity “reveal[s] a dearth of transformative
character or purpose.” Id. at 587. Consequently, rejecting
the fair use defense in this case will not likely “stifle the
12
very creativity” that the Copyright Clause “is designed to
foster.” Id. at 577.
With this context, the District Court correctly concluded
that Video Pipeline’s clip previews lack any significant
transformative quality. Thus, the commercial nature of the
clip previews weighs more strongly against Video Pipeline’s
use. Campbell, 510 U.S. at 580 (If “the alleged infringer
merely uses [the original work] to get attention or to avoid
the drudgery in working up something fresh, the claim to
fairness in borrowing from another’s work diminishes
accordingly (if it does not vanish), and other factors, like
the extent of its commerciality, loom larger.”). Given the
shared character and purpose of the clip previews and the
trailers (so that the clips will likely serve as a substitute for
the trailers) and the absence of creative ingenuity in the
creation of the clips, the first factor strongly weighs against
fair use in this case.
2. Nature of the Copyrighted Work
The second statutory fair use factor directs courts to
consider “the nature of the copyrighted work.” § 107(2).
“This factor calls for recognition that some works are closer
to the core of intended copyright protection than others,
with the consequence that fair use is more difficult to
establish when the former works are copied.” Campbell, 510
U.S. at 586. Fictional, creative works come closer to this
core than do primarily factual works. Harper & Row
Publishers, Inc. v. Nation Enters., 471 U.S. 539, 563 (1985).
The Disney movies at issue — including, for example,
Beauty and the Beast, Fantasia, Pretty Woman, and Dead
Poet’s Society — are paradigms of creative, non-factual
expression. And Disney’s trailers share imaginative aspects
with the originals.
Video Pipeline argues that this factor nonetheless weighs
in its favor because Disney released to the public its
movies, if not all of its trailers, prior to Video Pipeline’s
display of the clip previews.8 It is true that Disney would
have a stronger case against fair use had it not yet made its
8. The record does suggest that Video Pipeline streamed over the internet
clip previews of some Disney movies not yet released to the public.
13
movies available for the public’s viewing pleasure. See id. at
554 (“[T]he unpublished nature of a work is a key . . . factor
tending to negate a defense of fair use.”) (quoting S. Rep.
No. 94-473 at 64 (1975)) (alteration and quotation marks in
original omitted).
But the second statutory factor does not necessarily
weigh in favor of finding fair use simply because the public
already has access to the original work. Rather, that
Disney’s movies and trailers contain mainly creative
expression, not factual material, suggests that the use is
not fair regardless of the published or unpublished status
of the original. See e.g., Campbell, 510 U.S. at 586 (holding
that the song Pretty Woman fit “within the core of the
copyright’s protective purposes” because of its creative
expression, without considering that the original had
already been made available to the public). The District
Court therefore properly relied on the creative, non-factual
expression involved in Disney’s movies and trailers to hold
that this factor weighs against the fair use defense.
3. Amount and Substantiality of the Work Copied
The third factor requires an analysis of “the amount and
substantiality of the portion used in relation to the
copyrighted work as a whole.” § 107(3). The District Court
determined that this factor also weighed in Disney’s favor.
192 F. Supp. 2d at 340.
As Video Pipeline points out, its previews excerpt only
about two minutes from movies that last one and a half to
two hours. Quantitatively then, the portion taken is quite
small.
But the third factor “calls for thought not only about the
quantity of the materials used, but about their quality and
importance, too.” Campbell, 510 U.S. at 587. The District
Court found that the clip previews, “for the most part, were
used to provide the potential customer with some idea of
the plot of each motion picture, its overall tone, and a
glimpse of its leading characters.” 192 F. Supp. 2d at 339.
Although the plot, tone, and leading characters are, of
course, significant aspects of the films, the two-minute
“glimpse” provided by the clips is made up only of scenes
taken from the first half of the Disney films. Disney has not
14
claimed, for instance, that any of the clips “give away” the
ending of a movie, or ruin other intended surprises for
viewers of the full-length films. Moreover, as
advertisements, the clip previews are meant to whet the
customer’s appetite, not to sate it; accordingly, they are not
designed to reveal the “heart” of the movies. Simply put, we
have no reason to believe that the two-minute clips manage
in so brief a time, or even intend, to appropriate the “heart”
of the movies. Compare Harper & Row, 471 U.S. at 564-55(weighing this factor against finding fair use because the
alleged infringer “took what was essentially the heart of the
book”).
