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Designer Skin LLC v. S & L Vitamins, Inc., et al.
Unauthorized internet reseller of plaintiff’s products is not guilty of trademark infringement, and does not cause actionable initial interest confusion, by using plaintiff’s trademarks in meta tags of website at which plaintiff’s and its competitors’ products are sold, and in...

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

192 F. Supp.2d 321 (D.N.J., March 28, 2002) aff'd. 342 F.3d 191 (3rd Cir. 2003)

Court issues preliminary injunction, enjoining plaintiff Video Pipeline Inc. ("Video Pipeline") from continuing to display over the Internet 62 promotional "trailers" plaintiff made to promote the sale of videos of movies in which defendant's licensors hold copyrights.  (Defendant and it's licensors will be referred to herein collectively as "Defendant").  The trailers in question consist of excerpts from Defendant's movies, combined with a display of Defendant's trademarks and the title of the film.  Plaintiff did not add any commentary, music or voice overs to its trailers.  The trailers were made available to the public via the Internet websites of Vendors selling authorized copies of Defendant's films.  For this service, the Vendors paid plaintiff a fee based on the amount of time users spent viewing the trailers.

The court held that plaintiff's conduct infringed Defendant's copyright in the films, including Defendant's exclusive right to create derivative works of the copyrighted films, as well as its right to perform and publicly display the work under 17 U.S.C. Section 106.

The court further held that plaintiff's actions were not protected by either the 'first sale' or 'fair use' doctrines.  Plaintiff could not claim protection under the first sale doctrine because it only permits owners, and not their licensees, to advertise the sale of a copy of the copyrighted work that they own.  Moreover, the court held that the 'first sale' doctrine probably would not permit Vendors to display over the Internet promotional trailers they created to advertise the sale of copies of the films they owned.  Rather, such display was probably limited under 17 U.S.C. Section 109(c) to "the place where the copy [owned by the Vendor] is located."

The court held that plaintiff could not claim protection under the 'fair use' doctrine, because its use of Defendant's copyrighted materials was commercial and not transformative, represented a copying of the heart of the works in question, and was of a fictional, and not factual work.

The court accordingly issued the requested injunctive relief.  In so doing, the court rejected arguments that its order would allow Defendant to control the sale of home videos over the Internet to the detriment of the public and/or Vendors of legitimate copies of the works.  The court held that other means were available to the Vendors to market Defendant's films, including via written descriptions of the films.

Defendant Buena Vista Home Entertainment Inc. is the exclusive licensee of Walt Disney Pictures and Television and the exclusive distributor of Miramax Films Corp. in the home video market.  Defendant (as defined above) produced "trailers" of its movies for use in promoting their sales.  For approximately ten years, Defendant had a license agreement with plaintiff Video Pipeline, pursuant to which Video Pipeline was permitted to display these "trailers" in video stores to promote home video sales and rentals.  Pursuant to this license, Video Pipeline supplied such trailers for display by third party vendors in stores in which the Vendor offered to sell or rent the video in question.

In 1997, Video Pipeline started making the trailers available to its clients for use on the Internet to promote the online sale of home videos.  In September 2000, Defendant objected to this use of its trailers, advising Video Pipeline that such use was not authorized under the parties' license agreement.  Defendant subsequently terminated the license agreement between the parties, and plaintiff stopped using trailers supplied by Defendant on the Internet.

Commencing in or about November 2000, Video Pipeline began making its own promotional trailers of Defendant's films.  Each trailer created by Video Pipeline was approximately 2 minutes in length, and consisted of an opening display of Defendant's trademark and the title of the movie, followed by two or more scenes from the movie, and another image of the movie's title.  Plaintiff did not add any original work to its trailers - it added neither voice overs, commentary, or additional music - and used only images and sounds found in the film being promoted.

Plaintiff made these trailers available to its clients for use on the Internet in promoting their sale of home videos.  A user visiting one of these vendor's sites could, via a click, have the trailer displayed.  Plaintiff's clients paid a fee for the use of these trailers based on the amount of time users spent viewing them.  Plaintiff also made the trailers available on a web site it operated.  Users interested in purchasing Defendant's movies as a result of viewing the trailer were offered an opportunity to purchase the video via a link from web sites operated by third party vendors.

Defendant, claiming this use of its movies constituted copyright infringement, sought a preliminary injunction.  The court agreed with Defendant, and enjoined plaintiff from continuing to utilize the trailers it had created in this fashion.

The court determined that Defendant was likely to prevail on its copyright infringement claim.  A copyright infringement claim is established when the plaintiff demonstrates that it owns a valid copyright in the work in question, and that defendant, without authorization, is exercising one of the exclusive rights with respect to the works that is granted copyright owners under 17 U.S.C. Section 106.  It was undisputed that Defendant held the copyright in the films in question.

The court further found that Video Pipeline had, without authorization, exercised several of the exclusive rights granted to copyright owners with respect to the works in question.  Thus, the court held that Video Pipeline, by making trailers consisting entirely of scenes excerpted from Defendant's movies, had made a "derivative work" in violation of 17 U.S.C. Section 106.  The court further held that by showing these trailers to users on the Internet, Video Pipeline had engaged both in a "performance" and "public display" of the Defendant's copyrighted works in violation of 17 U.S.C. Section 106.

In reaching this conclusion, the court rejected plaintiff's arguments that its activities were protected by the 'first sale' and 'fair use' doctrines.  Pursuant to 17 U.S.C. section 109(a), the owner of a particular copy of a copyrighted work is allowed under the first sale doctrine to sell that work without authorization from the copyright holder.  The owner is also allowed to advertise the article he has for sale.  The court held that this right did not, however, extend to commercial licensees of the owner, such as plaintiff, and thus did not validate plaintiff's activities, even though they promoted the legitimate sale of copies by their owners.

Moreover, held the court, it was probable that the first sale doctrine did not grant those who owned copies of the films in question the right to create and display promotional trailers of them online.  17 U.S.C. section 109(c) provides, in pertinent part, that:

The owner of a particular copy lawfully made under this title, or any person authorized by such owner, is entitled, without authority of the copyright owner to display that copy publicly, either directly or by the projection of no more that one image at a time, to viewers present at the place where the copy is located.

Relying on the statute's legislative history, the court held that an owner of the film would probably not itself be entitled to display a promotional trailer it had made of the work over the Internet.  As such, concluded the court, Video Pipeline was not permitted under the first sale doctrine to engage in the challenged activities.

Nor were Video Pipeline's activities a 'fair use' of Defendant's copyrighted works.  Under 17 U.S.C. section 107, courts look to the following factors in determining whether a particular use of a copyrighted work is a permitted fair use:

(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 for the copyrighted work.

The court held that under this statute plaintiff's activities were not a permitted fair use.  In reaching this determination, the court relied on the fact that the use was a commercial, non-transformative use of the copyrighted material, was of fictional, and not factual works, and, though only using a small segment of the work, had copied a substantial portion of the heart of the work. 

Finding that Defendant was likely to prevail on its copyright infringement claim, the court issued an injunction, enjoining plaintiff from further use of 62 trailers it had made of defendant's films.

In reaching this conclusion, the court rejected plaintiff's claims that its order would allow Defendant to control the sale of home videos over the Internet to the detriment of the public and/or the Vendors.  The court held that other means were available to the Vendors to market Defendant's films, including via written descriptions of the films.

The full text of the court's decision can be found on a web site maintained by Rutgers University School of Law - Camden.

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