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Factual Background Edit
Internet movie piracy is now a matter of serious concern, but Video Pipeline is not a pirate. Instead, it creates and distributes movie trailers to retail video stores. Indeed, for many years, it did so with Buena Vista’s consent, using trailer materials supplied by Buena Vista itself. Before the Internet became a retail marketplace, all of Video Pipeline’s trailers were distributed on videotape to home video stores for promotional exhibition on television monitors located within those stores.
Once the Internet became a marketplace, many retailers began selling and renting home videos from websites — not by downloading them as digital files, but simply by allowing customers to shop and order online for subsequent deliveries by mail, FedEx, UPS or the like. Video Pipeline is technically savvy, and in response to these types of Internet sales, it did something that must have seemed entirely logical to it. It began using the trailer materials Buena Vista had supplied to make digital trailers for Internet streaming.
Using Video Pipeline’s service, Internet-based video retailers could give customers the ability to view 2-minute trailers, simply by clicking on “preview” buttons on the retailers’ websites. Doing so would seamlessly transport customers to Video Pipeline’s own server, from which requested trailers would be streamed; and Video Pipeline would charge retailers fees based on the number of streams their customers requested.
Though Video Pipeline handled the technology of all of this just fine, it did not get a license from Buena Vista to do any of it. Indeed, when Buena Vista objected — and asked for the return of the trailer materials it had earlier provided to the company — Video Pipeline began creating digital trailers from copies of videos its store clients had purchased.
Video Pipeline also sued Buena Vista, seeking a judicial declaration that its actions were legal. Buena Vista responded by filing counterclaims alleging that Video Pipeline’s actions constituted copyright infringement.
Trial Court Proceedings Edit
The reason that two courts have ruled on this case is purely procedural. Early in the case, federal District Judge Jerome Simandle granted Buena Vista’s motion for a preliminary injunction. Video Pipeline immediately appealed the injunction; but while the appeal was pending, other aspects of the case continued to be litigated in the District Court. Judge Simandle ruled, for example, that a Buena Vista counterclaim for unjust enrichment was preempted by federal copyright law; but he declined to dismiss its other counterclaims for trademark infringement, unfair competition, breach of contract, replevin and conversion.
Shortly before the Video Pipeline’s appeal from the preliminary injunction was decided, Judge Simandle granted Buena Vista’s motion for summary judgment on the merits. In a lengthy and quite methodical opinion, Judge Simandle ruled — as he had before, in issuing a preliminary injunction mdash; that Video Pipeline infringed Buena Vista’s copyrights by using Buena Vista’s movies in ways that were not permitted by the fair use doctrine.
In his decision granting summary judgment, the judge also rejected Video Pipeline’s other defenses. The judge found that Buena Vista was entitled to bring its copyright infringement claims, even though it had not separately registered copyrights to its own trailers. It was enough, the judge decided, that Buena Vista had registered the copyrights to the movies from which those trailers were made.
Judge Simandle also rejected Video Pipeline’s “copyright misuse” defense. He held that earlier cases applying that doctrine had involved clauses in licensing agreements that prevented licensees from creating competing works. “That doctrine is inapplicable here, where no such anti-competitive clauses are at issue,” he said. The judge also was unpersuaded by Video Pipeline’s estoppel and implied license arguments.
Judge Simandle ruled in Buena Vista’s favor in connection with its trademark claim, finding that there was a likelihood that consumers would mistakenly believe that Buena Vista created or authorized Video Pipeline’s clip previews. And he granted Buena Vista’s summary judgment motion on its breach of contract, unfair competition, replevin and conversion claims as well. (The replevin and conversion claims asserted that Video Pipeline failed to return trailer materials BuenaVista had once given Video Pipeline.)
Appellate Court Proceedings Edit
Shortly after Judge Simandle granted Buena Vista’s summary judgment motion, the Court of Appeals finally affirmed the preliminary injunction that had been issued at the beginning of the case. Judge Thomas Ambro decided that the appeal was not moot, because no final judgment had been entered yet. Judge Ambro affirmed the injunction, because he too was persuaded that Video Pipeline had infringed Buena Vista’s copyrights by engaging in conduct that was not excused by the fair use or copyright misuse doctrines.
Judge Ambro’s reasoning was similar — though not identical — to Judge Simandle’s. Judge Ambro applied the four fair use factors somewhat differently. And Judge Ambro’s analysis of the copyright misuse doctrine was more extensive. The two judge’s ultimate conclusions, however, were the same.