Because the clip previews copy a relatively small amount
of the original full-length films and do not go to the “heart”
of the movies, this factor, contrary to the District Court’s
determination, weighs in favor of finding fair Video
Pipeline’s display of its clips.
4. Effect on Potential Market or Value
Finally, courts should evaluate “the effect of the use upon
the potential market for or value of the copyrighted work.”
§ 107(4). The District Court considered the question to be
whether Video Pipeline’s “use of the copyrighted work
affects or materially impairs the marketability of the
copyrighted motion pictures,” and, finding the evidence
equivocal, concluded that the fourth factor weighed neither
for nor against finding a likelihood of fair use. 192 F. Supp.
2d at 340, 343.
As mentioned above, this final factor “must take [into]
account not only . . . harm to the original but also . . .
harm to the market for derivative works.” Campbell, 510
U.S. at 590. Because the issues pertaining to the potential
harm to the market for Disney’s derivative trailers are more
straightforward, we focus our analysis on this area and do
not review the District Court’s conclusion as to harm to the
market for the original full-length films.9 It is in this context
9. The District Court declined to consider the potential harm to the
market for derivatives on the ground that Disney had not argued the
issue. Disney did, however, so argue in both its briefs in support of its
motion for a preliminary injunction, and it submitted evidence to
support those arguments. Video Pipeline also responded in the District
Court to the merits of Disney’s arguments concerning potential harm to
the market for its derivative works. Consequently, Video Pipeline suffers
no harm by our addressing this issue.
15
that we conclude that the fourth factor weighs in Disney’s
favor.
Video Pipeline argued in the District Court that no
market exists, or could exist, for movie previews because no
one “ever paid or will ever pay any money merely to see
trailers.” But in fact retail websites are paying Video
Pipeline to display both trailers and clip previews.
Moreover, Video Pipeline takes too narrow a view of the
harm contemplated by this fourth factor. The statute
directs us to consider “the effect of the use upon the . . .
value of the copyrighted work,” not only the effect upon the
“market,” however narrowly that term is defined. § 107(4);
see also Worldwide Church of God v. Philadelphia Church of
God, Inc., 227 F.3d 1110, 1119 (9th Cir. 2000) (drawing
such a distinction). And the value “need not be limited to
monetary rewards; compensation may take a variety of
forms.” Id.; see also Sony Corp., 464 U.S. at 447 n.28
(stating in a different context that the “copyright law does
not require a copyright owner to charge a fee for the use of
his works, and . . . the owner of a copyright may well have
economic or noneconomic reasons for permitting certain
kinds of copying to occur without receiving direct
compensation from the copier”).
Disney introduced evidence that it has entered an
agreement to cross-link its trailers with the Apple
Computer home page and that it uses on its own websites
“the draw of the availability of authentic trailers to
advertise, cross-market and cross-sell other products, and
to obtain valuable marketing information from visitors who
chose [sic] to register at the site or make a purchase there.”
App. 945; see also Kelly, 336 F.3d at 821 (“Kelly’s images
are related to several potential markets. One purpose of the
photographs is to attract internet users to his web site,
where he sells advertising space as well as books and travel
packages. In addition, Kelly could sell or license his
photographs to other web sites or to a stock photo
database, which then could offer the images to its
customers.”). In light of Video Pipeline’s commercial use of
the clip previews and Disney’s use of its trailers as
described by the record evidence, we easily conclude that
there is a sufficient market for, or other value in, movie
16
previews such that the use of an infringing work could have
a harmful effect cognizable under the fourth factor.
We have already determined that the clip previews lack
transformative quality and that, though the clips are copies
taken directly from the original full-length films rather than
from the trailers, display of the clip previews would
substitute for the derivative works. As a result, the clips, if
Video Pipeline continues to stream them over the internet,
will “serve[ ] as a market replacement” for the trailers,
“making it likely that cognizable market harm to the
[derivatives] will occur.” Campbell, 510 U.S. at 591. For
instance, web sites wishing to show previews of Disney
movies may choose to enter licensing agreements with
Video Pipeline rather than Disney, as at least 25 have
already done. And internet users searching for previews of
Disney films may be drawn by the clip previews to web sites
other than Disney’s, depriving Disney of the opportunity to
advertise and sell other products to those users.10
Consequently, “ ‘unrestricted and widespread conduct of
the sort engaged in by [Video Pipeline] . . . would result in
a substantially adverse impact on the potential market’ for
the [derivative works].” Id. at 590 (quoting 3 M. Nimmer &
D. Nimmer, Nimmer on Copyright § 13.05(A)(4) (1993)). We
therefore hold that the District Court should have weighed
this factor against recognizing the fair use defense in this
case.
* * * * *
Three of the four statutory factors indicate that Video
Pipeline’s internet display of the clip previews will not
qualify as a fair use. From our consideration of each of
those factors, we cannot conclude that Video Pipeline’s
online display of its clip previews does anything but
“infringe[ ] a work for personal profit.” Harper & Row, 471
U.S. at 563. The District Court therefore correctly held that
Video Pipeline has failed to show that it will likely prevail
on its fair use defense.
10. Record evidence indicates that clip previews were streamed over the
internet more than 30,000 times between November 2000 and April
2001.
17
B. Copyright Misuse
Video Pipeline further contends that Disney has misused
its copyright and, as a result, should not receive the
protection of copyright law. Video Pipeline points to certain
licensing agreements that Disney has entered into with
three companies and sought to enter into with a number of
other companies operating web sites.11 Each of these
licensing agreements provides that Disney, the licensor, will
deliver trailers by way of hyperlinks12 for display on the
licensee’s web site. The Agreements further state:
The Website in which the Trailers are used may not be
derogatory to or critical of the entertainment industry
or of [Disney] (and its officers, directors, agents,
employees, affiliates, divisions and subsidiaries) or of
any motion picture produced or distributed by [Disney]
. . . [or] of the materials from which the Trailers were
taken or of any person involved with the production of
the Underlying Works. Any breach of this paragraph
will render this license null and void and Licensee will
be liable to all parties concerned for defamation and
copyright infringement, as well as breach of contract
. . . .
As Video Pipeline sees it, such licensing agreements seek to
use copyright law to suppress criticism and, in so doing,
misuse those laws, triggering the copyright misuse doctrine.
Neither the Supreme Court nor this Court has
affirmatively recognized the copyright misuse doctrine. See
Dun & Bradstreet Software Servs., Inc. v. Grace Consulting,
Inc., 307 F.3d 197, 221 (3d Cir. 2002). There is, however,
a well-established patent misuse doctrine, see, e.g., Morton
Salt Co. v. G.S. Suppiger Co., 314 U.S. 488 (1942); W.L.
Gore & Assocs., Inc. v. Carlisle Corp., 529 F.2d 614 (3d Cir.
1976), and, as noted below, other courts of appeals have
extended the doctrine to the copyright context.
11. The record contains three signed licensing agreements and numerous
letters sent by Disney to other companies asking them to sign the same
agreement.
12. A hyperlink allows an internet user to connect to another web site.
18
The misuse doctrine extends from the equitable principle
that courts “may appropriately withhold their aid where the
plaintiff is using the right asserted contrary to the public
interest.” Morton Salt, 314 U.S. at 492. Misuse is not cause
to invalidate the copyright or patent, but instead “precludes
its enforcement during the period of misuse.” Practice
Management Info. Corp. v. American Med. Assoc., 121 F.3d
516, 520 n.9 (9th Cir. 1997) (citing Lasercomb America, Inc.
v. Reynolds, 911 F.2d 970, 979 n.22 (4th Cir. 1990)). To
defend on misuse grounds, the alleged infringer need not be
subject to the purported misuse. Morton Salt, 314 U.S. at
494 (“It is the adverse effect upon the public interest of a
successful infringement suit in conjunction with the
patentee’s course of conduct which disqualifies him to
maintain the suit, regardless of whether the particular
defendant has suffered from the misuse of the patent.”);
Lasercomb, 911 F.2d at 979 (“[T]he fact that appellants here
were not parties to one of Lasercomb’s standard license
agreements is inapposite to their copyright misuse defense.
The question is whether Lasercomb is using its copyright in
a manner contrary to public policy, which question we have
answered in the affirmative.”).
Misuse often exists where the patent or copyright holder
has engaged in some form of anti-competitive behavior. See,
e.g., Morton Salt, 314 U.S. at 492 (explaining that public
policy “forbids the use of the patent to secure an exclusive
right or limited monopoly not granted by the Patent Office”);
Practice Management, 121 F.3d at 521 (finding copyright
misuse where license to use copyrighted good prohibited
licensee from using competing goods); Lasercomb, 911 F.2d
at 979 (holding the copyright holder misused its copyright
by including in licensing agreements a provision that
neither the licensee company nor its officers, employees, et
al., could develop competing goods for the term of the
agreement, ninety-nine years). More on point, however, is
the underlying policy rationale for the misuse doctrine set
out in the Constitution’s Copyright and Patent Clause: “to
promote the Progress of Science and useful Arts.” Const.
Art. I, § 8, cl. 8; see also Morton Salt, 314 U.S. at 494 (“The
patentee, like these other holders of an exclusive privilege
granted in furtherance of a public policy [trademark and
copyright holders], may not claim protection of his grant by
19
the courts where it is being used to subvert that policy.”);
Lasercomb, 911 F.2d at 978 (“The question is . . . whether
the copyright is being used in a manner violative of the
public policy embodied in the grant of a copyright.”). The
“ultimate aim” of copyright law is “to stimulate artistic
creativity for the general public good.” Sony Corp., 464 U.S.
at 432; see also Eldred v. Ashcroft, 123 S. Ct. 769, 787
(2003) (“[C]opyright’s purpose is to promote the creation and
publication of free expression.”) (emphasis in original). Put
simply, our Constitution emphasizes the purpose and value
of copyrights and patents. Harm caused by their misuse
undermines their usefulness.
Anti-competitive licensing agreements may conflict with
the purpose behind a copyright’s protection by depriving
the public of the would-be competitor’s creativity. The fair
use doctrine and the refusal to copyright facts and ideas
also address applications of copyright protection that would
otherwise conflict with a copyright’s constitutional goal. See
Eldred, 123 S. Ct. at 789; Campbell, 510 U.S. at 575 & n.5.
But it is possible that a copyright holder could leverage its
copyright to restrain the creative expression of another
without engaging in anti-competitive behavior or
implicating the fair use and idea/expression doctrines.13
For instance, the concurring opinion, written for a
13. See Note, Clarifying the Copyright Misuse Defense: The Role of
Antitrust Standards and First Amendment Values, 104 Harv. L. Rev.
1289, 1304-06 (1991) (advocating application of the copyright misuse
defense where “the plaintiff has improperly used its copyright power to
restrain free trade in ideas,” and explaining: “The copyright misuse
defense provides a necessary complement to the idea/expression
dichotomy [under which an author’s expression may be copyrighted, but
an idea may not] and fair use doctrine in vindicating the public interest
in the dissemination of ideas. The idea/expression limitation merely
restricts the scope of the particular copyright being sued upon, and
absent a claim of misuse, it cannot be brought to bear on improper
licensing restrictions or other misconduct. As with the misuse defense,
fair use doctrine excuses copying that would otherwise be infringement
in order to vindicate the copyright policy promoting the diffusion of
ideas. Unlike misuse doctrine, however, the fair use inquiry directs
courts’ attention to the social value of the defendant’s conduct rather
than the social harm caused by the plaintiff’s use of its copyright.”).
20
majority of the judges, in Rosemont Enters., Inc. v. Random
House, Inc., 366 F.2d 303 (2d Cir. 1966), concluded that
pursuant to the unclean hands doctrine the District Court
should not have entered a preliminary injunction against
an alleged copyright infringer where the copyright holder
sought to use his copyright “to restrict the dissemination of
information.” Id. at 311 (Lumbard, C.J., concurring). In
Rosemont Enters., a corporation acting for the publicity-shy
Howard Hughes purchased the copyright to an article about
Hughes solely to bring an infringement suit to enjoin the
publication of a forthcoming biography on Hughes. Id. at
313. The concurring opinion reasoned:
The spirit of the First Amendment applies to the
copyright laws at least to the extent that the courts
should not tolerate any attempted interference with the
public’s right to be informed regarding matters of
general interest when anyone seeks to use the
copyright statute which was designed to protect
interests of quite a different nature.
Id. at 311; see also Eldred, 123 S. Ct. at 790 n.24 (“[I]t is
appropriate to construe copyright’s internal safeguards to
accommodate First Amendment concerns.”).
Although Rosemont Enters. did not concern an
anti-competitive licensing agreement as in the typical
misuse case, it focused — as do the misuse cases — on the
copyright holder’s attempt to disrupt a copyright’s goal to
increase the store of creative expression for the public good.
366 F.2d at 311 (“It would be contrary to the public interest
to permit any man to buy up the copyright to anything
written about himself and to use his copyright ownership to
restrain other[s] from publishing biographical material
concerning him.”); Lasercomb, 911 F.2d at 978 (“[T]he
company is required to forego utilization of the creative
abilities of all its officers, directors and employees in the
area of [computer assisted design and computer assisted
manufacture] die-making software. Of yet greater concern,
these creative abilities are withdrawn from the public.”). A
copyright holder’s attempt to restrict expression that is
critical of it (or of its copyrighted good, or the industry in
which it operates, etc.) may, in context, subvert — as do
anti-competitive restrictions — a copyright’s policy goal to
21
encourage the creation and dissemination to the public of
creative activity.
The licensing agreements in this case do seek to restrict
expression by licensing the Disney trailers for use on the
internet only so long as the web sites on which the trailers
will appear do not derogate Disney, the entertainment
industry, etc. But we nonetheless cannot conclude on this
record that the agreements are likely to interfere with
creative expression to such a degree that they affect in any
significant way the policy interest in increasing the public
store of creative activity. The licensing agreements do not,
for instance, interfere with the licensee’s opportunity to
express such criticism on other web sites or elsewhere.
There is no evidence that the public will find it any more
difficult to obtain criticism of Disney and its interests, or
even that the public is considerably less likely to come
across this criticism, if it is not displayed on the same site
as the trailers. Moreover, if a critic wishes to comment on
Disney’s works, the fair use doctrine may be implicated
regardless of the existence of the licensing agreements.
Finally, copyright law, and the misuse doctrine in
particular, should not be interpreted to require Disney, if it
licenses its trailers for display on any web sites but its own,
to do so willy-nilly regardless of the content displayed with
its copyrighted works. Indeed such an application of the
misuse doctrine would likely decrease the public’s access to
Disney’s works because it might as a result refuse to
license at all online display of its works.
Thus, while we extend the patent misuse doctrine to
copyright, and recognize that it might operate beyond its
traditional anti-competition context, we hold it inapplicable
here. On this record Disney’s licensing agreements do not
interfere significantly with copyright policy (while holding to
the contrary might, in fact, do so). The District Court
therefore correctly held that Video Pipeline will not likely
succeed on its copyright misuse defense.
II. Irreparable Harm
On the basis of Disney’s prima facie infringement case
and its likelihood of success against Video Pipeline’s
asserted defenses, the District Court presumed Disney
22
would suffer irreparable injury if a preliminary injunction
did not issue. Generally, “a showing of a prima facie case of
copyright infringement or reasonable likelihood of success
on the merits raises a presumption of irreparable harm.”
Apple Computer, Inc. v. Franklin Computer Corp., 714 F.2d
1240, 1254 (3d Cir. 1983).
When, however, “material peripheral to the [copyright
holder’s] business has been infringed,” we “require a
stronger showing of irreparable harm as the [copyright
holder’s] likelihood of success on the merits wanes.” Marco
v. Accent Publ’g Co., 969 F.2d 1547, 1553 (3d Cir. 1992).
Video Pipeline has likely infringed Disney’s movies, which
are certainly more than peripheral to its business. Even if
we were to consider here (as we did under the fourth fair
use factor) that the likely market harm will be to the
derivative market for trailers rather than to the market for
the full-length features, and that the trailer market may be
only peripheral to Disney’s business, Disney has shown a
strong likelihood of success on the merits, and so need not
make a particularly strong showing of irreparable harm.
Regardless, the record indicates that Disney will likely
incur incalculable losses from the clip previews’ competition
with the trailers — especially in terms of internet users’
attraction to (and the “stickiness” of) Disney’s and others’
web sites and the concomitant opportunities for sales and
marketing on those sites. Disney will therefore likely suffer
irreparable harm if Video Pipeline is not enjoined. Moreover,
given the verbatim copying, lack of creative ingenuity, and
profit-driven purpose of the clip previews, we have no
concern that this case is one in which the creative and
expressive goals of copyright law would be served better by
denying an injunction. See Campbell, 510 U.S. at 578 n.10.
CONCLUSION
The District Court correctly held that Disney will likely
succeed on the merits of its copyright infringement case,
given its prima facie showing and that Video Pipeline’s
attempts to defend on fair use and copyright misuse
grounds will likely fail. The Court’s conclusion as to
irreparable harm was also correct. We therefore affirm the
23
entry of the preliminary injunction prohibiting Video
Pipeline from displaying its clip previews on the internet.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit